Climate Regulation
Tero Carbon is a Brazilian company that has established its own carbon standard specifically for climate projects in Brazil. These projects operate within the voluntary carbon market, both locally and globally. Their approach to project certification follows a structured procedure:
- Project Registration: Each climate project must first register with Tero Carbon.
- Validation: Project validation is conducted by third-party entities accredited by Tero. There are two separate groups of validators—one for small-scale projects and another for large-scale projects. As of the time of writing, Tero has approved only one validator for small-scale projects, accessible here.
- Verification: The same bodies and groups responsible for validation also handle project verification.
- Issuing Carbon Tokens (tCO2): Once a project is validated and verified, tCO2 tokens are issued on the Polygon blockchain. All operations, including minting, transfers, and retirements, are conducted transparently on this platform.
- Listing on Third-Party Platforms: tCO2 carbon tokens are made available on marketplaces like OpenSea and CAD Trust, a decentralised metadata platform that links, aggregates and harmonises all major carbon credit registry data, further increasing the visibility and tradability of these tokens.
Tero Carbon has three core programs to ensure the integrity of its certification processes:
- Certification Program: This program sets the standards for the certification of projects aimed at reducing and/or removing greenhouse gas (GHG) emissions. It serves as a comprehensive guide for project developers and validation and verification bodies, laying out the steps for document submission, reporting, and fee payments required for certification by Tero Carbon.
- Methodologies Program: This outlines the processes for reviewing and registering methodologies, with a focus on Brazil’s unique environmental and social contexts. It ensures the environmental and social integrity of GHG mitigation projects.
- Tero Carbon Asset Registration and Utilization Program: This program ensures the transparent and secure management of all environmental assets, following international best practice principles. It sets forth procedures for issuing, transferring, retiring, and canceling assets, and ensures a robust system for tracking the units. It also includes safeguards against double counting in trading and usage.
Tero Carbon has currently approved five methodologies:
- Nature-based Solutions:
- REDD+
- REDD
- Carbon Stock in Forests
- Carbon Stock in Agrosilvopastoral Systems
- Technology-based Solution:
- Reduction of GHG Emissions via Electric Vehicles
Tero Carbon has already registered two climate projects:
- Eco Farm Santa Bárbara Coffee: This project, which used the Carbon Stock in Agrosilvopastoral Systems methodology, issued 1,937 tCO2 credits for the period 2015/12/01 – 2024/01/24. These credits are available for purchase on OpenSea but have yet to see any transactions. You can view the project on CADTrust.
- Aruanã I: Using the REDD+ methodology, this project issued 2,240,307 tCO2 credits for the period 1980/01/01 – 2020/12/31. Like the Eco Farm project, these credits are also available on OpenSea but have not yet been purchased. The project is listed on CADTrust.
Public consultations play a crucial role in ensuring transparency for Tero Carbon’s programs, methodologies, and projects. Active participation from stakeholders is encouraged throughout the development process.
In terms of national regulation, Brazil has not yet established a national Emissions Trading System (ETS). However, significant progress was made on December 21, 2023, when the Chamber of Deputies approved an amended version of Bill 2,148/15. The final version is expected to be voted on and submitted for presidential sanction by the end of 2024. Key elements of the Bill include:
- SBCE – Compliance Market: This is a compliance market modeled on an emissions cap-and-trade system. It allows for the use of both emissions allowances and offset units for compliance purposes. Unlike other emissions trading systems, SBCE is not sector-specific and operates with a tiered compliance structure. However, primary agricultural production is excluded from its scope.
- Compliance Units:
- CBE (Emissions Allowance): A tradable asset that represents the right to emit one tonne of CO₂ equivalent.
- CRVE (Domestic Emissions Offset): A tradable unit representing the reduction or removal of one tonne of CO₂ equivalent, issued under SBCE and registered accordingly.
- Brazil’s voluntary carbon market (VCM) does not recognize voluntary units as compliance units for the SBCE. However, there are parallels with carbon credits recognized under global standards such as Verra and the Gold Standard.
Finally, the possibility of a joint carbon market among BRICS countries is currently under consideration, which could further influence the demand for carbon units produced in Brazil.
In conclusion, while Tero Carbon’s units remain in a somewhat uncertain regulatory zone, they are, from a legal standpoint, identical to carbon units produced under more widely recognized global voluntary standards.
Blockchain Technologies
Tero Carbon operates its Tero Platform, a web application that facilitates the registration of climate projects and the execution of various operations like transfers and retirements. The platform enhances the certification process by offering autonomy in registering operations and integrates with registrars and trading platforms.
For its blockchain infrastructure, Tero Carbon uses Polygon’s public network to ensure transparency and security. They have also integrated Magic technology into their platform, utilizing the Magic SDK. This allows for passwordless authentication and enhances user security through cryptographic methods like email-based magic links and social logins. Magic SDK streamlines the login process for decentralized applications (dApps) and eliminates the need for managing complex private keys or seed phrases, making it easier for users to engage with blockchain services.
The tCO2 tokens are listed on OpenSea, a non-custodial platform, which further supports transparency and decentralization.
Team, Investments, Marketing, and Community
The Tero Carbon team includes the following key members:
Details about the investments attracted by Tero Carbon are not publicly available. However, the company maintains a strong online presence with links to its website, Facebook page, Instagram, and LinkedIn.
As a relatively new carbon standard, Tero Carbon’s marketing strategy is focused on attracting validators, verifiers, and clients to initiate climate projects in Brazil. At this stage, tCO2 tokens are listed on OpenSea, although no transactions have occurred yet. It is likely that the main sales channel will involve traditional brokerage services.
Current Investment Attractiveness
tCO2 tokens have the potential to become a valuable investment tool. However, the project’s marketing strategy needs to clearly explain why this token could be an attractive investment, especially in light of the upcoming climate regulations. Tero Carbon may also expand its reach to a broader range of potential investors, both in Brazil and internationally.
Areas for Improvement
Tero Carbon has demonstrated that it is possible to create a carbon standard at a national level, competing with global standards like VCS and Gold Standard. By utilizing modern blockchain technology, Tero Carbon offers transparency and innovation in the production and tracking of carbon units.
However, from an investment standpoint, the project needs a more comprehensive strategy that explains the benefits of tCO2 tokens and broadens their appeal to investors. Learning from the mistakes of similar projects, such as MCO2 by Moss, could offer valuable insights into improving the overall strategy and avoiding pitfalls.
