Discover more from Venturing in #ReFi — Web3 for Climate
🌍 Web3 for Climate — Driving Impact w/ Carbon Markets
Your 5-minute deep-dive into the regenerative web3 ecosystem
Happy Thursday,
As ever, we’ve collated your complete ecosystem and fundraising news below.
However, this week the curated readings focus on voluntary carbon markets, concerns, challenges to address, and warnings to ensure this explosion of innovation results in climate progress. Before diving into these concerns, it’s essential to share that
most companies mean well, but the economic incentives and supply constraints drive the current market to waste capital or greenwash
blockchain’s features make it the better technology for long-term carbon marketplaces
the concepts are exceptionally complex to simplify
As a Prelude VC member beautifully framed it, “There's serious value [in web3 carbon], but we all lose if we sacrifice fidelity in our race to build the next multi-billion dollar business.”
Let’s dive in…
Global Ecosystem News 🌊
Fundraising
👩🌾 Earthbanc, a Stockholm-based carbon credit financier, raised a $1.5M pre-seed round.
(Writer’s note: Earthbanc raised from globally distributed investors, including Regen Network Development Inc (USA), Rampersand VC (Australia), Visive Capital (EU), Katalista Ventures (Lithuania), Sting Accelerator (Sweden), clients of Jindabyne Capital and Kaai Capital (Australia), European Space Agency Incubator (Sweden) and Regenerative Ventures Holdings (USA)).
⚡ iEX, a Korean renewable energy trading platform, raised a venture funding round (undisclosed amount) to expand its blockchain-based energy trading & settlement technology to the USA.
👨💻 TraceX Technologies, an agritech platform for “farm-to-fork” supply chain transparency, raised a $1 million seed round led by India’s NABARD, Paipal Ventures, and angel investor Sunil Kumar.
(Writer’s note: projection show the food traceability market may grow at a CAGR of 9.1 percent to reach $26.1 Billion by 2025)
Ecosystem News
♻️ Plastic Bank, a startup using tokenized rewards to create a plastic offset market, partnered with Metro and the America Banknote Corporation to offset >1.3M kilograms of plastic waste.
⛓️ Polygon, a platform built upon Ethereum, announced a $20 million commitment to offset its carbon emissions this year.
(Writer’s note: driving demand for the current market’s offsets is likely accidentally greenwashing unless Polygon is paying a higher price to generate high-quality supply)
🌲 Toucan Protocol had a PR crisis. Reporters revealed that 28%-85% of Toucan’s tokenized credits did not pass modern quality standards.
(Writer’s note: this reveals the lack of need for traditional carbon credit demand and the urgency to address the supply flaws in the current market)
🌳 Open Forest Protocol partnered with the government of Ivory Coast to reforest 20% of the nation’s land cover by 2030.
(Writer’s note: the Aera Force DAO recently allocated its first investment to OFP)
🇯🇵 Giant Japanese conglomerates, Fujitsu and IHI, partnered to create a platform trading carbon credits to help corporations decarbonize.
🌊 Stripe, McKinsey, Meta, Shopify, and Alphabet announced a $925m fund to incentivize novel carbon removal technology
🚴 Algorand, a proof of stake cryptocurrency, is donating $15M to the Climate Ride nonprofit over the next five years.
(Writer’s note: donations to nonprofits, while not offering the ability to “offset” a company’s footprint, is perhaps a more effective use of corporate climate philanthropy)
📈 ClimateTrade, a blockchain-based climate marketplace that recently raised $10M, received approval to operate in the EU’s regulated carbon market.
Newly Launched Projects
Founders, feel free to submit your project here 🚀
🪨 Abu Dhabi’s financial center announced the launch of a web3 carbon exchange in partnership with AirCarbon Exchange.
🪨 Carbon Exchange Africa is launching to offer carbon credit programs to the shipping and oil industries. Three corporates from Kenya and Dubai partnered to build it.
⛰️ ECORISE, a startup hoping to use blockchain to create a land-based stablecoin and incentivize ecological sustainability, announced their upcoming $RISE governance token offering.
Events
🌋 Aera Force and Senken’s founder are discussing Challenges in web3 Carbon Markets with experts from across the climate space. Listen in to the Twitter Space on April 28th at 12 pm ET.
🎨 The Positive NFT Hackathon hosted by the ReFi DAO is open to interested contributors (researchers, musicians, founders, investors) from the 22-24th of April.
Curated Content 📚
1 - Alex @Prelude VC’s thesis on web3 carbon markets (Twitter Thread): The carbon credit market is “embroiled in controversy at the highest level” for well-documented historical reasons. Alex outlines the other challenges that need solving before companies can sell carbon credits as “offsets.” Tokenized carbon credits and ecosystem services have intrinsic value. However, most emerging startups do not solve the climate challenges required to stop large quantities of low-quality carbon credits. Instead, by adding complexity, they’re shifting attention away from the challenges that would drive strong climate impact.
2 - Carbon credits are not offsets: this 5-minute read by authors Robert Höglund and Eli Larson from “the Oxford Principles for Net Zero Aligned Offsetting” is excellent for companies looking to “offset” emissions or #ReFi founders selling carbon credits. The crux of the argument is that, while carbon credits are valuable, “carbon offsets” are not something the market should sell. 1, the market has too many current quality issues (the current supply is low quality — usually not answering long-term concerns or being built on false climate premises). 2, if companies aim to “offset,” the market has economic incentives to provide low-cost (likely scammy) credits. Instead of offsetting, the authors recommend companies ask, “what drives the most benefit with my budget?” One answer they propose is the currently high-cost removals industry.
3 - An evolving thesis for #ReFi to fix carbon markets: Ikarus — a climate investor and contributor at Aera Force DAO — wrote his opinions on the sector after becoming an angel investor in web3 carbon markets. He discusses his predictions for web3 carbon markets (that web3 markets clearly win out over traditional approaches), which marketplaces will capture the most value, and how the market may evolve towards carbon removals. Additionally, he wrote his opinions on current issues and market complexities that founders must first address to realize that promise.
Extra reading on carbon markets
An evolving list of challenges for the web3 carbon industry — created by Adrian Senken (ex-Head of EY Germany’s blockchain labs) and Alex Filotimo (Aera Force core team).
Driving demand (besides for removals or higher price credits) will likely waste capital in the current market:
The Oxford Principles for Net Zero Aligned Carbon Offsetting provide a concise and actionable framework to approach offsets.
The recent capital wasted through the Toucan Protocol quality crisis emphasizes the urgency of these concerns.
The Cambridge 4C initiative is a lesser-known web3 ecosystem player with extensive backing from climate academics.
Aera Force contributors were impressed by their approach when meeting one of the project’s leaders.
Climate VC Shayle Kann and Bloomberg NEF’s Nat Bullard created this 54-minute podcast discussing the potential repeat of 2008’s carbon market crash.
If you have questions about the terms above (i.e., what is #ReFi), feedback, or article suggestions, we’ll happily reply to any direct emails.
With love,
Alex Filotimo and Aera Force contributors
Researching web3 venture investments for a flourishing future
P.S. if you want to help drive research into web3-climate startups, Alex is creating this open-source insights repository.
This newsletter is for educational purposes only. While we strive for accurate and unbiased information, none of it is verified or intended to help as investment advice.