Climate-change startup Nori has been funded to build a blockchain-based market for carbon credits that will start by paying farmers to remove CO2 from the atmosphere.
Announced Thursday, the Seattle-based startup closed a $4 million funding round which included Placeholder, North Island Ventures and Tenacious Ventures. A large, unnamed agribusiness also invested in the round, according to Nori CEO Paul Gambill.
The firm, which was part of 2019’s Techstars Sustainability program, previously closed a $1.3 million pre-seed round in December.
The funds will be used to expand the team and onboard more carbon-removal suppliers (i.e. farmers), the company said in a statement, laying the foundations for an industrial-grade carbon marketplace.
The same way that blockchains prevent the double-spending of digital coins, so too can they solve the double-counting problem in the carbon offset market. The first generation of carbon markets, though well-intentioned, led to the selling of carbon credits over and over again, while really it’s the same ton of CO2 being traded every time.
Read more: Carbon Credits Have a Double-Spend Problem. This Microsoft-Backed Project Is Trying to Fix It
“The idea is to build a carbon-removal marketplace that makes it really simple for people to pay for carbon dioxide that’s being removed from the atmosphere in a verifiable way,” Gambill said in an interview.
Step one for Nori is about working with farmers, who can remove carbon from the air and “sequester” it in the soil by adopting more sustainable farming practices. This part of the Nori project is not really blockchain-intensive, said Gambill.
“It’s more of a traditional software and data challenge to really improve the way in which we’re quantifying and verifying the carbon,” he said, adding:
“Right now we’re able to sell carbon for cash, so no tokens are involved. The next stage of the roadmap will involve building out a forward market in addition to our spot market, and integrating a token into that. And so the forward market will be an auction-based concept. And that’s where price discovery will happen.”
The idea is that when a farmer removes CO2 from the atmosphere, and then that gets verified, they are issued a Nori Carbon Removal Tonne (NRT) electronic certificate stored on the blockchain, which they can then sell to buyers in exchange for one nori (NORI) token. One token is always worth one ton, but the price of the token will fluctuate based on supply and demand, Gambill explained.
Read more: Ocean Protocol and Balancer Want to Do for Data What Uniswap Did for Coins
“The true price discovery is happening is on the nori token, and then the carbon is immediately retired, which is carbon-market language meaning that the buyer owns it forever,” said Gambill. (The carbon-removal certificate takes the form of an Ethereum-based non-fungible token that is non-transferable.)
In other words, Nori is transparently separating the trading part, so that the carbon is retired immediately, and then a token, representing one future ton of CO2 removed, is traded as a commodity.
The funding is one of Placeholder’s first investments that bridges the gap between crypto and the “real-world,” said Chris Burniske, a partner at the blockchain-focused VC firm.
“With Nori, farmers can adopt regenerative practices like planting cover crops in empty fields over the winter and get paid for doing so, as the same process that rejuvenates the soil also sequesters carbon,” Burniske said in a statement, adding:
“In pursuit of an elegant solution to a tough problem, Nori has employed a host of cutting-edge technologies, including blockchains, to account for and audit the carbon-backed assets produced by farmers.”