NFT critics often point to their environmental impact as one of the primary reasons they should be outlawed. However, many critics fail to understand that not all distributed ledger technologies (DLTs) are environmentally burdensome. Additionally, NFTs can and have been used to protect the environment. In this article, we’ll take a look at how NFTs can help fight climate change.
NFTs as carbon offsets
Carbon offsets are tokens or certificates representing actions that remove greenhouse gases from the atmosphere, such as carbon sequestering or renewable energy. These can be purchased by any entity looking to reduce its carbon footprint, whether a business or an individual.
Carbon offsets result in indirect emissions reductions, and according to a 2017 study, they genuinely work. Nonetheless, the current carbon offset system isn’t perfect. “One particular concern is that traded reductions might be ‘double counted,’ says the Environmental Defense Fund. “[Carbon offsets can be] counted once by the country of origin when reporting its emissions inventory, and again by the receiving country (or other entity).”
Double counting effectively misrepresents the amount of greenhouse gases removed from the atmosphere. Blockchain technology can be used to reduce the likelihood of double counting. When a project leads to a verifiable reduction in greenhouse gases, it can be reviewed by a qualified authority that mints a carbon offset NFT to a carbon-neutral DLT. This process results in an immutable record of the greenhouse gas reduction, and when it’s sold, we know the reduction has been claimed. Projects like Aerial have already begun utilizing this concept, and we’ll likely see many more.
NFTs as virtual power plants
As it stands, the power grid is managed by centralized entities. The current process is rife with problems, such as energy loss. The US power grid loses enough energy to power all seven Central American countries four times over, as it relies on sending energy great distances to reach its destination. Projects like the Brooklyn Microgrid use a decentralized energy approach to reduce energy waste.
Decentralized energy projects source power from various renewable energy producers throughout an area. In doing so, they can send the energy to its final destination from a nearby location. These renewable energy resources are often packaged as “virtual power plants.”
The Brooklyn Microgrid project utilizes blockchain technology to let solar panel owners tokenize their excess energy and sell it to others in a voluntary marketplace. Similarly, virtual power plants representing energy from various renewable sources could be minted as NFTs and traded to reduce our reliance on fossil fuels.
NFTs as carbon credits
Carbon credits are often confused with offsets but vary in key ways. Credits represent a reduction in emissions, whereas offsets represent greenhouse gas removal. Carbon credits are generally associated with cap-and-trade systems and may be required by law in certain industries.
Blockchain technology and NFTs have long been recognized as technologies that could improve the current carbon trading system. In fact, the Whitehouse acknowledged blockchain as a potential next step in Executive Order 14067, as it asked relevant agencies to create a report on its possible applications in the carbon market.
The importance of choosing the right DLT
Although NFTs can be used to combat climate change, it’s important to note that not all DLTs are the same. Emissions-reduction efforts on proof-of-work DLTs are inefficient due to the excessive energy requirements for those technologies. Still, ledger technologies like Hedera, Binance, and Solana have low energy requirements, ideal for carbon credits, offsets, and virtual power plants.
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*All investment/financial opinions expressed by NFT Plazas are from the personal research and experience of our site moderators and are intended as educational material only. Individuals are required to fully research any product prior to making any kind of investment.
NFT Artist. Musician. Founder of Crescendo.