Carbon credits, which represent the price of a unit of carbon dioxide reduction or offset, have been the primary solution for companies looking to mitigate their climate impact and invest in sustainability. However, the market price of carbon credits often does not reflect the full economic and social impact of their carbon emissions. This can make it difficult for organizations to properly invest in sustainability and meet their ESG commitments.
What’s needed is an estimate of the true cost of carbon emissions that reflects the full range of economic and social impacts associated with climate change.
To help improve the way companies invest in sustainability, we’re excited to announce that OpenEarth, in collaboration with UC Berkeley, is releasing a Chainlink carbon pricing oracle that delivers the true social price of carbon to blockchains. By dynamically leveraging the latest scientific models to provide accurate estimates of the social price of carbon, this carbon pricing oracle will enable organizations to better mitigate their climate impact by accurately pricing the social cost of their carbon emissions.
Measuring Real-World Impact With the Social Cost of Carbon
The social cost of carbon (SCC) measures the estimated economic damage associated with each additional ton of carbon dioxide emissions, taking into account factors such as the impact on human health, agriculture, and the environment. It’s becoming one of the most important climate metrics available today, driving policies and initiatives that help mitigate the harmful effects of climate change.
Measuring the social cost of carbon is an important step for companies to take in order to manage and reduce their environmental impact and position themselves for long-term success in a low-carbon economy. It helps organizations align their financial goals with their environmental goals, demonstrate their commitment to sustainability and social responsibility, and drive innovation and efficiency by encouraging them to find ways to reduce emissions and lower costs. This is especially important in light of increasing regulatory pressures, as well as growing consumer demand for environmentally responsible products, services, and investments.
In order to measure the social cost of carbon, an internal carbon price tool is needed to place a monetary value on greenhouse gas emissions. By assigning a price to carbon emissions, companies can make more informed and strategic decisions about how to reduce their environmental impact and transition to low-carbon business practices.
Building Integrated Assessment Models for Carbon Pricing
In collaboration with UC Berkeley, OpenEarth Foundation is building a tool to help companies set an internal price for their greenhouse gas emissions. The carbon pricing web tool will help companies understand the concept of carbon pricing and find their internal carbon price and commitment level, and then implement a solution.
As a key part of this tool, the Chainlink oracle node will deliver open-access integrated assessment models (IAMs) for carbon pricing on-chain. With an advanced carbon pricing mechanism that can account for a range of factors including social aspects, policy scenarios, various economic variables, equity weighting, discount rates, energy projections, and other key parameters, the Chainlink Carbon Pricing Oracle will help enable organizations to more accurately calculate their social cost of carbon.
"We’re excited to see OpenEarth leverage the Chainlink Network to help provide greater transparency in the pricing of carbon in transition planning and financing activity. By using this Carbon Pricing Oracle, powered by Chainlink, organizations are better able to account for all social aspects, energy projects, and other factors that impact their social cost of carbon.” — Charlie Moore, Head of Carbon and Sustainability Solutions at Chainlink Labs
Moreover, by using a scientifically valid carbon price that encompasses social factors, companies can create smart contracts that automatically adjust their carbon pricing based on the latest scientific evidence, such as changes in the carbon budget and atmospheric carbon concentration. This can help to ensure that the carbon price being used by the company accurately reflects the true cost of carbon emissions and the full range of economic and social impacts associated with climate change.
Unlocking Innovative Climate Finance Solutions
Publishing more nuanced carbon pricing models on-chain can support the creation of more stable and sustainable carbon markets that automatically adjust to changing social, economic, and environmental conditions. With easier integration of on-chain carbon pricing models into both Web2 and Web3 applications, companies can efficiently and accurately define their internal carbon prices and reference them in their financial systems. Meanwhile, smart contract developers will also be able to use the oracle to help them build innovative applications in support of climate change initiatives, such as carbon-backed assets, climate accounting protocols, and corporate compliance systems. Ultimately, a carbon pricing oracle could support the development of voluntary carbon taxation schemes powered by smart contracts.
“The social cost of carbon is a key metric to drive policies and initiatives that help mitigate the negative impacts of greenhouse gas emissions. By developing a Chainlink oracle node, we’re able to deliver integrated assessment models on-chain that dynamically update to reflect changes such as an organization’s carbon emissions and the remaining atmospheric carbon budget. Ultimately, this helps unlock innovative finance and incentive schemes for climate solutions that enable organizations to mitigate the impact of climate change by fully internalizing the price of emitting carbon.”—Dr. Martin Wainstein, Founder and Executive Director of Open Earth Foundation
To stay up to date on our carbon pricing tool and oracle node launch, make sure you join the waitlist. If you’d like to support the development of OpenEarth’s open digital technology designed to enhance our planet's resilience, from climate to biodiversity, you can make a donation.
Chainlink is the industry-standard Web3 services platform that has enabled trillions of dollars in transaction volume across DeFi, insurance, gaming, NFTs, and other major industries. As the leading decentralized oracle network, Chainlink enables developers to build feature-rich Web3 applications with seamless access to real-world data and off-chain computation across any blockchain and provides global enterprises with a universal gateway to all blockchains.
About OpenEarth Foundation
Open Earth Foundation is a not-for-profit creating and deploying open-source digital systems and solutions to tackle climate change and environmental challenges. Using blockchain, IoT, and artificial intelligence technologies, the foundation creates multi-stakeholder solutions that progress through the phases of ideation, proof-of-concept, prototypes, and commercial pilot. These projects are primarily aimed at developing global climate accounting systems, removing frictions in climate investing and financing, and mobilizing global networks of key stakeholders on open-source infrastructure.
The Open Earth Foundation collaborates with numerous organizations, such as the UN Environmental Programme, UNFCCC, scientific authors to the International Panel on Climate Change (IPCC), the National Oceanic and Atmospheric Administration (NOAA), Yale University, University of California at Berkeley, and more.