How Nori compares to traditional carbon markets
Nori is on a mission to reverse climate change by establishing the world’s first carbon removal marketplace. If you are just learning about Nori, here is a good primer. If you want to learn about how we’re different from other blockchain efforts, read this article. Because we are 1) pioneering a new industry by monetizing carbon removal, and 2) using software to build a new marketplace, there are several elements of our approach that differ from traditional carbon markets.
Over the last twenty years, a lot of really good work has been done to build environmental markets to slow the accumulation of CO2 to the atmosphere. However, they remain inhospitable to carbon removal and face serious scaling challenges to solve climate change entirely. While our white paper explains some of the conceptual problems in the CO2 markets and how our design addresses them, we are grateful to learn from what they have done well to adopt these concepts so that we can improve on the inefficiencies to achieve a shared goal.
The purpose of this article is to outline where Nori is similar to traditional carbon markets and where we are different.
We think of projects in the same way.
On the Nori platform, there will be similar ways for projects to apply, maintain, and verify their listing. Verification is still provided by trusted third parties. The activity needs to be permanent (for the duration of the contract), additional (in the sense that it represents carbon coming out of the atmosphere that can show a baseline and activity above the baseline), enforceable, and most of all: real.
We will host multiple methodologies for projects to monetize a carbon removal service.
Like Climate Action Reserve, American Carbon Registry, and Verra, Nori will host multiple methodologies for monetizing the carbon activity and creating a new digital certificate. Similarly, anyone can propose a new methodology for consideration.
All methodologies undergo a peer review and continual improvement process.
All of the methodologies and systems for estimating and quantifying carbon dioxide removal will be public and subject to continuous improvement. Implicit in our approach is transparency, science-based metrics, and peer review. We look forward to adopting best practices to continuously improve the systems for estimating and quantifying carbon dioxide removal.
We use some of the same verifiers.
On our platform, we are using some of the same third party verifiers. Any entity that is an accredited verifier by the California Air Resources Board, the above registries, or holds accreditation from the International Standards Organization in greenhouse gas accounting will be pre-approved to operate on the Nori marketplace. For entities who don’t hold these credentials, we’ll have another path to become an accredited verifier for our first methodology—outlined here.
We expect to work with some of the same project developers and brokers.
While we are designing a marketplace that we believe will remove many of the fees that come with existing carbon markets, we aren’t throwing the baby out with the bathwater when it comes to people involved. Along with working with some of the same verifiers in traditional carbon markets, we expect other market participants like project developers and brokers to participate in our platform. Lots of very good work has gone into creating financing options and leveraging capital to drive environmental impact, and brokers will be able to provide clients a new digital asset—retired Nori Carbon Removal Tonne (NRT)— to include in their offset portfolio.
We are creating a new digital commodity “Nori Carbon Removal Tonne” (NRT).
The NRT is different from carbon offsets in a number of ways.
- The first NRTs will come from soil carbon removal in US croplands, an area which has not been successfully served by carbon markets to date.
- A tonne is a tonne is a tonne. Each NRT represents one metric tonne of NRT removed, and will always sell for one NORI token or a combination of cash and a token. CO2 removed from one part of the atmosphere by one process is the same as removing CO2 from a different location by a different process.
- NRTs represent one tonne of CO2 removed from the atmosphere, treating carbon removals as non-fungible with other carbon activities. Projects such as clean cook stoves, renewable energy, avoided deforestation, or avoided emissions will not be eligible for the Nori marketplace.
- The NORI token sets a universal price on taking carbon out of the atmosphere, and does not reward individual projects based on co-benefits.
- When carbon offsets sell more than once they lose their underlying value. NRTs are immediately retired when they are purchased for the first time by a buyer.
Our revenue model is designed to maximize NRT sales.
Unlike traditional registries which make money from project listings and consulting fees for developing new methodologies, Nori earns revenue from transaction fees when CRCs are retired. This means that our design and profit motivations are aligned with maximizing the amount of carbon removed from the atmosphere.
We introduce carbon removal quantification methodologies that are open source.
Our first methodology comes from a dynamic baseline that is developed by COMET-Farm. Our methodologies of how to estimate, quantify, and monetize will always be open source and non-proprietary. Instead of a process that develops complex protocols and obfuscates the calculations to do the actual carbon accounting, the calculations and assumptions will always be transparent and grounded in science.
Forward contract auctions will set NRT prices.
We combined a blind single price auction (sometimes called a Dutch Auction) and forward contracts. To date there has been no true price discovery in compliance voluntary markets largely due to oversupply. They tend to be quickly flooded with a surplus of credits with limited underlying value. The forward contract auction is a mechanism that will allow buyers to set dollar prices that will enable true price discovery.
Additionality tests are embedded in the baseline.
In existing markets, the additionality test (would this project have happened ‘if not, but for’) is highly subjective, not transparent, and decisions are inconsistent from one project to the next. One of the reasons for lack of transparency is that traditional markets ask for financial data that must be kept confidential. Nori does not require an additionality test, because it is intrinsic in setting the baseline via the Nori methodology.
Nori doesn’t require covenants on land for periods extending far beyond the last time the land owner was compensated.
We think that landowners should be compensated for the incremental increase of carbon dioxide. In traditional markets, land owners must promise to maintain the carbon stock for one hundred years, but only get paid for the first twenty. In Nori, suppliers commit to storing the CO2 for 10 years, and then in order to get paid for incremental increases after 10 years, they sign a contract for another 10 year commitment.
At this point of the article you might be asking…
- Better deal for suppliers. We’ve lowered barriers to entry and increased the value to people removing carbon dioxide.
- Better deal for buyers. Through seamless e-commerce transactions, buyers will not need to find counter parties and can easily pay for carbon removal.
- New deal for verifiers. While verifiers will plausibly get paid less per project in terms of CO2 removed, they will have the opportunity to expand the scope of their work by verifying more projects than they currently do.
- Trust. We’re taking an open source software approach and using blockchain technology to improve the trust that people can have in environmental activity actually occurring.
And just remember…