During this Monday’s Hyperledger Climate SIG peer programming call, we went through an example of transferring emissions through a supply chain using the supply chain. Here’s a summary of how it works:

Imagine there are two utilities, one providing natural gas and one providing electricity, to a building. We want to figure out the emissions of the building based on the emissions of its utilities. Then, we want to be able to calculate the emissions of the tenant based on the emissions of the building.

With our open source blockchain-carbon-accounting project, the emissions of both utilities are tokenized as Audited Emissions tokens. Then, CarbonTracker tokens for the amount of energy they provide, therms for the natural gas utility and kilowatt hours for the electric utility, are created for all their sources of emissions, including Scope 1 combustion, Scope 2 purchased energy, Scope 3 downstream emissions, as well as fugitive methane leakage and flaring emissions. These CarbonTracker tokens are transferred to the building, and the building could calculate its emissions based on them.

Next, the building could create CarbonTracker tokens based on the amount of leasable space in square feet. It could then transfer its own CarbonTracker tokens to tenants. Finally, the tenant’s emissions could then be calculated from the tokens it receives from the office building.

This is could be deployed on any Ethereum-compatible network, like the one we’ve deployed on Avalanche’s mainnet and testnet.

Why do all this?

Currently, most emissions calculations are based on very general national or industry averages, so there’s really no real incentive for a company to reduce its emissions. If we could calculate the actual emissions of a company’s products or services and transfer them through the supply chain, though, we could give them a real incentive to reduce emissions. For example, if the utility uses more renewable energy, it could immediately transfer its reduced emissions to its customers. Similarly, if the building improved its energy efficiency, it could transfer its reduced emissions to its tenants. This would then allow us to create financial instruments based on emissions reductions.

And why blockchain?

A blockchain or distributed ledger is the easiest way to transfer emissions data through a supply chain. Once recorded on chain, the data is immutable–i.e., it cannot be changed–and is open, transparent, and available to all parties. At the same time, they’re recorded using pseudo-anonymous identities, so the transacting parties could choose to reveal their identities when they want to. This removes potential concerns about the validity of emissions reductions claims and the need for integrating data across different emissions accounting platforms.