A New Generation of Carbon Credits

Of all the reflections that have been provoked to me by the latest report of the Intergovernmental Panel on Climate Change (IPCC), it seems to me that the most terrifying is the following:

Let's imagine that on Monday we shut down the world's last coal-fired power plant, on Tuesday we rebelled against oil companies and stopped their operations, on Wednesday we confiscated and banned all combustion vehicles in the world, on Thursday we had the last beef burger in history and by Friday all the energy we generate and use is clean and renewable.

All of the above would be insufficient to stop the climate crisis we are in. The reason is quite simple: there are already too many greenhouse gases in the atmosphere, and many of them, such as carbon dioxide (CO2), will be there for at least a hundred years.

What do we do as humanity in the face of this? What is our intergenerational plan? Do we give up? Do we let go of hope and give in to the vice of the multiple systems that govern us? No. We don't give up. We fight. We build better systems; we fail and improve; we do our best and we move forward, as we have done and will do together for hundreds of thousands of years.

The possibility of sequestering carbon from the atmosphere and returning it to the Earth's surface is real, and not only that, but fundamental for building a future compatible with life. And by “life”, I mean a life in harmony with the planet that houses and sustains us.

One of the manifestations of these hopeful efforts is the Carbon market. What is it? It's a place full of good intentions—and lots of questions—where organizations that pollute pay other organizations to capture an equivalent amount of pollution. This is done through the generation and sale of carbon credits. A little bit of useful information about this:

- A carbon bond is produced by an organization that captured an equivalent ton of carbon dioxide (CO2e) from the atmosphere, or prevented the emission of one ton of CO2e into the atmosphere.

- An organization that pollutes one ton of CO2e each year can buy a carbon bond each year and therefore call itself “carbon neutral”.

Where have we seen this in the market? Everywhere.

“The carbon neutrality it's going to be so normalized that you'll look at anything that's not carbon neutral and you'll say: 'Where the hell did that monster come from?'It's exciting.”

- Christiana Figueres, March 22, 2014

“By 2030, Apple's entire business will be carbon neutral, from the supply chain to the energy used in every device we make. The planet we share can't wait, and we want to be a wave in the pool of water that causes a much greater change.”

- Tim Cook, July 21, 2020

Great! 1 - 1 = 0, right? Yes and no. It's not that simple. The ingredients in the atmosphere behave more like a cake than a salad: The ingredients of the cake are homogenized, but you could remove the tomato, for example, from the salad. Since the atmosphere is a homogeneous mixture of greenhouse gases, since they are emitted, it is very difficult to extract them. It's not the same thing to emit a ton of CO2 and then capture it, than to emit nothing in the first place. That is, it will always be better not to pollute or to pollute less. On the other hand, not all carbon credits are the same. There are some very, very good ones, and there are others that are very, very bad. Unfortunately, there are duckling bonds, copy bonds, fake bonds, lie bonds and junk bonds.

In addition, there are some that are so low in price that companies have no incentive to pollute less: either way they can buy millions of cheap bonds to offset their issues. This can have the opposite effect to what we want and end up causing an increase in emissions, not a reduction.

Carbon credits must at least meet the following characteristics to be acceptable bonds:

- The project must prove to be permanent, to the maximum extent allowed within the legal limits of each country.

- The removal of carbon from the atmosphere -and its above-mentioned permanence- must be Additional; that is, that they would not have occurred in the absence of the project.

- You must take a robust carbon record, so that each one is unique and is not claimed by two different companies.

But a significant number of companies and civil society organizations demand much more from the carbon market, and they are right to do so. In addition to the above attributes, next-generation carbon credits seek:

- Offer a level of geographical traceability until we reach the exact georeferencing of the place where the corresponding carbon is stored.

- Do the same in the case of financial traceability, where it is ensured that the owners of the land receive at least 70% of what the buying company pays.

- Seeking to raise the prices of carbon credits is essential. This encourages companies to seek to reduce their emissions before paying to compensate. In addition, theLand owners will have more resources to contribute to climate action.

How can we face these challenges in an increasingly complex world? Our view is as follows:

- Carbon credits must be clearly georeferenced on a map-based web platform. This avoids double counting and allows for public scrutiny with remote sensing tools.

- All projects must have an operations monitoring dashboard. This makes visible the restoration and conservation work that results from the project and generates important ecosystem benefits.

- Financial transactions must be recorded in the blockchain in a public, transparent and unchangeable way. It should be easy for the project and its financial structure to be publicly scrutinized.

We know that we don't have all the answers, but this is a good summary of the conceptual and technical analysis we have done in Toroto and a good way of understanding the family of projects that we are working.

How do we think we can contribute to building a much stronger carbon market? Through the Metaregistro, a Mexican platform that offers robustness, transparency and traceability to the domestic market:

- Carbon credits are georeferenced, allowing purchasing companies to see exactly where the carbon they are paying for is.

- It has geographic information systems that show the hundreds of monitoring sites that we install for each project.

- It is possible to access all the data related to floristic, biodiversity, biomass and other analyses carried out as part of the project.

- The purchase of carbon credits occurs in normal transactions outside the platform, but they are recorded on the blockchain forever.

- The co-benefits and sustainable development objectives are clearly defined and measured.

Our communication channels are open to feedback. Take a look and feel free to tell us if you think there's anything we can improve. Hopefully you'll enjoy the platform!