The World Bank’s International Finance Corporation (IFC) announced that Sumitomo Corporation of Americas (SCOA) had invested in tokenized carbon credits generated through the Carbon Opportunities Fund. The Fund was created last year by IFC, the Chia blockchain network, fintech Aspiration and Cultivation, which generates regeneration projects.

Multiple World Bank climate technology initiatives

Today’s announcement brings together multiple World Bank climate initiatives. The World Bank Climate Warehouse is an umbrella project that aims to create digital infrastructures for carbon markets. One of the warehouse initiatives is the Climate Action Data Trust (CAD Trust), a data aggregator for carbon credits. It was launched last year in partnership with the International Emissions Trading Association (IETA) and the Singapore government. It uses the Chia blockchain.

With dozens of carbon registries emerging around the world, the CAD Trust is a meta-registry that stores data from multiple carbon registries. This helps address fraud where a single project might attempt to issue carbon credits across multiple registries. Therefore, the initiative improves the transparency and quality of carbon credits.

Sumitomo Carbon Credit Tokens

For Sumitomo’s investment, the underlying carbon assets were registered on the EcoRegistry carbon registry. The Carbon Opportunities Fund tokenized 10,000 tons of carbon on the Chia blockchain as Chia Asset Tokens. The Fund then sent these tokens to Sumitomo. Once the tokens are retired in Chia, EcoRegistry subsequently marks the units as retired in CAD Trust.

“The creation of digital carbon assets (‘tokens’) is an important component of the Climate Warehouse program’s effort to increase the traceability and fungibility of high-integrity carbon markets,” said Hania Dawood of the World Bank. “IFC’s successful tokenization with registries managing carbon digital assets through the full transaction cycle will enable greater liquidity and greater participation in carbon markets.”

The expansion of carbon markets is an important objective. Unfortunately, there has been some controversy surrounding registrations and tokenization. Last year, one of the largest registries, Verra, suspended tokenization. That was not because the blockchain companies were doing anything wrong per se, but rather because the process resulted in a mismatch between removing the carbon credit token and removing the credit on the ledger. That’s something the CAD Trust is trying to address.

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