Launching a race to the top in voluntary carbon markets

Carbon Offset

Two Types of Transparency

We are missing a key building block in voluntary carbon markets. The way forward for these markets — everyone agrees — is more transparency. But there are at least two types of transparency we need more of.

The first is transparency about what an offset represents: how exactly did it remove or avoid carbon emissions? Everyone from offset industry veterans to John Oliver fans knows about this first type of transparency. A growing number of tools, standards and taxonomies describe the work that offsets do in the world and how good they are at doing it. Many take the form of some common questions. Is the carbon actually removed or avoided (quantification)? Did the carbon credit itself make the difference between increased emissions and business as usual (additionality)? Will the carbon stay out of the atmosphere for a long time (durability)? Does the offset improve the lives of local people, or help transition away from a fossil-fuel based economy (cobenefits)?

An entire industry’s worth of people is working on these problems and a widening circle of organizations such as the ICVCM, ICAO, and the UN Carbon Offset Platform work to separate good offsets from bad on the basis of these questions. The tools we use in web3 are a natural fit for enabling the verifiability and interoperability we need to supercharge this work. More about this in a later post.

The second type of transparency surrounds decisions to actually buy carbon offsets. Different entities buy carbon for different reasons. Some are deeply committed to environmentalism, have put in work to reduce their emissions as low as possible without offsets, and buy carbon to go the last mile in zeroing out their emissions. Others mainly want to claim that their products are net zero, and to do this as cheaply as possible. A growing handful of organizations have a theory of change that centers on scaling a certain type of technology such as durable removals or regenerative nature-based sequestration, and buy offsets in these industries to support them.

Rubber hits the road when these organizations’ ideals and levels of commitment get translated into purchasing decisions. These decisions themselves are complex. Not everyone has access to or knowledge of the same offset producers. Decision makers disagree about what makes a good offset and how different options score. Organizations’ budgets vary widely. Some have noticed that buying five times their emissions in cheap offsets is less expensive than reaching net zero through expensive options, and disagree in good faith about the real-world implications of this insight.

Taken together, these sources of uncertainty make it impossible for an outsider to judge how a decision was made. Combined with the default presumption that offsets are fungible — because ‘a ton is a ton’ — this makes it difficult for committed organizations to demonstrate their commitment.

We can’t have a race to the top unless we know what ‘up’ is. When decision makers disagree about the direction in good faith, we need systematic ways for them to show their work.

Offsetting SBS-EU Travel

When offsetting emissions for the Sustainable Blockchain Summit (SBS) EU, we struggled to solve this second transparency problem. One conventional solution would be to pass the buck by buying offsets that meet some established quality threshold (such as CORSIA or Verra’s CCB). Another solution would be to wrap our offset purchase in a narrative about a theory of change, such as the idea that the most leverage we can have is in supporting nascent companies aiming to scale durable carbon removal. We could instead privately ask a panel of experts and have them allocate our budget. While any of these methods might be a good one-off solution, none of them would bring us much closer to solving this central problem of governance transparency in carbon purchases.

Instead, we decided to set up an experiment (as described in this repo) to model a decision making process that is transparent to outside observers, so that questions regarding trade-offs can be better evaluated:

  1. We estimated the CO2e emissions in transportation to and from SBS. This used a survey from attendees, and event registrations. We then doubled this number to provide a margin of safety.
  2. Carbon offset producers submitted bids to decarbonize the summit.
  3. Based on the ICVCM Core Carbon Principles draft, we are asking for ratings of all the proposed offsets from conference attendees, speakers, and independent academic experts. These groups will also vote on the relative importance of the principles.
  4. Aggregated ratings from the three stakeholder groups will be published and used to maximize the total score of carbon offsets within a given budget. Equal weight will be given to each of the three groups. We’ll publish code that produces the final outcome.
  5. We’ll buy a set of offsets maximizing the score.

By modeling the decision making process in this publicly verifiable way, we aim to make it completely clear to an outside observer why the winning offsets were ultimately chosen. The process will disambiguate, for example, whether a set of cheaper offsets was chosen over more expensive ones because of budget or because stakeholders thought the cheaper offsets were better quality.

This should also begin to build a public resource of information about how individual offset products score on different dimensions, which can be used by individuals in the future to make their own public offset decisions. While offset ratings today largely consist of qualitative information (reports) and thresholds (either a product earned a certification or it didn’t), the externality created by this process will include both quantitative, actionable data (scores) and a persistent context for those scores (reviewer comments). When a new technology or product is introduced these scores will follow it over time, perhaps tracing concerns raised by previous reviewers which were then addressed by the project’s creators. This aims to set up a flywheel of decentralized governance information, by which transparent decision making now produces the raw material for transparent decision making later. By building our governance processes to both draw from and strengthen an informational public good, maybe we can help launch a race to the top in carbon markets.

If you were asked to participate in offset ratings, please do so!

We’d love any of your thoughts or feedback on this round of our offset experiment. If you have thoughts about what we did well or what we got wrong, please let us know at green AT filecoin DOT org.

Carbon Offset