KlimaDAO Forum

carbonadvisor

Hi Dimitri,

Transparency: In our onboarding procedure we engage with projects continuously. Each onboarded project is involved in its own local community, therefore, we discuss with multiple communities through our partners. We provide their social media details in the CCS for other people to follow the onboarded projects and communities.

Tracking: It's possible to track all the wallets of onboarded projects. Because all projects generate the same fungible CO2 token, it's not necessary to create project pools. The CCS criteria allows all projects to generate the same CCO2 token. This will make it easier to develop the natural disaster insurance product.

Third party validation is done through our satellite data partner. As they monitor all projects continuously. Our smart contract are developed in such a way that without their data projetcs can't claim their CCO2 tokens. Coorest doesn't control this.

Double counting is impossible in our system because the tokens only exist on-chain. Therefore, the minting and burning of the CCO2 tokens can be tracked without having to worry about bridges.

Additionality in the CCS looks at newly planted trees and not at the profitability of projects. We believe it's important to include yield-bearing trees in the standard because they provide income and food to local communities. Deforestation has often an economic root cause which we are trying to improve. Coorest thinks it's important that both environmental and economic impact go hand in hand. Therefore, farmers play an important role in our ecosystem. Want to so these farmers grow by earning more income enabling them to buy more land, plant more trees, hire more workers, and produce more food. The best weapon against deforestation, poaching, and pollution is growing local wealth.

We see that the market, mainly consumers in Europe, is becoming critical to carbon credits related to projects in South America / Amazon and forest preservation. Often these projects are opaque, untransparent and their impact questionable. We see that The Guardian article pointed made people/businesses very critical regarding kinds of projects. Coorest sees a shift to more transparent carbon offsets and people are willing to pay a premium for that. Example: https://www.sinkit.org/projects.

Coorest can guarantee the buyers of CCO2 tokens that their money is directly going to our onboarded projects and there is no possibility for double counting of these CCO2 tokens due to the implementation of the PoCC certificates.

Kind regards,
Nick

First off, thanks for this RFC - it's great to see alternative standards like Coorest putting themselves forward to be considered for inclusion in KlimaDAO's infrastructure via the public governance process.

carbonadvisor raises some important concerns about pricing, but in my view this is part of the appeal of Carbonmark's fixed pricing model as a complement to the liquid pools e.g. BCT. Would love to see multiple listings on Carbonmark for different amounts of CCO2 at different price points to get some price discovery going.

I'm curious to learn more about a few areas:
1. Can you share more details or any references about how the Floodlight oracle works? Where does the underlying data that the oracle nodes are reading come from? How many oracle nodes are there? Is it relying on a single modality of visual satellite data from a single source, or do you plan to corroborate the observed sequestration with multiple data streams?

2. Could you share any information about future methodologies Coorest may develop? Have you determined whether those additional methodologies will be issued under the same CCO2 fungible token, or under a separate token per methodology?

In particular, the current design of CCO2 is more similar to the MCO2 token (which represents a weighted basket of half a dozen roughly comparable Verra REDD projects) - as opposed to the selectable pool design of e.g. Toucan's NCT or C3's UBO.

3. Longer term, do you have any thoughts on the trade-off between using a single weighted basket token vs. a selectable pool of projects?

For context, in my view, there is an unavoidable compromise between liquidity and fungibility. That said, the project-vintage token approach combined with selectable pooling seems a more flexible system that can be adapted more easily over time compared with a single fungible token like CCO2 is at the moment.

4. Could you share any information about the size of the project pipeline? How much supply do you expect to be issued over the next, say, one year? 3 years?

MarcusAurelius

Thanks for thought about the necessity of token specification.
Tokens CO2 will have low value without defining the type of climate project, vintage .

It is necessary to release carbon tokens to the DVCM very carefully.
Companies like Particula are preparing ratings.
Project will be over if it receives several negative ratings.

Coorest
Nick, only the market will show the demand for Coorest tokens.

These tokens will compete with:

• one-bridge tokens such as BCT, NCT
• two-bridge tokens which were usued before Verra and Gold Standard adopt rules of tokenization
• tokens which will be usued after Verra and Gold Standard adopt rules of tokenization. Such Protocols as Toucan and Flowcarbon are ready to play by the new rules.
• tokens which will be usued after creating international rules for DVCM (IETA councel group on digital climate markets)

I gave you some tips from my studying of carbon market and ways of tokenization.
You can use them or not.

Thanks for the proposal @Coorest

One thing I have not seen directly answered is the amount of supply that will be available for retirements? Are we talking 10s of tonnes, 100s of tonnes, 1,000s of tonnes (or more) in the next year and beyond?

I see a couple of my concerns have been raised above from @carbonadvisor (thanks for the inputs here, Dmitri).

Re third-party verification and validation, understood that your satellite data partner monitors and enables the issuance of the CCO2 tokens. Making this process understandable to a broader audience would certainly help increase confidence in the solution and demonstrate to the market how this tech can help validate the robustness of supply within the VCM. As well as increase confidence and demand for CCO2 itself. Are there any resources you already have here to help communicate this approach, and its results, to the market?

I am not totally convinced (or perhaps I don't fully understand) the approach you are taking by using EUAs to benchmark prices. The EU ETS pricing mechanism is obviously different to that of voluntary credits. However, as Marcus points out, I do think Carbonmark can play a role in validating (or not) this approach.

@carbonadvisor raises a fair challenge around risks to the broader Digital Carbon Market if carbon credits onboarded into it are not up to the standards expected within the market. A personal opinion I hold here is that through the infrastructure KlimaDAO has built for the demand-side of the market, it can and should play a role in enabling and collaborating with novel approaches within the VCM's supply-side. Carbonmark offers a route to do this without immediately relying on our own LP capabilities. Listing CCO2 on Carbonmark can therefore be seen as providing a service to Coorest that can help them grow and validate their product, before a deeper partnership in future.

This therefore seems to be an appealing collaboration to pursue, which gets to the very reason KlimaDAO has built open-source, community-owned tech -- through decentralized governance the DAO can use opportunities like this to consider the role it wants to play in the market:

• Should it simply provide a route to market for the most established and utilized carbon credits (which is arguably what it does today);
• should it create a platform to support and accelerate leading innovators within the market (of which I perceive Coorest to be);
• or should KlimaDAO not gatekeep at all and, through demand, let the "market decide" what is good and what is not?

...This is perhaps more of a philosophical discussion point. But, to be very blunt if Carbonmark allows CCO2s to be listed, and there is no demand, KlimaDAO doesn't take much risk here (at least from a financial sense). Conversely, if its a success and CCO2s secure further validation and demand through this collab (e.g. via Provide Eco mentioned by @ryfleisch ) KlimaDAO stands to provide legitimate value to Coorest and the market more generally. Further, success here can open up routes for a deeper collaboration, whether that is bonding, forward funding as with SCB and Aither, etc.

Whether Carbonmark supports Coorest or not, I am sure they will come up against scrutiny because that is how the VCM regulates itself. Coorest are clearly serious, have extensive documentation and are gaining traction to bring them to where they are today. In addition, with the data-led approach they appear to be well-placed to deal with scrutiny by using objective data.

To summarize, from what I have read so far, I am generally "for" an experiment here with listing CCO2s on Carbonmark to help the validation of both Coorest and KlimaDAO's approach in the market.

Obviously there's more work to be done (not least understanding supply profiles, Coorest's own ambitions, etc...) before having a serious conversation around KlimaDAO bonding CCO2s, or other collaborations.

Coorest Coorest

Thanks for addressing those points, sounds like supply will be pretty constrained in the short term.

Side note: this does remind me of the whole "kilograms vs tonnes" discussion - I undestand CCO2 is denominated in kilograms instead of tonnes, honestly in a world of fungible tokens I'm not super fussed about that, though the industry standard is one tonne so in my opinion fighting against that isn't really worth the effort

Clarifying Scope

Just to make sure everyone is clear on the scope of this proposal, let's say hypothetically that this RFC advances, passes governance in a few weeks and then a month or two later the Carbonmark integration is successfully implemented:

1. How many tonnes would Coorest expect to list on Carbonmark initially?
2. Are there other significant holders of CCO2 besides Coorest itself (on behalf of your project developers) who you expect to list?

Overall I concur with 0xy_Moron that this initial proposal to include CCO2s in Carbonmark is a reasonable starting point, as there is little financial risk to the DAO. Data generated from CCO2 listings on Carbonmark would provide hard evidence of whether there is underlying demand for the credits at the listed prices.

This demand signal will also gauge the extent to which the Coorest Carbon Standard has established credibility with its innovative dMRV methodology and use of blockchain-native credit issuance.

In terms of reputational risk should issues arise with Coorest's standard or methodology, I'm not overly concerned as long as we clearly indicate in Carbonmark that CCO2 is a distinct asset from the traditional one-way bridged carbon credits originally issued under Verra's VCS standard.

This public governance process to vet the Coorest Carbon Standard and identify potential issues demonstrates KlimaDAO's commitment to credible neutrality. Even assuming all the concerns raised here are addressed, KlimaDAO will only gradually integrate this new credit issuance system into its existing infrastructure, with subsequent governance proposals required at each point of further integration (e.g. to create a liquidity pool or enable bonding).

Retirement Aggregator?

Another open question, more for the KlimaDAO community rather than Coorest, is whether this initial proposal should include integration of CCO2 into the retirement aggregator?

Considering retirement is a key function of the Carbonmark product, I'd argue yes it should, but that will also mean that the treasury would start accumulating CCO2 fees from the retirement aggregator.

Technically KIP-17 specifically delegated decisions about inclusion in the retirement aggregator to DAO contributors rather than the KIP governance process. As articulated in KIP-17, this establishes an "integration funnel" for new carbon assets with an increasing level of governance required for increasing levels of integration:

• Partnerships and Policy teams vet the new asset for sufficient liquidity, as well as the quality of the underlying offset tonnage and security of the bridging technology.
• If due diligence does not reveal any significant concerns, the asset can be added to the retirement aggregator and enabled as a reserve asset so fees count toward KLIMA backing.
• If the asset continues to perform well and gain adoption, a KIP can be put forward by the Policy team to open bonding for the asset.

Given that this is the first new carbon standard we've had initiate the governance process for inclusion, it would be worth discussing whether any retireable credit which is approved for integration with Carbonmark should also include integration in the retirement aggregator, and therefore accumulation of fees denominated in that type of credit.

In my opinion, additional fees are a pure win for the protocol in terms of treasury market value and diversity of carbon credits. Furthermore, I there should be some ability for KlimaDAO to benefit from inclusion of CCO2 in Carbonmark. A 1% convenience fee on retiring CCO2 via Carbonmark's retirement aggregator integration seems like a reasonable way to do so without imposing extractive fees on Coorest itself or the project developers in exchange for inclusion.

MarcusAurelius
As far as I understand, marketplaces are created precisely for the convenience of customers.

Therefore, I propose:

• to control the quality of carbon credits listed on Carbonmark, and not to allow all projects,

• to provide the buyer with all the necessary information about the project, To make a FAQ section about existing tokenization methods and used in particular listing.

• to provide the buyer with the opportunity to interact with a marketplace (leave feedback to the climate project and directly to the seller of carbon credits).

Marketplaces is a big business. It makes money from listing, selling fees, ads.
After approval of tokenization rules, there will be a hige increase in carbon credits marketplaces.
And the one who creates the best will win.

I think it's a good idea to implement a retirement function for all the carbon credits being listed.

Coorest right and those smart contracts are permissionless I assume?

Meaning we can build an integration into Carbonmark that allows users to buy and retire CCO2 in a single transaction by invoking the underlying CCO2 retirement function on the Coorest contracts.

We have a smart contract called the Retirement Aggregator that provides convenience functions for our products, and I'm suggesting that the initial integration of CCO2s into Carbonmark should include that functionality.

The aggregator's integration would include generating the proof/certificate and forwarding it along to the end-user who initiated the retirement

Coorest it would wrap the Carbonmark CCO2 purchase, CCO2 retirement action, and certificate issuance into a single transaction.

Since it's an aggregator, it also provides a single unified interface for interacting with multiple different carbon assets. Each carbon bridge or on-chain carbon credit issuer has its own design idiosyncrasies and function specification, so for partners building integrations with digital carbon it's a lot simpler to just integrate with the KlimaDAO RA and have a standard function to call for retirement regardless of whether the end-user is retiring e.g. BCT, MCO2 or CCO2

In the case of pooled assets like BCT, it also handles redemption of an underlying e.g. TCO2 token from the pool

Hi, thanks for your reply.
We are aware that the EU ETS is a different animal. Nonetheless, we see it as an important price indicator for the prices in the VCM. After conversations with local and national authorities, we think that in the near future carbon neutrality claims must be verifiable linked to projects with additionally (new tree planting). We expect to see some kind of merger between the compliance market and VCM after implementing CBAM. As Western/European governments are trying to force/incentivize companies to reduce emissions first and compensate for leftover emissions to become carbon neutral. But in the end, it's the market that decides the price. So far we have seen that smaller amounts of CCO2 tokens can be sold for 0.07 USD per kilo / 70 USD per tonne.
The price of EU ETS is indeed volatile, but the trend shows an increase in price over the last year. Initially, prices are set manually by us but we would like the market forces to determine the price via LPs and marketplaces. Coorest doesn't want to participate as a market maker, we just want to focus on tech development and onboarding of projects. The onboarded projects should have the biggest voice in the market, and that's what we are focussing on right now.
What I find interesting personally are the price difference between some of the carbon projects I see off-chain compared to on-chain. Sinkit sells carbon for 200 euro per tonne for example. I wonder how this works and who buys it.

MarcusAurelius
We have already developed a tool for that. People can purchase a PoCC certificate with credit card and Apply pay without having to interact with blockchain/wallets/smart contracts. When an amount is bought, CCO2 tokens are burnt and converted into a certificate and sent out as a PDF to email and link to transaction hash.

Visit our website: https://www.coorest.io and scrool down. https://www.arbon.one/checkout