Bitso, a Mexico City-based crypto exchange, pledges to purchase carbon offsets for every bitcoin transaction on its platform to offset the environmental cost of cryptocurrency. This may sound great in theory, but the idea also deserves a healthy dose of skepticism, given the sketchy reputation that carbon offset efforts have earned over the years.
Bitcoin’s thirst for energy has increased several times, recently exceeding the electricity consumption of several countries, including Denmark and Chile, according to estimates by the University of Cambridge. Most of this energy (61%, according to Cambridge) comes from the burning of fossil fuels and, unfortunately, Bitso can do nothing to prevent the resulting emissions from entering the Earth’s atmosphere.
Well, it could, for example, completely ban energy-intensive tokens. But that won’t happen. Instead, Bitso is working with Moss.Earth, a carbon offset company based in São Paulo, Brazil, to indirectly mitigate emissions associated with the transaction of bitcoin and Ethereum-based tokens through its platform. The exchange plans to do this by purchasing “token credits from conservation projects in the Amazon rainforest in Brazil.”
In other words, Bitso will absorb the cost by buying MCO2 tokens minted by Moss. In turn, Moss will use the money in part to fund projects that preserve forests and fund sustainable agriculture. The company is certified by groups such as Vera, a non-profit organization that sets standards for carbon credits. However, last year a Guardian and Unearthed investigation found that Vera’s methodologies were “not currently robust enough” – Vera strongly criticized the report.
For the numbers buffs: Bitso estimates that each bitcoin transaction on its platform “generates 29.4 kg of CO2 emissions, equivalent to 0.0294 MCO2 tokens, which Bitso will buy at market price,” a spokesperson told TechCrunch. There is a wide range of estimates that attempt to determine the exact emissions related to a single bitcoin transaction, and some are much higher than that of Moss and Bitsobut that is beyond the scope of this story. As for MCO2: it is an ERC20 token and has its own associated emissions, but Ethereum is more efficient than bitcoin and the platform is also working towards a less greedy proof-of-stake system. Phew!
With over 4 million users, Bitso calls itself the most popular and largest platform of its kind in Latin America. Yet globally, CoinMarketCap ranked Bitso 67th on its list of top exchanges at the time of this story’s publication, reflecting the limited scope of the deal.
Moss wants more. “We hope other projects in space will follow to offset their carbon footprint,” Moss CEO Luis Felipe Adaime said in a statement.
So will it work? Although the carbon credit industry is huge and expected to swell in the coming years, such efforts get tons of flak for not living up to their perceived potential. Greenpeace, for example, writes that “carbon offset plans are essentially public relations plans”, arguing that companies “must first prevent carbon emissions from entering the atmosphere”.
Zurich-based finance and climate policy doctoral student Lena Klaaßen told TechCrunch via email that it is “usually possible to offset emissions from cryptocurrency-related activities,” but she cautioned that “ transparency on the calculation methodology, the quality of the data and the selection of the lags is essential to assess the quality of such a project.
For its part, Bitso calls it a “first step towards a broader sustainability strategy to address the environmental impacts of the crypto industry.” Moss predicts the deal will “save about 342,000 trees in the Amazon, offsetting about 5,283 tons of carbon dioxide.” In total, Moss says it has helped save “approximately 152 million trees in the Amazon through internationally certified and audited projects” since March 2020. The company claims to work with “the most reputable environmental projects” , and he offers some details on how they operate via his site. Yet trusting Moss requires some trust in Vera as well as carbon credits in general. And again, when it comes to carbon credits, skepticism abounds.
Saving and planting trees are two wildly popular ideas, but many environmental and advocacy groups have criticized the tree fixation of politicians and corporations, in part because they say there just isn’t enough room. for all the saplings we would need to mitigate soaring emissions. that come from harvesting and burning fuel.
Either way, happy Earth Day!