As per the latest IPCC report we must swiftly act on a variety of fronts to achieve our common goal of not increasing the world temperature by more than 1.5 degrees Celsius.
There are multiple reporting standards and multiple initiatives leading to only knowing how much each company or individual actually produces. That is the first step towards appropriately pricing carbon to each emitent. However the next step must be the actual creation of a global market of carbon. Although there have been individual emission cap-and-trade schemes, the largest of which is in the EU and California, there still doesn’t exist any unified global carbon marketplace. On top of that, individuals cannot easily participate in the fight with climate change with the exception of making rational purchase choices, purchasing offsets or being a member of the Global Forest network. That is why a new global emission trading stablecoin is proposed in the form of GRN Stablecoin.
The process behind stablecoin is the following:
- Green0meter purchases emission trading certificate at a market price to establish the GRN Token collateral
- Green0meter issues an equivalent number of GRN Tokens with the ratio ((price per 1 emission certificate purchased/ number of CO2e tonnes)/100)
- The GRN stablecoin Tokens are 200% collateralized. Meaning that each 100 Tokens that are issued are backed by at least 2 emission trading certificates.
- The GRN Tokens are considered as algorithmic stablecoins. The stablecoin uses an algorithm underneath which issues more Tokens when price increases, and buys them off the market when the price falls.So whenever the demand goes up, the total supply of GRN Tokens increases and when the demand goes down its total supply decreases making it a lot more affordable to ensure prices stay fixed and immutable.
- Token owners own either the equivalent of a full emission trading certificate or a fraction of the emission trading certificate. They however never own the emission trading certificate since the value of the underlying certificate to which the GRN Token is pegged will form the basis of the stablecoin and thus will remain in the property of Green0meter.
- Traded emission certificates as part of the stablecoin:
- EU-ETS isin operation since 2005, the European Union Emissions Trading System (EU ETS) has faced a number of challenges resulting from the creation of the largest market for an environmental commodity in history. Currently, the EU ETS operates in 31 countries — all 28 EU Member States as well as Iceland, Liechtenstein and Norway — and covers CO2 emissions from emitters in the power sector, combustion plants, oil refineries and iron and steel works, as well as installations producing cement, glass, lime, bricks, ceramics, pulp and paper. More than 10 000 covered entities account for around 2 gigatonnes or 40% of EU total greenhouse gas emissions.
- California Cap-And-Trade is a key element of California’s strategy to reduce greenhouse gas (GHG) emissions. It complements other measures to ensure that California cost-effectively meets its goals for GHG emissions reductions.
- New Zealand Emissions Trading Scheme (NZ ETS) entered into force in 2008 and is the only ETS to include forestry as a covered sector.
- Tokyo Metropolitan Government Emissions Trading System (TMG ETS) was established in 2010. The targets energy-related CO2 emissions from industrial facilities as well as public and commercial buildings;
- Korean ETS began in January 2015 and covers over 60% of the country’s emissions. Over 500 companies (thousands of individual facilities) are covered in the power and industry sectors, but also waste and domestic aviation.
Pros and Cons of a stablecoin
- More decentralized
- Liquidation can take some time due to the transaction processing
- Very transparent — easy for everyone to inspect the collateralization ratio of the stablecoin
- Can be used to create leverage
- Can be auto-liquidated during a price crash into underlying collateral
- Less price stable than fiat stablecoin
- Tied to the global price of CO2 emission equivalents
- Relatively complex
The stablecoin is currently in the process of preparation so stay tuned for more information.