The U.S. Securities and Exchange Commission (SEC) is proposing that all public companies report their carbon emissions.
In general, it will increase the reporting transparency of public corporations. It will help investors know more about how climate risks affect their investments.
What to know about the new rule?
One major mandate is that companies disclose both their Scope 1 and Scope 2 emissions. The same goes for their Scope 3 emissions, if “material”.
Some firms have announced their carbon footprint reduction pledges already. The SEC will mandate them to share how they would achieve such commitments. If corporations set their own carbon price, the SEC will demand them to report about it.
Most companies are already disclosing their carbon emissions in their annual sustainability reports. But significant discrepancies remain.
The former SEC chair Schapiro noted that there are still many big companies that won’t do it unless it’s mandatory. The present SEC chair said that both companies and investors would value the new law.
Companies will need help from climate tech experts for their climate risk reports. This is good news for carbon accounting due to increased carbon emissions reporting.
How important is the disclosed information?
According to SEC, it is the investors that pushed them to draft the rule. They demand better and more transparent climate risk information disclosure. This is because climate change disasters impact the environment.
Likewise, climate risks are also becoming essential for investors to make informed decisions. The information will also show which companies commit to reducing their carbon footprint. The public and investors can put pressure on businesses that are true to their words, not actions.
This rule will make the SEC the leading enforcer of climate-related financial disclosures. The draft proposal will be more likely finalized before this year ends.
For a full overview of the proposed changes Click Here.
Zero-Methane Emissions Initiative launched by The Oil and Gas Climate Initiative (OGCI). The plan is to reach zero methane by 2030.
Bjorn Otto Sverdrup, OGCI Executive Committee Chair, said, “We are calling for an all-in approach that treats methane emissions as seriously as the oil and gas industry already treats safety: we aim for zero, and we will strive to do what is needed to get there.”
OGCI feels removing methane gas from upstream oil and gas will help meet Paris Agreement goals.
Who has committed to the Zero-Methane Emissions Initiative?
Many oil and gas companies have committed to OGCI’s initiative. CEOs across Aramco, BP, Chevron, CNPX, Eni, Equinor, ExxonMobil, Occidental, Petrobras, Repsol, Shell, and Total Energies have signed on.
Per Sverdrup, “We encourage all oil and gas companies to join us in this approach.”
According to the Zero Methane Emissions Initiative, the oil and gas industry can (and should)ane emissions.
To accomplish this, signatories will be transparent. This means they will annually report on their emissions. Companies will also set targets, develop new technology, raise awareness, and improve practices.
These four steps have decreased methane emissions by 30% since 2014!
“We recognize that eliminating methane emissions…represents one of the best short-term opportunities for contributing to climate change mitigation,” said OGCI Chair Bob Dudley.”
What else is the oil and gas industry doing?
First, the oil and gas industry has invested heavily in new tech. Second, the oil and gas industry buys carbon offsets.
Rio de Janeiro is launching a stock exchange for carbon credits and sustainable assets. Rio signed a protocol of intent Tuesday with the Nasdaq and Global Environmental Asset Platform (GEAP).
Rio’s goal is to have a leading role in the green economy. Once approved, they hope to have their Environmental Assets Exchange running soon.
According to Carlos Alberto Reis, former president of the Rio de Janeiro Stock Exchange (BVRJ), the partnership with Nasdaq is “very positive news.”
Ricardo Nogueira, director of the Union of Securities Brokers and Distributers of Rio de Janeiro, agreed.
“Having an environmental asset exchange headquartered in Rio is very good, both economically and institutionally for Rio de Janeiro.”
According to Governor Castro, the government team has worked on this agreement for nearly eight months. The goal is that the carbon stock reaches 73 million tons (or $25 billion).
The importance of carbon credits.
Countries that have reduced their emissions sell carbon credits to other counties that haven’t.
Simply put, one carbon credit is equal to one metric ton of carbon.
While carbon credits aren’t the only way countries can take the necessary steps to fight climate change, it’s a start. Nations typically use any profits to reduce greenhouse gas (GHG) emissions – like reforestation or cover crops.
Rio de Janeiro believes this will help the environment create domestic and international jobs.
According to Secretary of State for Finance Nelson Rocha, “We are going to create a favorable environment for this expansion to take place in the coming years. We want to make Rio a hub (base) for investments in environmental assets.”
Currently, 31% of Rio has natural forests. They expect to increase that coverage by 10% by 2050 by investing $410 million into reforesting projects.
This program will create more than 5,000 jobs.
Rio is actively working towards carbon neutrality – with the goal of 2045.
Net-Zero Framework for Malaysia to be Released this Year.
According to Datuk Seri Mustapa Mohamed, Malaysia’s Prime Minister of Economic Affairs, Malaysia is discussing details.
As such, Malaysia is exploring a voluntary carbon market and carbon tax. They are also exploring incentives to expand green technology.
“The details will be out hopefully sometime this year, and that should give us a clearer picture,” said Mustapa.
Malaysia’s ESG goals.
Malaysia wants to reach 30% renewable energy capacity by 2025. They also plan to keep 50% of the nation’s land area as natural forestry.
Their ultimate goal is to reach net-zero emissions by 2050.
Mustapa went on to say that lowering Malaysia’s carbon footprint won’t be easy. However, “To enjoy the benefits of a low carbon path, developing nations such as Malaysia must accelerate its transition to a greener future.”
Malaysia’s Securities Commission is also hoping to drive ESG objectives.
“There have been some positive developments in terms of our ESG compliance as companies have started to realize the importance of ESG,” said Mustapa.
Global net-zero goals.
In 2021, global investments in sustainable funds rose by 53% and totaled $2.7 trillion.
The Voluntary Carbon Market (VCM) boomed as well. Some experts believe it could reach $100 billion by 2030. That’s up from just $300 million in 2018! What’s great about the VCM is that it is open to businesses, non-profits, and individuals alike.
Each offset purchased on the VCM equals one metric ton of carbon “neutralized” through an environmental project.
Though carbon offsets are not the only way to meet net-zero, they certainly play a part. Combine offsets with technological advances, increased regulation, and environmental investments and the future is looking, well – green!
The FTSE4Good Bursa Malaysia Index (which has strict ESG criteria) has over 80 companies.
That figure is up from just 24 in 2014.
So, it appears that companies in Malaysia are on board, too.
Summit Carbon Solutions is taking the lead for the most significant carbon capture and sequestration project of its kind – anywhere in the world.
To make this project a reality, Continental Resources has committed $250 million. This will help to fund the project’s development and construction. The funding will happen over the next two years.
How will this carbon capture and sequestration project work?
The focus of Summit Carbon Solutions will be to capture carbon from 31 ethanol plants. Once captured, the CO2 will be transported through pipelines underground in North Dakota. It will then be stored deep within the earth.
Right now, the project is taking place in Iowa, Nebraska, Minnesota, and North and South Dakota.
Currently, the project will capture over 8 million tons of CO2. However, the project does have a capacity for 12 million metric tons of carbon.
Since it started, Summit Carbon Solutions’ goal is to help ethanol become a net-zero carbon fuel.
“This project will be transformational for the ethanol and agriculture industries and will have a substantial economic impact across the Midwest,” said Bruce Rastetter, CEO of Summit Agricultural Group.
Continental Resources agrees. Its CEO, Bill Berry, said, “Carbon capture will play an integral role in helping reduce global emissions.
“We believe Summit Carbon Solutions has the most capital efficient project to further this goal.”
Summit and Continental should release more information about the project soon.
Per Rastetter, “We have engaged with governors and leaders in all five states involved in the project and are grateful for the exceptional leadership and commitment from each to this initiative.”
“Continental Resources has been in North Dakota for over 25 years. As the state’s largest leaseholder and producer, no company knows the geology better than we do,” said Continental Resources Founder and Chairman Harold Hamm. “We are grateful to North Dakota’s leadership, who has been laying the groundwork for a project like this and leading sequestration for nearly 20 years.”
Carbon offsets are helping oil and gas companies meet emissions goals.
More than 130 countries have pledged to reach net-zero by 2050. That covers almost 88% of the world’s emissions!
Unfortunately, the oil & gas industry is the most significant polluter. They inject millions of metric tons of carbon into the atmosphere each year.
So, what can the oil & gas industry do?
In addition to investing in new technology to reduce carbon emissions, the oil and gas industry has started to use carbon offsets.
What are carbon offsets?
The Voluntary Carbon Market (VCM) is where companies buy carbon offsets. One carbon offset is equal to one metric ton of carbon. That metric ton of carbon is then “neutralized” through an environmental project.
So, for every carbon offset purchased, one metric ton of carbon is balanced (because of something like reforestation or cover crops – projects that serve as a way to capture carbon).
The VCM has grown substantially over the past year.
Currently, the VCM has a value of $1 billion. This is up from just $300 million in 2018.
Many experts believe the VCM could hit $100 billion by 2030.
The reason why? More and more businesses, non-profits, and individuals alike recognize the role offsets have to play in the fight against climate change.
The oil & gas industry sees an opportunity.
Companies can earn extra revenue for environmental projects by partnering with project developers to develop different projects and produce high-quality offsets.
BP and Shell have started to move into this space. And Eni, TotalEnergies, and Chevron have also begun to move into this space.
While carbon offsets cannot be the only means for the oil and gas industry to lower emissions, it undoubtedly plays a significant role.
As companies take additional steps to improve processes and invest in technologies that reduce or eliminate carbon, net-zero by 2050 starts to seem possible.
How’s this for a week-ending down note: in addition to war in Europe, we could lose the Amazon rainforest, one of the world’s largest natural carbon sinks and a major source of nature-based carbon offsets on the VCM.
More info below.
Rainforest Tipping Point
The rather alarming outlook for the Amazon comes by way of a decades-long study. The concern is that the entire ecosystem is nearing a tipping point, after which even natural disasters – such as fire – can cause irreparable damage to the broader system.
Nothing’s set in stone, of course, and predicting the future of entire ecosystems is notoriously difficult. The concerns for the Amazon are real, however.
Nature Loses, Europe Gains
Could the previous news item have influenced this one? Hard to prove directly, but the facts themselves are straightforward: nature-based carbon offsets had a tough week. Tuesday saw a brutal 16% drop, one of the largest single-day losses, for the leading Nature-Based Carbon Price NGEO. Exact causes for the drop are unknown, but likely due to a combination of bad news on the climate change front and the looming threat of a western recession.
On a more positive note, the EU ETS price gained 17%, the largest single-day gain ever. That still wasn’t enough to entirely offset the massive 30% drop which occurred after the start of the Ukraine-Russia war, but it highlights the ongoing demand for carbon offsets in the midst of political turmoil and an ongoing energy crisis.
Booming Markets: China Edition
The establishment of China’s own cap-and-trade system was big news for the global carbon market. Now, the program is poised to get even bigger. A recent survey indicated that a number of new sectors are set to join the market, including:
Cement
Steel
Petrocarbon
Aviation
That’s not an exhaustive list. As more industries join the scheme, demand for carbon credits will rise, pushing prices higher. Just how high is an open question, but some experts estimate a potential 78% increase by 2025. That’s quite a rapid rate of growth, but it makes a bit of sense: the scheme has only been open since July, but it reported a cumulative trading volume of 186.7 million tonnes in February.
Xpansiv Goals
300% increases in revenue year-on-year are always noteworthy. It’s no surprise that those gains mark an industry leader, whose platform hosts 90% of all transactions on the VCM globally.
And yet, Xpansiv is soon set to get even bigger.
Ahead of its Australian IPO, Xpansiv is raising capital and pursuing M&A. There’s an estimated $2 billion market capitalization looming for them. The best sign? The VCM is set to grow just as quickly as Xpansiv, keeping the gains coming (potentially).
There are billions of dollars at play on the VCM. Xpansiv is aiming for its share and more.
Carbon Fact of the Day:
The Amazon rainforest stores around 123 billion tonnes of CO2, both below and above the ground. That makes it easily one of the largest terrestrial carbon sinks on the planet. More alarmingly, however, some parts of the Amazon have already begun to emit more CO2 than they absorb. This is mostly due to deforestation and burning.
Oil and gas producers. Heavy industry. Planes, trains, and automobiles.
Farming?
The list of the leading sources of CO2 emissions includes one that most people probably wouldn’t put on the list. After all, what does farming have to do with climate change?
Modern Farming: A CO2 Factory
Growing crops, by itself, doesn’t cause any harm. In fact, growing plants of almost any kind are basically practicing small-scale carbon sequestration. That’s because plants use photosynthesis to combine energy from the sun, CO2 from the air, and minerals from the ground to build their basic structure. In doing so, plants form part of the carbon cycle.
When they die, the carbon-based structure of the plants starts to decay. Some of that CO2 is released directly into the air, and some of it can be trapped underground. Grasses and other fast-growing plants extract CO2 quickly and tend to release it quickly when they decompose; trees, like giant hardwoods, can take much longer both to sequester and release carbon.
So far, so good. Farming relies on growing crops regularly and rapidly – good news for CO2 emissions, right?
Unfortunately, not so much. Industrialized, modern farming employs a number of practices that result in net CO2 emissions. Carbon farming is less of a set of specific practices and more of a broad-level approach to land use.
Multiple Definitions of Carbon Farming
There are a number of approaches that can broadly be referred to as “carbon farming.” Some of them have relatively little to do with agricultural production.
In a very general sense, carbon farming can be thought of in two ways: farming carbon and carbon-friendly farming.
This article deals primarily with the latter – reducing atmospheric carbon emissions by employing a basket of climate-friendly practices. Both kinds generally deal with agricultural land use reform and changing agronomic practices.
A recent study commissioned by the EU identified five general categories of carbon farming practices that can apply variously to both kinds of carbon farming:
peatland rewetting and restoration
agroforestry
soil organic carbon (SOC) enhancement
livestock and manure management
nutrient management on croplands and grasslands
Each category holds immense potential for carbon offsets and credits on the broader carbon market, as well as a range of co-benefits.
Making Agricultural Carbon-Friendly
Modern agriculture relies on growing crops rapidly, intensively, and repeatedly. In major grain-producing centers, that might look like uniform acres of wheat or corn. In less developed countries, it might mean farmers routinely burning off old crops to prepare fields for new planting.
Some of the changes carbon farming brings are fairly simple. Mulching old crops, rather than burning them, locks away carbon in the soil. Reducing or eliminating tilling keeps that carbon underground for longer. No one practice reverses the CO2 emissions entirely; instead, carbon farming aims to use a basket of approaches to achieve crop production that removes atmospheric carbon.
Benefits and Co-benefits of Carbon Farming
Most carbon offset projects feature the concept of co-benefits – side-effects of the project that are beneficial in ways beyond direct CO2 removal. Carbon farming relies even more heavily on co-benefits than most offset projects.
Carbon farming initiatives such as advanced mulching offer the potential to improve overall soil health. Organic matter in agricultural soils increases with carbon farming. That provides a direct boost to the carbon cycle, but also boosts insect presence and soil organic carbon (SOC), both necessary for healthy soils.
The use of advanced crop rotation and cover crops also provide co-benefits. They may boost biodiversity through increased cover for birds and margin-loving animals. They can also reduce soil erosion as part of a set of agricultural practices aimed at being both productive and environmentally friendly.
Broadly, carbon farming fits under the umbrella of regenerative agriculture; practices designed to make carbon farming more eco-friendly. In some cases, that may also mean changing land use patterns altogether, such as restoring native forests or wetlands.
Verification and Regulation – A Familiar Problem
Carbon farming faces a number of challenges. Verification and regulation are among the biggest ones. Because carbon farming relies on a number of overlapping approaches, measuring total carbon sequestration and removal becomes increasingly difficult.
Current practices involve estimating the maximum mitigation potential for a given environment and then enacting practices to meet that potential.
Selling carbon credits on the Voluntary Carbon Market VCM requires measuring exact mitigation, and that poses a problem for carbon farming offsets. In some cases, modeling offset reductions can be used alongside measurement to help give a better picture.
Emerging Issues with Carbon Farming
The voluntary carbon market itself is growing by leaps and bounds. It stands to reason that carbon farming, like all sectors within the VCM, faces its own set of emerging issues.
Leakage
Leakage occurs when carbon gains in one area are offset by carbon losses in others. Think of leakage as the opposite of co-benefits; practicing no-till farming, for instance, might lead to increased clearing of woodland or wetlands to offset any production loss. Preventing leakage requires carbon farmers to clearly analyze the carbon sequestration potential of any approach they take.
Costs
Not all farming initiatives are created equal. It brings with it two costs which vary between approaches.
Like all climate change mitigation approaches, carbon farming imposes monetary costs. Those costs can be passive: restoring wetlands can take away opportunities for a cash crop. Approaches like no-till farming might also require increased human activity and labor costs. In both cases, achieving climate benefits comes at a real-world cost.
Carbon farming brings the added cost of impacting agricultural productivity. That could include reduced crop yields or, in the case mentioned above, loss of land available for food sources.
Application
The impacts of climate change are felt unevenly; the suitability of CO2 farming approaches is similarly uneven. Degraded soils might not be compatible with some techniques.
Soil carbon sequestration methods may work better with some geographies than others. In some cases, farmers and carbon offset projects need to carefully consider how various carbon sequestration techniques will impact food security and the broader food chain.
Potential
In the EU alone, estimates indicate that carbon farming as a basket of approaches has the potential to mitigate between 9-13% of total EU CO2 emissions, a significant percentage. That maximum mitigation potential positions carbon farming as a key growth sector in the VCM going forward.
The fact that carbon farming applies unevenly may also be a benefit in the short term. Since some aspects can be adopted and measured more easily, there’s an incentive to monetize carbon farming on the VCM quickly. Carbon farming approaches can also satisfy the need for immediate action on climate change and a demonstrable climate impact.
In short, the very fact that carbon farming means a number of things to different people also means that it is poised to be a key growth sector in the VCM. It can offset potentially huge amounts of atmospheric carbon dioxide, provide immediate climate benefits, and satisfy the continued demand for carbon offsets.
It can be easy to assume that blockchain is bitcoin, and bitcoin is blockchain. After all, bitcoin dominates the crypto airwaves; it makes a certain amount of sense to assume that blockchain begins and ends there.
The reality is far different. Bitcoin is important, to be sure, but only as a symbol of far greater things to come. Like Ford with the early automobile industry; even if Ford Motors had failed in the 1930s, or after WWII, or even in 2008 – the broader automobile and manufacturing industry would have been largely unaffected.
Blockchain powers Bitcoin, and it’s the success or failure of blockchain technology that will ultimately have a far greater impact than any one cryptocurrency.
A blockchain is a digital ledger of transactions that can’t be tampered with by any one entity because of its decentralized design. A blockchain is made up of blocks, which are chained together cryptographically. Each block contains a hash pointer (a number) linking it to a previous block, a timestamp, transaction data, and fees.
The combination of these components – the hash pointer, timestamps, and transactions – make up a record or block.
These records are linked like pearls on a string, forming a chain. This chain gets longer every time a new block is added, making the blockchain bigger over time.
Publicity and security
The prospect of a seemingly-endless stack of blocks towering into the digital heavens might be a bit intimidating, but there’s an immense amount of real-world value in it.
Because new block are inextricably linked to the old ones, old data can’t be changed. Previous entries into the ledger are therefore immutable. In addition, the total blockchain functions as an authentic record of all transactions on the chain. The actions of individual wallets, or the sale of individual items, can be easily traced through the blockchain.
Each crypto wallet has a public address and a private key. Users access the blockchain through wallets. The address receives cryptocurrency and other digital assets, sends them on, and can store them, and it’s the address that’s identified in the distributed ledger.
At the same time, private keys secure each individual wallet.
Users can hold assets securely in a wallet while the wallet’s address is publicly visible. The idea is similar to a postal system. Your postman knows where you live and how to pick up and deliver mail, but he doesn’t know what you do at that address.
Decentralized control
Blockchain structure raises a couple of important questions. With everything visible to the public, how are blockchains secured? What guarantees trust in the network?
One way in which blockchains can guarantee security and ledger accuracy is by limiting access. Blockchains can be permissioned or permissionless. Permissioned blockchains require users to obtain special permissions before they can use them. Blockchains designed to be used by one institution are a good example – trust is guaranteed by controlling who has access.
On the other hand, public blockchains face the very real problem of guaranteeing security and trust with a huge number of distributed users, including at some potential bad actors. That’s where cryptography comes in. The cryptographic hash – an algorithmically-generated number – secures each new block on the chain. Change the block, and you change the hash. And if you change the hash, you invalidate the chain, and the change is instantly viewable.
Cryptography guarantees security despite (and perhaps due to) being publicly visible. The longest-running blockchain in the world illustrates this point clearly. It isn’t Bitcoin, or even some private Ivy-League pet project; it’s a simple cryptographic hash published every week in the classifieds of The New York Times. Every week since 1993. Participants in that particular blockchain use that information to validate transactions over the previous week (in this case, security seals issued by a particular company).
The use of cryptography solves one trust-related problem, but it raises another: who, exactly, is allowed to make changes to the chain?
Nodes, mines, and stakes
Nodes are the control points of the blockchain. With a decentralized structure, someone has to validate the chain of transactions, add new transactions to a block, and add the block to the chain. If only one person or entity controls that process, the blockchain isn’t decentralized at all. But if too many entities control it, then there’s little chance for transactions to be processed quickly or efficiently.
In the case of the NYT blockchain, there’s one node – the classified ad itself. Transactions are processed weekly – fast enough for that company’s purposes, but not fast enough for anything like a high-performance digital blockchain.
Using a handful of select nodes solves part of that problem.
Everyone can participate in the chain itself (permissionless), but some kind of entry point is set for nodes. Usually this involves requiring nodes to have certain assets, whether technical (hardware or technical know-how) or in the form of digital assets (typically the token for that particular blockchain).
Nodes govern the chain. The exact method they use is known as the consensus mechanism. Currently, there are two primary consensus mechanisms in widespread use: Proof-of-Work (PoW, aka mining ), and Proof-of-Stake (PoS, or simply staking).
Proof-of-Work requires the use of real-world hardware in order to solve an algorithmic equation and win the right to create the next block on the chain. These chains tend to be energy-intensive, often requiring mass amounts of hardware, and are competitive – miners are essentially fighting each other over the solution. The most notable PoW chain is, without a doubt, Bitcoin. Ethereum is another well-established PoW chain.
Proof-of-Stake selects Validators who amass a stake of digital currency or tokens. The greater the stake, the more likely the Validator will be to win the block. PoS is less a fight, and more of a race. But it’s not a fair race; the greater the stake, the farther down the track you get to start.
Having said that, there’s always an element of chance, and even smaller stakes might occasionally win the block. Most new blockchains are PoS, as it lends itself to being more easily scalable than the PoW consensus mechansim.
Notable examples include Cardano, NEAR, and Ethereum again. The Ethereum network is a mixed bag; it’s a current PoS chain, that nevertheless still has staking options as it prepares to transition to a PoS mechanism in the near future.
Use-cases: Blockchain in Real Life
Enough technical details. What does the blockchain have to do with the real-world? What makes it more than just an unusually technical thought experiment?
Most importantly, what does it have to do with carbon credits?
Blockchains provide two crucial benefits with real-world uses.
Blockchains allow the coordination of large groups of disparate users.
And, perhaps even more importantly,
Blockchains can guarantee ownership.
The whole idea of a distributed ledger is to tie public addresses, and by extension, shared assets, to individual accounts without sacrificing privacy to a central authority. In theory, this can be done with almost any asset imaginable. Digital currencies are the obvious starting point, but blockchains can also be used with data. That’s all a transaction is, of course, so the entries in a distributed ledger don’t need to be simple sales. They can be data points, non-fungible (unique) tokens tied to real-world or digital assets, or anything else.
The application to carbon credits is especially promising. In a global carbon market beset by problems of quality assurance, the blockchain offers the potential to tie one credit to one project. And that’s just a starting point.
The Crypto Carbon Ecosystem
In their simplest form, blockchains are distributed ledgers for digital information. In an information-driven age, that means that almost any bit of information could, at least in theory, be linked to a blockchain.
Cryptocurrencies still draw the lion’s share of media attention and investor interest. But as the crypto world matures, developers have begun to apply blockchain to one of the other hot markets of recent years: carbon credits.
The idea is simple.
Carbon offsets are a unit of measure, certifying that a particular action, project, or thing has removed the same one metric tonne of CO2. One credit = one tonne. The math is simple, but applying it to the real world proves challenging.
Measurement – how do you measure how much CO2 a certain set of actions will remove, before it even does so? This can be especially complicated when you add in living organisms, such as trees, as is teh case for the majority of nature-based offsets.
Verification – even if you can measure things accurately, how do you verify that the set of actions did actually result in a measurable offset?
The blockchain can, in theory, help with both of those issues by linking offsets to blockchain-based cryptocurrencies or tokens. The tokens help to incentivise verification, while tokenizing offset projects can ensure correct measurement.
The emerging carbon crypto world is dominated by a number of trends coming together at once. Not all are directly aimed at tokenization. Here are three of the biggest trends that form the crypto carbon ecosystem.
Trend 1: Carbon-friendly Crypto
The OG cryptocurrency, Bitcoin, employed a Proof-of-Work consensus mechanism. That mechanism is well-known for being energy-intensive and therefore not particularly environmentally friendly.
Just how unfriendly? It’s hard to nail down for certain, but studies in 2019 put Bitcoin mining as responsible for 22 million metric tonnes of CO2e, roughly thesame amount of CO2 emissions as the Netherlands. A significant amount, for sure. And it’s worth noting that even crypto-friendly news sources place recent emissions for 2020 and 2021 even higher –36 million tonnes and 41 million tonnes, respectively.
However, even the higher numbers pale when compared to global emissions. As a number of outlets noted recently, Bitcoin mining accounted for less than 0.10% of global CO2e. Far less, even, than the CO2e produced by mining and printing traditional fiat currency.
Regardless, the idea of “carbon-hungry crypto” has stuck, particularly with Bitcoin. The result has been to push the crypto world towards a more carbon-friendly approach. Sometimes that takes a particularly mundane form, such asElon Musk dropping Bitcoin payments and thenaccepting Dogecoin.
In other cases, it can mean developing entirely new ecosystems around more carbon-friendly blockchains. The recent increase in Solana’s exposure owes something to its reputation as acarbon-neutral blockchain. And the industry-wide turn towards Proof-of-Stake instead of Proof-of-Work can be attributed to the former’s more eco-friendly consensus mechanism.
Trend 2: Tokenized Carbon Offsets
The global market for carbon offsets shows no sign of slowing down, and is seen to be worth billions by the end of the decade. A market growing so fast, and so widespread across the globe, poses unique challenges in verifying and enforcing offsets.
Tokenization answers some of those challenges. Non-fungible tokens are by their very nature unique. That allows some crypto carbon projects, like Moss, to issue NFTs for particular projects or even particular pieces of offset projects. TheAmazon NFT by Moss is one of many examples; a far splashier one is theRimba Raya NFT which sold for $70,000. That’s a single carbon offset, for a price that’s beyond current market value.
More down-to-earth NFT offset projects include the much-anticipated Save Planet Eartheffort, the first to incorporate industry-leading Gold Standard offset verification into its NFT schemes.
Most of these efforts are in the early stages, and there’s little track record on which to assess their performance. But the ability to link carbon offsets to a blockchain offers a solution to a number of VCM problems, such as double counting credits. That promise alone will be enough to drive the NFT offset trend even further.
Trend 3: Blockchain-powered Carbon Exchanges
Carbon NFTs and tokenized offsets are often sold on blockchain-powered carbon exchanges. Abu Dahbi reached carbon neutrality by purchasing offsets onAirCarbon Exchange. The exchange offers offsets from around the globe, but tokenizes them on its own exchange. AirCarbon follows the same model as a traditional commodities exchange to facilitate carbon trading.
Nor is AirCarbon the only game in town. Some of the upcoming efforts follow all three major trends at once:Cambridge University’s proposed carbon exchange will be built on Tezos, another eco-friendly PoS blockchain.
Other projects often involve aspects of each trend. The CryptoCarbons NFT project produces art-inspired NFTs that are linked to already-generated offsets. But the project also allows users to request custom NFTs created just for them, and linked to a specific number of offsets.
Major crypto exchanges, like Binance, Coinbase, and others, may sell carbon-related tokens without being a dedicated crypto carbon exchange. Some of the biggest crypto carbon projects, like Klima, Toucan, and others, are only available on these centralized exchanges.
The crypto world is more aware of the need to be eco-friendly. This has led to an ecosystem primed to accept ambitious carbon offset NFT projects and tokenized offsets.
Leading Carbon Projects
Harness the blockchain, verify carbon credits, and solve two problems with one cutting-edge stone. All the projects on this list promise some variation on that idea; the only challenge is putting everything into practice in a market-friendly, cost-efficient way.
Here are current carbon crypto projects that are generating buzz and drawing some attention. Not all of them are equally successful, and few have established anything like a long-term track record. But all of them offer
Moss
Moss is two projects in one: a popular token (MCO2) and a climate-based NFT project. Both projects rely on the concept of tokenization to incentivize carbon offset production and carbon reduction.
The MCO2 token is available as an ERC-20 token on popular exchanges such as Coinbase. Purchase of the token (trading at $11.46 at time of writing) funds carbon offset projects. Most are based in and around the Amazon rainforest.
Moss doesn’t administer offset projects directly. Instead, they source high-quality offsets from other providers and tokenize them. Each project results in a given amount of offsets; Moss produces a set amount of tokens based on the projected offsets. One MC02 token = an offset for one tonne of CO2.
By burning MC02 tokens, Moss locks in offset projects permanently, reducing the overall supply of offsets in the market and boosting the price of remaining offsets.
The Moss Amazon NFT project operates a bit differently. Moss buys portions of the Amazon that are at-risk for deforestation. That land is then divided into 1-hectare portions, each roughly the size of a football field. The rights to those portions are digitized and tokenized as NFTs (Non-Fungible Tokens). Each NFT is unique and tied to a unique piece of property.
The Moss Amazon NFTs are actual land sales; proceeds from the sales fund further purchases, with 30% of the proceeds going to a preservation fund. That fund pays for patrolling and physically protecting the Amazon NFT holdings.
Moss distinctives:
Amazon NFT based on actual ownership
Due diligence for purchase and enforcement
Part of the Celo Reserve, supporting a climate-based stablecoin (cUSD, cEUR)
KlimaDAO is nothing if not ambitious. Built on the common crypto carbon model of tokenized carbon offsets, Klima is also a DAO. As a Decentralized Autonomous Organization, KlimaDAO aims to boost the price of offsets on the VCM. This is done by purchasing carbon offsets, tokenizing them, and then selling or burning them to influence the market.
What sets Klima apart is its stated goal to be a carbon-backed currency, rather than simply a marker for credits held in reserve. To that end, all KLIMA tokens are backed 1:1 by reserve holdings in BCT, tokens issued by Toucan (see the next review).
Put more simply, to mint more KLIMA tokens (and increase supply), KlimaDAO needs to lock away BCT (Basic Carbon Tonne) in the treasury. KLIMA is backed by one BCT 1:1, and BCT is pegged to real-world offsets. Klima’s treasury functions as a blackhole for BCT and carbon offsets, removing them from the market and pushing the carbon price higher.
The DAO structure allows holders of KLIMA to take part in Klima’s governance. Holders can propose new measures and vote on their passage.
KlimaDAO Distinctives
DAO structure and governance
KLIMA as the currency of a new, carbon-based ecosystem
Pegged to the BCT
Toucan
It’s not enough to describe Toucan.earth as a crypto carbon project; Toucan is more about bringing a number of related projects together, each with their own distinctives.
Toucan helps bridge carbon credits on-chain. Toucan links the Web3 architecture to the decarbonization push. Put another way, Toucan forms the base of a new, carbon-focused Web3 stack.
The core of Toucan’s project is the TCO2, which simply stands for Tokenized CO2. Each TCO2 represents one verified, real-world carbon credit. TCO2’s are semi-fungible, with unique information about each project encoded on-chain. The tokens are Verra verified, linking Toucan to one of the premier carbon offset standards.
The bridging process is complete once the BatchNFTs are approved by a Toucan verifier.
Approved BatchNFTs can then be fractionalized, creating TCO2 tokens. TCO2 tokens can be deposited into Toucan carbon pools, with depositors receiving carbon reference tokens like BCT in return. These pools aggregate liquidity and the carbon reference tokens provide a carbon building block for DeFi and ReFi developers.
Most projects planned for the Toucan stack won’t use the TCO2 directly. Trading TCO2 tokens one-for-one isn’t always possible, simply because the projects each token represents are different. To achieve the necessary liquidity for market projects such as Klima, the TCO2 tokens are fractionalized and pooled.
The first Toucan pool was the BCT pool, with Klima being the first user. The pools are gated, meaning each TCO2 token must have specific attributes to pass the gating criteria. Toucan and Pool Party members are able to set these factors for gating.
Toucan forms the foundation for a Web3 carbon crypto stack. Projects like KlimaDAO build on that stack. Tokenized carbon credits are the key.
SavePlanetEarth’s self-description captures it all: a “carbon sequestration crypto project.” Structurally, SavePlanetEarth shares similarities with the Toucan/Klima project. The base of the project is tokenization of verified carbon credits, on which an entire ecosystem will be built – a currency and a blockchain powered by green energy.
There are a few key differences; the base token is $SPE, and the verification standard used for the carbon offsets is the Gold Standard, rather than Verra. The SPE project also relies more heavily on NFTs for the initial stage of project management, as well as something called “carbon credit certificates.”
The SPE roadmap includes a multi-level exchange, powered by the $SPE currency, where carbon credits can be bought and sold. It will also encourage external investment by allowing companies to trade their own credits on the exchange, once verified by SPE.
SPE distinctives
Phantasma blockchain (with native SPE blockchain in development)
Carbon-based exchange in roadmap
Uses The Gold Standard verification
Projects conform to all 17 of UN Sustainable Development Goals
Other notable projects:
Not every project is as well-developed as the ones above. Some are in the early stages, while others are more narrowly-focused. Here are a few significant projects to keep in mind.
AirCarbonExchange
AirCarbonExchange made the news by helping Abu Dhabi’s financial sector achieve full carbon neutrality. As an exchange, ACE sources carbon offset projects and tokenizes them into several different tokens, each tailored to a specific sector of the market. There’s no broader plan; AirCarbonExchange exists to promote the adoption of carbon crypto tokens as a commodity, and to trade them accordingly.
Base Carbon focuses on funding and support for developing crypto carbon projects. It also serves to source and verify projects for entry into Toucan’s TCO2 and BCT programs.
Tokenization on the smallest scale – the trees in your backyard. CarbonTokenProject uses an innovative approach of human verification, data oracles, and the blockchain to tokenize trees. With its innovative approach, CarbonTokenProject is probably the first grassroots (treeroots?) carbon crypto initiative.
Another crypto carbon currency, but with a twist: KumoDAO aims to be a USD-pegged stablecoin. Stablecoins pose unique technical challenges, but offer more ease of use with the traditional monetary system. KumoDAO is in the early stages, part of a wave of carbon crypto projects begun in the wake of KlimaDAO’s launch in 2021.
According to new satellite research, the Amazon rainforest is close to reaching a “tipping point” because of climate change. And once it does, the results could be catastrophic.
One of the biggest causes for concern is that the Amazon rainforest’s resilience to damage has declined steadily since 2000. So, whenever drought or fire hits or other artificial events, the Amazon rainforest is less able to repair itself.
And unfortunately, global warming is only adding to the problem. What’s worse is that without the Amazon rainforest, our ability to fight climate change adds to the problem. You see, without the Amazon, carbon-storing trees will no longer be able to play their part.
So, it is one vicious cycle.
This could cause increased droughts and fires across South America.
Tim Lenton, Director of the Global Systems Institute at Exeter University and a Global Expert on Climate Change, “It’s alarming to think where we’re getting the evidence now to confirm we’re heading towards the potential abrupt loss of this ecosystem.
One positive point to note is that the average rainfall in the Amazon has not changed in recent history. However, the dry seasons are longer and more intense.
Can carbon offsets help us stop climate change and protect the Amazon?
Carbon offsets are one way in which individuals, non-profit organizations, and individuals can help neutralize carbon emissions. The Voluntary Carbon Market (VCM) is where offsets are bought and sold.
Simply put, one carbon offset equals one metric ton of carbon.
Carbon offset projects can include the Amazon rainforest and other pieces of land across the globe.
As individuals and businesses take additional steps to preserve the environment and reduce emissions, net-zero goals are more achievable.
Regardless, per Lenton, “This gives new compelling evidence to support efforts to reverse deforestation and degradation.”
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.OkNoPrivacy policy
