“Following the Paris climate agreement, nearly 70% of the global economy has committed to achieving net-zero targets by 2050.
“Meeting these targets will require mobilizing enormous amounts of capital and financially incentivizing both companies and individuals to change their carbon-emitting behaviors.” -Ifeanyi Oteh, co-founder of 6C-Index
Many believe that carbon credits will be an important tool for achieving net-zero targets. Since the launch of Toucan Protocol last year, venture capital money has been flowing into Web3 projects seeking to improve and expand the carbon credit markets by bringing carbon credits to the blockchain.
Notably, Flow Carbon, which is backed by WeWork founder Adam Neumann, raised $70 million at the end of May.
So what are carbon credits anyway?
A carbon credit is essentially a certificate representing one ton of carbon dioxide removed from the atmosphere.
These credits can be purchased by individuals or corporations to offset their carbon footprint. If you’ve ever paid to offset the carbon impact of a flight then you have participated in the voluntary carbon credit market.
These credits are often created by agricultural or reforestation projects (e.g. planting a certain number of trees per kilo of carbon that you emit).
They can also be created when a project reduces, avoids, destroys, or captures emissions. Carbon credits incentivize projects to remove carbon from the atmosphere. The higher the price of carbon credits the higher the incentive for carbon capture projects.
Why are Web3 projects putting carbon credits on the blockchain?
The carbon credit markets in their current form suffer from a lack of transparency, liquidity, and accessibility.
Carbon credits in the voluntary market are often traded over-the-counter (OTC). This means big fees for brokers or middlemen. It also means that retail investors have a hard time purchasing, owning, and trading carbon credits.
“By bringing carbon credits onto the blockchain we can ensure transparency and make ownership of real carbon assets accessible to retail investors.” -Ifeanyi Oteh, co-founder of 6C-Index
Transparency is one of the core principles of Web3 and blockchain technology. Keeping a record of carbon credits on the blockchain could help solve the problem of “double counting,” where multiple parties claim credit for the same emission-reducing action.
The tokenization of carbon assets on the blockchain makes ownership of these assets available to a new market of retail investors. Tokens backed by real carbon can be bought and sold on major exchanges, bringing liquidity and price transparency to a previously illiquid market.
Web3 projects are betting that greater transparency, accessibility, and liquidity in the carbon markets will be a positive in the fight against climate change. They hope to encourage more carbon capture projects and discourage carbon pollution as the price of carbon increases.
Web3 carbon credit projects to watch
6c-Index is a Web3 project on a mission to make carbon an easily traded commodity, incentivizing the development of carbon capture projects. I spoke with project co-founder, Ifeanyi Oteh. He shared the following thoughts about the current state of the carbon markets and how they can be improved using blockchain technology:
“Currently the carbon credit markets suffer due to disparate project attributes, a lack of transparency, and illiquidity.”
Our goal is to be the new standard for investing in regenerative commodities. As the first tokenized carbon aggregator, our mission is to provide the world with clear, accurate and transparent access to both the voluntary and compliance carbon markets.”
6c-Index recently announced a partnership with the Telos blockchain. Their Index token is expected to go live in the first quarter of 2023.
Toucan is a core part of the Web3 regenerative economy. This platform is essentially a bridge that facilitates the process of bringing carbon credits on-chain.
As of writing, Toucan has bridged more than 21 million tonnes of carbon to the blockchain.
Most notably, Toucan supported the Klima DAO project in bringing more than 17 million tonnes of carbon on-chain. Klima DAO has been criticized for bringing low-quality credits on-chain, but their project has certainly progressed the conversation around tokenized carbon credits.
3. Flow Carbon
Flow Carbon is a carbon credit trading platform built on the Celo blockchain. Celo is known for being a carbon negative blockchain. Backed by WeWork founder Adam Neumann, Flow Carbon raised $70 million at the end of May.
The Flow Carbon platform is centered around their flagship token, GNT. GNT will only be backed by nature-based carbon offset credits that have a vintage no older than 5 years. Pre-sale of GNT is complete and the token is expected to launch soon.
Moss is a platform that makes it easy for individuals or businesses to offset their carbon footprint. They even help you calculate your carbon footprint.
Their Amazon Forest NFT project has tokenized governance and economic rights to small forest areas. By buying Amazon NFTs through Moss you can protect your own piece of the forest.
These are just a few of the many projects building at the intersection of Web3 and climate action. Many of us are looking forward to seeing how these projects develop and the impact that they end up having.
Are you interested in learning more about how to launch a project utilizing Web3 technology and principles? Browse our Klub programs to see which one could help!