IBM is collaborating with environmental technology firm Veridium Labs to launch a token with the goal of shaking up the carbon credits industry.
Veridium, whose plan to issue the so-called verde was revealed last year, isn't the first token-related project to land IBM as a partner, but it could prove to be one of the most consequential.
Their collaboration also builds on IBM's previous relationship with Stellar, which was unveiled last October with a cross-border payments initiative that used Stellar's lumens token as a medium of exchange.
Veridium's verde token runs on the Stellar network and is backed by Triple Gold REDD+ credits, or carbon credits issued by a company called Infinite Earth. Infinite Earth oversees the Rimba Raya Biodiversity Reserve, a 64,000-hectare-large area in Borneo. The reserve serves as the "natural capital" for the carbon credits and is home to a number of endangered species.
At the heart of the carbon credit concept is the idea that real change can be affected by relying on market forces to push down the total amount of pollutive materials companies produce. The credits, which companies can purchase, function as a kind of tradeable permit, each worth a ton of carbon.
REDD is short for Reducing Emission from Deforestation and Forest Degradation, and it focuses squarely on the carbon emissions created by deforestation. More than 60 countries are party to the REDD framework, spread across the Asia-Pacific region, Africa and South America.
Yet according to Todd Lemons, a co-founder and the CEO of Veridium, the process of actually measuring the carbon impact of each foot of forest can be cumbersome. In the company's years of work, there was always a need for a different tool to streamline the process and improve transparency, Lemons said.
And that's where blockchain comes in, he said.
"We've developed a new set of protocols to take a completely different approach, to create a set of calculations that measure the footprint per dollar. So that set of protocols is being codified into the verde token," Lemons told CoinDesk, going on to say of the token:
"It represents the underlying asset, the environment asset, as well as completely automates the carbon accounting and offsetting process to make it infinitely more consumable for companies to be able to integrate that into their transactions."
Carbon on the blockchain
Running on the Stellar network allows for some key benefits, according to Jared Klee, blockchain offering manager for IBM and the company's point person on the initiative.
Among those is the ability to swap those tokens directly, rather than relying on an exchange platform that would be vulnerable to hacking or other issues.
"Stellar has built in a decentralized exchange which, among other things, helps mitigate central points of failure," Klee explained.
More broadly, he contended, using a blockchain brings transparency that's been lacking in this market. As Transparency International wrote back in 2012, accounting for carbon can be problematic – thus making it more susceptible to fraud.
"Given the remoteness of REDD+ sites there may be no easy way of knowing whether a project is authentic or bogus," the group wrote at the time.
This is why IBM sees an auditable shared ledger adding value to the process. As Klee told CoinDesk:
"Blockchain plays a critical role in ... enabling the transparency so that individuals interested in purchasing, trading and using the token have visibility into the underlying carbon credits that back the token."
Borneo forest image via Shutterstock