Bruce Muirhead, Author at DIGTL

CRBN, the world's most impactful carbon avoidance offset program, is changing the voluntary carbon market. A unique voluntary carbon offset backed by oil and gas, CRBN guarantees that 100% of the underlying resources remain where they belong: in the ground. CRBN can make that promise because of the nature of its unique reserves (which are literally frozen in sand) and by leveraging cutting-edge blockchain technology to ensure transparency and accountability, making the asset available to everyone, everywhere. In this article, we'll examine the defining features of CRBN and explore its position within the current carbon market. We'll start with an overview of how carbon credits work, followed by a discussion of the current state of the market and the challenges it faces. Finally, we'll consider CRBN's position and how it will benefit from the next wave of exponential growth in this sector. What are Carbon Credits? Today, market participants mainly use carbon credits to either offset expected emissions or as a speculative investment. Each credit is like a pre-paid ticket that allows the holder to emit a certain amount of greenhouse gas in exchange. Thus, holders who need to participate in activities that may have an unavoidable environmental impact will use carbon credits to "offset" those emissions, leading to a carbon-neutral outcome. However, buyers can also use carbon credits to speculate on the future value of carbon and the value of the underlying projects issuing the credits. And while the carbon credit markets have the potential to grow exponentially over the 2020s1, participating in them is not just an investment, but an opportunity to join in a global movement to protect our planet for future generations to come. How Do Voluntary Carbon Credits Work? Businesses and individuals can use voluntary offsets to mitigate their impact on the environment. Companies are also motivated to participate because their involvement is seen as a model for environmental stewardship. Each carbon credit represents the removal or avoidance of 1TN of carbon dioxide emissions from the atmosphere and is usually generated by projects that reduce emissions (renewable energy or energy efficiency). While some projects are currently pursuing methods to remove carbon dioxide from the atmosphere (reforestation or afforestation projects), the technology required to have a meaningful impact using removal methods does not yet exist. Voluntary carbon credits provide a flexible mechanism for individuals, companies, and governments to offset their carbon emissions. By purchasing these credits, they can effectively neutralize part of their carbon footprint. This is particularly useful for entities that cannot easily reduce their emissions directly, either due to technical constraints or high costs. Voluntary carbon credits also stimulate investment in low-carbon technologies and practices. By creating a market for carbon reductions, they provide a financial incentive for developers to pursue other means of monetizing their assets, driving innovation, and accelerating the transition to a low-carbon economy. However, it’s important to remember that buying carbon credits is not a complete substitute for reducing one’s emissions. How Can I Personally Reduce Emissions? Buying voluntary carbon credits can help balance unavoidable emissions. However, in addition to purchasing carbon credits, individuals and organizations should also strive to reduce their emissions as much as possible using methods such as improving energy efficiency, switching to renewable energy sources, or adopting more sustainable practices. Personal lifestyle changes can also make a difference. This includes things like reducing energy consumption, recycling, using public transportation or biking instead of driving and buying local products rather than imports. Every little bit helps and if we all chip in, everyone can be part of changing the voluntary carbon market: together we can make a difference. Current Market and Projections The voluntary carbon market has grown rapidly in recent years, driven by increasing awareness of climate change and by the commitments of companies and governments to reduce their carbon emissions. Voluntary commitments could make up as much as 60% of demand by 2030, and grow 100x by 20502. Since 2015, the compound annual growth rate (CAGR) of the voluntary carbon market has been around 30%, which reflects the increasing demand for carbon credits as more entities seek to offset their emissions2. However, the market is still relatively small compared to the scale of the climate challenge and will need to grow (from $2 billion in 2020) to around $250 billion by 20503 if it is going to address the problem. One of the key sources of demand for voluntary carbon offsets is the commitment by many of the world’s largest companies to achieve net-zero emissions. These companies will continue to purchase carbon credits to offset their emissions and thus continue to drive demand. However, there are concerns that the supply of carbon credits may not be able to keep up with this growing demand. The top-five Big Tech companies, for example, could cause a supply shortage of carbon credits by 2025 if they opted to cover just their Scope 3 emissions2. The Greenhouse Gas Protocol categorizes GHG emissions into three ‘scopes’, with Scope 3 being emissions occurring outside a company’s own operations (like business travel, commuting, disposal, transportation, etc.). While analysts expect that supply will increase over the coming years, they believe it will lag demand until the second half of the decade. If there is ever a supply shortage, the cost of offsets will likely increase substantially. Current Market Dynamics The voluntary carbon market is complex and rapidly evolving. According to Accenture, 34% of the world’s largest companies have committed to net zero, but 93% will fail unless they double their pace4. This highlights the urgent need for more action now and faster progress in reducing emissions. It isn’t surprising that McKinsey Sustainability projects a 100x increase in global demand for voluntary carbon offsets by 2050, underscoring the growing importance of the voluntary carbon market in the global effort to combat climate change5. The market also faces some challenges. One of the main challenges is the potential for a significant increase in carbon offset prices—according to Bloomberg Markets as much as 3000% by 20291—which could make offsetting emissions significantly more costly in the future, thus straining companies and investors in the pursuit of profitability. The voluntary carbon markets are also notoriously opaque and this lack of transparency and failure to enforce accountability have left many concerned about their future6. The voluntary offset market and its many participants must address these issues in order for investors and producers to maintain their confidence in the market and ensure its continued growth. Challenges with Voluntary Carbon Offsets Changes Needed Our planet needs effective, well-planned, and well-executed voluntary carbon markets. And while we’ve seen how previous attempts have fallen short, CRBN now provides the model for how we can achieve this at scale by addressing the twin challenges of accountability and transparency head-on. The London School of Economics examined the incentives of the current registry model for voluntary carbon markets and concluded, simply, that “the incentive structure is wrong”7. These problems arise mainly from the fact that the financial interest of registries creates a potential conflict of interest with the projects they list. Such skewed incentives end up saturating the market with low-quality assets, uncertain valuations, and anxiety about relying on them to accomplish the offsetting many companies are not yet mandated to perform. The voluntary offset markets must meet higher standards for listing and managing assets. They cannot depend on a single registry or small group of authorities but must allow any high-quality asset to service the needs of the market while leveraging the properties of a decentralized, public ledger to provide complete transparency, pulling the retirement data into every registry around the globe. Aligning Incentives: Why Oil and Gas Offsets Are a Solution Unlike most voluntary carbon offsets, CRBN is backed by oil and gas. This eliminates the risk of impermanence, and ensures 100% avoidance: if you don’t drill, the oil doesn’t move. And by drawing on close to a century’s worth of cumulative engineering and assessment experience across the oil and gas industry, CRBN ensures the most accurate and accountable verificatIon of its reserves now and in the future. CRBN’s use of oil and gas as underlying assets aligns the incentives of both producers and investors. Producers can meaningfully contribute to the transition away from fossil fuels by developing alternative successful business models that will continue providing value to customers around the globe. At the same time, CRBN offers an attractive investment opportunity: Because it is the only carbon asset with no long-term risk (unlike even other oil and gas-based offsets whose resources shift in pools underground), CRBN provides investors with the first opportunity to capture the potential 3000% increase in value by 2030 that analysts predict. CRBN is not just another carbon offset program but a pioneering solution that addresses the critical challenges of impermanence and trust in the carbon offset market. By leveraging the strengths of its underlying assets and digitally native properties, CRBN has set a new standard for the voluntary offset market and provides new hope for the fight against climate change. Regulated and Trustworthy: Solving Problems Using the Liquid Network Issuing, distributing, and managing CRBN on the Liquid Network provides complete transparency and accountability to the voluntary offset...

Author: Bruce Muirhead

Changing the Voluntary Carbon Market: A Study of CRBN