Cars speed by and make us sneeze on our way to work.
Soon, there will be no trees to see through the forest. It’s just too hot. As the climate crisis deepens, carbon trading has been hyped as a key solution, promising to reduce greenhouse gas emissions through market-based incentives. But is only partly works. This approach often results in unintended consequences, particularly for developing nations. Wealthier countries exploit poorer ones
through emissions trading, creating a new form of inequality (carbon colonialism). Can web3 tech have a potential remedy?
Carbon trading systems allow countries and companies to buy and sell emissions allowances or credits. In theory, this should drive cost-effective emissions reductions and stimulate investment in sustainable projects. However, the reality falls short. For instance, carbon markets have sometimes exacerbated inequalities by benefiting wealthier nations at the expense of poorer ones.
Let’s not kid ourselves. It’s good business to outsource carbon-intensive activities to poorer countries.
Nearly a quarter of global CO2 emissions now come from these imported emissions. For example, while the UK reports a decrease in domestic emissions, it has actually increased its imported emissions by 28% since 1997, shifting the burden to developing countries.
The financial implications are striking.
Research indicates that developed nations have far exceeded their fair share of the global carbon budget, using up three times their allocated amount and claiming half of what should belong to poorer countries. By 2050, it’s estimated that these nations will owe $192 trillion in compensation to the global South to address this imbalance.
But it’s not just about money! People suffer because of carbon colonialism.
In Uganda, the scenario of carbon colonialism is evident in afforestation projects by Norwegian companies. These projects, aimed at earning carbon credits, have led to social unrest and displacement of local communities. The focus on international carbon markets over local needs highlights a troubling trend of neo-colonial practices.
In this context, Regenerative Finance (ReFi) offers a different approach. ReFi aims to shift the focus from these failing financial models to those that prioritize local communities and ecosystems. One promising, yet simple area, is the promotion of clean cooking methods. ReFi projects designed to provide clean cookstoves to families can significantly reduce emissions and improve health outcomes.
Consider a family in rural Kenya. Previously, they used an open fire for cooking, which emitted harmful smoke and led to respiratory problems, particularly affecting the children. With a new clean cookstove funded by a ReFi project, their firewood can be decreased by 60%, and their health can be significantly improved. Cleaner air in their home can also led to better school attendance and lower medical expenses.
What’s new here? Clean cookstoves equipped with emission measurement sensors can track and verify carbon reductions. This data can be recorded on a blockchain, ensuring transparency. ReFi projects could use blockchain-based tokens to compensate families for their verified reductions. These tokens could be redeemed for goods, services, or further investments in sustainable practices.
ReFi represents a shift towards a more equitable approach to climate solutions, but its success depends on addressing fundamental issues. The brutal reality of foreign companies using carbon credits as an excuse to cut down pristine rainforests must end.
Let's stay alert to the risks of carbon colonialism, as it will probably persist due to the profit it generates.
But web3 tech is promising. By ensuring genuine community involvement, fair compensation, and transparency, ReFi could help move beyond the traditional carbon markets. It’s a chance to create a more balanced approach to climate action—one that genuinely supports and benefits the communities most affected by environmental degradation.