Brazil eyes blockchain to snap carbon credit logjam

Brazil's biofuels industry is considering blockchain technology to clear logjams that are preventing corn ethanol and biodiesel plants from issuing carbon credits.

According to a recent industry webinar, officials involved in talks between the government and industry leaders are mapping out the challenges of traceability – that is, the ability to document the production process of each corn ethanol or biodiesel plant all the way back to the tens of thousands of corn or soybean farmers that produce the feedstock grains.
"Blockchain technologies may be a solution for improving traceability," Alexandre Alonso, head of the agroenergy department at the government's crop research company Embrapa, adding that the approach would also protect proprietary information.
Blockchain, widely used in the cryptocurrency industry, is a digital system that preserves a record of transactions along a supply chain on to a peer-to-peer network for transparency.
Brazil began implementing its sweeping biofuels law known as Renovabio this year. But certification of biofuel plants to issue the carbon credits known as Cbios has lagged.

Biodiesel plants and ethanol mills must pass through a certification process to be graded on their energy efficiency and on the traceability of their biofuel production. A mill's grade determines how many Cbios it can issue for every liter of ethanol or biodiesel that it produces. Each Cbio is equivalent to removing one metric ton (t) of CO2 from the atmosphere and trades on the B3 stock exchange.
"We have biofuel mills that are stunningly energy efficient, but score very poorly on traceability because of their vast number of suppliers, and that really penalizes them in the end," said Felipe Bottini, founder of renewable project consultants Green Domus.
Brazil's sugar cane mills are better able to navigate the certification process because their supply chains are more transparent. Most mills produce half of their own cane needs, with at most 2,000 third-party suppliers in 10-year contracts.
 "A corn ethanol producer is drawing feedstock from 20,000 growers and there are a lot of externalities that could improve the biofuel's grade that are not being taken into account, such as better use of land through second cropping or no-tilling techniques," said Guilherme Nolasco, president of the Unem group of corn ethanol producers.
Miguel Ivan Lacerda, head of biofuels at the energy ministry, said traceability is key to the market value of Cbios because it guarantees that biofuel producers "don't go and cut down the Amazon in an attempt to profit" from biofuel production.
"I'm very excited by the potential of blockchain use in expanding the traceability in biofuels and, in the end, all Brazilian farming is headed in this direction of digitalization and transparency," Lacerda said.