INSUBCONTINENT EXCLUSIVE:
Veridium Labs has been trying to solve a hard problem about how to trade carbon offset credits in an open market
The trouble is that more complex credits don&t have a simple value like a stock, and there hasn&t been a formula to determine their
That has made accounting for them and selling them on open exchanges difficult or impossible
It a problem Veridium believes they can finally solve with tokens and the blockchain.
This week the company announced a partnership with IBM
to sell carbon offset tokens on the Stellar blockchain
Each company has a role here with Veridium setting up the structure and determining the value formula
Stellar acts as the digital ledger for the transactions and IBM will handle the nuts and bolts of the trade activity of buying, selling and
managing the tokens.
Todd Lemons, CEO and cofounder of Veridium Labs, which is part of a larger environmental company called EnVision
Corporation, says that even companies with the best of intentions have struggled with how to account for the complex carbon credits
There are simpler offset credits that are sold on exchanges, but ones that seek to measure the impact of a product through the entire supply
chain are much more difficult to determine
As one example, how does a company making a candy bar source its cocoa and sugar
It not always easy to determine through a web of suppliers and sellers.
Moving forward
To partly solve this problem, another Envision
company, InfiniteEARTH developed a way to account for them called the Redd+ forest carbon accounting methodology
It is widely accepted to the point that it has been incorporated in the Paris Climate Agreement, but it doesn&t provide a way to turn the
credits into what are called fungible assets, that is an easily tradable one
The problem is the value of a given credit shifts according to the overall environmental impact of producing a good and getting it to market
That value can change according to the product.
Jared Klee, blockchain manager for token initiatives at IBM, says that buying and accounting
for Redd+ credits on the company balance sheet has been a huge challenge for organizations
Today Redd+ credits are over the counter assets and there is no central exchange,& he said
That means they are essentially one-off transactions and the company is forced to hold these assets on the books with no easy way to account
That often results in a big loss, he says, and companies are looking for ways to comply in a more cost-efficient way.
Putting it
together
The three companies — Veridium, IBM and Stellar — have come together to solve this problem by creating a digital token that
acts as a layer on top of the carbon credit to give it a value and make it easier to account for
In addition, the tokens can be bought and sold on the blockchain.
The blockchain provides all the usual advantages of a decentralized record
keeping system, immutable records and encrypted transactions.
Veridium is working on the underlying formula for token valuation that
measures &carbon density per dollar times product group,& Lemons explained
&That can be coded into a token and carried out automatically,& he added
They are working with various world bodies like the United Nations and The World Resource Institute to help figure out the values for each
product group.
All of the details are still being worked out as the idea works its way through the various regulatory bodies, but the
companies hope to be making the tokens available for sale some time later this year.
Ultimately this is about finding ways to help
businesses comply with environmental initiatives and remove some of the complexity inherent in that process today
&We hope the tokens will provide less friction and a much higher adoption rate,& Lemons said.
