What are carbon Credits?
Carbon Credit = a digital certificate that proves that a company or an environmental project (forest conservation projects, reforestation of devastated areas, clean energy, biomass, etc.) prevented the emission (pollution) of 1 ton of CO2eq (carbon dioxide) in a given year.
1. High credibility
Voluntary Carbon credits are audited by international institutions and registered with global registries (non-profit foundations that regulate the global registration of voluntary credits), following strict global protocols.
2. Eternal (until consumed)
As they were certified, and as the registries establish “buffers” or guarantee funds that act as insurance against the reversibility of carbon capture, carbon credits from the voluntary market do not expire (until they are consumed/canceled by someone or a company that wants to compensate for their GHG emission).
3. Digital and dollarized
Carbon credits are intangible assets (similar to mileage points, brands) and are therefore digital certificates. Most credits are traded and quoted in US dollars.
CO2eq = carbon dioxide. In photosynthesis, a process in which plants generate their glucose (their food), plants absorb CO2 from the air and use solar energy through their leaves to break down CO2 (one carbon atom, two oxygen) and the water absorbed by their roots and leaves (H2O) into carbon, hydrogen and oxygen atoms. Plants thus generate new glucose molecules (C6H12O6) and break them down to generate energy to grow and live. As a result of photosynthesis, plants release O2 into the air
Additionally, plants and algae in the ocean absorb CO2 during the day and release oxygen (O2).
What is the problem with deforestation and forest fires? When we burn trees or kill them by cutting them, they die/rot and release the carbon atoms from their trunks and leaves as CO2 and other GHGs are released into the atmosphere.
Furthermore, most of our global economy 0 9 works based on the generation of energy by burning fossil and non-renewable fuels (oil, coal and natural gas account for 70% of energy use in the US and China). All this burning of fossil fuels, which are essentially carbon atoms, releases.
We are providing the tools to foment a new economic system and a new model for protecting the forest. That is our goal. We believe that the solution to save the Planet and to combat climate change is in the private market. We want companies and citizens to engage and take the lead in fighting climate change.
The voluntary carbon market is a non-mature market and has not evolved much since its inception 20 years ago (according to Forest Trends volumes have remained largely unaltered in the past two decades). The catch is that global greenhouse gas emission since then has more than doubled, and out of the 55 billion CO2e tons that we emit every year, only 11 billion are compensated (retired via cancelation of voluntary carbon credits or regulated allowances). Even so, these 11 billion are a gigantic (and annual) US$ 250 billion global market. If all CO2 emissions in the world were compensated, the potential market would be of US$ 1.3 trillion yearly.
Voluntary carbon credits represent only 100 million tons annually, or a market value of US$ 300 million, or 1% of global compensation.
In spite of the fact that voluntary carbon credits are digital certificates (that certify that the emission of one ton of CO2 was avoided in the past by a company or environmental project), the security or credibility provided currently by existing exchanges is not up to the level granted by blockchain and smart contracts.
We believe there could potentially be an important decentralization, a decrease in transaction costs and an increase in the security of transactions in voluntary carbon credits through their tokenization, that is, through their programming into smart contracts that are standardized (one MCO2 Token = one carbon credit). It is somewhat shocking that, in the current times of rapid development of smart contracts and use of blockchain to improve transactability and standardization of highly complex contracts for many physical assets and transactions (real estate, metal commodities, credit rights and derivatives), carbon credits have not yet been translated into smart contracts in an effective way. It is relevant to point out that carbon credits are some of the first digital contracts ever created and have always followed global protocols and standards. In fact, carbon credits existed as digital certificates many years before the creation of Bitcoin, but still (inexplicably) have not yet been successfully tokenized.
We believe that the tokenization of carbon credits via the creation of a simple crypto asset, the MCO2 Token (“MOSS Carbon”), in which every single MCO2 Token represents one voluntary carbon credit and has its ledger publicly available for any holder to check and audit at any time, would lead to several benefits for the voluntary carbon markets:
(a). Given the simplicity of the token structure, we aim for it to become a “primitive”, which in crypto parlance is equivalent to a “building block” that other innovators can use to create other functionalities and products on their tokens, smart contracts, fintech apps, etc. We believe that the world is beginning to incorporate carbon offsetting in industrial processes, products, services, and way of life. Today, that is hard to do because of the complexity of sourcing high quality credit and retiring them in flexible quantities.
We have designed the MCO2 Token to enable innovators to add this functionality and to easily embed offsetting in their inventions simply by plugging/tapping into the MCO2 Token. We have designed the MCO2 Token structure in a functional and flexible way to facilitate this process, including for example a mechanism for retirement that smart contracts and other algorithms can simply ‘call’ to API-style mechanisms without human intervention.
Our goal is to turn the MCO2 Token into the easiest, most functional “primitive.” If eventually adopted and used by other innovators, the MCO2 Token may potentially lead to far higher consequences in terms of innovation than if it is simply bought by individuals for holding for the long term or for personal offset purposes.
We want the MCO2 Token to be more than just a product: we aim for it to be a global platform.
(b). Eliminate the unnecessary “middleman” and transaction bureaucracy. One begs to registries via email or phone calls, or manually input the transactions, a process clearly prone to human error and lacking the digital safety available at extremely low costs nowadays. We also believe that the MCO2 Token promotes decentralization of the current carbon credit global flow structure, as under the MCO2 Token system no single entity controls access to carbon credits or controls the market – as it may be the case nowadays, where registries have great power on the decision of which entities enter the market.
(c). Raise awareness of the existence of the carbon market and simplify the GHG (Greenhouse gas) compensation process. Each MCO2 Token has, in its code, a link to a page at MOSS, where the holder will have the right to “burn” the token - MOSS will “retire” (cancel) the equivalent credit that serves as ledger to the token, and that compensation will be processed in microseconds (instead of hours or many days as currently). You can check the Token Etherscan link here.
(d). Finally, as well known in the crypto world, the minting and mining of crypto assets consumes significant energy, leading to significant greenhouse gas emissions. Therefore, trading and owning crypto assets contributes to global warming.
Bitcoin’s annual electricity consumption adds up to 45.8 TWh - the corresponding annual carbon emissions range from 22.0 to 22.9 MtCO2 (or the annual emissions of small countries like Sri Lanka or Jordan). Since MOSS has the capacity to retire carbon credits, any MCO2 Token will already be minted and issued with a neutral carbon footprint. MOSS monitors the transactions and total ledger and constantly retires the necessary amount of credits to offset the GHG emissions from its tokenization activities. Via the tokenization, MOSS is not creating a new market either in primary or secondary trading, or in trading or retirement of carbon credit fractions (all these exist already). The Carbon Trade Exchange (CTX), for example, has traded since 2015 (both primary and secondary markets, fractional and whole) in VCS credits.
We believe that our tokenization process simply adds a layer of security and credibility to the underlying asset, but in any other way or interpretation, the MCO2 Token is exactly like the underlying asset (voluntary carbon credits), for which there are existing, organized exchanges for primary and secondary trading, in integer or fractional form, and which allow retirement of integer or fractional credits. Importantly, the coding of contracts into blockchain inforces intrinsic selfregulation (information technology governance, transparency, security, self-custody, etc.) and thus leads to an improvement to the quality and credibility of the carbon credit system globally.
The layer of security for the token does not unlock any value, or add liquidity, or grant further access, or increase demand for it, it simply adds security and credibility of the integrity of the transactions. The creation of the “primitive”, or “building block,” creates the foundation for extensive innovation and incorporation of offsetting into many products and services.
In order to have the highest credibility possible for its underlying ledger, MOSS carries out an extensive due diligence of the environmental projects that generate the carbon credits. MOSS only purchases credits that are certified in the most respected and credible global registries, following rigorous globally recognized certification protocols and audit procedures, and MOSS does its own legal, background and reputational checks prior to purchases. MCO2 Token buyers can rest assured that the underlying assets are among the highest quality possible in the global voluntary market.
We believe that the tokenization via ERC20 does not characterize the creation of an “investment pool” and that it does not have mutual fund capital raising characteristics, since:
(a). MOSS does not charge commissions for tokenization and therefore does not benefit economically from the process (unlike a fund administrator) and:
(b). the theoretical or supposed “quotaholders” of the “fund” (the holders of the tokens) do not benefit from improved pricing of the underlying asset, the carbon credit, when buying the token and participating in such a supposed “capital pool.” The price of the carbon token is equivalent to the price of the credit itself in the existing secondary global market.
(c). there is no financing of the credit generation or token activity, one buys existing assets in the market and “performed contracts”, and the proceeds from token or carbon credit primary sales remunerate the activity of the environmental projects. This remuneration thus comes from the sale of the project products (credits).
The tokens do not finance in any way the generation of credits (these have already been generated, tokens do not finance any project activity, there is no funding of “capex”, or capital expenditures).
(2) The primary function of tokenization is to grant further security to carbon credits, which are digital certificates already, but were never successfully coded into blockchain. The fractionalization of carbon credits already exists currently in the market – both the primary and secondary trading of fractioned credits, and their retirement in fraction format. MOSS is in no way creating any new markets via the issuance of its MCO2 Token.
The main global compensation platforms in Europe and the US, for example, currently offer sales of carbon credits that happen in fractionated form in both primary and secondary markets
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