The Sustainable Bitcoin Protocol has launched a pilot project with Crusoe Energy, a waste gas crypto miner. This is to develop a methodology for assessing the environmental impact.

In a Thursday press release, the companies stated that “SBP will use a third party audit to verify that Crusoe’s waste gas technology and procurement meets a standard which verifies a reduction in greenhouse gas emissions while also contributing to the clean energy transformation.” SBP created a methodology with Crusoe, and other parties, according to CoinDesk.

SBP, a startup, is looking to develop a market-based incentive system that will encourage bitcoin (BTC), miners to improve their sustainability. The startup works with third-party auditors to assess the operations of miners and, if these meet their standards, they are cleared for Sustainable Bitcoin Certificates. SBC assets are issued on the blockchain for each bitcoin that is mined sustainably. These can be traded. Investors can buy these assets to make ESG statements about their bitcoin holdings.

Crusoe, along with other crypto miners, work at oil and gas wells that release excess gas into the air. This will add carbon dioxide equivalents and especially methane to the air. Crusoe installs power generators to burn the gas and extract energy, which is then used for bitcoin mining.

Read more: Middle East Oil Producers Move into Bitcoin Mining with Crusoe Stakes

The process emits greenhouse gasses, but it avoids the methane, which is 80 times more powerful than carbon dioxide . Instead, it uses the gas. Crusoe claims it will capture over 4 billion cubic foot of gas in 2022, saving about 509,000 metric tonnes of carbon dioxide emissions.

The key to this methodology is ensuring that the gas will not be burned, which would add more greenhouse gases. Brad van Voorhees is the co-founder and CEO at SBP. He said that SBP wanted to “ensure using this waste gas does not perpetuate the problem” while “recognizing that oil and natural gas will be used in many years to come”. He said that, when done responsibly and with the right intentions, using this waste gas can be a great way to transition energy.

Chase Lochmiller is Crusoe CEO. He said that if the oil and natural gas producer can find a pipeline to transport their product somewhere else, that’s what they would prefer from an ESG standpoint. He said that if the producer could get a market price somewhere else, then the gas would not be wasted.

The first SBC transaction was completed in February when Georgia miner CleanSpark sold SBC digital asset investment company Melanion Capital.

SBCs, unlike other environmental assets such as carbon credits and renewable energy certificates, are fungible. Van Voorhees said that SBCs do not represent one bitcoin mined with sustainable practices but ownership of all climate-friendly assets that are included in the protocol.

SBP has created a mechanism for making claims about the mining process, ensuring that it is rigorously audited by a third party mechanism and that the claim is “independently tradeable” from the actual bitcoin commodity, which ensures the mined Bitcoin remains perfectly fungible.

Click here to read about six new projects that are aiming to reduce the energy footprint of bitcoin mining

Parikshit Miishra is the editor.