FAQ

Rethinking the carbon economy

Dealing with corporate sustainability transformation and carbon markets is complicated and confusing. The new generation of Web3 and climate companies is not making it any easier. We have compiled the most important questions.

Questions

Understanding the market

Time is short and that's why many are setting out to work in the climate sector and offer solutions. Where a lot is happening, it's hard to keep track of it all. Here you will find the answers to the most important questions about Web 3 x Climate.

How does voluntary offsetting work?
The principle of offsetting is based on the idea that the climate does not care where greenhouse gases are emitted or avoided. Therefore, emissions caused in one place can also be removed in a distant place. Since avoiding one's own emissions is always preferable to offsetting them at a later stage, voluntary offsetting should only be part of an ambitious decarbonization strategy.
How do carbon credits work?
A carbon credit is a certified and tradable asset that represents one tonne of CO2 or equivalent greenhouse gases that have been avoided or removed. Each credit is unique and is stored in a public register. They are created by climate offset projects and can be retired by the credit holder to offset the corresponding volume of residual emissions.
What are tokenized carbon credits?
Tokenized carbon credits are carbon credits that have been transferred from traditional voluntary carbon market registries to the blockchain or have been created natively on the blockchain. Tokenisation has many advantages, it makes carbon credits more substantial and dynamic: They can be provided with more information, access to them is simplified, trading is facilitated, price signals can be better set and standards can be introduced more easily. Any tokenized carbon credit on senken is equivalent to normal carbon credits.
Isn’t blockchain bad for the environment?
We are often reminded of the energy consumption of blockchains. And yes, the energy consumption of current dominant crypto applications, especially Bitcoin, is very high due to the consensus algorithm used (Proof of Work). The problem is well known, which is why blockchains now exist that are much more efficient and whose energy consumption is comparable to modern cloud applications. Senken uses the blockchains of Celo and Polygon, both of which operate using the Ethereum blockchain, which in turn uses Proof of Stake consensus algorithm. These are energy-efficient networks and conserve resources. They also offset their emissions and are thus carbon-neutral. Our friends at Toucan have taken a closer look at this topic and released an excellent blog post: “Can Blockchain be Good for the Climate?".
Why purchase carbon credits?
Many companies are determined to do their part to mitigate climate change. Reducing carbon emissions is a business imperative. However, many corporate models are unable to change their emissions as quickly as markets would like. Nevertheless, many companies have decided to do something. They use carbon credits to compensate for their emissions to achieve their net-zero targets. Offsetting emissions reinforces commitment, demonstrates concern to partners and customers, and creates a sustainable corporate identity. Some companies even go a step further and offset more emissions than they produce. This is referred to as being 'climate positive'.
Aren't carbon credits and carbon offset projects ineffective?

There are repeated reports in the media that the voluntary carbon market is not effective. In some cases, there is even talk of scams. And yes, the quality and confidence in the current market are poor to say the least. This is caused by suboptimal climate and carbon project registries, a lack of understanding of what does and does not constitute good offsetting, and a significant absence of transparency in the climate project value chain.

Fortunately, solutions are already being worked on. Global guidelines and standards, e.g. VCMI, ICVCM, are emerging to help define appropriate levels of quality for Carbon Credits — on both the supply and demand sides. At the same time, new technologies such as satellite imagery and remote sensors make it easier to develop carbon ratings based on data and facts that provide insight into quality. Regenerative Finance applications and services are trying to create new incentive structures and market mechanics to direct more climate money to the impactful stuff. We at senken incorporate all these new guidelines and datastreams in order to increase transparency and offer trustful transactions.

We're happy that much is being done in the market to cure the ills of the current system. And yes, most likely not all initiatives will help us. But the question should not be whether to offset or not. Because offsetting, if done properly and communicated transparently, can help effectively. It offers a swift alternative to the all-important decarbonization that unfortunately too often remains at the planning stage. Especially when high-quality offset projects are supported through climate finance and net-zero pledges.

Moreover, we have reached a point where even a definitive halt to all CO₂ emissions will not be enough to achieve our climate targets. Plus there will always be emissions that are difficult to avoid even with the most ambitious reduction efforts (residual emissions) or that have accumulated in the atmosphere (historical emissions).

According to the United Nations Intergovernmental Panel on Climate Change (IPCC), we need to actively remove up to 310 billion metric tons of carbon by 2100 to limit global warming to 1.5°C.

We can do this by protecting natural carbon sinks such as forests and peatlands (not only to continue storing carbon, but also to support biodiversity and wildlife) and by investing in technology-based carbon removal projects.

For these projects, carbon credits have emerged as an efficient and effective transaction tool. And the more we pay attention to transparency and itnegrity in the future, the greater the impact.

Therefore, the question should not be whether to offset or not. The real question is how to approach and build carbon markets with confidence and quality.

Is offsetting carbon emissions greenwashing?

A popular critique is that offsetting emissions is greenwashing. Particularly at risk are organizations that use offsets solely to make climate claims or that are not transparent about their offset strategies. However, as long as companies keep two points in mind, no one will talk about greenwashing:

Offsetting is not an excuse for skipping the decarbonization of one's business. It should be used as part of a broader strategy that follows the mitigation hierarchy (avoid, reduce, offset).

Offset transactions only have a positive impact on climate if the credits used are additional, permanent, and justified by legitimate, verifiable carbon accounting. Buyers should conduct sufficient due diligence and should report transparently on their investment activity and on the details of their use of credits.

To avoid greenwashing, transparency is key.

How to choose the right carbon credit?

Choosing the right type of carbon credit is an important part of offsetting your carbon footprint. There are a number of factors to consider, including the type of the project, its location, its co-benefits, and its impact characteristics.

At a high level, a distinction can be made between projects that store carbon and those that avoid it. Projects to avoid emissions are e.g. protecting a forest from deforestation or improving renewable energy generation in the grid. Projects to remove GHG emissions, e.g. planting a forest that absorbs CO2 as it grows or introducing direct carbon capture technology.

Both categories can be achieved through natural and technological solutions. There is an ongoing debate about which solution is more effective, but both are essential in the fight against climate change. Capture credits account for 3% of the market. Nature-based solutions without capture account for 45 %.

Location is important because lots of companies choose projects that offset emissions in their regions. Co-Benefits evaluate the social and environmental benefits that carbon removal projects generate.

Clear statements on the characteristics of the impact are also important. Good projects are transparent and share data on additionality (would that carbon be offset if the credit wasn’t generated?), permanence (What is the risk of stored carbon being re-released into the atmosphere?), leakage (What is the risk of displacing activities that cause greenhouse gas emissions from the project site to another site?) and verification method (Can the offset be verified through a registry and science-based methodology?).

How do carbon credits help me to achieve net-zero?

Net-Zero is the goal of completely eliminating the number of greenhouse gases produced, which is to be achieved by reducing emissions and adopting methods to absorb carbon dioxide from the atmosphere. Companies pursuing a net-zero strategy reduce all direct and indirect emissions to a level consistent with the 1.5 degrees target of the Paris Climate Agreement.

    While we're on the subject, there are other terms you've probably heard before:

  • Carbon-responsible means that you balance your emissions with common offsets which are based on avoiding the release of additional carbon dioxide into the atmosphere, for example by preventing deforestation or supporting renewable energy projects.
  • Carbon-neutral means that carbon emissions emitted are balanced by an equivalent amount being removed elsewhere through carbon sequestration.
  • Climate-neutral means reducing all greenhouse gas emissions to zero while eliminating all other negative environmental impacts an organization may cause.
  • Climate-positive or carbon-negative means climate action beyond achieving net-zero carbon emissions. Climate positive seeks to create environmental benefits by removing additional carbon dioxide from the atmosphere. Microsoft, IKEA, Henkel or H&M are at the forefront of a major new corporate movement.

You can’t become net-zero by buying carbon credits coming from avoidance projects. You need to invest in carbon removal credits that actually draw down greenhouse gases. And only when you have actively reduced your emissions and balanced the hard-to-reduce ones with carbon removal credits, can you achieve the status of “carbon neutrality” or “net-zero”. But it’s totally fine to also invest in carbon avoidance credits in order to bring down the overall global emissions.

What are the benefits of blockchain-based trading of carbon credits?
The current voluntary carbon market is hardly digitized and almost everything is hardly transparent. The more digital technology is used for project development, monitoring, reporting and verification, the greater the need for information transparency. The nature of blockchain technology offers the advantage of increasing the visibility and traceability of tokenized assets (in this case, carbon credits), leading to better transparency, integrity and liquidity in the market.
What is Senken's role in the carbon market?
Senken considers itself an ecosystem orchestrator. We integrate Web3 carbon infrastructures and services and make them accessible on an easy-to-use platform. With senken anyone can effectively invest in carbon credits and transparently disclose their impact.

Benefits

Transparent Climate Action

The ideation for senken dates back to 2021. Together with the University of Digital Science, Adrian and René founded the Competence Center for Progress and Innovation, which is dedicated to the question of"How do we solve the world's most important problems and inspire people that these problems can be solved?"

To show that action is possible, we founded the first iteration of senken: a carbon emission calculator that computes carbon footprints of your NFTs, Bitcoin and Ethereum wallets.

After extensive research and development, participation in Gitcoin GR13 and many intensive discussions with experts from the climate x web3 ecosystem, senken was incorporated in March 2022. Since then, everyone involved has made Senken what it is today: more than the sum of its parts.

Glossary

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  • Blockchain

    A blockchain is a distributed, public database. In the context of carbon credits, this database is used to manage carbon credit transactions in a transparent and traceable manner.

  • Bridge

    A bridge facilitates cross-network transactions by allowing assets to move between different databases and blockchains. E.g. Toucan builds a bridge to move carbon credits from Verra’s registry into their blockchain-based database to create tokens that represent carbon credits.