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Investing in Sustainability: The Promising Future of Regenerative Finance

2/4/23

By:

Varun Iyer

Exploring the Role of Sustainable Investing in Driving a Greener, More Equitable Future

Image by Tatiana Serova


The future of the internet is here… or not?


The carbon credit system is not new.


Essentially, it is a way for companies/individuals to buy a tonne of carbon, that is prevented from entering the atmosphere, to offset their production. In a world where climate change is a buzzword, surely this is a booming market, now more than ever.


Sadly, you are mistaken.


There are countless issues in the current carbon market, with companies buying “low quality” carbon credits, which have very little impact on the environment. The market is illiquid, and “double-counting” is a frequent occurrence, with multiple companies 

claiming to have bought the same credit.


Enter crypto.


Companies like Flowcarbon are attempting to solve the aforementioned problems, in an attempt to revolutionize the system.

Its premier asset is the very fact that it is decentralized.


The carbon credit market has proven itself to be highly corrupt, with 

several intermediaries that often affect the rate, speed and quality of the transaction. The blockchain jumps in to fix all this, due to its peer-to-peer method of transactions, where all transactions occur between just two parties and are safely recorded on a publicly available ledger.


The illiquidity of the carbon market is yet another issue with the current carbon market, as it leads to lower transparency regarding the price.


This fundamentally undermines the reason carbon credits were initiated in the first place - to serve as a tradable unit of carbon, which governments can then use to drive emissions down.

With the blockchain, we are guaranteed a highly liquid market, with transactions taking seconds, instead of the multiple hours that traditional carbon trading systems use.


However, all is not sunshine and rainbows - a universal truth in our lives.


Verra, a once fierce competitor in the space, was found to have a staggering 90% figure of illicit transactions taking place.

This issue is pertinent not just to the carbon credit market, but to the entire crypto industry as a whole.


Due to their virtual and intangible nature, several blockchain companies have successfully manipulated investors into funding organisations that operate on buzzwords.


So, if web3 is indeed the future, what do we do to fix the carbon market?


Well, it seems like the only way to make a decentralized process legitimate would be to incorporate legislature from a central perspective.


Indeed, the only way forward may be for crypto-pioneers and internet philosophers alike to draft documentation that sets a particular set of international standards, thus attaching a meaningful real-world value to the credit.


Web3’s praises seem to be incessant, coming from individuals whose ideas seem absurd to society - most of them at least. However, in a world where talk about climate change is ceaseless, there seems to be a light at the end of the tunnel after all, even if its current state isn’t doing the world much good.

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