04.07.2017
What are the criteria (“filters”) for issuance/registration of carbon units in DAO IPCI?
Any user, potential Issuer, may initiate the procedure by creating specific registry indicating the name for the units to be registered and the name of Independent Entity. This registry shall be empty and shall not be actually created in DAO IPCI or represented in DAO IPCI dAPP interface until the Independent entity and overall limit for this registry are approved by the Operator. Before the registry for specific units is actually created in DAO IPCI, the Independent Entity has to confirm agreement to work with this registry by indicating its unique address and the unique address of the Issuer’s contract. Operator has to add the Independent entity into the List of Independent Entities (“accreditation” procedure).
Therefore, creation of a registry initiated by the potential Issuer requires approval of both the Operator and the Independent entity. None of them may create registry or register environmental (carbon) units independently.
The Operator is acting on the basis of the requirements, criteria, terms, and conditions of the climate program he is representing. The Operator is responsible for admitting issuers and independent entities to DAO IPCI, establishing limits for the registries, validity period for the units, etc. The Operator has the necessary authority to perform these duties and block the activities of other participants and of the units, by removing registries and deactivating specific contracts. Deactivation of the contract specific environmental units are based upon, results in prevention of any consequential operations with them.
The only current Operator is assigned by the Integrated Program for Climate Initiatives.
The Independent entity is acting on the basis of agreements with the Operator and the Issuer and is authorized, and responsible for registration of the number of units equal to verified (assured) amount within the limit and validity period established by the Operator. Supporting document (verification or assurance report) linked to this specific registration is to be downloaded by the Independent Entity to IPFS.
Any discoordination in the procedure (wrong names, addresses or values) would result in failure of registration and issuance process in whole.
What is potential liability of the Independent entity?
Potential claims on the side of Buyers that the environmental units acquired are not valid for legal of physical reasons:
The only responsibility of the Independent entity in DAO IPCI is to make sure that the amount of units registered is exactly equal to the amount verified or assured in the report (statement). Current DAO IPCI rules imply that the environmental units acquired in DAO IPCI are intended for voluntary offsetting of carbon footprint only. This may change once legal agreements with relevant climate programs, GHG emission compliance programs on recognition of specific units and transactions in DAO IPCI are in place. However, the responsibility of the Independent entities in this case will not change.
To mitigate the physical risks for some projects (e.g. removals by sinks recognized as void in case of forest fires) part of the environmental units shall be withheld by the Operator for a specific period of time. The Independent entity’s advice and cooperation on specific parameters to keep certain part of units in reserve appropriate for specific projects and units in reserve might be requested by the Operator. In this case the reserved units are kept by the Operator until the reservation period is over.
Determination, verification (assurance) for removals by sinks (e.g. reforestation projects) would require assessment of risks of extermination of the forest by fires, insects etc. For example, if the risk would be evaluated as 20% in a 5-year period, then for this project(s) 20% of environmental units registered shall be withheld for 5 years by Security Reserve smart-contract at the disposal of the Operator. Once the reservation period is over the units shall be returned to the Issuer automatically.
What are DAO IPCI development prospects?
Projections for Russia are nearly impossible, as currently DAO IPCI is the only way to express either supply or demand. Projected Russian demand is limited by voluntary offsetting by corporations and individuals and is assumed to be initially at the level of 100, 000 tCO2 per year. Initial supply confirmed by Russian project owners – at least 500,000 tCO2 per year.
We are finalizing arrangements with Aeroflot (Russian Airlines) to provide the air travelers with the opportunity to voluntary offset carbon footprint through DAO IPCI. Aeroflot (Russian Airlines) carbon footprint is at approx. 8 million tCO2 per year
A number of Russia and international companies have expressed interest in using carbon offsets of Russian origin. E.g. OK RUSAL carbon footprint is at approx. 9 million tCO2 per year.
At the same time, DAO PCI team is working on specific arrangements with major international voluntary programs, which have shown interest in placing their own carbon units onto the DAO IPCI market, and in marketing carbon units of Russian origin. Annual volume of voluntary market is 80-100 million tCO2.
DAO IPCI immediate target is pilot phase market under CORSIA (marked based measure for international aviation). Projected CORSIA-based market volume for 2020 – 2025 is USD2.2 - 6.2 billion.