Trusted Carbon Credits

The Cambridge Centre for Carbon Credits is an initiative I started with Andrew Balmford, David Coomes, Srinivasan Keshav and Thomas Swinfield, aimed at issuing trusted and verifiable carbon credits towards the prevention of nature destruction due to anthropogenic actions. We combine large-scale data processing from Remote Sensing of Nature and Planetary Computing with econometric techniques and decentralised Tezos smart contracts to design a carbon marketplace with verifiable transactions that link back to trusted primary observations.

Origins and Early Work

In around 2019 Srinivasan Keshav joined the Cambridge Computer Lab from Waterloo, and we got chatting about ways that computer science could be applied to helping our colleagues in conservation with their quest to improve nature-based solutions (both deforestation and rewilding efforts). We wrote down our initial thoughts with some colleagues in "How Computer Science Can Aid Forest Restoration" and ran a summer UROP set of projects (writeups here) which had to be done remotely due to the 2020 lockdown.

Later during the pandemic, Srinivasan Keshav and I joined up with Andrew Balmford from Zoology and David Coomes and Thomas Swinfield from Plant Sciences and the Cambridge Conservation Institute to establish a centre dedicated to combining classic topics from computer science (big data processing, reproducible computation and distributed consensus) to the pressing problem of issuing trusted and verifiable carbon credits towards the prevention of nature destruction due to anthropogenic actions. Our centre was announced later in 2021 officially.

Scientific and Methodological Advances

An Ex-Post Credibility Framework

The foundation of 4C's work rests on establishing scientific credibility in carbon credit methodologies. Our early warnings in Credit credibility threatens forests published in Science highlighted how inadequate quantification methods threaten not just carbon markets but forest conservation itself; if credits don't accurately represent environmental benefits, relying on them could exacerbate rather than mitigate climate change.

We also developed a framework for addressing permanence (now called "durability") concerns in Realizing the social value of impermanent carbon credits, showing how to estimate the net social benefit of impermanent nature-based interventions through conceptualizing permanence as additionality over time, risk-averse estimation of reversal costs, and post-credit monitoring to correct overly conservative forecasts.

Building on these foundations, our Nature Sustainability commentary Nature-based credit markets at a crossroads on carbon and biodiversity credits, led by Thomas Swinfield and Sophus zu Ermgassen, advocates for selling credits only after they have been proven to be demonstrably additional using robust statistical techniques ('ex-post'). This represents a fundamental shift from the questionable ex-ante methodologies that have dominated voluntary carbon markets and led to widespread over-crediting concerns.

Continuing to produce nature-based credits using dubious accounting methodologies will yield limited carbon and biodiversity gains. Establishing scientific credibility unlocks the potential of credits to meaningfully contribute to targets of the Paris and Kunming-Montreal agreements. -- > Nature-based credit markets at a crossroads

Risk Mitigation and Release Schedules

We developed predictive release schedules for nature-based solutions, addressing a pressing challenge in carbon credit markets of how to finance projects upfront while maintaining credibility (like our ex-post approaches above). The key innovation in our Mitigating risk of credit reversal in nature-based climate solutions by optimally anticipating carbon release work is developing "release schedules" that predict future drawdowns and allow issuing extra credits when actual performance exceeds conservative predictions. This approach removes the need for traditional buffer pools entirely while bounding the risk of project failure.

This addresses the critical financing question of where early project finance comes from if projects can no longer sell ex-ante credits credibly. As Siddarth Shrikanth notes in the crossroads paper above, we need to figure out which projects fall into which risk archetype and create enough trust that outputs will be valuable enough to justify upfront investments, similar to how other industries handle uncertain but potentially valuable payoffs.

Remote Sensing Methods for Forest Carbon

Our comprehensive review The path to robust evaluation of carbon credits generated by forest restoration and REDD+ projects, led by Charlotte Wheeler with David Coomes and Srinivasan Keshav, lays out the path to robust evaluation of carbon credits generated by forest restoration and REDD+ projects. We recommend that voluntary carbon markets evolve as science advances, incorporating high-resolution maps of carbon stocks, causal inference methods for additionality, and remote sensing approaches for leakage detection.

The work builds on our detailed PACT Tropical Moist Forest Accreditation Methodology v2.1 methodology that demonstrates a comprehensive pipeline for tropical moist forest carbon accounting. Converting this manual specification into reproducible, automated code remains a key challenge we're tackling through Planetary Computing.

Blockchain Infrastructure and Digital Assets

The reproducibility and traceability requirements for trusted carbon credits lead us to investigate blockchain-based infrastructure for a trustlesss network. We developed the PACT (Permanent Additional Carbon Tonne) stablecoin system described in Global, robust and comparable digital carbon assets. This creates a new class of digital carbon asset combining:

Remote sensing data from Remote Sensing of Nature for measuring forest carbon changes
Modern econometric techniques for establishing additionality and avoiding over-crediting
On-chain certification and trading on the Tezos blockchain for transparent verification

PACT stablecoins are produced as outputs from a reproducible computational pipeline built using Planetary Computing infrastructure. The system quantifies CO2 emissions and allows similar credits to be pooled based on co-benefits (biodiversity, jurisdictional attributes), increasing liquidity through fungibility within pools. We chose Tezos for our prototype for its low-cost transactions and minimal environmental impact (crucial for a climate-focused application).

Our implementation includes a registry contract for tracking issuance, ownership, and retirement of credits, and a custodian contract to bridge on-chain and off-chain transactions. This brings scale and trust to voluntary carbon markets by providing a transparent, scalable, and efficient framework for high-integrity transactions.

Legal and Policy Framework

Carbon credits are not just scientific or technical artifacts; they're also legal property with complex tenure and taxation implications. Our A Legal Perspective on Supply-side Integrity Issues in the Forest Carbon Market paper, led by Sophie Chapman, examines supply-side integrity issues from a legal perspective. A forest carbon credit represents a specific type of property, and integrity requires addressing:

Tenure arrangements that influence implementation and proper allocation of carbon revenue between participants
Recognition in taxation and climate regimes affecting government's ability to tax revenue and use credits for climate commitments
Ownership clarity at the heart of carbon transactions and finance flows

Addressing these legal issues appropriately is fundamental to market integrity and ensures that carbon finance reaches the communities actually protecting and restoring forests.

Looking Forward

The combination of rigorous science (ex-post methodologies, remote sensing, causal inference), computational infrastructure (reproducible pipelines, planetary-scale data processing), blockchain technology (transparent certification, fungible pooling), and sound legal frameworks are all components of a bigger market structure. Our research in 4C is now being spearheaded by a spinout charity Canopy PACT that will take the project forward.

You can follow the outputs and publications from 4C directly on the website at https://4c.cst.cam.ac.uk.