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Carbon Markets Newest Player’s – Crypto and Blockchain

Published: December 11, 2021 by Editorial Team

Over the past year, participation in voluntary carbon markets has rapidly increased, causing rising prices and a dwindling supply of offsets. At the same time, there are several speculators, investors, and crypto groups entering the space. Most recently, Klima, a DAO (decentralized autonomous organization), has created a carbon offset token that is stored on their blockchain. Mark Cuban has notedly been purchasing $50,000 worth of offsets weekly and adding them to Klima’s DAO blockchain as Base Carbon Tonnes (BCT). A BCT is created when one ton of carbon is purchased and permanently retired from a registry and transferred to the Klima blockchain.

Klima’s website states their purpose is to accelerate the price appreciation of carbon assets. To date they have 11.6 million tonnes of CO2 from VERRA stored on their blockchain. Brokers and investors are moving carbon offsets to Klima with the goal of lowering supply on the registries to increase carbon offset prices. Investors ultimately hope to access the returns on increasing prices of BCT.

There are several reasons for cautious skepticism with this approach and blockchain in general. The first is that Klima’s current approach is open to double counting by allowing for the possibility that an actor could retire an offset from Verra, use it in their organization’s carbon accounting, and then add the offset to the Klima registry. A second major concern for all cryptocurrencies that rely on blockchain is that there is a high energy usage required to complete blockchain transaction. This is particularly true for Bitcoin, which generates the same annual emissions as New Zealand. Klima and other crypto groups that are increasing their presence in carbon markets should ensure their technologies generate no more emissions than existing carbon registries. Finally, carbon markets are complicated enough without adding another layer of accounting that further obscures the underlying carbon sequestering activity.

That said, these challenges are all seemingly surmountable and market participants are optimistically curious as well as cautious.  Hopefully, cryptocurrency innovations open new avenues for financing the development of high-quality carbon offset projects.


News + Resources

Bitcoin Energy Usage
Ryan Browne, CNBC, February 2021
Klima DAO Accumulates $100M of Carbon
Brian Newer, CoinTelegraph, November 2021
Klima Stirs Up The Carbon Market
BeZero Carbon, November 2021