Could China be the first country to tokenize its trees?

November 17, 2020
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Louisa Bartoszek

Barely a day passes without questions being asked about what the world needs to do to tackle the climate emergency and the possible role of trees in saving the planet. We discuss how blockchain technology could help and whether China will be the first country to tokenize its trees.

Amazon founder Jeff Bezos this week revealed the first wave of recipients to secure funding from his $10bn Earth Fund, exactly nine months after he launched the programme to support the work of climate scientists, environmental activists, and other green groups.

Much of the money will go towards natural climate solutions in an effort to preserve and protect the natural world from climate change. The World Wildlife Fund (WWF), who will be receiving $100 million, has said it will focus on the restoration of forests and degraded mangroves in Colombia, Fiji, Madagascar, and Mexico.

It’s terrific to start to learn more about Mr Bezos’ intentions for his Earth Fund and from a personal perspective, I am particularly pleased to see his early focus is in supporting natural climate solution initiatives such as reforestation and research into carbon credit capture.

Investing in environmental research institutions, along with clean and green tech start-ups, innovating on everything from fusion to hydrogen, will go a long way in accelerating the world forward in achieving a zero-emission energy economy.

The world’s most effective green energy tech

The role of trees in reversing climate change interests me enormously – specifically their role in carbon removal and storage. As when implemented correctly, trees are currently the most cost-effective and best technology for carbon removal and storage.

I really like the perspective offered by the World Economic Forum (WEF) who, in their article on why trees really matter in the race to decarbonization as part of their Race to Zero Dialogues campaign (10-12 November), suggest we think of forests as a proven technology. As for 3.8 billion years, forests and oceans have always been the best carbon removal technologies around, naturally creating balance for our planet.

Reforestation has risen to prominence lately and gained substantial momentum worldwide for this very reason. With a proliferation of new global, regional and local tree planting and forest restoration initiatives including the UN Decade on Ecosystem Restoration, the WEF’s Trillion Trees Platform 1t.org and the Time for Trees, to name a few.

Yet whilst pleasing progress is certainly being made, natural climate solutions have historically been overlooked by many investors, corporations, and governments. Much more investment is needed.

Fighting climate change is a multi-pronged attack which requires action from not just every country, but everyone. All of us.

China pledges to be carbon neutral by 2060

Since September, my thoughts have turned increasingly to China and the role China could play in leading the “Earth Race” to reverse climate change. President Xi Jinping’s video address to the UN general assembly, announcing that China would aim to become “carbon neutral” before 2060, came as a surprise. To me at least. In doing so, China joined the UK, European Union and dozens of other countries in adopting a mid-2000s climate target.

Looking at the data, this news comes not a moment too soon, with China seemingly responsible for 28% of the world’s greenhouse gas emissions at this present time. More than the United States and the European Union combined. A staggering amount.

But here’s the paradox and why my interest in China is heightened.

China has started to change course from an environmental perspective.

It is also by far the largest investor, producer and consumer of renewable energy. China’s clean energy drive and economies of scale are driving down the once extortionate cost of cutting-edge green technologies making them more affordable and in reach of the average person.

To quote one of China’s top environmentalist campaigners, Ma Jun, we are seeing a lot more “walk the walk” action. China has adopted tough measures to try and deal with pollution and environmental damage problems, with some progress. Indeed, China’s proactive tree-planting policy has been recognised globally as playing a significant role in reducing global warming.

China’s blockchain world leader ambition

China has also expressed bold ambitions to become the world leader in blockchain technology infrastructure. An ambition it appears to be taking very seriously with media reports quoting data from the World Intellectual Property Organization that suggests China already leads the world in blockchain-related patents.

And by blockchain I don’t mean digital currencies of course, although that is one of its uses. I am referring to the power of the underlying blockchain technology to completely transform operational business processes and verify all sorts of transactions through using decentralized identity technology, for example tokenization.

This is where two of my interests collide. Blockchain innovation and solving the climate crisis.

Specifically, an innovative solution Mozaic Markets is developing called “Forest Tokenization”.

In their Global Forest Resources Assessment (FRA) for 2020, the Food and Agriculture Organization of the United Nations (FAO) reported forests cover 31% of total land area (4.06 billion hectares). Of this figure, more than half, 54%, are in just five countries – Russia, Brazil, Canada, the United States and China. With China accounting for 5% of the world forest land area.

As I expressed recently, I’m interested to see which countries, particularly these five, will be the first to truly understand and unlock the powerful potential of blockchain in forestry to tackle the climate emergency. Whether that be carbon credits, forest management or, the really innovative end of the blockchain forestry spectrum, tokenization.

I’m starting to wonder if the first country to step up and launch Forest Tokenization will be China. It wants to be the world leader in blockchain solutions. It appears to be making bolder and bolder moves in its desire to pioneer change in the Earth Race to reverse climate change.

Suggesting China could be the first country to tokenize its trees, makes a lot of sense.

Why would China tokenize its trees?

Firstly, it would be able to claim the covetable “World's First Forest Token” title if it did as well as take further steps forward in its global blockchain leadership ambitions.

Second, tokenizing trees and allowing citizens to invest in forests would unlock new capital which could be used by the government and other forest landowners to finance further improvements in green or clean energy tech. Accelerating China’s ability to achieve its 2060 zero carbon emissions target.

Not to mention the additional incentives to protect existing forests and amplify reforestation. An action which not only contributes to reversing climate change, but also protects biodiversity and forest-dwelling indigenous communities.

Third, tokenization would enable what is called “fractional ownership” and lower the barriers to investing in relatively inaccessible institutional-grade asset classes, like forests, real estate, even precious metals.

Through using blockchain technology, China could digitize then tokenize its forests through fragmenting them, like a mosaic, into lots of individual pieces called forest tokens. Then selling them to investors at a price much more accessible to the average Chinese citizen. Introducing a new way for consumers to directly invest and hold stakes in China’s forests. Stakes which could generate a return and be sold on just as easily, same as say investing in equities or securities.

Demand for green finance innovations like Forest Tokenization in China certainly seem to exist. As evidenced by Alibaba’s tree-planting initiative, where users on the Alipay platform are rewarded through allowing them to grow a virtual tree on their smartphone whenever a low carbon choice is made. When enough points are stacked up, actual trees are planted on their behalf.

This gamification concept is really smart and shows a growing environmental interest by Chinese consumers and business. But today Chinese consumers are unable to easily invest directly in trees and say they own part of a forest, as part of their investment portfolios.

This is where forest tokenization comes in, specifically, 2030 Group and Mozaic Markets.

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It’s not as difficult or costly to digitize a forest as you might think. Not to mention the additional benefits in utilizing your forest “digital twin” to improve efficiency, reduce costs and elevate transparency in forest management practices.

If you are a forest owner and want to discuss how to digitize, utilize and tokenize your forest, email talk@2030.io

In other Forest Tokenization news:

Could a President Biden ignite an “Earth Race” in green tech innovation?

Tokenization could help reverse our ecological crisis

How forests could help Africa eradicate extreme poverty

IMPORTANT INFORMATION
This article is comprised of personal opinions and ideas to facilitate debate. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy, nor does it guarantee or predict future performance. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. 2030 Group does not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same. All investment decisions must be based only on the most up to date legal offering documents.

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