Energy consumption of main public blockchain networks is a real concern and a highly discussed issue. Collateral damage of fossil fuel based power generation is huge and "multidimensional". It includes damages to human health and to the environment due to air, water pollution, GHG emissions, irrevocable consumption of natural resources, etc. CO2 equivalent is a universal integrated parameter to quantify the damage, and offsetting carbon footprint once it is real is of great value. DAO IPCI Whitepaper states: "The manufacturers argue that they supply goods and services in demand, which at least means that the buyer of the goods and services (the second Party) is equally liable. From the economic point of view, it is neither the installation, physical objects, nor physical processes, nor the ownership that causes damage. It is actually the transaction, the deal, the trade, which causes the damage, the negative externality". For major public blockchain networks "the manufacturers" are the miners. That's why it would be fair that the users and the miners share the liability for collateral damage and reimburse, compensate or in other words offset this damage.
As we have already pointed out, numerous offers to offset environmental footprint are minimarket solutions to reimburse environmental damage in-kind. To be considered as fair, these solutions have to be justified on both ends, on the demand side, i.e. in terms of calculation of environmental footprint, and on the supply side, i.e. in terms of quality of offset credits. In many cases calculation is not just too approximate but straightly fraudulent. Calculating specific personal carbon footprint is a complex endeavor. The methodologies used should be transparent and at least reviewed and endorsed by the expert community. Selection and quality of offset credits are even more important. People, who pay to offset environmental damage would expect that offset credit is worth the name. Offset credit should be real, absolute, permanent, verified, enforceable and measurable. At the minimum, there should be an adequate and traceable selection of standards applied, project types and prices to make a choice. Most of carbon offsetting proposals, including those that come from reputable brands, do not actually let people see what sort of credits are used, what is their market price, who has verified them, are they really retired or used again and again. Most of carbon credits used to offset carbon footprint represent hypothetically avoided emissions with negligible market price but not actual reductions or quotas. Public blockchain changes the paradigm and makes such scam practically impossible. But only when and if the whole life cycle of carbon credits and allowances is there - on public blockchain, and you don't have to rely on somebodies "trust me".
DAO IPCI team has been working on offsetting scheme for public blockchain carbon footprint from the very beginning in 2016, but reluctant to actually introducing it exactly for the risks and reasons described. Now, that we have managed to arrange for verification, issuance and retirement of high quality actual reductions on Ethereum blockchain, created a mechanism that allows to issue any carbon compliance units secured by the Security Deposit Contract, on the one hand, and while calculation is still approximate high quality studies for calculating energy consumptions indices are available, on the other, comes the time to introduce the "trustless mechanism" required.
General design for offsetting carbon footprint of individual transaction
Calculation Algorithm: Electricity consumed per transaction (MWh) multiplied by Grid Emission Factor (tCO2e*MWh).
Offsetting Algorithm:[1]
- the User may choose the units he would prefer out of those that are placed on the Complier contract, which means that they are born and die on the blockchain
- carbon footprint calculated would be divided by 2
- once the units are paid for and burnt the User and relevant Miner receive public report, which includes the addresses of the burning transaction, of the token, of the verification report, and the amount of tCO2e burnt and left to be burnt
Sources of Data
Transactions data: http://etherscan.io for Ethereum, e.g. https://www.blockchain.com/explorer for Bitcoin
Energy consumption per transaction: https://digiconomist.net/ethereum-energy-consumption for Ethereum, https://digiconomist.net/bitcoin-energy-consumption for Bitcoin.[2]
Grid emission factor: assessed conservatively as equal to national grid emission factor for P.R. of China. According to "China's electricity emission intensity…"[3] equals to 0.861 t/MWh.
Example
TxHash: 0x8cb77d212b249ba3c455f405ceb07d1b05e36ccb7e59cd53ecd3311b08513a28
Block height: 6063159
Mined By: 0x829bd824b016326a401d083b33d092293333a830 (f2pool_2)
Energy consumption per transaction: 0,079 MWh
Grid emission factor: 0,861 t/MWh
Calculation: 0,079*0,861=0,068019 tСО2e
For offsetting purposes the result is divided by 2 and the price established by the Complier is used (ex. current EU ETS price approximately 15 Euro)
The User has to pay for 1,020285/2= 0,51 Euro
Once the units are paid for and burnt the User and relevant Miner receive public report, which includes the addresses of the burning transaction, of the token, of the verification report, and the amount of tCO2e burnt and left to be burnt (0,0340095 tCO each)
[1] Prototype has been tested
[2] Digiconomist Copyright © 2018
General design for offsetting carbon footprint of individual address
Calculation Algorithm would be different: Electricity consumed per transaction (MWh) multiplied by Grid Emission Factor (tCO2eMWh) multiplied by the number of transactions.
Example
Address: 0x6CEc6913fF2F8802a0eaA183Fb61C0234AAB5830
Number of transactions: 327 (https://etherscan.io/address/0x6CEc6913fF2F8802a0eaA183Fb61C0234AAB5830 )
Energy consumption per transaction: 0,079 MWh
Grid emission factor: 0,861 t/MWh
Calculation: 3270,079*0,861=22,242213 tСО2e
For offsetting purposes the result is divided by 2 and the price established by the Complier is used (ex. current EU ETS price approximately 15 Euro)
The User has to pay for 11,1211065 tCO2e = 166.82 Euro
Once the units are paid for and burnt the User and relevant Miner receive public report, which includes the addresses of the burning transaction, of the token, of the verification report, and the amount of tCO2e burnt and left to be burnt (11,1211065 tCO each)
To compare, Bitcoin energy consumption per transaction is not 0,079, but 0,915 MWh. And carbon footprint for transaction would be not 0,068019 but 0,787815 tCO2e, and for the address with 327 transactions not 22,242213 but 257,615505 tCO2e.