On May 24, 2016, the Russian Carbon Fund has officially unveiled the Integrated Program for Climate Initiatives (IPCI) and IPCI-based Carbon Registry.
“The Integrated Program for Climate Initiatives is designed to develop a distributed network of mitigation contributors based on common principles, rules and criteria, as well as provide an accounting platform which can achieve absolute emission reduction targets in compliance with quantitative emission limitation commitments. The goal of the Integrated Program for Climate Initiatives is to integrate corporate and regional mitigation initiatives”, — wrote Sustainable Europe.
The IPCI derives from ongoing subnational and corporate climate initiatives and aims at providing for common investment instruments, which are based on climate change mitigation outcomes including high quality carbon offset credits.
In parallel with the Carbon Registry, alternative decentralized ledger for carbon units and carbon units’ operations data is being developed and tested.
Taking into account the Paris agreement requirements IPCE has formulated criteria that may seem too strict to follow. The Program does not allow baseline scenario emissions to exceed baseline actual emissions and does not recognize hypothetical reductions, that are permissible under Kyoto protocol mechanisms and popular voluntary standards (Gold Standard, VCS etc). “Those mechanisms and standards are in essence ‘relatively green, relatively low-carbon growth’ standards. They easily allow for certifying growth of emissions as emission reductions”, — says Chairman of the Council of the “Russian Carbon” Fund Anton Galenovich.
Key task for the design of the platform was to secure high quality absolute reductions as underlying asset for digital units, to ensure the integrity of robust requirements of the Program-based Carbon Registry and compliance with these requirements of blockchain-based system of smart contracts. The result makes sure that the amount of digital units on the platform is at any time and in any event correlates with actual absolute reductions and manipulations virtually impossible.
A blockchain ledger DAO «Integrated Program for Climate Initiatives» (DAO IPCI) is being developed on the Ethereum platform as an option for IPCI operator and participants, Carbon Registry users and other than IPCI GHG emissions limitation and reduction programs’ operators and participants to account for the data on carbon units’ issuance, transfer, and operations including offsetting goods and services carbon footprint. DAO IPCI allows for creation of smart contracts-based business environment to minimize transaction costs, to make issuance and transfer of carbon units highly reliable, transparent and centralized manipulations-free.
Previous attempts to create carbon emissions-related blockchain systems and cryptocurrencies have failed due to the lack of high quality underlying to support them. DAO IPCI essentially excludes emission of cryptocurrency, and is based on the assured climate change mitigation outcomes as the underlying asset.
Independent Entity, the Auditor, assures the existence and quality of the underlying asset and preclusion of double-spending. The latter is further supported by the internals of blockchain technology. Operator and Auditor ensure fundamental link of underlying assets and units issued through “two keys confirmation” proof-of-asset protocol. Previous experience of issuance of asset-based digital units has been taken into account and consideration.
The IPCI and Carbon Registry Council – an advisory body of comprising of highly reputable international experts – is authorized to review and evaluate basic IPCI rules, requirements and criteria to support compatibility of the Carbon Registry and DAO IPCI ledger with highest international standards.
The Integrated Program Mitigation Units (IPMU) may be issued to DAO IPCI:
- Directly by the Issuer and the Auditor subject to the Operator’s approval on the grounds of assurance by the Independent Entity of mitigation outcomes compliance with IPCI rules, requirements and criteria endorsed by the Carbon Registry,
- Through transfer of IPMU from the Carbon Registry to DAO IPCI,
- On the grounds of Carbon Registry decision to accept carbon units issued by alternative programs and accounting platforms or to convert and exchange such units for IPMU on a case-by-case basis subject to compliance with IPCI requirements and criteria and confirmed cancelation of alternative registry entries and units turnover
- By other than IPCI mitigation programs’ operators and issuers subject to preclusion of double-spending and assurance of integrity of digital units with underlying carbon compliance units by Independent Entity.
Figure 1. – Issuance of the Units
The Issuer is required to reserve specific share of the units established by the Operator on the grounds of independent assessment of the related risks for burning is case the units issued are legally recognized as void, so that total amount of digital units issued to the platform would in any event be equivalent to underlying mitigation outcomes.
Apart of the digital units’ issuance process, the following modules and operations are undergoing testing:
- Transfer of the units between Issuers and Users
- Acquiring of the units to offset specific goods and services carbon footprint with reference to specific contract, invoice, billing details
- Burning of the units for the purpose of offsetting carbon footprint and other operations
- Placing sell/buy orders.
The designers have focused on offsetting carbon footprint scheme (Figure 2). Combining these steps into one contract is implied for development.
Figure 2 – Offsetting carbon footprint scheme
Long-term prospects of DAO IPCI development are virtually limited only by its’ functional capacity as the trends are evidently in favor of carbon markets’ expansion both in scale and number, linkage and integration with a perspective of ultimate creation of common market space with fungible instruments. DAO IPCI is a prototype of such market space and units.
Near-term prospects rely on primary demand development at the account of large corporate and regional (subnational) climate programs, carbon footprint offsetting programs, consumer demand development.
To participate in the testing please contact +7 499 394 04 79 or [email protected].