In the face of an escalating environmental crisis, the search for sustainable solutions has never been more urgent. Biochar, a powerful tool in the fight against climate change and soil degradation, has emerged as a promising technology. In May 2024, the International Biochar Initiative (IBI) partnered with ECHO Asia to deliver the Biochar Academy at the Small Farm Resource Center in Chiang Mai, Thailand. This immersive, multi-day, hands-on course aimed to equip emerging and future biochar professionals with the necessary knowledge and tools to become effective advocates, educators, and practitioners in the biochar field.

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Biochar, a stable form of carbon derived from organic materials like agricultural residues, is produced through pyrolysis – a process of heating organic material in the absence of oxygen. This method not only sequesters carbon but also improves soil health, water retention, and microbial activity when used in agriculture. Its versatility extends beyond agriculture to applications in building materials, water filtration, concrete, cooking stoves, cosmetics, and energy generation, making it a key player in global sustainability efforts.

Biochar has the potential to greatly improve soil health through enhanced water retention, increased nutrient availability, and stimulation of microbial activity, which can ultimately boost crop yields and reduce reliance on chemical fertilizers, leading to cost savings over time.

Nevertheless, many biochar producers face a significant hurdle in finding suitable markets for their biochar products due to a lack of understanding among potential consumers, including farmers.

Indeed, biochar is not a one-size-fits-all solution. The type of feedstock and feedstock drying methods, production techniques, additives, and applications – both agricultural and non-agricultural – significantly impact the benefits of a particular biochar. For agricultural uses, mixing biochar with microbial material is essential to realize benefits such as water retention and improved microbial health.

In countries of the Global South like Thailand, promoting the adoption of biochar among farmers involves demonstrating its efficacy through field trials, emphasizing long-term savings on fertilizers and soil management costs, and customizing approaches to suit local soil conditions. Educating farmers about the benefits of biochar and showcasing concrete outcomes can play a key role in establishing a market for this environmentally friendly technology.

The economic landscape for farmers is complex, especially with the rise in fertilizer costs, sparked by Russia’s invasion of Ukraine in February 2022. Biochar can help reduce these costs, but it requires time and demonstration of its effectiveness to gain farmer acceptance.

More on the topic: The Remarkable Growth of the Global Biochar Market: A Beacon of Environmental Progress

The Biochar Academy, organized by the International Biochar Initiative in May 2024, aimed to equip professionals with the knowledge and tools needed to advocate for and implement biochar solutions, emphasizing its potential to address environmental challenges and promote sustainable practices.

A SWOT analysis of biochar in Southeast Asia conducted by the Academy’s participants highlighted the following key points:

• Strengths: Biochar works well with Southeast Asian soils, reduces the use of chemical fertilizers, and offers diverse feedstock options, leading to varied applications. Farmers in the region are eager for new solutions.
• Opportunities: There is abundant biomass and accessibility to small-scale biochar production. Potential energy uses, such as storing energy created during biochar production, present additional opportunities. There is also a potential market for biochar products and carbon credits, with the opportunity to scale. The carbon market industry is crucial for the development of biochar, with the material delivering over 90% of carbon credits as of 2023. This understanding is vital for developing business strategies around biochar production and leveraging carbon credits.
• Weaknesses: The benefits of biochar are poorly understood by farmers, the life cycle analysis process is complex, and there is a general lack of awareness about biochar.
• Threats: Competition with industrial agriculture, unethical and unsustainable feedstock sourcing, and a lack of transparency in biochar production and application are potential threats.

Diverse Applications of Biochar

Biochar has applications beyond agriculture, including building materials, water filtration, concrete, cooking stoves, cosmetics, and energy generation. Understanding these applications helps broaden the market and potential uses for biochar.

Participants in the Academy had diverse backgrounds and applications for biochar. Some were involved in large-scale production using coconut husks, while others were integrating biochar into existing farming practices.

Discussions in Chiang Mai highlighted the need for community input and collaboration to enhance biochar adoption. Biochar’s benefits and applications depend on various factors, including feedstock type and regional specifics. Demonstrating tangible impacts is crucial for public and institutional support.

The Academy showed local communities in Chiang Mai how to reduce agricultural waste, improve soil health, and create economic opportunities through biochar production and use. This hands-on approach underscored biochar’s potential to address environmental challenges and promote sustainable practices.

Future Outlook

Inspired by the Academy’s success, IBI plans to organize similar events in other regions, fostering a global network of biochar advocates. New research projects and practical applications are expected to emerge from collaborations initiated during the Academy.

Biochar technology plays a pivotal role in global sustainability and climate action efforts. The Biochar Academy in Chiang Mai has equipped a new generation of biochar advocates with the skills and knowledge needed to implement and promote biochar solutions worldwide. It was not just an event – it was a significant step towards a more sustainable world.

The post Biochar Technology and Its Varied Applications: Insights from the Biochar Academy appeared first on Earth.Org.

The National Plant Diagnostic Network (NPDN) is a crucial bastion in the defense of the United States’ agricultural and natural ecosystems, ensuring the health of a sector that contributes over $1 trillion to the US economy annually. As legislators review the Farm Bill, they face a critical decision: to bolster NPDN’s ability to identify and defend against biological threats or risk severe economic and environmental consequences.

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In the intricate nexus of agriculture and economics, the National Plant Diagnostic Network (NPDN) emerges as a pivotal force. The fragility of our agricultural ecosystems is evidenced by the potential havoc a single plant pathogen can wreak on food chains and industries worth billions. The interception of such threats before they inflict economic carnage is a testament to the indispensable role of early detection and diagnostics, which not only prevent staggering financial losses but also preserve the integrity of the ecosystem. A fiscal examination further substantiates the high returns on investment in plant health, where even minimal funding could save millions by averting the costly repercussions of disease outbreaks. 

The economic rationale for fully funding the NPDN is unequivocal, positioning it as not only a protector of natural heritage but a strategic defender against the perils of underfunding.

Economic Rationale and Analysis

It is conservatively estimated that NPDN’s early detection and diagnostic capabilities save tens to hundreds of millions of dollars annually by preventing economic losses in agriculture and preserving ecosystem services. 

One manuscript offers a vivid example, recounting how NPDN’s proficiency in testing plant material potentially saved over $990,000 in plant value in just one regulated pathogen case from 2019 to 2020. Before NPDN labs stepped in to assist in this kind of testing, the US Department of Agriculture’s Animal Plant Health Inspection Services (APHIS) laboratories became overwhelmed by cases like this one, resulting in retail plants being held for extended periods without approval to sell the products.

The Perils of Underfunding

Should funding for NPDN stagnate, the implications would be dire. 

The US would witness outdated diagnostic equipment failing to detect new pathogen strains, leading to unchecked spread and crop destruction. The oak and tanoak trees in California and Oregon, for example, might have succumbed to a regulated pathogen, translating into losses exceeding the market value of $50 million in timber and ecosystem services. With pests and diseases costing the global economy more than $220 billion annually, the US cannot afford to fall behind in plant health diagnostics.

Strategic Alignment with National Goals

The alignment of NPDN’s mission with national security and biosecurity goals is unequivocal. With the detection of over 1,800 pathogens in new locales throughout 2023, its role in preempting threats to the US agricultural system – worth billions in trade alone – is clear. Without the network, the cascading effect of unchecked pathogens on crop yield, trade embargoes, and food supply resilience would be profound.

Federal Funding Efficiency and Critique

The budgetary analysis reveals a stark reality: with current funding levels, NPDN operates on a mere 20% of the funds required to run state-based diagnostic labs. Static funding jeopardizes the network’s ability to respond to emerging threats, maintain critical equipment, and provide essential training. 

The network’s highly leveraged efficiency in utilizing federal dollars is unparalleled, yet the constant threat of budgetary stagnation endangers its ability to protect an agricultural export market valued at $177.3 billion in 2021.

The Imperative for Modernization

Allocating additional funds for technological advancements and first-detector training is not just recommended but also essential for maintaining pace in the ever-evolving battle against new pathogens. The absence of such investment leaves our diagnostic labs vulnerable, potentially resulting in significant financial repercussions for the industry, including yield losses, costly control measures, and market restrictions. Therefore, a strategic approach to funding is crucial for the continuous innovation required to safeguard our agricultural future.

The cost of neglecting these areas is quantifiably substantial; without dedicated investment, diagnostic labs could fall critically behind, leading to unchecked pathogen spread. This neglect could manifest in annual industry losses potentially amounting to hundreds of millions of dollars through reduced yields, increased expenditure on control measures, and imposed market restrictions. 

Thus, proactive fiscal commitment is indispensable to preclude such sizable economic deficits and to ensure ongoing innovation in protecting our agriculture.

Opportunities for Collaboration and Expansion

Current funding constraints mean missed opportunities for collaboration and expansion. The potential for a multiplicative effect of invested dollars is immense: for every dollar spent on NPDN, the return is not just in safeguarded crops but also in educational outreach and enhanced biosecurity. Investment here would pay dividends in building a more resilient agricultural sector capable of withstanding the trials of climate change and globalization.

With the NPDN requiring a fraction of the Farm Bill’s multi-billion-dollar allocation to operate at full capacity, the choice is clear. Fully funding NPDN means protecting billions in agricultural assets, securing the jobs of millions of Americans, and preserving the cornerstone of our food security. 

The cost of inaction is not just the dollars lost; it is the irreversible damage to our nation’s agricultural heritage and the future it sustains.

The post Plant Health at a Crossroads: The Economic Imperative of Fully Funding the NPDN appeared first on Earth.Org.

In the rapidly evolving world of carbon dioxide removal (CDR) technologies, biochar stands out not only for its impressive market growth but also for its significant environmental co-benefits. 

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A recent report by the International Biochar Initiative (IBI) and the US Biochar Initiative (USBI) showcases the soaring success of the global biochar market, which hit a market value milestone of $600 million in 2023, demonstrating a remarkable 91% Compound Annual Growth Rate (CAGR) production growth rate from 2021. This growth is a testament to the industry’s potential and its crucial role in combating climate change.

Biochar is one of the Intergovernmental Panel on Climate Change-endorsed (IPCC) CDR technologies, and the IPCC also notes that there is no longer an emissions budget scenario left that allows the possibility of staying on a 1.5-2C pathway without greenhouse gas emissions reduction paired with CDR.

Biochar, a stable carbon form derived from organic materials like agricultural residues and forestry trimmings, is a pivotal solution in the fight against global warming. By capturing carbon in a stable form during biochar production, and with high technology readiness levels, biochar offers accessible and durable carbon dioxide removal. 

For this and other factors, in 2023, biochar’s contribution to carbon removal was over 90% of delivered carbon credits, and recent research points to its potential to remove up to 6% of global emissions annually. This all sets the stage for reaching a gigaton of biochar carbon removal by 2040, marking a significant milestone in global efforts to mitigate climate change.

The 2023 Global Biochar Market Report, a comprehensive survey involving over 1,000 stakeholders from 101 countries, marks the first of its kind since 2015, spotlighting the biochar industry’s robust growth and the diversity within its technologies and business models. It underscores the dual challenge of cultivating high-volume, high-value markets for biochar and navigating the complexities of voluntary carbon markets, both crucial for the sector’s advancement. 

Developing these markets is vital for enhancing biochar’s carbon removal impact, ensuring its economic sustainability, and incentivizing broader adoption across various sectors. High-volume markets aim to escalate biochar production, thus boosting biochar  carbon removal, while, at the same time, high-value markets seek to make biochar production more economically viable. Voluntary carbon markets play a pivotal role, offering a mechanism for biochar projects to generate and sell carbon credits, thus providing essential funding, market validation, and incentivization for carbon removal efforts. Yet, the full potential of these markets and biochar’s role in climate change mitigation hinges on overcoming significant challenges, including the need for standardized and verified carbon sequestration claims, market acceptance, and policy integration, necessitating concerted efforts among industry stakeholders.

According to Lucia Brusegan, IBI Board of Directors Chair, biochar is a “system,” underlining the interconnectivity between market demand, carbon credits, and the physical benefits and uses of biochar. The adaptability of biochar systems to various scales of production, from large industrial plants to small kilns aiding farmers, demonstrates its versatile role in addressing climate change challenges.

The report also calls for increased engagement from all industry sectors and geographic regions, highlighting the critical role of industry organizations in supporting growth through market demand generation, policy advocacy, and access to funding. Myles Gray, Operations Director at USBI and co-author of the report, emphasizes the ongoing efforts to develop robust markets for biochar in industrial and agricultural supply chains, aiming to meet greenhouse gas (GHG) emissions targets such as those outlined by the Science Based Targets initiative (SBTi).

The global biochar market is also poised for exponential growth, projected to reach nearly $3.3 billion by 2025. This growth is not just a financial success story; it represents a beacon of hope for environmental sustainability, soil fertility, and climate resilience. The collaborative efforts of organizations like IBI and USBI, alongside their partners, are crucial in paving the way for biochar to increase its role as a key player in global CDR strategies.

The continued innovation and adoption of biochar technologies hold the promise of a healthier planet, underscoring the vital connection between economic growth and environmental stewardship.

More on the topic: Biochar: The Miracle Material For a Sustainable World

The post The Remarkable Growth of the Global Biochar Market: A Beacon of Environmental Progress appeared first on Earth.Org.

Carbon capture and storage technology (CCS) takes CO2 before it is released into the atmosphere and safely stores it. While it is not today an economically viable technology, wide-scale CCS adoption could be just over the horizon.

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Despite decades of increasingly clear warnings from scientists and corresponding commitments from governments around the world, more and more heat-trapping greenhouse gases (GHGs) including carbon dioxide (CO2) are released into the atmosphere each year. CO2 stays in the atmosphere for between 1,000 and 3,000 years. The result? Global temperatures are rising to dangerous and historically high levels. So far, the planet’s atmosphere (and oceans) have already warmed an average of 1.1C above pre-industrial levels (1850-1900). 

Experts say that global emissions must be reduced by between one to two billion tons each year to keep global temperature increase below 2C relative to pre-industrial levels – a threshold which scientists agree we need to stay below in order to avoid the worst consequences of a climate catastrophe. 

But what if we could remove excess carbon from the atmosphere? Designed to sequester carbon dioxide directly from the atmosphere, carbon capture and storage technology (CCS) could potentially be a tool to not only lower, but start to turn back the clock on humanity’s historical carbon footprint. In fact, according to the latest report by the Intergovernmental Panel on Climate Change, which is made up of the world’s top climate scientists, simply lowering our eliminating our collective GHG emissions will not suffice given the volume of carbon already our atmosphere – carbon removal is now an essential, ‘unavoidable’ mechanism to help achieve global emission targets and reduce atmospheric GHG concentrations. 

CCS involves trapping CO₂ at its emission source via a capture plant, transporting it to a storage location and then isolating it far away from the atmosphere. Currently technology captures around 85-95% of the CO2 processed in a capture plant. 

There are three main ways to capture carbon: pre-combustion, post-combustion and oxyfuel combustion. With pre-combustion carbon capture, carbon is first trapped and then removed from fossil fuels before the combustion process ends. Post-combustion is used to capture carbon from part of the flue gases from a number of existing power plants – and is the most common form of carbon capture and storage technology. Thirdly with Oxyfuel combustion, a power station burns pure oxygen. This creates flue gas consisting of CO2 and water. It is then possible to separate the CO2 by compressing and cooling the water.

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This all sounds pretty cool, right? Well don’t get too excited just yet. The economic viability of carbon capture must be considered before CCS is embraced as a panacea for the climate crisis.

The first carbon capture plant, Sleipner CO2 gas processing and capture unit, began operations in 1996 in Norway.  The Sleipner CCS plant was not by itself a profitable enterprise. Rather, Norway’s carbon emissions tax – which today stands at about USD$235 per tonne – provided an economic incentive for Sleipner to offset emissions from its gas fields. 

Today, carbon capture globally costs in the range of US$600 per ton of CO2. The world emits approximately 43.1 billion tons of carbon per year. This translates to around $25.8 trillion to sequester all of the carbon emitted each year.  Adoption of renewable sources of energy has increased at a rapid rate over the last 10 years and is the fastest-growing energy source in the United States, growing by 42% from 2010 to 2020. This was due in no small part to increased investment in renewables by the US government. In 2020 alone, US Congress passed a spending bill that allocated US$35 billion towards renewable energy sources.

Given the economics of carbon capture, it is not currently realistic to implement CCS on a wide scale. But if we look to renewables as an analog, there is reason to be hopeful. Adoption of renewable sources of energy has increased at a rapid clip over the last 10 years and renewable energy has been the fastest-growing energy source in the United States growing by 42% from 2010 to 2020, while costs of solar energy dropped 80% over that same time frame. This was due in no small part to increased investment in renewables by the United States government. In 2020 alone, US Congress passed a spending bill that allocated $35 billion towards renewable energy sources. 

In addition to receiving increased investment, the cost for renewable energy sources such as solar has fallen 80% since 2010. Similarly to how the costs of renewable energy infrastructure have plunged in recent years, we can be hopeful that the costs of carbon capture and storage technology will similarly plummet. In 2020, the market for CCS technology was valued at around $1.9 billion. The CCS market is predicted to reach $7.0 billion by 2030, which would reflect a Compound Annual Growth Rate (CAGR) of 13.8% from 2021 to 2030.

Climate technology has historically depended on the private sector to bear fruit. While government subsidies certainly helped it, electric car manufacturer Tesla would not have become a trillion dollar company without the ingenuity of entrepreneur Elon Musk and free market incentives. If critics might be tempted to consider these supports as evidence of how renewables or CCS could not survive in the “free market”, recall that the fossil fuel industry was, and continues to be one of the most heavily-subsidised industries on this planet – with global subsidies still ranging between $500B and $1T annually.

To that end, tech billionaire Bill Gates, through his investment fund Breakthrough Energy Ventures, invested in the carbon capture company Verdox technology. Verdox technology uses a new innovation that uses electrical energy to capture carbon. Today, a number of CCS enterprises are working to lower costs and increase the efficiency of CCS.

On May 11 2022, Carbon Clean, a provider of carbon capture solutions for heavy industries, raised $150 million for its CCS tech. Carbon Clean’s technology aims to be 10 times smaller than conventional point-of-source carbon capture equipment. It also could potentially cut average costs roughly in half, to around $30 per tonne.

In addition to receiving venture capital funding, CCS technology may also be the recipient of voluntary carbon market (VCM) investment via carbon credits, and taxpayer dollars. The voluntary carbon market has traditionally funded sustainable initiatives such as the expansion of renewable energy and forest conservation projects. CCS is becoming another carbon offset option. Canada’s biggest retail company, Shopify, has signed a deal to remove 10,000 tons of carbon dioxide directly from the atmosphere.

Today, there are only 24 commercial CCS plants worldwide of which 12 are in the US.  We will have to wait and see in the decades to come if carbon capture becomes an economically feasible tool in the fight against climate change and if it will become enmeshed into the fabric of human civilisation.

You might also like: World’s Largest Direct Air Capture Plant Starts Carbon Capture and Storage

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In a bid to cut emissions worldwide, countries are exploring alternatives to fossil fuels. Hydrogen could be an important source of energy in the future but nowadays, most hydrogen is still produced by using fossil fuels. Green hydrogen has a huge potential to grow if costs fall enough to make it economically viable. 

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What Is Green Hydrogen Energy? 

According to the World Economic Forum, hydrogen could be one of the key drivers in the world’s transition to clean energy.  Hydrogen, the simplest known element in the universe, may very well be an essential source of clean energy in the years ahead. But hydrogen isn’t necessarily ‘green’ – in fact, most hydrogen is produced from fossil fuels, in particular, natural gas – and hydrogen still needs the support of both the public and private sectors to realise its potential as a clean energy source.

More on the topic: What Is Green Hydrogen?

How Is Green Hydrogen Produced?

Green hydrogen currently accounts for less than 1% of total annual hydrogen production. One of the more common types of hydrogen produced right now – blue hydrogen – is sourced from natural gas. This is achieved through a process called steam methane reforming (SMR). SMR blends natural gas with hot steam, producing both hydrogen and carbon monoxide. Hydrogen from gasification costs between USD$1.31/kg and $2.06kg. Meanwhile, green hydrogen is made from renewables and relies on a process called electrolysis – the process of using electricity to split water into hydrogen and oxygen, which is healthier for the environment than blue hydron’s carbon monoxide split because natural gas production results in methane emissions from so-called fugitive leaks, which are leaks of methane from drilling, extracting and transporting blue hydrogen.

While green hydrogen could be pivotal to decarbonising heavy industry, such as ships or planes; it is not so efficient to use broadly as an energy source, while blue hydrogen has large emissions and can only be used at low percentages in the current gas system.

Green Hydrogen Energy Outlook

The issue is that similar to carbon capture and sequestration, green hydrogen is not yet at a place where it is commercially viable. Emanuele Taibi, Head of Power Sector Transformation Strategies at the International Renewable Energy Agency, noted that “renewable energy technologies [have] reached a level of maturity… today that allows competitive renewable electricity generation all around the world, [which is] a prerequisite for competitive green hydrogen energy production. Electrolysers, though, are still deployed at [a] very small scale, needing a scale-up of three orders of magnitude in the next three decades to reduce their cost threefold.”

Costs for wind and solar power have dropped precipitously over the past several years. Similarly, the cost to produce green hydrogen is expected to lower over time. Today, green hydrogen energy produced through electrolysis using renewable power costs approximately USD$10-15 per kg, depending on availability. The cost of alkaline electrolysers manufactured in North America and Europe fell 40% between 2014 and 2019. Due to the falling costs of electrolysers, BloombergNEF’s calculations suggest that renewable hydrogen could be produced for $0.7 to $1.6/kg in most parts of the world before 2050.

The public sector is certainly on the right path to catalysing the growth of green hydrogen energy. On June 7 2022, President Biden pledged to support hydrogen projects via an USD$8 billion dollar investment. The Biden administration’s support for the energy source is indicative of hydrogen’s growing momentum as a clean energy source. The Department of Energy is providing 6-7 billion dollars of funding for 61-10 hydrogen hubs across the country. But it’s not only in the US where green hydrogen is finding public support. As part of its trillion-dollar Green Deal package, Europe is aiming for 50% of all hydrogen production to derive from renewable energy. Currently, a massive 96% of the continent’s hydrogen production comes from fossil fuels. 

Green hydrogen needs continued support from governments if it is going to become a viable alternative to fossil fuels. In 2018, 99% of hydrogen was made with fossil fuels. One of the reasons for this is that hydrogen is harder to store than natural gas. Therefore, up to four times more storage infrastructure needs to be built for $637 billion by 2050 to provide the same amount of energy as provided by fossil fuels.

If the energy sectors can make hydrogen production more economical, clean hydrogen could meet up to 50% of the world’s energy needs by 2050. The future is looking promising for hydrogen as a viable energy source and, most importantly, one that can help transition our global economy off of fossil fuels.

The post Is Green Hydrogen Energy Viable and Clean? appeared first on Earth.Org.

Environmental concerns regarding blockchain and cryptocurrencies are well known and not surprising given that Bitcoin mining reportedly uses more electricity each year than all of Finland. People who might not know much about blockchain seem to have at least a vague notion that the technology is energy-hungry.  As such, reducing blockchain’s power consumption is high on the priority list of those looking to truly understand the technology. This article seeks to demystify the technology’s abilities and explore the role of tokenized carbon credits could play in combating the climate crisis. 

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Proof of Work is a cryptographic process that Bitcoin and Ethereum use to securely validate transactions This not only puts the ‘crypto’ in cryptocurrency,  but its inherent complexity also has the advantage of making it very expensive to attack a cryptocurrency’s network. Yet this Proof of Work (PoW) approach comes at a severe environmental cost due to the energy  required by dedicated and expensive hardware ‘mining rigs’ as they carry out the necessary complex calculations behind PoW. In contrast, Proof of Stake (PoS) is an alternative approach that maintains network security, but requires drastically less calculations and can be done on a desktop computer. This process – employed by networks like Polygon – can avoid the massive significant energy consumption of Proof of Work and has already managed to reduce associated greenhouse gas (GHG) emissions by over 99% in comparison.

However, looking beyond energy consumption, some climate technology entrepreneurs are asking whether there are even greater opportunities that blockchain technology can be used to support and address the climate crisis. 

One of the most promising approaches involves exploring how blockchain technology can reinvigorate the Voluntary Carbon Markets (VCM). While this market was touted as a game-changer in addressing global warming by incentivising GHG reductions, it has only recently begun to see widespread adoption as governments, individuals and corporates react to the growing evidence and urgency that our changing climate is an existential threat. 

The earliest iteration of the VCMs came about in the 1990s when over-the-counter exchanges allowed organisations and individuals to buy carbon credits outside of any formal national or international regulatory requirements. VCM trading volumes have been steadily increasing since then, and are widely expected to continue gaining in popularity thanks to investor interest in environmental, social, and governance (ESG) factors, and increased pressure on nations to begin taking action on their Paris Agreement commitments.

One of the key factors attributed to the growth in the utilisation of carbon credits has been the increased robustness and quality of the carbon credits that are issued within the markets; with a variety of quality standards, such as the Verified Carbon Standard (VCS) and the Gold Standard.  

That said, on the demand side of the market, little progress has been made in the past 20 years. The VCM is understood to have a number of shortcomings, particularly within the market’s supply chain where credits are traded between brokers, organisations, and consumers, inhibiting the market’s ability to scale. According to a 2021 McKinsey report, VCMs in their current form are “fragmented and complex with questionable credit sale practices and limited pricing data that “make it challenging for buyers to know whether they are paying a fair price, and for suppliers to manage the risk they take on….” Over-the-counter exchanges have been criticised by the US Securities and Exchange Commission (SEC) for their lack of transparency. In order for the market to scale, it is clear that the progress made on the supply side needs to be integrated with a more efficient and transparent marketplace that can further increase trust and enable scalability.

It is here where blockchain technology (and more specifically Ethereum, and Ethereum compatible blockchains) can help address market failures. With public and transparent distributed ledger systems and smart-contract enabled marketplace innovations introduced by decentralised finance (DeFi) protocols such as UniSwap and SushiSwap, new ways for transacting assets have emerged by using Automated Market Makers (AMMs). These solutions have already played a transformative role within the cryptocurrency ecosystem as new products require liquid and efficient markets to support their growth; without them, scale and adoption cannot be achieved.

In traditional finance, large hedge funds and banks can serve as ‘market makers,’ essentially providing billions of dollars in capital to serve as the liquidity to create a market and help it operate efficiently – reflecting orders from buyers and sellers alike. The blockchain solution of AMMs instead allows anyone to provide liquidity or interact with the market. AMMs incentivise liquidity providers when they offer up a pair of frequently traded tokens to a ‘pool’, which can then be used by traders to complete their orders at any time, at the market equilibrium. As these liquid pools of assets are hosted on the blockchain, all market activities past and present are transparent and traceable. 

Given the oft-cited issues of the VCM with respect to poor transparency, fragmentation, and illiquidity on the demand side, the DeFi-enabled liquidity pools can bring much-needed clarity and accessibility to carbon credits by integrating carbon credits within them. 

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The launch of KlimaDAO – which is working to realign the economic incentives of participating in the voluntary carbon market (VCM) by accelerating the shift towards net-zero global carbon emissions – and the Toucan Protocol, which is bringing carbon markets to the DeFi marketplaces, are effectively empowering individuals and organisations to contribute to a cleaner planet.  This symbolises something of a  watershed moment for the VCM, as together these entities created the infrastructure and incentives to embed the supply of carbon credits into DeFi and expose the carbon credits to the benefit of the blockchain. 

​​Since the launch, the market has seen almost 25 million carbon credits be bridged onto the blockchain through the infrastructure developed by the Toucan Protocol. With over 17.5 million of them subsequently being locked into the KlimaDAO treasury. This is made possible by the incentive mechanisms built into the KlimaDAO protocol, which rewards those who offer their tokenized credits to KlimaDAO.

However, what is perhaps of most interest to the wider VCM is that KlimaDAO uses its Klima tokens to facilitate deep and stable liquidity pools for tokenized carbon credits, such as the Toucan Protocol’s Base Carbon Tonne, or Moss’ MCO2. Through these pools, a market is created that lets any individual or institution directly access and acquire tokenized carbon credits with low slippage. This could be for those who wish to acquire credits to retire to compensate for carbon emissions or those who wish to use them for other incentives in DeFi. The creation of this market from nothing, to having liquidity consistently exceeding USD$10,000,000 worth of volume on a daily basis is no mean feat in and of itself, and it could be revolutionary.

Previously, the only way to access carbon credits was via a carbon credit broker. When purchasing credits from a broker, a buyer does not have oversight of the additional fees that have been charged on a credit, and they rely on the broker itself to offer credits that they already have or can acquire, and retire the carbon credit on their behalf. If a buyer wishes to receive more information about the market price of carbon credit, they’d need to engage with a number of brokers via phone calls and emails in order to understand which carbon credits they can procure, how many, and how much – a tiresome process for an organisation who simply wants to invest in the planet. 

With an increasing supply of carbon credits finding their home on the blockchain and accessible and efficient markets that enable them to be traded, we are now seeing a new paradigm for the Voluntary Carbon Market emerges. AMMs themselves, and ‘tokenized carbon credits’ are novel concepts. With KlimaDAO providing liquidity within a transparent marketplace, it unlocks growth and investment into the planet for anybody to participate within. 

Although significant work has been done and demonstrably positive results have already been achieved, there will be much attention on how these novel markets can scale up their impact and remain relevant over the long term. For example, currently, a significant amount of the available tokenized carbon credits focussed on carbon mitigation projects – of which there are many still available within the system. There is, however, a growing interest in carbon removal technologies, but with very limited liquidity available even within the legacy VCM, it will be interesting to see how if and how this new blockchain-powered market, which is ultimately predicated on ‘deep liquidity and scale, can provide these increasingly wanted removal carbon credits to its users. Only time will tell.

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