9. Workshop: Impact Markets - Bogota 2022

hey everyone uh thanks for sticking around I'm excited to share with you uh some interesting work we're doing and get input from all of you on uh generating consistent demand for environmental assets um slides will come up in a minute here I'll just start riffing um so most of you are probably familiar with carbon credits if you're hanging around in these circles um carbon credits are one example of a broader class of asset that's often referred to as environmental asset ecosystem service asset and the general idea is that people want to fund climate action they want to fund sustainable activities but uh not everyone wants to get a shovel and start planting trees or installing renewable energy so the question is how can we incentivize people uh to carry out the activities we need to carry out to mitigate the climate crisis um without necessarily uh directly doing that ourselves um so the mechanism that I'm going to talk about today is the voluntary carbon Market but you should think of this as one example of a sort of broader class of assets uh that can be developed and a lot of the same principles will apply regardless of whether we're talking about carbon or plastic or water Watershed restoration um still not getting any slides but I think they're working on that um so the first thing I want to frame is like the scale of the problem uh we need to substantially reduce emissions as soon as possible um the targets are somewhere around 50% by 2030 in order to avoid U more than 1.5 degrees sea of warming um so that's quite an urgent situation um on the other hand we have a massive depth of carbon already up in the atmosphere that needs to be drawn down um so the sort of two sides of this coin are avoidance credit and removal credits avoidance will help us speed that transition to reducing emissions while removal credits will give us the long-term ability to manage uh the carbon debt that's up in the atmosphere okay here we go um so this is just a demonstration visually of what I was just talking about um so you can see we need that 50% reduction by 2030 um to get to 1.5 and we also need substantial negative emissions um and that's the red line there um the key thing I want to point out here is that negative emissions are basically zero right now we have very low levels of removals being done the tech is still being developed capital still being deployed um whereas we need to reduce emissions substantially as quickly as possible so um the sort of setup is uh in the next say 5 to 10 years we need to be substantially reducing emissions while we develop the technology to do large scale removals um so in in terms of like the carbon markets in general um there's some challenges but there's also a lot of potential um you might think oh well arm carbon credit's just for greenwashing my point here is that uh there's an underlying Financial technology that people with money who want to fund climate action can allocate that money to project developers on the ground actually doing the work um and the UN is very clear um in the latest ipcc report there really isn't a pathway to 1.5c that doesn't involve large scale removals and the only mechanism we have right now for funding large scale removals is the voluntary carbon Market um of which I'll be showing more in a minute um so yeah I don't think carbon credits are just for greenwashing even though historically they've often been used by large corporations for greenwashing so um I just want to give a brief overview of the different types of carbon credit projects um this isn't super important for the breakout session but it'll give us some context um basically we have reductions and removals um reductions also known as avoidances basically a reduction is going to prevent emissions in the first place a removal is going to take down carbon that's already been in a Bim minuted um and the key thing here is that it's not really an either or in my opinion it's really a both and um we both need to substantially reduce emissions as quickly as possible and long-term draw down carbon from the atmosphere uh so shortterm I would expect and this is sort of the reality that most of the credits on the market today are avoidance um and in the future those avoidance credits will cap out there's only so much renewable energy to install only so much existing Forest to protect um whereas removal credits have a much more um a higher theoretical limit of how much removals we can do um and so we would expect that removals will scale up avoidance will scale down over the coming decades um so just to sort of get a sense of the scale we need here we need to increase the scale of the traditional vcm by uh 15 to 20x uh in the next 10 years or so um right now we've generated about 1 billion tons of carbon credits ever um we need to do that every year for the next like 20 years uh to address the the crisis okay so how does the vcm work um I don't want to spend too much time on this if you have any questions please come up after during the breakout um but basically you have suppliers uh who are the project developers and then you have the buyers um and traditionally those buyers are corporations um because even though there's a lot of exciting stuff going on on the supply side a lot of new methodologies being developed for the issuance of credits uh the reality is that if we 10x the supply today prices will collapse because there's simply not enough consistent demand for the underlying asset to meet the scale up of Supply that we anticipate coming in the next few years um so what I want to talk about today um is basically scaling the vcm by migrating on chain there's a lot of you know unique benefits uh we can solve uh in the traditional Market by bringing it on chain uh but the big one that uh is going to be relevant for our discussion today is programmability uh so we can take these tokenized carbon credits and we can use them in novel ways uh that wouldn't be possible in a traditional sort of u u SQL and email uh going back and forth on the phone uh mechanism of of sourcing which is what we see in the traditional vcm okay so that ual subject of the talk and and what I want to talk about in the breakout session today um is how we scale the vcm um so the there's a really strong imbalance in the traditional vcm uh in particular the there's always people selling there's always suppliers who want to offload their credits and the the buyers uh only come around once in a while um so the way it's been described to me by some traders who operate in the space is that um there are constant offers everyone wants to sell and very few bids um the bids come around kind of few and far between when a corporation shows up that's not correlated uh one to one with like a offsetting initiative um but is really driven by economic activity on chain so that's one example um this is just sort of a walkthrough you can go to the advanced settings and Sushi swap on sushi.com and you can try this out yourself um so that's one example another great example is Live Events like this one we're all here today um I want to point to SBS sustainable blockchain Summit they're doing a lot of really cool work developing uh sort of community-driven offsetting approach for their event Live Events have this really nice characteristic that they recur every year at least they usually do um and so there's going to be uh this sort of consistent demand if we can fill the calendar with live events that are offsetting their own emissions um that creates a much more consistent demand and the reality is like we all value Live Events right we all here um and so this is unavoidable emissions we can reduce the use of plastic we can travel by train or car instead of air but ultimately people want to travel for Live Events so we should be capturing that and using it to drive demand for retirements um another interesting opportunity that we're working with a couple of companies on um at CLA is uh basically when you purchase a durable good or a consumer good that portion of your purchase price will go toward retiring carbon not necessarily in a onetoone offsetting approach um but where like a portion of your purchase is going to be set aside held in some yield bearing asset like the CLA token or usdc um and then the yield will be retired on an ongoing basis throughout the life cycle of that product so let's say you buy a diamond ring right that diamond ring has some carbon uh embodied in it and the longer you wear that diamond ring um sort of the more use value you're getting out of it and the idea is that diamond rings last a long time so you'd want to be perpetually offsetting rather than offsetting once at production um again creating that consistent demand consumer package Goods is another opportunity we're looking at it's a little bit less straightforward but a lot of cpg companies want to Market their uh sustainable activities in a more direct way so rather than having a 45-page PDF document on their website you might have a QR code on every bottle of I don't know Coca-Cola where you scan the QR code and you can see the specific projects that are being supported uh by the carbon credits consumed uh to mitigate the emissions of that production okay another really interesting one that's already being used in the traditional vcm is online bookings um so you know you have um Airlines that'll give you the option when you're booking to offset the carbon emissions from your flight um we think this can be generalized to things like hotel bookings uh rental car bookings um by basically building a little API that the uh bookings companies like you know bookings.

com last minute.com all these online travel agencies can hook into and easily calculate and offer um tokenized carbon credits to their users uh okay it's Frozen um but that's pretty much it um there's one other interesting example um we're integrating with lens protocol to make it so that when you collect a a post on the lens protocol you can send instead of money sending a carbon credit retirement to the creator of that post um so it's a nice sort of um a way of paying for something in in a non-monetary form right you're basically offsetting Carbon on behalf of someone else um and to pay them for the work that they've done um okay I'm going to cut it there um thank you all for listening I'm going to be over here um but what i' really like is for us to talk about new ways that we can drive demand for environmental assets because all the great work in the world being done by lots of people here to build environmental assets will be for not if we don't have demand for those assets thanks everyone