Critics of NFTs often cite their environmental impact as one of the main reasons they should be banned. However, many critics fail to understand that not all distributed ledger technologies (DLT) are bad for the environment. Additionally, NFTs can and have been used to protect the environment. In this article, we will 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 capture or renewable energy. They can be purchased by any entity that wants to reduce its carbon footprint, whether it is a business or an individual.
Carbon offsets lead to indirect emission reductions and under a 2017 study, they really work. Nevertheless, the current carbon offset system is not perfect. “One particular concern is that traded discounts may be ‘double-counted,'” says The Environmental Protection Fund. “[Carbon offsets can be] counted once by the country of origin when reporting the emissions inventory and again by the host 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 results in a verifiable reduction of greenhouse gases, it can be reviewed by a qualified body that deducts the NFT for carbon offsets of carbon neutral DLT. This process results in an immutable record of the GHG reduction, and when it is sold, we know that the reduction has been claimed. Projects like Aerial have already started using this concept, and we’re likely to see a lot more.
NFTs as virtual power plants
In its current form, the electricity grid is managed by centralized entities. The current process is fraught with problems such as energy wastage. The US electric grid loses enough energy to power all seven Central American countries four times over, as it relies on sending energy long distances to reach its destination. Projects like the Brooklyn Microgrid use a decentralized energy approach to reduce energy waste.
Decentralized energy projects supply power from various renewable energy producers across an area. In this way, 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 uses blockchain technology to allow solar panel owners to tokenize their excess energy and sell it to others on a voluntary market. Similarly, virtual power plants representing energy from various renewable sources can be minted as NFTs and traded to reduce our dependence on fossil fuels.
NFTs as carbon credits
Carbon credits are often confused with offsets, but they differ in key ways. Credits represent emissions reductions, while offsets represent greenhouse gas removals. Carbon credits are usually 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 White House has acknowledged blockchain as a potential next step Executive Order 14067as it asked the relevant agencies to produce a report on its possible applications in the carbon market.
The importance of choosing the right DLT
While NFTs can be used to combat climate change, it is important to note that not all DLTs are the same. Efforts to reduce emissions in proof-of-work DLT are ineffective due to the excessive energy requirements of these technologies. Yet ledger technologies like Hedera, Binance and Solana have low energy requirements, ideal for carbon credits, offsets and virtual power plants.
I want more? Contact NFT Plazas
Join the weekly newsletter
Join our Discord
Follow us on Twitter
Like us on Facebook
Follow us on Instagram
*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. People are required to fully research any product before making any investment.
NFT artist. Musician. Founder of Crescendo.