IBM is partnering with Stellar to bring Carbon Credits to the blockchain. The startup Veridium Labs wants to issue tokens on the Stellar blockchain and IBM is helping to do so. Carbon credits are tradable instruments aimed at reducing greenhouse gas emissions, and Veridium Labs is a startup that creates environment-related virtual currencies so as to improve the environment.
According to IBM, Veridium will be using the technology provided by the tech giant to issue and manage carbon credit-backed tokens on the Stellar network. Carbon credit tokens will be fungible, which means that they can be traded for other virtual currencies or tokens.
Jared Klee, director of digital asset registry at IBM, explained:
“Right now, if you look at the carbon credit market – specifically the voluntary carbon credit market – they’re traded through bilateral agreements which means there’s a lot of friction involved. They’re not fungible assets, you see that in pricing that one can be very different, the same asset with large price fluctuations between two of them. And we see that reflected in other places like secondary volumes and what not.”
Companies like the startup Veridium Labs are searching for solutions related to distributed ledger technology because of its ability to handle massive amounts of information in a transparent and immutable network.
Carbon credits allow governments and institutions to emit a limited amount of carbon dioxide so as to reduce their carbon footprint. At the moment, these credits are being traded, but IBM and Veridium explained that the current structure of the market creates too much friction.
Additionally, IBM and Veridium are planning to let traders hedge potential environmental impacts using this new blockchain platform.