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

2) Innovation Tagline:  Using the blockchain to create supply chain incentive incentives to help reduce up to 1 Gt CO2e of Greenhouse Gas emissions per year. 

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

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

Problem 

1. Arezki Dji

Problem 

Even as we reduce our Greenhouse Gas (GHG) emissions to stop climate change, While the world tries to avert the worst of climate change, most scenarios still show the oil and gas industry remaining will remain a significant central part of the global energy system for several decades to come.  During In this transition, however, we must do everything possible to reduce the climate impact from continued use of fossil fuels. A top priority for doing so period, a top priority is to reduce the amount of methane that is leaked and flared during the production of oil and natural gas.   Flaring and venting of natural gas at oil wells happens because methane is Methane trapped in the geological formations of the oil wells.  During the extraction of oil and gas, it must be removed to keep the well operating safely.  In some wells, this methane is captured and sold profitably as natural gas.   In other wells, especially those located in remote areas, the lack of pipelines or other infrastructure to transport the natural gas makes it uneconomical to do so.  In those cases, it is simply burned (flared) or, worse still, released directly to the atmosphere.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, Because methane has 25 times the climate impact of CO2, this methane leakage and flaring is a major source of global Greenhouse Gas (GHG) emissions.  The Environmental Defense Fund estimates the total global oil and gas methane leakage and flaring at between 250 Mt to 1 Gt CO2e per year (Figure 1).  The latter amount is greater than the total emissions of Germany or all the world's airlines combined.   

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

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In recent years, there has been a concerted effort on the part of The Environmental Defense Fund, Although major oil companies and the Oil and Gas Climate Initiative, international organizations such as the United Nations Environmental Program, and institutional investors to reduce methane leakage and flaring.  Nevertheless, this remains a difficult goal to achieve , NGO's, and investors have all committed to reducing oil and gas methane emissions, it remains a challenge because of a lack of data and proper financial incentives.  Many oil wells do not have equipment to record how they are handling excess underground methane, and many companies do not report on the level of the methane that is releasedquality data about the methane emissions of specific facilities and producers.  As a result, even though methane is a valuable commodity (natural gas), it is not possible to estimate the value that could be captured from the leaked or flared methane and therefore determine the returns from investing in infrastructure to capture them.

Fortunately, there has been progress on this front recently:  EDF 2021 has urged investors to engage energy companies to improve flaring transparency, requiring collaboration to establish clear metrics.  Several new data sources ranging from satellite imagery to instrumentation at oil wells will be coming online to improve the data.  Independent tracking tools are being introduced ( for waste emissions.  Converting this data into useful fuel value chain metrics require integration with production data.  Flaring Monitor, an open source project, has made some progress on this, and will provide key part of our solution to bridge reporting silos for waste emissions. (this effort could align with the World Bank's Imported Flared Gas Index).

In this project, we will work on using the blockchain to provide trusted data on methane and transfer that data to fuel consumers to incentivize methane reduction at the point of production.  The first part of the project will integrate data from different sources to arrive at the best estimate of the methane emissions of a facility.  The second part of the project will use Value chain (scope 3) reporting standards to calculate the impact of methane emissions reduction on the fuel used by customers.  It could then be used as part of the Supply Chain Decarbonization Project to incentivize the use of lower  's difficult to allocate the needed investment to the right places.

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Solution

We propose to use a solution using two important blockchain oracle, such as Chainlink, to integrate the different features:

• An oracle which could integrate multiple sources of data

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• , 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. 

Once the combined data is used to derive the methane emissions of an oil producing facility, a non-fungible token (NFT) contract could track the additional emissions from the fuel produced.  This carbon tracker NFT (C-NFT) has been implemented using the ERC-721 standard as part of the Hyperledger Labs Net Emission Token (NET) network to issue, transfer, and retire carbon tokens by different accounts.  For example:

• Voluntary Carbon Tracker Token (VCT) could be used by industry members to note the amount of methane emissions associated with the oil or natural gas produced at the well. 
• Audited Emission Certificate (AEC) could then be assigned to energy consumers based on the VCT.  Fuel from high methane wells would have higher embedded emission for whoever consumes it.
• Credits similar could be issued to transfer the lower embedded methane emissions from one party to another, helping them meet their emissions reduction goals while providing incentives to reduce methane emissions at the well.

In this example of an energy value chain, imagine an oil & gas producer or well extracts the crude oil from the ground.  A utility power plant then produces the heat and electricity which is used by a refinery to process the crude oil into fuel products, such as gasoline for cars, diesel for heavy transportation, and kerosene or jet fuel for aircraft.  A C-NFT provides a digital emission profile for accounts owned by facilities, e.g., oil and gas field,  power plant, refinery (Figure 2):

Figure 2 C-NFT illustration

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Each step in this value chain (reporting "silo") consists of inputs and outputs, which are transacted using the Net Emissions Token (NET) network, in Carbon Dioxide equivalent (CO₂e) of Greenhouse Gas emissions.  Based on the Value chain (scope 3) reporting standards: 

• Inputs are retired NETs for direct (scope 1) emissions due to fuel burned or indirect emissions for purchased energy (scope 2) or downstream emissions (scope 3).
• Outputs are tokens transferred downstream to the users of the fuel, such as freight companies or airlines.
  • 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

Emission profiles can explicitly reference a source C-NFT (arrows in Figure 2) to track embedded emissions, for example the crude oil or the heat and electricity supplied by the power plant that went into the finished products. 

In practice, we envision a supplier sends an emissions tokens (e.g. VCT) from this facility's emission profile to its customer using the oracle-validated methane flaring data.  This emissions token is an NFT which allows organizations to bridge the internal boundaries of traditional data silos to get a complete view of the energy value chain.  It is attached to each quantity of fuel it sells so that the consumer of the fuel could correctly calculate the emissions of the fuel it uses.

The consumer (e.g., Fuel user such as a freight carrier or airline) could then identify the embedded waste metahne emissions through public view functions of the NFT, such as carbon intensity metrics:

• CI of oil & gas supplied (Fuel trade out) -> flared gas + leakage / fuel outputs
• CI of Refined fuel trade -> other emissions (e.g., electricity/heat, flue gases) / refined fuel out 

The consumer could also reduce its carbon intensity (CI) by purchasing a certificate from a low CI producer.  This would require simultaneously subtracting the embedded emissions of the fuel inventory of the consumer and adding back it to the embedded emissions of the fuel inventory of the producer.  In future transactions, the producer would have to attach a higher CI to the fuel it sells as it sells certificates of lower embedded emissions.  This creates a mechanism for fuel consumers looking to reduce their emissions footprint to incentivize producers to reduce their carbon intensity. 

Figure 3 Architecture for verifying waste emission. 

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Figure 3 depicts an ongoing effort by the blockchain carbon accounting team to collect emission data points into a database (orbitDB) using IPFS or Fabric. These are connected to Ethereum contracts (NET/C-NFT) using a ChainLink oracle service or DAO.

The next step will involve building tools to pull in different data sources to support independent auditing and verification (MRV cycle):

• company voluntary reports/ ERP sensors (gas flaring)
• independent tracking service focusing on Flaring Monitor

Other Value chain scope 3 tools/services

To our knowledge there is no system focused designed to bridge the MRV systems used by organizations to direclty identify value chain emissions.

The GHG Protocol provides a free tool to help measures cross-sector value-chain impacts. It provides inputs typically used in LCA practices, which may only provide historic/aggregate data from several years ago. It is more focused on providing measures for individual organizations as opposed to connecting reporting activities.    However, according to the Carbon Disclosure Project (CDP), value chain reporting has not been very successful in reducing emissions (Patchell 2018).

Value chain reporting may use the Life Cycle Assessment (LCA) practice, which can be difficult for organizations to implement on their:

• Access the credible metrics restricted by data silos across emission measurement, reporting and verification (MRV) systems
• Rely on historic data based that may be several years old
• Employ of on model estimates that may be subjective and hard to validate

LCA applied to fuel carbon intensity standards have no been very effective in mitigating emissions (Plevin et al 2017).

CarbonChain is a comparable solution to help organizations assess emission impacts across commodity supply chains. However, it operates as a centralized services, focusing on gathering data into a bigger silo not connecting them.

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:

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

Bertrand WILLIAMSRIOUX  is an energy economist, engineer and programmer, putting together a startup to provide   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 and energy intensive commoditiescommodity 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 Masters in Business Administration 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.

b. Identify talent/resource gaps and needs (Do you need more support developing the blockchain solution? Do you need support with front end development? Do you need support developing the business model?)

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)

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