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1) Project Name: Reducing Methane Leakage and Flaring through Supply Chain Tokens

2) Innovation Tagline:  Using non-fungible tokens (NFTs) as digital ink for  tracking waste emissions.

Project Keywords:  #NFT #TokenEconomy #ValueChain #CarbonEmissions #Flaring #Scope3

Project Members

1. Bertrand WILLIAMSRIOUX

Project Description (no more than 1,000 words including graphics)

Problem 

Phasing out fossil fuels is an important climate action, but it will take time, and a future without fuels is unlikely. Flaring, and venting, of associated natural gas by oil producers is a major source of value chain emissions (Figure 1) for fuel users (estimated at250 Mt to 1 Gt CO2e per year) and reducing these waste emissions is a first step to decarbonize fuel supply chains.

Figure 1 Annual flaring and associated gas use, from EDF (2021)

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Value chain (scope 3) reporting standards help organization identify indirect impacts. According to the Carbon Disclosure Project or CDP in a report by Patchell (2018) value chain reporting (e.g., Corporate Value Chain Standard) has not been very successful in reducing emissions.

Value chain reporting involves the Life Cycle Assessment (LCA) methodology to assess indirect environmental impacts. LCA can be difficult for organizations to implement on their, and involves several challenges:

• data silos across emission measurement, reporting and verification (MRV) systems
• reliance on model estimates that may be subjective and hard to validate
• incentive structures that discourage data exchange and collaboration

The GHG Protocol provides a free tool to help measures cross-sector value-chain impacts, however it does not directly address data silos and collaboration.

CarbonChain provides an emission accounting platform for commodity supply chains. It focuses on providing centralized services rather than working on removing data silos, and providing new incentive structures to encourage collaboration. 

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 Using the blockchain to create supply chain incentives to reduce 1 Gt CO2e of from methane flaring and fugitive emissions 

3) List the Hyperledger Projects that will be leveraged to develop your solution: We are building a carbon tracking network to tie together supply chain emission data. This will include a set of smart contracts as part of the open source blockchain carbon accounting tools built by the CA2SIG: a Utility Emissions Channel Project for auditing emission from electricity purchases, Net Emissions Token (NET) Project to tokenize emissions and offset credits, and a Climate DAO Project, the elements of an operating system for climate action.  These projects are built on top of Hyperledger Fabric, Besu, and Bevel.

4) Project Members

1. Bertrand WILLIAMSRIOUX
2. Sherwood Moore
3. Si Chen
4. Arezki Dji

Problem 

Even as we reduce our Greenhouse Gas (GHG) emissions to stop climate change, the oil and gas industry will remain a central part of the global energy system for decades.  In this period, a top priority is to reduce the amount of methane that is leaked and flared during the production of oil and natural gas. Methane trapped in the geological formations of oil and gas wells is often disposed of as a safety measure, but also leaked or vented to the atmosphere when infrastructure is not available to gather, process and distribute it as natural gas for a profit. This is typical in remote and undeveloped areas (the highest rates are observed in Africa, Figure 1) where methane is burned (flared) and converted into Carbon Dioxide (CO₂), or worse, vented or leaked. 

Figure 1 flaring and venting data from EDF (2021) 

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The Greenhouse Gas (GHG) warming potential of uncombusted methane is more that 25 times on a CO₂ equivalent (CO₂e) basis. While, flaring was estimated at 142 billion cubic meters (bcm) in 2020 (figure 1), 265 million tons (Mt) CO2e, 8 Mt of methane were released at 240 Mt CO2e (IEA 2020). Assuming a lower combustion efficiency total emissions could reach as high as 1 Gt of CO2e, greater than the total emissions of Germany or all the world's airlines.   

Although major oil companies, NGO's, and investors have all committed to reducing oil and gas methane emissions, it remains a challenge because of a lack of quality data about the methane emissions of specific facilities and producers.  As a result, it's difficult to allocate the needed investment to the right places.

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Solution

We propose a solution using two important blockchain features:

• An oracle which could integrate multiple sources of data, from satellite images to company reported data to facility level instruments, that together could provide the best estimate of methane emissions at the facilities and company levels.
• A tokens network that would allow the value of lower methane emissions to be transferred to buyers looking for fuel with lower carbon intensity.

For more technical details, please see Oil & Gas Methane Emissions Reduction Project. 

Minimum viable product

Our target product is a portal where data from multiple sources of methane emissions could be viewed, and the final methane emissions for a production facility is calculated.  Then an oil & gas producer could also:

• registers as an industry dealer of the NET network
• construct a (voluntary) emission profile (C-NFT) for current inventories (using VCT) based on the calculated methane emissions
• connects its C-NFT profile to the waste emission verification system (Figure 3)
• list inventories as digital VCT that can be transferred to other industry/consumer accounts.

Accomplishment and Team

Our team-members has been working on the Supply Chain Decarbonization for some time, with the Operating System for Climate Action providing much of the underlying code needed for this challenge.

Bertrand WILLIAMSRIOUX  is an independent consultant with 15 years of experience in energy economics, climate science and computer programming.  He has worked as an analyst and advisor on energy market and climate policy issues, and is currently creating a startup offering carbon accounting and management services for energy intensive commodity industries.

Si Chen is the founder of Open Source Strategies, Inc. and coordinates the Carbon Accounting and Certification WG of the hyplerledger Climate Action and Accounting (CA2 SIG).  He is the author of the open source book, Open Climate Investing, and a co-editor of an upcoming book "Sustainable Carbon Economy with Blockchain: The Role of Oil and Gas Industry in The Energy Transition". 

Sherwood Moore is currently acting Co-chair of the Climate Action and Accounting Special Interest Group (CA2SIG). He holds a MBA with 10+ years of experience planning and executing Go-to-Market strategies for early stage tech start-ups. He also has expertise in the field of internet governance, where he supports ICANN's (Internet Corporation for Assigned Names and Numbers) multistakeholder decision-making model to help the global community reach consensus around the protocols, standards and policies needed to support the security, stability and resiliency of the internet's Domain Name System.

Additional resources needed:

• Front end user interface development
• Hyperledger Fabric - Integration of remote sensing data to Fabric and integration of Fabric with Layer 2 Ethereum network.

Project Plan

We set the following goals for the a prototype methane reduction C-NFT

• Construct the methane emissions of an oil and gas producer by combining industry repots with with independent data 
• Illustrate the verification of emissions in line with recognized standard setting body practices
• Track embedded emissions though to the final producer of a consumer fuel (gasoline/diesel).

Launch phase

1. Collect and prepare emission data (4 weeks)
   1. Select a set of typically of oil/gas well and gather relevant data, sourced from company reports, independent sources, (Flaring Monitor), sensors, or simulated.
   2. Create/select a representative model/data set for intermediate processing of oil and gas in a refinery and a power plant to produce a consumer fuel.
   3. Setup up data sources to be storage within a fabric emission channel or IPFS database (Figure 3) 
2. Build the blockchain oracle (8 weeks)
   1. Select an oracle service
   2. Integrate the distributed database (fabric/ipfs) with the oracle
   3. Register "real-world" methane emission data as digital token in the layer 2 NFT contracts.
3. Construct emission profiles  (4 weeks)
   1. Design UI/UX for for constructing and linking emission inventories
   2. Using the NET network compile emission inventories (accounting boundaries) for each facility using the GHG Protocol corporate reporting standard 
   3. Using C-NFT Bridge accounting boundaries following the Value chain (scope 3) reporting standards: 
4. Simulate trading of methane performance tokens / CI certificate using C-NFT (4 weeks)

Solution

We propose a non-fungible token (NFT) model to track waste emissions and break down organizational reporting silos. 

The carbon tracker NFT (C-NFT) contract has been introduced to the Net Emission Token (NET) network to issue, transfer, and retire carbon tokens owned by different accounts:

• Voluntary Carbon Tracker Token (VCT),
• Audited Emission Certificate (AEC),
• Emission Offset Credit (EOC) and R
• Renewable Energy Certificate (ERC).

A C-NFT paints emission profiles for accounts owned by a facilities, e.g., oil and gas field,  combined heat and power (CHP) plant, and refinery (Figure 2).

Figure 2 C-NFT illustration

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Each profile consists of inputs and outputs as NET transaction values - expressed as Carbon Dioxide Equivalent (CO₂e) emissions. 

• Inputs are retired NETs for direct (scope 1) or indirect (scope 2/3) emissions.
• Outputs are tokens  transferred downstream.
  • VCT are transferred as the CO₂e of fuels sold to consumers (used in commercial trade).
  • AEC are indirect emissions, e.g., from selling electricity/heat

Inputs and outputs are tracked to other C-NFT outputs (arrows in Figure 2). This connects the internal boundaries or traditional reporting silos. Carbon intensity (CI) metrics transfer embedded emission data across NFT links:

• CI of oil & gas supplied (Fuel trade out) -> flared gas + leakage
• CI of Refined fuel trade -> other emissions (e.g., electricity/heat)
• The example also subtracts offset credits purchased from a dealer (green box)  

Linking consumption by a Final user (Figure 2) to a C-NFT communicates all waste emissions, including percentage/totals of flared gas. Verification requires independent auditing in the MRV cycle. Flared gas inputs of the Oil & Gas producer's NFT(red boxes), could be replaced by AEC issued by a tracking service. 

Accomplishment and Team

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