INTERVIEW: Carbon datahub CAD Trust onboarding more registries to reach critical mass

Singapore-hosted global carbon markets datahub CAD Trust is working toward connecting with the world's largest voluntary registries to consolidate the critical mass of data, Federico Di Credico, board member of CAD Trust, told S&P Global Commodity Insights.

CAD Trust was jointly launched(opens in a new tab) by the International Emission Trading Association, World Bank and the government of Singapore in December 2022 to harmonize and connect data from separate registries.

"We already have three [EcoRegistry, Global Carbon Council and BioCarbon registry], but we have others joining us to have enough of critical mass," Di Credico said in an interview in Tokyo. The company is currently onboarding Verra, the Gold Standard and the American Carbon Registry, he said.

Enabler for integrity

Once the connections are established as planned, CAD Trust will capture over 90% credits in the present-day voluntary carbon market, CAD Trust data showed. Di Credico said having the critical mass enables the company to proceed to the subsequent phase -- showcasing how different stakeholders can make use of the data.

He highlighted that CAD Trust will become "an enabler for integrity."

"CAD Trust will just reflect, in a correct and precise way, everything that's on that and everything has been verified in terms of data connection. Then, there are many service companies, maybe be rating agencies, NGOs, journalists or anybody, they can use the CAD Trust and say, 'let me dig if there's any double counting'."

Onboarding national registries

Besides voluntary registries, the company is also working on onboarding national registries, Di Credico said, adding that this is a necessary step to facilitate the implementation of Article 6.2.

Under the Paris Agreement, Article 6.2 enables countries to invest in projects overseas and use respective carbon credits to meet their climate targets.

"That [Article 6.2] would be an essential part of the CAD Trust value creation. Those initiatives have actually gone quite strong ahead. If you think about what's going on in Japan itself, or thinking about what Singapore is working on, right? So that part of the equation is very strongly committed," he said.

Besides buyer countries like Singapore and Japan, Di Credico said a lot of host countries are also interested in joining, and CAD Trust is in advanced discussions with them.

Facilitating private sector's actions

Some companies provide customers with options to offset their carbon footprints from the purchased goods or services. However, some skeptical customers have started questioning the legitimacy of such offsetting services.

Di Credico said the CAD Trust will not take the task of the private sector to convince customers about the quality of their carbon offsets. "That's what other companies should be doing. The CAD Trust is supposed to make that easier," he said.

"And obviously, we are working [toward] a user-friendly way to read those data," he said, adding that a dashboard will be delivered along with the database for stakeholders to visualize and analyze the massive data.

Crossing barriers

Governments have different mindsets in terms of how to use the carbon market and whether to disclose their data. For instance, Indonesia banned the export of voluntary carbon credits and China issued guidelines to avoid leakage of crucial market data.

"Obviously, very pragmatically, we don't necessarily need to have the entire world connected, right? As long as all the key countries which are actually using carbon markets are connected. Let's build up something progressively rather than just looking for perfection and waiting for that to happen," Di Credico said.

He said CAD Trust will only collect a "minimum common denominator" of information, focusing on data that are supposed to be publicly available. He added that, if CAD Trust manages to become the best practice, countries need to connect with it to develop a healthy Article 6.2 market.

"Otherwise, people might ask why I'm not connecting? What am I hiding? So, the success of the CAD trust will be -- when not being in the CAD Trust will be a problem. Because then people will perceive as you are less transparent."

COP expectations

"If this COP [UN Climate Change Conference] will not reach an agreement on 6.4, I'm expecting people to still maybe trying to negotiate 6.4, but definitely maybe pushing on 6.2 a bit more just to keep things moving," Di Credico said.

Different from Article 6.2 that focuses on country-level, bespoke ways of collaborations, Article 6.4 creates a centralized carbon crediting regime under UN, which is yet to be operationalized.

"6.2 is something available already, and many countries start to think how to use it and learning via the first movers. That's why we are quite confident that it would be a powerful tool."

For Article 6.2, a crucial agenda for this COP is to settle whether host countries can revoke authorization for carbon credit exports.

The revocability would create extra uncertainty for investors and project developers, Di Credico added.