Learn more about the state and trends in international carbon markets "State and Trends of Carbon Pricing: International Carbon Markets
Learn more about the state and trends in international carbon markets "State and Trends of Carbon Pricing: International Carbon Markets
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Building an End-to-End Digital Ecosystem for Carbon Markets-background

Building an End-to-End Digital Ecosystem for Carbon Markets

Climate Warehouse
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Climate Warehouse

The Climate Warehouse program prototypes, tests, and develops digital infrastructure to foster greater transparency, trust, and integrity in the carbon markets. Successfully prototyped and tested elements of the digital infrastructure will be operationalized to build the market infrastructure. Examples include the launched metadata platform to connect and aggregate registry information (the Climate Action Data (CAD) Trust), digital MRV systems, national carbon registries, tokenization instruments, and a one-stop resource platform that enhances knowledge-sharing and capacity-building.

End-to-End Digital Ecosystem for Carbon Markets
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Ecosystem & Collaborations

Ecosystem. Post-2020 markets under the Paris Agreement will be built using a bottom-up approach, as each party to the Agreement must track greenhouse gas (GHG) emissions reductions (or removals) achieved, and has considerable leeway to determine how this will be done. 

 

Carbon markets are facing a future with increased complexity and diversity of approaches to reporting and verification of GHG emissions inventories and mitigation outcomes. Against this backdrop, there is an opportunity to underpin and streamline post-2020 carbon markets with digital technologies. Opportunities to improve efficiency and transparency, while reducing the generation and transaction costs of carbon assets, exist in both the upstream and downstream processes of carbon markets.

 

Collaborations:

  • Digital For Climate (D4C). The D4C work program is a collaboration with EBRD, UNDP, UNFCCC,  and WB that aims to coordinate respective workflows and create a modular end-to-end digital ecosystem for the carbon market. Partners include the European Space Agency (ESA) and the International Emissions Trading Association (IETA). 

 

 

  • The World Bank together with the Government of Singapore and the International Emissions Trading Association (IETA) launched the Climate Action Data Trust in December 2022 (for more details, please check the official site).

 

 

  • The Climate Warehouse program partnered with Chia Network to prototype and test the metadata layer (Climate Action Data Trust) during Simulation III (for more details, please check the Simulation III page).

 

 

  • The Climate Warehouse program of the World Bank supports the entire ecosystem to develop digital solutions in the international carbon markets. Enabling the industry to build on top of the Climate Action Data Trust across multiple blockchains will enhance the transparency and integrity required to scale the financing through this market. To this end, the Climate Warehouse program has a collaboration with Chainlink Labs to prototype and pilot interoperability mechanisms to catalyze adoption and enable the scale-up of market infrastructure.
    For more information on interoperability layers for carbon markets, please check: https://chain.link/use-cases/climate-markets 
    For more information and industry comments on requirements, please contact: Enterprise@chainlinklabs.com                                                                                     

 

 

 

 

                                                                                                                                                                          

 

The World Bank recognizes the rapid technological innovation in this space and the emergence of new platforms and will continue to assess the opportunities of using emerging technologies and platforms to support transparency, reduce transaction costs and maintain the integrity of climate markets. The opportunities include support for developing an end-to-end ecosystem that encompasses digital MRV at the project/program level and relevant protocols; real-time data flow through dMRV to the national MRV and registry systems and finally connectivity with the Climate Action Data Trust or another infrastructure element. 

 

While the Climate Warehouse (CW) is open to collaborate through a non-exclusive, no-fee arrangement, using open-source platforms with low environmental impact that promote functionality, interoperability, sustainability, and inclusiveness, the CW is currently focused on delivering the minimum viable products of critical applications and will initiate further collaboration when the current commitments have been delivered. For further inquiries, please contact: climatewarehouse@worldbank.org.  

Metadata Layer - Climate Action Data Trust

Climate Action Data Trust (link) is a decentralised metadata platform that links, aggregates and harmonises all major carbon registry data to enhance transparent accounting in line with Article 6 of the Paris Agreement. The CAD Trust open-source metadata system uses blockchain technology to create a decentralised record of carbon market activity with the aim to avoid double counting, increase trust in carbon credit data and build confidence in carbon markets.

 

By connecting registries through a decentralised infrastructure, and making CAD Trust information publicly available, it will be possible to identify risks of double counting that can damage the integrity of the markets. The data layer can be used to support data sharing, and it provides a backbone infrastructure that can support services built by the public and private sectors to support market activity, such as compliance reporting, transacting, and benchmarking services.

 

 

Operational Phase:

  • Official launch was announced on December 7, 2022, at Asia's Climate Summit in Singapore.  
  • Management has been transferred to an independent legal entity created in Singapore and it is led by the Council and the Board, and supported by the Technical Committee, User Forum and the Secretariat.  
  • Public Data Dashboard was launched at COP 28. The Data Dashboard, as a public interface of the metadata layer, incorporates datasets from four carbon market registries (Verra, Global Carbon Council, EcoRegistry, BioCarbon Registry), along with Clean Development Mechanism (CDM) data from the United Nations Framework Convention on Climate Change (UNFCCC) and Bhutan's national carbon registry.

 

Resources:

 

For more information on the testing and simulation activities, please visit these two sites here: 

 

The CADT repos:

 

Core Registry version of CADT:

 

 

 

National Carbon Registries

1. The National Core Carbon Registry 

The Core Registry provides national-level registry infrastructure enabling member countries to issue digital carbon assets. Users can manually upload projects and units' data in sync with the World Bank's Climate Warehouse Metadata layer.

 

The public blockchain enables inclusiveness, accountability (decentralized governance and peer-to-peer support), transparency (fully auditable record of transactions) and integrity (fully immutable, traceable and interoperable). 

 

 

Key Features:

  1. Information about projects and issued units is published in a publicly viewable and auditable manner 
  2. Tokenization of issued digital climate assets  
  3. Automated recording of retirements detected on-chain in the CADT  
  4. Disable detokenization for digitally native climate assets

 

 

The Core Registry is currently comprised of two main applications:  

  • The Climate Action Development Trust (CADT), which will enable market participants to record data about projects and issued units  
  • The Native Tokenization Engine (NTE) enables the issuance of tradeable instruments based on CADT data  
  • Additional modules will be added to expand functionality

 

The Core Registry aims to provide a seamless solution for registry admins to issue digital carbon assets. 

 

 

Code:

 

Core Registry Specific Components:

 

Tokenization components used by Core Registry:

Digital Measurement, Reporting & Verification (d-MRV)

A digital MRV (dMRV) can be defined as a MRV system that includes using digital technologies and processes to automate the collection of data, the reporting of GHG emissions, and the generation of mitigation outcomes to improve the functioning of future carbon markets and ease the burden of satisfying reporting requirements under the Paris Agreement.  

 

The World Bank aims to support countries to pilot digital MRV systems to demonstrate proof-of-concept, test interlinks of digital MRV systems with registries, and foster an enabling environment for the implementation of digital MRV. A Digital MRV improves the speed and accuracy of reporting, lowers reporting and verification costs, and increases scalability and security of MRV systems. 

 

Principles:

  • A dMRV has a two-layer system (physical and digital) that automatically collects, stores, analyses and display relevant data in the context of emission mitigation projects. It allows users to obtain, in a faster and cheaper way, reliable data aiming at creating emission reduction credits.  
  • dMRV can help mitigation projects report data from remote locations with minimal human intervention.  
  • AI and algorithms provide data control and quality checks and identify missing or wrong data for an enhanced accuracy when reporting.  
  • Data storage ensures access to historic of projects, raw data, transformed data and easy and quick access to verification body at any stage of the value chain. 

 

 

Please read the recently published report: Report D-MRV and Its Application in Future Carbon Markets: https://openknowledge.worldbank.org/handle/10986/37622

Tokenization

Tokenization Engine: Infrastructure to support the native tokenization of carbon credits

The World Bank is currently conceptualizing market mechanisms to enable native tokenization of carbon credits and plans to pilot these prototypes with carbon market participants to capture knowledge and lessons learned.

 

 

Benefits of WB Tokenization Engine:

  • Open-source, non-exclusive, interoperable that can be used by independent and sovereign carbon registries so they can create digital representation of new and previously issued credits into Native Carbon Tokens  
  • A Native Carbon Token is a legally equivalent digital instrument embedded with the same rights  

 

 

Features:

  • On-chain tokenization based on issued verified Emission Reduction Credits (ERCs) in the underlying registry (Native tokenization).  
  • Carbon units in registry will be denoted as tokenized until reversed or retired.  
  • Retirement of tokens on-chain results in retirement of ERCs in issuing registry  
  • Functionality to support redeeming tokens for underlying carbon units in registry. 
  • Enable efficient transfers of carbon tokens 

 

 

Implementation:

  • Registry integration: Straightforward implementation as tokenization utilizes Climate Warehouse data  
  • Low (Cost) entry barrier: Tokenization engine will be developed open source for a public good facility  
  • Interoperable:  Tokenization modules can extend to any blockchain qualified as sustainable, secure and legal  
  • Transparent: Authenticity is easily verified by the public in the Registry or Climate Warehouse

 

 

Resources:

The Tokenization Engine:

The Climate Wallet:

The Climate Explorer:

The Climate Token Driver, used by the Tokenization Engine, Climate Wallet and Climate Explorer:

Knowledge & Capacity Building

The Climate Warehouse offers a wide range of knowledge products on each workstream, such as reports, technical papers, blogs and audiovisuals. Browse the online library by clicking this link and explore a one-stop shop of end-to-end digital infrastructure for carbon market.

 

The capacity-building programme is conducted in collaboration with the Partnership for Market Implementation (PMI).