The environmental impact of NFTs has been a topic of concern and criticism by many. However, it’s important to note that not all distributed ledger technologies (DLTs) have a detrimental environmental impact. In fact, NFTs can play a role in protecting the environment and combating climate change.

One way that NFTs can help fight climate change is by serving as carbon offsets. Carbon offsets represent actions that remove greenhouse gases from the atmosphere, such as carbon sequestering or renewable energy. They can be purchased by entities looking to reduce their carbon footprint. While carbon offsets can result in indirect emissions reductions, concerns exist regarding double counting. Blockchain technology can help to reduce the likelihood of double counting by providing an immutable record of the greenhouse gas reduction, making the system more transparent and efficient.

Another way that NFTs can contribute to fighting climate change is by serving as virtual power plants. Currently, the power grid is managed by centralized entities, which is associated with issues such as energy loss. Projects like the Brooklyn Microgrid have utilized decentralized energy approaches to reduce energy waste. Decentralized energy projects can source power from renewable energy producers throughout an area and package these resources as “virtual power plants.” Renewable energy sources could be minted as NFTs and traded, enabling us to reduce our reliance on fossil fuels.

Additionally, NFTs can be used as carbon credits, which represent a reduction in emissions. The White House has recognized blockchain technology and NFTs as technologies that could improve the current carbon trading system, requesting relevant agencies to create a report on its possible applications in the carbon market.

While NFTs can contribute to fighting climate change, it’s essential to consider the type of DLT being used. Emissions-reduction efforts on proof-of-work DLTs are inefficient due to the excessive energy requirements for those technologies. However, ledger technologies such as Hedera, Binance, and Solana have low energy requirements, making them ideal for carbon credits, offsets, and virtual power plants.