Ben Strack

Firms that revealed plans for a climate-conscious spot bitcoin ETF in December are still working on getting that fund to the US market.&nbsp;



The product proposed by alternative investment firm 7RCC and Tidal Investments would seek a portfolio comprising 80% bitcoin and 20% carbon credit futures contracts “to provide exposure to bitcoin with an environmentally responsible approach,” according to a Dec. 18 filing.



7RCC would be the fund’s bitcoin adviser, while Tidal Investments is set to be its sponsor. The firms have not yet disclosed a fee for the fund. 



Read more: <a href="https://blockworks.co/news/bitcoin-clean-energy-etfs">Bitcoin ETFs could actually be good for the environment</a>



The <a href="https://www.sec.gov/Archives/edgar/data/1985840/000183988223034059/tidal-s1_121823.htm">filing</a> came just weeks ahead of the Securities and Exchange Commission <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">approving spot bitcoin ETFs</a> for the first time. In all, 10 spot bitcoin ETFs began trading in the US on Jan. 11. Those funds have since brought in combined net flows of roughly $1.5 billion, according to Bloomberg Intelligence data.&nbsp;



Though the planned 7RCC Spot Bitcoin and Carbon Credit Futures ETF was left out of the first wave of launches, the firms behind the proposal are moving forward with their plans.&nbsp;&nbsp;&nbsp;



“We’re a little bit of a different product anyway,” 7RCC CEO Rali Perduhova told Blockworks.



A 19b-4 document — a form set to be submitted by the New York Stock Exchange in this case — has not yet been filed for the fund. <a href="https://blockworks.co/tag/sec">SEC</a> approval of such a document is necessary before it would begin trading.&nbsp;&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etf-environmental-impact">This proposed bitcoin ETF has a twist. Would investors bite?</a>



<h2 class="wp-block-heading">Addressing investor concerns&nbsp;</h2>



The proposed offering by 7RCC and Tidal Investments would give investors another bitcoin ETF option amid the ongoing conversations around the environmental impact of BTC mining.



While critics of BTC mining note the sector’s electricity <a href="https://ccaf.io/cbnsi/cbeci">usage</a>, proponents have highlighted miners’ <a href="https://blockworks.co/news/transparency-coming-to-bitcoin-mining">increased use of renewable</a> or otherwise stranded energy, as well as helping balance power grids.  



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">New filing: 7RCC Spot Bitcoin &amp; Carbon Credit Futures ETF… Holds 80% bitcoin &amp; 20% carbon credit futures. Was only a matter of time before we got an “ESG” bitcoin ETF. We’re gonna see all types of permutations on spot bitcoin ETFs. <a href="https://t.co/yeIyEGaGyf">pic.twitter.com/yeIyEGaGyf</a>&mdash; Nate Geraci (@NateGeraci) <a href="https://twitter.com/NateGeraci/status/1736880395121983847?ref_src=twsrc%5Etfw">December 18, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“In no means is this targeted against bitcoin itself,” Perduhova said. “I think you can apply a similar investment strategy to any industry out there. You can do the same with gold mining, you can do the same with banking, you can do the same with anything.”



“But we know this has been a concern for certain investors and we wanted to address it,” she added.



Read more: <a href="https://blockworks.co/news/crypto-mining-energy-consumption">US Department of Energy demands consumption stats from bitcoin miners</a>



Carbon credits represent the reduction or removal of greenhouse gas emissions that compensate for carbon emitted elsewhere. Carbon credit futures contracts physically deliver these carbon credits.&nbsp;



The 7RCC fund would seek to reflect the daily changes of the price in bitcoin and the value of carbon credit futures contracts as represented by the Vinter Bitcoin Carbon Credits Index.&nbsp;



The index’s carbon credit futures are linked to the value of emissions allowances issued under the European Union Emissions Trading System, the California Carbon Allowance, and the Regional Greenhouse Gas Initiative. The fund would gain exposure to the carbon credit futures portion of the index via swap agreements.



Bloomberg Intelligence data <a href="https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/">indicates</a> that global assets conscious of ESG — environmental, social and governance factors — are on track to hit $53 trillion by 2025.&nbsp;



Perduhova said <a href="https://blockworks.co/news/white-house-criticizes-proof-of-work-crypto-mining">climate conversations on the government level</a> have remained prevalent at events like the recent World Economic Forum in Davos, Switzerland.&nbsp;



“When you have governments involved in that, there is a lot of pressure coming from the top, and a lot of investors need to think along those lines going forward,” Perduhova said.



Neena Mishra, director of ETF research at Zacks Investment Research, told Blockworks in December that she doubted the carbon credit futures twist in this fund would entice investors. But Nate Geraci, president of The ETF Store, argued the proposed fund could ultimately “carve out a unique niche” in the bitcoin ETF category.



<h2 class="wp-block-heading">Timeline of launch?</h2>



It remains unclear exactly when the proposed 7RCC Spot Bitcoin and Carbon Credit Futures ETF could launch. After the New York Stock Exchange submits a 19b-4 for the proposed fund, the SEC would publish the proposal into the federal register. From the date it hits the federal register, the regulator has 240 days before it would ultimately have to rule on the planned product.&nbsp;



Perduhova declined to comment on the possible launch timeline given that the SEC is actively reviewing the plans.



However, she noted: “We’re not proposing anything much different on the bitcoin side than anybody else that got approved.”



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The bid for a climate-conscious spot bitcoin ETF presses on

Yet another fund issuer wants to offer a spot bitcoin ETF — with a twist, in what appears to be an attempt to differentiate from a crowded field of would-be competitors.&nbsp;



The proposed fund could resonate with those aware of the environmental impact of bitcoin mining, segment observers told Blockworks, but offers exposure that has recently lacked investor interest and good returns.



Tidal Investments, in partnership with alternative investment manager 7RCC, seeks to launch a spot bitcoin ETF that would also hold carbon credit futures contracts, according to a Monday filing.&nbsp;



The proposed offering would develop a portfolio comprised of about 80% bitcoin and 20% carbon credit futures. It would track the Vinter Bitcoin Carbon Credits Index, which “seeks to provide exposure to bitcoin with an environmentally responsible approach through offsetting carbon emissions,” the <a href="https://www.sec.gov/Archives/edgar/data/1985840/000183988223034059/tidal-s1_121823.htm">disclosure</a> notes.



7RCC did not immediately return a request for further comment.&nbsp;



The US Securities and Exchange Commission has never approved funds that hold bitcoin directly, though some industry watchers believe that could change next month.&nbsp;



Read more: <a href="https://blockworks.co/news/spot-btc-etf-applicants-status-update">Lucky 13? Where spot bitcoin ETF proposals stand ahead of judgment day</a>



Critics of bitcoin mining have pointed to the electricity <a href="https://ccaf.io/cbnsi/cbeci">usage</a> of such activities. Proponents have pointed to miners <a href="https://blockworks.co/news/transparency-coming-to-bitcoin-mining">increasingly using renewable</a> or otherwise stranded energy, as well as helping balance power grids.&nbsp;&nbsp;



Neena Mishra, director of ETF research at Zacks Investment Research, said blending carbon credit futures exposure with bitcoin reflects an attempt to appeal to younger, sustainability-conscious investors.&nbsp;



“Carbon credits do have low correlations with other asset classes and could add diversification benefits to a portfolio,” she told Blockworks. “While there are many ESG-focused products, including carbon credit futures <a href="https://blockworks.co/tag/etfs">ETFs</a>, available to investors, these haven&#8217;t been popular lately and I don&#8217;t think this product will entice investors to jump in.”



The largest US carbon credit futures ETF — the KraneShares Global Carbon Strategy ETF (KRBN) — has $415 million assets under management. It has endured year-to-date net outflows of $134 million, according to ETF.com.



The recent lack of investor interest could be due to returns. KRBN, which launched in July 2020, was down 7.8% in 2023 as of 12 pm ET Tuesday, according to Google Finance data.&nbsp;



Read more: <a href="https://blockworks.co/news/cambridge-bitcoin-electricity-consumption">Why did Cambridge revise its bitcoin electricity consumption index?</a>



The benchmark KRBN tracks — the IHS Markit’s Global Carbon Index — was up 131% since inception, as of Nov. 30, according to a KraneShares fact <a href="https://kraneshares.com/resources/factsheet/2023_11_30_krbn_factsheet.pdf">sheet</a>. But the index’s performance, at that date, stood at roughly 1% in 2023 and at -8% in the trailing three months.



The latest carbon credit futures fund to come to market was the <a href="https://www.etf.com/NTRL">Global X Carbon Credits Strategy ETF (NTRL</a>). It has failed to grow beyond $2 million in assets since its May launch.



Despite lackluster performance and investor interest in carbon credit futures funds of late, bitcoin has rallied.&nbsp;



The price of bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) is up nearly 155% in 2023.&nbsp;



Anticipation for a spot bitcoin ETF is growing, as <a href="https://blockworks.co/news/pinning-down-bitcoin-etf-approval-dates">the SEC is set to rule on a proposal by Ark Invest and 21Shares</a> — and potentially others — by Jan. 10. There are more than a dozen proposals in front of the regulator, some from traditional finance giants such as BlackRock, Fidelity and Invesco.



Expense ratio and marketing will play a critical role in determining winners and losers in the space, said Nate Geraci, president of The ETF Store. Several spot bitcoin ETF issuers, if such funds launch, may not last even a year, he added.



Read more: <a href="https://blockworks.co/news/bitwise-ad-marketing-bitcoin-etfs">New Bitwise ad reflects expected bitcoin ETF marketing blitz</a>



One way to potentially sidestep the fierce competition is to differentiate in some other way, Geraci said.&nbsp;



“Rightly or wrongly, there are meaningful concerns around the environmental impact of bitcoin mining,” he told Blockworks. “It’s possible an ‘environmentally conscious’ spot bitcoin ETF could appeal to a certain type of investor, which might allow it to carve out a unique niche in the overall category.”



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This proposed bitcoin ETF has a twist. Would investors bite?

Shalini Nagarajan

The fintech arm of major Chinese real estate developer Greenland is reportedly vying for a Hong Kong virtual asset trading license, after the city-state recently introduced a new licensing framework tailored for crypto. 



Greenland Financial Technology Group, whose parent company is 46.4% owned by the Shanghai municipal government, is poised to make its second foray into digital banking, per South China Morning Post.



The firm is said to be the first state-owned entity to show interest in capitalizing on Hong Kong’s crypto push. Geng Jing, the firm’s CEO, <a href="https://www.scmp.com/business/article/3220802/unit-chinese-state-owned-developer-greenland-apply-hong-kong-virtual-asset-trading-licence-ceo-says?module=live&amp;pgtype=homepage" target="_blank" rel="noreferrer noopener">reportedly</a> said the firm hopes to delve into crypto trade, NFTs and carbon credits.



Jing reportedly highlighted the strategic significance of obtaining a Hong Kong virtual asset operator’s license. He noted the move would broaden the company’s business portfolio and enhance its global presence. Blockworks has reached out to the subsidiary for comment.



Greenland’s interest in setting up shop in Hong Kong is particularly noteworthy due to mainland China’s harsh stance on digital asset trading, which has included <a href="https://blockworks.co/news/cryptos-decline-as-china-doubles-down-on-regulations-markets-wrap" target="_blank" rel="noreferrer noopener">restrictions on such activities</a>. 



In 2018, Greenland Holdings was one of 29 applications vying for virtual bank licenses issued by Hong Kong. But its hopes were dashed when it wasn’t among the chosen eight. Now, it&#8217;s reportedly trying again with a crypto twist.



Earlier this year, Hong Kong’s Securities and Futures Commission (SFC) <a href="https://blockworks.co/news/hong-kong-crypto-moves" target="_blank" rel="noreferrer noopener">proposed new regulations</a> for the crypto industry, including a fresh licensing scheme.



The SFC emphasized that all existing and prospective crypto trading platforms must initiate a thorough review of their systems and controls in preparation for the forthcoming regulatory framework.



The framework’s consultation process generated an overwhelming response, with over <a href="https://www.bloomberg.com/news/articles/2023-04-27/hong-kong-sfc-to-issue-crypto-exchange-license-guidelines-in-may" target="_blank" rel="noreferrer noopener">150 submissions</a> received.



In any case, Hong Kong’s efforts to <a href="https://blockworks.co/news/hong-kong-crypto-testing-ground" target="_blank" rel="noreferrer noopener">attract players</a> in the crypto space appear to be working. Regional crypto exchanges Huobi Global and OKX were the first prominent firms to <a href="https://www.scmp.com/tech/tech-trends/article/3210963/crypto-exchanges-huobi-okx-eye-hong-kong-licences-regulators-ready-new-virtual-asset-rules" target="_blank" rel="noreferrer noopener">announce their intent</a> to apply for the same license.



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State-backed Chinese Developer Unit Wants Hong Kong Crypto License: Report

Natural gas producer PureWest is minting tokenized emissions credits in an effort to reduce the footprint of a methanol producer and other customers.



The Denver-based company’s certified environmental tokens (CETs) reflect aggregated data collected and verified by data company Project Canary.&nbsp;



PureWest is now transacting the tokenized credits with Switzerland-based Proman, the world&#8217;s second largest methanol producer, the energy firm announced this week.&nbsp;PureWest itself is the most prolific natural gas producer in Wyoming, per its website.



The CETs are each matched to one million British thermal units (MMBtu) of gas produced and are sold on an MMBtu basis, Kelly Bott, PureWest’s senior vice president of ESG, land and regulatory told Blockworks.&nbsp;



Using blockchain eliminates concerns about double selling and proves that each MMBtu of gas was produced with the Project Canary-verified attributes. PureWest <a href="https://purewest.com/news/purewest-energy-and-proman-sign-agreement-to-reduce-scope-3-methanol-footprint-through-digital-tokens/" target="_blank" rel="noreferrer noopener">describes</a> CETs as &#8220;purchasable credits stored on the blockchain for third-party users to achieve their emission reduction goals.&#8221;



“With the purchase of these tokens, Proman can now purchase gas from anywhere while taking credit for our low-methane, freshwater friendly, safely and responsibly produced/certified gas when calculating their own environmental footprint,” Bott said.&nbsp;&nbsp;&nbsp;



“These types of transactions serve to incentivize other producers to reduce their own environmental footprint and jump into this rapidly developing market.”



The tokens are transacted and stored on EarnDLT’s private blockchain, which was built using enterprise blockchain platform Quorum.&nbsp;



JPMorgan forked Ethereum to create Quorum in 2016 before selling it to blockchain software firm ConsenSys four years later.



<h2 class="wp-block-heading">Tokenization is becoming en vogue</h2>



The PureWest-Proman linkup comes after Gold Standard chose climate tech company Flowcarbon to help it finalize guidelines around tokenizing voluntary emission reduction (VER) credits.&nbsp;



Gold Standard CEO Margaret Kim said in a statement last September — when the company began <a href="https://www.goldstandard.org/blog-item/gold-standard-announces-proposals-allow-creation-digital-tokens-carbon-credits" target="_blank" rel="noreferrer noopener">exploring</a> how it should go about creating digital tokens — that “blockchain could bring innovation, transparency and greater finance to the carbon market.”&nbsp;&nbsp;



<a href="https://blockworks.co/news/2023-year-of-asset-tokenization" target="_blank" rel="noreferrer noopener">Tokenization has picked up steam</a> in recent months, with Goldman Sachs, investment firm <a href="https://blockworks.co/news/private-markets-investment-firm-hamilton-lane-to-tokenize-3-funds" target="_blank" rel="noreferrer noopener">Hamilton Lane</a> and Hong Kong’s government among those who have revealed such initiatives.&nbsp;&nbsp;



BlackRock’s Larry Fink, CEO of the world’s largest asset managers, said in a letter earlier this month that the tokenization of assets is <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization" target="_blank" rel="noreferrer noopener">an attractive use case</a> for his company. He had previously called the tokenization of securities <a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal" target="_blank" rel="noreferrer noopener">“the next generation for markets.”</a>



Most recently, <a href="https://blockworks.co/news/tokenized-home-nets-thousands" target="_blank" rel="noreferrer noopener">Roofstock sold a Georgia home to ReaIT</a>, a provider of fractional real estate investment in tokenized assets, in a transaction facilitated by an Ethereum-based NFT.



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Major Energy Companies Are Trading Tokenized Emissions Credits

Michael Bodley

<div id="highlights-block_6334582d3129b" class="highlights">
 <ul>
 <li>No partnership has raised even close to $2 billion for a series of market-making products that feature both asset classes</li>
 <li>Tokenized carbon credits feature aspects of structured products, commodities and related derivatives</li>
 </ul>
 
</div>



Carbon offset credits, meet crypto.



Digital assets-focused exchange and carbon credit liquidity provider 1GCX and T3 Trading, a proprietary trading firm that invests in the space, have struck a deal, raising a whopping $2 billion and setting up a $100 million liquidity pool to ease carbon credit transactions.



The move, made possible by the unprecedented fundraise for tokenized carbon credits, has been propelled by the <a href="https://cms.blockworks.co/mymetaverse-launches-carbon-sink-nfts-to-further-web3-sustainability/" target="_blank" rel="noreferrer noopener">growing interest</a> of institutional investors in the securities, executives from the firms exclusively told Blockworks. Such securities — proponents say — ease the ability of institutional investors, including pension plans and endowments, to put their money where their mouth is in terms of deriving measurable alpha from ESG investment products.&nbsp;



As an asset class, however, fractionalized carbon credits carry plenty of risk: The financial instruments are quite volatile, and the verdict is still out, according to detractors, on how much good they do in terms of stopping the rampant spread of <a href="https://cms.blockworks.co/blockchain-tech-is-key-to-combating-climate-change-report-says/" target="_blank" rel="noreferrer noopener">global warming</a>. And that’s not to mention a glaring absence of liquidity, considering the offsets trade more like illiquid structured products than anything else in digital assets, despite coming with far steeper ups and downs in terms of price.&nbsp;



Enter 1GCX, which is providing the infrastructure for the ambitious new trading platform.



T3 moves millions of dollars of capital around between a number of major crypto exchanges and also puts money to work in commodities markets. Both firms additionally specialize in equity derivatives and have rolled out a number of related synthetic trading pairs coupling commodities with cryptocurrencies. The exact terms of the deal were not disclosed.&nbsp;



The idea is to set up a series of liquidity pools and associated over-the-counter (OTC) market-making activities that reduce the spreads of such transactions in a bid to attract institutions into the markets, including entities from traditional finance accustomed to carbon assets but still learning when it comes to digital assets.&nbsp;


<div class="wp-block-image">
<figure class="alignright size-thumbnail"><img loading="lazy" decoding="async" width="150" height="150" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png" alt="" class="wp-image-32708" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=400 400w" sizes="(max-width: 150px) 100vw, 150px" /><figcaption>RA Wilson, 1GCX’s chief technology officer</figcaption></figure></div>


RA Wilson, 1GCX’s chief technology officer, told Blockworks the company has been doing due diligence on the feasibility — and the cost of quantitative-driven execution — on the initiative for several years. It was especially driven after finding there were virtually no other market makers that catered to retail and accredited investors alike in terms of pairing digital assets with real-world commodities, plus derivatives.



Even now, according to Wilson, liquidity is mostly made up of bulge-bracket banks snapping up large quantities of the carbon securities at discounted prices, then acting as an unofficial marker maker for counterparty trading firms. The banks likely capture a handsome spread for doing so, considering such trades are essentially de facto OTC in nature. 



<h3 class="wp-block-heading">The case for tokenization</h3>



Wilson, who has personally invested in crypto since 2011, said he noticed about five years ago that, while carbon credits — promoted by governments, including the US, and featuring tax incentives, in select cases — were gaining momentum, companies see the products as more of a do-good effort, not the “currency” the instruments were designed to become.&nbsp;



“Business development starts with building the right marketplace, making sure there’s liquidity, of higher-quality offsets and nature-based solutions,” Wilson said. “Diverting financial assets from land-based projects can actually benefit us globally.”



1GCX is also in the relatively early stages of developing its own blockchain, featuring a token that draws a parallel between “proof-of-authority” and algorithmic “computational proof-of-authority.”



Proof-of-authority is a method of signing off on transactions that features elements of proof-of-stake consensus mechanisms but relies on validators <a href="https://medium.com/poa-network/proof-of-authority-consensus-model-with-identity-at-stake-d5bd15463256" target="_blank" rel="noreferrer noopener">staking their identity or reputation</a>. It typically features in private, centralized blockchains, rather than public permissionless systems.



The end goal: building a digital assets-based market driven by the burgeoning “green web mixed with the internet of energy.”



The first-of-its-kind setup would, ideally, increase the transparency of price discovery and real-world utility — in terms of combating climate change — two common thorns of institutional investors that until now have had to rely on Wall Street and the commodities hub of Chicago to transact in illiquid carbon credits denominated via the murky pricing of market makers.



Traders using 1GCX already have access to a range of digital assets, such as bitcoin, ether, AVAX and SOL. 



There’s already a “huge demand” from institutions hungry for carbon offset credits, one that’s growing every year, according to Wilson. The launch of the trading platform ought to boost liquidity, transparency and fair pricing — while clamping down on fraud — by adding crypto to the mix, he said.



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Upstart Crypto Carbon Credits Platform Raises $2B to Tap ‘Internet of Energy’

<div id="highlights-block_625efbaff8465" class="highlights">
 <ul>
 <li>By storing carbon credits as digital tokens, they can be more easily tracked and traded</li>
 <li>Companies using blockchains and smart contracts to advance climate change initiatives to become “industry norm,” according to Chainlink Labs</li>
 </ul>
 
</div>



Blockchain technology will play a key role in combating climate change by managing clean energy solutions and enabling enhanced automation, a report by Chainlink Labs and Tecnalia says.



<a href="https://chainlinklabs.com/" target="_blank" rel="noreferrer noopener">Chainlink Labs</a>, which offers open-source blockchain interoperability solutions, and European research institute <a href="https://www.tecnalia.com/en/" target="_blank" rel="noreferrer noopener">Tecnalia</a> posited in a <a href="https://chain.link/resources/managing-climate-change-energy-industry" target="_blank" rel="noreferrer noopener">report</a> Tuesday that the energy industry can make clean energy investments more efficient by leveraging blockchain technologies.  



By tapping blockchains, the power business can better digitize and value clean energy investments, according to the report. That would likely lead to additional capital deployed to green investment opportunities, more transparency and stronger accountability when it comes to meeting climate-friendly commitments, the two companies found.&nbsp;



The report labels “hybrid smart contracts” as the new backend framework necessary for building clean energy solutions. The framework uses blockchains to track and settle multi-party processes and smart contracts to define the rules for involved parties.



It also uses oracles — or interoperability solutions for blockchains built on smart contracts — to integrate data and non-blockchain infrastructure into the contracts.



More than 140 research projects and startups had begun studying, testing and deploying blockchain-based solutions as of 2019 to improve energy industry processes, the report says.



“As more and more companies recognize how blockchains, smart contracts and oracles can advance climate change initiatives, we’ll begin to see a trend that will only grow with time until it becomes an industry norm,” a Chainlink Labs spokesperson told Blockworks.&nbsp;



Among the use cases outlined in the report are tokenized carbon credits, which companies buy to offset emissions. By storing carbon credits as digital tokens, the thinking goes, the tokens can be more easily tracked and traded, and oracles can then issue and audit them.



Oracles can use satellite and remote sensing data to measure the carbon sequestration in a certain region to verify a project’s stated carbon offset before issuing a credit.



Hybrid smart contract system Hyphen, for example, uses Chainlink oracles to bring verified greenhouse gas data on-chain and prove stated corporate climate commitments.



“We can now supply validated real-world measurements to dynamic carbon assets,” Hyphen CEO Miles Austin said in a statement. “This gives confidence to investors, capital markets, banks [and] regulators.”



Like the tokenization of carbon credits, climate bonds and green bonds — fixed income instruments that raise money for environmental projects — can also be tokenized on blockchains.



Ethereum-based climate risk solutions platform <a href="https://c212.net/c/link/?t=0&amp;l=en&amp;o=3508495-1&amp;h=1682524004&amp;u=https%3A%2F%2Fwww.arbolmarket.com%2Fenergy&amp;a=Arbol" target="_blank" rel="noreferrer noopener">Arbol</a> uses smart contracts to help energy businesses hedge power demand and revenue fluctuations around changing temperatures.



Individuals could also be incentivized to reduce emissions through rewards programs, according to the report. Consumers could be compensated with crypto or NFTs in exchange for meeting the requirements of a smart contract designed to minimize their carbon footprint.



Going forward, clean energy industry leaders must assign researchers to focus on the benefits of blockchain technology and how they can leverage smart contract and oracle technologies before competitors, the Chainlink Labs representative said.



“What they discover will motivate them to act,” the spokesperson added. “And that momentum on an industry-wide level will help facilitate the inflection point we need to realize a more sustainable future.”



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