On the 25th of July, Crypto Mondays Zürich invited the CEOs of 3 leading companies at the forefront of environmental innovation.
The forest carbon offsets approved by the world’s leading certifier (Verra) and used by Disney, Shell, Gucci and other big corporations are largely worthless and could make global heating worse, according to a new investigation.
Patrick Greenfield in The Guardian on January 18, 2023
Driving Climate Action with Reforestation
Frederic Fournier, of the Open Forest Protocol, discussed his organization’s efforts to combat climate change through innovative blockchain technologies. The focus is on reforestation and forest conservation efforts, employing blockchain solutions to monitor, report, and verify the progress of such initiatives.
Open Forest Protocol developed a platform for exploring and monitoring restoration projects. Users can find descriptions, documents, and monitor how forests are observed using specially developed tools that promote complete transparency. Project participants can onboard through a Web2 platform to define their projects, such as the type of trees they plant, project duration, social impact, etc.
Once approved, participants can access carbon finance, thereby creating carbon credits through the data they upload. This process involves on-the-ground data collection using an app, data validation through multiple knowledgeable entities worldwide, and finally, transparent showcasing of all activities. Blockchain’s role is pivotal here, enabling a decentralized verification process and data-backed value creation, primarily through carbon credits.
This protocol aims to make carbon finance more accessible by eliminating associated costs and complexities, thereby unlocking a vast market potential. The approach is anticipated to facilitate a boom in the number of global reforestation projects. Transparency is their key selling point, ensuring all aspects of a project, from data uploads to carbon credit creation, are publicly visible.
The Open Forest Protocol was launched the previous year and has 50 projects on the chain with a pipeline of another 50, covering around 50,000 hectares. Established industry players are showing interest due to recent controversies regarding carbon credits. The team attributes their success to the diversity of their members, combining expertise from different fields rather than focusing solely on blockchain technology.
Biodiversity Credits in Regenerative Finance
Yannick Zehnder, the founder and CEO of CEVEN, emphasized the company’s mission to measure and «make visible nature’s bugs» in his talk. He indicated that there is a growing interest in biodiversity, in comparison to carbon, within the regenerative finance ecosystem. CEVEN monitors biodiversity based on gathered data and their goal is to translate this data into information that can influence decision-makers controlling natural ecosystems.
Yannick explained that biodiversity is different from greenhouse gases, as it is not a global problem but rather a localized one. CEVEN focuses on providing transparency about their clients› eco-friendly practices, which helps them communicate with their stakeholders. They collect their data through soil samples and analyze them for environmental DNA to observe micro-organisms.
The company targets 3 primary sectors: urban construction, agriculture, and nature-based solutions. For urban construction, some regulations require the replacement of biodiversity destroyed during construction, like e.g. in the city of Zürich. In agriculture, they want to replace soft metrics with hard KPIs (Key Performance Indicators) to provide data on the effects of regenerative farming. As for nature-based solutions, they aim to add more value and credibility to carbon credits sold on the market by providing additional information about biodiversity.
Yannick critiqued the idea of replacing carbon credits with biodiversity credits, arguing that biodiversity is location-specific and cannot be compensated elsewhere. He advocated for using blockchain technology to understand biodiversity and produce transparency, as well as to prevent falsification of data. He foresees a future in which certificates will provide comprehensive information about various ecosystem services, biodiversity, and carbon sequestration.
Transforming Carbon Markets with Real-Time Data Streams
Miles Austin, from Hyphen, spoke about their unique approach in the carbon markets. Unlike many other organizations, Hyphen focuses on large corporate projects and doesn’t aim to position itself in retail markets. The company sees a need to align market activities with real-world environmental science, particularly with regards to nature-based carbon credits.
Austin highlights a concerning trend where many groups are abandoning carbon credits and focusing only on their own operational footprints. He argues that both internal greening and external offsetting should be pursued in tandem. He criticizes the standard «activity-based» approach to measuring carbon offset because it is not as effective in nature, which is a complex, living, and dynamic system.
Hyphen advocates for an atmospheric-based monitoring system to provide more accurate, real-time data on carbon sequestration in natural environments like forests. Their system involves installing monitoring towers in areas of at least 30,000 hectares (preferably 50,000), and these towers measure greenhouse gas concentrations to establish accurate baselines and flux values. This data allows them to accurately calculate the amount of carbon that is being stored (the «sink») in a given area.
This granular data is then processed through a complex inverse model, which correlates the flux values with the amount of carbon being sequestered. This approach provides accurate, auditable track records of data, which can be used to issue carbon credits with embedded metadata representing the exact outcome of mitigation practices.
Austin underscores the financial importance of accurately measuring carbon sinks. For a 50,000 hectare forest, the difference between a low-end and a high-end carbon sink could be as much as $50 million in offset credits.
Currently, Hyphen’s main focus areas are in the Global South, particularly Southeast Asia, where credits are often undervalued. Their atmospheric monitoring system allows these credits to be sold at more competitive prices, thus uplifting the market.
Austin emphasizes the benefits of their approach, which include exact emission reductions, real-time data streams, high-quality credits, and peer-reviewed backing. For corporations, this eliminates greenwashing and incentivizes local communities to conserve nature, as they could potentially earn more from preserving their environments than from extracting resources.
Panel Discussion
The discussion after the presentations revolved around the complexities of the carbon market and the role of blockchain within it. Key challenges of the carbon market include lack of regulation, opacity, various forms of carbon credits, and the hype-driven, under-regulated environment leading to a ‹race to the bottom› in pricing. As solutions, they advocate for greater transparency, more tools for understanding the market, a shift in narrative to include more types of high-integrity solutions, and the potential for blockchain to add value to the carbon market. The panel also discussed the necessity for education and awareness around the value and variances in carbon credits.
When talking about the complexities of carbon credits, we have to compare the removal of carbon dioxide through natural processes like forests and modern technologies like direct air capture. The panelists argued about the market value and reliability of these credits, indicating that direct air capture credits are priced premium due to their verifiability, but also acknowledging that nature-based solutions are cheaper and necessary. They also discussed the efforts by startups and platforms to provide transparency and standardization in carbon credit projects, though they acknowledge the challenges posed by different governmental standardization methods and the lack of a global standard.
Regarding the role of blockchain technology in addressing environmental concerns, particularly carbon emissions, the participants discussed the use of carbon credits and the pros and cons of regulated versus voluntary carbon markets. While some countries like Switzerland have adopted measures to work with nations in the global South to offset their emissions, others haven’t, and the challenge of ensuring transparency, trustworthiness, and low environmental impact of blockchain technology was also mentioned.
Thanks to the Crypto Mondays team for organizing another great Crypto Mondays meetup. I’m looking forward to future events and more opportunities to learn and grow within this vibrant community.
Credits
- Picture by Nick Weisser
- The Guardian: Revealed: more than 90% of rainforest carbon offsets by biggest certifier are worthless, analysis shows
