Phaeton

Navigating Compliance Carbon Markets with Phaeton

Compliance carbon markets are pivotal mechanisms shaped by national, regional, or international regulations aimed at curtailing greenhouse gas (GHG) emissions from industries and businesses. These markets, often known as emission trading schemes (ETSs), enforce limits on total emissions through specific regulatory frameworks.

Types of Emission Trading Schemes:

1. Cap-and-Trade Schemes: In cap-and-trade schemes, such as the European Union ETS, governments establish a strict cap on the total volume of GHG emissions permitted within the scheme. Companies operating within this framework receive emissions allowances, also known as carbon credits, which they can trade among themselves or on the open market. Over time, the cap is progressively reduced to achieve emission reduction targets.

o European Union Allowance (EUA): This is the primary carbon credit used within the EU-ETS, allowing entities to comply with emission limits while trading surplus allowances to those in need.

2. Baseline-and-Credit Schemes: Baseline-and-credit schemes, like Australia’s Safeguard Mechanism legislation, target high-emission companies identified by the government. Each company is assigned an individual emission baseline they must not exceed. These schemes also establish an aggregate cap on emissions.

o Safeguard Mechanism Credits (SMCs): If a company emits below its baseline, it can generate SMCs that can be sold to other regulated entities. Conversely, entities exceeding their baselines must purchase additional carbon credits, such as Australian Carbon Credit Units (ACCUs), from accredited projects that facilitate carbon removal or avoidance.

Complexity and Market Dynamics: ACCUs, issued under Australia’s scheme, illustrate the intersection between compliance and voluntary markets. While primarily intended for compliance, ACCUs can also be utilized in voluntary carbon markets, adding a layer of complexity to supply and demand dynamics. This dual usability influences market pricing and participant strategies, shaping the broader carbon trading landscape.

Phaeton’s Perspective: Phaeton recognizes the intricate dynamics of compliance carbon markets and their impact on global emission reduction efforts. By leveraging innovative technologies and strategic partnerships, Phaeton aims to enhance transparency, efficiency, and accessibility within these markets. Through its platform, Phaeton facilitates secure transactions and tracking of carbon credits, empowering stakeholders to navigate regulatory complexities and achieve sustainable outcomes.

Website: https://phaetonccx.io/
Contact: [email protected]

About Phaeton: Phaeton is committed to driving innovation in carbon markets through blockchain technology. By fostering transparency and sustainability, Phaeton empowers global stakeholders to participate actively in climate action and environmental stewardship.

Phaeton REDD+ Credits Executive Summary

June 14, 2024 - The imperative to price forest carbon appropriately and establish effective channels for payment is critical to meeting the 2030 mitigation objectives. Despite over 15 years of discourse, compensation for emissions reductions from forests remains disproportionately low, both in terms of pricing and quantity. Concurrently, proven mechanisms from other sectors, which enhance the catalytic potential of public funds and private sector involvement, are notably absent from the arsenal against deforestation and forest degradation. Urgent change is imperative. Here are the key highlights from this report which the Phaeton Carbon team has analysed:

Costs of High-Quality Emissions Reductions (ERs) from REDD+:

While high-quality and high-integrity ERs from REDD+ are cost-effective, they are not inexpensive. Different emissions reductions carry varying costs, with forest carbon averaging $30-50/tCO2. Additionally, as the demand for REDD+ escalates to bridge the emissions gap, competition with alternative land uses will drive up forest carbon costs progressively. Adhering to cutting-edge accounting and crediting standards necessary for high-integrity ERs will entail significant expenses. By 2030, the marginal cost of scalable, high-quality ERs from REDD+ could equal compliance market carbon prices.

Fair Compensation and Market Integration:

Ensuring fair compensation for forest carbon is contingent upon amplifying transactions of REDD+ ERs on compliance markets. Integration into compliance markets could notably augment both price and volume compared to voluntary carbon markets. Initial revenue from voluntary markets can facilitate the development of market institutions, including jurisdictional-level monitoring and reporting, while gradually enhancing compliance with state-of-the-art standards. This progression could transform ERs from REDD+ into fungible assets in the emergent global compliance carbon market, offering equitable compensation to tropical forest countries. Eventually, elevated forest carbon prices on compliance markets would incentivize these nations to prioritize robust policies for forest conservation and restoration, alongside more ambitious NDC targets.

Leveraging Pricing Instruments for Enhanced Funding:
The adoption of existing pricing instruments can substantially magnify the leverage of public funds to mobilize private finance and expand the supply of REDD+ ERs. Scaling up upfront investment in REDD+ is crucial for a timely transition to a zero-deforestation trajectory, and solely relying on public finance is inadequate. Innovative pricing instruments, such as call and put options and low-risk bonds, can enable public funds to catalyze investments in REDD+ implementation. These instruments combine flexibility with a predictable minimum return on investment, maximizing the leverage effect on private investors.

Estimates of REDD+ supply potential and avoided deforestation costs may vary across models and geographies, with indications suggesting an average cost of $30-50/tCO2. Presently, REDD+ offers a cost-effective means to narrow the gap between current emission trends and the net-zero emissions target. However, meeting this emissions gap with REDD+ will involve heightened competition with alternative land uses, thereby raising forest carbon costs. To prioritize avoided deforestation and forest degradation, tropical forest countries and jurisdictions must be offered fair or even higher prices for their emissions reductions.

Phaeton, in close collaboration with numerous organizations in Northern India, is dedicated to supporting such initiatives. We are committed to fostering a sustainable future in partnership with traditional laner owners and the indigenous people of India, offering the opportunity to pre-sell REDD+ Credits through Phaeton's Carbon Credit Exchange.

Project Readiness Development:

• Signed NOC with the community for 25,000 hectares.
• Drone mapping of 6,000 hectares of identified forest has been completed.
• Registration with Verra and project development under VCS (Verified Carbon Standard)
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https://phaeton-technology.medium.com/world-earth-day-2024-7c8180bbaba0

World Earth Day 2024: A Call to Protect Our Planet’s Future