Ernst & Young launches Ethereum-based carbon credit tracking platform to drive ESG with blockchain technology

Ernst & Young announced at a global blockchain summit in London that it has launched an Ethereum-based platform to provide enterprises with the ability to track their carbon emissions and carbon credits traceability. The platform is now in beta on the EY Blockchain SaaS platform, utilizing carbon credit tokens developed by the InterWork alliance standard supported by Microsoft. The alliance is part of the Global Blockchain Business Council (GBBC), of which Ernst & Young is a member.

EY Focuses on Low Carbon Emissions as One of the ESG Themes

Ernst & Young (EY), a multinational professional services firm headquartered in London, UK, is one of the Big Four accounting firms globally, alongside PwC, Deloitte, and KPMG. With over 700 offices in more than 150 countries, EY provides audit, tax, transaction, advisory, and legal services to various companies. Their motto is "Building a better working world," and in recent years, they have been dedicated to Environmental, Social, and Corporate Governance (ESG), focusing on issues such as low carbon emissions.

Why Are Carbon Emissions So Important?

Due to the increasing severity of the greenhouse effect, the 21st Conference of the Parties (COP21) to the UNFCCC held in Paris in 2015 agreed to collectively strive to limit the increase in global temperature to within a range of up to 2 degrees Celsius compared to pre-industrial levels. This agreement is known as the "Paris Agreement." The Paris Agreement also requires developed countries to provide climate finance to assist developing countries in reducing greenhouse gas emissions and adapting to the consequences of global climate change. It also allows countries to set their own emission reduction targets, known as Intended Nationally Determined Contributions, in five-year cycles.

In response to the importance of reducing carbon emissions, the European Union took the lead in releasing a draft of the Carbon Border Adjustment Mechanism (CBAM) in July 2021, which was approved by the European Council in March 2022. The main goal is to ensure achieving net-zero emissions by 2050 and to prevent disparities in carbon regulations among countries, making CBAM a means for countries to tighten carbon emission controls at the trade level.

This means that if the carbon content of the products you produce exceeds the regulations, carbon tariffs will be imposed. Therefore, how companies calculate their carbon emissions, reduce them, or even trade carbon credits with others becomes a significant issue. EY's corporate solution involves using blockchain technology to track and trace elements throughout the entire workflow.

Marking Carbon Emissions and Using Carbon Credits Tokens with Blockchain Technology

EY has been actively promoting blockchain technology and, in 2020, collaborated with ConsenSys to develop the Baseline Protocol, a new protocol designed for enterprises. This protocol allows businesses to synchronize data with collaborators or partners on the Ethereum blockchain without disclosing all business records.

Paul Brody, EY's Global Blockchain Leader, stated:

EY has always believed that blockchain can act as a glue that connects business processes and the global ecosystem across enterprise boundaries. The detailed traceability of blockchain allows the tracking of emission inventories through tokenization, including the ability to link carbon outputs to specific product outputs. By using carbon credit tokens created or purchased in the market, companies can now understand their decarbonization actions.