Blockchain Contributions for the Climate Finance

Sep 04, 2018

Source/author : Konrad Adenauer Stiftung

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Executive Summary

The consequences of climate change have rapidly become one of the most important issues of the global agenda. Along with the consequences of global warming, the current course of climate change is directly related to a series of environmental impacts such as: the rising of sea levels, increased frequency of extreme weather events, the shifting patterns of rainfall, increased risks for the wildlife, economic instability (especially in the agricultural sector), to name a few. The dimension of the expected impacts, combined with the speed of the climatic events, poses a significant challenge not only to countries, but to the international community as a whole, in designing a set of actions to adapt to and to mitigate those consequences.


In order to address these challenges, a significant amount of resources is needed. For instance, under the logic of the concept ‘Common but Differentiated Responsibilities’ the developed countries have pledged, under the UNFCC, to mobilize 100 billion US dollars yearly until 2020 to fund adaptation and mitigation efforts, especially in the developing world.


The international flows of capital aimed to fund climate initiatives have gained a lot of attention recently and has been at the center of the climate change debate. The massive volume of resources and its multiples financing channels have posed an enormous challenge in managing and guaranteeing the efficiency of the funding. Amidst the main challenges in the Climate Finance sector, we would highlight: difficulties to establish Standards and Definitions, lack of Transparency and Accountability; low frequency of Monitoring/Tracking and Evaluation processes; and Overlapping and Double Counting.


The Urgency in spending to curb the environmental impact in time; the Fragmentation, of the players involved in funding and operating the climate funds; and the Volume of resources, which is necessary to promote change in a global scale are fundamental characteristics of the Climate Finance process. Nonetheless, those are unchangeable features. Combined with the issues aforementioned, they provide a serious combination that allows delays, inefficiency and corruption to thrive in the way Climate Finance is managed. In that sense, tackling those issues seems paramount to the success of the international efforts to deal with climate change.


Encouraged by the UNFCC and the Paris Agreement recognition of the importance that technology has on mitigation and adaptation, and their call for the critical role that innovation has to foster and enable those technological solutions – a variety of actors has searched for alternatives.


Blockchain Contributions for the Climate Finance: Introducing a Debate 8 The Distributed Ledger Technologies (among which Blockchain has gained worldwide recognition) is undoubtedly one of the forerunners in this process. The recent successes of one of its applications, the Bitcoin and other cryptocurrencies, have propelled the Blockchain technology to be considered one of the Top 10 Emerging Technologies by the World Economic Forum, besides Nanotechnology, Artificial Intelligence and others cutting-edge innovations.


The process in which the Blockchain technology operates relies on a number of characteristics that offers us a compelling case by the impressive complementarity between what Blockchain has to offer and what the Climate Finance needs. Blockchain applications generally provide gains in several areas that seems to be critical for dealing with the challenges experimented by Climate Finance. From those, worth mentioning the following: Transparency; Time Stamp and Traceability; Trust-Minimizing; Identity Management; Privacy; Immutability; Decentralization; and Reliable Data Storage & Compliance.


It is true, however, that the adoption of Blockchain solutions might bring with it several challenges, some even seems to go in the opposite direction of “saving the climate”, such as the issue of the energy consumption. Nonetheless, rather than barriers, those challenges, if carefully addressed, could even strengthen the adoption of the technology. Therefore, further research are required to help in identifying the strengths and weakness of the Blockchain technology and assess to which extend it could provide a valuable contribution to the climate sector.


This report is one of the frontrunners in this regard. It hopes to foster an informed debate in order to demystify some general ideas regarding the technology and to deepen the level of the debate. This report takes a policy oriented approach, that goes further than providing a context, it also offers several recommendations in critical areas, such as: the importance in Bridging the Institutional Gap focus on countries and Civil Society Organizations; how to Enhance Civil Society Role; Foster New Solutions; and Strengthen the Political Debate.


Above all, we hope with this report to shed light to the issue at hand. By focusing the debate in a positive agenda, we expect that adoption may thrive in an environment where regulation would take an enabling approach, rather than a prohibitive one. If so, we believe that soon Blockchain-based solutions would greatly improve the Climate Finance processes and thus our effort in coping with the Climate Change.

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