Carbon Markets were initially conceived in Article 6 of the 2015 Paris Agreement. Fraught with issues of application and regulation, it lay in limbo as climate negotiators attempted to reach a consensus over its exact implementation.
Rife with legitimacy issues revolving around inefficiency, ineffectiveness, and a lack of transparency, the whole scheme has resulted in little to no emissions reduction.
Coorest has devised a more equitable and transparent method to revolutionise and revitalise Carbon Markets through the use of sustainable Blockchain Technology.
To best understand how Coorest is accomplishing this task, it is necessary that we first outline some of the underpinning issues that have hindered the growth of Carbon Markets thus far.
The Genesis of Carbon Markets
Currently, there are two types of carbon markets that coexist:
- Regulatory/Compliance markets
- Voluntary markets
Compliance markets are regulated by national, regional, and international agencies and serve corporations and governments legally bound to account for their GHG emissions.
Voluntary carbon markets enable private investors, governments, non-governmental organisations, and businesses to purchase carbon offsets to counter their emissions voluntarily.
Although often viewed as synonymous, allowances and carbon credits or offsets operate in fundamentally different ways.
Carbon Allowances are tradable certificates, typically purchased from national or international governmental organisations. Their issuance gives the purchaser permission to generate one ton of CO2 emissions or an equivalent amount of different greenhouse gases.
Carbon Credits or Offsets
Carbon Offsets or Carbon Credits represent either an actual reduction in the emission of GHG (Green House Gases) or an increase in carbon storage. The former is achieved through improved industrial efficiencies while the latter utilises carbon sequestration techniques, e.g., soil restoration or reforestation.
Credits and Offsets are measured in terms of Carbon dioxide equivalent or CO2e, which equals the number of metric tons of CO2 GHG emissions or carbon sequestration. (carbon capture)
Simply put, one CO2e is equivalent to 1400 kilometres driven by an average car or the carbon captured by .4 hectares of forest in a year.
Hindrances and Hurdles
While not perfect, Article 6 of the Paris Agreement did give countries the tools necessary to build a framework for Carbon Markets. Still, in order to achieve the desired level of environmental integrity, certain obstacles and irregularities have to be overcome.
And with increased pressure to reduce their carbon footprints, the need for companies and investors to understand carbon markets has never been greater.
Setting a Standardised Price
Carbon markets convert CO2 emissions into a commodity by assigning an agreed-upon price. In theory, it provides a simple market-based solution to a complicated problem.
But the ever-evolving state, federal, and international regulations have made this process difficult if not impossible. Compounding the problem is that issuing companies and environmental projects determine the value of their individual carbon offsets.
With little or no way to independently verify the compensating activity behind carbon credits, subsequent trade has been severely curtailed.
Third-party validators have attempted to address this issue by assuring that any carbon offset results from real-world emissions reductions. However, there’s still no consensus which results in wild price variances from exchange to exchange.
These variances in price wreak havoc in the marketplace and sow uncertainty and mistrust in the minds of potential investors.
Although International Carbon Markets have been around for some time, more recently, there has been a dramatic increase in investment with the advent of “regional” markets. Burgeoning carbon sequestration initiatives enable emerging countries to be increasingly active in the overall carbon marketplace.
Debates centred around accounting issues and, more specifically, double-counting have subsequently arisen.
For example, country A builds a wind farm funded by country B. Country A then sells the resulting carbon credits to country B. Double counting results when the country sponsoring the wind farm and the country hosting it both deduct the same carbon emissions. Doing so creates the illusion that the world is making more progress in GHG reduction than it is.
The Glasgow Climate Pact was an agreement reached at the 2021 United Nations Climate Change Conference (COP26), wherein world leaders committed to rules for a new international carbon market.
Countries will now be allowed to fund projects that reduce emissions in other countries, like solar farms or reforestation, and count the climate benefits toward their national greenhouse gas goals. But it’s a scheme where the risks are as high as, if not higher than, the rewards.
Proponents of this new U.N.-regulated carbon offset market see it as a way to goad wealthier countries into doing more to cut emissions by making it cheaper to do so.
Kelley Kizzier, vice president for global climate at the Environmental Defence Fund, views it as “an opportunity to get more finance flowing into developing countries to help them grow sustainably.”
But although private sector companies will now have a financial incentive to build green projects in poorer countries, the deal is not without critics.
Jonathan Crook, policy officer at Carbon Market Watch, readily admits carbon markets can advance climate action by distributing sustainable development funds to places in need. However, he stressed that countries shouldn’t be substituting the hard work they need to do within their borders simply because there are less expensive alternatives.
“We need to be targeting high-hanging fruit that is difficult for a country to attain. If it ends up targeting all the low-hanging fruit, then the country is left with all the difficult work to do,” Crook said.
Rachel Kyte, a co-chair of the initiative, believes that voluntary carbon markets(VCM) can bring much-needed transparency and validity to carbon-neutral claims ensuring they play a pivotal role in keeping global warming to 1.5C.
While admitting that the agreement took strides in closing down some of the more egregious loopholes, Ms Kyte stated, “the language remains unclear in some areas, and we have much to do to stop companies and countries gaming the system.”
The success of the new carbon trading mechanism hinges on the U.N. overseer’s willingness to develop standards that ensure actual emission reductions are taking place.
Creating Confidence With Coorest
Coorest has levelled the playing field for farmers and environment project managers by setting a fair and equitable price for carbon compensation units.
Onboarding these two groups, who are doing most of the world’s carbon sequestration, generates revenue pools never before available to them. This additional revenue can then be invested in existing or newly proposed carbon sequestration projects.
Cost-effective projects providing flexibility and price stability will attract additional private and public participants into the marketplace.
Providing Accurate Accounting
One of the driving forces behind Coorest’s creation was the need to address carbon counting inefficiency. To combat this issue, Coorest created a sustainable Blockchain solution backed by real-world assets, i.e., land, outbuildings, and trees.
Trees are the backbone of Coorest’s tokens. The CO2 captured is first quantified, then correlated, and finally expressed in the form of Coorest’s $CCO2 token.
The $CCO2 token alone does not constitute a claim of carbon compensation.
To generate a compensation certificate for CO2 emissions, the holder of $CCO2 tokens burns their tokens on the Coorest Decentralised Exchange (“Coorest DEX”). A corresponding amount of CO2 compensation is then registered on the Coorest DEX as Proof of Carbon Compensation (“PoCC”).
This certificate is then digitised, taking the form of an NFT. Thereafter, it is transferred to the crypto wallet of the compensator. The PoCC NFT contains pertinent compensation data, including the amount and date, with an option to add the holder’s particulars.
Once burnt, the $CCO2 token is removed from the overall supply, thus solving the double counting and double claiming problem. As a result, only the purchaser can claim the carbon compensation. It cannot be resold or reclaimed a second time.
This process of removing the $CCO2 token from the total available supply also adds liquidity to Coorest’s ecosystem, assuring the Blockchain’s long-term viability.
Transparency through Blockchain
Lack of investor confidence in Carbon Markets has plagued the program from inception. Dilemmas brought on by double deals, suspect carbon credits and offsets, and an over-bloated bureaucracy have severely restricted market growth.
Coorest’s use of Blockchain technology allows retail and institutional investors to invest in CO2 compensation and wildlife preservation projects around the globe in a much more transparent manner.
Tokenization of wildlife, trees, and CO2 capturing, creates a more open and globally accessible market where investors feel more confident investing in sustainable projects worldwide. The upcoming Coorest DEX will add extra layers of security and transparency to each transaction.
$CCO2 Token Retirement
Coorest’s ease of use provides a barrier-free gateway for individuals wishing to compensate for their carbon footprint. Purchasing the equivalent amount of $CCO2 tokens makes it possible not only to compensate for your daily, weekly, or yearly carbon generation but directly contribute to COP26’s two per cent annual goal of carbon credit retirement.
What does it mean to retire carbon credits?
Retiring a carbon credit means removing it from the carbon market forever once purchased. It cannot be traded or resold again. Therefore, only the purchaser of the carbon credit can claim the reduced emissions.
A practical business scenario may be as follows.
Country A’s wind farm generates ten carbon credits which it intends to transfer to country B. A percentage of these credits is purposefully not applied to either country A or B’s Nationally Determined Contributions. (NDC) but was instead removed totally from the marketplace.
So, rather than emissions reduction being transferred from one country to another, retiring these credits contributes directly to further emission reduction.
The purchasing and burning of $CRST tokens accomplish the same goal and is carbon compensation by definition.
So, while “two per cent is low,” according to Jonathan Crook, policy officer at Carbon Market Watch, it is a positive step in the right direction, moving us closer to the EU’s goal of 55% emissions reduction by 2050.
Coorest Serves Business
One of the biggest obstacles limiting the growth of voluntary carbon markets is businesses’ valid concern of increased energy costs. Such increased expenditures negatively affect Shareholder value and consequently share price.
Coorest has devised a way for businesses to subsidise this increased expense in a simple yet effective manner.
Traditionally, corporations offset their mandated GHG emissions by purchasing carbon credits or offsets and applying them. NFTrees enable companies to produce their own carbon compensation units ($CCO2 tokens) while simultaneously allowing them to generate additional yields effectively counterbalancing any increased energy expenditure.
Businesses will soon have the option of purchasing or selling the $CCO2 tokens obtained via their NFTrees on Coorest’s DEX.
This boon for business will enable faster, less labour-intensive, and lower cost carbon transactions. NFTrees are NFTs backed by real-world trees. They provide companies and individuals with two revenue streams:
- $CCO2 tokens derived from both regular and fruit NFTrees
- An approximate amount of 10 USDC from the sale of fruits produced by each fruit NFTree
Why Participate in Coorest?
No longer the exclusive realm of banks, brokers, and financiers, Coorest’s sustainable Blockchain technology enables businesses and individuals to benefit directly from the exponential growth of carbon markets.
Coorest will allow farmers, ranchers, and landowners easier access to funds to develop new or scale-up existing carbon compensation projects. More efficient machinery and technology resulting from increased revenues will further benefit developing nations by lowering their domestic carbon footprints.
With increased confidence in Coorest’s sustainable Blockchain solution, public and private financing is steadily growing. Additional revenues provide incentives for countries hosting new mitigation projects and investors seeking more diversified, cost-effective opportunities. With more Carbon Compensation projects coming online weekly, the levels of carbon removal will steadily increase.
The Future Looks Bright
Studies show that carbon markets can achieve the lofty goals set out in Article 6 of the 2015 Paris Agreement if designed well. But this can only occur if the market is credible, reliable, and has integrity. Coorest provides both current and potential participants with this level of assurance.
With the emergence of blockchain technology, it is now possible to connect the real world to the digital world, making it sustainable and rewarding for all participants.
Coorest’s ecosystem is a symbiotic solution enabling businesses and individuals to come together and create the Carbon Neutral Economy of the future.