China’s Carbon Credit-Backed Digital Tokens to Launch August
China is set to get carbon neutrality tokens (CNTs) as a type of non-fungible token (NFT) stored on a blockchain, Singapore-based Cyberdyne Tech Exchange (CTX) has disclosed to Caixin Global.
According to the exchange whose platform seeks to enable trading of green assets like solar or wind farms and electric-vehicle infrastructure in tokenized form, each CNT will represent 1 ton of carbon credits. They come as tradable certificates that allow holders to emit 1 ton of carbon dioxide or other greenhouse gases, the report says.
Tokenized assets are those sliced into fractions of ownership using the blockchain technology to make it accessible to a wider range of investors. Aside from reducing barriers to investment, tokenization boosts an asset’s trading liquidity and price discovery.
China’s Paris Agreement goal to cut down 60% of the carbon emission per GDP by 2030 based on that of 2005. Though China is the world’s largest emitter of greenhouse gases, it only started its first national emissions-trading market on July 16 based on a cap-and-trade model. The model allows emitters to be allocated a certain number of emissions allowances up to a cap, and then either trade or buy allowances if they remain below or exceed this.
CTX’s launch of CNTs brings a blockchain and crypto approach to carbon tokenization at a time when crypto mining activities have been getting a lot of attention of late going by the carbon emission reduction efforts globally and particularly in China.
Recent coal mine accidents in Xinjiang, Shanxi and Guizhou provinces which saw some mining farms shut down due to a power cut, fuelled even more crackdown on crypto miners and some of them have relocated to other parts of the world.
The focus on Bitcoin miners has been has been supported by various claims including a study published in the broad open-access journal, Nature Communications, which puts the estimate of CO2 emissions from China attributed to the Bitcoin blockchain between January 2016 and June 2018 at up to 13 million metric tons (based on a Bitcoin blockchain carbon emission model).
The authors of the study set an April 2024 timeline for the profit of Bitcoin miners in China to likely drop to zero. They project the annual energy consumption of the Bitcoin blockchain in China would peak at 296.59 Twh in 2024 to generate 130.50 million metric tons of carbon emission correspondingly unless policy interventions were made.
After CTX received its Monetary Authority of Singapore (MAS) Capital Market licence in May, its Executive Chairman and co-founder, Bo Bai, claims the exchange will focus on being “regulated, digital and green” and is the first exchange to require carbon emission disclosure for all assets for both issuers and investors. With services that include the primary issuance, secondary trading, settlement and clearing, and the custody of asset-backed tokens, the exchange says it aims to become an international hub for green financing and the first regulated exchange that enables carbon disclosures for both the issuers and investors.
It notes that the CNT blockchain-backed token which will contain information — including data on emission volume, carbon offsetting and carbon capture — will be traded by global investors on its green digital exchange regulated by MAS. CTX earlier this month signed an agreement with China Taiping Insurance to encourage the investment, trading and insurance of green assets for issuers and investors (both accredited and institutional).