Decarbonising crypto: essential sustainability terms explained

What does sustainability mean, and how does it relate to crypto?
WRITTEN BY
Daniel Taylor
26/06/2022
7 min

If you’ve been following the Zumo news recently, you know how serious we are about sustainability. Protecting our planet has been baked in to our values from the get-go, and now more than ever there’s an urgent need for us to be talking openly – and taking action – on this critical issue. But, you might ask, what do we mean by that word sustainability in the first place? And what terms and terminology should you know to better understand the topic?

“Sustainability”. It’s a word we hear all the time. Within just five years, online searches for sustainable products have soared by a staggering 71%. Around the world, thousands have broken out of their ordinary lives to protest the climate crisis. Placards, protests and even arrests bombard our headlines, all in the name of sustainability. But despite the roaring momentum, reporting suggests that two thirds of us using sustainability buzzwords don’t know exactly what they mean.

In this blog, we’ll break down some key terms you need to know, explain why it matters, and share what we’re doing to take action on crypto and the climate.

What is “sustainability”?

Simply put, sustainability is the ability of something to sustain itself forever without negative impact. In other words, it doesn’t run out and it doesn’t cause harm. As the United Nations once put it, sustainability is about “meeting the needs of the present without compromising the ability of future generations to meet their own needs”.

For example, solar energy is sustainable because the sun will not run out (not any time soon at least!) and harnessing that energy can be done without unduly damaging our environment. Likewise, hydro energy plants and wind farms are sustainable because we will always have water and plenty of windy days.

What does “unsustainable” mean?

By contrast, energy generated from burning fossil fuels such as oil or gas is unsustainable, because those resources will run out and they cause irreversible harm to our environment in the process. This is primarily due to greenhouse gases (something we’ll talk more about later on), which contribute to the warming of our planet and result in nasty climate impacts such as flooding, forest fires and the destruction of biodiversity. If we carry on this way, our planet becomes unlivable, and so fairly evidently these are not sustainable solutions.

Sadly, because of the damage we’ve already done to the planet due to unsustainable practices, sustainability today must also go beyond the traditional sense of the term. Where we are now, it’s no longer enough to be neutral and not do active harm; we’ll also need to work actively to regenerate, rehabilitate and actively nurse our planet back to health - and focus on delivering net positive outcomes wherever we can.

Does “sustainability” have a different meaning in finance?

Yes and no. Because the term was so vague for so long, some companies and investors were falsely marketing their services as “sustainable”. This is known as “greenwashing”, and it can be extremely damaging both for well-meaning investors and the environment. To try to deal with the problem and stamp out greenwashing, the European Commission created a strict definition of sustainability for finance professionals, known as the EU Taxonomy.

Within the EU Taxonomy, there is a much stricter definition of “sustainable activities” broken down into six environmental objectives:

  1. Climate change mitigation
  2. Climate change adaptation
  3. The sustainable use and protection of water and marine resources
  4. The transition to a circular economy
  5. Pollution prevention and control
  6. The protection and restoration of biodiversity and ecosystems

Companies can only be sustainable if they meaningfully contribute to at least one of these objectives – without damaging any of the others. Of course, there’s a big difference between statutory minimums as defined by rulemakers and effective societal action. We’ll all need the ambition to go beyond obligation and proactively push the envelope if we want to deliver real change.

What are “greenhouse gas emissions”?

When we do everyday things like drive cars, switch on lights or even use our phones, we consume energy. When that energy comes from fossil fuels, this releases gases into the atmosphere, including carbon dioxide, methane and nitrous oxide. For example, one person checking their emails is estimated to release the equivalent weight of a pineapple of greenhouse gases - every single day. Taking a return flight from London to New York could release a couple of tonnes.

Collectively, these emissions are known as “greenhouse gases” because they trap heat in the atmosphere – like a greenhouse. Greenhouse gases cause global heating and, to avoid disaster, we urgently need to stop emitting them in such volume. To put it into some sort of perspective, according to NASA estimations carbon dioxide concentrations are as high as they have been in three to five million years! The scale of the problem is immense - and the time we have to change course short.     

Why we need rapid decarbonisation  

If the planet continues to heat, problems with flooding and forest fires will become more and more commonplace. And as ecosystems become further damaged, so too do their regenerative capacity, resulting in negative feedback loops that only accelerate the decline. This doesn’t just mean that millions of people will be displaced, it also threatens our food sources. Global heating and changing weather patterns destroy crops, while important pollinators like bees are falling into rapid decline.

To try to reduce the severity of these impacts, companies and organisations must rapidly reduce the quantity of greenhouse gases they release – or at minimum compensate for them as the measure of last resort. This process is generally called “decarbonisation”… and despite the name, it’s often used to include all greenhouse gases, not just carbon dioxide.

We are now at a stage where rapid decarbonisation is needed across the board to tackle the climate crisis and avoid passing the point of no return.

Is it possible to decarbonise crypto?

We believe that it’s not only possible, it is essential. We all have a part to play in reducing global emissions and that certainly includes the crypto industry. The CCA (Crypto Climate Accord) has set an objective to decarbonise all crypto miners, exchanges and investments by 2030, and Zumo has signed up to this commitment.

To get there, we first need to develop a standard, universally-applied methodology to understand the true carbon footprint of crypto. Although there is still much work to be done, we’re confident we can get there. At Zumo, we’ve already conducted significant research in this area, which we invite you to explore here. And as a leader in the space, we have a 2030 net zero strategy in place to bring our own company emissions right down too.

What are “carbon reduction strategies”?

The best way to meet our climate goals is to stop emitting greenhouse gases altogether. While this may never be completely possible, companies are finding ways to bring their emission levels down. This planning process is known as a “carbon reduction strategy”. And, indeed, this is precisely the longer-term ambition for the crypto sector as a whole. Deep cuts in emissions are needed, and the sooner we can get there, the better.

What does “net-zero” mean?

Net-zero is a quick way of saying that the overall balance of carbon or greenhouse gases released into the atmosphere is, well, zero. This is sometimes also referred to as “carbon-neutral” - the difference being that with carbon-neutral, the emphasis is on offsetting, while with net zero the emphasis is on absolute emissions reduction, with offsetting as a measure of last resort.

Net zero is perhaps best imagined as a journey - climate technologies are still being developed and most of all it’s the attitude of making incremental improvements at the soonest possible opportunity that adds up to effective change. 

What is “carbon offsetting”? And does it work?

Eliminating greenhouse gases entirely from certain production processes is (currently) impossible. And so when companies cannot reduce their emissions any further, some will pay for a service known as “carbon offsetting”. Broadly, carbon offsetting means compensating for (or ‘offsetting’) the emissions you cause by preventing the release of greenhouse gases elsewhere.

Many companies offer offsetting services by selling “carbon credits”. One carbon credit is supposed to be the equivalent of offsetting 1 tonne of carbon emissions.

However, before opting for an off-setting service, be sure to research carefully. The unregulated industry – described by some as “The Wild West” – is notorious for fakes and double-counting, though it also includes many well respected players.

Carbon removal and nature-based solutions

Carbon removal and nature-based solutions aim to go beyond the prevention of emissions and actively reduce carbon in the atmosphere.

This may be technology-based - for instance, there are some tech companies, sometimes called CarbonTechs, claiming to suck up carbon from the air and lock it away. However, some scientists and experts are sceptical about whether this truly works.

A far more common – and probably more successful – approach is simply to plant more trees. Plants absorb carbon dioxide and pump out oxygen, so they truly are nature’s ideal solution to the climate crisis. However, we need a lot of trees to offset the damage. One study found that to offset charging one mobile phone to 100% battery in the home, it would require more than 34 house plants!

Are “RECs” (Renewable Energy Certificates) an alternative to carbon credits?

They can be! In the same way that a carbon credit – by design – gives a company the opportunity to offset one tonne of greenhouse gases, RECs represent one megawatt-hour of electricity generated from a renewable source. 

As sustainability continues to dominate our thinking, we anticipate RECs will become more popular in the crypto industry over the next years - especially given crypto’s electricity-driven consumption. As elsewhere, it comes with the caveat that we focus on driving down emissions wherever we can.

What now…?

By this point, hopefully you’ve come to understand a little of the decarbonisation challenge and some of the issues at stake. While it’s a topic that encompasses all of us, in all our capacities and across all industries, we’re glad to say that, within the digital assets space, the adventure to decarbonise crypto is well on its way. The sector has set itself some ambitious targets - and at least has the clarity about what it needs to do to make the progress the climate crisis demands.

At Zumo, we continue to do everything we can to facilitate and support that change, and currently are focusing on driving progress over five core areas: our net zero strategy; practically-oriented crypto decarbonisation solutions; decarbonising crypto research; WasteAid commitment; and sustainability pledge.

For those interested in learning more, all of these are explained in further detail on our sustainability hub. Despite all the challenges, we believe crypto solutions can be made to benefit people and the planet - and we very much hope you’ll join us on that journey!