The growing voluntary carbon credit market is fraught with challenges, but one Canadian company is revolutionizing the process through blockchain technology.
The voluntary carbon credit market, which surpassed $1 billion (USD) in value for the first time last year, is believed to be one of the best solutions to reducing global carbon dioxide (CO2) emissions. Up to now, this market has been hard to access. Most voluntary credits have been trading on the over-the-counter market involving multiple brokers, erratic prices, markups, and duplication — resulting in lack of transparency and liquidity.
It makes sense then that buying or selling carbon credits on the blockchain through non-fungible tokens (NFTs) would ease access and solve many of these problems. After all, a blockchain network shows the full details of every node in the chain and allows for transactions to be conducted on any of the decentralized exchanges that already trade in cryptocurrencies and tokens. However, not all tokenization platforms are created equal.
DeepMarkit Corp. is a publicly-traded Canadian company (TSX Venture: MKT) that’s ready to launch its turnkey platform called MintCarbon.io, which converts carbon credits into highly-customizable NFTs (or smart contracts), tradable on the blockchain. In addition to making carbon credits accessible to everyone, the company is striving to bring transparency, liquidity, and integrity to the carbon offset markets. DeepMarkit already has an agreement with Radiance Assets Berhad, an international holding company with extensive exposure to high-end technology solutions, agritech, and advanced clean technology. MintCarbon.io is expected to receive increased transaction volume as a result of any and all users referred by Radiance who mint existing credits into NFTs, and in addition, intends to facilitate Radiance’s portfolio companies in pursuing carbon neutrality through the acquisition of NFTs representing thousands of tonnes of CO2 minted via the MintCarbon.io platform.
Mediaplanet recently spoke with a company official to learn more about digital carbon credits and what makes DeepMarkit a frontrunner in this expanding sector.
What are carbon credits?
A carbon credit — or carbon offset — represents one tonne of greenhouse gas emissions that someone, somewhere has prevented from being released into the atmosphere. Companies in sectors that tend to emit high amounts of carbon, like oil and gas, can purchase carbon credits from companies involved in projects that reduce carbon emissions.
How do carbon credits trade?
Carbon credits currently trade in two markets — the compliance market and the voluntary market. The compliance market is enforced by governmental bodies. With the voluntary carbon market, which is where we’re involved, companies can voluntarily purchase carbon credits from carbon-friendly companies to offset their own emissions.
Why are companies buying voluntary carbon credits?
In March of this year, the U.S. Securities and Exchange Commission (SEC) published proposed rules for how publicly- traded companies will need to report climate risk in their audited financial statements. If passed, every publicly-listed company will be required to disclose its environmental policies in the future. This is largely driven by increased demand by investors and other stakeholders. Any company not under the compliance regime will want to purchase credits voluntarily to show in their annual and quarterly reports that they’re doing their part as good global citizens.
What are some of the challenges with the current voluntary carbon market for investors?
While there are a lot of great and interesting projects taking place, it’s still very much a Wild West with good and bad actors. There’s no universal standard for carbon, and the market is prone to wide price fluctuations, markups, falsification, double counting, and inconsistent record-keeping because it’s still very much over-the-counter trading.
How does your NFT minting process work?
The NFT minting process starts by confirming and authenticating the project or credit on a third-party carbon project verification registry such as Gold Standard or Verra. Once the credit has been authenticated, the user is approved to mint the carbon offset credit into a verified NFT through MintCarbon.io. The owner of the carbon offset project creates a blockchain wallet, such as MetaMask, into which their NFTs are deposited. Once the credit has been minted, the user can list their NFTs for trading on any decentralized exchange in the world, such as OpenSea or Rarible.
Your approach to tokenization is through the ERC-1155 protocol rather than the ERC-20 protocol. Why is that?
First, MintCarbon ERC-1155 tokens are based on active, verified, and high-quality carbon credits that allow purchasers to interact directly and fund legitimate projects on leading registries. Second, the ERC-20 protocol doesn’t allow for the embedding of various features, data, and tracking details. We believe that there’s a lot more to these carbon credits than commoditizing them, and each story is unique. The ERC-1155 lets the project owner share a lot of additional information about their projects, including co-benefits, graphics, artwork, video, and project descriptions, so they can also get their underlying stories out into the marketplace.
What role can NFTs play in the carbon credit market?
NFTs help to reduce market friction, increase market access, and reduce intermediary fees. They also offer a way for carbon offsetting projects to be showcased by amplifying the qualitative aspects, impacts, and sustainable development goals that their champions have worked hard to achieve. Another thing that NFTs can do is scale capital flows by allowing companies with carbon credits to receive royalties on subsequent trades of NFTs, which can be used to monetize their assets and further develop environmentally-friendly projects that reduce carbon emissions.
Are these carbon credits available to the public?
Yes. Anyone with a blockchain wallet or account at any of the decentralized exchanges can purchase carbon credits. We’re democratizing access to this environmental mass market by breaking everything down to a level playing field where anyone with an internet connection can browse projects on MintCarbon.io, and if they so choose, click on the desired link to take them to a decentralized exchange such as OpenSea where they’re able to buy and sell the underlying carbon credit.
How do carbon credits get retired once they’ve been purchased?
The real environmental benefit occurs when an active carbon credit is retired as it means the carbon offset has occurred. A holder of an active carbon credit can retire it through a retirement contract on the MintCarbon.io platform. It then gets retired on the blockchain and on the registry itself. Only the purchaser of the carbon credit that retires the credit can claim to have reduced the emissions.