Blockchain in Energy: Accurate and Transparent Carbon Emissions Reporting and Verification

Borislav Stojanovic

Borislav is an Energy Economist at Hygge Energy. He has a Bachelor of Applied Science in Environmental Engineering from the University of Waterloo and is passionate about being at the forefront of the renewable energy revolution. Borislav finds his purpose in being part of Team Hygge though helping with research and the development of innovative carbon emission tracking technologies.

Today’s Challenges:

By 2050, climate change is projected to cause an additional 14.5 million deaths and $12.5 trillion in economic losses worldwide (World Economic Forum, 2024). If we continue business as usual, these estimates are only likely to worsen, leading to more frequent and severe natural disasters like hurricanes, wildfires, droughts and floods.

To mitigate these catastrophic outcomes, accurate and transparent carbon emissions reporting is crucial. Unfortunately, carbon emissions reporting has lost its credibility due to a pervasive global failure to ensure transparency. A survey by KPMG revealed that 24% of Canadian companies from their sample set were victimized by Environment, Social and Governance (ESG) fraud in the past five years, while 89% say their stakeholders are increasingly demanding proof of their ESG records (KPMG, 2024). However, when a corporation has no way of validating the emissions claims associated with their value chain, answering stakeholder demands is not possible.

Data accuracy goes hand in hand with transparency: where are corporations getting their emissions data from? A study on the German electricity grid revealed that emission calculations varied by 31.5% when using six different emission factor (EF) data sources, all the while being completely compliant with the Greenhouse Gas Protocol Guidelines (Schäfer et al., 2024, 1). Many organizations rely on the GHG Protocol for guidelines on GHG accounting including their Scope 2 Guidelines for electricity-related emissions. Furthermore, EFs today are dependent on general geographical grid location, which means that the EFs used for Scope 2 reports are vague estimates over a region rather than precise values specific to a utility.

24% of Canadian companies […] were victimized by ESG fraud in the past five years. […] Emission calculations varied by 31.5% when using six different emission factor data sources, all the while being completely compliant with the Greenhouse Gas Protocol Guidelines.

Creating an Energy Data Exchange:

Blockchain technology serves as the ideal solution to the desperate need of adding transparency and trust to the entire ESG and carbon emission reporting industry. It will not only put an end to the guessing game on national net-zero progress, but also enable ESG reporting to regain trust from stakeholders. In a world where every company’s emissions are public on the blockchain, each actor will be responsible for lowering their carbon footprint as there will be no room for manipulating data through loopholes or even illegal activity. Having energy on the blockchain will create a self-sustained carbon reporting scheme where the implications will be seen on a global scale. Countries will have exact figures associated with their emissions and tracking progress will be transparent.

Hygge’s Solution:

Hygge is dedicated to bringing to the market products and solutions that leverage advanced patented AI and blockchain technologies to provide trust related to Scope 1, 2 and 3 emissions data. We have already developed and executed a product that focuses on carbon emission verification for Scope 2 emissions. Along with the highest accuracy in the industry, we put all this data on the blockchain for anybody to verify.

Our platform operates by utilizing utility time-stamped smart meter data to track the purchased amounts of electricity from various generators, including coal-fired, natural gas, solar, and wind sources. The data from these smart-meters is recorded on a 15-minute interval basis; this means that for a given interval, the type and quantum of electricity purchased by the distribution utility is known as is distributed to its industrial customers. Hygge’s platform enables these utilities to track the carbon emission intensity from the generator at any given point in time to the end customer. The 15-minute interval provides granularity of Scope 2 emissions. A certificate based on the time and day can be automatically generated. Hygge’s platform makes a detailed record of the transfer between the utility and the entity, for which a certificate with the entity’s name and address, along with CO₂ emissions amount can be obtained from Hygge’s platform by any stakeholder for verification purposes.

Hygge’s platform enables these utilities to track the carbon emission intensity from the generator at any given point in time to the end customer. The 15-minute interval provides granularity of Scope 2 emissions.

This ensures that there is no longer a guessing game involved with determining the carbon emissions related to Scope 2. Hygge plans to scale this platform for Scope 1 and 3 in the near future.

Roadmap:

The key to bringing the entire carbon emissions industry on the blockchain lies in addressing Scope 2—for which Hygge has already developed a product—because one company’s carbon footprint is a component of another company’s value chain or Scope 3 emissions.

Scope 3 is the most challenging emissions class to calculate, and the margin of error in these calculations increases exponentially as the supply chain expands, especially with companies that do not report their Scope 2 emissions accurately. By using centralized blockchain, two companies relying on different utilities in different parts of the world can view each other's immutable emissions data.

Another step in Hygge’s strategy is to place Scope 1 emissions on the blockchain. Widely accepted methodologies for accurately evaluating Scope 1 emissions already exist. By adopting a methodology such as the Scope 1 GHG Protocol Guidelines, these emissions can be made available on the blockchain, providing detailed insights into a company’s carbon footprint. A third-party auditing body would be needed to ensure due diligence is conducted prior to publishing the calculation results.

By using centralized blockchain, two companies relying on different utilities in different parts of the world can view each other's immutable emissions data. […] These emissions can be made available on the blockchain, providing detailed insights into a company’s carbon footprint

Enabling Hygge’s platform for global use will enable companies to report their entire emissions onto the blockchain. With the assistance of auditing firms, Hygge’s platform will provide the most accurate representation possible of the exact emissions associated with a shipment, ensuring transparency throughout the entire supply chain for every company worldwide.