Article10.19.2023
A Compliant-By-Design Carbon Credit: ZeroSix Tech-Based Transparency and Auditability
Carbon credits are an important tool in our decarbonization toolbox, as they can play a key role in narrowing the gap between goals and current abilities for companies at various points along the decarbonization spectrum.
However, recent criticisms have put carbon credits under a microscope–and with good reason. As we have written about previously, the voluntary carbon market (VCM) has wrestled with a trust issue, due to, in part, concerns around opacity, shortfalls in carbon credit quality/additionality, and the inability to vet projects.
The ZeroSix approach overcomes these challenges and criticisms with a blockchain-based, tech-centric approach to administering credits.
Protocols + Proofs: The Total Package
Buyers want better carbon credits; suppliers want their carbon credits to stand out from the crowd. The ZeroSix carbon credit stands alone among a sea of competitors because the ZeroSix solution is an end-to-end solution rooted in a blockchain. The ZeroSix platform hosts both the protocols and the proofs in a complete package.
A distributed ledger technology, blockchain creates an immutable, publicly-accessible record of transactions, allowing for enhanced transparency and accountability. These traits make blockchain a powerful infrastructure for applications where certainty about the provenance, existence, and characteristics of a digital asset are required–such as in the generation of carbon credits.
However, blockchain-based transparency means nothing if low-quality carbon projects are written to the ledger. For this reason, the ZeroSix protocol is built upon the principles of accuracy, additionality, permanence, and transparency. The protocol helps ensure that only high-quality projects and associated credits pass muster—all via an approach that also provides needed transparency and verifiability for VCM participants.
The Underlying Tech: Building Blocks of a Better Carbon Credit
The oil and gas protocol is the first ZeroSix protocol, however, the ZeroSix tool/solution/platform is suitable for any high-quality protocol.
This first ZeroSix protocol incorporates well-established standards and processes, such as those utilized in the oil and gas industry, for the purpose of retiring producing oil and gas assets in exchange for the highest quality carbon credits.
Compliance with the protocol is controlled and digitally recorded employing a blockchain-based decentralized application, the ZeroSix digital solution, which ensures:
● aspects of project governance, including overall adherence to the protocol
● project verification via digital signatures from independent third-party verifiers
● transparency by publicly storing project documentation on the InterPlanetary File System (IPFS), which is an immutable and tamper-proof distributed file storage system
● generation and distribution of ZeroSix digital carbon credits
● tracking and elimination of double counting.
Given the distributed nature and associated pitfalls of the VCM—such as its opacity and excess of low-quality carbon credits—certainty about the provenance, validity, and existence of carbon credits is of great added value.
This immutable ledger and transparent audit trail will help ensure that quality carbon credits play an increasingly important role in our collective sustainability efforts.
Smart Contracts; Smarter Credit
The ZeroSix carbon credits are generated via smart contracts, which are simple programs stored on a blockchain that run immutably and tamper-proof when predetermined conditions are met.
The ZeroSix carbon credit (represented by a digital token) can only be generated (minted) after following the strict ZeroSix protocol, which includes proofs of accuracy, additionality, and permanence. In other words, the carbon credit is created only after the project owner has proven ownership of the well, sought agreement from all stakeholders, secured regulatory approval, plugged the well, and submitted all the necessary documentation. These steps are independently verified and a provenance trail is anchored to blockchain.
If all steps are completed successfully, the ZeroSix carbon credit is generated in the form of an ERC-1155 token and is assigned to the well owner. The well owner is then free to trade, retire, or hold the carbon credits.
Why an ERC-115 Token?
By using an ERC-1155 token to digitally represent a carbon credit, ZeroSix can maintain the information related to the location and specific characteristics of each O&G well belonging to a project.
The ERC-1155 multi-token standard can represent any number of fungible and non-fungible token types. The well-specific information is encoded to the non-fungible part of the carbon credits, therefore allowing any carbon credit holder to be able to link and trace the digital asset they own back to the specific well to which it corresponds.
The non-fungible part of the carbon credits includes:
● the unique well identifier [API (American Petroleum Institute) number]
● the ZeroSix protocol that was applied to the specific project
● the unique serial number of the project that is based on content identifier (CID) of the project documentation folder stored on the IPFS
● the unique digital signature of the third-party independent verifier that reviewed and approved the specific project.
This process ensures the quality and verifiability of the credit.
An Evolved Carbon Credit
There’s a lot of hype out there, when it comes to both the promise of blockchain as well as carbon credits. And at the end of the day, a carbon credit is only as good as the standard to which it is held.
At its core, the ZeroSix protocol results in a carbon credit which is an evolution beyond business as usual, setting a new standard for accuracy, additionality, permanence, and transparency.
Rooted in stringent protocols, practices, and technologies, the ZeroSix solution bridges the gap, from aspirational to achievable, delivering where other carbon credits fall short.
Learn more about ZeroSix carbon credits and how they rise above the rest.
