Looking over the horizon
Pursuant to KlimaDAO’s mission of rapidly scaling up the deployment of capital toward high-impact sustainability projects, we propose the utilization of a set amount of treasury funds toward financing the development of new carbon projects. This effort strongly aligns with the coalition-building necessary to accelerate the on-chain carbon ecosystem’s development and showcase the collaborative potential of the ReFi space.
Bootstrapping new carbon pools with partners
Discussions over the past two months with key partners in the ReFi space have yielded a number of exciting developments toward creating new carbon pools on-chain. At this time, three pool types have been identified as likely candidates for deployment in the coming months:
Nature-based carbon removal - C3’s ARBOL pool
Blue carbon - C3’s BLUC pool
Energy efficiency and impact - C3’s EEIMP pool
Note, the final deployment timeline and inclusion criteria of these pools remains contingent on which registries have published tokenization frameworks in the next 2-4 months.
Proposal to fund a project pipeline
In order to maximize the impact and credit diversity of the KlimaDAO treasury and catalyze future growth in the on-chain carbon ecosystem, the DAO should allocate a portion of the treasury’s reserves to be deployed toward carbon project development initiatives. Note that discussions are ongoing regarding potential structures for a separate budget with a wider sustainability mandate beyond traditional carbon credit projects.
Proposed capital allocation
—From USDC currently available in the treasury: allocate $1.5 million toward this forward carbon credit project development effort.
—Some partners have expressed that they are open to accepting BCT in exchange for alternative credits from carbon credit projects in development. In this case, the dollar value of the BCT at the time that BCT is committed to the project is simply subtracted from the $1.5 million allocation above.
Key partners in this endeavor:
Aither is an emission trading firm with over 12 years in carbon trading. Aither has independently traded over 1 billion units of CO2 worldwide to support global companies in the compliance market (EU, CH, and UK schemes) and the voluntary market. Aither guides private and public companies toward carbon neutrality by offering tailor-made projects that result in high-quality carbon offsetting.
C3 works to catalyze the carbon market’s expansion, increase bandwidth between the legacy and DeFi carbon markets, and develop innovative means for delivering finance toward high-impact carbon mitigation and removal projects.
SCB Group is a world leading low carbon commodity group relentlessly pursuing a low carbon future. They work with the whole value chain of the voluntary carbon space, helping to fund projects in least developed and developing countries. Additionally, StarCB also offers portfolio management services and voluntary carbon product sourcing for end users and investors.
Solid World DAO de-risks carbon investments and makes them liquid. The added safety of investing in the carbon space will result in significantly more capital deployed toward carbon projects. They've partnered with the top companies in ReFi, such as SCB, Vlinder, Emsurge, Arbol, SustGlobal, Toucan, OFP and others.
Vlinder is a blue carbon specialist and digital carbon market company. A team of climate tech pioneers, risk managers and environmentalists, engineers and data scientists of 10 nationalities, we plant mangroves and accelerate climate projects with early-stage funding and innovation. Our mission is to empower people to make a planetary impact. Our "North star" goal is to restore 1 million hectares of degraded mangrove forests, recovering what was lost in the last 3 decades.
Driving value into the KlimaDAO ecosystem
New commodified carbon pools composed of projects with methodologies which currently have low representation on-chain will provide additional client choice and further position the on-chain carbon market as the premier access point for a wide variety of carbon projects with low slippage and minimal transaction fees.
In particular, the trend toward supporting projects with strong social co-benefits stands to grow, as does that toward supporting nature-based carbon removal projects. KlimaDAO’s leadership in helping bootstrap pools that promote both of the aforementioned values will further catalyze the innovation and positive impact of the on-chain carbon market. This is critical for accelerating the adoption of tokenized carbon for demand-side VCM participants and ultimately scaling climate action.
The partners we have outlined above each employ due-diligence measures to ensure carbon project success. Nonetheless, carbon project development is never risk free. We therefore would employ the following measures to lessen treasury risk and ensure a positive return in terms of carbon tonnage:
-Supporting pre-project financing and forward carbon only when projects have already been registered according to an ICROA-endorsed certification standard.
-Supporting projects which have already completed validation by a verification and validation body (VVB) and are expected to have credits issued within 365 days of capital deployment.
-Leveraging the support of our growing advisory board of VCM experts to weigh in on project development opportunities.
-Engaging in contractual arrangements that provide guaranteed delivery of like-kind-credits should a delivery shortfall occur with a specific project.
Project & Partner Identification
Initially, partners and projects will be identified by the DAO contributors on the Partnerships and Policy Teams. We will move to progressively decentralize this process and welcome the community’s input on how to best structure the authority to allocate funds from the proposed carbon project development budget.
It’s important that the individuals making decisions about which projects to allocate funding to understand the risks associated with carbon credit project implementation, and are prepared to research emerging methodologies and conduct due diligence on each project under consideration. It’s also critical that those individuals are aligned with the long-term mission of KlimaDAO.
In the future, a formal public process can be implemented for project developers to apply for funding consideration. In the interim, RFCs on the KlimaDAO governance (like this one) can be used. We expect to gain valuable information from this first funding phase which will help inform and structure a subsequent application process.
Solving Crypto’s Image Problem and Establishing ReFi as the Premier Real-World Crypto Use Case
One point of agreement for both crypto supporters and critics is the reality that crypto has a negative public image. From the collapse of the Terra ecosystem, freezing of withdrawals by centralized operations like Celsius - not to mention stories of hacks, thefts and rug pulls and the allegation that crypto supports North Korean money laundering and Russian oligarch sanction avoidance - the past six months have not just been brutal for the crypto markets, but also for crypto’s public image. These events have only further solidified the views of crypto skeptics, with economist and New York Times columnist Paul Krugman in early June perhaps best summarizing the overarching critique of crypto as an asset class that “has yet to find any significant real-world uses” and "lacks any real value — that it is a house built not on sand, but on nothing at all.”
However, while Krugman and other critics base their skepticism on the volatility of individual crypto tokens and marketing tactics of various entities, they have overlooked a number of the promising and proven use-cases for crypto that have been demonstrated over the past years. Among the most compelling use cases is the tokenization of carbon credits - enabling credits to be traded on a transparent, efficient blockchain-based market exchange - transforming one of the most promising tools available to combat climate change. Indeed, tokenization has opened a highly scalable and transparent pathway for capital to fund sustainability projects which mitigate and remove carbon from the atmosphere. It would thus not be an exaggeration to view the work done by the growing number of entities seeking to bring the carbon markets onto blockchain - collectively known as the “ReFi” community - as among the most impactful and promising developments in the global effort to reduce carbon emissions and save the planet.
The disconnect between the proven and demonstrable success of blockchain and crypto as a key part of the fight against climate change and the views of critics such as Paul Krugman are the result of a void that has been created in the public messaging and communication strategy for crypto writ-large. The vast majority of talent and energy in crypto is, rightfully so, dedicated toward building and innovating, not communications and politics. However, now that regulators and policymakers are paying closer attention to crypto than ever before, it is imperative that immediate action be taken to actively address crypto’s image problem - and no one is better positioned to do this than the ReFi community.
KlimaDAO and its partners are operating at a critical juncture in the history of blockchain and the VCM. Now, more than ever, it is necessary to show the collaborative power of our efforts in leveraging blockchain technology for the benefit of society and the planet.