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How to tackle carbon emissions and climate change? Blockchain may hold the key

Besides increased transparency and accountability, advances in the application of blockchain innovation in emerging economies can also help save millions of lives, explains Dr Huy Pham, a leading FinTech researcher and lecturer at RMIT University

Could blockchain hold the answer to a more sustainable future? PHOTO: GETTY IMAGES

As the world seeks to rapidly reduce carbon emissions and mitigate the impacts of climate change, could blockchain hold the answer to a more sustainable future? 

Many governments have implemented environmental regulations and emission trading schemes to reduce carbon emissions and advance sustainable development.

Transparent reporting of these is critical in making real progress on reducing emissions, explains Dr Huy Pham, a lecturer in finance at RMIT in Vietnam and the founder of the RMIT FinTech-Crypto Hub.

“At country and regional levels, one critical problem with emission trading schemes is they are susceptible to fraudulent activities, such as carbon-trading frauds,” says Dr Huy.

“At the firm level, environmental, social and governance (ESG) reporting has been crucial to many giant companies but the reporting usually contains non-transparent, questionable and hard-to-trace data.”

Dr Huy says blockchain could be a valuable tool to increase transparency in reporting and, in turn, reduce carbon emissions, as nations push to make progress towards the United Nations Sustainable Development Goals (SDGs).

According to the European Commission, blockchain technology can significantly improve the transparency, accountability and traceability of carbon emissions. 

“With the application of blockchain, firms are also less likely to commit carbon emission fraud because governments can easily track emissions at the firm level in real-time,” explains Dr Huy.

“Blockchain will also help stakeholders use the network effect, transforming individual effort into a network effort that could boost innovations for fighting the impacts of climate change – and subsequently lead to sustainable development.”

According to Dr Huy Pham, a lecturer in finance at RMIT in Vietnam, blockchain could be a valuable tool for nations to utilise as they make progress towards the United Nations Sustainable Development Goals (SDGs). PHOTO: RMIT UNIVERSITY

Blockchain-based insurance for climate mitigation

One example of blockchain innovation for mitigation is how the technology could help hundreds of millions of people impacted by tropical storms.

In emerging economies, people often suffer from tropical storms without adequate insurance protection, and even for those who are covered, many insurance claims are refused if the damage is caused by a natural disaster. 

Dr Huy is mentoring and advising on a new project to develop a blockchain-based parametric insurance platform for tropical storms.

The project, led by Hillridge Technology, was recently awarded a US$200,000 grant by NEAR Foundation, one of the world’s biggest blockchain foundations.

The platform will be piloted in Vietnam, where around 7.7 million people were impacted by typhoons last year.

According to the Office of the UN Resident Coordinator in Vietnam,1.5 million people were directly affected, and 177,000 were considered vulnerable and required humanitarian assistance. 

The typhoons caused 30 trillion dong (US$1.3 billion) in damage – about 0.37 per cent of Vietnam’s GDP – in 2020. 

Dr Huy says the project will provide a weather-based technology that improves the coverage and quality of insurance for farmers and others, going well beyond current crop or livestock insurance. 

“We’re using a global weather oracle and smart contracts – an application of blockchain – for settlement of insurance claims. The premium is based on the short-term risk of bad weather and is tailored to the insuree,” he explains. 

“The company’s technology will continually scan the weather and if weather triggers occur, as per someone’s policy, the payment will be processed. This way the payment will be made within weeks – not months – and the technology makes the claim for you.”

Blockchain and climate vulnerability in Singapore 

The recent UN climate change talks in Glasgow at COP26 made it clear that more attention and action is needed on how to meet the urgent needs of climate-vulnerable countries to help them deal with climate impacts and transition to net-zero economies.

As a low-lying island, Singapore faces significant threats from climate change and rising sea levels. Although the country has limited options to deploy renewable energy at scale, Singapore has reaffirmed its commitment to phase out coal and plans to transition to a low carbon future.

Given the benefits of blockchain, Dr Huy says Singapore needs to keep pushing the boundaries in both regulatory and innovative efforts to increase the green bond issuance, which is currently at US$5.25 billion for the first half of 2021, and ranked 13th in the world.

“As one of the world’s most developed fintech markets, the region’s blockchain hub and ASEAN’s largest green finance market – accounting for close to 50 per cent  of cumulative green bond and loan issuances – Singapore is undoubtedly a role model for other countries both in the region and the world,” Dr Huy notes.

Continuing to pave the way forward, the Monetary Authority of Singapore is developing a blockchain-based ESG Data and Certification Registry which is expected to provide access to quality and transparent ESG reporting.

“Once its ESG Registry is complete, it will be Singapore’s cornerstone in the green finance market, as well as in its pursuit of the SDGs towards a sustainable future,” Dr Huy says.

RMIT, which has offered programmes in Singapore for 34 years, is ranked number three in the world in the 2021 Times Higher Education Impact Rankings for the University’s progress towards all 17 of the UN SDGs; and ranked number two globally for blockchain in the 2021 CoinDesk ranking, conducted in conjunction with Stanford University.

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