Boosting integrity in carbon markets through real-time, open-source data

Global carbon markets, when operating with high integrity, have the potential to channel capital for impactful climate action and low-carbon infrastructure.

Today’s carbon markets, however, are complex and fragmented. Registries operate in siloes and there is no vision yet available of how they interact and connect. The absence of centralized registries between voluntary and compliance markets creates a significant hurdle in achieving optimal carbon credit transparency within the market. With these markets poised for growth, we collectively recognize the need to drive towards greater transparency and accountability.

As in any market, data has a crucial role to play here. There is global consensus on the need for a common carbon credit data infrastructure, or standardized protocol to act as a bridge and accelerate the collection, structuring and real-time display of climate and carbon market data. This common data foundation would become a reliable source for the entire carbon market (rating agencies, due diligence, exchanges, traders, analytics firms, certification agencies, compliance checking firms), but also governments and companies that are so critical in the supply and demand aspects of these important markets.

At the Climate Action Data Trust, we leverage state-of-the-art distributed ledger technology – specifically, blockchain technology – to establish such a decentralized metadata platform to connect, aggregate and harmonize carbon credit data. In doing so, we create a decentralized record of carbon market activity, which has several benefits.

Maximizing carbon credit transparency and efficiency

Transparency and accountability are vital for an efficient carbon market, driving climate action in the public and private sectors. CAD Trust’s digital infrastructure collects real-time carbon project data from multiple sources, enabling transparent market operations such as transactions, benchmarking, analysis and compliance reporting. Stakeholders and investors need 360-degree visibility of projects and can harness the data displayed on our platform.  Clear, credible and real-time, this data informs market analytics and forecasts, streamlining decision-making processes and fast-tracking investments.

Minimizing the risk of double counting

At the moment, each buyer must manually check whether a similar product has been registered in another registry. This is a time-intensive process with a significant margin for error. Blockchain technology plays a critical role here, providing the immutability and auditability of all registry activity. What is more, by connecting disparate registries across the world and thus establishing a peer-to-peer network for sharing data, our platform provides critical data that can help identify “double counting”, when more than one entity claims the same emissions reductions. This ultimately enables transparent accounting of carbon and strengthens the implementation of the nationally determined contributions (NDCs) that sit at the Paris Agreement.

Supporting reporting-compliance requirements

Blockchain technology provides accountability to address the increasing diversity of Monitoring, Reporting and Verification (MRV) systems used to measure GHG emissions reductions. This also helps account for the diversity of regulations, climate assets, and values of mitigation outcomes, within and across jurisdictions.

Article 6 implementation

As a facilitator of Article 6 cooperative approaches, the CAD Trust aims to support internationally compatible national registry systems through providing a common data infrastructure that they may connect to. As Parties begin to report activities to CAD Trust using a single data standard (including ways to track project activities, authorizations, corresponding adjustments, and other developments), this will enable connectivity and conflict resolution between national and independent standard registries. This can help to support international reporting under the Paris Agreement. The consensus data model developed and adopted by the Parties participating in the CAD Trust may either support the development of Article 6.2 and 6.4 reporting requirements or be adapted to what is agreed. CAD Trust may also support future extensions to enable Parties to transmit data submitted to the CAD Trust to the Article 6 database or UN’s Centralized Accounting and Reporting Platform (CARP) using Application Programming Interfaces (APIs) so that Parties who use the CAD Trust need not submit the data twice.

Collecting real-time carbon project data from multiple sources through the decentralized digital infrastructure of the Climate Action Data Trust will help facilitate key services helping the market to function transparently. We aim to help all interested parties to harness this data to further boost transparency, collaboration, and innovation, which will help ensure confidence in carbon markets.

Dinesh Babu, Executive Director, Climate Action Data Trust