Planting trees is one of the best-known ways to help minimizing climate change effects, besides increasing the resilience of ecosystems. Although reforestation is unlikely to be enough to achieve this goal on its own, it can at least buy people and governments more time to adapt to a more a sustainable way of life. This importance of reforestation is also recognized by the United Nations among its 17 Sustainable Development Goals (SDGs), in particular when the intention is to “Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss” and to “Take urgent action to combat climate change and its impacts”. It is not hard to argue, though, that reforestation and related land restoration initiatives can bring positive impacts to all other SDGs, including fighting poverty and hunger, promoting good health, well-being and more sustainable consumption/production, improving access to clean water and sanitation, and building more sustainable cities and communities.
In the last years, this interest on reforestation has spurred many solutions aimed at promoting such activity. One example are non-profit organizations that help individuals, communities and businesses around the world to engage in reforestation efforts, e.g., via seed distribution, agroforestry training, or simply by gathering and motivating volunteers. Examples of such volunteer-based platforms are One Tree Planted, Trees for the Future, Plant for the Planet, and Tree-Nation.
The power of tokenization comes into play
Whereas traditional reforestation efforts were mainly volunteer-based, some recent solutions have started building upon the properties of blockchains to turn trees into digital assets. One immediate benefit of the resulting tokenization platforms is that they provide a clear business model for those interested in planting trees, thus reducing their dependence on donations.
Two examples of such initiatives are Smart Forest Coin and Tree Cycle, both of which create non-fungible tokens (NFTs) for timber trees (respectively, paulownia and eucalyptus), so investors earn some profit when their tokenized trees are harvested and sold. Albeit interesting, one drawback of such approaches is that they do not fully explore the long-term ecological benefits of trees, since the end goal is to cut those trees down.
Conversely, platforms like Forestcoin, Tree Defi and Moss promote and explore a more long-term vision of reforestation actions. Specifically, Forestcoin is an initiative where each tree planted generates one coin for the corresponding user. The actual existence of the tree is expected to be collaboratively verified by “before and after” photos, as well as other data loaded into the Forestcoin app. In comparison, Tree Defi (with collaborating organizations) plants and tokenizes individual trees as “NFTrees”, which can then be auctioned to interested parties. Holders of NFTrees periodically receive CO2 tokens associated with the amount of CO2 absorbed by the corresponding trees; those tokens can then be turned into CO2 offset certificates and, in the future, be used as fungible tokens for trading. There is little information on how the state of the real trees is tracked, though (e.g., what happens with the NFT if a tree naturally dies, or is cut down for some reason). Finally, Moss focuses on facilitating access to the traditional carbon credit market, so anyone aiming to offset their carbon footprint can more easily purchase credits generated by companies and environment-friendly projects. Due to this direct link with the carbon market, though, the initiative is not very suitable for promoting reforestation in small properties: even though the size of a property is not the only factor, studies indicate that the generation of carbon credits is usually viable for properties having at least 10 thousand hectares.
The Carbon 21 initiative
Like the aforementioned solutions, the CARBON 21 initiative builds upon tokenization for encouraging reforestation, and, ultimately, for promoting a better and more sustainable world. Whereas being “yet another tokenization solution for promoting reforestation” would not be a bad thing (after all, the more numerous the efforts toward this goal, the better for planetary health!), our goal is to deliver more: besides sharing the merits of existing systems, we also aim to address some of their shortcomings, and expand the coverage of use cases.
First, the project focuses on landowners (either public or private entities) that would like to increase the area inside their properties that is covered by trees, but refrain from doing so because there is no obvious way to make a profit out of it. This scenario applies, for example, to rural areas where proprietors rent their lands for somewhat aggressive ranching activities, like growing soy or sugar cane crops, or raising livestock. It is also the case of areas that are not farming-friendly (e.g., due to landscape or soils characteristics), and are sometimes left unused. In a smaller degree, CARBON 21 should also increase the revenue opportunities for those who invest on timber trees for extraction purposes, as long as they are adequately managed (e.g., to avoid soil arenization and reduced air humidity). Finally, it is also meant to turn areas of native vegetation that must be kept untouched due to law requirements into a source of revenue. In Brazil, for example, the current legislation mandates that landowners must dedicate 20-80% of their areas to native vegetation (the exact proportion depends on the biome). This revenue can also help preserving public areas that require special treatment, like the Brazilian Amazon Rainforest, Atlantic Rainforest, Mangrove Forests (“manguezais”) and dry forests (“caatinga”), but are oftentimes abandoned to their fate exactly due to an apparent absence of economical interest.
In all those cases, the CARBON 21 platform allows landowners to register part of their lands for the purposes of planting trees and preserving them, receiving a non-fungible token (NFT) in return. Any revenue generated by that NFT is then registered for its owner in a transparent manner, using a Blockchain and IPFS to store the corresponding data. It is not even necessary to register a huge property to benefit from the platform: any 1 hectare is enough to create a revenue. This contrasts with the much larger area requirements observed in traditional carbon credits markets. The reason for this difference is that the CARBON 21 platform is not (and does not seek to be) tied to such markets, but instead aims to stand on its own. Nevertheless, users of the platform can still benefit from the carbon market, as the platform itself can help consolidate smaller properties and present itself as an area large enough to generate carbon credits.
That being said, a fair question is then: “But how exactly the NFTs registered at the CARBON 21 platform can generate revenue? Come on, they are just trees…” Well, there are actually a few manners.
First, landowners can benefit from Environmental Compensation Laws, also called Ecological Compensation Laws. In Brazil, for example, such laws dictate that any endeavor where trees must be cut down (e.g., for construction purposes) must compensate this environmental impact. Commonly, the compensation involves planting a certain number of trees somewhere in the same biome. The reforested area must then receive species that are necessarily native to that region, and the landowner must ensure the area remains preserved for a few decades. In some cases, when the forest is already there and is not part of the land’s legal reserve, the decades-worth commitment for preservation is enough to enable the area for compensation. Obviously, any subsequent misconduct in the area (e.g., the removal of trees) is then punishable by law. The CARBON 21 platform leverages this legislation by associating a “compensation capability” to any NFT for a land that can be used for the purpose of ecological compensation. This usually means that the corresponding area is registered at the administrative body responsible for enforcing compensation laws (e.g., in Brazil, the Brazilian Institute of Environment and Renewable Natural Resources – IBAMA), which provides users of CARBON 21 the required legal proof that this compensation capability is valid.
Then, any person or company needing to perform ecological compensation can negotiate a fair price and purchase (a portion of) this capability from the NFT owner. For example, suppose that Jane works in the real estate business, and the Ecological Compensation Law requires her to reforest an area of 0.7 hectares due to her company’s last development. She then finds an NFT for a 2-hectares land, and decides to purchase 35% of its compensation capabilities, which would be enough to fulfill her legal obligations. If that NFT corresponds to an area that has already been reforested, the total amount paid by Jane (except for applicable fees) reverts to that NFT’s owner. Alternatively, the NFT owner might be waiting for that extra income to start reforesting the corresponding area, and can now do so. Once 100% of the NFT’s compensation capability is consumed, it cannot be used for this purpose anymore. Nevertheless, if the applicable legislation allows compensation with undergrowth trees (i.e., trees that grow under the coverage of larger trees), that NFT may regain its compensation capability once the area is old enough to accommodate this sort of compensation.
From that use case, it might seem that the CARBON21 is merely a matchmaking platform, without providing much incentive for reforestation. After all, why would the NFT owner start reforesting that area before Jane pays him, if there is no benefit in doing so? It turns out, however, that the benefits come from the second capability of those NFTs: periodically, they generate an amount of fungible tokens proportional to the corresponding area, in the form of “sylvancoins” (or “C21”, for short), which are minted for the NFT’s owner. As any cryptocurrency, C21 can be exchanged among users, as well as traded for goods and services in the real world, with small fees involved. Promoting liquidity of the C21 is among the main commitments of the CARBON 21 initiative. For example, the platform is expected to establish partnerships with entities from the private and public sectors who see the value of reforestation-backed tokens, e.g., as part of their Environmental, Social and Governance (ESG) policies. The partnership could involve discounts/cashbacks for clients when the payment method is C21, which creates a win-win scenario: while companies can promote their brands with an ESG-conscientious initiative, the fees generated in such transactions benefit all users of the CARBON 21 platform. Also, in partnership with public authorities, similar actions can be promoted for the payment of taxes (e.g., rural property taxes) and even fines (e.g., those related to violation of environment regulations). Some entities may even voluntarily “plant” some of their C21, i.e., permanently remove those C21 from the pool of tokens, similarly to what is done in the voluntary Carbon Market — note: some cryptocurrencies call this procedure “burn”, but since new C21 are minted as time passes, the term “plant” sounds more appropriate. Finally, as aforementioned, the CARBON 21 platform should also be able to tap into the power of (micro)carbon markets by aggregating multiple small forested areas, bringing additional revenues for small property owners.
All such initiatives are part of a larger goal of creating a Carbon Collective Consciousness (C3). After all, since trees help with micro-climate control, improves air quality, preserve the land against erosion, among many other benefits, accepting C21 as payment and collaborating with the platform in various manners is one step that companies and public services can take to contribute with a more sustainable planet.
Now, this whole discussion leads to another fair question: “And why not generate C21 per tree, then, given that every tree counts?” There are a few reasons. One is that only trees that are standing and alive should generate C21, whereas the law mandates the preservation of areas used for ecological compensation. Hence, we need to monitor the tokenized areas carefully. When dealing with large areas, it is easier to notice changes using satellite images or sensor networks (e.g., using platforms like MapBiomas or BrasilMais). Moreover, suppression of trees in an area is more easily noticeable by bystanders. Doing the same level of monitoring for individual trees, on the other hand, is much trickier. For example, if a tree naturally dies inside a preserved area, in principle it must be left untouched, since its ecological value (e.g., as home for birds and insects) does not end with its death. However, it is hard to argue that dead trees should keep generating C21 even after they fall down on the ground, and are naturally replaced by newborn species. Furthermore, when reforesting an area, it is not unusual to distribute the newly planted trees with a density that is higher than recommended, aiming to compensate for natural deaths; later, if surviving trees are too close to one another, a few of them may be sacrificed for the sake of their counterparts, following forest management recommended practices. Once again, this would lead to NFTs that correspond to “ghost trees”, whose actual value would inevitably be questionable. When we consider forested areas instead of individual trees, all such issues are essentially solved by design.
Finally, CARBON 21 is also committed to be useful for landowners that, instead of focusing on compensation laws and other strictly preservation-oriented opportunities, are interested in sustainable agroforestry business, like the timber market. Specifically, the CARBON 21 platform should allow areas dedicated to such activities to be registered as NFTs as long as competent parties, according to applicable laws, approve the corresponding forest management plan. The main difference from the aforementioned cases is that the resulting NFT’s compensation capabilities would be potentially restricted. For example, in Brazil, the current Ecological Compensation Laws forbid the extraction of wood from compensation areas, implying that the compensation capabilities of NFTs generated for timber-oriented lands cannot be activated until that area is repurposed. Nevertheless, the NFT will still be able to periodically generate C21. In addition, interested parties may purchase parts of those NFTs, acquiring the right to participate in the profits generated once the wood is sold. Hence, the benefits of the CARBON 21 platform in this scenario are twofold: first, it leads to a more continuous source of revenue for those landowners, with C21; and second, it gives landowners increased access to crowdfunding opportunities.
Conclusion
The goal of the CARBON 21 initiative is to make reforestation a profitable and enticing business for owners of small to large scale properties. Essentially, it provides a tokenization platform that leverages the opportunities created by existing ecological compensation laws, micro-generation of carbon credits, the timber market, and any other ESG-related actions, while also generating an opportunity of its own with the minting of digital coins backed by real-world forested areas. To benefit from the CARBON 21 initiative, landowners need only to register their lands in the platform, showing proof that the competent authorities have approved the intended land usage for growing trees. Then, they can already start profiting.
Instead of just “yet another tokenization platform”, CARBON 21 aims to be a force of change for promoting planetary health. Indeed, like trees, it is continuously growing and evolving. While doing so, new use cases and additional opportunities are prone to appear, including collaborations with other platforms that, like ours, have the mission of creating a better and more sustainable world.