Building an End-to-End Digital Ecosystem for Carbon Markets
The Climate Warehouse program prototypes, tests, and develops digital infrastructure to foster greater transparency, trust, and integrity in the carbon markets. Successfully prototyped and tested elements of the digital infrastructure will be operationalized to build the market infrastructure. Examples include the recently launched metadata platform to connect and aggregate registry information (the Climate Action Data (CAD) Trust), digital MRV systems, national carbon registries, tokenization instruments, and a one-stop resource platform that enhances knowledge-sharing and capacity-building.
End-to-End Digital Ecosystem for Carbon Markets
Ecosystem & Collaborations
Ecosystem. Post-2020 markets under the Paris Agreement will be built using a bottom-up approach, as each party to the Agreement must track greenhouse gas (GHG) emissions reductions (or removals) achieved, and has considerable leeway to determine how this will be done.
Carbon markets are facing a future with increased complexity and diversity of approaches to reporting and verification of GHG emissions inventories and mitigation outcomes. Against this backdrop, there is an opportunity to underpin and streamline post-2020 carbon markets with digital technologies. Opportunities to improve efficiency and transparency, while reducing the generation and transaction costs of carbon assets, exist in both the upstream and downstream processes of carbon markets.
Digital For Climate (D4C). The D4C work program is a collaboration with EBRD, UNDP, UNFCCC, and WB that aims to coordinate respective workflows and create a modular end-to-end digital ecosystem for the carbon market. Partners include the European Space Agency (ESA) and the International Emissions Trading Association (IETA).
The World Bank together with the Government of Singapore and the International Emissions Trading Association (IETA) launched the Climate Action Data Trust in December 2022 (for more details, please check the official site).
The Climate Warehouse program partnered with Chia Network to prototype and test the metadata layer (Climate Action Data Trust) during Simulation III (for more details, please check the Simulation III page).
The Climate Warehouse program of the World Bank supports the entire ecosystem to develop digital solutions in the international carbon markets. Enabling the industry to build on top of the Climate Action Data Trust across multiple blockchains will enhance the transparency and integrity required to scale the financing through this market. To this end, the Climate Warehouse program has a collaboration with Chainlink Labs to prototype and pilot interoperability mechanisms to catalyze adoption and enable the scale-up of market infrastructure. For more information on interoperability layers for carbon markets, please check: https://chain.link/use-cases/climate-markets For more information and industry comments on requirements, please contact: Enterprise@chainlinklabs.com
The World Bank recognizes the rapid technological innovation in this space and the emergence of new platforms and will continue to assess the opportunities of using emerging technologies and platforms to support transparency, reduce transaction costs and maintain the integrity of climate markets. The opportunities include support for developing an end-to-end ecosystem that encompasses digital MRV at the project/program level and relevant protocols; real-time data flow through dMRV to the national MRV and registry systems and finally connectivity with the Climate Action Data Trust or another infrastructure element.
While the Climate Warehouse (CW) is open to collaborate through a non-exclusive, no-fee arrangement, using open-source platforms with low environmental impact that promote functionality, interoperability, sustainability, and inclusiveness, the CW is currently focused on delivering the minimum viable products of critical applications and will initiate further collaboration when the current commitments have been delivered. For further inquiries, please contact: firstname.lastname@example.org.
Metadata Layer - Climate Action Data (CAD) Trust
Climate Action Data Trust (link) is a global platform that links, aggregates and harmonises all carbon credit data from project registries to facilitate transparent accounting. The CAD Trust open-source metadata system uses distributed ledger technology to create a decentralised record of carbon market activity with the aim to avoid double counting, increase trust in carbon credit data and build confidence in carbon markets.
By connecting registries through a decentralized infrastructure, and making CAD Trust information publicly available, it will be possible to identify risks of double counting that can damage the integrity of the markets.
The data layer created by the Warehouse can be used to support data sharing, and it provides a backbone infrastructure that can support services built by the public and private sectors to support market activity, such as compliance reporting, transacting, and benchmarking services.
CAD Trust´s media launch took place on October 26. The official launch was announced on December 7, 2022 at the Asia Climate Summit in Singapore. It is planned to deliver a platform that can integrate multiple carbon credit registries in Q2, 2023.
For more information on the testing and simulation activities, please visit these two sites here:
The core registry is a national-level registry that provides basic manual entry functionalities to upload projects and units' data in sync with the CADT.
The PMI enhanced registry was developed by the World Bank and the government of Jordan, offering enhanced functionalities for countries. In addition to managing projects, issuing units, and tracking unit transactions between registry account holders, the Enhanced Registry can track workflows, manage project types and methodologies, and generate reports on project and sector performance. The Enhanced Registry can also be integrated with digital MRV systems for automatic data entry.
Digital Measurement, Reporting & Verification (d-MRV)
MRV is a multistep process to measure, report, and verify emission reductions achieved by a specific mitigation activity. Digital MRV covers the use of digital technologies to improve data collection and verification by increasing transparency, speed and reducing transaction costs substantially while reducing the level of effort.
The World Bank aims to support countries to pilot digital MRV systems to demonstrate proof-of-concept, test interlinks of digital MRV systems with registries, and foster an enabling environment for the implementation of digital MRV.
Increased penetration of blockchain technologies in the carbon market will lead to the development of new marketplaces to trade on-chain credits, launching of opportunities to finance novel carbon removal projects, and creation of platforms that provide tokenization as a service to project developers and registries.
The World Bank is currently conceptualizing market mechanisms to enable native tokenization of carbon credits and plans to pilot these prototypes with carbon market participants to capture knowledge and lessons learned.
The Climate Warehouse offers a wide range of knowledge products on each workstream, such as reports, technical papers, blogs and audiovisuals. Browse the online library by clicking this link and explore a one-stop shop of end-to-end digital infrastructure for carbon market.
The capacity-building programme is conducted in collaboration with the Partnership for Market Implementation (PMI).