Carbon Credits Market Project

Carbon Credit Market Project

 The ALO Global Project aims to make a positive contribution to the carbon credit market and work for environmental protection to avert climate change.

To this end, we consider participation in carbon finance and trading to be strategic.  Thanks to new financial instruments, we can finally stimulate the reduction of greenhouse gas emissions, achieve cleaner air, clean and sustainable energy and create new jobs. In addition, carbon finance is a set of innovative instruments that help put a price on companies’ carbon emissions. Based on the “polluter pays” principle, the price of emitting a ton of carbon is paid by companies that, by obligation or of their own volition, want to offset their carbon emissions.

The Antarctic Foundation (AAL), the operational structure of the Global ALO Project, identified this still developing market as an opportunity to apply its expertise in the area of blockchain, cryptocurrencies and smart contracts. The intention is to create faster and more advanced financial instruments to help facilitate carbon finance solutions.

In terms of problems, below we highlight some of the issues that some analysts have identified as slowing down the implementation of Carbon Finance and Carbon Trading, and what the Global ALO Project proposes to do to make them smoother, cheaper and faster.

Let us now turn to climate change and the initiatives launched by nations following the Kyoto and Paris environmental summits.

Climate change

The latest UN climate report mentions the main causes of climate change.

Emissions from fossil fuels, such as coal, oil and gas, are primarily responsible for climate change, accounting for more than 75% of global greenhouse gas emissions and more than 90% of carbon dioxide emissions.

Greenhouse gases remain suspended in the atmosphere and have the particularity of retaining heat. As soon as the sun’s rays reach them, they heat up even more. The overall effect is an increase in the temperature of the atmosphere. Over time, the increase in temperature has the effect of altering climatic processes and the normal balance of nature. If no action is taken, the consequences could be dramatic.

It is estimated that the average global temperature has increased by 1.5 degrees since the beginning of the industrial era, from 1850 to 2020. Unfortunately, projections indicate that the temperature increase could reach almost 2 degrees Celsius by 2030.

The consequences of the temperature increase would be very serious. Unless the increase can be contained to around 2 degrees Celsius, we could see extreme weather events of great severity, such as an increase in hurricanes, heat waves, droughts, floods and fires. Moreover, as tropical areas would be the most affected, the climatic consequences could push populations living there to migrate to more northern regions.  There are an estimated 3 billion people living in the tropics, who could no longer live in these areas because they would become too inhospitable.

Another consequence that is being monitored as of now is the Gulf Stream, which is the current that runs through the Atlantic Ocean from south to north and vice versa, and has a strong influence on the climate of Europe and America. A recent slowing of the current itself has been observed, probably caused by excess cold water from melting Greenland glaciers due to rising temperatures. The current slowdown is approaching 15%, which has led to more storms and more heat waves in Europe. According to scientists, a further rise in temperature could cause a real permanent change of climate with unimaginable consequences.

Even the spread of new viruses could be attributed to man-made environmental impacts. According to a report by the World Wildlife Fund (WWF), the emergence of epidemics is due to indiscriminate man-made deforestation. “Wherever trees are cut down and wildlife is killed, germs from the area are found flying around like dust kicked up from debris.” According to WWF, forests would be the best natural antivirus. If there were no deforestation, viruses would not leave their natural habitat. In natural forests, viruses find their habitat in nature and in animals. However, when forests are destroyed, viruses have to “settle” with new species, generating epidemics. Therefore, the forest ecosystem is our natural protection against extreme weather events, CO2 accumulation in the soil, atmospheric pollution and the spread of epidemics.

To date, it is estimated that we have already destroyed half of the world’s forest area. According to a WWF study, it is estimated that since the beginning of the agricultural revolution “there were about 6 billion trees on Earth, while today there are about 3 billion left”.

International carbon credit agreements

In 2016, an agreement was reached as part of the resolution of the World Conference on the Environment held in Paris the previous year, in which 190 countries committed to improve their environmental protection strategies to curb greenhouse gas emissions and limit the maximum temperature increase to 1.5 degrees by 2030.

In July 2021, the European Commission adopted a package of proposals to align climate, energy, land use, transport and taxation policies to reduce net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. Achieving these reductions over the next decade is crucial if Europe is to become the first climate-neutral continent by 2050.

The EU’s energy production and use sectors are responsible for 75% of greenhouse gas emissions, so the European Commission is calling for an accelerated transition to greener energy systems. The EU Renewable Energy Directive sets a target of producing at least 40% of energy from renewable and sustainable sources.

The EU, in compliance with the Kyoto Protocol subsequently ratified by the 2015 Paris Protocol, sets an annual emissions cap for industries belonging to the aviation, power plants and shipping sectors, which are eligible for an emissions trading system known as the EU Emissions Trading Scheme (EU ETS). Each company is measured to calculate the amount in tons of carbon it emits annually. The EU then sets a number of emission allowances (CAP) that the company can emit during the year. If emissions are higher than the stipulated CAP, the company will have to buy emission allowances on the market to offset the surplus. If, on the other hand, emissions are lower than the stipulated CAP, the company can sell the surplus. The cap (CAP) decreases each year, ensuring a reduction in total emissions. Each ETS represents one metric ton of CO2.

In 2021, the EU ETS trading volume was €760 billion, an increase of 164% compared to 2020. The increase is mainly due to a rise in the price per ton of CO2 and a modest increase in traded volumes. Prices per ton of CO2 in the period from 01/01/2022 to 31/08/2022 ranged from a low of €58.65 to a high of €97.82.

The voluntary CO2 market

The voluntary market has emerged as a complement to the regulated market. Emission reduction certificates that cannot be traded on the regulated market are traded on this market. There are two types of companies that buy emission reductions: 1) companies subject to mandatory emission reductions 2) companies that voluntarily pursue emission reductions in accordance with the Kyoto Protocol.

The dynamics of the voluntary market are based on the emissions compensation mechanism. If a company exceeds its allowable emissions, it can offset the excess by purchasing carbon credits from projects that, in turn, capture carbon by removing it from the atmosphere.

Projects can be classified into four main categories:

1) Renewable energies such as solar and wind energy

2) Improvements and optimizations to achieve energy efficiency

3) Elimination of greenhouse gases

4) Carbon sequestration in the soil or through reforestation of the forests

Projects must be audited by certification bodies to verify the environmental impact and calculate the reduction of emissions and their equivalence in carbon credits. To demonstrate this, certificates are issued in which one carbon credit is equivalent to one ton of carbon captured.

Offsets can also take place between companies that are not located in the same country and/or continent. If, for example, a European company wants to reduce its greenhouse gas (GHG) emissions, it can buy carbon credits from a reforestation company in a developing country. It is assumed that we only have one atmosphere, and that it does not matter where the polluting gases are emitted or where the emissions are reduced, because sooner or later they will end up mixing with each other.

Moreover, there will be a significant benefit to European business, as carbon credits from emission removal projects traded on the voluntary market are priced lower than the official prices traded on the regulated market. The price is, of course, variable, depending on the type of project, supply and demand, and the country of origin. Moreover, it is almost always the result of bilateral negotiation.

Following the Kyoto Protocol in 1997, the United Nations allowed developing countries to set up emission reduction projects. These projects must be duly certified before being sold to companies that need to offset their carbon footprint.

The life cycle of a carbon credit consists mainly of five key stages.

The Antarctic Foundation AAL business model

STEP 1: Description of the project and business plan

The Antarctic Foundation (AAL) aims to identify entrepreneurs in the forestry and livestock sectors to facilitate and assist them in describing the project. Legal requirements are also examined at this stage.

Our consultants then proceed to draw up a business plan from which the potential profitability of the enterprise should be derived. 

Unfortunately, we have observed that many companies “die” in this initial phase, due to the inability of entrepreneurs to access experienced and cost-effective consultants.

It is well known that many withdraw because the consulting costs are too high and demotivating. Small entrepreneurs, in particular, cannot access this market because of the initial investment required. The Antarctic Foundation (AAL) has a project to bring together tens or hundreds of small entrepreneurs and give them access to a larger and more profitable business.

Carbon Cycle Steps
 STEP 2: Submission of the project to a certification body

The certification company assesses the project’s potential to eliminate, reduce or avoid CO2 emissions. Upon certification, entrepreneurs can offer their carbon credits on the Voluntary Market, each of which is equivalent to one ton of carbon eliminated, reduced or avoided. The credits can be purchased worldwide by companies that have established their own emissions reduction plan. Again, the cost of certification can be prohibitive for many businesses.

In this phase, the Antarctic Foundation (AAL) can intervene in different ways.

  1. a) Direct funding to PHASE 1 stakeholders, after verifying the business plan and revenue potential of the project.
  2. b) Thanks to available fintech tools, funds can be raised for financing through online fundraising activities
  3. c) Reduce certification fees through agreements with leading certification companies while waiting to complete the process of setting up our own certification company.
STEP 3: Verification of the carbon credits issued in order to be able to market them

The authenticity of the carbon credits is established at this stage, as they come from an already certified project. In addition, each credit has a value that is specifically derived from the project it comes from and the geographical area. Double counting of carbon credits is one of the most common problems in international transactions. The issuing country deducts the credit from its emission obligations and the receiving country does the same, resulting in double counting of the same credit.

The Antarctic Foundation (AAL) has considered how to solve this problem and will soon launch the True Carbon Credit (TCC), which is a system that allows each carbon credit to be identified and endowed with a unique identity that will avoid double counting and at the same time guarantee its authenticity through the creation of an NFT.

STEP 4: Registration of carbon credits in the GHG Registry

The GHG Registry is a platform where the project and its carbon credits are registered. Once registered, the carbon credits are called VCUs (Verified Carbon Units) and are tradable through the Registry platform. Through the Registry, you can buy, sell and track the movements of the certificate.

Unfortunately, registration is quite cumbersome and complicated, and above all very expensive. Registration is therefore a cost that affects the profitability of the project. In addition, fraud has been discovered on numerous occasions, which has tarnished the image of the relevant registries. It is also in the registries’ interest that these phenomena are not repeated, as they undermine their credibility and generate distrust in the entire carbon credit market.

Therefore, the True Carbon Credit (TCC) project of the Antarctic Foundation (AAL) will interface with the registries through an API that will have several functions, including linking the NFT with the corresponding VCU to reduce the possibility of fraud to zero. In this way, each project will be able to verify the movements of its credits and compare them with its own results.

STEP 5: Sale of carbon credits and presentation of accompanying documentation

The Antarctic Foundation (AAL) is responsible for assisting its clients in the sale of carbon credits. In the case of the purchase of carbon credits, it is responsible for assisting the investor in the purchase of verified carbon credits from good quality projects and ensures that the process is smooth and fast.

As part of this, the Antarctic Foundation (AAL) will initiate intermediation activities in the Voluntary Market. This activity aims to facilitate the knowledge of the market by the buyer and seller. The profitability of this activity comes mainly from commissions. The next step will be to become carbon retailers, by creating a portfolio of properties specialized in forest restoration projects, in addition to the company’s own Amazon rainforest conservation project. Sixty percent of each portfolio will be used for marketing and the remaining 40% will be reserved as an investment fund.

2) The Global ALO Project is perfecting a carbon credit tokenization system to streamline and facilitate transactions. Blockchain is a database that can be shared publicly in a decentralized circuit. With the tokenization of carbon credits, much would be gained in terms of transparency of transactions, as well as speed and security. Tokenization therefore plays an important role in expanding and simplifying the market by meeting the demand of many investors who want to participate in environmental finance.

As noted above, the Antarctic Foundation (AAL) will be involved in all phases of carbon credit processing, with the prospect of multiplying revenue opportunities at all key points in the market. Furthermore, when a market is booming, the demand for services and the return on benefits increases exponentially. When added to direct investment in carbon credits, this creates a solid asset base consisting of a portfolio of assets that can be sustainably revalued over time. 

How much is the Voluntary Carbon Market (VCM) worth?

In 2021, the trading volume in the Voluntary Carbon Market reached 1 billion US dollars. Estimates are very optimistic. The carbon market can only grow. For many companies, reducing carbon emissions has become paramount. Some companies, such as Microsoft, not only want to reduce emissions to zero, they even want to cancel all their historical emissions.

Large companies that are not yet required to reduce their emissions, but want to do so voluntarily, are turning to the voluntary market to buy offsets to their carbon footprints. Companies such as Amazon, Google, Disney, Apple, Microsoft, Stripe, Shell, Coca Cola, Xerox and British Petroleum are spending millions of dollars on carbon credits on their own initiative. They have realized that they have to make environmentally friendly choices to continue to be preferred by consumers if they want to remain profitable. And that is why they are publicly communicating their environmental policies. It is expected that in the near future all public companies will be required to disclose their carbon footprint and will also have to explain how they intend to reduce it. The same will apply to the private sector. 

Even investors have realized that polluting companies will not only lose consumer preference, but will become much less competitive, as they will have to keep buying carbon credits, which will become increasingly expensive. In fact, statistics show that many investors have already abandoned coal, one of the most traditional energy sectors, not only because of its unpopularity, but also because it will be much less profitable.  This is why the voluntary carbon credit market could be the fastest growing in the next 30 years.


The Future of the Carbon Credit Market

The International Monetary Fund is calling for a global increase in the price per ton of carbon as a requirement to keep emissions below 2% by 2030. According to the IMF, the global average price should reach $75 per ton. Considering that the carbon price currently stands at only 6 US Dollars per ton at 80%, we realize that the carbon price still has a long way to go in an upward direction. In this regard, in March 2022, the IMF launched a proposal to set a variable minimum carbon price per country, which should range from $25 a ton up to $75, depending on the level of development. With this proposal, the IMF wants, on the one hand, to recognize fairer prices for developing countries and, on the other hand, to force companies to consider alternative measures to reduce emissions.

Major international financial companies have been showing great interest in carbon credits for some time now. Financial instruments such as investment funds and carbon ETFs have already been created, making it possible to offer new financial products to the public. 

Such a positive general context with excellent growth prospects is the backdrop against which the Antarctic Foundation (AAL) has already begun to operate and in which it will be able to make a difference by contributing its own technological innovations. The objective is to add value to the carbon market players with our high quality solutions and services.

From this point of view, the next issue of the Antarctic Token (AAL) to facilitate transactions in the carbon finance and trading ecosystem is presented to the public.

The Antarctic Token is issued at a very competitive price. It represents a great opportunity for investors to enter a new and very promising market, on a massive scale, but with a small investment.

According to Robert Kiyosaki, investor and author of the book “Rich Dad, Poor Dad”, investing now in the carbon market is “a bigger opportunity than gold, bigger than oil and bigger than Bitcoin”.

As companies and individuals embark on the path of eliminating CO2 from their carbon footprint, the demand for carbon credits will increase dramatically, so prices will inevitably rise. As prices rise, there will be many more investors rushing to buy carbon credits and cryptocurrencies such as the Antarctic Token that tokenizes carbon credits. However, good investors are known to be those who buy when the price is low and sell when the price is high.

In an undiscovered market whose existence is still unknown to the public, the Antarctic Token represents the perfect investment opportunity, with almost zero initial risk and incalculable potential. If you are looking for an investment for the future, if you want to reduce your carbon footprint, if you want to protect yourself from inflation and increase your capital, the Antarctic Token is the right instrument to achieve your goals.