Cryptocurrency meets carbon trading.
That's the pitch from Nori, a new Seattle-based startup, that just raised $4 million in funding from cryptocurrency-focused investors including Placeholder, North Island Ventures, Tenacious Ventures, and a big, privately held agriculture multinational that the company declined to disclose.
Founded by Paul Gambill, a former Deloitte Technology employee who left the firm in 2015 to begin working on a company that would tackle climate change, Nori uses blockchain to solve the "double counting" that exists in the carbon offset market.
"Every single carbon credit that has been sold across international borders has been counted twice," said Gambill. "When a project happens, the carbon credit themselves are the assets that someone then sells to someone else. They sell that to a broker who sells it on to someone else. If you see carbon trading in markets … it’s the same ton that is trading hands over and over and over again."
Using a rainforest preservation project in Brazil as an example, Gambill said that both the Brazilian originators of a project and the international purchaser of the credits will count the project in their own carbon emissions mitigation accounting.
"It’s a silly problem that can easily be solved by double-entry bookkeeping but no one is doing it," Gambill said. While many companies are now buying and immediately retiring carbon offsets so they can't trade again on open markets, those transactions only represent a fraction of the total volume of offset sales, according to Gambill.
Gambill believes that carbon markets are the right solution for the climate change problem, which he sees as a matter of engineering.
"In 2015 I left and I wanted to work on something that was bigger and more important and climate change seemed like an obvious thing to me," Gambill said. "I’ve been thinking about this as more of an engineering project. The CO2 is in the wrong location and we have to move it. This is the next great engineering project that humanity must undertake … by 2017 i had put together a team and a business model and we were off to the races."
The problem that Gambill set out to solve in 2017 was the way carbon markets have failed to operate by separating out the certificate for the offsets from the payment mechanisms. Buyers pay using Nori's token and a token is always good for one ton of sequestered emissions, but the price of the token will fluctuate based on supply and demand.
"We want a commodities market where people are speculating on and buying and selling, but we don’t want to do that on the actual carbon itself," Gambill said.
The company operates an e-commerce front end where people can buy Nori tokens to offset their purchases (the company already has a customer in Shopify) and then there are trading mechanisms where Nori will list its token to trade on exchanges that also address carbon emissions mitigation and financing for projects. "We will have auctions in our application in the future," Gambill said. It's another step on the company's roadmap toward becoming an API for carbon removal that integrates into any platform or application.
If that vision sounds familiar, that's because Nori's not alone in attempting to develop the API for carbon offsets.
Companies like Wren and Cloverly are also pursuing emissions reductions, but Gambill says that they're approaching the issue from the wrong side of the equation. While Cloverly and Wren are coming up with ways to sell existing carbon credits based on customer demand, Nori's Gambill argues that his company is tackling the supply side of the equation by promoting the development of new carbon sequestration projects starting with farmland.
The company has a convincing collaborator in Comet Farm, a greenhouse gas accounting and reporting system developed by the U.S. Department of Agriculture, that's working with Nori on its emissions reductions accounting framework.