Tokenizing Carbon Credits on the Hybrid Finance Blockchain (HYFI)
🎯 1. The problem
Greenhouse Gas Emissions are a form of air pollution and increase the earth’s temperature by trapping heat within the atmosphere.
Greenhouse gases include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrochlorofluorocarbons (HCFCs), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).
Efforts are on to limit the global average temperature increase to 1.5 °C above pre-industrial levels.
🎯 2. What are Carbon Credits?
Carbon trading is a market-based system that creates a financial incentive to reduce greenhouse gas emissions.
A carbon credit is a value assigned to a reduction or removal or avoidance of greenhouse gas emissions achieved. It is equivalent to 1 ton of carbon dioxide equivalent (tCO2e).
🎯 3. Avoidance v Removal Projects
Avoidance Projects reduce the volume of greenhouse gasses emitted into the atmosphere e.g. development of energy-efficient buildings.
Removal Projects remove greenhouse gasses directly from the atmosphere e.g. using trees or soil to remove and capture carbon.
Removal credits tend to trade at a premium to avoidance credits.
This is because Removal Credits:
1. require a higher level of investment,
2. have a higher demand,
3. are considered to be a more powerful tool in the fight against climate change.
🎯 4. Prices of Carbon Credits
In the current carbon markets, the price of 1 carbon credit can vary from a few cents per metric ton of CO2 emissions to:
+ $15 – $20/mtCO2e for afforestation / reforestation projects
+ $100 – $300/mtCO2e for tech-based removal projects
The factors influencing the price of carbon credits:
1. Geography of the project
2. Type of the underlying project
3. Vintage / age of the project
4. Volume traded at a time
The Taskforce on Scaling Voluntary Carbon Markets has estimated that by 2030, the carbon credits market would be worth over $ 50 billion.
🎯 5. Indian laws
The Indian laws relevant to Carbon Credits are:
1. Energy Conservation Act, 2001
2. Carbon Credit Trading Scheme, 2023.
According to section 14A of the Energy Conservation Act, 2001:
1. The Government can issue energy savings certificates to consumers whose energy consumption is less than the prescribed norms & standards
2. Consumers whose energy consumption is more than the prescribed norms & standards can purchase energy savings certificates to comply with the prescribed norms & standards.
3. Anyone can purchase carbon credit certificates on a voluntary basis.
4. The purchase / sale of carbon credit certificates will be as per the Carbon Credit Trading Scheme, 2023.
🎯 6. Tokenizing Carbon Credits on the Hybrid Finance Blockchain (HYFI)
Hybrid Finance Blockchain (HYFI) is a permissioned blockchain for fast, immutable, secure & legally compliant transactions.
HYFI has been granted a Limited Use Authorization License as a Fintech Entity in the Innovation Sandbox by the International Financial Services Centres Authority (IFSCA).
To understand how carbon credits can be tokenized on the Hybrid Finance Blockchain (HYFI), email us at team@hyfiblockchain.com
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