This week, The Universal Protocol Alliance (UPA), a coalition of corporate cryptocurrency and blockchain confreres including San Francisco-era crypto asset VC Fifth Era, digital gold trader InfiniGold, crypto hardware maker Ledger, and digital multi-asset trading platform Uphold, launched the first publicly tradable carbon token. Universal Carbon (UPCO2), trades on a public blockchain and can be bought and held as an investment, or burnt to offset an individual’s carbon footprint.
The UP Alliance—which says it can “tokenize and transparently substantiate any asset”—hailed the debut of the UPCO2 Token, which it says will democratize an important new asset class. The coalition says the token may also (at long last) lead to the establishment of a global clearing price for carbon (such as already exists for extracted commodities as oil and gold) and more resources going directly into environmental projects.
Each UPCO2 Token represents one year-ton of CO2 pollution averted by a certified REDD+ project preventing rainforest loss or degradation. Every Token is backed by a Voluntary Carbon Unit (VCU), a digital certificate issued by Verra and other international standards agencies, which allows certified projects to turn their greenhouse gas (GHG) reductions into tradable carbon credits.
“The projects we support through carbon credit purchases prevent deforestation in the Amazon, Congo Basin and Indonesia as well as other threatened rainforests”‘ said UP Alliance Chairman, Matthew Le Merle. “For a new generation of investors looking for more than mere financial return, UPCO2 offers attractive social, economic and environmental benefits. At a key moment for climate change, UPCO2 allows people worldwide to do good for the planet and potentially do well for themselves.”
The group says that, as with all commodities, prices for carbon credits are likely to fluctuate, but they make a case for durable demand. They argue that while human emissions have grown from 25 billion tons to 55 billion tons between 2008 and 2018, the supply of voluntary credits has remained largely flat, perhaps due in part to constraints from the slow, costly process of Voluntary Carbon Project certification.
They point to data from the World Bank indicating that just 22 percent of global emissions are compensated through the purchase and retirement of carbon credits, while the percentage of countries operating regulated carbon markets has risen from 40 percent of GDP in 2016 to 70 percent in 2020.
“Combating climate cancer”
UPCO2 is available to trade on Uphold, the Silicon Valley cross-asset trading platform founded in 2014 that today serves more than 3 million customers in over 150 countries, allowing them to trade “Anything-to-Anything.” The Uphold platform allows clients to trade across 36 digital assets, 27 national currencies, four precious metals and 50 fractional U.S. equities with no required minimum investment amount.
Over the summer, Uphold debuted a physical gold-backed token, UPXAU, that, like UPCO2, is issued by the Universal Protocol Alliance.
“This year may go down as the key inflection point for climate change,” said J.P. Thieriot, Uphold CEO and Co-Founder of the UP Alliance. “The year it went from far-off issue enshrined in distant accords like Kyoto and Paris, to a palpable threat affecting the lives of tens of millions of people. In recent months, we’ve seen Australia and California on fire, ever more powerful hurricanes, U.S. president-elect Joe Biden announcing a Climate Administration, and companies such as Apple, Microsoft, and Nike voluntarily committing to carbon neutrality.
“Combating climate cancer is likely to become the dominant economic issue of the next 20 years. The UPCO2 Token allows people everywhere to participate in this hugely important – and potentially lucrative – new market, as well as do the right thing for the planet.”
The alliance argues that voluntary carbon credits, which back all UPCO2 Tokens, offer major economic advantages compared with regulated credits. As dollar-denominated, globally-recognized, fungible and perennial assets, voluntary credits last forever, maintaining option value, until consumed or retired by a company or an individual seeking to compensate for carbon footprint.
“It’s astonishing that there is no single global clearing price for carbon emissions,” said Le Merle. “A non-deliverable, digitally-tradable commodity that’s essential for human activity shouldn’t be traded bilaterally on OTC markets, as carbon credits are today.
“One year-ton of carbon means the same everywhere. As a globally-recognized asset, defined by international standards, a Voluntary Carbon Credit should eventually fetch the same price anywhere.” said Le Merle. “We believe that the UPCO2 token has an important role to play in democratizing access to carbon credits, which could eliminate price arbitrage and produce a single global price. This was a light bulb going on for me. Combine a digital asset with a rainforest carbon offset and give everyone in the world access. How could that not be a great idea?”