Overview of carbon classes
Learn how the Klima Protocol structures carbon credits into carbon classes within its portfolio.
Whitelisting decisions do not create ownership rights, pricing guarantees, or obligations to acquire credits. Carbon classes define eligibility and pricing parameters only. They do not create fungible financial instruments, redemption rights, or secondary trading markets.
A given carbon class may have just a few different carbon credit methodologies contained within it, or many different ones. However, the carbon credits contained within a carbon class must share similar characteristics to allow the creation of a semi-fungible group of credits.
Examples of existing groupings of carbon classes that demonstrate a degree of fungibility and established liquidity within the market include CORSIA carbon credits, trading on exchanges such as the CME, or Toucan’s CHAR pool trading on Aerodrome.
The characteristics considered when designing a carbon class include:
Methodology
Technology type
Certification standard
Geography
Vintage
Registry
Carbon classes are the primary way that carbon buyers and suppliers interact with the Protocol:
Suppliers: supply eligible carbon credits to the protocol via a carbon class at the applicable execution price.
Buyers: access the carbon credits to source carbon for retirement demand at the live applicable price. This can be achieved either directly via the protocol, or via third-party frontends.
The Protocol standardises carbon credits within classes to enable comparability between various credit typologies, and in-turn enable the development of liquidity and price discovery around them. However, the actual users of carbon classes are able to select which specific carbon credits within a class that they interact with.
For example, a supplier looking to liquidate a carbon credit via the protocol can do so by holding only one carbon project of a given carbon class. In the graphic below, a carbon supplier holding Biochar Project 1, could respond to the carbon classes’ bid price, without holding Biochar Project 2 or 3. Further, a buyer for retirement demand can also choose which specific carbon credit to retire at the offer price, and not receive a randomised unit from within the class, as shown below.
Well-curated carbon classes should contain credits that reflect long-term potential to increase overall market impact by supporting sustained retirement demand. Poorly defined carbon classes may instead result in inventory that sees limited retirement activity and reduced environmental impact.
Carbon classes are dynamic, in order to respond to the ever-changing nature of carbon markets – and in acknowledgement that it is challenging to curate a carbon class that will contain credits that will not diverge in value over time.
They can evolve, expand, or be deprecated over time. For example:
A new biochar methodologies may be added to a Biochar carbon class, allowing new credits to be transacted into and out of it.
REDD+ credits may be removed from a mitigation-focussed carbon class, disallowing new deposits of a given methodology into it (but still allowing retirements from it until the supply reaches zero).
A new carbon class may be created with its own pricing and liquidity dynamics, to fragment one or many existing carbon classes.
Whitelisting
The whitelisting of carbon credits into a carbon class, or the creation of a new carbon class entirely, is an important aspect of the Klima ecosystem and it represents the primary non-economic governance input into the protocol.
Functions of whitelisting:
Creating a new carbon class: defining the specific carbon credits that may be deposited into it, and allowing it to facilitate carbon supply and retirement interactions with the protocol.
itelisting new credits into an existing carbon class: changing the types of carbon credits that may enter a carbon class that is already facilitating supply and interactions with the protocol.
Blacklisting existing credits from an existing carbon class: disallowing any new credits within a carbon class that is already facilitating supply and interactions with the protocol.
As we can see, whitelisting is an important filter that can be used by the protocol to ensure that high-quality credits are eligible for protocol-facilitated retirement. Whilst whitelisting acts as a barrier to stop certain credits entering the Protocol, credits that enter and are subsequently blacklisted can only be removed if they are then retired.
Initially, whitelisting is a centralised process, managed by the Protocol team. Over time, the whitelisting process may evolve to allow token-voting; or via a formal advisory council with voting power (either offchain, onchain, or via delegations).
The initial governance approach for whitelisting will be taken bilaterally between the Protocol Team, and members of its partnership programme. Initial members of its partnership programme include Anaxee, Regen, ICR, Super Biochar, UCR.
A quarterly RFP will be issued to partners for their feedback on any proposals for new carbon classes or specific carbon credits to include, as well as to capture feedback on existing carbon classes.
In general, the Protocol team will require recommendations for new carbon classes to be “demand led”, i.e. there must be data validating that there is legitimate demand and value for new carbon credits to be included within carbon classes.
Additional key attributes will be considered when evaluating new carbon credits, such as:
Certification standard, ICROA status, CCP labels.
Methodology relevance to compliance schemes (e.g., CORSIA).
Vintage criteria.
Geography and project type.
Publicly available data on liquidity and volume.
In addition, there is a hard requirement that all carbon credits that the Klima Protocol whitelists have explicit permission from the host registry to be integrated with a blockchain ecosystem. This is to ensure that the appropriate technical implementation can be achieved to mitigate any risk of double counting, and that relevant carbon registry Terms of Service are adhered to.
Transparency
Open-source governance principles emphasise inclusivity, clarity, and auditability – whilst the initial process will be centralised, it will be conducted with maximum transparency, ensuring all market stakeholders understand the process, and can react to decisions fairly.
All RFPs, feedback and decisions will be published publicly on the Klima Protocol forum before any action is taken (e.g. creating the carbon class).
Current carbon classes
Ocean alkalinity enhancement
Limenet – CMARK02
14 tonnes
Live at launch
Coming soon
Biochar
TBD
100 tonnes
Live at launch
Coming soon
Avoided deforestation
ECO-22; ECO-114
30,000 tonnes
Live at launch
Coming soon
Regen – City Forest Credits
TBD
TBD
TBD
Coming soon
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