Blockchain technology isn’t just good for powering cryptocurrencies. Distributed ledgers could also enable transparent, auditable carbon-trading markets.
That’s Hedera’s big bet. The company, whose distributed ledger technology (DLT) was rated the fastest and most energy-efficient on the market by experts at University College London, allows users to issue, buy, and sell climate credits in an immutable distributed digital ledger with security, speed, and energy-efficiency that rivals competitors, according to its creators. Unlike other crypto networks, it also benefits from a 28-member governance council made up of tech companies (including ServiceNow, publisher of Workflow Quarterly), global banks, and top universities.
Workflow recently spoke to Jonathan Rackoff, head of global policy at the HBAR Foundation, Hedera’s grantmaking arm. Rackoff is an attorney who served for seven years in the Obama White House and the U.S. Environmental Protection Agency, focusing on financial services reform and environmental sustainability. He also worked in private practice advising Coinbase and other tech companies.
He argued that Hedera will revolutionize how companies meet their climate goals and compliance requirements. This interview has been edited for clarity and length.
One of the challenges in deploying DLT networks to solve environmental sustainability problems is that the networks themselves can often be vastly energy consumptive, and therefore, the carbon footprints of the networks are extraordinarily high. Hedera has changed that landscape, because it provides a network that is orders of magnitude less energy intensive than any competitor and can also be used for real-world commerce because it doesn’t have long lag times.
Combine that with the Hedera token service and our open-source Guardian tool, and we’re able to create digital representations of carbon credits that build in all of the environmental and social metadata associated with the asset. The way I like to describe it is when you’re buying a house, you want to be able to go to the county courthouse and look up its chain of title. This permits us to do that with assets for which there has never been a way to collect that data before.
So now, when you buy a carbon credit, you know where it came from, the local communities and people involved in generating it, the tools that they used to validate and verify it, and the methodologies they relied upon to assess the amount of carbon removed from the atmosphere. When you know this with a high level of confidence, you have trust and the asset value goes up.
We’re in this uncertain regulatory moment. We’re waiting on new rules from the U.S. Securities and Exchange Commission, which are expected this spring, and we’ve already seen some new regulations in the EU. It’s my belief that you will see an acceleration of adoption when demand for reporting increases.
If we’re successful, what makes this technology exciting will fade away because it will be adopted by everyone. It will be the backbone that powers the climate markets.
