Blockchain-native carbon credits
Last updated
Last updated
Native Carbon Credits is a term coined by CLNK to describe carbon credits that are created directly on-chain using blockchain technology.
The envisioned digital solutions (digital MRV) will support transformational systems change to scale high-impact climate action that catalyzes sustainable development." Open Collaboration on Next Generation Digital Solutions for MRV, Gold Standard
Blockchain technology applied to the context of carbon markets has a number of advantages over the existing system: improved traceability, removal of middlemen, elimination of issues such as double counting and more access to carbon markets to anyone who wants to participate. Let's take a look at what has been done in this space already.
Carbon map created by @hristovbz
Toucan Protocol represents one of the largest players in the Regenerative Finance (ReFi) space, having bridged over 20 million carbon tons on-chain (at the time of writing), with other players like C3 now emerging.
The bridging process is essential to the current on-chain carbon market: Carbon credits from standards bodies are brought onto the Polygon blockchain via the Toucan Carbon Bridge. Once bridged, these credits can be tokenised and, depending on the attributes, can then be deposited into a 'carbon pool'.
Currently, Toucan has two pools: Base Carbon Tons (BCTs) allow any post-2008 VERRA credits, and Nature-based Carbon Tons (NCTs) allow any post-2012 VERRA credit from a nature-based methodology. C3 also has two Universal Basic Offsets (UBO) Nature Based Offsets. UBO is the widest criteria carbon token, accepting most VCS and GS methodologies for credits issued from 2014 onwards. Natured Based Offset (NBO), is an Nature-based offset accepting all credits from the Verified Carbon Standard (VCS) and Gold Standard (GS) methodologies characterised as Natural Climate Solutions, including REDD+, Improved Forest Management, and those with VCS or GS certification utilising Clean Development Methodologies, CDM-based forestry methodologies such as AR-AM0014. Vintage of 2014 onwards.
Bridging tons across has been hugely successful and has allowed for the on-chain carbon market to flourish. However, it is still a work-around and the process could be greatly simplified and provide better audibility if carbon was instead created directly on-chain.
Blockchain native carbon provides benefits across all participants: Project developers have access to quicker financialization of their projects and due to the lack of middlemen, can charge higher prices for their tonnage. Consumers have better access to the carbon market and more transparent information on the credits themselves. The carbon market as a whole benefits from better price discovery, easier traceability and improved trust.
In the next section, we explain how CLNK intends to pioneer blockchain-native carbon credits.
