World Bank's IFC taps blockchain for carbon offsets

Verra Mobility

17/08/2022 12:00

* IFC co-launches the Carbon Opportunities Fund 
    * Platform to help sell and track credits via blockchain
    * Aims to help bring integrity to market ahead of COP27

    By Simon Jessop, Shadia Nasralla and Cole  Horton
    LONDON/NEW YORK, Aug 17 (Reuters) - International Finance
Corp (IFC), a World Bank affiliate, told Reuters on Wednesday it
is backing a blockchain-enabled platform to trade carbon
offsets, aiming to attract more support from institutional
investors for climate-friendly projects in emerging markets.
    It is a bet that using blockchain - a digital database with
information that can be publicly shared within a large
decentralised network - will boost the use of carbon offsets to
a greater extent than more traditional methods. 
    These credits are used by companies and organisations to
offset emissions when accounting for their carbon footprint.
They are backed by projects that compensate for emissions, such
as tree planting or creating solar and wind power.
    Several financial technology firms have sprung up over the
last year to turn carbon offsets into digital tokens, yet the
market has struggled to gain traction with companies and
institutional investors amid concerns about the origin and
environmental benefits of some of the traded credits. Blockchain
technology has also been criticised by environmentalists as
being too energy intensive.  urn:newsml:reuters.com:*:nL8N2R04T0
    Verra, operator of the world's largest registry of carbon
credits, has said it will not allow its retired carbon offsets
to be tokenised, and has announced a consultation https://verra.org/wp-content/uploads/2022/08/Verra-Public-Consultation-on-Crypto-Instruments-and-Tokens.pdf
 on the tokenisation of its credits.
    An IFC spokesperson told Reuters it would only source,
tokenise and sell unused credits from an established registry
that pass its additional quality checks.
    The IFC has partnered with sustainability finance company
Aspiration, blockchain technology firm Chia Network and
biodiversity investor Cultivo to launch the Carbon Opportunities
Fund, which will provide the carbon offsets on blockchain.
    Seeded with $10 million as a proof-of-concept, the fund will
buy carbon credits from projects chosen by Aspiration and
Cultivo, which will then be tokenised using technology from Chia
and tracked using the World Bank's Climate Warehouse https://www.theclimatewarehouse.org/work/climate-warehouse
 database.
    A Verra spokesperson said it was speaking with the IFC about
its role in the Climate Warehouse.
    "It's going to set a standard and a benchmarking for the
market that makes it more likely other institutional capital
will come in behind it," said Steve Glickman, president of
Aspiration's international arm.
    Glickman added that only about 10% of carbon credit projects
would currently meet the fund's criteria.
    Carbon credit markets are largely unregulated as governments
have yet to agree on trading rules. Many countries and companies
consider offsetting as a way to help meet their net-zero carbon
emissions targets by 2050, a crucial goal to mitigate the
effects of climate change. 
    Yet only a third of the 50-60 gigatonnes of emissions that
need to be slashed annually can be eliminated through renewable
energy sources and efficiency measures, according to Aspiration.
    The IFC's fund has identified 250,000-300,000 tonnes of
credits that can be bought by year-end and is conducting due
diligence on projects that represent around 1 million tonnes of
credits that could be available in the next few months.
    Bruce Keith, senior investment officer at the IFC, said the
platform's transparency would help companies and investors
better assign value to the environmental projects behind the
offsets.
    "Why is a credit from the Amazon worth more or less than a
credit from the Congo basin? Or more or less than a credit from
a forest in the southern U.S.? You (now) have the means to know
that," Keith said.

 (Reporting by Simon Jessop, Shadia Nasralla and Cole Horton;
Editing by Greg Roumeliotis and Josie Kao)
 ((simon.jessop@thomsonreuters.com; +44 (0) 207 542 5052;
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