Indonesia, too, has its own homegrown success story, with Ghozali Ghozalu. At 22-years old, Ghozali is a case study in the accidental crypto millionnaire, but the market conditions for what made this possible are clear: Home to a young, digitally-driven population, Indonesia, like Southeast Asia, more broadly, has the makings of a rising non-fungible token (NFT) capital.

Yet, despite the financial empowerment that NFTs can offer, there are, admittedly, broader issues at play. According to the UN's Intergovernmental Panel on Climate Change (IPCC)’s latest report, climate change is already worse than expected, amid increasing incidences of extreme weather events to which archipelagic nations such as Indonesia, are extremely vulnerable.

It’s hard to ignore the existing “energy-guzzling” narrative that’s been relegated to NFTs and its underlying blockchain technology — and it’s true, like any technology, they all play a role in impacting the environment. Rather than jumping to conclusions, discussions of the industry’s energy footprint merit a nuanced take, so where are critics getting it wrong?

Discussions around the energy expenditure of cryptocurrencies have centered on the computationally-intensive Proof-of-Work (PoW) consensus model used by some legacy blockchains. PoW requires specially-designed hardware that consumes an estimated 141 terawatts hour of power per year. Despite its security benefits, concerns about energy consumption prevail, so much so that the European Parliament — grounded in their existing sustainability commitments made on the back of the COP26 — came close to prohibiting PoW-based digital currencies in the EU.

In recognition of this, more than 200 companies and individuals launched the Crypto Climate Accord, committing to net-zero operations and 100 percent renewable energy-powered blockchains by 2030. Ideological and philosophical divides aside, the move is a critical step in recognizing the industry’s role in climate change.

But there are some stark differences to keep in mind: Networks on which NFT marketplaces and NFTs can be minted are home to a myriad of use cases — these blockchains, whether it’s Ethereum, Tezos, or Polygon — serve more than one sole application. This introduces some complexity in how we understand the carbon footprint of a single NFT.

If you consider the entire carbon footprint of one art exhibition, you would need to factor in the specialized shipping, storage, and associated utilities in bringing an art piece and exhibiting it later on for several weeks. Go back further and take into account the materials used to produce the work itself — how were they sourced?

Everything has a footprint. Industry giants such as Christie’s have recognized this, pledging to reach net-zero carbon emissions by 2030, taking a holistic approach to sustainability transformation across shipping to energy consumption.

The cost of operating in the traditional art world is fundamentally different from that of the NFT art ecosystem — you remove the overheads that you would have in working with physical goods and limit it to server costs, software and design talent, and in older networks, mining.

In turn, it’s hard to argue that NFTs are directly increasing the carbon footprint of a given network — minting one NFT doesn’t change how much energy is expended, how a given blockchain is operated, does.

Many networks are looking for more efficient consensus protocols such as Proof-of-Stake (PoS). Ethereum is amid its ongoing transition to PoS, known across the industry as “The Merge” which is set to reduce the energy expenditure of the entire Ethereum blockchain by 99.95 percent. On the other hand, early movers such as Tezos, regarded as a PoS pioneer across the industry, increased in energy efficiency on a per transaction basis by at least 70 percent and have an average energy footprint of only 17 global citizens, as compared to other blockchains with an energy expenditure as entire countries.

The industry aside, academic circles have acknowledged the vital role that blockchain technology can inherently play in strengthening carbon markets. Blockchain can address one of the most challenging aspects of the Paris Agreement — the issue of accurately accounting for and tracking carbon credits to account for the phenomenon of double-counting as companies and governments are at risk of taking ownership for the same climate action under a country’s nationally-determined contributions (NDCs).

As recognized by the Organisation for Economic Co-operation and Development (OECD) and the EU alike, blockchain can imbue greater integrity and trust in the sustainability sector and provide clarity to make more meaningful inroads in addressing climate change in a verifiable way.

In line with this, various departments at the University of Cambridge collectively worked to launch the Cambridge Centre for Carbon Credits (4C) last year. As a trusted, decentralized, nature-based solutions (nbS) marketplace, 4C strives to ensure that purchasers of carbon credits can confidently and directly fund trusted nature-based conservation and restoration projects. This helps resolve the pain points of slow, costly, and inaccurate accreditation systems that exist today that most ESG investors and companies rely on to measure the value of sustainability-focused initiatives.

Without reliable data, trust, as a whole, is undermined in these systems, thus impacting access to badly-needed financial capital for sustainability projects.

In Indonesia, home to the world's third-largest tropical forests and also its biggest palm-oil producer, deforestation rates have bucked the worsening global trend. Last year, the sprawling archipelago improved from third to fourth place in the GFW ranking for tropical forest loss, which amounted to about 270,000 hectares (667,000 acres), as forest protection policies, lower commodity prices, and wetter weather eased pressures. Under the Paris Agreement, the country has pledged to reduce its greenhouse gas emissions by 29 percent by 2030 — creating a greater market need for decentralized marketplace initiatives such as 4C that provides access to international capital with more efficient carbon trading markets.

Beyond the tech and network mechanics which ultimately rest on project teams and their roadmaps, there are approaches that individual artists, brands, and creators can take on to support broader decarbonization efforts. They can champion an ethos for “cleaner NFTs”, working with and only purchasing NFTs minted and sold on marketplaces powered by eco-friendly blockchains.

The truth is, decentralized or not, we can’t separate conversations around the economy and the climate — how we choose to live, work, and behave has an unmistakable impact on the environment. While the tangible value that NFTs can bring cannot and should not outweigh the existential concerns brought about by the threat of climate change, it doesn’t necessarily mean they need to be at odds with one another — we just need to make better, well-informed choices.

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The writer heads marketing and operations at TZ APAC.