NFTs Bring Equity to Climate Finance For Earth’s Sake
Just like the Earth’s atmosphere, climate-focused NFT and token projects are hot. In Web3, the term ‘ReFi’ has taken off like a billionaire’s rocket.
ReFi, an offshoot of DeFi, refers to the crypto version of regenerative finance: the idea that sustainability and social justice are the primary drivers of investment, and financial return is a secondary concern. The core tenet of ReFi is the regeneration of environmental and societal systems, using decentralized finance as the basis for a self-sustaining circular economy rather than as a vehicle for profit.
As well as benefiting from DeFi protocols, ReFi initiatives can leverage blockchain technology (which enables immutable, unique, and censorship-resistant records to be created and stored indefinitely) to reduce fraud, increase inclusion, and track outcomes, producing a positive impact for people and the planet.
Similarly, the blockchain technology underlying NFTs can drive positive investment in so much more than creative projects like art, profile pictures, or music. Generally, NFT ownership tends to come with much-hyped utility such as entry to a gated Discord community, early access to more NFTs, and the power to earn associated tokens or other rewards. NFTs have been criticised for their impact on the environment, although there are efforts to address this. As individuals, we can make our own informed decisions about where our attention is best directed, but the existence of myriad projects such as the LEAF Coalition, the Forest Conservation Fund, EarthFund, and MakerDAO’s partnership with One Tree Planted proves that there is a growing desire by those in crypto to invest in a greener future.
Does this resonate with you? The Earth and its atmosphere have never been so fragile; any action you can take as an individual matters. Wherever you live on this glorious planet, now is the time to become an informed and responsible global citizen, and that includes thinking about how you invest in and support crypto projects.
The exciting new Carbon Collectible NFTs project which focuses on empowering communities to care for old-growth forests, is one Web3-native way that you can have a positive impact on future atmospheric health. It’s not every day that an NFT purchase provides ownership of the virtual rights to a hectare of dense, mountainous forest in equatorial Africa, along with the knowledge that the purchase guarantees future carbon sequestration.
Decades of Decadence
Carbon sequestration is the process whereby carbon dioxide from the Earth’s atmosphere is captured and stored in a stable state by plants, soils, wetlands, forests, oceans, and other ecosystems which act as carbon sinks.
Prior to the industrial revolution, there was a natural balance to the carbon cycle: the release of carbon into the atmosphere and the amount of carbon being stored were in equilibrium. Human activity, in particular the burning of fossil fuels, has caused a dramatic and deadly shift in carbon emissions which in turn has led to devastating changes to the global climate. The consensus among climate scientists is that to avoid a catastrophic level of global warming, we must act now to halve carbon emissions by 2030.
Global annual fossil fuel carbon dioxide emissions through the year 2004, in million metric tons of carbon, as reported by the Carbon Dioxide Information Analysis Center. Attribution: Mak Thorpe, 2008. Licensed under the CC BY-SA 3.0 licence.
In the 1990s, it was thought that carbon offsets and carbon credits would be a good way to address growing carbon emissions in the short term, while companies with large carbon emissions inherent in their processes could actively work to reduce their footprints. Instead, it appears that some companies are content to buy their way out of this obligation by purchasing offsets and continuing about their business. Three decades later, there are legitimate fears that there has been too heavy a reliance on this strategy, that we have been complacent — perhaps even negligent — allowing big business (such as Tesla) to trade in carbon credits.
Reduce, Renew, Restore, and Ignore
As the Australian Climate Council points out, the highest priority for all individuals should be to reduce fossil fuel use. Only then should consideration be given to supporting carbon offset projects, and the preference is for projects which “offset like-for-like” such as renewable energy use.
Restoration of landscapes, referred to as “vegetation-based offsetting” is recognised as being essential in its own right, but sits third on the Council’s list in terms of high-priority climate actions. The site makes only a passing reference to the fact that long-term storage in vegetation is superior to planting new trees.
There is a certain kind of blindness in asserting that efforts to preserve untouched areas don’t matter much — even this peak climate organisation approaches the issue as though vegetation projects are those which repair forests, not preserve them. This is probably because in the countries most concerned with maximising the economic benefits of their carbon offset schemes, nearly all the old-growth forest is already gone.
Most carbon offset initiatives aim to ‘neutralise’ actual emissions, either by investing in a project that avoids/reduces a future emitted amount (such as renewable energy production), or one that actively captures the carbon already in the atmosphere (such as reforestation). What this approach fails to address, and therefore fails to incentivise, are the areas and practices on earth that are contributing to a reduction in carbon simply by ‘existing’.
Add It or It Doesn’t Count
The chief cause of this failure is the ‘additionality’ feature of currently approved carbon offset schemes. These schemes do not recognise the world’s mature-growth forests as ‘projects’ which address carbon emissions, because they have not been specially created to do so. In other words, the fact that the communities responsible for managing such treasures choose to leave them untouched is seen as ‘business as usual’ and therefore not worth incentivising through the carbon offset market.
Additionality is a requirement that protects the integrity of the incentives market. It has little to do with protecting the planet. Consider this detailed definition of additionality which makes it clear that the primary goal of offset trading is not to reward reductions in carbon emissions, rather it is to ensure that the money changing hands pays only for reductions that would not have happened without the scheme.
This is not to say the concept of additionality does not matter at all. It does, but it is bound up in the imposition of a financial market on the very real climate emergency happening under our noses. A good explanation of why additionality matters for carbon trading schemes can be found in a 2016 World Bank report, titled Carbon Credits and Additionality: Past, Present, and Future.
But additionality leaves us with a ludicrous situation in which the only way that an area of the Amazon rainforest becomes eligible as a carbon offset project is for a reforestation or sustainable agriculture project to be initiated in areas that have already been destroyed. Similarly, the untouched forest owned by the Avatime community in Ghana is ineligible for traditional carbon offset programs if they choose to maintain their pristine local environment.
Avatime’s Time to Shine
And this is really what this article is about: a Web3-based initiative which will allow the Avatime forest community to benefit from what actually makes perfect sense for the planet too — maintaining as much established, ecologically mature forest as humanly possible.
The Avatime region is in the south-eastern corner of Ghana on the continent of Africa. This mountainous region, close to the border with Togo, is home to several communities which make up the Avatime Traditional Area. The forest is dense and impenetrable in places, consisting of many old-growth trees. In terms of carbon sequestration, large trees in untouched old-growth forests are the heavy hitters of Team Earth. According to a recent study of such trees in the United States, the amount of carbon stored is “disproportionately massive” and they are crucial to the process “in forests worldwide”.
The Carbon Collectible NFTs project will mint 20,000 tokens; each one NFT will represent the pay-to-preserve virtual rights to one hectare of the Avatime forest region. What does virtual rights mean?
NFT owners will be purchasing 5 tons of “carbon removal” per year which equate to, and in fact ensure, future carbon sequestration on their assigned hectare.
Importantly, the NFT does not convey any physical rights associated with the forest. That ownership remains with the Avatime community.
Image credit: Carbon Collectible NFTs
Because of the forest’s density, it is difficult to properly assess the level of actual carbon sequestration. To estimate the amount of carbon sequestered by the Avatime forest, the team used data from Global Forest Watch (GFW). This data will be made available to NFT holders via a bespoke Sat Nav app, through which NFT holders can track and measure the area associated with their NFT rights.
Images taken from the Carbon Collectible NFTs Sat Nav app
Ghana’s forests are vitally important to the country, the continent and the planet. A report prepared for the Forestry Commission of Ghana in 2014 highlighted the issues arising from deforestation:
“The extent of deforestation and forest degradation is a matter of national concern, with major implications for national income and employment as well as environmental integrity and services, and for social welfare. The major driving forces are unsustainable logging, unsustainable farming, annual bushfires, surface mining and infrastructural development. Underlying these driving forces are forest policy challenges, population growth, weak institutional coordination, and lack of stakeholder participation in forest management.”
The Carbon Collectible NFTs project aims directly at the last concern, involving the Avatime community in the project from inception. The project team has held a number of recorded discussions with Avatime stakeholders such as the Paramount Chief of Avatime, the Forestry Commission of Ghana, the Department of Agriculture, a local farming cooperative, and local business owners to establish key concerns and ensure their interests are kept at the forefront of decision making.
According to the project’s white paper, 65% of the proceeds of NFT sales will be returned to the community — 15% will go towards forest management and 50% directed to a ReFi Social Innovation Studio. The studio will fund projects that promote “alternative livelihoods” for the local community, such as eco-tourism, bee keeping, mushroom farming, and snail farming. In addition, there will be opportunities for the global community of NFT holders to help solve “local social challenges” using Web3 innovations. For example, a DeFi platform that offers affordable micro loans to local business people could prevent the current exploitation by loan sharks.
The United Nations Sustainable Development Goal (SDG) 15 aims to protect the remaining 1.11 billion hectares of the world’s old-growth forestry ecosystems, and yet the most recent SDG progress report paints a tragic picture, stating that 100 million hectares of forest have been lost in the past two decades.
That’s why the initiative behind the Carbon Collectable NFTs project is so brilliant. In essence, it strives to increase the value of the forest to its local community, which will reduce poverty-driven deforestation.
It leverages the financial contribution of a concerned global crowd while bringing both the responsibility and the reward for preserving the forest right to the communities that are best-placed to enact the protection.
Carbon Collectible NFTs appeal to Web3-centric organizations and impact investors who wish to help offset their carbon footprint with forest preservation and blockchain-based technology. All NFT holders will be able to see the estimated rate of carbon removal per hectare and to learn about special environmental features in the landscape. The information on the project’s website provides an estimate of the number of Carbon Collectible NFTs needed to compensate for the carbon footprint of an individual, an organization, a conference, or even NFT releases, which is a really clear way to present the benefit of sponsoring the project.
Do Your Own (ReFi) Research
There are many projects, protocols, and platforms in the Web3 ecosystem which claim to be part of the ReFi movement, so if you’re looking to get involved it’s important to do your own research and understand what the value proposition is for participants. Good places to start your research are the ReFi DAO website or the ReFi podcast. You can also support a range of climate-focused projects through Gitcoin Grants.
The Gitcoin Grants website, filtered by the ‘Climate Solutions’ tag as at July 23, 2022
To find out more about Carbon Collectible NFTs, visit the website, or join the Bankless Africa channel in the BanklessDAO Discord to learn about a range of DeFi and ReFi projects happening across Africa. The global reach of DAOs, combined with the ethos of distributed decision making, means we are better equipped now than at any time in history to address the imbalances in our planet’s health. Projects that are locally connected, environmentally friendly, and economically sustainable are a win for the Earth. Combined with the power and passion of the growing Web3 community, these types of projects are a giant leap in the right direction for all mankind.
Trewkat is a writer and staff editor at BanklessDAO. She’s interested in learning as much as possible about crypto and NFTs, with a particular focus on how best to communicate this newfound knowledge to others.
BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.
Disclaimer: this isn’t investment advice. This article has been written for informational and educational purposes only and it reflects my personal experience and current views, which are subject to change.
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