• General

  • RFC: blockchain native carbon tokens - Coorest x KlimaDAO

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.

    MarcusAurelius

    We would have to consult with our onboarded projects for the amount and price for the Carbonmark listing.

    Regarding the retirement of CCO2 tokens. That needs to happen via Coorest smart contracts in order to generate the proof of carbon compensation certificates.

        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

          Yes, our smart contracts are permissionless. What convenience functions are provided by the retirement aggregator?

            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

                Coorest looks like a hugely innovative project, and bringing cutting-edge dMRV tech to a blockchain-native carbon token is a really welcome development. The partnership with Etherisc is also really promising. Clearly, if you guys get this right this will be a big step forward for the Digital Carbon Market.

                Your answers to the questions the KlimaDAO community have asked above are thoughtful and impressive. However, as others have touched on above, I don’t really see the logic behind the price being benchmarked in any way to the EU ETS. Of course, a listing on Carbonmark will allow price discovery but I would like to see the starting point more thoroughly justified than has been the case so far. As a compliance market under the control of the European Parliament, the EU ETS is a completely different animal to the VCM – the pricing of carbon in the cap-and-trade scheme is subject to forces like the end of April compliance deadline (it’s down quite a lot now, for example, early in a new year), CBAM reforms, expansion of covered industries, number of free allowances, etc. In other words, forces that are not at play in the VCM, which, moreover, has a large range of different types of credits available – therefore creating competition between standards, projects, etc. that has no equivalent in the EU ETS. So I guess my main question is: what makes the EU ETS a reasonable point of comparison for a VCM credit based on tree planting?

                Secondly, when you say the price will be EU ETS but 30% lower, how does the CCO2 price reflect changes in the EU ETS price, which is pretty volatile itself?

                To be clear, this is not to say that there isn’t room for credits in the DCM priced far above UBO, NBO, BCT, NCT - and even the blue carbon currently available on Carbonmark for $30. And I'm pleased to see you showing flexibility on pricing in your answer To MarcusAurelius above about your onboarded projects having a say. But, naturally, any proposed listing surely stands more chance of being a success if it is priced reasonably from day one. Unfortunately, I think there is a real risk that CCO2 would sit on the shelf for some time before the price needed to be lowered to find a market if the approach of 70% of EU ETS pricing is chosen.

                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

                    Coorest
                    I'm not quite convinced that this strategy of pegging CCO2's to the EU ETS makes sense. While we are indeed seeing a 'merger' between compliance and voluntary systems, the primary play thus far is a merger between carbon tax systems and the VCM (e.g. what's occurred in Colombia and South Africa). The exception to this is California's cap and trade system which also accepts voluntary offsets to a certain extent. We also have the emergence of compliance regimes that leverage voluntary offsets (CORSIA). Importantly, this latter system provides more price discovery and market freedom compared to a system like the EU ETS that is still highly influenced by government intervention.

                    That said, it sounds like Coorest is open to the project developers themselves establishing pricing for CCO2s. However, given that all CCO2s are fungible, this may lead to a situation where project developers that can establish projects at the lowest cost will be able to out compete and move a greater share of volume compared to others in Coorest's network. Does Coorest envision a future where individual project tokens are issued that could be deposited into a CCO2 pool for fungibility, but still allow clients to purchase credits from individual projects with differentiated pricing?

                    Overall, I appreciate the healthy discussion on this proposal. There are two major points that I could see moving to a more formal forum vote:
                    1) The inclusion of CCO2s on Carbonmark and their integration into KlimaDAO's RA.
                    2) The initiation of a more formal policy study on building CCO2 liquidity and how KlimaDAO may be able to assist with that (for, example, via bonding).

                    Finally, I'd like to touch on the response to Marcus' comment on the value of the RA. The RA's value is for integration partners to have one single interface / contract system to plug into, rather than X number of bridging partners and carbon credit issuers such as Coorest. Potentially, the usage of this could free up development resources from Coorest on the side of certificate generation and fiat 2 retirement.

                        Dionysus

                        HI and thanks for your feedback. We are definitely not married to pegging the CCO2 price to the EU ETS. BUt for now we think it makes sense. But when the market decides otherwise we would be the first to rethink that.
                        I like to point out an example of a municipality in The Netherlands creating their own price for "fair" price for CO2. The want to calculate the price of 875 euro per tonne. Yes, that's not a typo. See article below.
                        https://klimaatverbond.nl/actueel/provincie-utrecht-gaat-als-eerste-overheid-in-nederland-een-eerlijke-co2-prijs-hanteren/

                        In the end this carbon market is very messy and basically nobody really knows the price.

                        Coorest doesn't envision project-specific tokens. This is why we created the Coorest Carbon Standard to facilitate the minting of fungible carbon tokens. Clients can still purchase project-specific CCO2 tokens directly from a farmer or tree planting project.

                        The certificates and fiat retirement don't require us a lot of resources. All the tech is already developed and deployed and has a highly scalable design.

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