KlimaDAO launched on October 18th, 2021, with a vision to scale the impact and efficiency of climate finance globally through building transparent, neutral, and public infrastructure for the carbon market. It achieves this through the development of a Web3-enabled tech stack that can improve the performance of the carbon markets.
Since our launch one year ago, significant progress has been made within the on-chain carbon market. Initially creating the incentives to bridge over 25 million carbon credits onto the blockchain by using the treasury’s bonding mechanism, KlimaDAO has seen its liquidity pools and offsetting infrastructure increasingly adopted across Web3 and beyond. Around 500 users—from individuals to large organizations such as Polygon—have offset carbon credits using the KlimaDAO retirement aggregator, with many having written unique climate pledges.
In the past few months alone KlimaDAO has delivered a number of new products to market that can facilitate greater adoption of this new technology, including its climate pledge dashboard, carbon dashboard, and retirement aggregator (see the Q2 2022 Roadmap here).
KlimaDAO has also continued to develop a strong, value-aligned community, and the DAO has participated in consultations and engagements with the wider carbon market and policy arena. These include both the Verra and Gold Standard tokenization consultation processes (including playing a leading role in the latter’s ongoing working groups) and the community voting in favor of removing the problematic HFC-23 credits from the BCT pool and properly disposing of them.
The DAO has also begun to develop partnerships and engagement with the market’s supply side, and is now playing a large role in defining how new tokenized carbon can be onboarded within the ecosystem. Examples include the C3 Forum post on introducing EEMIP credits and the KlimaDAO Forum proposal to explore investment into supply-side innovations.
The implementation of our Green Fee switch on the Sushi Decentralized Exchange, which allows users to programmatically offset up to one hundred times their transactions’ carbon emissions, represents a new type of financial infrastructure that ensures the negative externalities associated with climate breakdown can be addressed at their source.
Similarly, our partnership with Confluence Analytics on the Climate Optimized Direct Index (CODI) will allow investors of all sizes to systematically offset the emissions of their portfolios through a robo-investment tool linked to Klima Infinity. Digital carbon and KlimaDAO’s product and service rails make the aforementioned innovations possible.
While significant progress has been made in the first year, and KlimaDAO has presented the carbon markets with an alternative approach to unlocking scale for climate finance – one that is now being widely recognized for its transparency and openness – there is still a lot of work to do across the entire supply chain to increase understanding and adoption of Web3 technology in the Voluntary Carbon Market (VCM).
On the supply side of the market, there remain concerns about not only the quality of carbon credits that are issued and transacted in the market but also how these carbon credits that are created can be efficiently integrated into the demand side. In addition, raising and allocating more funding that flows into the development of new, high-quality carbon projects remains an area that Web3 could meaningfully contribute to as the market scales up over the coming years.
On the demand side, there remains a high barrier to entry. Within the legacy market, third-party providers are still required for businesses and consumers alike to access the market. Barriers also remain in terms of access to the KlimaDAO ecosystem, particularly around process complexity related to setting up crypto wallets and executing transactions on the blockchain.
Solving these issues will lead to higher throughput within the KlimaDAO ecosystem and the wider VCM. The achievement of this requires KlimaDAO to further engage with the supply side of the market, while also continuing to develop best-in-class infrastructure for demand-side participants.
The year ahead: A focus on accessibility
The year ahead will involve iterative improvements to the accessibility of the on-chain market, both for environmental assets and for information related to market dynamics. Increased accessibility will help catalyze the adoption of Web3 technology by VCM incumbents, which have thus far been hesitant to interact with the DeFi landscape due to various user experience and user interface hurdles. Ultimately, deeper liquidity, greater asset diversity, and easier access will help the digital carbon market become the de facto arena for VCM commercial activity.
In addition to continuing to release products that improve the usability of KlimaDAO’s infrastructure, the DAO will continue its market engagement. The delivery of inbound marketing will help increase people’s awareness and understanding of, as well as engagement with, KlimaDAO’s infrastructure. More understanding and awareness of what KlimaDAO is building will enable the benefits of Web3 technology to be passed through to the market itself. In addition, KlimaDAO will continue to engage with the carbon standards bodies that are defining their approaches to the tokenization of carbon credits.
In the past 12 months, KlimaDAO has presented the market with new technology that can help scale the carbon markets in line with their growth forecasts for the next decade and beyond. As a Deutsche Bank report from October 11th recognized:
[c]arbon credits will remain one of the most important tools to mobilise capital towards mitigating climate change.
There is a clear and pressing need in this growing market for the kind of technologies being pioneered by KlimaDAO.
Moving forward, KlimaDAO is prioritizing the development of infrastructure that makes the adoption of its tech easier for those who wish to consume tokenized carbon credits and claim their environmental benefit, while simultaneously working with those on the market’s supply side and defining the best and most efficient ways to integrate new carbon supply into the Web3-enabled carbon markets. While instability continues to plague the macroeconomic environment, and has been an almost continual feature of KlimaDAO’s first year, we will continue to build the foundations of a new regenerative economic paradigm that has the planet’s health at its core. One year on from now, we'll be looking back at the year of Web🌳.
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