The Metaregistro: mapping a remote market

In 1997, the Kyoto Protocol was signed, which defined for the first time the architecture of a global emissions market. Specifically, the market is a set of different systems that governments, companies or individuals use to buy or sell assets that represent mitigated and/or captured tons of carbon dioxide or its equivalent (known as carbon credits). The main objective of the market is to reduce greenhouse gas (GHG) emissions. The above-mentioned protocol came into force in 2005 and its global impact and participation has grown significantly in the last decade.

There are two aspects to the carbon market. The first one is the regulated market in which companies and governments that are required by regulation to compensate for the greenhouse gas emissions generated by their activities participate. Within the regulated market, there are different mechanisms (which I will not go into detail in this article) such as international emissions trading, joint implementation and the clean development mechanism (CDM). All of the above mechanisms have the same mission of meeting global GHG reduction objectives.

The second side of the market is the voluntary market in which some companies set emission reduction objectives on a voluntary basis, most of them motivated by the idea that sustainable development and social responsibility can strengthen the business in the long term, in addition to improving the company's reputation before society.

In general, the carbon market was born as a strategy to reduce the damage that the planet is suffering, establishing a space where carbon credits can be purchased and sold.

CURRENT STATE OF THE CARBON MARKET

Although it has been in operation for several years, the carbon market is still a growing and constantly developing market. Therefore, it has several problems and areas of opportunity. The first problem identified with the carbon market is its diffusion and from my point of view it has to do with the fact that the regulated market does not apply to all countries. In countries where the regulated carbon market exists, there is diffusion, competition and different types of assets with different prices and quality, however, in countries where only the voluntary market exists, knowledge of the carbon market is relatively low and is not public knowledge. Leaving this consideration behind, we come to the next problem of the current carbon market, which is that there is no public space to obtain information regarding the different carbon capture projects or the carbon credits that they can offer.

Currently, there is no place where different carbon credits can be compared and easily accessed; most companies looking to buy carbon credits have to directly contact international certifiers, project developers or carbon bond distributors. Once carbon credits are acquired through any of these options, all the company receives is a digital certificate specifying the identifiers of both the project and the carbon credits as such. This digital certificate currently works for regulations and acts as proof of the purchase of carbon credits, but: does it really give the company a clear view of the carbon credits it is acquiring? Can third parties effectively verify that the company owns these carbon credits? The concise answer to those questions is: no. As we can see, this current carbon market needs transparency, visibility and dissemination. In response, we developed the Metaregistro.

WHAT IS THE METAREGISTRATION?

The Metaregistration of Carbon Bonds is a digital platform which aims to provide a better structure to the current carbon market. Specifically, it is a georeferenced list of carbon credit projects in which you can view various details of these projects, including:

-The project developer

-The amount of carbon credits it generates

-The history of carbon credits

-The sustainable development goals to which it adheres

-The diversity of species found in this project

The list of carbon capture projects is intended to function as a portfolio of global projects in which the different projects can be compared and the benefits of each one can be analyzed, and to provide buyers with the opportunity to purchase the carbon credits that best suit their needs and objectives.

In addition to being a list of projects, the Metaregister also represents, on a map, carbon credits. Un carbon bonus It is an asset that was captured at a certain time and in a specific place, so it makes sense that it can be represented on a map that changes over time. In the Metaregir, you can view all the carbon credits that a project has generated. This is extremely important because this visualization of bonuses also shows their availability. Specifically, in the detail of the carbon credits of a project You can clearly see how many carbon credits are available for purchase and which ones already have an owner. In an effort to improve market transparency, in this visualization of carbon credits, we can also see the buyers of that project and the exact location of the bonds they purchased. Since this is a completely public record, the Metaregistro can also work as a verifier so that third parties can verify the transaction that the company made to buy its carbon credits and even see its exact location on a map!

TILE SYSTEM AND THE ROLE OF GEOGRAPHIC INFORMATION SYSTEMS (GIS)

How do we manage to capture carbon credits on a map? To solve this complex challenge, we use geographic information systems (specialized software for the treatment, analysis and visualization of georeferenced data) to analyze the areas of activity of the carbon capture project. After this analysis and taking into account the amount of carbon credits generated by the project in an annual period, we decided that carbon credits could be represented as hexagons on a map within the project's areas of activity. We call these hexagons tiles. To achieve this, factors such as tree cover, biomass indices and some other vegetation indices are taken into account in order to find the location of the carbon that is being captured within the areas of activity. In addition to providing us with the opportunity to visualize carbon credits on a map, it also serves to treat these assets individually as unique units and this allows us to convert them into Tokens digital. What does this mean?

BLOCKCHAIN AS THE FUNDAMENTAL BASIS

With the idea of tiles and the objective of representing a carbon bond as an individual unit on a map, we took the initiative to use one of the most disruptive technologies of the decade: blockchain. Blockchain is a set of technologies that meet the objective of forming a database that is public and immutable. This technology emerged as the basis for Bitcoin and all the well-known cryptocurrencies that are currently on the market, however, after several years it has begun to be implemented in different types of projects in different industries, such as education, the medical sector, video games, supply chains and several others. The use of this technology makes it possible to generate digital assets from which every transaction and movement that is made with them is stored.

In addition to recording transactions and movements, blockchain is a distributed system. What does this mean? The fact that it is distributed means that the database lives on more than one server; in fact anyone could have the database living on their own computer. The real benefit of blockchain being a decentralized system is that the records in the database become immutable, or unalterable, since they use consensus algorithms to validate transaction information and the digital assets themselves. I will not go into more detail about how blockchain works because I could write a full article about it and still have doubts, however, I will leave here a brief conclusion about this technology and why it is relevant to this article. In very general terms, blockchain is a set of technologies that work as a transactional and decentralized database, and some of the features that make this technology an excellent solution are: records are public, which provides transparency; blocks throughout the chain are intertwined with cryptographic keys and this provides an important level of security; and finally, the system is distributed and this (in addition to increasing security) provides immutability.

But what does this have to do with carbon credits and tiles?

The Metaregister of Carbon Bonds uses a tile system to locate the tons of carbon dioxide captured, but in addition to that, these tiles are stored on the blockchain. In this way, carbon credits also become digital assets and they inherit all of the previously mentioned blockchain features. As a digital token living on blockchain, we can store and know all its characteristics. This solution can be thought of as a public accounting book for carbon credits where all the bonds that a project generates are recorded and subsequently all the transactions that are made with them are recorded. The word to highlight here is spectators, this means that anyone (from the land owner, project developer, bond marketer and buyer) can view both the project portfolio and the carbon credits they have generated. All carbon bond transactions are completely public and immutable, so in the Metaregister you can view all the carbon bond movements that the projects have had, as well as a list of the buyers of carbon credits. In this way, The Metaregistro aims to provide a new level of transparency to the carbon market in which you can view absolutely all the details of the project and of the bonds as such.

HOW CAN THE CARBON MARKET BE STRUCTURED WITH THE METAREGISTRATION?

The Metaregistration of Carbon Bonds aims to improve the structure of the current carbon market in the following aspects:

-Visualization and dissemination: The first problem solved by the Metaregistro is to provide a centralized information location for carbon capture projects, so all market participants will find a portfolio of carbon credits and will be able to access those that best suit their needs, capabilities and vision.

-Transparency: All the information found in the Metaregistro, from projects to carbon credits and buyers, is completely public and easily accessible to anyone interested. The available carbon credits, the retired bonds, the owner of the withdrawn bonds and the transactions and movements of the carbon credits can be viewed on the map. By making all this information visible to anyone, the problem of double counting is prevented, in which more than one company is awarded the possession of the same carbon credits. Each carbon bond becomes a digital unit encapsulated in blockchain and captured on a map, and with this everyone can have specific information about each of the bonds generated and/or withdrawn.

-Immutability: The public quality of blockchain enables a decentralized system and this implies an additional level of security compared to traditional databases. In addition, each record that enters the blockchain is not editable or removable, so every transaction that happens with carbon credits can be viewed publicly.

-Validation and verification: Once again, the transparency and public feature of the Metaregistration will allow project owners to verify the sales of their carbon credits; project developers to view the carbon credits generated and withdrawn; buyers to differentiate, choose and share their certificates and carbon credit locations; and finally verifiers to verify the transactions and possession of the carbon credits that companies are accredited.

The carbon market is one of the international mechanisms that seeks to reduce the amount of current GHG emissions and although it is a truly important initiative in the fight against the climate crisis, it still has many problems and areas of opportunity. The carbon market is crying out to be digitized and to increase the level of transparency it currently has. To counteract these problems, the idea of the Metaregister of Carbon Bonds emerged, which is a digital platform that will allow all actors in the carbon market to clearly, publicly and transparently view the different carbon capture projects that exist as well as all their generated and withdrawn carbon credits. With the help of geographic information systems and blockchain, the Metaregister will be a visually attractive and secure tool for representing information about carbon credits and sharing it with anyone. It is necessary to improve the structure of the current market so that this emissions trading mechanism truly becomes the engine for mobilizing and visualizing the tons of carbon dioxide that are being captured year after year.

To learn more and see the prototype of the Metaregistro, check out the webinar where we present it.