AirCarbon – A New Carbon Trading Frontier
By Ho Ning Li and Adrian Pang
Paia Consulting’s partner, AirCarbon Exchange (AirCarbon) hosted their inaugural International Chamber of Commerce (ICC) – AirCarbon trading day on 10th June 2020, a virtual carbon trading simulation amidst the budding sphere of carbon trading.
Incorporated in Singapore in late 2019, AirCarbon is the world’s first digital exchange platform for airlines to trade carbon credits. Their launch is timely, with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) initial programs approved by International Civil Aviation Organization (ICAO) in March 2020. Even with global air travel down due to COVID-19, CORSIA timelines are expected remain in place, with climate action a key focus as economies recover from the pandemic.
Carbon: an asset class for responsible investment
Carbon has been traded in several regions and countries for a decade or so, such as European Union, Japan, South Korea and China, each with their own mechanisms and regulations. With ICAO’s approval of CORSIA programs, we expect a more global, industry-wide and hopefully more mainstream trading of carbon.
Carbon (or emissions) trading is premised on the cap-and-trade concept, where only a certain amount of carbon dioxide emissions is allowed for the region or industry in order to limit global temperature increase. Carbon trading is therefore one of the policy tools that is used by economies to mitigate climate change.
Singapore, as a regional and global hub for tourism, trade and finance, is primed to propel carbon trading as a new form of commodity trading that also carries environmental significance through carbon emissions reductions.
Read more about AirCarbon’s carbon trading mechanism below or speak to us if you are interested to incorporate carbon trading in your sustainability strategy.
Trading carbon using the AirCarbon platform
AirCarbon provides a platform that uses conventional commodities trading infrastructure and architecture while leveraging more recent and popular blockchain technology to create securitized carbon credit on Ethereum (second largest cryptocurrency platform by market capitalization). Moreover, AirCarbon seeks to securitize carbon credits around market demand that allows traders to gain exposure to an asset class as opposed to the conventional carbon market’s organisation around individual projects (see UN’s Clean Development Mechanism). AirCarbon also designed their platform to be in the same nature as other financial market platforms and maintains their independence from carbon market participants by operating solely as a trading platform.
AirCarbon seeks to streamline carbon trading based on market demands by securitizing carbon credits into three tradable carbon asset classes. Each credit class is organised and regulated around the market they serve. Traders who deposit carbon credits into a Trust managed by the platform will acquire a one-ton Token of any of the three carbon asset classes they prefer in return. The rate of each Token is subject to an Exchange like any other traditional asset trading. The platform’s Token is currently the easiest and most streamlined instrument for carbon credits trading.
AirCarbon’s three carbon assets are as follows:
- AirCarbon CORSIA Token (ACCT): Every ACCT is backed by a corresponding carbon credit eligible under International Civil Aviation Association’s (ICAO) Carbon Reduction Offset & Reductions Scheme for International Aviation (“CORSIA”).
- AirCarbon Nature Token (ACNT): Every ACNT is supported by a corresponding carbon credit registered under Verified Carbon Standard (VCS) covering activities in wetlands, grasslands, forestry and agriculture
- AirCarbon Premium Token (ACPT): All carbon credits supporting the ACPT satisfy stringent additional criteria and at least 4 UN Sustainable Development Goals.
References:
Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)