Sometimes the most important news gets the least attention. Yesterday, to little fanfare, IHSMarkit, a financial data company, announced it would introduce a global registry for carbon credits using distributed ledger technology. It would link various registries around the world and provide a single data set for all projects and credits.
Why is this so important?
First, it has the potential to solve the two biggest problems that have haunted the carbon-offsets market for decades – verification and additionality. Or, in other words, ensuring that offset projects really deliver the carbon reductions they promise and that the benefits aren’t counted twice, once by the credit seller and again by the buyer.
Keeping track of projects and credits has been tedious and time consuming, which is exactly the kind of inefficiency that distributed ledger technology can address. Close readers of this blog will recall that we tipped the potential for distributed ledger technology in carbon trading more than three years ago. (Small bow.)
The other reason this is important is that the announcement adds another plank in the floorboards supporting the emerging global carbon market. In the past six months, there has been international collaboration on carbon accounting standards and an initiative to ramp up carbon trading, the Task Force for Scaling Voluntary Carbon Markets, led by Bill Winters, CEO of Standard Chartered. US regulators are stirring, too, after a long slumber, with the SEC announcing a fresh focus on climate disclosure and a staff to enforce it.
Finally, this announcement also signals that important parties are cooperating in the growth of the carbon market, from standards bodies and industry associations to private sector firms. It’s not every day that you have major environmental groups, the leading emission-trading organization (IETA), major global banks and technology companies working together. And the World Bank is involved, too, which recently announced its Climate Warehouse Initiative to create a public infrastructure for tracking and reporting of carbon assets.
So at last carbon trading is becoming more like a true global market, with accounting and reporting standards, record-keeping systems and a growing number of market participants. They all will help drive investment flows, asset pricing and risk management activity as consumers and businesses adapt to a low-carbon future.