Carbon Offsets Meet the Blockchain

By far, the largest threat to investing with your values is something called “greenwashing.”

This is when a company talks a big game – it makes promises to cut carbon, it says it’s promoting diversity, it sends cookies to your grandma. (OK, not that last one.) It does pretty much everything it can to get on your good side.

If a company thinks you’re an investor who is trying to do good for the planet, it will put out flashy ads about how good it is at stuff like recycling.

But if you look under the hood, it’s still the same old lemon. For example, major oil company Shell has an entire page of its site dedicated to promoting renewable energy. But when faced with a judge’s orders to cut its greenhouse gas emissions at its home base in the Netherlands, Shell opted to just relocate its HQ to the U.K.

Unfortunately, this is a problem with no clear-cut solution. Even if Shell were dedicated to fixing its emissions problem, it would still face challenges. It wouldn’t be able to cut its emissions all at once, for starters. That would mean that to meet any goals – like the one the Netherlands judge issued of cutting emissions by 2030 – it would need to offset some of the emissions it couldn’t outright cut.

That’s where it would run into one of my least favorite forms of greenwashing: carbon offsets.

Imagine if your cousin told you that they’d plant a tree for you if you paid them $10. And then you could feel better about driving to the grocery store in your gas-guzzler. Not bad, right? Adding $10 to a grocery bill to save the planet?

Except your cousin wouldn’t be able to guarantee what kind of tree it was, or whether it would actually absorb the amount of carbon your car emits, or whether it would even be alive tomorrow to do the absorbing.

Scale that up a couple billion times, and you have a carbon offset program.

Unfortunately, this isn’t even hyperbole. You can read this article about how, just this year, a wildfire in California wiped out a forest that had been set aside to offset carbon from Microsoft.

This is a known problem. The world is currently scrambling to find ways to offset carbon in a dependable, consistent way. Right now, the technology isn’t all there.

Enter: Silicon Valley.

The news broke a few weeks ago that a new company, Flowcarbon, raised $70 million from investors. The company promises to develop a crypto token backed by existing carbon offsets to trade on a blockchain market called Cleo.

Basically, it wants to package up carbon offset programs and sell shares of those programs on a blockchain. Flowcarbon has said that this is a solution to scaling carbon offsets.

Just as an aside here, have you ever heard the term “throwing spaghetti at a wall to see what sticks”?

It means that people are trying anything they can think of, hoping to find something that solves the problem they’re aiming for.

I’m not against spaghetti, for the record. Sometimes the only way to find an innovative solution to a problem is to try something “off the wall.” (This metaphor is working, right?)

Look, I’m heartened to see that this topic is getting a lot of attention. Tech developers and researchers seem to understand that this is a large, complicated issue. And they seem committed to trying to find solutions.

And if a company does come up with that white whale of a fix, we’ll be here to tell you about it.

Until then…

– Annie Stevenson

Numbers to Know

$500 million

Amount pledged to support carbon capture technologies. This commitment comes from companies like Microsoft, Alphabet, and Salesforce. These companies organized into a “First Movers Coalition” that aims to make more investments like this.

52%

Amount of respondents to an Ernst & Young survey that said they wanted their next car to be an electric vehicle. This number broke over 50% this year, for the first time since the survey started.

What’s Happening in Sustainable Investing

“Greenwashing is not a trivial offense”: CEO of asset management company steps down over allegations of misleading investors

Prosecutors raided DWS (an asset manager wholly owned by Deutsche Bank) early this month. They were investigating reports that the company was exaggerating its green credentials, according to CNN Business.

Clean energy companies grapple with how to handle rising interest rates

E&E News does a deep dive on recession fears, consumer sentiment, and the future of sustainable financing. It’s worth a read.

Links We Like

Your “Sustainable” Investments Might Not Be
Hint: Some own big oil — here’s how to tell (The Grove)

Interested in Solar Panels? Here Is Some Advice.
Buying a solar energy system can be expensive and confusing. Here are some things to think about if you are in the market for solar panels. (New York Times)