Carbon offsets are claims of activities which reduce carbon emissions, such as investments in renewable energy generation, improved forestry and land management, circular economy and reuse, and carbon capture and sequestration. Carbon offsets are either part of mandatory schemes, such as the European Emissions Trading Allowance, industry schemes, such as CORSIA, and voluntary purchases by primarily corporate buyers and some individuals.
Mandatory carbon trading regimes are often limited in scope and region, and in the past have suffered large swings in activity due to political shifts. The European Emission Trading scheme, for example, was active until 2010.
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
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 centralized directory of voluntary offsets, pulling the data from different registries and the Berkeley Carbon Trading Project. It can then be used to:
- Register trades between parties and serve as a price discovery service
- Allow peer review of quality of offsets
- Identify possible duplicate selling of projects
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/
How to Get Ecosystem Buy-In: https://hbr.org/2017/03/how-to-get-ecosystem-buy-in
Methodology Of Business Ecosystems Network Analysis: A Field Study In Telecom Italia Future Centre http://www.diag.uniroma1.it//~nonino/Publications/CI20.pdf
BEAM: A framework for business ecosystem analysis and modeling: https://ieeexplore.ieee.org/document/5386541
Business ecosystem analysis framework: https://ieeexplore.ieee.org/document/7341356
The Delicate Balance of Making an Ecosystem Strategy Work: https://hbr.org/2019/11/the-delicate-balance-of-making-an-ecosystem-strategy-work
Mapping and Strategising Across Business Ecosystems: https://www.europeanbusinessreview.com/mapping-and-strategising-across-business-ecosystems/