Crypto has a strange reputation. It’s renowned for face-melting gains and equally significant losses, but it also promises an opportunity for anyone to invest in projects outside of the white-collared world of Wall Street and Silicon Valley.
Today an Aussie project has announced that regular peeps can now purchase carbon credits as easily as buying crypto following the launch of the new BetaCarbon platform.
Previously, retail investors were unable to gain any exposure to Australian carbon credits, but through the new green crypto initiative, which purchases and tokenises Australian Carbon Credit Units (ACCUs), eco-conscious investors can now invest and directly purchase the Australian Carbon Token (BCAU).
The BCAU token — which is built on the Ethereum blockchain — represents 1kg of CO2 emissions being captured or avoided altogether.
Guy Dickinson, the CEO of BetaCarbon told The Chainsaw that investors can reasonably expect the price of carbon to rise over time as the more environmentally aware Federal Labor government begins to implement harsher restrictions on Australia’s biggest polluters.
“The price of carbon is a function of demand and supply. For Australia to meet its nationally defined 2030 legislated commitments we need to be 43% more efficient as a nation than we were in 2005,” he said.
“Investors need to ask themselves if they believe the urgency to achieve better outcomes is real, and [if so], how do they express that conviction?”
“Carbon market price appreciation is a reasonable way to express that view, all things being equal.”
So, what are carbon credits?
Carbon credits represent projects that capture carbon dioxide in the atmosphere or prevent emissions from being released altogether.
The intended use of these carbon credits is to make it increasingly more expensive for major companies to offset their emissions over time. Governments set a limit on how much carbon these companies can emit, and if they go over, they need to purchase more credits, which creates an incentive for businesses to consider lowering their carbon emissions.
It’s worth noting that while this method isn’t perfect, it is proving to be one of the most successful ways to limit the emissions of major companies.
Why are investors bullish on carbon?
Dickinson says that Australia’s carbon market is still in its nascent stages, and investors can look to New Zealand and the European Union for guidance on how the price of carbon can grow when governments start to make more concerted efforts to reign in emissions.
“EU and NZ markets have a more stringent participation. For example, In Europe 12k companies need to buy EU Carbon,” he said.
“In NZ the market sets a range for the price of carbon and brings that price up over time. Less than 2 years ago, the NZ carbon price was NZ$30 … it’s now over NZ$80.”
“Australia is, in my view, where Europe and NZ were 2-3 years ago and we have seen what happens to price when we make a concerted effort to drive outcomes politically,” he added.
According to Dickinson, growth of the Australian carbon market is currently limited by the voluntary involvement of more environmentally conscious companies, but as the Federal government begins to implement firm emission requirements as handed out by the Paris Agreement, the price of carbon could grow significantly.
“The ACCU market is a voluntary market currently, with only a handful of large polluters forced/expected to purchase credits in the Australian Scheme.”
“With NDC commitments, and reviews to the safeguard mechanism that will bring 200 of Australia’s largest polluters in, the landscape is set to move quickly
“The ACCU traded up to $58 in Q1 2022 from $22 in Q3 2021. So [we know] it can move.”
A clear example of growing investor confidence in carbon as a commodity can be also seen in the growth of KRBN, an ETF that tracks the weighted global price of carbon, which has risen 90% since its inception in July 2020. This is an extremely substantial increase in a fund that tracks a global commodity (which are typically far less dynamic than digital asset markets). At its peak of $52 in November last year, KRBN was up 250% from inception.
Overall, carbon markets are becoming an increasingly fundamental way to profitably incentivise big emitters into achieving net-zero targets for greenhouse-gas emissions.
Dickinson ultimately says that by providing greater access to carbon markets for everyday investors, the pace at which companies are incentivised to reduce emissions will see a substantial uptick.
“With transparency and awareness, the margins and efficiencies of the market will improve & incentivise more companies to begin treading the path [to net-zero].”
Last week, BetaCarbon won Best Investment Innovation at the Finder Innovation Awards. The jury panel at the awards ceremony commended BetaCarbon for “giving access to a market that was previously difficult to access for the majority of investors [while] working to disincentivise emissions”.