Innovation Tagline: Using non-fungible tokens (NFTs) as digital ink for tracking waste emissions.
Project Keywords: #NFT #TokenEconomy #ValueChain #CarbonEmissions #Flaring #Scope3
Project Members
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)
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.
The Environmental Defence Fund (EDF 2021) points out that investors need to pressure energy companies to improve flaring transparency, requiring collaboration across stakeholders to establish clear metrics. Several waste emission tracking tools (GGFR, Flaring Monitor, MethaneSat, UNEP IMEO,flare-intel) have been created. Converting this data into useful measures requires integrating with production data, e.g., World Bank Imported Flared Gas Index.
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 Credit (REC)
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
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 verified by issuing AECs backed by an independent tracking service. For this
