⛔The problem

Governments around the globe have set goals to reduce carbon emissions by 55% by 2050. Since our economy has been based on fossil fuels for more than 150 years,, reduction alone will not be enough to meet these ambitious goals. Compensation for CO2 emissions will be needed to facilitate a transition to a carbon-neutral economy. At this moment, companies and other institutions with environmental and social goals (ESG) that are seeking to compensate for their CO2 emissions, have difficulties accessing carbon markets and showing transparency relating to their compensation.

The voluntary carbon markets (VCM) and its traditional product “carbon credits” have been built on legacy (financial) systems. This creates hard-to-access and untransparent carbon markets. At the same time, the VCM is facing a dilemma regarding greenwashing current CO2 emissions and the quality of the offsets available to the market. It is a fact that experts doubt if carbon offsets coming from existing forests are helping to reach the carbon emissions reduction goals. Thus, a need for a new approach and standard are needed to stimulate additional tree-planting projects.

The capturing of CO2 is being materialized by farmers and green projects but do not get the maximum financial benefits for their efforts due to middlemen. Especially farmers and green projects from developing countries have great barriers to entry for selling their captured carbon. Missed income from an ability to sell captured carbon, hampers them from the possibility to reinvest in their carbon capture projects.

Numerous parties are deploying many initiatives, but no natural synergy has been released thus far to bundle the initiatives into a sustainable CO2 platform and to bring the profits to the source of carbon-capturing value. Initiatives to tokenize CO2 have started but are facing three primary issues:

1. How to account for emission reductions and removals in a way that avoids double counting

2. How the associated carbon units currently are and will be used by corporates and retail to claim carbon neutrality, net zero, or other similar claims

3. How to ensure voluntary markets continue to drive finance to catalyze and generate additional emission reductions and removals (Verra, 2020)