Demand is rising for tech solutions that allow organizations to calculate their carbon footprint and assist in creating their ESG reporting. Renewable energy certificates (RECs) make up one part of this. But an important part. Some argue that carbon offsets are a zero-sum game. In contrast, incentivizing businesses to increase the proportion of renewable energy is undoubtedly a net win.
And there’s plenty of headroom for growth. According to the International Energy Agency, 28% of global electricity generated in 2020 came from renewables (2019: 26%).
Typically, renewable energy certificates are issued by clean energy producers and can be bought by governments or businesses that want to source a portion of their energy from renewables or have carbon emission reduction goals that need to be met.
Currently, trading energy certificates is costly and complex. Transactions between operators can be difficult to trace and verify and are often handled by intermediaries.
A blockchain-based solution would eliminate third-party involvement in the transaction, allowing suppliers and consumers to trade energy certificates with greater efficiency and at a lower cost. Blockchain technology can offer scalability, transparency, standards and identity verification.
Another promise of blockchain is that it could allow for partial credits, which would allow more small-scale buyers and sellers to participate in the market.
IBM’s enerT solution is being developed using Hyperledger Fabric and the new Fabric Token-SDK. On the blockchain platform, high volume transactions can be processed at a rapid rate, allowing renewable energy certification processes to be sped up and automated. Each transaction remains permanently recorded on the platform and is traceable.
There is potential that the tokens could store other useful characteristics, such as CO2 emissions in the energy supply chain.
As part of the move to use blockchain for ESG, the InterWork Alliance is working with Accenture and others to standardize carbon offset blockchain tokens.
Meanwhile, two major carbon credit trading ventures have recently been announced. Singapore’s DBS Bank, SGX, Standard Chartered and Temasek are launching Climate Impact X, which is harnessing satellite monitoring and blockchain technology. CIBC, NatWest and NAB are also launching Project Carbon to help their clients achieve a net-zero carbon goal. Perhaps IBM is hoping its new solution might be used for similar large scale REC initiatives.