Blockchain Technology for Emissions Management
Cloud to the Ground: ESG and EHS&S in Age of Blockchain
The two "Killer Apps" that are among the cornerstones of the ongoing computing revolution that began over 25 years ago are the World Wide Web (WWW) and the Internet of Things (IoT). The first of these has primarily run its course and connected our world. The WWW has enabled us to get answers to even the most obscure of questions in a matter of seconds, exchange emails with our friends and business associates, shop, trade stocks, and engage in social networking. The second, in contrast, is just starting as it could not begin to take shape until the Web's tentacles had reached deeply into our daily lives. The IoT promises to expand the Web's capabilities to include interactions with a broad spectrum of appliances, electronic devices, and sensors that are already ubiquitous and increasingly connected to the WWW.
We refer to devices that are part of the IoT and directly accessed, monitored, or controlled by Web technologies as the Physical Web: Physical Web = Web technology + IoT. The Web provides an important interaction model for the IoT by letting users access device-related information and, in some cases, control their devices through a Web browser. If you are monitoring and controlling the heating and cooling of your house through the use of a Nest or similar device, then you are already enjoying the fruits of the Physical Web. But there is a new technology entering the business and consumer world that will make the IoT even more prolific and manageable: the Blockchain.
Blockchain has become one of the most talked-about technologies since the advent of the Internet. Ultimately, it will move beyond talk and become a core functional technology powering everything from payments to emissions management. But given that we are still in the early stages, we need to understand the reality of Blockchain today and the potential for tomorrow. While many of you may not hear of this technology per se, it is at the heart of an application that has been discussed and reported on widely in the press. I refer to Bitcoin, which is defined as "a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank." Growing awareness and understanding of blockchain technology, coupled with our ever-growing need to monitor the health of our planet, point the way for a new paradigm as to how we manage emissions and discharges to the air, land, and water. We are at the very beginning of the blockchain technological revolution. The subject of the rest of this paper is how it may impact the Environmental, Social, and Governance (ESG) and Environmental, Health, and Safety (EHS), particularly efforts to track the rate and effects of climate change. But before we do so, let's take a brief look at the evolution of computing systems.
Last 50 Years
One of the most prolonged debates that have taken place in computer science has been whether to build either centralized or fully decentralized and distributed systems. Much of the Web has been created today takes a centralized approach to its services, but it is not clear that this makes sense for much of the IoT.
Over the last 50 years, the computing world has shifted paradigms several times, from the centralized mainframe computer to the decentralized PC running standalone applications back to today's centralized cloud services. As of this writing, the computing industry has gravitated toward more centralized cloud services through various multi-tenant, Software as a Service (SaaS) applications. This approach makes applications easier to manage and more cost-effective, thus providing more bang for the buck for their users. The advantages of this model include the economics of scale when building data centers, automatic backup of all data, and enforcing physical security. However, this model is about to yield to something even more powerful in several areas — blockchain technology. (see Figure 1: Evolution of computing 1 to 4)
The Internet was made possible by the invention of the TCP/IP communication protocol. Robert Elliot Kahn, along with Vint Cerf, invented the Transmission Control Protocol and the Internet Protocol or TCP/IP in 1973. These fundamental communication protocols are still at the heart of the Internet to this day. In 1989, Sir Tim Berners-Lee, a CERN employee in Geneva, Switzerland, invented the World Wide Web (URI's, HTTP, HTML) and Browsers. Two years later, on August 6, 1991, the World Wide Web debuted and changed the world.
Bitcoin first appeared in a 2008 white paper authored by a person or persons using Satoshi Nakamoto's pseudonym. The white paper detailed an innovative peer-to-peer electronic cash system that enabled online payments to be transferred directly, without an intermediary. Shortly after the white paper's release, it became evident that the main technical innovation was not the digital currency itself but the technology that lay behind it, known today as Blockchain. Although commonly associated with Bitcoin, it is only one of seven hundred applications that use the blockchain model today.
IoT can be as revolutionary as the Internet itself when implemented on blockchain technology. Gartner predicts the IoT will grow to 26 billion connected devices by 2020. That is almost four connected devices for every citizen of the planet. Gartner also predicts that Blockchain will deliver $176 billion in value to businesses by 2025 and an incredible $3.1 trillion just five short years later. We are very early in this evolutionary phase, or revolution is perhaps a more apt word. Go back in time and picture the Internet in 1994. That's where we are in blockchain-based IoT. But how and who will manage these billions of devices, each generating continuous or streaming data and talking to each other?
What is Blockchain?
Over the last several years, Blockchain has entered our vocabulary and has become a hot topic primarily because of Bitcoin cryptocurrency. But for many, the underlying technology remains an elusive concept. The concept is simple once you understand its architecture and the basics of the theory of crypto-economics. When you do, you will discover its enormous transformational potential and the many verticals it can be applied to.
The core concept is a simple breakdown of the name: Blockchain is a chain of data blocks. Because it is spread out over a network of computers, no single company owns all the data. This means there are no discrepancies between company ledgers since there is only one record of the data held across this network.
In its outward manifestation, blockchain technology allows one entity to communicate with another (peer-to-peer transactions) without the intervention, or need for, an intermediary. The underpinnings of the technology are where it gets its name, for a blockchain is a continuously increasing list or, better yet, a digital ledger of records, called blocks. Each block contains a timestamp, the data associated with a given transaction, and a cryptographic hash of the previous block. Blocks are linked together into a chain, hence the presence of the word "chain," and secured using cryptography. Most importantly, the ledger is distributed to and shared amongst all network members. Thus, if A sells an item to B, which then makes improvements to the item and in turn sells it to C, the record of these and all and other relevant such transactions would be broadcast to and shared by A, B, and C, as well as any other interested parties that are members of the network, in the form of an immutable ledger.
As companies look to the blockchain model to perform financial transactions, trade stocks, and create open market spaces, many other industries are utilizing blockchain technology to eliminate the middleman. Blockchain will profoundly disrupt many industries that rely on intermediaries. A good analogy for its potential reach was recently made by Sally Davies, Financial Times Technology Reporter. She said: "[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one".
Blockchain is a highly disruptive technology that promises to change the world as we know, much like WWW's impact after its introduction in 1991. The technology will not only shift the way we use the Internet, but it will also revolutionize the global economy and almost all transactional business. Blockchain has applications that go way beyond obvious things like digital currencies and money transfers. Some areas or activities candidates for disruption include credential management, car leasing, stock trading, property sales, supply chain management, public records, wills, charitable donations, human resources, and credit histories (Joel Conn and Travis Wright). Blockchain technology could bring about improved security, transparency, accuracy, and efficiency for each of these.
One sector well positioned to benefit from blockchain technology is the Environment, Health, and Safety and Sustainability (EHS&S) space. In particular, I see three significant ways ESG and EHS can utilize blockchain technology to change how they manage information: 1) Blockchain-based IoT monitoring, 2) emissions management, and 3) emissions trading.
IoT Monitoring- The Future is Decentralized.
The IoT is one entity that is especially likely to feel the impacts of blockchain technology. There are, however, technical hurdles to overcome because most IoT devices lack the adequate computing power to participate in blockchains directly. That said, as with most IoT initiatives, a small thing like insufficient power will not stop the world from trying. In the early eighties, many thought that cell phones and personal digital assistants like the Palm Pilot would never merge into a single device due to the incompatible battery power requirements of the two devices. Fast forward and look at what has transpired. The integration was not supposed to happen, and now smartphones rule the roost.
Understanding the need for technologies like Blockchain for IoT behooves us to understand a critical problem that IoT will be facing in the future. Most of today's IoT ecosystems are built around a centralized, brokered communication model (See Figure 1, Item 3). All the IoT devices in a given system are known, authenticated by, and communicated through a centralized, large cloud that provides vast processing power and storage.
At its basic level, any two IoT devices exchanging information are brokered through the central system, even if they are a couple of feet away. They rely on a private network and internet cloud servers to exchange even the tiniest bit of information. If sending a text message to a person sitting in a room next door, that message travels to some centralized cloud servers and back to the recipient. While the cloud provides immense potential for computing and storage and will continue to persist as a technology of choice for small-scale IoT deployments, this central model will not be able to cope with a large number of new devices that we expect to see coming online. Even if centralized cloud servers could economically accommodate the scale, they are still the single point of failure for the whole ecosystem.
For an ecosystem of devices to scale to billions, a decentralized approach is preferred in which each device represents an autonomous system. All communication and information exchange between devices, servers, and ecosystem services should be based on distributed protocols. This is where the blockchain model enters the picture.
Carnegie Mellon University has published a proof of concept project called Sensor Andrew, an infrastructure for Internet-scale sensing and actuation across a wide range of heterogeneous devices that have been designed to facilitate application development. The goal of Sensor Andrew is to enable a variety of ubiquitous large-scale monitoring and control applications in a way that is extensible, easy to use, and secure while maintaining privacy. To illustrate how Sensor Andrew works, multiple classes of energy sensors are combined with environmental sensors to monitor energy usage and identify energy waste within buildings. Also, IBM, in partnership with Samsung, has published a proof of concept white paper for a system known as ADEPT that uses elements of Blockchain to create distributed networks of autonomous devices to form a decentralized IoT ecosystem.
IoT devices need to transmit messages to nearby devices to alert them to a change in the environment and do so in a distributed, secure, and authenticated way. As a result, new peer-to-peer messaging systems are taking shape, which provides (1) encrypted messaging, (2) low latency, and (3) guaranteed delivery, storage, and forwarding of messages whereby the message can 'hop-on' to other devices. Technologies of this ilk that are under development include Distributed Hash Tables, Bittorrent, MQTT, CoAP, and Extensible Messaging and Presence Protocol (XMPP). Describing each of these protocols is beyond this paper, and providing details would not make the whole concept any more understandable.
But all these protocols are still not enough. When there is a need for an actual transaction, like recording energy usage or emissions, Blockchain will likely be the technology of choice, as it provides a decentralized ledger where autonomous 'things' in the network follow the rules and verify the validity of transactions without relying on central authority (e.g., cloud) or human. Every "thing" in the network will keep a complete history of all the transactions performed by member nodes. For reasons explained elsewhere, this digital ledger will be tamper-proof and, as such, not subject to 'man in the middle' cyber attacks.
Combine all this together, and IoT becomes intelligent, self-supporting, and self-sustaining. Blockchain technology will allow devices to make informed decisions at the right time and then log a history of these. This is ideal for the EHS&S and ESG reporting industry, where there must be a ledger of transactions for regulatory compliance.
Quantifying Emissions
One application where I can see blockchain technology making a significant impact is emissions quantification.
Blockchain technology will help quantify the impact of man-made emissions on global warming trends and provide tools to manage them. One cannot control what one cannot measure!
Currently, much confusion (created intentionally or not) in today's debate on global warming is because we do not have excellent and defensible data about the causes and correlations between man-made emissions and climate. Blockchain technology has the potential to change all of that. Imagine this: every emissions source in your company, whether to water, air, or soil, is connected wirelessly via a sensor or another device (thing) to a blockchain ledger that stores a description of the source, its location, emission factors, etc. Every time the source generates emissions (that is, it is on), all necessary parameters are recorded in real-time. If air emissions are involved, equivalent tons of carbon are calculated and recorded in a blockchain ledger and made available to reporting and trading entities in real-time. Blockchain ledgers may exist at many levels. Some may register emissions at a given site. Others at higher levels (company, state or province, country, etc.) may roll up information from lower-level ledgers.
Suppose that emissions are traded so that they are not yours anymore. In that case, someone else owns them, and you do not need to report them again, but everyone knows that you were the generating source. The same logic can be applied to tier 1, 2, and 3 level emissions. Attached to the emissions ledger are all other necessary information about the asset generating those emissions, financial information, depreciation schedule, time in service, operating time, fuel consumption, operators' names, an estimate of future emissions, and the list goes on.
After emissions data are recorded in a blockchain ledger, a company could enroll in a research study to compare its use of an asset with similar assets from other entities. Data from each would be submitted to higher-level blockchain ledgers while keeping the identities of the different participants confidential. As the data from these participants are studied, trends may emerge, and companies may gain insight into when and how to optimize the use of their assets and adjust operating practices to achieve better outcomes.
All of this could completely change how companies run their businesses and present new opportunities far beyond sustainability and environmental emissions management.
An even more profound impact may take place relative to governmental submittals. No longer would there be a need to provide agencies with emissions reports, quarterly groundwater reports, OSHA 300 logs, or EPA's hazardous waste manifest forms, the latter being designed to track hazardous waste from the time it leaves the generator facility where it was produced until it reaches the off-site waste management facility that will store, treat or dispose of the hazardous waste. Or consider a Chain of custody (CoC) reports associated with environmental sampling and analyses. All that information could be stored in blockchain ledgers and made available to anyone with the proper privileges to see these data in real-time, including the government agencies responsible for enforcing applicable rules and regulations.
This would significantly reduce reporting and compliance costs while improving the efficiency at both companies and regulating entities.
Emissions Trading
Once emissions are quantified, they can easily be traded using the same blockchain ledger technology without transferring any emissions data to another database or vertical application. This is where blockchain technology can make an even more significant impact. Cryptocurrencies have already paved the way for blockchain-based emission trading to take place. Transactions involving tokens such as bitcoins are recorded chronologically and publicly. Applying this model to carbon credits to create a "carbon currency" is the key to demystifying and consolidating the carbon market so it can scale up. Carbon credits are the perfect candidate for a digital currency as they are data-driven, rely on multiple approval steps, and exist separately from the physical impacts they represent.
That is already happening in the financial world today. Companies like Ripple are revolutionizing money transfers around the globe. This may result in the complete transformation of emissions management.
Emissions data will flow in real time between emitters and governmental agencies, and more importantly among emitters themselves. This will allow a peer to peer trading of emissions in real time. Reporting will be significantly reduced and simplified. All of this will be possible because new IoT technologies are running on the decentralized blockchain technology.
Blockchain technology-based emission trading will enable businesses to trade emission credits much more frequently and efficiently, significantly boosting local and international trade of emissions. Blockchain technology would allow government agencies to effectively aggregate emissions quantities and origins across geographies, industries, and other criteria. Governments will be able to measure, track and trade emissions transparently.
Everyone with a phone or a laptop will have equal access to emission numbers without the ability to hack them. The potential impacts of blockchain technology on environmental issues and sustainability are significant.
Turn Negative to Positive Offset
Like with every new technology, there is a potentially harmful side to blockchain technology that needs to be mentioned and considered before technology proliferates to a point where it cannot be reined in. Ironically, this negative aspect goes directly against the central theme of this paper: energy consumption and related emissions management that can be more efficiently solved with the blockchain model, as I described above. According to some, the electrical power consumed by the massive processing necessary to sustain the blockchain technology is significant and threatens to offset the benefits of blockchain technology itself. But is this true?
Complex data do not back the current debate on power consumption associated with Blockchain. The race is on to solve this problem. Energy efficiency allows Blockchain to scale for business needs. That means processing significantly more transactions per second at minimal cost while accommodating a growing user base. Developers are creating new blockchains that would reduce its energy consumption to almost nothing and allow it to scale and improve security.
High energy consumption arguments associated with Blockchain may be flawed. Many discussions take reasonable assumptions and push them to extremes to make them fail. Many are related to Bitcoin and associated "mining," not Blockchain per se. We have seen similar assumptions in the past when new technologies emerge. Remember the nineteen-century industrial revolution and Luddite Movement in UK or Tesla vs. Edison debate in the US on alternating vs. direct currents?
Last Remarks
We live in a world where companies and governmental agencies cannot easily quantify and access their ESG and EHS information. Using blockchain technology will allow companies to track, store, roll up, gain insights into, and share their data with other interested parties as needed. It can put accurate and verifiable information into the hands of companies and regulating agencies more quickly.
To make better progress on global warming, regulators need to find ways that reward positive and proactive behaviors instead of leveraging fines when it is too late. We will not solve the global warming problem by fining emitters until they behave. Blockchain technology can help us move in this direction by assisting companies to reduce their emissions while lowering their operating cost at the same time. Social sharing elements may also play a role here, giving companies that benefit from the fruits of blockchain technology a valuable marketing and PR advantage over those who do not adopt this technology and lag in their progress on environmental issues.
