How nature can help get us back on track
With their investment and trading platform, goodcarbon is connecting nature-based climate solutions to capital. Using blockchain technology, they address the current supply problems of voluntary carbon markets. Here is why we invested.
The latest IPCC report highlights a powerful and largely untapped solution to stem the climate crisis: nature. More specifically, Natural Climate Solutions (NCS) such as the conservation and restoration of forests or ocean ecosystems. According to the IPCC, reducing the destruction of forests and other ecosystems, restoring them, and improving the management of land are among the top five most effective strategies for mitigating carbon emissions. It’s one of the most important sources of negative emissions by 2030 due to their attractive economics — as the cost of production is around $10-$40/ton of CO2.
NCS can contribute 30% of the required carbon dioxide reductions in the atmosphere until 2030 at economically attractive terms. On top, such solutions come with substantial co-benefits, as they have the potential to positively impact biodiversity, ecosystem functioning, air and water quality, soil productivity,food security, and human wellbeing.
NCS are also an attractive investment for corporates — their Net Zero pledges are a key driver for the $30 to $100 billion Voluntary Carbon Market by 2030. However, natural climate solutions currently receive less than 3 percent of all global climate funding, while between $1.7 and $5.1 trillion of investment are needed to fully exploit the potential. A lack of available finance “forms a critical barrier” to the rollout of land-based climate measures, the IPCC report says.
Reinventing project finance
The lack of financing is a major challenge for natural climate solutions. Project developers face high up-front costs to start a project, while income streams from selling carbon credits begin much later. goodcarbon is about to change that by establishing a forward-financing marketplace. Project developers can monetize future carbon streams from high-quality NCS projects by issuing goodcarbon tokens at project registration. That is a game-changer, not only for project developers. Corporates can secure supply and price points for their estimated carbon credit demand required for their path to net-zero.
Cutting out the middlemen and ensuring quality
Using decentralized ledger technology (‘blockchain tech’), goodcarbon addresses further problems that currently hamper the scaling of nature based sinks. Today’s voluntary carbon markets are mostly non-transparent and swamped with low-quality projects. In most cases, you don’t know what you are buying and whether it brings additional reductions or benefits. Developers usually have to rely on brokers to access demand, which reduces the margin and transparency. By issuing project-specific tokens, goodcarbon directly brings together developers and investors or corporates in the most transparent and efficient way.
Building on leading independent verification schemes, goodcarbon additionally applies their own quality assessment for each project, which takes into consideration climate change mitigation and adaptation, biodiversity enhancement, feasibility, and other ESG criteria like harm to existing ecosystems and working rights.
Goodcarbon also puts a number of ambitious incentives in place to ensure the permanence of the sinks, among them: i) a waiting period for carbon stream and a token escrow mechanism which means that eligible credits will only be issued when CO2 savings have been verified, ii) rewards for strong co-benefits, iii) financial “skin in the game” of project developers. Such high-quality supply lowers due diligence costs and investment risk on the buyer’s side.
Tapping the largest carbon sink in the world: the ocean
Another reason that made us team up with goodcarbon is their strong focus on ocean-based climate solutions. The ocean’s potential to mitigate climate change is enormous. Around 25% of global CO2 emissions are being absorbed by our oceans. Blue carbon ecosystems such as seagrasses, salt marshes, and mangroves are highly effective in sequestering and storing carbon. Estimates indicate that these ecosystems can sequester more than double the carbon per area as terrestrial forests, mangroves in particular have ‘magical’ sequestration abilities.
goodcarbon focuses on five natural ocean-based sinks: mangrove forests, wild ocean forests, wetlands, and coral reefs as well as Regenerative Ocean Farming (algae, seagrass etc.). To better make use of the blue potential and accelerate investments in ocean-based climate solutions, goodcarbon teamed up with Oceans 2050, a leading advocate for ocean restoration, founded by Alexandra Cousteau (yes, that Cousteau) and Prof. Carlos Duarte, an internationally renowned ocean scientist.
Whether land or sea reforestation, nature is a powerful and largely untapped solution to stem the climate crisis. The demand for NCS credits will skyrocket in the years to come and lead to excess demand. Securing the supply of high-quality credits will be the biggest challenge to overcome, as current flaws in voluntary carbon markets clearly show. The goodcarbon team around serial impact founder David Diallo and Jerome Cochet came up with a convincing answer to those challenges. That’s why we are happy to be part of their journey.
Authors: Nick de la Forge and Lena Thiede, Co-founding partners Planet A Ventures
This article was first published on linkedin on May 3, 2022
ABOUT PLANET A VENTURES
Planet A is an investment fund partnering with European green tech start-ups that have a significant positive impact on our planet while building scalable businesses globally. Our mission is to contribute to an economy within the planetary boundaries. We support innovation in four key areas: climate mitigation, waste reduction, resource savings and biodiversity protection. First in the European VC world we offer scientific impact assessments to support our investment decisions and empower founders to manage and improve their impact. A wide network of experienced founders and experts support our portfolio companies. Investments include Traceless, Ineratec, Wildplastic, C1 and Makersite.
Planet A’s vision is to make impact investment the new normal.