In this ever-pressing battle against climate change, the need for innovative solutions can never be ignored. To combat these climate changes, Web3 stands ready against this global issue. To reach the goal of $1 trillion in annual climate financing, everybody needs to jump in and participate to make it a reality.
But the contribution has only come from the governments of developed institutions, which has consequently failed to make an impact. Their strategies may have helped developed countries, but not the developing ones. The good news is that Web3 closes this “Climate Funding Gap”, with Grassroots crypto initiatives. This article will discuss how Web3 will revolutionise climate finance, so let’s begin.
Web3 is the most advanced generation of the web after the previous two generations. Web 1.0, proposed by Tim Berners-Lee, was the first browser based on Hypertext Markup Language (HTML) and Hypertext Transfer Protocol (HTTP) at the beginning of this Web era in 1989. “Semantic Web”, was also introduced in this new era.
This web was then upgraded to Web 2.0 after it became well-known among the masses. Its development made an interactive web using social networks like Facebook. The appearance of the two latest technologies followed this. Yes, it’s about the current era of Web 3.0, promoting cryptocurrency and blockchain. Gavin Wood started calling this version of the decentralised web “Web3”.
The Environmental Impact of Traditional Finance
The financial stability of many business sectors is affected by adverse climates. According to the Intergovernmental Panel on Climate Change (IPCC), Around 20% of global regions have exceeded the temperature limits by 1.5 degrees above the pre-industrial levels.
It is safe to say that traditional financial institutions do not greatly impact tackling the climate crisis. These risks have grown exponentially with the substantial financing of carbon-intensive activities.
Web3 Solutions for Climate Finance
Investments have always attracted retail investors. According to the Sustainable Banking Report 2022, investors want to deploy around USD 8.2 trillion into sustainable opportunities. These can be made through financing the fight against climate change. Here are some Web3 solutions:
#1. Micro Green Bonds
The concept behind Green Bonds is to raise funding for financing projects to enhance renewable energy resources. To make this accessible at the micro level, Web3 has a part to play that would greatly impact this ecosystem.
#2. Grassroot Projects
The infrastructure of Web3 launch pools gathers climate experts on board to prioritise which projects should be started first and the funding process for those projects. Community-based approaches like Grassroot Project initiate such economic movements.
#3. On and Off Chain Climate Assets
Usually, the off-chain climate assets were not accessible to retail investors. The first step to democratising access is to bridge this gap and make all climate assets on-chain to increase revenues.
Web3-Powered Climate Finance Projects
Climate Decentralised Autonomous Organisation (ClimateDAO), Celo Climate Collective, Plastiks, KlimaDAO, Treejer, and Reverse are some successful projects of Web3 climate finance. A brief introduction of all of these is:
- Celo Climate Collective: It aims to build regenerative applications to back stablecoins with tokenised natural assets.
- ClimateDAO: It opened a new frontier in the fight against climate change. It uses Earth Fund to pool resources and invests them in carbon removal, Green-tech etc.
- Plastiks: By utilising Non-Fungible Tokens (NFTs) and carbon-neutral blockchain, it has created a platform to trace the recovery of plastic production.
- Treejer: This platform connects tree funders to rural planters and stakeholders in a transparent ecosystem.
- Reverse: It supports the regeneration of 13 climate projects based on water conservation, pollution, tree plantation and more.
- KlimaDAO: This platform is building a climate-backed digital currency with tokens backed by verified tokenised carbon reduction and removal.
Also Read: Crypto for Financial Inclusion
The Role of Cryptocurrencies in Climate Finance
The creation of carbon credits through blockchain technology is one of the emerging applications. Along with Web3, cryptocurrencies based on climate themes can also make a huge impact with their rewards and incentives.
For Example, a native token KIMA, a carbon-backed cryptocurrency, lets everyone participate in the carbon economy without the involvement of a third party. The Crypto Climate Accord (CCA) aims to make crypto a 100% renewable energy resource by 2050. This will ultimately help the stakeholders to measure their greenhouse gas emissions and reduce their carbon footprints.
NFTs and Conservation Efforts
NFTs are digital assets frequently bought and invested with cryptocurrencies. The aim is to promote traditional fundraising for the conservation of extinct and endangered worldwide. Tristan Wood, director of the wildlife charity, claimed he raised around US $7,000 using NFT trading. They let the investors be a part of wildlife conservation projects and keep them updated.
But there are some contradictions in using these NFTs. Some organisations like Greenpeace rejected trading with NFTs because of their impacts on the climate. According to them, their production damages the environment, causing charities to go wasted by their adverse effects on the ecosystem.
In the face of the climate crisis, Web3 technology emerges as a powerful ally in the quest for sustainable finance and conservation efforts. By leveraging blockchain’s transparency and decentralisation, Web3 enables innovative climate finance solutions accessible to individuals worldwide. Building a greener and more sustainable future will be easier if more individuals and organisations participate in the projects offered by Web3 Technology.
Frequently Asked Questions
What Are the Key Features of Web3 Technology That Make It Suitable for Climate Finance?
Web3 uses blockchain and smart contract technologies. These smart contracts can potentially create transparent and automated transactions ensuring the purposeful use of climate-fund. Also, as it operates on decentralised networks, it is more accountable and trustable to record transactions and actions.
How Can the Average Individual Participate in Web3-Powered Climate Finance Initiatives?
Participating in Web3-powered climate projects is accessible by investing in climate-focused tokens, supporting NFTs for climate causes, joining Climate DAOs, and engaging in carbon offset projects. Individuals can also participate in Web3 projects with staking mechanisms to lock their tokens in smart contracts.
What Are the Main Challenges Hindering the Widespread Adoption of Web3 in Climate Finance?
Despite the transparent ecosystem of blockchain, individuals in developing countries are still sceptical about trusting new technologies. Some organisations and institutions hesitate to adopt these innovations due to legality issues. Also, digital assets are highly volatile, exposing investors to financial risks.
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