October 13, 2022
The Merge, Ethereum’s most highly anticipated upgrade since its release in 2015, finally took place on September 15th, 2022. This event was not only significant for the Ethereum ecosystem but also for the climate impact of the Ethereum blockchain, reducing its carbon footprint by over 99.9%. Moving forward, this means that activities on this blockchain are nearly carbon neutral, with the emissions proportional to running a network of PCs.
While a remarkable first step, the switch in consensus mechanisms from Proof of Work to Proof of Stake does not yet tackle the issue of Ethereum’s historical emissions, which are about 6.33 million tonnes of carbon per year, sitting between the annual emissions of El Salvador and Cyprus.
Importantly, even once we manage to address Ethereum’s historical emissions through offsets, we can – and must – look beyond carbon neutrality. The Merge mitigates carbon emissions from the Ethereum blockchain going forward, but the Web3 building blocks built on top of Ethereum’s base layer allow us to go further – to climate positivity.
Climate positivity, specifically in the context of Web3, refers to harnessing the technologies we have available to us to become a powerful, positive force in fighting climate change.
The Merge shows us how blockchain technology can be upgraded to minimize its energy footprint. Through continued development and improvements, we can reduce emissions, which is the first and most important step of the mitigation hierarchy. Once reduced, the remaining emissions can be offset, ensuring that there is no net growth in Greenhouse Gas (GHG) levels in our atmosphere.
Climate projects funded by the sale of carbon offsets help to achieve just this by removing GHGs or preventing their emission. Today, however, carbon dioxide levels in the atmosphere are at 415 parts per million (ppm), and need to be reduced to at most 350 ppm to avoid catastrophic impacts from climate change and ocean acidification. It is therefore clear that carbon neutrality through a combination of reductions and offsets will not be enough.
Going carbon neutral can help us get to Step 3 in the mitigation hierarchy – Web3 can help us to go beyond and get to Step 4
Climate positive actions are those that contribute to a net gain in our efforts to reverse the course of climate change. Organizations using Klima Infinity, for example, can contribute to a net gain by offsetting over-and-above their historical carbon footprint. The perpetual commodity vaults protocol LandX did just that, retiring 400 tonnes of MCO2. By offsetting many multiples of their actual footprint, and electing to support forestry (REDD+) projects via MCO2, LandX became a contributor in our efforts to lower GHG levels, and also in driving various biodiversity and community benefits through the protection of the Amazon Rainforest.
LandX, alongside Polygon, Olympus DAO, Eco, and hundreds of other Klima Infinity users who have offset over 170,000 tonnes of carbon to date, show us that fulfilling each step of the mitigation hierarchy is very real and achievable today. Framed by our society’s unprecedented challenge to reduce the annual CO2 debt by 30 billion tonnes by 2030, which represents a 55% reduction from projected levels, the fundamental requisite of success is scalability – and Web3 is emerging as the foremost enabler to achieve scalable climate positivity.
Just three weeks after the Merge, on October 3rd, 2022, Sushi and KlimaDAO announced the launch of an automated carbon offsetting integration via a ‘Green Fee’, leveraging a technology stack that combines Polygon, Chainlink, Sushi, and KlimaDAO components.
For the first time, users of a core piece of decentralized financial infrastructure – in this case Sushi, a Decentralized Exchange (DEX) – became able to offset the impact of their activity, without having to leave the platform or even interrupt their user experience. Users gained access to opt-in via a switch to compensate for the carbon emissions of their transactions for a nominal fee.
Sushi users on Polygon can opt in to automatic carbon offsetting via a simple toggle
This integration demonstrates how Web3 primitives can unlock climate finance. When embedded directly into blockchain applications, we can
The Sushi x Klima Infinity integration sits on a modular and energy-efficient technology stack.
At the bottom layer is the Ethereum blockchain – now running Proof of Stake – which is the settlement layer. On top of Ethereum sits Polygon, which acts as a ‘meta registry’ for carbon offsetting: an immutable ledger where every carbon offset is logged, serving as a proof of offset and ensuring the integrity of transactions in the on-chain Voluntary Carbon Market. The Polygon network also hosts KlimaDAO’s Sushi liquidity pools, which contain tokenized carbon credits ready to be offset.
When a Sushi user opts in to use the Green Fee and executes a trade, Chainlink Automation nodes bundle users' opt-in transactions to be offset at 24-hour intervals, routing them through the Klima Infinity retirement aggregator. This tool executes carbon offsets automatically, using tokenized carbon credits contained within KlimaDAO's Sushi liquidity pools. The offset transactions are logged directly on the Polygon blockchain.
The transactions are executed without requiring permissions or activity to execute the offset, making this a fully automated climate solution.
With automation comes scalability: the amount of carbon that is offset scales directly with increased adoption of the Sushi DEX and of opt-ins to the Green Fee. Friction does not increase as volumes scale, and no technical or operational debt is incurred.
Importantly, the components of the tech stack are interchangeable. Sushi operates across 14 different blockchains, so it can roll out the Green Fee across chains and use cross-chain offsetting to draw on KlimaDAO’s Polygon-based carbon liquidity pools. Chainlink Automation likewise supports multiple blockchains. The Green Fee could therefore be integrated across other DEXes and aggregators (such as Uniswap, Quickswap, and 1inch), other decentralized financial infrastructure (trading platforms, lending platforms), and even on Web2 platforms (when sending payments via PayPal, or your airline’s ticketing portal).
When the Merge took place in September 2022, the foundational layer of this tech stack made an evolutionary leap forward in fulfilling the reduction step of the mitigations hierarchy, with the Ethereum network’s carbon footprint dropping by over 99.9%.
Even prior to the Merge, the Polygon network – sitting on top of Ethereum and operating with Proof of Stake consensus since it was launched as MATIC Network in 2017 – was energy efficient, with checkpointing and bridging transactions with Ethereum Mainnet being responsible for over 99% of Polygon’s emissions. With these Ethereum emissions now also minimized, the inherited emissions higher up in the stack are just fractions of those produced by traditional financial infrastructure.
These astounding results profoundly benefit the end user: users opting in to the Sushi x Klima Infinity integration offset carbon credits equivalent to 0.02 MATIC per transaction – which is a cost of around one cent per transaction in USD terms. Even at this extremely low cost to the user,
every Green Fee transaction is climate positive: offsetting a single transaction with 0.02 MATIC is 100-fold overcompensating the actual emissions of the transaction.
The Polygon, Chainlink, Sushi, and KlimaDAO Web3 stack, built on top of Ethereum, has driven carbon emissions down to the bare minimum, and is setting the precedent for automated, scalable, and frictionless climate positivity.
The Sushi x KlimaDAO integration is the first of its kind, leveraging Web3 primitives to unlock climate finance. Operating on a scalable and energy-efficient stack, the deployment is a pioneering proof of concept: by minimizing emissions, and maximizing scalable offsetting, it showcases the potential for technology to scale up the Voluntary Carbon Market. The modular architecture foreshadows a future where the removal of carbon emissions in all areas of our society is not a novelty but the norm, paving the way to a world where humanity lives in a sustainable balance with its ecosystem.
The best next step, perhaps, is to head over to Sushi.com, connect to Polygon, switch “Carbon offset” on – and just think forward to a world where every Web3 protocol, every Web2 platform, and all traditional financial infrastructure enables you to do the same.
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