The battle against climate change is confusing. Until all industries find ways to pivot to regenerative or sustainable models, there will be a need to “offset” emissions by funding environmentally-sound carbon-negative projects. But this is currently a vague and unstructured marketplace with fragmented guidelines, few regulations, and myriad accounting methodologies. This proposed “Carbontology” illustrates the components and actors across the global carbon markets, and briefly describes the influential groups in each space.
Governing Bodies
- United Nations Framework Convention on Climate Change (UNFCCC): international environmental treaty and alliance with implementations such as the Kyoto Protocol, Paris Climate Agreement, REDD+, COP, and more.
- Task Force for Scaling Voluntary Carbon Markets (TSVCM): a private sector-led initiative working to scale an effective and efficient voluntary carbon market to help meet the goals of the Paris Agreement.
Registries
Before they can hit the market for funding, projects must pass a screening process for certification. There are numerous options that vary with location:
- Verra Verified Carbon Standard (VCS): provides numerous accounting methodologies that support a range of project types and other registries
- UN-sponsored Reducing Emissions from Deforestation and forest Degradation (REDD+) standard focuses on rainforest conservation in compliance with Paris Agreement
- Gold Standard Emission Reductions: CERs for Compliance, VERs for Voluntary markets
- American Carbon Registry (ACR), California Offset Project Registry
- Clean Development Mechanism (CDM) to earn certified emission reduction (CER) credits
- Australian Small-scale Technology Certificates (STCs)
- Energy Web Switchboard: Decentralized Identity and Access Management system for energy market participants
Projects
The TSCVM highlights key attributes of Additionality, Permanence, and no Detriment on the ecosystem. Verifiers must ensure that Operators stick to the project charter, and provide guidance for strategic decisions.
Examples include:
- The International Small Group and Tree Planting Program (TIST)
- California Bioenergy renewable natural gas (RNG)
- Window power project at Jaibhim
- Blue Carbon Coastal and Marine development
Project Drawdown provides several ready-made solutions devised by experts, and conducts an ongoing review and analysis of climate solutions. More speculatively, I think Dr. Kate Raworth’s “Doughnut Economic” provides great inspiration for ways to improve humanity:
Private Exchanges
Only accessible to institutions and accredited investors. I still don’t quite understand the role carbon accountants/brokers play, since there is intrinsically no fixed “price” of sequestering 1 ton of carbon.
- EU Emissions Trading System (ETS)
- CME CBL Global Emissions Offset (GEO)
- California Carbon Allowance (CCA)
- Regional Greenhouse Gas Initiative (RGGI)
- Privately issues credits such as Nature Conservancy
Public Marketplaces
Options for retail investors are currently fairly limited, but many projects are on the way:
- Nori: peer-to-peer blockchain based marketplace for “Nori Removal Tonnes” (NRTs)
- Pachama: accessible marketplace and AI technology company with innovative monitoring solutions
- Moss.earth: “Climatech” company that “simplifies the offsetting process and guarantee the traceability and transparency of everything we do by using blockchain technology.”
- Trees as Infrastructure: A “platform to value and invest in nature beyond carbon”. Launching soon at COP26, they aim to establish nature as a “critical part of urban infrastructure, alongside bridges, roads and rail, enabling investment, profitability and sustainability.”
- KlimaDAO: purchasing the KLIMA token allows any retail investor access to carbon assets on blockchain. “Drive climate action and earn rewards with a carbon-backed, algorithmic digital currency”, which we will return to shortly.
Public Ledgers
Tamper-proof records and data feeds provide much-needed transparency to the current black-box carbon market institutional transactions.
- Toucan: “carbon-bridge” for blockchain tokenization for use in decentralized finance
- Energy Web: digital operating systems for energy grids with global community of distributed energy resources
Data Capture
Critical but nascent part of the ecosystem that would enable a more trustless marketplace with fewer centralized intermediaries.
- dClimate: on-chain marketplace and oracle for climate data; can onboard other weather data sources
- Yardstick: IoT based automated soil carbon measurement at scale
- Pachama: satellites, lidar, AI powered monitoring technology
- Astral: spatial data for smart contracts and oracles
- New Sun Road: solar microgrid remote monitoring and control
Insurance Providers
As climate change continues to accelerate natural crises, there is an increasing need for rapid disbursement of funds based on preset, measurable data. This provides an appealing alternative to the traditional model with filing insurance claims that can be disputed by the underwriters. Chainlink founder Sergey Nazarov calls these “paper promises”:
- Arbol: parametric insurance provider from dClimate leadership, with simple coverage for agriculture, maritime, energy, and hospitality ventures
- Other regional insurance providers specific to the project implementation
Natural Capital Reserves
An emerging DeFi-native capital structure that creates a long-term symbiosis between the currency and natural assets, providing carbon-denominated yield.
- KlimaDAO: a Decentralized Autonomous Organization (DAO) with a treasury described as “a vacuum for carbon” that “only accepts certified, third-party verified emissions reductions from reputable carbon markets”. Every KLIMA token is backed by 1 tonne of verified, tokenized carbon reduction or removal in the treasury, so as the currency expands so too can the treasury natcap assets. Their larger goal is to “accelerate the price appreciation of carbon assets. A high price for carbon forces companies and economies to adapt more quickly to the realities of climate change, and makes low-carbon technologies and carbon-removal projects more profitable.” They just launched on October 18th and already have over 30k members on Discord!
- Celo Reserve: used to expand and contract the supply of widely used Celo stable assets (such as cUSD and cEUR) in-line with user demand. It is composed mostly of crypto assets, but they foundation plans to increase the allocation of natural capital as part of the Climate Collective initiative. They already have roughly $1M in Moss.earth issued tokenized credits, and plan to foster a symbiosis between expansion of stablecoin usage and carbon sequestration.
I am going to expand this “Carbontology” project to an interactive website in the coming weeks, keep an eye out!
This post was in part inspired by Tree As Infrastructure diagram. Excited for their launch at COP26!
