Before we dive into the process of tokenization, let’s first get an overview of the stakeholders in the voluntary carbon market and what a typical process looks like:
As an example, consider a nature-based project such as the reforestation of a tropical rainforest in South America. The project developer is providing technical assistance and support for the planning, implementation and optimization of the project with regards to project finance, certification strategies, business and management plans as well as monitoring efforts.
He is seeking funding from or through the token seller in return for the carbon credits the project generates. Furthermore, the project developer will hire a verification firm, which is verifying the project concerning the underlying methodologies and the way the credits have been calculated. Once approved and verified, the carbon credits issued by the project will be registered in a traditional carbon registry such as Verra, Gold Standard or BioCarbon Registry.
A carbon registry system is a platform that enables organizations to track and manage their carbon certificates. It also allows companies to claim a credit to offset their unavoidable emissions, a process called “retiring”. Once the company has retired a credit, a certificate for the owner will be issued and it is immobilized in the registry.