Funding Today the Forests of Tomorrow with Tokenized Carbon Credits
GreenTrade Connects Project Developers and Corporate Buyers in a Digital Marketplace; First Nature-Based Tokens Launched in Cooperation with Wilderness International in Peru.
If we are to limit global warming to below 2°C and avoid a climate disaster, CO2 emissions need to be cut by half by 2030. Natural Climate Solution projects that avoid new emissions or remove carbon from the atmosphere play a crucial role in this endeavour. It is estimated that the conservation and restoration of natural ecosystems could deliver one third of the necessary reductions (1) if — and that’s a big if — these projects receive enough funding.
Here’s the problem. On the one hand, project developers face high up-front costs to maintain or expand forests that will only generate carbon credits in the future. On the other hand, companies committed to reducing their environmental impact are competing for a fast-dropping inventory of already existing credits. As of today, more than 700 out of the 2,000 largest corporations have already announced their net zero plans (2). That means that a growing number of buyers are chasing fewer — and more expensive — high-quality credits.
At GreenTrade we offer a marketplace solution to bridge both sides. At its core are Emission Reductions Payment Agreements (ERPAs), a well-known financing mechanism that incentivises climate-protection initiatives. In these forward contracts, one party is obliged to deliver verified carbon credits to another. Payments are triggered by the achievement of specific targets agreed upon in advance. Over the last two decades, the World Bank has made $2 billion in emission reduction payments through more than 200 ERPAs in 65 countries (3). This is an important mechanism, but one limited to few investors with particular knowledge in the field.
Our goal at GreenTrade is to make carbon projects accessible to companies anywhere and, most importantly, to turn those forward contracts into liquid investments right now. Our work starts with sourcing the best ecosystem carbon projects from around the world (learn more about our first partner below). Similar projects are bundled into categories depending on their nature and location. These pools of comparable projects are fractionalized into non-fungible tokens (NFTs), which are made available for trading in our platform. The integrity and traceability of those digital assets are guaranteed by blockchain technology.
We believe that technology will play an important role in the development of an efficient voluntary carbon market. The need for carbon credits is expected to increase by a factor of 15 by 2030 (4) and current market design is simply unable to overcome the growing imbalance between supply and demand. By leveraging the blockchain, we enable companies less familiar with the procurement and negotiation process of carbon credits to access and secure high-quality credits, helping them fulfil their net zero commitments and mitigating the risk of future price increases. That surge in demand, in turn, empowers developers with quicker access to capital to fund new projects. Our mission is to enable an additional supply of 1 billion carbon credits by 2030.
High-quality carbon projects. An essential part of our offer consists of curating the most impactful ecosystem carbon projects from around the world and presenting corporate buyers only the highest quality credits. We decided to start with the preservation of forests, a specially powerful lever within this climate emergency. Forest loss is currently responsible for 20% of total global greenhouse gas emissions (5). When large areas are burned down, more carbon is released into the atmosphere than we could realistically re-capture in the short term. As a matter of comparison, tree-planting projects take 25 years to become climate-positive — whereas ancient forests offer a much more efficient absorption and storage system, not to mention their role in wildlife and biodiversity conservation as well as climate stabilisation.
Our partner Wilderness International is a Peruvian-Canadian-German non-profit currently responsible for the conservation of 2,500 hectares of endangered rainforest. Its new El Gato project, based in the region of Madre de Dios in Peru, is now part of our platform. The project consists of buying large pieces of undisturbed Amazonian rainforest which are catalogued in the official land registry, offering the necessary legal safeguard. Wilderness International commits not only to keeping the forest standing permanently but it also promotes educational programs, scientific research and ecotourism. “We have partnerships with different research institutes both in Peru and in Europe that help us measure and control the ecological integrity of our projects”, says Kai Andersch, CEO at Wilderness International.
“One of the reasons why we decided to work with Wilderness International was their use of state-of-the-art tools to measure, report and verify the generation of carbon credits. They provide us with several data points — from RGB and Lidar drone imagery and vegetation and Fauna biodiversity data — which we add to the blockchain records, so that buyers get updated on the development of projects”, says Frederick Leuschner, co-Founder and CEO at GreenTrade.
It is estimated that El Gato will avoid the emission of 260,000 tonnes of greenhouse gas. The resulting carbon credits will be certified by Verra, the leading carbon accounting organisation. The project is expected to kick-off by later this year and will also offer what is commonly referred in the field as co-benefits or positive externalities, namely the protection of amazonian wildlife and biodiversity as well as the creation of jobs in the ecotourism sector. Tokens will start being sold in September and more information is available on: https://greentrade.tech.
