Implementation of smart contract solutions on a distributed ledger network (blockchain) based on physiological state variables of woody plants
Author(s)
Buonocore, Luca
Date Issued
July 14, 2023
Type
Doctoral Thesis
Abstract
The main objective of this work is to investigate, design and implement an innovative solution based on smart contracts running on a public blockchain network to record, monitor and verify physiological state variables of woody plants. The solution enables also the possibility to emit tokens representing carbon credits with all key attributes: real, robustly quantified, additional, permanent, and uniquely claimed to ensure full transaction transparency.
The background context that triggered this research work can be defined by three, global, macro trends. The first one is the need to improve capital flow towards sustainable practices of forest management given the paramount importance of forest ecosystems for human society and planetary health. For example, forests play a pivotal role as a global carbon sink accounting for c. 45% of terrestrial carbon stocks (Bonan, 2008; Y. Pan et al., 2011). Nevertheless, in the “the state of climate action 2022 report” (Boehm et al., 2022), the World Resources Institute outlines that none of the indicators directly related to ecosystem services provided by trees is on track showing that the increase rate of “Reforestation” should be 1.5x faster and the reduction rate of “Deforestation” should be 2.5x faster. The second one is the impressive growth over the last years of the carbon credit markets both under the form of regulatory schemes and voluntary markets. For example, the voluntary carbon market quadrupled the value in 2021 reaching almost USD 2 Bln. LULUCF (Land Use, Land Use Change and Forestry) and in particular forest carbon offsets projects play a pivotal role in this market having the largest market share and growing steadily with an increase of +300% in terms of MtCO2e sequestered between 2020-2021 (Ecosystem marketplace 2022). Therefore, we can say that capitals are flowing into the forestry sector but, despite this steady growth, the scientific community have raised concerns on the quality, transparency and integrity of carbon credits related to forest projects by signaling for example, systematic over-crediting (Badgley, Chay, et al., 2022), ownership and accountability issues (Streck, 2020), contracting issues due to asymmetric information (van Kooten, 2017). There is the need to improve the Monitoring, Reporting and Verification (MRV) processes of these projects by implementing advance solutions to minimize credibility failures, including double-counting, lack of transparency in the transactions and limitation in the information access of all stakeholders. The implementation of such solutions could have been utopian just few years ago, but we are currently in a timeframe where all key enablers are becoming available. There is in fact a (third) macro trend related to the emerging of a new digital stack to proper record, validate, and access to forest ecosystems’ data. Technologies such as IoT (Internet of Things) devices, satellites, drones, and microprocessors represent new real-virtual digital sockets to register the state variables of forest ecosystems at different spatial scales, from tree to forest level. Furthermore, blockchain technology can act as a technological layer to store and transact the calculated asset for a specific ecosystem service (e.g., t CO2 sequestered in a given period of time) without the need of a trusted third party and providing a tamper-proof full log of the evolution of ecosystem services at tree and forest level.
The work structure follows a top-down approach. In the first chapter, we introduce a theorical framework to design a forest digital twin (FDT) that, by integrating different state variables at both tree and forest levels, creates a virtual copy of the forest to enable the system of recording, reporting, accounting, and trading of ecosystem assets generated by a forest. The chapter is reported as scientific article being published on Forests journal in 2022. In the second chapter, we narrow down the scope, and, starting from the FDT framework, we design the technical solution just related to one single ecosystem service (carbon sequestration at tree level) and relying on one single real-virtual digital socket (IoT devices monitoring radial growth). In the third chapter, we build a proof of concept of the solution for two stands of Prunus domestica located in Italy. We run the proof of concept in 2022 covering from the monitoring of the CO2 accrued at tree level via the TreeTalker® IoT platform, to the tree stand information recording on a public blockchain network and the related carbon token generation. In the last chapter, we perform an economic assessment in the EU area of forest projects generating carbon credits in different scenarios and conditions such as climate region, planted species, MRV solution adopted, fire risk, project transaction costs, and carbon credit price. The goal is 1) to assess the driving factors influencing the profitability of these projects and 2) to better understand the economic impact of adopting such advance MRV solutions. We then qualitatively discuss the market price premium due to adopting such solutions.
Additional information
Dottorato di ricerca in Scienze, tecnologie e biotecnologie per la sostenibilità
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