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Climate Finance 101: Introduction to Carbon Currency

'We start thinking about putting prices on water, on trees, on biodiversity'

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Yudi Sherman

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Yudi Sherman

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November 22, 2022

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01:06 AM

Climate Finance 101: Introduction to Carbon Currency

At the COP27 climate conference this month, former Bank of England Senior Adviser and G20 Co-Chairman Michael Sheren encouraged members of the global elite to embrace “climate finance,” which includes a carbon currency. 

“Carbon, we already figured out, and carbon is moving very quickly into a system where it’s going to be very close to a currency, basically being able to take a ton of absorbed or sequestered carbon and being able to create a forward-pricing curve, with financial service architecture, documentation,” said Sheren at a side panel called “Digital environment assets programmable money and the future of climate finance.” 

Sheren also urged governments to put a price on natural resources. 

“We start thinking about putting prices on water, on trees, on biodiversity […] How do we start tokenizing? How do we start building systems that actually create not only the value, but transfer that value around the world?” he asked. 

Sheren would be pleased to know that carbon currency and climate tokenization already exist. 

A mobile app feature from Australia’s Commonwealth Bank tracks the carbon footprints of its customers based on their transactions. The app then analyzes the customer’s carbon footprint, including how many trees were destroyed by the customer’s purchasing behavior. The customer is notified within the app and is offered the opportunity to pay to offset their carbon footprint.   

Commonwealth Bank told America’s Frontline News that the atonement is accomplished when the customer purchases Australian Carbon Credit Units (ACCUs). An ACCU is a financial instrument that represents one carbon ton removed from the atmosphere. ACCUs are issued by Australia’s Clean Energy Regulator for the abatement of carbon emissions. 

For example, a construction company contracted for a large project may take strides to reduce its carbon footprint and satisfy the Clean Energy Regulator’s (CER) environmental urges. For each carbon ton the construction company avoids emitting, the CER adds an ACCU to the Australian National Registry of Emissions Units

A second company might realize that its project, on the other hand, is about to exceed the government’s allowed cap on carbon emissions. In such a case, the company may purchase ACCUs to extend its limit. 

Companies and individuals may transfer and soon trade ACCUs on an exchange regulated by the CER. 

“The Australian Carbon Exchange will operate in a similar way to online stock exchanges, but in the purchase, clearing and settlement of Australian carbon credit units (ACCUs) and potentially other types of carbon units and certificates,” says the regulator. 

One Singapore-based company named Metaverse Green Exchange (MVGX) has already built an exchange ledger for people to trade carbon units in the metaverse. This will be made possible through asset-backed Carbon Neutrality Tokens, which is one of the company’s “Carbon-as-a-Service" solutions. 

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