How to build a shared audit trail
A carbon economy can only emerge if all participants have an economic incentive to participate, and all participants have an incentive to act honestly. We describe how this can come about.
This newsletter is technically speaking not just about hydrochar, but it is especially relevant to hydrochar. It is also relevant to other solid carbon capturing technologies like pyrolysis, and to a certain extent it is also relevant to CO2 capturing technologies, but because of the advantages of hydrochar, all the things we’re discussing here matter to hydrochar first and foremost. It’s a key ingredient to the Internet of Carbon.
We are talking shared audit trails.
In our previous newsletter about carbon markets, we mentioned the need for audit trails to preserve the integrity of carbon markets. But what are audit trails, and why do we need to share them?
Audit trails and carbon economies
An audit trail is just a record of all the things that happened within a value chain. A value chain is just the many activities that have to happen in order to produce something of value from a range of inputs. Add displacement (not all things happen in the same location) and market transactions (not all things happen within the same company), and a value chain turns into a supply chain.
The “something of value” in our case is the temporary or permanent storage of stabilized carbon, hydrochar or pyrochar, in a designated facility such as an abandoned open-pit mine.
The range of inputs are the types of carbon-rich solid biomass we mentioned before, agricultural waste products, sewage sludge, food production waste, grass cuttings, etc.
The value we intend to create is not only the value to humankind (and nature in general) by reducing carbon emissions, but also the economic value to all participants by upcycling what is initially worthless or even polluted waste biomass.
A carbon-neutral or carbon-negative economy?
An important split happens here because, as we mentioned before, hydrochar offers the option of creating a carbon-neural economy by simply upcycling and stabilizing the biomass via hydrothermal carbonization and reusing it in a meaningful fashion — indeed hydrochar was originally invented as cheap ersatz fuel — or the option of creating a carbon-negative economy by sequestering it and storing it for a set time period.
If we want to go the latter route and create a carbon-negative economy, we have to compensate the owner of the storage facility for this service to humankind, since at this point the upcycled biomass has economic value. This happens via certificates.
One of the key points we are trying to make is that hydrochar has the best chance to unfold its economic and ecological potential is via negative certificates. Current cap-and-trade certificates give enterprises the right to pollute, and if they pollute more or less than their capped allowance to buy or sell more rights. Negative certificates compensate actors for provably removing carbon from circulation.
These certificates, especially of negative kind, provide proof that the removal happened, and also the technical details on how it happened, in the form of process delivery, and inspection protocols. This is where the audit trails come in.
Ultimately, a carbon market can only survive if it moves from price competition (the cheapest way to produce a certificate) to quality competition (the most trustworthy way to produce a certificate). With transparency comes trust.
Shared audit trails and polycentric governance
A major advantage of hydrochar is that it builds on ubiquitous input materials, waste biomass, and a comparatively simple and exothermic chemical process, hydrothermal carbonization, so that it can be deployed decentrally in small units, possibly even on shipping containers, in almost all places. Storage can also happen decentrally, wherever stable biomass can be sequestered.
This means many small actors can participate in the carbon economy and benefit from it.
But this can only work if all actors, big and small companies, governments, households, banks, insurances, can be compelled to act honestly. This can only happen if their activities are monitored and recorded properly. In the industrial context we’re discussing here, most of this monitoring of processes, movements, and storages will happen automatically, via IoT sensors and devices.
It is equally important to assess the biomass inputs in terms of carbon content, content of nutrients and of non-useable or pollutants, as this is crucial for the value creation process. Similarly capturing process parameters allow us to improve the value chain.
Ideally, this will also be done via IoT sensors, but there will always be steps within the value chain that have to be checked by certification bodies — the goal here is to automate that as much as possible. The same applies to the overall process, which is documented in the shared audit trail. Because the most important thing is to establish credibility and to regularly check and ensure that it is provided.
Governing the carbon commons
The only way this can happed if all this information is shared between participants, all the information is checked for consistency (no double-listing of a carbon-capturing activity on multiple markets), and all this information is stored in a way that limits or eliminates the opportunity for participants to tamper with the data.
The shared information, and its demonstrable accuracy and consistency with other available information, will become the main value driver to avoid “every click a tree” schemes with high engagement scores and low impact.
This could in theory happen centrally — one actor holds the power to monitor everyone else — but the drawbacks of such a solution are obvious. Instead we should follow the decentral (or polycentric) principles based on mutual control established by Nobel Laureate Elinor Ostrom to govern shared beneficial and essential resources, like water. Or carbon.
This is what we consider a shared audit trail.