Tokenizing Carbon Credits-"caveat emptor"

Sound blockchain technology but the devil is in the detail.

Blockchain, which uses Direct Ledger Technology (DLT), can be used to tokenise carbon credits. It serves as a good avenue to promote the trading of carbon credits and to open up the carbon credit markets to more participants.

DLT is an ideal delivery package for economic systems of trade that are cross-jurisdictional and have to rely on multiple third party validations to complete transactions. With a shared network in which all users validate and maintain all transaction records between parties, Blockchain technology provides transparency and trust to all users and third parties.

Accuracy of information is paramount as there can be no amendments to the information attached to carbon credits once they are a part of the blockchain, ensuring no falsification of the number of carbon credits.

Information is secured on the blockchain as it is extremely difficult to hack it and falsify information or steal carbon credits. All information on the blockchain is traceable in real time for all stakeholders to check and verify, making it a safe, reliable and efficient system. The speed of transactions executed on the blockchain is mere seconds and costs are minimal.

There are some existing tokens that have been issued for the trading of carbon credits, such as UPCO2 and MCO2 tokens. Both of these projects have a verifiable offset mechanism and are therefore structurally sound.

Not all projects are similar, although interchangeably used to describe carbon credits, both carbon credits and carbon offsets are actually two different things. Carbon Credits are tradable permits or certificate that provides the holder of the credit the right to emit one ton of carbon dioxide or an equivalent of another greenhouse gas. Carbon offset in the context of carbon credit means the retirement of the carbon credit by its owner to signify that the owner has actually offset its carbon footprint. Carbon credits which have been offset or retired does NOT exists any longer hence have ZERO value. This is because it has been struck-off or deleted from the carbon registry.