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Objectives

This project will develop an emissions ledger which could be used by multiple parties in a supply chain to record emissions data.  It could then calculate the net emissions for a product which is transported through the supply chain. The goals are:

  • Quantify the amount of greenhouse gas (GHG) emissions per unit of product delivered at the destination of the supply chain, for example per kg of fruit or unit of equipment received.  This include both the embedded emissions of the product itself, the emissions of the supply chain, and loss of product in the supply chain. 
  • Quantify the effects of leakage or spoilage or other loss in the supply chain on net emissions and compare that against the emissions of the supply chain itself.
  • Enable emissions reductions either from the product or its supply chain which could be tokenized and traded. 

Use Cases

The destination emissions of the products could be used for regulatory compliance, such as the EU carbon border tax, the EU Carbon Boarder Adjustment Mechanism targeting imports of energy intense commodities, and for meeting customers' climate objectives.  They could also be used to help investors assess the risk of different products.  Finally, by comparing the actual results versus simulations of business-as-usual alternatives, these calculations could be used to prove emissions reduction, certify products as low carbon, and create carbon offsets.

This ledger plus the Emissions Tokens Network Project could be help solve the hard problems of reducing emissions in the supply chain:

  • Cost of carbon footprinting - We're free. (smile)
  • Creating incentives for suppliers - Customers, either big ones or a group of small ones, could set up their own "cap and trade" scheme: Declare their supply chain emissions targets which decline over time, aligning with the Paris Agreement (-50% by 2030, zero by 2050.)  Allocate tokens to suppliers based on those targets.  Suppliers can trade their emissions with each other but over time must reduce them as a whole.

  • Providing turnkey solutions - Again using tokens, major customers could either invest in emissions projects directly and provide them to their customers (like Apple and "Enabling carbon neutrality across the value chain" in this article) or provide financing or guarantees for financing for suppliers.

  • Verification - Could be done through this ledger.
  • Going deep - Suppliers could get their suppliers on the ledger, and tokens could be transferred further up the supply chain.
  • Address the pain points, needs and interests of emerging regulations like the CBAM on the international stage
  • Communicate the importance of corporate carbon reduction efforts

Sample Supply Chains

Fruit and Produce: Fruit and produce is harvested at a farm, transported by truck, processed at a distributor facility, shipped by freight (air, truck, or rail) with refrigeration, and delivered to a grocery store or supermarket.  Optionally we can consider storage at the grocery store or supermarket as an additional step in the supply chain to the final consumer.

Recycled Plastic: Recycled plastics is collected at residential homes, public places, beaches, etc.  It is could then be transported and delivered to different types of facilities, which could then enhance it into different materials.

Carbon Capture and Storage (CCS): GHG emissions are captured at the point of burning natural gas, for example at a power plant, and transported via pipeline to underground storage.  The product transported has very high GHG emissions content relative to the transport process itself. Tracking these emissions will support markets for offsets based on CCS.

International trade of energy intense commodities like aluminum, steel, and cement that make up a large share of global international trade and anthropogenic emissions (>~12%). tracking  embodied supply chain emissions of these commodities will be essential in building a market for green commodities with lower carbon footprints.

Implementation

Ethereum tokens are used to store the embedded emissions at origin and destination of the supply chain.  This opens up the supply chain to all parties who tokenize their emissions.  Cactus is used for integration with outside ledgers (ie trade finance or supply chain ledgers.)

A Hyperledger Fabric channel similar to the Utility Emissions Channel Project is used to combine the emissions of the product at origin and the steps of the supply chain to calculate the emissions at the destination. 

The steps of the supply chain is simplified for emissions accounting purposes, so that it is a series of steps each recording:

  • Supply chain ID - a unique identifier which identifies a particular product item, which could in reality be a single physical item or a lot or batch, through the supply chain.  This could be used by a supply chain system to find the actual item.

  • Step ID - automated unique identifier for each step.  A supply chain will have many steps each with the same supply chain ID and a unique step ID.

  • Quantity of item at origin
  • Type of activity - what happened at this step of the supply chain.  Was something shipped?  By air, sea, rail, or truck?  Was a product compressed, flash frozen, stored in a warehouse?
  • Activity party - Information about who performed the activity, which would be used to find the right emissions factors.
  • Amount of activity - how far was the item shipped?  How long was it stored?
  • Previous and next node - link to the previous and next steps for this item by their step ID.  Use ORIGIN for previous step if the current step is the origin of the supply chain and FINAL for next step if the current step is the final or destination of the supply chain.
  • Emissions - calculated emissions of this step based on the type of activity, activity party, and amount of activity.  This will require standard emissions factors similar to the ones used in the Utility Emissions Channel Project, but for all the different types of steps in the supply chain.

The emissions of each step of the supply chain are added to the per unit embedded emissions of the item at origin, which could be an audited emission specific to the item or, if not available, generic emission for this type of item.  The total emissions are then tokenized and issued to the next step of the supply chain, and the process repeats itself.

Data sources for calculating emissions:


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