Unlocking Net Zero: How Technology is Transforming Voluntary Carbon Markets

Hello, my name is Ladin Boys, and I am delighted to be here today with Briany, who's a partner at Hogan Levels.

Bryony, you recently led on publishing a report that just came out on tokenization for net zero and the opportunities and challenges of digitalizing voluntary.

Markets, what a hit.

It sounds like a very, very interesting topic, and I was hoping that we could talk about it a little bit today and it'd be great to just start off with a bit of an overview of voluntary carbon markets today and why that was the focus of the report in the first place.

Yeah, sure, thanks, Maddie.

It's great to be here.

We know that this report is really timely.

OK.

Voluntary carbon markets are of increasing importance in our world broadly, but they've been around for a long time and yet they're failing to achieve their full potential as things stand.

Unfortunately, the markets are fragmented and complicated, you know, it's difficult for people to kind of enter the voluntary carbon markets and.

We really need these markets to function to function better in the context of pushing towards net zero and trying to achieve better solutions for climate change mitigation.

And so really this report is focused on how we can use evolving technology solutions to improve these markets and to really bring some of the features of that technology to solve the.

Detailed kind of challenges that we see in this existing space.

That's super interesting.

And so I mean when you speak about challenges like fragmentation and high barriers to entry, it'd be really great to understand on a detailed level then how the technology works and how the technology solves some of those challenges.

In the report we've looked at really trying to map how the technology features can tackle.

Cool, some of those existing challenges, you know, you've got challenges that arise from market information, for example, like the lack of transparency around market data, in particular price information in voluntary carbon markets is difficult at the moment, and some of that's because there's a kind of deal trends where a lot of the larger transactions in the kind of high. tokens are actually being done off market in these kind of bilateral private contracts.

So what we'd like to see with technology is the ability to bring that kind of transparency on the platform using DLT in order to enable everybody who's going to participate in this market to have that real price transparency to be able to access that information readily.

In addition, there are some problems around integrity, and you know I've already mentioned quality of carbon credits.

There's definitely a sense of like differentials in quality.

And we really need to lock down the connection between, you know, a single ton of carbon removal into that carbon credit, and the technology really enables that connectivity between the environmental impact, the kind of traceability of the underlying carbon tons.

Together with then the instrument that's being traded on the market, we really need to kind of bring that technology feature along to make that connection much stronger and support integrity.

I mean, I think it's really fantastic that in the report you were able to map out those deltas because it's really useful for people to understand exactly for what challenges the technology solves and how it does that, and I think it's also great to see that there were some really strong use cases that were featured in the report, so.

Use cases with Northern Trust, for example, token of other market participants who are really trying to do this exactly and explore how we can leverage these new technologies for the environmental goals at least at hand, but I think the last feature that I wanted to touch on on the report it's the set of concrete recommendations that you've laid out which I think are incredibly useful for the industry to really be thinking about what are the next steps, what's the blueprint.

So Bryony questions for you.

What's the blueprints?

So I mean, you know, obviously trying to produce a detailed report, it's great, but we need to bring public and private sector along together, so we need clear recommendations so that the policy can kind of reorientate around solving some of these issues.

Obviously this report's focused on how we can use technology for that.

And one of the key recommendations actually is about tackling this kind of standards fragmentation that we've got in the existing VCM.

So there are different sets of standards in the existing markets, and we summarize some of those and kind of some of the differentials between those standards.

But we really need to use the technology to come along to try and standardize that.

So that's really the first recommendation.

How can we develop a framework that's technology positive that's going to really support that standardization in terms of, you know, how these things are kind of measured and verified, right?

The second recommendation is about. is around transparency.

It's about using distribute selective technology to create that transparency.

So I've spoken about it in the context of price discovery, but also in the context of that source like the connection between environmental impact and then what you're actually receiving if you buy one of these tokens.

So really that transparency piece is the second key recommendation.

The third point is about it kind of covers two things, so.

When you have your your DLP platform, you can bring independent verifiers.

You can embed standards, and you can embed kind of data about compliance with those standards in an automated way into the tokens that you are going to issue.

But you can also bring your verifiers, you know, your auditors, your kind of the people who are there to perform that third party checking role.

Directly onto that platform, so there's there's that kind of direct connection between your verifiers and then the streams of data that are coming through that platform.

That's both useful obviously in terms of accountability and that sort of direct transparency, but also it's helpful in terms of lowering barriers to entry because one of the challenges in the current markets is the cost and costly for these projects to bring carbon credits.

And onto the existing kind of verification platforms and then be able to offer them.

So it's hoped that with that kind of direct access to verifiers we'll reduce some of those costs and the final recommendation is really about that public private policy alignment piece, you know, how do we, how do we kind of enable the policy framework to really bring this technology forward to support these advancements?

Well, it's been fascinating to see you.

Thanks so much for joining.