A carbon offset credit represents one metric tonne of reduction in CO2 emissions. Although there are compliance credits mandated by national or international official authorities, there are also voluntary carbon markets where businesses can purchase credits. Companies can then claim the underlying emission reductions and progress toward their climate change goals.
Conventionally, voluntary carbon credits are traded off-chain. But there’re two major problems with this approach. First, it’s challenging to scale, and second, although carbon offsets are validated by certification bodies, there’re high gaps in quality among different offsetting projects.
Blockchain technology can assist in solving both problems through open platforms that speed up the funding of carbon offsetting projects. Furthermore, thanks to its transparency, it makes projects traceable and trackable.
There’re many blockchain projects that strive to improve the effectiveness of voluntary carbon credit markets. While some companies like FlowCarbon issue their own fungible tokens that are representatives of one metric tonne of CO2 emission reduction, others place NFTs at the forefront. In this article, we’ll focus on the latter.
Mint NFTs as carbon credits
MintCarbon, backed by the technology company Deepmarkit, is a platform that allows carbon offset project owners to mint their offsets into NFTs. The platform ascertains that a certification entity verifies all listed carbon credits so that the possibility of dual listing of the same carbon credit, which is another common problem of the traditional carbon markets, is eliminated. The resulting NFTs may include a variety of project details like visual data, prices, and statistics.
The platform takes up to a 10% minting fee of the value of the credits. Carbon credit owners can list their NFTs for resale on any decentralized NFT marketplaces like OpenSea and Rarible. When an NFT is resold, the transaction fee is split between MintCarbon and the NFT credit holder.
The platform is built on the Polygon blockchain, and the NFTs are in ERC-1155 standard. Because these standards can simultaneously represent multiple token types, both fungible and non-fungible, carbon offset project developers can fractionalize their NFTs to represent single CO2 units.
Amazon NFTs from Moss
Moss, a significant player in the blockchain carbon market, has a different approach. The company distributes encrypted digital ownership certificates as NFTs that represent land shares of its Amazon rainforest preservation project. In other words, NFTs are directly linked to a specific high-quality carbon offset initiative.
Moss built a 30-year forest protection fund for this purpose. The sales of the NFTs will support 20% of the total fund by covering expenses associated with monitoring deforestation, like patrolling and satellite imagery. The company partnered with Descartes Labs to enable efficient monitoring.
The buyers of Amazon NFTs acquire the right of the actual land by pledging to preserve it. Put another way; NFT land owners aren’t permitted in any way to defrost their lands.
To date, three NFT land sales have been held that represent the parcels in the Blue River Forest project. Each series included 50 NFTs, corresponding to 150 hectares of preservation area totally.
CarbonABLE is another blockchain company that links NFTs with offsetting projects based on real natural resources. However, in this instance, NFT buyers don’t own the parcels of forests but rather a proof of participation in a nature-based carbon offset project. As in the case of Moss, NFT owners will be able to monitor the process of on-field activities thanks to the incorporation of satellite imagery technology.
For a carbon offset project to be approved by CarbonABLE, it must meet at least three of the 17 Sustainability Development Goals. CarbonABLE’s objective is to identify and finance such decarbonization projects through NFT sales while at the same time rewarding NFT purchasers with high staking yields.