In this list
Energy Transition

Climate activist group Klima DAO looks to expand types of voluntary carbon credits

Commodities | Energy | Energy Transition | Emissions | Metals | Non-Ferrous

Breaking the myths on battery recycling

Energy | Energy Transition | Natural Gas

Methane Performance Certificate Assessments

Metals | Coronavirus | Steel

16th Steel Markets Asia Conference

Energy | Energy Transition | Coal | Agriculture | Renewables

INTERVIEW: India's Adani Solar to raise output to 3.5 GW, drive up domestic content

Energy | Energy Transition | Energy Oil | Refined Products | Bunker Fuel | Petrochemicals | Shipping | Marine Fuels

Methanol’s growing traction as alternative shipping fuel

Climate activist group Klima DAO looks to expand types of voluntary carbon credits

Highlights

CDM, nature-based credits, Article 6.4 certified credits among possibilities

Tokenization of entire carbon projects also in sight

Organization recently increased rate of absorption of credits

Klima DAO, a cryptocurrency group with a focus on climate activism, is looking to expand the types of voluntary credits it is buying up from the voluntary carbon market and pulling into its treasury, a number of Klima DAO organizers said in an interview with Platts.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Until now, Klima has been absorbing carbon credits through the Base Carbon Tonne (BCT) token, a standardized contract created by tech solutions company Toucan Protocol. The BCT reflect some of the most competitively priced carbon credits available in the voluntary carbon market -- its specifications are a Verra certification and a 2008+ vintage.

Klima DAO -- or decentralized autonomous organization -- defines itself as a grouping of environmentalists, developers and entrepreneurs aiming to use the blockchain technology to accelerate the appreciation of carbon credits. On Oct. 18, it launched the KLIMA token, a cryptocurrency whose value is linked to carbon credits.

Every KLIMA token is backed by at least 1 ton of BCT credits. BCT is a standardized contract reflecting VCS-certified credits with a 2008+ vintage and which is tokenized through Toucan Protocol.

The value of the Klima token is given by the value of the Klima treasury and therefore dependent on the value of the BCT.

Moving forward, Klima DAO may create a pool of specific offsets such as for example a pool for nature-based offsets with a 2016+ vintage, Klima DAO organizers said.

A pool for carbon credits registered under the Clean Development Mechanism could also be an option, especially after the implementation on Nov. 13 of Article 6 of the Paris Agreement, which allows 2013+ CDM credits to be used by nations to reach their nationally determined contributions under the Paris Agreement. Credits certified under the yet to be implemented 6.4 mechanism envisaged by Article 6 are also in sight.

"In the future, we could have more specific types of carbon pools, and we could even move beyond carbon credits," the organizers of Klima DAO said, adding that an option could be to tokenize entire carbon projects directly.

In this case, the ownership of a carbon project would be tokenized and then tokens would be issued directly on blockchain.

While the current value of the treasury is given by the value of the BCT token, with more pool of credits in place, the value of the treasury would be given by the value of all pools, as defined by an algorithm.

Each pool of credits will have different bonding parameters, the Klima organizers said.

Bonding

Bonding is the practice used by Klima to incentivize market players to sell credits into the Klima protocol instead of in the broader voluntary carbon market.

It allows market participants to receive discounted Klima tokens in exchange for carbon credits. The bond contract requires players to deposit BCTs in return for the discounted KLIMA over a fixed vesting period.

The bonding practice is what allows Klima DAO to make a profit.

For example, supposing the value of one Klima token is $1,000, and a market participant intends to sell 200 BCTs whose value is also $1,000, when the participant sells 200 BCTs to the Klima protocol, it receives 1 Klima token in return.

However, one Klima token is by definition backed by at least 1 mt of CO2e, or one BCT. So when a player sells 200 BCT in exchange for just one Klima token, the protocol has earned 199 Klima tokens, which are then used to reward owners of Klima tokens through a practice known as staking.

Owners of Klima tokens receive interest payments every eight hours and in the shape of Klima tokens. This staking is used to incentivize owners of Klima tokens to hold on to their crypto coins and keep the value of the Klima token supported.

Market impact

The launch of Klima DAO on Oct 18 has already had an impact on the market, with the price of renewable carbon credits seeing a fast increase.

Traders keen to sell carbon credits into the Klima protocol have been on a hunt for the most competitive of the VCS certified credits accepted within Toucan's BCT standardized contract, with 2008 renewable credits representing the preferred choice.

But as supply of older renewable energy credits dried up, traders moved to the next most competitive credits, continuously pushing the floor price of VCS 2008+ carbon credits up.

In the month of November itself, the Platts Renewable Energy Current Year assessment has surged nearly 63%. It was assessed at $7.20/mtCO2e on Nov 22, up from $2.3/mtCO2e Aug. 9.

Klima DAO recently announced on the Klima Discord chat -- a chat used by owners of Klima tokens to communicate with one another -- that it has increased the overall bonding capacity, meaning how much bond the protocol is willing to take in.

According to Klima organizers talking to Platts, this expansion was originally planned to happen later, but it was brought forward after the project gained traction.

"We saw that a lot of people were joining Klima DAO very quickly. So we decided to scale the project faster than expected," one of the organizers said, adding that the decision will increase the rate at which Klima DAO can absorb carbon credits from the market.