AN OPEN CLIMATE ACCOUNTING SYSTEM

ABSTRACT

The open climate project is an open source initiative exploring the application of distributed ledger technology (DLT) and other emerging technologies, such as IoT (Internet of Things), big data and machine learning, to the challenge of helping the world keep a transparent climate accounting system towards the climate targets set in the 2015 Paris Agreement—i.e. maintaining anthropogenic warming below 1.5oC. Global climate accounting, the process of recording climate actors and their actions in respect to the shared account of the planet’s climate state, occurs in diverse set of registry platforms that are individually centralized and collectively dispersed and unlinked. This is often due to lack of trust between actors, resisting to share data that exposes them to scrutiny. This project involves a software ‘platform of platforms,’ distinguished here as the Open Climate platform, the development of climate communication protocols, and a shared user interface as portal to the system. The platform acts as a common integrator that can reconcile climate records and functions from both legacy and DLT-based climate platforms in the pursuit of helping maintain a decentralized ‘ledger of ledgers’. With climate actors and their associated records mapped in a shared network— ranging from countries, to companies to individuals— DLT and other cryptographic tools are primarily used to: provide general transparency alongside individual data privacy, prevention of double counting in the digital certification and trading of climate actions, and a platform for contractual automation of rules and mechanisms with financial nature; from Paris Agreement stocktakes to carbon pricing and rewards for mitigation outcomes.

We distinguish with capitalized letters the ‘Open Climate platform’ from the ‘open climate project’ as a broader initiative involving other networked platforms and protocols.

 

PLATFORM APPROACH

For the last year, the Yale Open Innovation Lab,  along with multiple other partners has been working on the concept of an 'Open Climate Platform;' designed to act as a 'platform of platforms’ by acting as a common integrator that can reconcile climate records and functions from both legacy and DLT-based (distributed ledger technology) climate platforms in the pursuit of helping maintain a decentralized ‘ledger of ledgers’.

 

This system creates a single point of truth of the remaining carbon budget and all carbon-related actions. Climate action is democratized through an integrated climate market, where certificates can be traded and climate actions can be financed. 

 

The project includes a user interface as a portal to the system, providing access to the main functions climate actors need to account their climate action progress and participate in compliance, trading and financial schemes.

 

The open climate project is based on principles of radical inclusivity and equality at the planetary level. It is motivated by the belief that bottom-up civil action and collective intelligence is the most powerful innovation to address the climate challenge. 

Whilst the platform is currently incubated at the Yale Openlab and hosted in its GitHub account, it combines multiple other platforms in advanced technological; stages incubated and developed by a growing network of collaborators. For the combined development, the open climate project adopts a multi-stakeholder open innovation framework and consortium to actualize this ambitious endeavor through radical collaboration. The project will be initially governed by a consortium agreement for shared decision making and common funds management throughout the development phases. Upon platform maturity, it will be released thereafter as a decentralized autonomous organization and system. 

COLLECTIVE PROJECT

LEVERAGING BLOCKCHAIN & EMERGING DIGITAL TECHNOLOGIES FOR CLIMATE CONSENSUS

With climate actors and their associated records mapped in a shared network— ranging from countries, to companies to individuals— distributed ledger technologies (DLT) and other cryptographic tools are primarily used to: provide general transparency alongside individual data privacy, prevention of double counting in the digital certification and trading of climate actions, and a platform for contractual automation of rules and mechanisms with financial nature; from Paris Agreement stocktakes to carbon pricing and rewards for mitigation outcomes.

Smart contracts can be used automate key articles in the UNFCCC Paris Agreement, linking political actors and their commitments with the physical ecosystem state of the planet, and embed mechanism by which subnational and non-state actors can account their actions towards nationally determined contributions and participate in international markets of mitigation outcomes. 

BACKGROUND & CONTEXT

As we move to a stricter management of carbon in our atmospheric commons to prevent global warming from exceeding a dangerous threshold of 1.5/2oC, we must revise the process of transparent carbon and climate accounting. Historically, global accounting has been focused at the county-level, where Parties to the United Nations Framework Convention on Climate Change (UNFCCC)— the primary international climate secretariat— negotiate commitments and submit their greenhouse gas inventories. Ensuring inventories follow the correct guidelines and have robust supporting data has been far from a simple task. Countries are often disincentivized to be fully transparent on their carbon accounting, particularly when economic opportunities are linked, or perceive to be linked, with higher emission practices. This dilemma has eroded trust in the political climate ecosystem.

 

The 2015 Paris Agreement is a landmark international commitment that introduces guidelines to rebuild climate trust with a strong foundation in transparency and bottom-up action. It is considered a “bottom-up” climate change agreement because it proposes that countries define their own nationally determined contributions (NDCs) towards domestic emissions reductions. Countries are then expected to periodically revise their NDCs and strive to meet more ambitious targets. Many provisions of the Paris Agreement are obligatory but not legally binding. There are no consequences for failure to achieve one’s NDC other than the fact that nations around the world use political pressure to hold one another accountable. 

Nevertheless, Article 6 of the Paris Agreement opens up avenues for cooperation between nations, for example by allowing international transfers of mitigation outcomes — essential the possibility of transacting climate credits between countries to fulfill NDCs efforts. Article 13 of the Paris Agreement encourages transparency amongst nation-states, as they must submit greenhouse inventories and information on their progress towards implementing their NDCs. This transparency drives the need for an innovative approach to climate accounting. However, the exact mechanisms to deliver this are yet to be fully developed and would still continue to depend on the UNFCCC as the official warehouse tracking national climate actions.

 

Furthermore, nation states are not the sole climate action stakeholders. Cities, provinces and regions (i.e., subnational actors), as well as business, investors and civil society —collectively referred here as non-state actors (NSA)— are increasingly recognized for their ability to catalyze, implement, and innovate climate actions. In some cases, these efforts go beyond or are more ambitious than national governments’ commitments. Consolidating a climate accounting system that can combine state and NSA climate actions is essential to the success of the Paris Agreement and the prevention of dangerous global warming. In fact, NSAs and their progress should inform national target-setting, tracking and policy-making that in turn should encourage even more non-state action commitments. Quantitatively assessing and tracking climate pledges and certifying the efforts to achieve them, however, are still fraught with difficulties.

 

Existing measurement, reporting and verification (MRV) systems to track climate action —both from state and NSAs— are labor-intensive and costly, frequently requiring third-party consultants, which discourages resource-constrained actors from participating and recording actions in transnational climate action networks or measuring their climate change impacts at all. If we were to consolidate and maintain a single record-keeping ledger with global consensus (i.e. where all parties agree) the task would be far from a simple under a trustless and competitive world. Decades of slow climate negotiations among countries attest to the intricacy of this challenge. The rise and maturity of blockchain and its cryptographic science, paired with emerging digital technologies such as internet-connected sensors, big data and artificial intelligence can provide robust opportunities for existing and new climate platforms to streamline and incentivize data collection, climate action certification (i.e. MRV), accounting and trade. These tools could fill a critical gap in the understanding of how bottom-up non-state climate actions are implemented, what they achieve, and how to build a sustainable system that lowers measurement and reporting burdens to be more inclusive globally.

 

Whilst the initial application of blockchain focused on digital currencies (e.g. Bitcoin), other non-financial applications quickly followed. In fact, its core promise of decentralized consensus eventually caught the attention of the climate world. Eventually, the UNFCCC declared its support for research on blockchain and distributed ledger technologies (UNFCCC, 2018). Following this announcement, initiatives like the Climate Chain Coalition have successfully created a growing network of entrepreneurial actors that are actively exploring the blockchain and climate intersection, each with their own set of technological value propositions. To date, however, there hasn’t been a compelling direct application of the technology, at least not in terms of a global internationally recognized framework for carbon and climate accounting that propose to leverage the power of trustless decentralization and automation to integrate legacy accounting practices with emerging technological ones. There has also been little discussion about how to address questions around the governance of these tools, data sharing between existing climate platforms, development of globally accepted accounting protocols for NSAs, and the dichotomy of maintaining actor data privacy alongside climate transparency. 

 
MULTI-DOMAIN INTEGRATION OF CLIMATE RELATED LEDGERS: A METADIAGRAM

This stylized flow diagram provides a visual reference for the potential of applying and integrating blockchain’s record keeping system across multiple layers pertaining to global climate accounting and the enforcement of the 2015 UNFCCC Paris Agreement. An integrated system, involving multiple blockchain mechanisms connected through shared protocols, allows contractual automation in the link between finance and climate value flow based on the agreed physical parameter of the Earth system (eg. 1.5oC). The climate portal allows users to interface with the global accounting system, as well as digital streamlining the interactive processes for individual actors/agents. The diagram also represents a visual summary of the scope of the project’s vision.

*Networked climate market layer adapated from figure 3, World Bank Group “Blockchain and Emerging Digital Technologies for Enhancing Post-2020 Climate Markets,” 2018.

 

SITE MAP

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