Critics of NFTs often point to their environmental impact as one of the main reasons why they should be banned. However, many critics do not understand that not all distributed ledger technologies (DLT) are a burden on the environment. Additionally, NFTs can and have been used to protect the environment. In this article, we will look at how NFTs can help combat climate change.
NFT as carbon offsets
Carbon offsets are tokens or certificates that represent actions that remove greenhouse gases from the atmosphere, such as carbon sequestration or renewable energy. These can be purchased by any entity looking to reduce its carbon footprint, be it a company or an individual.
Carbon offsets result in indirect emission reductions, and according to a study 2017they really work. However, the current carbon offset system is not perfect. “A particular concern is that negotiated reductions could be ‘double counted,’ says the Environmental Defense Fund. “[Carbon offsets can be] counted once by the source country 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 probability of double counting. When a project leads to a verifiable reduction of greenhouse gases, it can be reviewed by a qualified authority who coins a carbon offset NFT to a carbon neutral DLT. This process results in an immutable record of the greenhouse gas 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 are likely to see many more.
NFTs as virtual power plants
As it stands, the electrical grid is managed by centralized entities. The current process is plagued with problems, such as power loss. The US Power Grid lose enough energy to feed the seven Central American countries four times, since it depends 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 obtain power from multiple renewable energy producers in an area. By doing so, they can send the energy to their 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 power from various renewable sources could be coined as NFTs and marketed to reduce our reliance on fossil fuels.
NFT as carbon credits
Carbon credits are often confused with offsets, but they vary in key ways. The credits represent a reduction in emissions, while the offsets represent the removal of greenhouse gases. 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 White House recognized blockchain as a potential next step in Executive Order 14067since it asked the 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 is important to note that not all DLTs are created equal. Emission reduction efforts in proof-of-work DLTs are inefficient due to the excessive power requirements for those technologies. Still, ledger technologies like Hedera, Binance, and Solana have low power requirements, ideal for carbon credits, offsets, and virtual power plants.
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*All investment/financial opinions expressed by NFT Plazas come from the personal research and experience of our site moderators and are intended for educational purposes only. People are required to fully research any product before making any type of investment.
NFT Artist. Musician. Crescendo Founder.
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