The CARBON Copy (CC) team had a chance to sit down with Sebastian Persch, a forest scientist for reforestation project developer Forest Carbon, to discuss Web3's potential in the carbon credit space, the phenomenon of carbon tunnel vision, and what his future outlook is for regenerative finance.
CC: Great to have you with us, Sebastian.
Sebastian: Happy to be here and excited by the work you're doing. We need more of a spotlight on the space.
CC: We appreciate that. First off, we'd like to get a sense of how you got into forest science in the first place. Did you know at a young age or get into it later?
Sebastian: I grew up in a rural part of northern Germany surrounded by forest. When I wasn't at school, I was always keen to run around in the forest studying the birds and trees, playing with sticks and building huts. It was endlessly fascinating. When I graduated high school, I asked myself what's the most fun thing I could do? It didn't take long for me to realize that I just had to remember my childhood to find the answer. That's when I knew that forestry was what I wanted to do for a living. I started with temperate forestry, but with an aim to study tropical forestry for my master's.
CC: That's a great origin story. How did you come across Forest Carbon?
Sebastian: It was back in 2015. I randomly met a former co-founder at a dinner party in Bogor, Indonesia. We started chatting about forestry. It turned out that Forest Carbon had just won a contract to do forest inventory for the Lao People's Democratic Republic. Forest inventory was something I had a lot of ideas about, so I suggested that Forest Carbon should leverage things like real-time automated data analysis to significantly increase the efficiency of the forest inventory process. Luckily for me, Forest Carbon was really impressed and I soon started as a freelance consultant assisting with the field training of the staff in Laos. From there, I got more and more involved in other projects, including carbon projects in Indonesia.
CC: And how would you describe Forest Carbon? What is it trying to achieve in terms of climate impact?
Sebastian: Forest Carbon is a premium carbon project developer in Southeast Asia, with a focus on nature-based projects in Indonesia. Its overall goal is to protect and restore as much forest and nature as possible in order to win the fight against climate change.
CC: Let's move to Web3. What's your opinion of its potential impact on your work? Are you bullish or bearish?
Sebastian: I'm definitely bullish on Web3's impact. The use of distributed ledger technologies like blockchain can address some of the key problems with the voluntary carbon market (VCM), like increasing the transparency and integrity of a traditionally opaque process. Web3 also has the potential to help scale the VCM through the implementation of tokenized carbon credits and trustless marketplace infrastructure.
CC: How far along are we in terms of actual implementation of these ideas? Are there any projects you can point to as examples?
Sebastian: We're still at an early stage of Web3 implementation in climate projects. Blockchain, for example, remains a relatively new technology that most people still associate with crypto trading. As a result, exploration of use cases for real-world assets like carbon credits has yet to really take off. This isn't all that surprising because there is always a natural hesitancy towards adoption of emerging technologies.
There are some great examples of pioneers in this space. Toucan Protocol is one. It was among the first companies to tokenize carbon credits by bridging off-chain credits on-chain. Senken is another. It has emerged as a thriving Web3 marketplace for carbon credits.
CC: But there's still the issue of carbon credit certification, is there not? Like, issuing or bridging credits on-chain is an important step, but isn't much of the centralisation in the industry at the certification stage?
Sebastian: Yes, that's true. A handful of private companies, like Verra and The Gold Standard, do the vast majority of certification. This is something that we need to address in order to increase the transparency of the certification process. Web3 can definitely be part of the solution. For example, the implementation of a decentralised certification protocol. But it's important that we acknowledge that the certification companies are making progress towards more transparent, Web3-based processes such as issuing carbon credits natively on-chain.
CC: Perhaps it would be better to back up a step. How exactly does the carbon credit certification process work?
Sebastian: The first step is for the project developers to create a document that outlines all of the activities it will carry out throughout the project's lifespan. At the foundation of this document is a methodology approved by a standard like Verra. Methodologies differ depending on the activity, so, for example, renewable energy has a different methodology than carbon sequestration in tropical forest ecosystems.
What the methodology describes, in effect, is how the project is going to calculate its climate impact and, ideally, its co-benefits towards biodiversity and community development. In the case of the reforestation of degraded rainforest, this means describing the calculations the project developers will use to quantify carbon sequestration and, thus, carbon credits.
Once the document is complete, the project developers need to hire a standard-approved 3rd party auditor to review the calculations. After some back and forth with the auditor, the document is then submitted to a certification standard for approval.
It's important to note that there is up to a 2-year lag between the time the project document is approved and the issuance of the first carbon credits. During the first year of this period, the project developers create and submit monitoring reports using on-the-ground data. These reports are proof that the project developers are meeting the estimate submitted in the project document.
During the second year of this period, the monitoring reports are approved by the certification company, who then issue the credits. In a typical scenario, carbon credits with a 2021 vintage, for example, are issued in 2023.
CC: Wow, that's a rather complex process. Okay, so you have these big companies acting as gatekeepers, but this has a kind of positive effect because we need to make sure the carbon credits being issued are actually reducing greenhouse gas emissions. Is the democratisation of carbon credit issuance a good idea? Or, more specifically, what needs to be done so that democratisation doesn't result in a bunch of junk credits and scams?
Sebastian: That's a really good question. I totally agree with your statement that we need companies who ensure the quality and integrity of credits, such as ratings agencies like BeZero, Sylvera, and Renoster. This is important for buyers, but also critical for actual climate impact. Beyond that, there are organisations like ICVCM (Integrity Council for the Voluntary Carbon Market) which produce guidelines - the Core Carbon Principles - that the certification standards must abide by in order to get accredited and secure a "high integrity" label.
Democratisation, obviously, will result in more competition in the market. This ultimately drives innovation and a push towards greater transparency and integrity. But there is also the risk of fragmentation, which could lead to fraud. Standard-level certification (e.g., ICVCM) and project-level ratings provide a strong measure of integrity and quality, this creating an environment where fraudulent credits simply won't survive in the market because no one will buy them.
CC: There's such a thing in the climate impact space called "carbon tunnel vision". The idea is that we are focusing much of our energy on reducing carbon emissions without considering other elements such as biodiversity. Is this a real concern in your mind?
Sebastian: The focus thus far has been on carbon because it is fairly easy to quantify. But we are now starting to see a change in the nature credit market with the introduction of things like biodiversity credits. PV Nature by Plan Vivo Foundation or the Nature Framework from Verra are two good examples.
It does have to be noted, though, that high-quality carbon projects always factor in community development and biodiversity. This is called the CCB (Climate, Community and Biodiversity) Standard. It ensures that communities are included and consulted throughout the process and a priority is placed on increasing biodiversity. The resulting carbon credits from these high-quality projects also fetch a higher price in the market, which increase the incentives to implement the CCB standard.
CC: Is the nature credit system a good way to incentivise climate action?
Sebastian: Yes. Every action counts, be it offsetting your own carbon footprint or corporations moving towards net-zero by buying carbon offsets. Credits are an instrument that provides the incentives for project developers to make demonstrable climate impact, whether it be the reforestation of degraded land and are production of renewable energy.
CC: Where does the average person fit into this? Do they have access to these credits?
Sebastian: Yes, they do. There are multiple service providers where the average person can offset their carbon footprint through the purchase of carbon credits. We mostly seem them integrated into the airline ticket purchasing process through companies like Atmosfair.
CC: Before we go, we wanted to get your thoughts on regenerative finance (ReFi). How do you see ReFi evolving over the next decade or so? Is mainstream adoption a real possibility?
Sebastian: I have great hopes of ReFi becoming an integral part in the fight against climate change. We see more and more projects coming online, which is great, but I am expecting a sort of consolidation period in the future. Currently, there is this "gold rush" sentiment where everything seems possible. This is good, but only the ReFi projects that create real impact and gain real traction in the market will survive.
CC: Last one. Any thoughts you'd like to leave our readers with?
Sebastian: We are all sitting in the same boat. Everybody is impacted by climate change already. Every action counts, be it small or large, so I encourage you to be part of the solution.
CC: Thanks for taking the time to speak with us, Sebastian. We wish the best of luck to you and Forest Carbon in your fight against climate change.
The answers in this article are the personal opinions of Mr. Persch and do not necessarily reflect the views of Forest Carbon.