November 27, 2022

Eureka News

All the News All the Time

Indonesia Considers Blockchain-Powered Carbon Trading Scheme • Eureka News Now

3 min read

Indonesia wants to steer the blockchain craze towards more environmentally friendly use. Indonesian Stock Exchange (IDX) has signed a Memorandum of Understanding with Metaverse Green Exchange (MVGX), a Singaporean startup specializing in digital exchange technology. The proposed collaboration will focus on IDX’s emissions trading scheme to be launched in 2025, and MVGX’s mission is to support IDX in building a carbon registry and sharing using blockchain as an infrastructure layer.

Using blockchain in carbon trading solves the so-called double counting problem, where two companies or one company and one country claim the same climate action, Bo Bai, executive chairman and co-founder of MVGX, tells Eureka News Now. Established in 2018, MVGX is licensed by the Financial Authority of Singapore to provide securities and custody services. The startup offers SaaS for commercializing carbon credits and focuses on “emerging markets that want to offer international access to their emission reduction projects”.

“The infrastructure also provides an immutable record of creation and ownership of the credit, as well as a tamper-proof record of the past performance of the green project to which the carbon credit is linked,” Bai explains.

Indonesia has joined a number of countries increasing their environmental stewardship with a financial mechanism. According to the International Monetary Fund, 46 countries have been pricing emissions through carbon taxes or emissions trading schemes (ETS) since July.

“The Indonesian government has recognized the important role the financial services industry can play in strengthening the country’s sustainability commitments. IDX is currently preparing for the possibility of becoming a carbon exchange in Indonesia and has entered into discussions with several parties to further our understanding,” said Jeffrey Hendrik, IDX’s director of business development, in a statement.

Carbon trading is not a panacea for climate change. The mechanism gives carbon emitters an incentive to be less polluting or they would have to buy from those with excess carbon credits to offset their carbon footprint. The capital generated from the sale of emission allowances can then, at least in theory, be used to finance environmental protection efforts. One of the biggest criticisms of the mechanism, however, is that offsetting allows companies to claim carbon neutrality without even making any significant efforts to reduce emissions.

Although blockchain is believed to help create a streamlined public record for carbon trading, it does not address the incentive issues related to offsetting. Nor does it ensure the quality of emission reductions by credit issuers or whether these claims will last over the long term.

Crypto’s reception in the world of carbon trading hasn’t been particularly warm either. Startups working to tokenize carbon credits have gained popularity over the past year on promises of attracting more investors to the world of carbon exchanges. One of the liveliest projects is Toucan, which late last year began pushing bridge loans issued by Verra, the standard bearer of the carbon trading industry, onto the blockchain and “retiring” the loans as tradable tokens. In May, Verra banned the conversion of retired balances into cryptocurrencies “on the basis that the act of retiring is widely understood to refer to consumption of the balance’s environmental benefit.”

Toucan’s backlash hasn’t stopped countries from embracing blockchain carbon trading. Aside from potential partnership with Indonesia, MVGX has also worked with carbon trading initiatives in China, including the Guizhou Green Finance and Emissions Exchange, according to Bai, and is in advanced talks with relevant authorities in Malaysia and Taiwan to collaborate on infrastructure projects.

Copyright © All rights reserved. | Newsphere by AF themes.