Innovation Tagline: Using the blockchain to create supply chain incentives to reduce the 1 Gt CO2e of Greenhouse Gas from methane flaring and fugitive emissions
Project Keywords: #NFT #TokenEconomy #ValueChain #CarbonEmissions #Flaring #Scope3
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Using the derived methane tokens and an oil&gas facility (well) starts constructing an emission profile is constructed for and oil producing facilityfor its fuel production. The emission profile is expressed digitally encoded as a non-fungible token (NFT) smart contract used to the that track embedded methane emissions across other fuel supply chain stakeholders. A A carbon tracker NFT (C-NFT) has been implemented using the ERC-721 standard as part of the Hyperledger Labs Net Emission Token (NET) network to issue, transfer, and retire carbon tokens by different accounts.
- Voluntary Carbon Track Tokens (VCT) are issue by industry members to note the amount of emissions
- realized from flared/vented methane
- unrealized emission from contained in oil, natural gas and derived fuels sold to other facilities in the fuel value chain.
- Audited Emission Certificates (AEC) can be used issued by independent sources to verify the realized emissions of a facility.
- AEC are also assigned to energy consumers based on audited emission profilesto communicate embedded methane emissions downstream. Fuel consumed from high/low methane wells would have higher producers will carrier higher/lower embedded emissions for whoever consumes it.
- Credits, in the form of methane performance certificates, are used to transfer the lower embedded methane emissions from one party to another, helping them the receiver meet their an emission reduction goals goal, while providing incentives the supplier an incentive to reduce its methane emissions at the well.
In a simple example of an energy value chain, imagine an oil & gas producer that extracts crude oil and gas from the ground. A utility fuel from a well. A power plant uses the gas to produce heat and electricity sent to a refinery to process the crude oil into fuel products, such as gasoline for cars, diesel for heavy transportation, and jet fuel for aircraft. A The C-NFT provides contract is used to construct a digital emission profile for accounts owned by each facility, i.e., oil and gas producer/ well, power plant, refinery (Figure 2):
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Each step in the value chain (reporting "silosilos") consists consist of inputs and outputs, are transacted using the NET network, in Carbon Dioxide equivalent (CO2e) of Greenhouse Gas emissions. Based on the Value chain (scope 3) reporting standards:
- Inputs are retired NETs for direct (scope 1) emissions due to fuel burned or indirect emissions for purchased energy (scope 2) or downstream other upstream emissions (scope 3).
- Outputs are tokens transferred downstream to the users of the fuel, such as power plant, refinery, freight companies or airlines.
- VCT are transferred as the CO2e of fuels sold to consumers (used in commercial trade).
- AEC are indirect emissions, e.g., from selling electricity/heat
Emission profiles can explicitly reference a source C-NFT (arrows in Figure 2) to track embedded emissions, for example of the crude oil, or the heat and electricity supplied by the power plant, that went into the finished products.
In practice, we envision a supplier sends emissions tokens (e.g. VCT) to its customer from its facility's emission profile (C-NFT) with oracle-validated methane flaring data, to its customers. This allows organizations to bridge the internal boundaries of traditional data silos to get , and construct a complete view of the energy value chain. An NFT is attached to each quantity of fuel it sells so that the consumer of the fuel could correctly calculate the total emissions of the fuel it uses.
The consumer (e.g., Fuel user such as a freight carrier or airline) could then can identify the embedded waste methane emissions through public view functions of the NFT, such as carbon intensity CI metrics:
- CI of oil & gas supplied (Fuel trade out) -> flared gas + leakage / fuel outputs
- CI of Refined fuel trade -> other emissions (e.g., electricity/heat, flue gases) / refined fuel out
Investors could also purchase C-NFTs' with verified comparatively lower methane emission profiles as part of their climate commitment strategy, incentivizing producers to reduce emissions.
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The consume can reduce (or compl)y with a desired CI standard by purchasing carbon tokens from a low methane supplier. This token transfer could be arranged without physically taking delivery of the fuel. The NFT(s) simply provides a methane performance certificates for the output fuel tokens, helping producers with lower carbon intensity to obtain greater value for their output, or an actual offset, to provide funding for producers with high carbon intensity to reduce it. A certificate of carbon intensity products. A CI certificate is simply a transferrable claim of origin backed up by data. It is similar to a Renewable Energy Certificate (REC), but whereas a REC attests that electricity produced is from a renewable source, the CI certificate of carbon intensity attests the carbon intensity of fuel produced using oil and gas. It could then be transferred between two users of fuel so that a user which is looking to reduce its emissions footprint could pay for a lower carbon fuel, without physically taking delivery of it. This would require simultaneously subtracting the embedded emissions of the fuel inventory of the consumer and adding it back it to the embedded emissions of the fuel inventory of the producer. In future transactions, the producer would have to attach a higher CI to the fuel it sells as it sells certificates of lower embedded emissions. This creates a mechanism where a producer of lower carbon fuels could monetize greater value for their output.
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attests the total emissions of the fuel produced.
In contrast, an offset is an accounting of emissions reduction in return for an investment, such as equipment for capturing, storing, and transporting methane This creates an incentive to make capital investments at high carbon intensity producers to reduce them. To be valid, an offset must follow the general principles of carbon offsets, such as Additionality, Correct Baseline, Permanence, Real, and Leakage protection – In other words, the emissions reductions must not have occurred without the investment from the buyers of the offsets. The offset would be a token which would transfer the emissions reductions to the buyers of the offsets, which again could be a fuel user.
Ownership of CI certificates could be transferred between two fuel users at a premium allowing a user to reduce its emissions footprint. This would require simultaneously transferring, with the aid of a smart contract, fuel token (and embedded emissions) inventories of the consumer and the supplier.
Investors could also purchase C-NFTs' with verified low methane emission profiles as part of their commitment to combat climate change and support the financing of additional infrastructure to reduce methane emissions.
Figure 3 Architecture for verifying waste emission.
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To our knowledge there is no system focused designed to bridge the MRV systems used by organizations to direclty directly identify value chain emissions.
The GHG Protocol provides a free tool to help measures cross-sector value-chain impacts. It provides inputs typically used in LCA practices, which may only provide historic/aggregate data from several years ago. It is more focused on providing measures for individual organizations as opposed to connecting reporting activities. However, according to the Carbon Disclosure Project (CDP), value chain reporting has not been very successful in reducing emissions (Patchell 2018).
Value chain reporting may use the often employs Life Cycle Assessment (LCA) practicepractices, which can be difficult for organizations to implement on their:
- Access the credible metrics restricted by data silos across emission measurement, reporting and verification (MRV) systems
- Rely on historic data based that may be several years old
- Employ of on model estimates that may be subjective and hard to validate
LCA Standard LCA practices applied to fuel carbon intensity CI standards have no been very effective in mitigating emissions (Plevin et al 2017).
CarbonChain is a comparable solution to help organizations assess emission impacts across commodity supply chains. However, it operates as a centralized services, focusing on gathering data into a bigger silo not , rather than connecting them.
Minimum viable product
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Si Chen is the founder of Open Source Strategies, Inc. and coordinates the Carbon Accounting and Certification WG of the hyplerledger Climate Action and Accounting (CA2 SIG). He is the author of the open source book, Open Climate Investing, and a co-editor of an upcoming book "Sustainable Carbon Economy with Blockchain: The Role of Oil and Gas Industry in The Energy Transition".
Woody Moore is currently acting Co-chair of the Climate Action and Accounting Special Interest Group (CA2SIG). He holds a Masters in Business Administration with 10+ years of experience planning and executing Go-to-Market strategies for early stage tech start-ups. He also has expertise in the field of internet governance, where he supports ICANN's (Internet Corporation for Assigned Names and Numbers) multistakeholder decision-making model to help the global community reach consensus around the protocols, standards and policies needed to support the security, stability and resiliency of the internet's Domain Name System.
b. Identify talent/resource gaps and needs (Do you need more support developing the blockchain solution? Do you need support with front end development? Do you need support developing the business model?)
Project Plan
We set the following goals for the a prototype methane reduction C-NFT
- Construct the methane emissions of an oil and gas producer by combining industry repots with with independent data
- Illustrate the verification of emissions in line with recognized standard setting body practices
- Track embedded emissions though to the final producer of a consumer fuel (gasoline/diesel).
Launch phase
- Collect and prepare emission data (16 weeks)
- Select a set of typically of oil/gas well and gather relevant data, sourced from company reports, independent sources, (Flaring Monitor), sensors, or simulated. 1 Month)
- Create/select a representative model/data set for intermediate processing of oil and gas in a refinery and a power plant to produce a consumer fuel.
- Setup up data sources to be storage within a fabric emission channel or IPFS database (Figure 3)
- Build the blockchain oracle (16 weeks)
- Select an oracle service
- Integrate the distributed database (fabric/ipfs) with the oracle
- Register "real-world" methane emission data as digital token in the layer 2 NFT contracts.
- Construct emission profiles (16 weeks)
- Design UI/UX for for constructing and linking emission inventories
- Using the NET network compile emission inventories (accounting boundaries) for each facility using the GHG Protocol corporate reporting standard
- Using C-NFT Bridge accounting boundaries following the Value chain (scope 3) reporting standards:
- Simulate trading of methane performance tokens / CI certificate using C-NFT (4 weeks)