How a “Forest Union” powered by blockchain would help the EU achieve its climate neutrality targets

To achieve its climate neutrality goal by 2050, the European Union needs to take urgent action to reverse its deforestation problem. There are six immediate ways using blockchain to digitise Europe’s forests can help the EU achieve its ambitious and difficult to attain targets. In this article I explain how and why I believe the EU needs to create a European Forest Union.

When the European Parliament elected Ursula von der Leyen as the European Commission’s first female President one year ago (1 December 2019), her victory was built on a promise that the European Union (EU) would begin a new chapter in its fight to protect the planet.

Since then, the EU’s 2050 net-zero emissions target, an ambitious part of its European Green Deal, is on the brink of being legally binding for all 27 countries in the bloc. And whilst the Commission has previously proposed that natural solutions, such as protecting forests, can play a role in removing carbon from the atmosphere. They have not yet provided concrete clarity on an achievable forestry action plan.

Nor have they yet indicated if they are exploring the full potential of the innovative technology known as blockchain, to measure, track and fund such forest initiatives. Their “post-2020 EU forestry strategy” expected by early 2021, is eagerly awaited.

Pressure for action is certainly mounting for all Government’s to walk the walk not just talk the talk through setting goals with no roadmap to achieving them. More than one million members of the public have already responded to the Commission’s consultation on deforestation and forest degradation — reducing the impact of products placed on the EU market. A record response to an EU call for feedback on environmental, or indeed, any policy.

Everyone is coming to realise that protecting and sustainably managing forests is critical to fighting the climate crisis.

There are six immediate ways blockchain can help. Here’s how.

1. Create a single market for forest data

The EU has struggled for decades to unify various markets to work as one homogenous block. You only have to look at the ongoing herculean task underway to try and create the Capital Markets Union in financial services.

Through mass adoption of blockchain and digitisation of Europe’s forests, the EU-27 would have a simple, transparent and harmonised EU database to monitor the effects of forestry policy implementation. Measuring results as various experiments, innovations and policies are deployed in each country. Learning what works and sharing knowledge across the union to help all member states.

If the EU created a single market for forests through an integrated “Forestry Union”, data could flow freely across Europe for the benefit of everyone. It would also ensure European rules, in particular privacy and data protection, as well as competition law, are fully respected.

2. Facilitate forest metrics to track progress

As they say, what gets measured, gets done. First, we need to count Europe’s 182 million hectares of forest (5% of the world’s total) and gather all the needed data. Data which can be digitised, measured and benchmarked so we can determine the effectiveness of a forest and other environmental initiatives as they are introduced.

This data would be decentralised and secured through a private, “permissioned” blockchain. Managed by the individual forest owners across Europe who own the data. Not stored on one central database in Brussels or elsewhere, making it slow to update, expensive to maintain and vulnerable to hackers. Forest owners would give those that need access to the data permission to use it. Connecting data. But I’ll explain more about decentralisation of forest data in a future article.

Going back to forest metrics, we need access to European-wide data to track progress in achieving the EU’s 2050 carbon-neutrality goals and be able to access this data available in real-time. Whether that be at EU or domestic European country level. For example, to measure the impact of a forest fire in real time to inform an immediate change in forest management strategy.

Blockchain would enable EU and domestic governments to have greater access to trusted and consistent forest data. Everything from biodiversity and health of a forest to carbon capture data and impact on the environment.

It feels out of reach, but blockchain makes it realistically possible.

3. Improve traceability of wood in supply chains

Illegal logging and related trade is a major problem around the world. Europe included. Paperwork is being faked, people are being bribed, and the authorities cannot have their eyes everywhere. In economic terms, it costs governments billions in lost revenue, causes environmental damage and delays sustainable development.

Europeans also increasingly want to have the guarantee that their shopping habits are not funding ecosystem destruction. They want to know where the goods they are buying come from.

Blockchain can help tackle trust in wood and other natural resource supply chains through using new decentralised identity technology which uses digital signatures, rooted on a blockchain network to guarantee specific attributes and other relevant identity information about assets such as forestry.

With decentralised identity technology, absolute trust could be vested in the forest origin, forest owner, tree type as well as GPS tracking locations as the wood is transported from forest to manufacturer to end user. Once information has been ‘credentialised’ and secured by a signature on a distributed ledger, the trust is immutable. It is time-stamped, verified and permanent. Creating a “chain” of truth and trust.

For Governments it would mean being able to stem the tide of lost revenues and regulations being much more effective with decentralised identity technology making provenance extremely difficult to fake.

And for consumers, we would be able to look at a products digital history and be able to ensure trust, ethicality and authenticity in the materials and processes of the product across the entire lifecycle.

That’s game-changing.

4. Incentivise forest owners to reverse deforestation

In the EU, over 60% of productive forests are already certified as sustainably managed. However, Europe’s carbon sink has reportedly decreased since 2013. With analysis showing farmers and foresters simply have more incentives to do other lucrative things with their land than to leave it as forest.

There needs to be an alternative financial incentive to encourage preservation and reforestation of land.

This is where blockchain comes in and why I believe blockchain is the catalyst to forest transformation.

Once all the information about a forest has been digitised, that data can be tokenised to allow forest owners to raise money through selling forest tokens to investors, including the general public.

At a high level, tokenisation as a concept is taking a real-world asset, in this case a forest, and turning it into a financial product (a digital asset) which forest owners can sell through a digital finance platform. Same as a security or share, for example.

Once you have created a digital twin of your forest, it can be fragmented into thousands of small tokens which can be sold to small investors. A process called fractional ownership.

‍This would generate a brand-new income for forest owners. But more importantly, a new financial incentive and alternative to cutting down the trees to release land for other commercial use.

5. Create a new mechanism for the public to invest in forests

After watching David Attenborough’s ground-breaking A Life on Our Planet documentary, many people will have been galvanised to seek out ways they can help save our forests. But what choices are available to them today?

Some will have rushed to donate money to charities focused on planting trees. All worthy causes. But once they have made that donation, there is no proof that the tree they donated money to be planted, has been planted. Nor how that tree is nurtured, from say acorn to sapling to great oak. Nor do we know if the right tree has been planted for a particular habitat.

Another way people could help is by buying part of a forest as an investment. But that is near impossible today for the average person. And then what would they do with the trees they bought if they did? They probably don’t want to become forest rangers. They just want to help save the planet and stop deforestation.

Blockchain has the ability to introduce a fast and easy way for ANYONE to invest in a forest.

Blockchain would allow the EU to create a financial mechanism to facilitate a way for its 446 million citizens to invest in forests with forest owners responsible for managing them. Choosing which individual forest they want to support.

Not to mention the many global investors seeking opportunities to support ESG initiatives too.

As well as reducing the barriers to entry by creating a new and affordable way to invest in forests, blockchain would bring in a new level of transparency and trust around forest data. Enabling investors, large and small, to carry out sophisticated cross-border due diligence on a forest. All from their desktop or mobile device. And in real-time, with all the records they need accessible in one portal.

Everything they need at the touch of a button.

This is game-changing for cross-border investment.

Especially for small EU countries who might be struggling to access international inward investment.

6. Raise money to fund scientific research

Scientific forest research needs funding, but there are many different initiatives competing for access to the same government purse. With the coronavirus pandemic adding to this existing strain even further.

By digitising and tokenising Europe’s forests, pressure on EU and domestic budgets could be eased with the public being able to choose to support forest research initiatives through buying tokens in individual forests.

With forest data accessible through a private, permissioned blockchain, investors in forest tokens would have full transparency over not just the performance of the forest they have invested in. They could also make tactical investments through buying tokens which allow for investment into research and development measures that enhance forest resilience and adaption to climate change. Choosing to forgo their token returns and reinvesting them back into forest research and science-based forestry practices.

Accordingly, forest tokenisation unlocks an exciting new way for the EU to fund environmental research.

Creation of a European Forest Union

Forestry and environmental sustainability are a cross-border issue. It requires collaboration. It requires courage too as uniting 27 countries will require a lot of faith, persistence and intense diplomacy.

On the one hand, one can argue EU member states have an obligation to create a European Forest Union. They have signed up to a target of climate neutrality by 2050.

They understand that trees are an important mechanism to achieving this target. And in order to ensure efficiency, cost effectiveness and measure progress, having one unified platform is a logical move. Particularly when a blockchain-based platform would enable strict data privacy and protection for countries on a national level too.

On the other hand, there are also opportunities for advancing the EU’s digital agenda too. Establishing technologies and processes that serve new markets, thereby creating new digital jobs and economic prosperity.

It’s a win-win for both the EU’s green and digital economies.

It won’t be easy, but it needs to be taken seriously as a smarter and greener use of digital technologies is key for making Europe climate-neutral by 2050.

The EU needs to invest in blockchain and digitise its forests.