Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.

It might come as a surprise that one of crypto’s biggest “use cases” has been in combating climate change, considering the overall sentiment around blockchain’s environmental footprint and heavy energy consumption.

In just the last three months of 2021, some $3 billion worth of tokenized carbon credits were traded, accounting for hundreds of millions of metric tons of the greenhouse gas, according to The Wall Street Journal, citing KlimaDAO data.

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In the first six months of this year, at least 23 million carbon credits were moved on-chain from centralized registries, representing about a quarter of credits listed at the time, according to data provider Trove Research.

Then there’s the $423 million that venture capitalists have invested in crypto-based carbon tracking initiatives over the past 18 months.

Despite this measurable market growth, a big win for those looking to disrupt and democratize the sclerotic world of carbon offsetting, the industry is facing something of an existential crisis. And maybe it’s better to let it die.

This weekend, the WSJ reported that Flowcarbon, the buzzy blockchain project founded by discredited ex-WeWork CEO Adam Neumann and backed by crypto powerhouse Andreessen Horowitz just two months ago, has indefinitely delayed the launch of its suite of products.

The Journal situated this news among a greater trend of high-profile crypto-climate startups that have “either slowed operations or delayed product rollouts” in recent months. This might be just deserts for those that saw Nuemann – who tried to trademark the word “we” – reinvent himself as a crypto-climate advocate and thought, “surely this must be a scam.”

Speaking with the Journal, Flowcarbon’s Chief Executive Dana Gibber said Neumann was not involved day to day and pointed to the crypto market downturn for the pause. (The Celo blockchain-based effort hoped to launch its goddess nature token (GNT) by the end of June, after raising about $70 million in a private presale advertised on its website.)

But there’s a larger issue at foot than a market rout: Last May, the standard-bearer of carbon credits, Verra, announced it would ban the conversion of retired credits into crypto tokens after finding that crypto upstarts were less than accountable. While this hasn’t affected all crypto carbon projects, it has been a major roadblock for many, and it casts doubt that blockchains can ever outrun the human-scale problems plaguing climate advocacy.

In theory, crypto provides a way to bring transparency and liquidity to mostly unregulated and voluntary carbon credit markets. There is no doubt that some of these claims are true, considering how fractured the current carbon credit industry is. But the overall effect is one of slapping lipstick on a pig.

Carbon credits are issued by firms that claim they are removing carbon-dioxide from the atmosphere, either by their business practices or more active conservation efforts like planting trees. While they could help incentivize or finance sustainable efforts, these assets are really just “offsets” that allow others to pollute.

As consumers demand more sustainable practices, companies are turning to carbon offsets for an easy PR win. Crypto exchanges Gemini and FTX, for instance, voluntarily buy credits because they profit indirectly from the energy-intensive proof-of-work process used by the two largest blockchains, Ethereum and Bitcoin. But they are hardly alone in greenwashing.

No amount of market efficiency magic can fix this high-level issue. Crypto can certainly help prevent the “double spending” of carbon credits, can increase access to these markets and even help resolve some of the “governance” issues that have plagued the industry for decades. But isn’t that accelerating what Greenpeace called “a distraction from the real solutions to climate change”?

At worst, crypto carbon credits are a waste of effort and, literally, energy. One of the projects affected by Verra’s hardstop, KlimaDAO, demonstrated this after “sweeping the floor” of old carbon credits hoping to raise the price of polluting.

The strategy actually worked; it took 5% of Verra’s carbon credits out of circulation by locking them in a treasury (what it called a “black hole”) thereby increasing the cost of carbon credits. However, critics were quick to note that many of the credits it purchased were from retired or dormant projects – so not actually sucking carbon out of the atmosphere.

That’s not quite as wasteful as restarting formerly mothballed coal power plants to mine bitcoin but is resurfacing carbon at least indirectly.

Again, many of the issues that plague crypto carbon credits are simply inherent to the overall market. There’s no consensus about how to value these assets or what makes a green project green. There’s also little oversight that ensures projects are doing what they promise.

“Proponents of blockchain celebrate its capacity for transparency. But if this power is wielded only on tracing transactions, not the details of what’s being transacted or by whom, we’ve missed a trick – especially in such a heterogeneous market,” Sarah Leugers of Gold Standard wrote in a Carbon Pulse op-ed.

It’s also hard to see how some of the promises of blockchain will play out, like the hope that it could make these assets “interoperable.” The issue here is that carbon credits are usually issued by individual companies or projects and sometimes brokers, making a uniform standard difficult.

While it’s possible for there to be “atomic swaps” and cross-chain assets, at this point there’s little indication that these crypto projects alone will become interoperable, let alone harmonize the entire market.

In fact, one major criticism of crypto’s role in carbon markets has been increased market confusion – stemming from the increasing number of players and having to check whether an asset is live on-chain.

That said, Verra hasn’t soured entirely on crypto-based carbon credits, and except for the most ardent critics, many see the potential for blockchain’s transparency for this industry. Both crypto and combating climate change are decades-long processes, and it’s likely that innovation and reinvention will come.

But, at this stage, much like Adam Neumann’s reinvention of real estate/the office/climate advocacy, this is a hollow effort.

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Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.

Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.