Logo
ScienceStack
Table of Contents
Fetching ...
Sign In

Global, robust and comparable digital carbon assets

Sadiq Jaffer, Michael Dales, Patrick Ferris, Thomas Swinfield, Derek Sorensen, Robin Message, Srinivasan Keshav, Anil Madhavapeddy

TL;DR

The paper addresses credible, scalable offsetting in the voluntary carbon market by introducing the PACT carbon stablecoin. It combines econometric, data-driven baselines with on-chain registry and custodial contracts on the Tezos blockchain, enabling transparent issuance, trading, and retirement of carbon credits. Key contributions include a reproducible evaluation pipeline, a three-contract on-chain architecture, and pooling mechanisms for co-benefits to achieve fungibility and liquidity. This approach promises improved trust, liquid markets, and real-time offsetting, potentially expanding finance for nature-based interventions while maintaining rigorous climate impact accounting. The work demonstrates a concrete path toward scalable, high-integrity carbon credits in a digital ledger ecosystem.

Abstract

Carbon credits purchased in the voluntary carbon market allow unavoidable emissions, such as from international flights for essential travel, to be offset by an equivalent climate benefit, such as avoiding emissions from tropical deforestation. However, many concerns regarding the credibility of these offsetting claims have been raised. Moreover, the credit market is manual, therefore inefficient and unscalable, and non-fungible, therefore illiquid. To address these issues, we propose an efficient digital methodology that combines remote sensing data, modern econometric techniques, and on-chain certification and trading to create a new digital carbon asset (the PACT stablecoin) against which carbon offsetting claims can be transparently verified. PACT stablecoins are produced as outputs from a reproducible computational pipeline for estimating the climate benefits of carbon offset projects that not only quantifies the CO2 emissions involved, but also allows for similar credits to be pooled based on their co-benefits such as biodiversity and jurisdictional attributes, increasing liquidity through fungibility within pools. We implement and evaluate the PACT carbon stablecoin on the Tezos blockchain, which is designed to facilitate low-cost transactions while minimizing environmental impact. Our implementation includes a contract for a registry for tracking issuance, ownership, and retirement of credits, and a custodian contract to bridge on-chain and off-chain transactions. Our work brings scale and trust to the voluntary carbon market by providing a transparent, scalable, and efficient framework for high integrity carbon credit transactions.

Global, robust and comparable digital carbon assets

TL;DR

The paper addresses credible, scalable offsetting in the voluntary carbon market by introducing the PACT carbon stablecoin. It combines econometric, data-driven baselines with on-chain registry and custodial contracts on the Tezos blockchain, enabling transparent issuance, trading, and retirement of carbon credits. Key contributions include a reproducible evaluation pipeline, a three-contract on-chain architecture, and pooling mechanisms for co-benefits to achieve fungibility and liquidity. This approach promises improved trust, liquid markets, and real-time offsetting, potentially expanding finance for nature-based interventions while maintaining rigorous climate impact accounting. The work demonstrates a concrete path toward scalable, high-integrity carbon credits in a digital ledger ecosystem.

Abstract

Carbon credits purchased in the voluntary carbon market allow unavoidable emissions, such as from international flights for essential travel, to be offset by an equivalent climate benefit, such as avoiding emissions from tropical deforestation. However, many concerns regarding the credibility of these offsetting claims have been raised. Moreover, the credit market is manual, therefore inefficient and unscalable, and non-fungible, therefore illiquid. To address these issues, we propose an efficient digital methodology that combines remote sensing data, modern econometric techniques, and on-chain certification and trading to create a new digital carbon asset (the PACT stablecoin) against which carbon offsetting claims can be transparently verified. PACT stablecoins are produced as outputs from a reproducible computational pipeline for estimating the climate benefits of carbon offset projects that not only quantifies the CO2 emissions involved, but also allows for similar credits to be pooled based on their co-benefits such as biodiversity and jurisdictional attributes, increasing liquidity through fungibility within pools. We implement and evaluate the PACT carbon stablecoin on the Tezos blockchain, which is designed to facilitate low-cost transactions while minimizing environmental impact. Our implementation includes a contract for a registry for tracking issuance, ownership, and retirement of credits, and a custodian contract to bridge on-chain and off-chain transactions. Our work brings scale and trust to the voluntary carbon market by providing a transparent, scalable, and efficient framework for high integrity carbon credit transactions.
Paper Structure (38 sections, 3 figures, 2 tables)

This paper contains 38 sections, 3 figures, 2 tables.

Table of Contents

  1. Introduction
  2. Background
  3. Problems in the Voluntary Carbon Markets
  4. Carbon Credit Valuation
  5. Additionality
  6. Leakage
  7. Permanence
  8. Carbon Credit Fungibility
  9. Carbon Credit Liquidity
  10. Architecting our PACT carbon stablecoin
  11. PACT Valuation
  12. PACT Fungibility
  13. PACT Liquidity
  14. Implementing the PACT carbon stablecoin
  15. Algorithmic quantification of project climate benefit
  16. ...and 23 more sections

Figures (3)

  • Figure 1: System architecture showing the evaluation oracle feeding carbon credits (climate benefit) into a smart contract system. Clients can depend on oracles to calculate emissions harm, and indexers can track global progress.
  • Figure 2: Stages in carbon credit lifecycle
  • Figure 3: A visualisation of the counterfactual pixel-matching pipeline to assess the additionality of an avoided deforestation project in Sierra Leone. Pixels in green are from the project and they are matched to similar locations in blue.