The net emissions tokens network represents the net emissions of an entity, which could be an organization, a building, or even a person. It is the sum of all the emissions from different channels such as the utility emissions channel, plus offsetting Renewable Energy Certificates and carbon offsets. Each token represents either an emissions debt, which you incur through activities that emit greenhouse gases, or an emissions credit, which offset the debt by removing emissions from the atmosphere.
The carbon emissions token is a fungible token, whereas data on the utility emissions channel are just immutable data (not tokens), as they represent the emissions from a particular meter tied to a particular utility during a particular period of time. Following examples from capital markets, we can link this kind of data to the fungible tokens by:
- The underlying data, such as the utility emissions records, should be updated to link to the particular fungible token.
- The fungible token should contain a manifest of all the underlying data which went into it.
We propose to implement a carbon emissions token based on the eThaler project from the Capital Markets SIG. eThaler is a Central Bank Digital Currency (CBDC) implemented on a private Ethereum network running Hyperledger Besu. It supports a central bank which creates and mints tokens and transfers them to member banks, who would then distribute them to retail customers of the banks. In the case of carbon emissions, it could support a registry authority, which could be a network operator or supranational/national/regional carbon authority (see below), which authorizes a number of issuers of tokens. The issuers could be auditors of carbon emissions or project developers of renewable energy or carbon offsets, who issue tokens based on audits of companies' or projects' operations. eThaler's features can be mapped to emissions tokens like this:
- Emissions audit - represents the actual emissions of an organization, as reported by an auditor.
- Carbon offsets - represents reduction of emissions through projects such as forestry, sequestration, etc.
- Renewable Energy Certificates (REC's) - represents energy generated from renewable sources such as wind and solar
- Add new token definition – Multiple types of emissions tokens can be supported on the network, such as emissions, Renewable Energy Certificates (REC's), and offsets.
- Mint – Authorizes a supply of tokens to be issued in the future, based on results of operations from audited companies and renewable/offsets projects.
- Register/Unregister dealer – In our case, it would be registering and unregistering auditors or project developers authorized to issue tokens.
- Transfer – In eThaler, the central bank transfers tokens to dealer banks. In our case, we would allow an auditor or project developer to create a token based on audited results and then transfer it to a party, which could be a business or individual. Emissions audit tokens cannot be transferred: They stay with the organization that was audited as a record of their emissions. Offsets and REC's can be transferred until they are retired.
- Retire - this is not in eThaler but would need to be implemented. When a token is marked as "retired," it is counted towards the emissions reduction of the retiring organization and cannot be transferred again.
- Burn – this would not be implemented.
The Carbon Emissions token taxonomy developed by the Interwork Alliance is similar to eThaler's token taxonomy. The differences are:
- Currency could be repeatedly transferred between parties, where as emissions records, offsets, and REC's should not be.
- Currency could be removed from circulation or "burned", but emissions records could not be, because the physical greenhouse gases stay in the atmosphere (hundreds of years at least.)
The only operation for a net emissions token/asset is Issue with the following fields:
- issuer identifier
- recipient identifier
- token type
- from date/time stamp
- thru date/time stamp
- date/time stamp of when the asset was created
Examples of these tokens/assets include:
- Renewable Energy Certificate:
- Issuer ID = Generator of REC
- Recipient ID = Buyer of REC
- Asset Type = REC
- Quantity = 1
- UOM = MWH
- From/thru date time stamp = do we need this for REC's?
- Metadata = Region and Time of energy enerated
- Manifest = URL linking to the registration for the REC purchased
- Carbon emissions offest:
- Issuer ID = Certifier or Issuer
- Recipient ID = Buyer
- Asset Type = Emissions Offset
- Quantity = amount
- UOM = MtCO2e
- From/thru date time stamp = do we need this for emissions offset?
- Metadata = type of project, location, etc.
- Manifest = URL linking to the registration of the emissions offset
- Emissions Audit:
- Issuer ID = auditor
- Recipient ID = organization or entity
- Asset Type = CO2 emissions
- Quantity = amount of emissions
- UOM = MtCO2e
- Metadata =
- From/thru date time stamp = time period of the net emissions
- Manifest = links to access all the emissions tokens/assets used to prepare this net emissions
With these tokens, we can calculate the net emissions by first subtracting the effect of Renewable Energy Certificates (REC's.) REC's offset the energy produced by non-renewable sources, so we'll need to get the non-renewable vs renewable energy mix in the original emissions tokens/assets from utility emissions data channel. Then we subtract the offsets to get the net emissions.
Possible Use Cases
Cap and Trade:
- The central bank could be the cap and trade authority.
- Tokens for allowable emissions could be issued to all members of the cap and trade regime.
- They can trade the tokens amongst themselves.
- As emissions are counted, during an audit, cap and trade tokens should be retired.
- The central bank is a green bank, which raises funds for climate projects.
- For approved projects, the bank would issue emissions tokens to project developers based on the projected emissions reductions of the projects.
- When emissions reductions are verified, they are exchanged for tokens.
- The tokens can then be redeemed for money.
Network Operator Model:
- The network operator is a neutral, blockchain technology vendor who runs the network for a (very very very small) fee.
- It could mint and issue tokens in response to requests from network members, who pay a fee for the tokens to be issued.
Transfer of emissions down the supply chain and avoiding double counting are major issues to be addressed in the future. The problem is that emissions are counted in multiple ledgers, for example this document from Gold Standard describes how they could be counted in both offsets and national registries. See also the Gold Standard double counting guidelines document.