• The Conference of Parties (COP) is a two-week sprint to discuss the measures to tackle climate crisis.
• Economic tools such as carbon markets, green bonds and other green assets are often inaccessible to small and medium-sized companies from developing countries.
• Web3 use cases in green finance include the transfer of assets from traditional centralized registries to the blockchain via fungible or nonfungible tokens (NFTs).
The UN Framework Convention on Climate Change
The Conference of Parties (COP) of the United Nations Framework Convention on Climate Change unites around 40,000 people from 196 countries. Governments, international institutions, financiers, businesses, non-governmental organizations and native communities gather for a two-week sprint to discuss the measures to tackle the climate crisis. The famous 17 United Nations Sustainable Development Goals were also first introduced at COP21 in Paris along with the historic Paris Agreement. It is aimed at limiting global warming to below 2 degrees Celsius above pre-industrial levels, with an aim to limit it to 1.5 degrees (most likely already achieved according to most evaluations).
Economic Tools for Decarbonization
The COP has also created tools to prevent climate doomsday. Such economic tools as voluntary and compliance carbon markets, carbon credits, green bonds and other green assets tied to positive environmental impact play a crucial role in decarbonization global efforts. However, they are often inaccessible to small and medium-sized companies from developing countries. The main reasons are high upfront costs and complex structuring processes in line with global green standards. Positive and negative impacts on the environment have to be forecasted and described according to approved methodologies. This information is used for future monitoring and reporting verification by assurance providers which can lead towards deceptive eco-claims or ‘greenwashing’ . On-chain verification brings data immutability and transparency stimulating issuers towards meeting their commitments .
Web3 Use Cases
It is an open secret that the issuance of green finance instruments has long been monopolized by Web2 financial infrastructure players such as banks , exchanges , registries & standards . Web3 brings disruption into this space through its ability of tokenizing carbon credits pioneered by DAO IPCI in 2017 & scaled by Toucan & Klima DAO in 2021 leading towards 12% of offsets getting transferred onto blockchain .
On Chain Verification
On chain verification brings data immutability & transparency creating trust among stakeholders with regardsto their commitments towards environment making sure these agreements are followed through effectively . This helps create more reliable transactions while reducing fraudulence & counterfeit issues arising out of such transactions .
In conclusion , Blockchain technology has opened up new avenues within sustainability initiatives providing greater reliability , transparency & scalability than existing systems thereby helping us fight against climate change more effectively than ever before .