Carbon credits exchanges are merely adopting ‘old-school’ models based on a traditional ‘walled garden’ approach. The COP28 award-winning solution by ZERO 13 offers an interconnected digital carbon market infrastructure that is leveraged by multi-blockchain technology. Chairman & CEO of GMEX Group and ZERO13, Hirander Misra, highlights the collaborative ‘network of networks’ approach to ensure the scaling of climate finance in a way that did not exist in the market before.
ZERO13, our Platform-as-a-Service ecosystem focused on the 4Cs – Climate, Communities, Companies, and Countries. The ecosystem instils trust, enables interoperability, and supports monetisation between buyers and sellers of climate projects/carbon credits and other ESG assets with a focus on water, energy, and food.
According to the World Economic Forum, there is a $4-5 trillion dollar climate financing gap hindering a climate-resilient future, yet fragmented, siloed, and analogue approaches are also hindering financial capacity building.
Hirander Misra, Chairman & CEO of GMEX Group and ZERO13, believes that the old-school models adopted at carbon exchanges launched over the last few years have not worked.
“These venues generally have very little liquidity and while they say they are digital, many use a manual account at a registry such as Verra and input that information into the exchange system. Some may tokenise that input, but the majority still return to a ‘walled garden'”, he says.
If carbon credits stop being sold or pledged, the ‘walled garden’ approach means they cannot now get back into the registry and are effectively orphaned at the exchange. In addition, buyers may be in a country with its own registry or may want to use a different registry to the seller of the credits yet are forced to open accounts at multiple registries as it’s not possible to move inventory around.
“Despite all these factors, it astounds me that some exchange technology and post-trade market infrastructure vendors are stating that they have an interoperable carbon credit offering when they do not. Instead, they are merely offering an old-school centralised exchange model with integrations that take years to get in place. With the speed the market moves, this approach cannot scale”, says Hirander.
In working to address the climate challenge we are not only dealing with some organisations ‘greenwashing’, but we are also faced with organisations ‘technology washing’. The use of the term interoperability is often used incorrectly to describe solutions that are, in fact, vertical and closed. It is time for those looking to deploy carbon market infrastructure to wake up and take a reality check, as by making incorrect claims about their technology, they are not only doing a disservice to their shareholders and customers but also to the climate.
ZERO 13: Ensuring trust and interoperability for carbon exchanges
An interconnected digital carbon market infrastructure is needed to address fragmentation and siloed approaches by encompassing interoperability across both APIs and blockchains, to bridge both traditional and newer digital approaches. “This is what we are doing at ZERO13 with our COP28 award-winning solution, which utilises multi-blockchain technology and will scale climate finance in a way that did not exist in the market before, using a collaborative ‘network of networks’ approach”, says Hirander.
It is evident that exchange and financial market infrastructure Model 1.0 is not fit to support the carbon markets and will likely become extinct over the coming years as standalone exchanges will not be able to survive.
“Today’s exchanges are perceived by many people like the phones of the past – slow and unintuitive with limited functionality – trying to operate in the era of iPhones and smart technology. Can we think of a time before the smartphone? Technological innovators like Apple and Samsung revolutionised and democratised the way we access and generate information, and are seen as providers of knowledge rather than simply products. The days of supplying technology and commanding a premium for supplying products and services are over”, he says.
Model 2.0 is all about industry collaboration and distributed interconnection across jurisdictions to achieve greater positive climate impact, and ZERO13 are firm believers of this. “We should be collectively working towards Digital Carbon Exchange 2.0 – the much-anticipated climate-focused sequel”, concludes Hirander.
