Last spring, AIR launched an initiative called the Crypto Climate Accord, a voluntary effort to make the crypto sector carbon neutral by 2030. Our partners in this project are two other nonprofit organizations -- the Rocky Mountain Institute and the Energy Web Foundation. My guest today is Jesse Morris, Energy Web’s CEO and one of the most visionary innovators in the climate space.
In this conversation, we talk about the Accord -- what we’re doing and who is joining in. The group includes crypto miners, crypto exchanges, renewable energy providers, and financial services firms offering crypto options. Please note that all kinds of entities that work with crypto are invited to participate.
More broadly, this episode talks about some of the most challenging problems raised by climate change, in crypto and across the global economy -- especially the foundational challenge of figuring out how to reliably measure climate impact.
For the crypto sector, the measurement problem is acute. Jesse says no one actually knows how much electricity is used by crypto activities, but it’s probably somewhere between one and two hundred terawatt hours -- the equivalent of a country the size of the Netherlands or Argentina. Most of this goes into powering computers to solve the complex mathematical problems involved in Bitcoin mining and its “proof of work” protocols. Jesse notes that crypto is still a tiny contributor to the world’s overall energy consumption, but at the same time, it’s also a tiny contributor to the financial world. For those of us who think crypto is breaking through into the mainstream of payments and investment, this is the time to get the industry set up right in reducing carbon impact.
How do we do that? Jesse explains the range of solutions available, from switching to renewable energy sources to purchasing carbon offsets. Since crypto is a young industry with a brief history, some companies are committing to actually going back and offsetting all their carbon emissions in the past. He also explains the lively debate underway in the crypto world about whether to replace the original, energy-intensive “proof of work” protocols with a new system of “proof of stake” that would meet the goals of preventing manipulation, but would simply have a light energy footprint.
The Crypto Climate Accord has launched working groups that are tackling some of the hardest problems. One is helping crypto exchanges automate purchasing of renewables to make crypto clean for their users. Another group is working toward creating a “green hash rate” (derived from the hash rate system used in crypto mining as a metric of, essentially, speed and power of problem-solving). A third group is working on the fundamental question of how to measure climate impact in a way that is consistent and can be widely used and trusted.
This metrics issue is a tremendous obstacle to progress in addressing climate change. Jesse says most of the reporting on carbon intensity of crypto currencies is based on estimates and survey data. Metrics for most other sectors are just as bad -- electric utilities are still documenting renewable energy by sending people certificates in the form of PDFs. There are no globally-recognized standards of measurement and no trusted way actually to know the provenance of any given unit of energy.
So, you may be thinking what I’m thinking: when we hear of markets that have dysfunction because it’s hard to trace a chain of activity, they sound like something that might need a blockchain. That is certainly what Energy Web thinks, and Jesse tells us about their blockchain project for solving this very problem -- again, not just for crypto, but overall.
One of our goals at AIR is to break silos and connect people whose work needs cross pollination. Climate innovation and financial innovation are a dramatic example. Bank regulators are grappling with shifting risk calculations for loan and investment portfolios in vulnerable geographies and sectors. Meanwhile regulators of financial firms, securities and consumer markets are exploring how to assess companies’ competitive claims about their climate impacts. As this factor becomes increasingly important to investors and consumers, regulators worry about fake “greenwashing” and other exaggerations that may mislead the public. Jesse talks about how he sees the rising role of ESG efforts intersecting with this work
He also has some advice for regulators and policymakers, and for everyone on where to start in taking on these challenges.
The crypto sector offers an ideal learning laboratory for all of this work. The sector is small (but again, rapidly growing). It’s young and nimble. And it’s inherently high tech. We think the solutions we develop with the firms partnering in the accord can become both models and tools, accelerating traction for climate efforts of all kinds.
Jesse Morris is the current CEO and former CCO of the Energy Web Foundation. Throughout his career in the electricity sector, Jesse has had one focus: to partner with utilities, technology providers, developers, and regulatory stakeholders to help clean energy become an integral, widely-accessible part of the global electricity system.
Prior to EWF, Jesse was a principal in the Electricity Practice of EWF’s co-founder, the Rocky Mountain Institute (RMI). During his time at RMI, Jesse’s research, convening, and consulting work focused on the fundamental economics of batteries, electric vehicles, and flexible electric loads and their ability to provide a wide variety of services to the grid. He coauthored several of RMI’s landmark findings on the economics of battery storage, advanced demand response technologies, and solar-plus-storage systems, in addition to helping large corporates build new business models focused on the grid edge.
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Next up on Barefoot Innovation we will have Melissa Koide, CEO of FinRegLab, on the important research they are doing on artificial intelligence, especially in credit underwriting. After that we’ll hear from Stephanie Cohen, Global Co-Head of Consumer and Wealth Management at Goldman Sachs. And, happily, we will be making my 2021 SXSW session with Cleve Mesidor, on Diversifying Tech, into a podcast soon.
AIR has been very busy this summer! For those interested in climate and green finance, please join David at the IPPNY Fall Conference in Saratoga Springs, NY — that’s the Independent Power Producers of New York. He will also speak at AITE Group’s Financial Crime Forum. And don’t forget to register for my FDIC presentation, ‘Banking on Data: Great Possibilities, Great Responsibilities!’ And in the fall, I’ll be speaking at SCxSC 21, hosted by the securities regulatory commission in Malaysia. I’m also helping with the fall planning for Money 2020 — back in person this year — and with the Singapore Fintech Festival.
