A DAO is developing infrastructure to make trading in forward carbon credits easier and less risky
Spotted: There are now a huge number of projects working to reduce or sequester carbon. However, there is not nearly enough funding available for all the projects that require it. This is proving to be a major stumbling block to developing innovative solutions to the crisis of global warming. Estonian DAO (decentralised autonomous organisation) Solid World is working to change this by using blockchain infrastructure to supply forward carbon credits.
To offset carbon use, organisations can either purchase verified carbon credits from an advanced and ongoing offset project (such as established renewable energy or methane capture, for example) or they can invest in new projects that will generate offsets over time (such as a tree-planting project that needs time for trees to mature). Forward crediting is a method of accounting that allows companies to support early-stage projects in return for future offsets. But for forward crediting to work, early-stage projects need sufficient investment.
This is where Solid World comes in. They are creating a blockchain-based tokenised infrastructure that adds liquidity to forward markets. This will be done using a variety of mechanisms, including maintaining ‘world-class’ due diligence and risk assessment of all projects; creating tokenised agreements backed by blockchain and off-chain options; forward commodity trading which guarantees there is always a buyer and a seller at market rates; and collaboration options such as a loan facility collateralised by specific carbon credits held by traders.
Solid World Chairman Stenver Jerkku explains that the DAO is entirely rethinking the mechanics of the forward carbon market. “The carbon markets are really untransparent and predatory towards new players right now. Our mission in Solid World DAO is to fix that. Using Blockchain and web3, we can realign the economic incentives for all the players in the space, bring capital efficiency to the institutions and make sure there is a liquid forward market for carbon credits.”
Blockchain is being used for an increasing number of investment vehicles – especially those involving decarbonisation projects. Recently, Springwise has covered a number of innovations in this space including a nature-backed financial instrument and a peer-to-peer renewable energy marketplace.
Written By: Lisa Magloff