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- Governments around the world have been introducing carbon credit programs to incentivise businesses to slash carbon emissions
- However, a lack of regulation around carbon and sustainability credit trading has left room for fraud and abuse from opportunistic businesses and countries
- While global leaders discuss how best to approach international carbon credit rules, ASX-listed Security Matters (SMX) believes it already has a solution
- Security Matters’ technology is designed to mark physical objects and record them digitally on a blockchain-based platform
- Just this week, Security Matters launched its blockchain marking tech for forest, lumber and wood operations — key areas for emissions reduction and carbon credit reform
World leaders have been in Glasgow for the past week discussing climate change and how to incentivise businesses to slash their carbon emissions.
The general solution being implemented by governments around the world revolves around carbon credits. Effectively, these work by giving a business, or in some cases a country, an allowance of carbon emissions per year, and then allowing that business to sell or trade its credit to the government if its emissions land under the allowed amount.
It’s a way to reward companies who cut back their emissions with an extra revenue stream.
However, a key topic of discussion at the Glasgow COP26 conference has been around rules and regulations for carbon and sustainability credit trading. Currently, a lack of clear guidelines and directions leaves room for fraud and abuse from opportunistic businesses looking to make a quick buck.
Similar programs throughout the past few decades have seen countries intentionally create high-emitting hotspots so they could be paid to shut them down. Many countries have reported credit scheme frauds running into billions of dollars.
The lack of regulation also leads to a potential lack of accountability for businesses or countries fudging their numbers to profit from carbon trading.
In fact, Mark Carney, the former Governor of the Bank of England, was quoted in Bloomberg recently forecasting the carbon credit market to reach over $100 billion by the end of the decade.
However, while global leaders discuss how best to approach international carbon credit rules, ASX-listed Security Matters (SMX) believes it already has a solution.
Digitising physical assets
Security Matters’ technology is designed to mark physical objects and record them digitally on a blockchain-based platform.
For broad strokes purposes, think of the tech like a QR code: placed on a physical object, SMX’s marks can be linked to an online storage system for verification.
However, the tech goes far deeper than QR code technology by retaining its scannability even if the object is physically transformed into something entirely different.
For example, SMX said it can mark iron ore mined from underground and, perhaps years later, scan this same iron ore after it’s gone through a refinery and been made into an aeroplane component.
This type of technology helps businesses ensure that all materials used throughout their supply chain are sourced ethically.
More than this, the SMX tech can be used as an auditing system for carbon-emitting operations to ensure countries and businesses are reporting their carbon credits honestly and regulators can easily identify and track carbon credits.
Just this week, Security Matters launched its blockchain marking tech for forest, lumber and wood operations — key areas for emissions reduction and carbon credit reform, according to the company.
SMX forest, lumber, and wood operations
Security Matters’ forest, lumber, and wood marking operation means the company can mark a seed before it’s planted in the ground and track the material through its life cycle.
Not only does this help forest growers and insurance companies monitor their assets, but it also means the company’s blockchain capabilities can be expanded across the versatile timber industry.
Further to this, Security Matters Founder and CEO Haggai Alon said the tech provides full visibility across the production and value chain from forest to waste of timber and lumber products.
“We mark the seed; we mark the plant; we mark the timber and lumbar phase; we mark the product,” Mr Alon said.
“We insert our markers at every stage, and from that, you get full visibility, carbon neutrality, quality control, and the ability to reclaim and reuse your waste.”
He said the ability to mark, track, and trace timber products for authentication, carbon credits, and sustainability currently remains an “untapped venture”.
The need for carbon credits for forests
The forest industry is rife with carbon credit misreporting and fraud — whether intentional or not.
For example, researchers at California-based nonprofit research firm CarbonPlan reported back in April that over US$400 million (A$542.6 million) of carbon offsets had been sold in California alone without absorbing a single tonne of carbon dioxide.
Around the same time, Finnish nonprofit group Compensate reported that 90 per cent of carbon offsets either fail to deliver what was promised or come with damaging side effects for local communities.
With technology like Security Matters’, these issues can be mitigated through detailed tracking and transparency. While governments scramble to find regulatory solutions to carbon credit problems, Security Matters offers a thorough auditing process based on secure blockchain technology.
“Through SMX’s unique capabilities, we will be the only solution, that will be able to solve this multi-industry issue through a ready, easy to implement, scalable solution that can easily detect the origination and traceability data embedded in the timber and lumber through SMX’s proprietary reader within seconds and without having to undergo extensive lab tests,” Mr Alon said.
Why does this matter?
Security Matters has found a potential critical gap in the carbon credits market, and the company believes it has built the tech to address the associated issues.
The biggest winners of the global shift to carbon emissions reductions will be companies who offer a scalable solution that can be taken up by countries anywhere in the world.
It’s up to investors, then, to spot the opportunities opening up in the emissions reduction and energy market and get on board before it’s too late.
