Based biochar.
Need I say more?
In all seriousness, this is a strong opportunity for KlimaDAO to help support an increasingly in-demand carbon asset from a reputable standard. Setting up a liquidity pool on Base, a chain that is highly supportive of the RWA movement, is a big brain play that can help increase blockchain adoption within the climate finance space. LFG.
This move will enhance KlimaDAO's asset management capabilities and mitigate risks associated with third-party dependencies.
Positives of the proposal:
Potential risks and mitigation activities
In support of this proposal. This would represent the first project where KlimaDAO is directly involved as a lead financier; ergo, this is truly a 'KlimaDAO' carbon project.
Strongly in favor of this given positive market sentiment around biochar as a scaleable and cost-effective carbon removal method. As Toucan currently has bridge support for Puro this is a strong opportunity to bring more carbon on-chain and into KlimaDAO's ecosystem.
Current biochar prices for ex-post credits range from $100 - $250/tonne. As the market evolves over the course of this year it's very likely that KlimaDAO could offer these credits at a considerable spread ( > 100% margin). This would yield additional capital for forward purchases and ultimately serve to grow the on-chain carbon market.
This opportunity has been evaluated as per our Carbon Credit Evaluation and Acquisition Framework. Key areas of consideration are outlined below:
Methodology: Evaluate the robustness of the project's carbon credit generation methodology.
—> The methodology has been developed by Gold Standard and their partner network. Gold Standard is known for their rigorous methodology review process and thus we are confident in the quality and robustness of this project’s validation. You can read more about the specific methodology used here.
Certification Standard: Assess the credibility and recognition of the certification standards applied to the carbon credits.
—> The proposed certification standard, Gold Standard, is held in high regard globally.
Bridge Support: Determine compatibility with tokenization platforms that support the credits.
—> Currently, there is no bridge support for GS credits; however KlimaDAO has participated in GS working groups on tokenization, and market intelligence indicates that GS credits will have tokenization support in the coming months.
Market Demand: Analyze on-chain credit retirements from the previous year and off-chain market demand indicators. For example, the following off-chain data sources may be utilized:
—> Data taken from Allied Offsets indicates that these water filtration projects have a very high retirement/issuance ratio, which we can take as a proxy for overall demand. Specifically, for similar projects issued under Gold Standard certification, retirements often represent > 75% of issued volumes.
Country: Consider the country of origin for geopolitical risk, local regulations, and environmental impact.
—> Low risk compared to projects in politically unstable / contested regions.
—> The project has strong co-benefits and helps distribute low-carbon technology to rural areas.
Risk Assessment: Examine the project's financial health and operational risks.
—> The project is backed by a company with longstanding operations and positive reputation in the carbon market.
Spot Price: Compare the spot price with the average market price to gauge profitability.
—> The methodology utilized is relatively new and there is sparse data available. Similar projects, using far less sophisticated measures of verification, have been traded in the market between $6.30 - $5.50/tonne. However, it’s important to note that this price range represents older vintages (2016-2020) and projects that do not utilize dMRV, nor blockchain-accessible data.
The evaluation framework has been completed below. Bold items indicate where this project has been scored.
1) Company Financial Standing:
More than 12 months of financial runway: 10 points
6-12 months of financial runway: 5 points
3-6 months of financial runway: 3 points
Less than 3 months of financial runway: 1 point
2) Security of End Market:
Confirmed buyer ready with a contract: 10 points
Demand known and buyer in negotiations: 5 points
Demand uncertain but potential buyers identified: 3 points
Demand and buyers not identified: 0 points
3) Methodology On-Chain Presence:
Methodology already on-chain with high adoption OR Methodology not on-chain but with high adoption off-chain: 10 points
Methodology not on-chain but can be brought on-chain with high potential for adoption: 5 points
Methodology not on-chain and challenging to bring on-chain: 1 point
4) Trailing Six-Month Purchase Volumes:
Purchase volumes significantly greater than the purchase amount: 10 points
Purchase volumes about equal to the purchase amount: 5 points
Purchase volumes less than the purchase amount but showing growth: 3 points
Purchase volumes minimal or declining: 0 points
5) Registry Issuance:
Registry already issuing tokenized carbon with high liquidity: 10 points
Registry planning to issue tokenized carbon with confirmed demand: 5 points
Registry not yet issuing tokenized carbon and demand uncertain: 1 point
6) Qualitative Assessments:
Strong positive trend in demand for this credit type based on market publications, data, and expert consensus: 10 points
Moderate positive trend based on market data and some expert support: 5 points
Uncertain or mixed signals regarding demand trends: 2 points
Negative trend or declining demand: 0 points
7) Project Longevity and Scalability:
Proven scalability and a clear long-term operational plan: 5 points
Limited scalability but a long-term operational plan: 3 points
Unclear scalability and operational plan: 1 point
8) Co-Benefits and Sustainable Development Goals (SDGs):
Addresses more than three SDGs with significant co-benefits: 5 points
Addresses at least three SDG with clear co-benefits: 3 points
Co-benefits or SDG alignment is minimal or unclear: 1 point
9) Verification and Monitoring (preference for distributed ledger MRV - dMRV):
Verified with scalable dMRV: 5 points
Third-party verified without dMRV: 2 points
Self-reported or unverified: 0 points
10) Stakeholder Engagement and Social Impact:
Strong community support and positive social impact: 5 points
Some community engagement and social impact: 3 points
Minimal or no community engagement: 1 point
11) Additionality and Baseline Scenario:
Strong additionality with a credible baseline scenario: 5 points
Some additionality, baseline scenario is reasonable: 3 points
Additionality and baseline scenario are weak or not well-defined: 1 point
12) Project Type Diversification:
Project represents a new type for KlimaDAO's portfolio, enhancing diversification: 5 points
Project is similar to existing types but adds value or diversification: 3 points
Project is the same type as many existing holdings, offering little diversification: 1 point
13) Strategic Value:
Project adds strategic value to KlimaDAO (e.g., opens new markets, enhances reputation): 5 points
Project has some strategic value but benefits are not clearly defined: 3 points
Project has no clear strategic value to KlimaDAO: 1 point
Total points: 62
As per the Carbon Credit Evaluation and Acquisition Framework, all carbon project funding RFCs must have at least 50 points to progress to the KIP stage. As it stands, the IOT-AI-ML on Blockchain Water Filtration High Quality Project RFC can proceed to the next phase of KlimaDAO’s governance process.
This opportunity has been evaluated as per our Carbon Credit Evaluation and Acquisition Framework. Key areas of consideration are outlined below:
Methodology: Evaluate he robustness of the project's carbon credit generation methodology.
—> utilizes CDM-methodology AR-ACM0003: Afforestation and reforestation of lands except wetlands. This has widely been used by Verra and CDM previously. There has been far less controversy around this methodology compared to e.g. REDD+.
Certification Standard: Assess the credibility and recognition of the certification standards applied to the carbon credits.
→ ICR utilizes the above methodology, VVBs that have worked with GS and Verra, and includes an ISO standard for calculating carbon mitigation and removal outcomes.
Bridge Support: Determine compatibility with tokenization platforms that support the credits.
→ ICR bridge is in production with direct interfacing w/ Carbonmark
Market Demand: Analyze on-chain credit retirements from the previous year and off-chain market demand indicators. For example, the following off-chain data sources may be utilized:
—> Qualitative feedback from our carbon market advisors indicates that nature-based carbon removal projects are seeing an upswing in retirements and demand.
Country: Consider the country of origin for geopolitical risk, local regulations, and environmental impact.
—> Moderate risks in SSA offset through partnerships and local implementation partners such as Planet for the Planet and the Inter-Religious Council of Uganda.
Environmental and Social Impact Metrics: Review the project's contribution to sustainability and its social and economic co-benefits.
—> strong co-benefits have been outlined in the RFC above.
Spot Price: Compare the spot price with the average market price to gauge profitability.
—> ACR IFM: $15.80 (13.11.23); Redd+ CCB Brazil $10 (2018 vintage, 07.11.23); Other Verra afforestation: $14.50 - $17.50
The evaluation framework has been completed below. Bold items indicate where this project has been scored.
1) Company Financial Standing:
2) Security of End Market:
3) Methodology On-Chain Presence:
4) Trailing Six-Month Purchase Volumes:
5) Registry Issuance:
6) Qualitative Assessments:
7) Project Longevity and Scalability:
8) Co-Benefits and Sustainable Development Goals (SDGs):
9) Verification and Monitoring (preference for distributed ledger MRV - dMRV):
10) Stakeholder Engagement and Social Impact:
11) Additionality and Baseline Scenario:
12) Project Type Diversification:
13) Strategic Value:
Total points: 73
As per the Carbon Credit Evaluation and Acquisition Framework, all carbon project funding RFCs must have at least 50 points to progress to the KIP stage. As it stands, the GroInitiative RFC can proceed to the next phase of KlimaDAO’s governance process.
Further clarifications on the points you raised below:
When will the scoring be done? Once a new RFC is published, or after its been moved to KIP?
Scoring should occur once an RFC is posted and there is initial traction on the forum. The framework is designed to help inform the community and key stakeholders in the Klima ecosystem, and therefore it should be available for review when a KIP is live.
who will do the scoring; assume DAO contributors? But how will community feedback on the scores be captured - via Forum discussion? At RFC or KIP stage? or via some other process?
The initial state will have members of the KRC and Guarantee Committee (there will likely be overlap in these roles at first) review carbon funding proposals via this framework. The community is welcome to share their feedback, challenge scoring, etc, on the forum. The scores will be shared in the relevant funding request RFC thread.
If the Klima Foundation RFC moves to KIP - how would this slot in alongside the "Guarantee Committee"? Some sort of initial filtering happening via via this framework, before receiving oversight from the Guarantee Committee?
Members of the Guarantee committee will analyze carbon funding opportunities via this framework and share the results as per the process outlined above. The Guarantee Committee will also provide due diligence on data provided by the community and other key stakeholders (including our informal advisory board of VCM experts) when providing recommendations for RFCs to move to the KIP stage.
Great to see this proposal! The dMRV element via IoT is certainly interesting and a pioneering endeavor that can showcase the power of blockchain maintaining more frequent updates of a carbon project's integrity.
For @Aither_Carbon and our community's benefit, note that this proposal will go through our Carbon Credit Evaluation and Acquisition Framework as outlined in the recent RFC post here. The results of this evaluation will be shared in this thread.
endwar Hi Endwar,
Thank you for your question! This system is indeed designed to provide a more transparent and easily digestible analysis of carbon funding opportunities to our community and wider ecosystem. Thus, any carbon project funding proposal that makes its way to the KIP forum vote will have its scoring made public.
This proposal outlines a framework for KlimaDAO to evaluate and acquire carbon credits. It defines specific criteria and methodologies for assessment, measurement, target project identification, and the establishment of a smart contract architecture for transparent and efficient management.
To ensure KlimaDAO's investments in carbon credits are impactful, sustainable, and aligned with our strategic objectives, a clear and comprehensive framework is essential. This proposal aims to enhance decision-making processes, maximize environmental impact, and ensure financial prudence.
The framework is designed to support risk minimization and direct capital toward carbon projects that are robust, viable, and impactful. It introduces a scoring system that evaluates potential carbon credit projects across 16 dimensions, including project impact, financial stability, market demand, and alignment with KlimaDAO's mission. This system is designed to quantify the viability and sustainability of projects, thereby facilitating data-driven and risk-aware investment decisions.
The following variables will always be considered:
The following considerations must always be weighed:
Measurement:
Target Projects:
With enough data, this framework can be codified:
End-Game:
With a clear scoring mechanism, procurement decisions can be data-driven.
Weighting Criteria:
A scoring system has been developed to evaluate potential carbon credit projects. Projects must score at least 50 points to proceed past the Request for Comment (RFC) stage. Proposed weighting criteria are as follows:
1) Company Financial Standing:
2) Security of End Market:
3) Methodology On-Chain Presence:
4) Trailing Six-Month Purchase Volumes:
5) Registry Issuance:
6) Qualitative Assessments:
7) Project Longevity and Scalability:
8) Co-Benefits and Sustainable Development Goals (SDGs):
9) Verification and Monitoring (preference for distributed ledger MRV - dMRV):
10) Stakeholder Engagement and Social Impact:
11) Additionality and Baseline Scenario:
12) Project Type Diversification:
13) Strategic Value:
Projects will be evaluated across these criteria, and the total score will determine their eligibility for further consideration. A project must score a minimum of 50 points to be considered low-risk and eligible for investment.
The scoring process will be conducted by the Protocol team prior to any procurement proposal being presented for escalation to KIP by the KRC.
In the rapidly evolving carbon market, it is imperative that KlimaDAO's investments are not only environmentally and socially responsible but also financially prudent. This framework is established to enhance our decision-making processes, allowing us to identify and invest in projects that offer the highest potential for positive impact and returns.
The primary beneficiaries of this framework are the KlimaDAO community and the broader ecosystem we support. By optimizing our procurement strategy, we ensure the maximization of environmental impact and the advancement of our mission to drive climate action. Furthermore, this structured approach provides transparency and accountability, bolstering confidence among our stakeholders and partners.
We invite the KlimaDAO community to review and engage with this proposal. Your insights and votes are crucial in shaping our approach to carbon credit investments. Together, we can set a new standard for strategic, impactful, and transparent support of environmental projects within the decentralized space, driving us closer to our collective goal of a carbon-neutral world.
Thanks for submitting this comprehensive proposal Gro team!
Regarding dMRV, can you please direct us to where we can view tree planting data via the Plant for the Planet application? Is this data something that can be accessed and embedded in other applications (e.g. the Carbonmark marketplace)?
Additionally, could you provide further information around the activities / relationship between GroFoundation and the project proponents listed?
We're looking forward to learning more.
antoniusaurelius Hey ser, this initiative has already passed our snapshot vote. When feedback is largely positive usually there is a week or two discussion here at the RFC stage. This feedback is then used to craft a more refined formal Klima Improvement Proposal (KIP). You can view the KIP section of the forum here: https://forum.klimadao.finance/t/proposals
After KIPs pass a forum vote, they move to snapshot, where holders of the KLIMA token can cast their official votes to make changes to the protocol or allocate capital in some specified way.
Thank you @0xWhiteLotus and the rest of the Helios team for your inputs on this proposal. There are a few points I'd appreciate further clarity on:
1) "Helios only funds Commercial & Industrial (C&I) solar, rather than residential or utility-scale, to ensure we're working directly with well-established, long-standing commercial partners. (as opposed to individuals at residential scale and governments at utility-scale)." --> Can you provide examples of some of these clients? Are you currently exploring options outside of Zambia? Are there specific industrial sectors you are targetting?
2) Regarding yield distribution, is it correct to assume that reinvesting the yield simply results in more LP tokens being made available to the holder? How does this toggle work in practice? Would we be able to select whether our yield is reinvested in certain projects or paid out as USDC on a monthly basis? Or, are we locked into such a decision for a specific period of time?
3) Regarding the 'worst case scenario 2', you stated "Sad days, but honestly not too bad. In this case, Helios would sell off its substantial portfolio of profitable, operating solar assets to a larger asset management firm and use all the funds to repay users. " --> Is information regarding your current assets under management disclosed somewhere? If not, we can move forward with an MNDA in order to conduct our due diligence.
Looking forward to learning more. Thanks!
Thanks for submitting this comprehensive proposal. Puro.Earth has been gaining traction in the carbon removal space and its my understanding that they'll soon be supporting the tokenization of carbon credits issued via their registry.
I'm curious to know more about Glanris' traction and the types of entities (citing specific examples, if possible) that have utilized CORCs issued from your projects for carbon offsetting purposes. Additionally, re. the 40,000 carbon credits produced annually, do you antiicpate this volume to increase in the years ahead?
AndrewSaul More demand for carbon credits issued via Regen's registry.
AndrewSaul I agree 100% with you. IMO it makes sense to migrate existing tokenized carbon liquidity to Uniswap at this point.
There's a reason players like Solid World leverage Uniswap's infrastructure for their own platform.
Thank you for posting this RFC.
For the community’s benefit, I’d like to share a few activities and considerations relevant to this proposal and to the overall strategy of increasing the diversity of supply on-chain.
1) Though Verra is currently the dominant carbon standard in the VCM, their market share’s decrease is accelerating. This is primarily due to the rise of more tech-enabled standards that provide buyers with more robust information concerning the impacts and integrity of their projects. Blockchain serves a purpose here as digital Monitoring, Reporting, and Verification (dMRV) solutions can provide near real-time data concerning the status of projects as information flows in. Several registries are experimenting with this, and the J-Credit registry has shown interest in leveraging blockchain technology as a foundation for new features and the potential of programmable carbon credits.
2) J-Credits are the primary credit type used by Japanese companies, and the attitude concerning market-based climate instruments in Japan is more bullish than other markets at the moment (e.g. Europe).
3) We have an opportunity here to display leadership in this space by being the first to tokenize J-Credits, list them for sale via Carbonmark, and have Japanese entities utilize them via new payment gateways in development. This presents a powerful case study opportunity that can help rally other stakeholders in the industry. Indeed, the pieces concerning tokenization, having a partner with a J-Credit registry account, and aligning on a data standard for listing these credits on Carbonmark are already in place.
4) The total ask for this proposal ($35,000) is well within the remaining budget we previously outlined in the Carbon Project Development Initiative. Thus far we’ve deployed ~$1,000,000 of the $1,500,000 we envisioned utilizing to diversify on-chain supply and bring strategic stakeholders into our ecosystem.
For the above reasons, I am in favor of this proposal. I believe it is well aligned with our current strategic priorities and presents an exciting opportunity to work with a national carbon registry in one of the world’s largest economies.
The last 6 months have been difficult as we’ve navigated several internal challenges and worked to respond to an increasingly competitive market. Carbonmark’s core function has always been to serve as a gateway to the DCM landscape – making it easier for players both new and old to the Web3 world to access the liquidity that KlimaDAO has incentivized and facilitated on-chain.
A number of community members have highlighted the need to ensure alignment between Carbonmark and KlimaDAO. I certainly understand this sentiment, and believe the following factors will de facto ensure that these entities are aligned long into the future:
1) There is no other widely available interface for players to access KlimaDAO’s carbon liquidity. Period. While there are some players in the past that have promised such access and alignment, they’ve since turned to playing the same old games that the traditional industry has been by gating off their marketplaces and trying to own their own DCM tech stack. Long term, I don’t see these actions as viable strategies, and believe openness leveraging the network effect of countless builders together will be vastly superior. What’s the point of building a blockchain-based system if you’re not utilizing the advantages that come from the composable and interoperable nature of DeFi tooling?
2) Carbonmark’s entire raison d'être is to open demand channels to KlimaDAO’s liquidity while making it easier for supply-side participants to add their own liquidity to the Klima ecosystem. The projects have been symbiotic from the start and will continue to be because it makes clear sense. We expect KlimaDAO to continue servicing the base layer infrastructure necessary for a fully interoperable DCM, and Carbonmark will build atop those foundations and ensure the overall throughput of the system is increased.
3) Core contributors to Carbonmark’s infrastructure have heavy skin in the game to KlimaDAO’s success (including the majority of Klima’s actual founders). Our upside from the continued growth of the KlimaDAO protocol is what drives us forward to bring in new carbon supply, improve Carbonmark tooling, and build partnerships with demand-side players.
I'd also like to clarify a key point that was made by @Archimedes
“The biggest retirements and offsets that occurred in the history of the DAO came from personal connections to larger orgs, none of which came during the time of Carbonmark or from the team that currently works on it. These were all largely done in 2021 and early 2022.”
Number one, I was intimately involved with all of those deals and am still on the Carbonmark team. Number two, without any reasonable Web2 interface for corporates to connect to, of course the only large retirements that could have been made would be made by Web3 protocols at the tail end of the bull market. All of the low hanging fruit from that segment of the market were taken by mid 2022, and therefore the sales strategy was altered as per the feedback we began to receive re. integration partners (and from countless carbon market participants that we’ve spoken to over the last two years).
On the integration side, we can leverage the programmatic nature of tokenized carbon while abstracting away the Web3 pieces through a fiat-enabled partners (e.g. Provide Services). This is precisely where we’re seeing exciting partnerships develop now and where we believe the advantages of tokenized carbon shine. As I spoke about at Token2049, the next wave of adoption is only going to occur when fiat onramping/offramping and wallet abstraction are further developed (across the entire blockchain space) and this is a core objective within Carbonmark’s development over the next few months.
We have an opportunity to chart a promising path forward for the DAO by focusing our efforts on the commercialization of Carbonmark, increasing access to the DCM and KlimaDAO’s infrastructure stack, and having the organizational structure necessary to succeed in the market. Stagnation and straw man arguments are the exact opposite of what we need right now.
In summation, I trust that the community will recognize who is working tirelessly to drive innovation forward in this organization and vote in the best interests of that endeavor.
This represents the next stage of Klima protocol mechanics and will result in a healthier DCM ecosystem. I'm excited to see how this develops over time, especially as we start to intake more robust data around expected carbon tokenization from new standards and carbon registries.
One of the key innovations in the DCM is the ability to draw real-time data from what's happening on-chain. Adjusting AKR and, in the future, bonding parameters for different asset classes, will make the Klima liquidity engine more intelligent and effective in response to DCM dynamics.