Carbon markets are still an emerging market and likely will have issues.
Bitcoin economics are improving – S19JPro breakeven is now at $80/MWh
Gas markets continue to move down.
Power markets have dropped but still are not on pace with gas.
To continue the theme from last week’s report on carbon, in this report we discuss the issues in the newly emerging carbon offset market. The carbon offset market trades carbon credits or allowances, which represent an amount of CO2 removed from the air. The market for carbon credits is no different than any new emerging market in the past, in that it currently has a problem with bad actors conducting “honest” miscalculations. We saw this in the crypto space and the dot.com boom. The latest setback for carbon markets is a potential 400% overcounting of carbon credits by one of the largest climate consultancies, South Pole, which works with hundreds of companies including Gucci, Volkswagen, and energy supplier Greenchoice.
The carbon market is unique, in that credits are generated from emission reduction projects that may or may not happen without the intervention of the credit provider. For example, the credits in the above case were generated by helping communities near Lake Kariba farm more sustainably by chopping down fewer trees. This keeps forests intact and thus theoretically prevents a certain amount of greenhouse gas emissions. Computing how much CO2 will be saved in this and similar instances is not black and white: a baseline estimate needs to be understood. A key assumption would be to determine if the community would have operated differently without the interference of the project – exactly how many trees would have been chopped down? This is really the only way to truly determine the value that should be given to the credit.
As noted in the article in Follow The Money (ftm.eu), the prime issue is the baseline estimate: “At the time, South Pole estimated the future deforestation in the Kariba area at 3.2 per cent of the forest area per year. In other words, if the forest were not protected, it would almost completely disappear within 30 years.”
For that estimate, South Pole relied on previous deforestation figures from areas adjacent to the Kariba project that were not being protected. Their reasoning: if deforestation increases faster in these areas during the project than it does in Kariba, that difference can be attributed to the credit provider CGI’s efforts.
However, satellite data recently collected by South Pole shows that the company has overestimated the rates of deforestation in the adjacent areas. This is good news for the climate, but bad news for South Pole’s business: “currently, the company is overestimating the deforestation it would have prevented by about a factor of 14.”
Therefore, they likely sold carbon credits that are not supported by emission reductions. However, given the nascent emergence of this market, the rules and ramifications for these types of events are not clear and legal precedents are limited.
As we have previously noted, the crypto space is seeing a similar evolution. At BitOoda, we understood that successful emerging markets would require a regulated framework, and so we focused on building within such a framework and working with reputable counter parties on regulated platforms. With this approach, we can help you with your sustainability goals, power, and bitcoin hedging.
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To continue the theme from last week’s report on carbon, in this report we discuss the issues in the newly emerging carbon offset market. The carbon offset market trades carbon credits or allowances, which represent an amount of CO2 removed from the air. The market for carbon credits is no different than any new emerging market in the past, in that it currently has a problem with bad actors conducting “honest” miscalculations. We saw this in the crypto space and the dot.com boom. The latest setback for carbon markets is a potential 400% overcounting of carbon credits by one of the largest climate consultancies, South Pole, which works with hundreds of companies including Gucci, Volkswagen, and energy supplier Greenchoice.
The carbon market is unique, in that credits are generated from emission reduction projects that may or may not happen without the intervention of the credit provider. For example, the credits in the above case were generated by helping communities near Lake Kariba farm more sustainably by chopping down fewer trees. This keeps forests intact and thus theoretically prevents a certain amount of greenhouse gas emissions. Computing how much CO2 will be saved in this and similar instances is not black and white: a baseline estimate needs to be understood. A key assumption would be to determine if the community would have operated differently without the interference of the project – exactly how many trees would have been chopped down? This is really the only way to truly determine the value that should be given to the credit.
As noted in the article in Follow The Money (ftm.eu), the prime issue is the baseline estimate: “At the time, South Pole estimated the future deforestation in the Kariba area at 3.2 per cent of the forest area per year. In other words, if the forest were not protected, it would almost completely disappear within 30 years.”
For that estimate, South Pole relied on previous deforestation figures from areas adjacent to the Kariba project that were not being protected. Their reasoning: if deforestation increases faster in these areas during the project than it does in Kariba, that difference can be attributed to the credit provider CGI’s efforts.
However, satellite data recently collected by South Pole shows that the company has overestimated the rates of deforestation in the adjacent areas. This is good news for the climate, but bad news for South Pole’s business: “currently, the company is overestimating the deforestation it would have prevented by about a factor of 14.”
Therefore, they likely sold carbon credits that are not supported by emission reductions. However, given the nascent emergence of this market, the rules and ramifications for these types of events are not clear and legal precedents are limited.
As we have previously noted, the crypto space is seeing a similar evolution. At BitOoda, we understood that successful emerging markets would require a regulated framework, and so we focused on building within such a framework and working with reputable counter parties on regulated platforms. With this approach, we can help you with your sustainability goals, power, and bitcoin hedging.
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
Ooda Commodities, LLC is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2022 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
To continue the theme from last week’s report on carbon, in this report we discuss the issues in the newly emerging carbon offset market. The carbon offset market trades carbon credits or allowances, which represent an amount of CO2 removed from the air. The market for carbon credits is no different than any new emerging market in the past, in that it currently has a problem with bad actors conducting “honest” miscalculations. We saw this in the crypto space and the dot.com boom. The latest setback for carbon markets is a potential 400% overcounting of carbon credits by one of the largest climate consultancies, South Pole, which works with hundreds of companies including Gucci, Volkswagen, and energy supplier Greenchoice.
The carbon market is unique, in that credits are generated from emission reduction projects that may or may not happen without the intervention of the credit provider. For example, the credits in the above case were generated by helping communities near Lake Kariba farm more sustainably by chopping down fewer trees. This keeps forests intact and thus theoretically prevents a certain amount of greenhouse gas emissions. Computing how much CO2 will be saved in this and similar instances is not black and white: a baseline estimate needs to be understood. A key assumption would be to determine if the community would have operated differently without the interference of the project – exactly how many trees would have been chopped down? This is really the only way to truly determine the value that should be given to the credit.
As noted in the article in Follow The Money (ftm.eu), the prime issue is the baseline estimate: “At the time, South Pole estimated the future deforestation in the Kariba area at 3.2 per cent of the forest area per year. In other words, if the forest were not protected, it would almost completely disappear within 30 years.”
For that estimate, South Pole relied on previous deforestation figures from areas adjacent to the Kariba project that were not being protected. Their reasoning: if deforestation increases faster in these areas during the project than it does in Kariba, that difference can be attributed to the credit provider CGI’s efforts.
However, satellite data recently collected by South Pole shows that the company has overestimated the rates of deforestation in the adjacent areas. This is good news for the climate, but bad news for South Pole’s business: “currently, the company is overestimating the deforestation it would have prevented by about a factor of 14.”
Therefore, they likely sold carbon credits that are not supported by emission reductions. However, given the nascent emergence of this market, the rules and ramifications for these types of events are not clear and legal precedents are limited.
As we have previously noted, the crypto space is seeing a similar evolution. At BitOoda, we understood that successful emerging markets would require a regulated framework, and so we focused on building within such a framework and working with reputable counter parties on regulated platforms. With this approach, we can help you with your sustainability goals, power, and bitcoin hedging.
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
Ooda Commodities, LLC is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2022 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.