The Peril and Promise of Greenwashing
Why MobileCoin isn't a carbon negative cryptocurrency and commentary on how greenwashing can be good
Last week I read a headline in Hackernoon, “MobileCoin is the World’s First Carbon Negative Cryptocurrency” and I almost fell out of my chair. This was for three reasons: 1) this is a greenwash (and also not true, on both the “world’s first” and “carbon negative” count) and there are few things in the world that enrage me more than a greenwash 2) I recently spent some time in the San Francisco Bay Area where I had the chance to meet a MobileCoin founder, and a few backers of the project and 3) as a co-founder of Nori, a company building a blockchain-backed carbon removal market to enable these types of transactions, I think a lot about this. The headline felt personal.
For the record, I think MobileCoin is a fantastic application of blockchain technology with an amazing potential to make positive social change for the un- and underbanked, and I will happily grant that there is no malicious plot here to deceive. It’s probably just semantics, and also the fault of a confusing carbon offset industry. But as this is just the latest headline in a spate of blockchain companies making superlative greenwashing claims (Algorand Pledges to be the Greenest Blockchain with a Carbon-Negative Network Now and in the Future, April 22, 2021; “A Carbon Negative Blockchain? It’s here and it’s Celo”, May 26, 2021; “Elrond Becomes First Carbon Negative Blockchain in Europe”, August 6, 2021; “Accelerate Launches Accelerate Carbon-Negative Bitcoin ETF on the TSX”, August 31, 2021), I feel inspired to correct the record and make a point or two on greenwashing.
What is greenwashing?
To start, it’s worth understanding what greenwashing is and why it’s problematic. The Oxford Dictionary defines it as: Disinformation disseminated by an organization so as to present an environmentally responsible public image. The idea has been around for a while, but was first coined in 1986 by Jay Westerveld, an environmentalist from upstate New York. He wrote an essay that called out the hotel industry’s promotion of the reuse of towels as part of a broader environmental strategy, whereas the suggested practice of reusing towels was really just a cost-saving strategy.
Since then, environmentalists have distinguished types of greenwashing into the “Seven Sins of Greenwashing” (pulled from EcoWatch):
Hidden Trade-Off: Labeling a product as environmentally friendly based on a small set of attributes (e.g., made of recycled content) when other attributes not addressed (e.g., energy use of manufacturing, gas emissions, etc.) might make a bigger impact on the eco-friendliness of a product as a whole.
No Proof: Making an environmental claim without providing easily accessible evidence on either the label or the product website (e.g., a light bulb is touted as energy efficient with no supporting data).
Vagueness: Using terms that are too broad or poorly defined to be properly understood (e.g., an “all-natural" cleaner may still contain harmful ingredients that are naturally occurring).
Irrelevance: Stating something that is technically true but not a distinguishing factor when looking for eco-friendly products (e.g., advertised as “CFC-Free"—but since CFCs are banned by law this is unremarkable).
Lesser of Two Evils: Claiming to be greener than other products in its category when the category as a whole may be environmentally unfriendly (e.g., an organic cigarette may be greener, but, you know, it's still a cigarette).
Fibbing: Advertising something that just isn't true (e.g., claims to be Energy Star Certified, but isn't).
Worshiping False Labels: Implying that a product has a third-party endorsement or certification that doesn't actually exist, often through the use of fake certification labels.
Across the board, these sins are problematic because they divert our attention and dollars away from making real environmental change. Greenwashes succeed in making consumers complacent, giving sinners cover to continue to cause environmental damage, extract resources, and continue business as usual without fundamentally addressing the root of the problem. Fortunately, there is a growing trend of lawsuits being filed against the most egregious greenwashing claims - like a $14.7 billion dollar settlement from Volkswagen for fooling consumers on their “clean diesel” cars. Unfortunately, it’s still more profitable to freely pollute, smudge balance sheets, highlight vanity projects, settle in court, keep the public outrage focused elsewhere, and invest in merchant of doubt style misinformation campaigns.
Of course, VW’s sins are outright fraudulent, warranting an episode on a Netflix series “Dirty Money”, and laying them squarely in Dante’s 8th circle of hell - Fraud, whereas MobileCoin may only be in the first circle, Limbo (they can still get out from correcting the record). Nonetheless, from the above list, MobileCoin is guilty of a few.
Vagueness, Fibbing & Worshipping False Labels
Carbon negative means removing more carbon than is emitted. However it’s not actually an understood - or agreed upon standard. Even if the MobileCoin community was paying for carbon removal, they would need to be wary of the nuances behind the claims. Much more could be said on the failures of carbon markets to protect buyers from purchasing garbage and being at risk of greenwashing. That’s not the case here as they didn’t pay for carbon removal, so I’ll save that for a future post and share below an image of a eucalyptus tree plantation, generating carbon negative attributes.
What MobileCoin did pay for are the abstracted attributes of clean energy in India. Through ClimeCo, their community decided to support a project that’s generating 25 megawatt hours in Gujarat, India through purchasing Renewable Energy Certificates (RECs). Even though they paid for the RECs, or attributes of the “clean” power onto the grid, and paid for ten times as much megawatt hours consumed by their blockchain, RECs are not a viable offset. This is because it’s nearly impossible to prove that the solar array would have been built without the sale of RECs, or that the new energy on the grid would have been. Moreover, it’s not even clear that voluntary RECs work (see Google’s shift away from using them).
Hidden Trade Offs
I commend MobileCoin for their use of a hyper energy efficient consensus mechanism - Federated Byzantine Agreement - to run their blockchain. This is far superior to Proof of Work from an energy efficiency standpoint. But it’s sort of like advertising off-grid ultra sustainable islands that can only be accessed by a private jet, and buying some credits to give those islands more sheen. Unless I’m one of the cool kids or social media influencers getting air-dropped tokens at an exclusive party, in order to buy the MobileCoin cryptocurrency, I first must purchase Bitcoin or Ethereum. As of today’s writing, one transaction on the Bitcoin network consumes 1737.41 kWh, or the equivalent energy use of 55 days of a US household. Taken as a whole, if Bitcoin were a country, it would rank 25th in its annualized energy consumption, right between Egypt and Poland, consuming north of 150 Terawatt Hours. Until Ethereum transitions to the alternative and more energy efficient consensus mechanism Proof-of Stake, it ranks 42nd as a country in energy consumption. Any feel-good sustainable claims on blockchains which do not have an easy way to get on and off the proverbial island on a carbon free vehicle - a necessity for liquidity - are hiding the true costs if they claim to be carbon negative.
“Wait, Christophe, if you’re so enraged about greenwashes and see them as problematic, why did you say there is a promise of them?”
When the tail wags the dog
The headlines I’ve shared are just the latest of the blockchain industry “greening” it’s image. It has quite a long way to go. However, sometimes, greenwashes come in the form of audacious goals or pledges that companies announce to reduce their environmental footprint. These announcements can be the tail that wags the dog. They serve as directional guideposts. Although the one making the claim may have no idea how to get there, the goal serves as a challenge the organization, or in the case of crypto - a decentralized network has to figure it out. Blockchain can solve the proof, and quickly deliver relevance that haunts greenwashes, and if there is a true call across the entire blockchain ecosystem to make it carbon negative, then perhaps there might be truth to MobileCoin’s claim.
Social and environmental licenses to operate are increasing
When we hold those who make the claims accountable, they are forced to make the environmental shift. Investors can divest. Activist shareholders are making moves. Then general awareness and pressure on companies and governments to do the right thing is growing. They will demand transparency.
Don’t let perfect be the enemy of good
Of course ESG metrics are still incomplete and can be unreliable. But they are an important directional start that allows people to put money where their mouth is. We can applauded MobileCoin for taking a stance that may, if it came true, be a huge boon for accounting for the carbon footprint of making cryptocurrency a reality. They multiplied way more than they actually consumed. They may shift their strategy to make carbon negative jets to the island. We are in no place to restrict shots on goal. Greenwashes will continue, but they are an important element for progress.