The Climate Action Data Trust (CAD Trust) is a new initiative using blockchain to create a decentralized registry of carbon credits to store data from multiple major carbon registries. He plans to launch and share details in December.

The Singapore-based independent entity was founded by the International Emissions Trading Association (IETA), the World Bank, the Singapore government, other governments, and public and private sector organizations.

The CAD Trust is creating an open source metadata system and decentralizing the data using distributed ledger technology.

“Carbon markets can help countries meet their climate goals, but only if the reductions are real and credible. The Climate Action Data Trust is an important step in solving the challenge of standardizing and interconnecting carbon market registry systems,” said Chandra Shekhar Sinha, World Bank Senior Finance Specialist.

Blockchain to tackle double counting

Ledger Insights covers many different business sectors, and there are parallels with the goals of the CAD Trust and other sectors, such as trade finance, that use blockchain to prevent double counting.

A small number of companies seeking to raise funds for trade based on their invoices, shipments, or stored goods will take the documents to multiple banks and fraudulently raise funds multiple times. It’s not most companies, but it happens often nonetheless.

Also, as the number of carbon registries grows, a solar farm, forest conservation project, or some other sustainability initiative might seek to generate carbon credits with more than one registry. The solution is to aggregate data between records.

One of the challenges of sustainability is that it attracts people’s best intentions and can therefore be a magnet for charlatans seeking to exploit them. Hence the need to ensure trust, allowing funding to be channeled to projects that have a climate impact.

As the number of carbon registries grows, a single API connection to the CAD Trust will allow organizations to check the status of carbon credits across multiple registries. That means they only need to access one API instead of several.

The CAD Trust evolved from the World Bank Climate Store, an innovation project that researched, prototyped and developed digital infrastructures for carbon markets, with the CAD Trust as one of those infrastructures.

Dirk Forrister, President and CEO of IETA, said the CAD solution was based on input from a number of its members who participated in the Climate Warehouse. “They helped us identify Data Trust governance features that could accelerate work on common data specifications for future digital record systems,” Forrister said.

“The resulting Climate Action Data Trust will serve as a public good, providing an accessible, decentralized and secure digital infrastructure that can be used by all carbon market participants, acting as an invaluable tool for communication, trust and transparency. From the market”.

Tokenization of carbon credits

This particular project is about sharing log data rather than tokenization. Nonetheless, there is considerable momentum in the use of blockchain technology to tokenize, trade, and settle carbon credits. Some of the initiatives are being carried out by major companies such as Carbonplace, backed by large banks, and Singapore’s Climate Impact Exchange (CIX). But there are also several created by web3 and they have sparked considerable controversy.

In fact, one of the main registries, Verra, has suspended the tokenization of its carbon credits pending the outcome of a query. Most web3 tokens are deregistered at the time of tokenization. However, retirement means that the credit is consumed, but this is invariably not the case when it is tokenized. That means Verra’s record still needs to be updated.

This is an issue where IETA was ahead of the game.

In March, IETA published its thoughts on the matter. He sees benefits in using blockchain to monitor, report and verify climate benefits (MRV) and for credit tokenization.

However, he raised concerns about the speculative nature of some schemes. He made suggestions, including only withdrawing tokenized credits on the registry when the carbon credit tokens are burned and the underlying credit is withdrawn.