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Therefore, to reach Paris Climate goals, a robust voluntary carbon offsets market is needed. The voluntary carbon offsets market is currently a highly fragmented, illiquid market with poor transparency and questionable quality. The goal of this project is to bring forward a blockchain-based solution which will allow greater transparency, price discovery, and ultimately higher quality. Through interviews with key stakeholders, we will identify the key issues, fine tune a solution, and bring on initial participants to launch it.
Current Ecosystem
Carbon offsets are created by
- A developers invests in projects, such as renewable energy or forestry management
- Claims about the emissions reduction of the project is calculated under a methodology published by a verification body. These methodologies are based on the CDM methodologies.
- The project is registered with a verification body.
- A Validation and Verification Bureau (VVB) validates the project.
- On an ongoing basis, the VVB reviews the data and independently verifies aspects of the project, to certify the amount of emissions reduced.
- The verified emissions reductions are sold as carbon offsets, through brokers or directly to buyers.
The Players
Verification Bodies:
- Gold Standard - More focus on community and co-benefits
- VERRA - largest, highest volume traded
- Global Carbon Council - new standard body based in Qatar looking to issue first batch in July 2021
- American Carbon Registry
- CAR
- Woodlands Trust
Validation and Verification Bureaus
See for example Gold Standard’s approve auditors list
Buyers
Major corporations such as Microsoft
CORSIA - eligibility criteria for airlines to purchase credits
ICROA
IETA
Pricing References
Since the market trades directly or over-the-counter, most of the information is not available. However, a few references are:
- CME Global Emissions Offsets futures
- Gold Standard Marketplace - really very small and not representative of the market
- Forest Trends EcoSystem Marketplace
- EcoSecurities Price Index
Challenges
- Very heterogeneous market with different project types (forestry, renewables, etc.) and different regions
- Different offsets trade vastly differently, from under $1 to nearly $50 per ton, even though they’re all denominated in tons of CO2 emissions
- Lack of transparency in pricing
- A lot of different registries makes it difficult for buyers to track
- Risk of double selling, where the same project is listed on different registries and the offsets are sold several times
- Buyers question the validity of the offsets
Proposed Solution
A blockchain based platform to provide a central directory of voluntary offsets based on a decentralized architecture. Built on a permissioned network such as Hyperledger Fabric, members of the network could contribute data about voluntary carbon offsets, including the projects details, quantity issued, background documentation, and any trades that occur. Fabric is a high speed ledger, faster and with lower energy usage than public proof of work or even proof of stake ledgers. We could use IPFS or another decentralized storage mechanism to store documentation of the offsets and use md5 to verify that documents have not been altered.
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This directory would not directly allow trading between participants. It is for information purposes only.
References
- Securing Climate Benefit: A Guide to Using Carbon Offsets
- These Countries have Prices on Carbon. Are they working? (NY Times)
- Taskforce for Scaling Voluntary Carbon Markets Final Report
- Comments on the Initial Recommendations of the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) from Berkeley Carbon Trading Project and affiliated groups
- Startup That Rates Carbon Offsets Finds Almost Half Fall Short
- Top Airlines’ Promises to Offset Flights Rely on Phantom Credits
- NPR Reporting on Forest Carbon Credits Gets It Wrong in 5 Ways
- Carbon Direct Commentary on Release of the Voluntary Offsets Database
- Microsoft Carbon Removal - Lessons from an Early Corporate Purchase
Ecosystem Analysis
The Case for Starting Your Project with an Ecosystem Map: https://spin.atomicobject.com/2018/03/19/why-ecosystem-map/
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Mapping and Strategising Across Business Ecosystems: https://www.europeanbusinessreview.com/mapping-and-strategising-across-business-ecosystems/
Other
This project is part of the Documentation and Use Cases for Climate Action mentorship. For updates on this project, see the Project Plan - Documentation and Use Cases for Climate Action.
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