All your questions about Capturiant answered.
What is Capturiant?
Capturiant is a global integrated environmental registry, and regulated exchange, with offices in Texas and the Bahamas.
What is the purpose of Capturiant?
The purpose of Capturiant is to create the first market for environmental asset risk management and finance. With an experienced team, global partnerships, and regulatory experience, Capturiant prioritizes standardization, authentication, compliance, transparency, assurance, and exchange.
What issues does Capturiant solve?
Existing environmental asset registries lack transparency, efficiency, risk management and are limited to carbon credits. Currently, the market is fragmented with no trust or transparency. Common issues include lack of standardization, verification difficulties, double counting, aggregation difficulty, and high costs.
Why is Capturiant being created now?
The carbon credit market is currently a wild west. The market is atomized, and sellers don’t know what to sell. Capturiant represent an effort to turn a nebulous creation of NGOs into a standardized financial product, moving carbon credits from a philanthropic purchase to a real financial asset.
The carbon credit market is currently in a state of disarray, with a lack of standardization and confusion among sellers regarding the most viable products to offer. Capturiant aims to transform this opaque market, dominated by NGOs, into a standardized financial asset, turning carbon credits from a philanthropic endeavor into a viable investment option.
What is the market size Capturiant is targeting?
Ultimately, Capturiant’s goal is to be the premier global exchange for environmental assets. The global value of carbon markets alone was approximately $800B in 2021, up from roughly $300B in 2020. With the eventual inclusion of water rights and other environmental assets, hundreds of billions of dollars of assets will be traded on the Capturiant platform.
What makes Capturiant different?
Capturiant has several key competitive differentiators. One fundamental differentiator is the fact that, as an exchange, Capturiant allows market participants to obtain greater insight into the value of environmental assets, and therefore facilitate the marketing and trading of such assets. Capturiant’s proprietary Performance Environmental Asset Credit™ allows developers and sponsors to sell forward future assets via a preliminary analysis of the environmental and sustainable development benefits to be generated from a project, and is unmatched by any competitors. Similarly, Capturiant is alone in offering warranty coverage and a centralized, deal-vetted location for trading. Capturiant is a leader in using distributed ledger technology to track the global trade of credits, and in enabling B2B2C use cases. With all of these advantages, and a team of licensed securities professionals with experience and skills in due diligence, disclosure, and high standards of conduct, Capturiant provides the safest and most professional platform for carbon trading.
What is Capturiant’s vision for the next several years?
Capturiant’s goal is to be the reference and premier exchange market for any environmental asset companies may create to respond to the growing trend of private environmental action. Capturiant wants to provide the market with a tool to create and trade environmental assets like any other asset.
Who is the Capturiant team?
The Capturiant team is led by James Row, founder and CEO; Michael Miller, Chief Risk Officer; Ryan Reneau, Chief Compliance Officer; Sam Stokes, Director of Strategy & Pedro Blanco Head of Business Development. Together they have decades of experience in capital raising, deal structuring, private equity, and international tax law.
What is the process for an issuer using Capturiant?
An issuer wishing to leverage the Capturiant platform will have to go through an onboarding process, similar to onboarding any investment banking transaction. Then, Capturiant will evaluate the product they are trying to develop, or even help walk them through the methodology needed to create a valid environmental asset from square one. Once those steps are completed, the project must be validated by a Capturiant-approved validation body; once validated, the project may be listed on the Capturiant platform. If the issuer wishes to issue PEACs to fund the project they may, otherwise once emission reduction and removal activity has taken place the project will undergo verification, at which point credits may be issued.
What is the process for an investor or product buyer using Capturiant?
Buyers will have to go through an onboarding process, similar to onboarding any investment banking relationship. Once onboarding is complete, buyers can review projects and the attached environmental assets on the Capturiant platform, and register just like other purchasers of securities. Once registered, buyers can transact and purchase assets, with Capturiant either retaining custody of the assets or transferring custody to another institution or account as with any other securities product.
What technology does Capturiant use?
Capturiant is leveraging the latest AI developments to streamline operations and reduce costs. Capturiant also leverages the Hedera hashgraph to build a digital registry for tracking environmental assets on a distributed ledger, and will use automation as much as possible to ensure fast, compliant, and secure transactions.
Why is Capturiant using this technology vs. the technology of its competitors?
Credit registries today are largely behind the times when it comes to leveraging technology in this space, and to the extent they use blockchain it is largely trend-chasing rather than truly using the technology in a productive and meaningful way. The Capturiant team has extensive experience in bringing cutting-edge technology key to ensuring transparency and safety to the realm of finance.
How secure is Capturiant?
Capturiant is a regulated securities institution with extensive experience protecting assets and registries, in contrast to other issuers of carbon credits, which are unregulated non-profits. Capturiant follows securities industry best practices for protecting customer information and assets.
How can I use Capturiant as an individual?
Once there is a liquid market in environmental assets, an individual can include those assets in their personal portfolio for investment purposes. Just as with any other financial asset, they can be held short or long, and investors and broker-dealers will be able to use traditional financial tools with respect to these assets.
What does the Capturiant registry look like?
Like any other security registry, investors’ assets are held in custody and assigned to a digital ledger, CUSIP number if applicable, and similar tracking. Capturiant brings decades of experience in managing customer assets to ensure assets are held securely and transacted rapidly.
Do I need to submit a validation/verification work plan under GS4GG?
No, Gold Standard is a separate, proprietary standard. Capturiant’s goal is to create an open, agnostic standard so that assets can be transacted from any source.
What are the validation/verification requirements? How does that process work?
Verification and validation requirements will vary depending on the exact type of project and asset in question. For example, a GEMS project sequestering resources in the ground will involve confirmation of the amount of resources and calculations of the environmental impact of their extraction. For any project, a thorough evaluation by area experts will determine the impact, which will then allow the project to issue the appropriate type and amount of assets.
How do you transition a CDM-registered carbon project to Capturiant?
Capturiant follows the same methodologies as the Clean Development Mechanism, or CDM, for evaluating projects. If a project has been found to meet CDM standards, those documents can be transferred to Capturiant, where the project will be evaluated on our standards as part of the product registration process.
Why is Capturiant Environmental Assets Exchange located in the Bahamas?
Capturiant is setting up its operations in jurisdictions with the most comprehensive and uniform digital exchange regulations. While there are laws in the United States related to digital exchanges, these laws and regulations vary by industry and by state. For example, there are federal laws that regulate digital currency exchanges, such as the Bank Secrecy Act and the USA PATRIOT Act, which require these exchanges to comply with certain anti-money laundering and counter-terrorism financing requirements, with which Capturiant is compliant. However, there are also a patchwork of state laws which make compliance overly complex. For that reason, Capturiant is locating in the Bahamas, where the Digital Assets and Registered Exchanges (DARE) Act has created a straightforward and comprehensive path to regulation for digital exchanges.
Has Capturiant already been licensed to operate?
Capturiant has been Approved in Principle under the DARE Act, and has finalized its second document request. Approval upon Condition is pending, and when received Capturiant will be able to operate in the Bahamas under the DARE Act.
Does DARE regulation only cover carbon credits, or are other assets covered too?
Capturiant has sought approval under DARE with the intent of servicing any and all environmental assets—carbon credits, green and resilience bonds, water rights, credit pools, and more. However, DARE does not limit Capturiant to these environmental assets, and Capturiant may expand its offerings in the future.
If carbon credits aren’t recognized under US securities or commodities regulations,
are US persons restricted from trading or listing on the Capturiant platform?
US investors are not restricted from listing or trading environmental assets on the Capturiant platform. Most Capturiant consumers, both project developers and potential credit purchasers, are US-based.
What are carbon credits?
Carbon credits, also known as carbon allowances, work like permission slips for emissions. When a company buys a carbon credit, usually from the government, they gain permission to generate one ton of CO2 emissions. With this type of carbon credit, carbon revenue flows vertically from companies to regulators. Carbon credits can also be generated in cap-and-trade systems, in which the government sets a cap on CO2 emissions, and companies that produce less CO2 than the cap are able to sell the difference to companies whose emissions exceed the cap.
What is a carbon offset?
Carbon offsets represent reductions in greenhouse gas emissions which are made elsewhere, either through actions that would not have happened without the investment or through the buying of credits from projects that would have gone ahead even without the investment. The buyer is, in effect, paying a premium to compensate for their own emissions as well as supporting projects which might not otherwise see the light of day. While carbon offsets differ from carbon credits in their origin and purpose, they are often referred to as carbon credits as well.
How are carbon credits created?
When a company chooses not to engage in activity that would generate CO2 emissions, such as drilling for oil or cutting down trees, or chooses to actively make changes that reduce CO2 emissions, such as replacing incandescent light bulbs with LEDs, it can calculate how much their product reduces CO2 emissions, and have that amount certified. Importantly, there must be an “additionality factor”--that is, the project would not have been undertaken absent a market for carbon credits.
What is additionality?
Additionality means that the reduction or removal of a greenhouse gas (GHG) emission arises from an activity that would not have occurred without the revenue from the sale of carbon credits. A first and critical step in this context is to determine that a project activity is not required by law or regulation.
All Capturiant-approved methodologies must include a detailed approach for determining the additionality of a specific project activity. The validation body audits the demonstration of additionality to conclude whether the project meets Capturiant rules and requirements.
What are baselines?
The baseline is the reference point against which a project’s emissions reductions or removals are measured. The baseline scenario represents the activities and greenhouse gas (GHG) emissions that would occur in the absence of a project. It is determined according to the specific carbon accounting methodology applied to the project. Emission reductions or carbon removals in excess of the baseline level are considered additional and, thus, eligible to generate a carbon credit.
What is permanence?
Permanence refers to the question of whether carbon emissions reduced or removed from the atmosphere will remain out of the atmosphere in the long run. Factors that could result in sequestered or removed carbon being released back into the atmosphere include logging, mining, fires, or drought, or other natural disasters, depending on the project. To ensure the permanence and the environmental integrity of all Environmental Asset Credits, Capturiant requires all projects to set aside a risk-adjusted percentage of the emission reductions and removals achieved, which are then placed into a project’s buffer pool. These “buffer credits” are managed by Capturiant and can be canceled when per a project’s Remedy and Replacement Schedule. At the end of a project’s last crediting period, all buffer credits are canceled. Any project that experiences a likely loss event is required to notify Capturiant of any substantial impact, and must quantify the loss and submit a formal report. If any significant impact has occurred, we will put buffer credits on hold when notified, and ultimately cancel them based on final reported losses.
How are credits calculated?
The calculation of emissions reductions and removals (which become carbon credits once they are issued for trading) is specific to each project methodology. Projects undertake the monitoring in accordance with the procedures in the methodology and must contract a third-party auditor — an approved, independent verification body – to verify that all emission reductions or removals are quantified according to VCS requirements.
How are the projects that create carbon credits funded?
Companies deciding to undertake a project creating carbon credits either fund it themselves, in order to meet regulatory requirements surrounding their carbon footprint, or through the sale of the carbon credits generated by the project.
What is the difference between Blue, Green, and White carbon credits?
Blue carbon credits refer to carbon credits generated by projects that conserve and restore carbon sinks in and around the ocean. This can take the form of planting mangroves or other plants, or reintroducing key organisms to an area, and these projects are generally very efficient at capturing carbon dioxide. Green carbon credits are those generated by land-based projects, such as reforestation or other planting projects. And white carbon credits are those that reduce CO2 emissions from human activity, for example by switching from coal to solar or wind power. Capturiant plans to introduce other types of Carbon Credits, such as their GEMS Environmental Asset.
What is the difference between voluntary vs. compliance credits?
Not all companies purchase carbon credits out of a genuine desire to reduce CO2 levels: some do so in order to meet regulatory requirements limiting their carbon impact. Companies with a regulatory cap on their emissions purchase carbon credits to comply with those regulations if they aren’t able to reduce their emissions through other means—hence, these are known as compliance credits. When a company, organization, or individual isn’t required to reduce its CO2 impact but purchases credits (or funds a credit-generating project) anyway, those credits are known as voluntary credits.
Is the voluntary carbon market regulated?
The voluntary carbon market is not regulated, which has resulted in significant setbacks when it has become apparent that credits were being improperly issued. The improper issuance of credits, either due to misleading calculations of emissions impact or because of failure to properly establish additionality, creates distrust in the carbon market and makes potential credit purchasers less likely to enter the market. Moreover, lack of regulation places a burden on project developers, as registries and validators are not subject to oversight and may take advantage of developers through unsavory practices.
Capturiant is changing this dynamic by acting as the first regulated registry and exchange for carbon credits. While credits themselves are not regulated, Capturiant and its team are regulated by US securities regulators, and thus are subject to strict standards of truthfulness and professional conduct. With this regulatory backdrop, both project developers and carbon investors can be confident in the validity of the processes used to generate credits and of the honesty of all players involved.
Are carbon credits a commodity?
Yes, carbon credits are commodities. Carbon credits are discrete, tradable goods whose price is determined by supply and demand in the marketplace, and although unlike other commodities they are intangible, they are treated as commodities by the SEC and other regulators. Carbon credits represent the right to emit a certain amount of greenhouse gases, and they can be bought and sold in a market, and they can be traded on exchanges just like other commodities such as oil or gold. Carbon credits are typically traded as part of a government-mandated emissions trading scheme or voluntary market, and they may be issued by governments or private organizations.
What are the advantages/disadvantages of carbon credits and carbon trading?
Carbon credits and carbon trading have several potential advantages, such as encouraging companies to reduce their emissions, promoting the development of clean energy technologies, and providing a market-based approach to emission reduction. However, they also have some potential disadvantages, including complexity, lack of transparency, difficulty in setting appropriate carbon prices, and the potential for carbon leakage. It is important to carefully consider these factors when designing and implementing carbon credit and carbon trading programs.
What are the shortfalls of the trade in carbon?
Lack of transparency and difficulty in setting appropriate carbon prices can undermine the credibility and effectiveness of the carbon credit market. Carbon leakage and limited coverage can allow companies to avoid reducing their emissions. And carbon credits and carbon trading can be complex and may create barriers to participation. Capturiant seeks to solve all of these problems by creating a transparent and easy-to-use venue for transacting carbon credits held to the highest standards.
What does COP mean?
COP stands for Conference of the Parties, referring to the signatories of the 1992 UN Framework Convention on Climate Change. However, it is used more broadly to refer to the annual meeting of those signatories. At the meeting, nations discuss their ongoing efforts to combat climate change and make commitments to further reduce emissions—however, those commitments are non-binding, and not all countries abide by them.
What is the Kyoto Protocol?
The Kyoto Protocol was adopted on 11 December 1997. Owing to a complex ratification process, it entered into force on 16 February 2005. Currently, there are 192 Parties to the Kyoto Protocol. In short, the Kyoto Protocol operationalizes the United Nations Framework Convention on Climate Change by committing industrialized countries and economies in transition to limit and reduce greenhouse gas (GHG) emissions in accordance with agreed-upon individual targets. The Convention itself only asks those countries to adopt policies and measures on mitigation and to report periodically.
What does the Kyoto Protocol have to do with carbon markets?
The Kyoto Protocol commits industrialized countries to reduce their carbon emissions levels to below 1990 levels, whereas developing countries are not committed to any reduction targets. The goal set by the Kyoto Protocol is that by 2050, the atmosphere should contain no more than 450 parts per million (ppm) of CO2 equivalent greenhouse gases. This is meant to prevent “dangerous climate change,” including dangerous changes in global weather patterns, sea level rise, and potential mass extinction of species. Countries which have met their emission targets can sell their spare credits to countries that have not.
What greenhouse gases are involved in the Kyoto Protocol?
There are six greenhouse gases covered under the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, perfluorocarbons and nitrogen trifluoride. Thus, in addition to carbon credits generated from reforestation and other sustainable land-use projects, there is also some trade in offsets for hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs).
Which is the largest carbon trading market?
Carbon trading exists today in various forms. One way carbon trading occurs is under the framework of the European Union’s Emissions Trading System (EU ETS). The EU ETS is the largest multi-national greenhouse gas emissions trading scheme in the world. It is a major pillar of EU climate policy and was approved by the European Parliament in December 2003.
What are some carbon exchanges?
The European Carbon Exchange is a marketplace for trading carbon credits under the EU ETS system. There are also smaller exchanges such as Xpansiv, AirCarbon, and Carbon Trade Xchange. These exchanges differ from Capturiant in that they are not all bound by US securities regulations, and rely on existing registries for the tracking of credits rather than confirming original ownership and transfer themselves.
What is the history of the carbon market?
The idea of carbon trading has been around since the 1980s. However, it was not taken seriously by corporations or policy makers until after the signing of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992 which mandated that all parties meet their greenhouse gas emission targets through international cooperation. As a result, many international institutions have begun to implement new guidelines for climate change mitigation through the use of carbon trading.
What are the three basic types of carbon trading?
There are three basic types of carbon trading:
· Cap-and-trade: Under a cap-and-trade system, a government or regulatory body sets a cap on the total amount of greenhouse gas emissions that can be emitted by a particular sector or region. Companies are then issued a certain number of emission allowances, which represent the right to emit a certain amount of greenhouse gases. Companies that emit less than their allotted amount can sell their excess allowances to other companies that need to emit more than their allotted amount. This creates a financial incentive for companies to reduce their emissions. · Carbon taxes: Carbon taxes involve the imposition of a fee or tax on the emission of greenhouse gases. The goal of a carbon tax is to encourage companies to reduce their emissions by making it more expensive to emit greenhouse gases. · Voluntary carbon markets: Voluntary carbon markets involve the trade of carbon credits between companies or organizations on a voluntary basis, rather than being mandated by a government or regulatory body. These markets can provide a way for companies to offset their emissions or to invest in clean energy technologies.
What are the three methods to reduce and offset GHG emissions?
There are three main methods that can be used to reduce or offset greenhouse gas emissions. These include the use of energy efficient technologies, emission reduction or removal projects, and government policies which provide tax incentives for companies to invest in renewable energy sources. Carbon credits are a means of incentivizing the second method.
What are the two main types of emissions?
There are two main types of emissions: direct and indirect. Direct emissions arise from processes that take place on the premises of a company while indirect emissions come from business activities outside of its facilities, such as employees commuting to work or suppliers shipping goods to the company’s stores. In order to fully account for its carbon footprint, a corporation must first calculate both direct and indirect emissions.
What is the Clean Development Mechanism (CDM)?
The Clean Development Mechanism (CDM) is an international policy mechanism created under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). It enables countries with industrialized economies – referred to as Annex 1 countries – to invest in emission reduction projects in developing countries. The CDM was designed so that industrialized countries could meet their emission reduction targets by funding emission reduction projects in developing countries.
What is Joint Implementation?
Joint Implementation (JI) is an international carbon offsetting mechanism created under the Kyoto Protocol of the UNFCCC. It enables industrialized countries to invest in emission-reduction projects anywhere in the world, with the aim of achieving economies of scale and ensuring that best practices are shared across national borders.
What is a carbon tax?
A carbon tax is a fee imposed by a government on the burning of carbon-based fuels such as coal and petroleum. The tax is levied according to the quantity of greenhouse gases, usually CO2, produced through the process. The proceeds from this tax are used to fund programs which aim to reduce emissions or help communities adapt to climate change.
What is a cap-and-trade system?
A cap-and-trade system is a market-based approach to controlling emissions. Under such a system, the government sets an overall limit or cap on the amount of carbon that can be emitted, and issues permits for companies to burn a certain amount of carbon (the number of credits they receive usually depends on some combination of past performance and industry standards). Firms that cut their emissions faster than required can sell their surplus credits to other companies that have not reduced their carbon footprint enough. The cap and trade system thus encourages companies to pollute less.
What are the benefits of carbon trading?
Carbon trading has a number of benefits. The primary benefit is that it mitigates emissions to address climate change, both by creating a market for CO2 reduction and, in the case of cap-and-trade and similar systems, by imposing costs on excess CO2 emissions. Carbon trading also reduces the costs of international compliance by creating funding mechanisms for carbon reduction. Additionally, carbon trading increases investment in sustainable activities, harnesses market forces to drive change, and creates carbon assets that can be traded or monetized.
What are some of the challenges facing carbon markets?
A major challenge facing carbon markets is market volatility and high price fluctuation, mainly due to the small size and fragmented nature of today’s markets. Carbon markets also face roadblocks to adoption because the increased costs of carbon faced by businesses are often passed on to consumers. In many voluntary carbon markets, lack of regulation means there is potential for fraud and other types of abuse, as well as possible increases in GHG emissions if cheap offsets are used and risk of carbon leakage. Finally, voluntary markets also often face difficulties measuring and predicting GHG emissions.
What does a carbon emissions trader do?
A carbon trader’s job is to sell and buy carbon credits/reduction on the international market. Businesses and governments around the world are under pressure to reduce their greenhouse gas emissions. The primary tool used to encourage these reductions is a system for putting a price on greenhouse gas emissions, through either emissions taxes or emissions trading schemes.
What is the difference between carbon trading and emission trading?
Carbon trading and emission trading are similar terms that describe a system for reducing pollution where the total amount of greenhouse gasses is capped and organizations or corporations work to reduce their share of emissions. In carbon trading, each participating organization is assigned an allowance at the beginning of the period by a governing body called a regulator.
Organizations that reduce their emissions below the limit may trade their surplus allowance to another organization that has a deficit, allowing them to exceed their limits. In emission trading, each participating organization is assigned a limit at the beginning of the period by a governing body called a regulator. Organizations that emit less than their individual limits can sell or trade excess allowances to other organizations that have a higher emissions level. In both schemes, the main limiting factor is economics: there is no point in continuing to invest in technologies and equipment that do not cut greenhouse gasses enough to be profitable. The success of carbon trading has been varied because there are some economic factors that can influence it.
How is the price of carbon set?
The price of carbon can either be set by the government via taxation—i.e., taxing every ton of carbon emissions by a certain amount—or by the market via carbon trading. Under the market system, producers of carbon credits sell those credits to companies that either must offset their own emissions under law, or choose to do so to help the environment. The interaction between supply and demand yields a price of carbon, as with other commodities.
What kind of benefits will Korean exporting companies regarding CBAM in purchasing
voluntary carbon credits from Capturiant?
Capturiant engages in all types, jurisdictions, and both voluntary and compliance carbon credit markets. Concerning CBAM, voluntary credits are not a viable method of reducing a company’s liabilities under CBAM. As of now, companies exporting to Europe only face reporting requirements under CBAM. In 2025, companies will be required to purchase CBAM certificates from EU member states. Once CBAM is fully implemented in 2030, only compliance credits within the EU Emissions Trading System (ETS) will be eligible for offsetting exporters’ emissions. Capturiant will be able to facilitate ETS transactions for Korean exporters once they face those requirements. Additionally, Clear Rating (
www.clearrating.com), an Entoro/Capturiant affiliated entity in valuation and ratings, is planning on getting regulated in Europe to assist non-European companies in the various regulated carbon schemes that are being required for EU and non-EU participants.
Do these carbon credits can be used to mitigate Scope 1 or 3 carbon emissions?
Yes, offsets can be used for offsetting emissions at any point in a company’s supply chain. Voluntary offsets are not tied directly to any scope level until the company retires (uses) them, at which point the company may make clear what activities they are offsetting. If there are other requirements or regulatory guidelines determining what offsets can be used by companies, those may determine what types of credits to purchase. Capturiant believes it has a structure where a company, particularly an OEM can create a closed-loop Scope 3 strategy and system to satisfy environmental issues, but can be a profitable venture.
Does Capturiant issued voluntary carbon credits have same authentic power with like
Verra or Gold Standard?
Yes, we would argue better. Based in Houston, we are experts in Oil & Gas, petrochemicals, mining, power, and technology. Our focus and expertise is on non-nature-based carbon credits, such as direct air capture (DAC), sequestration in place (SIP), methane abatement, and other energy and hydrocarbon sector credits requiring direct measurement of emissions impact. This is in contrast to Verra and Gold Standard, who focus primarily on nature-based methodologies such as forestry projects whose impact is calculated based on estimates rather than scientifically validated measurement systems. The nature-based credits promoted by Verra and Gold Standard are also vulnerable to fraud and have recently turned into a public relations and legal disaster for Verra and its clients like Delta Airlines. Beyond our focus on sound methodologies, we bring our securities industry background to our approach to compliance and risk management, following KYC/AML procedures mandated in the financial industry, employing a team of SEC/FINRA-licensed and regulated individuals (Verra and Gold Standard are unregulated), and leveraging distributed ledger technology to ensure credits cannot be double-sold as sometimes happens on other registries. We had this same conversation with Occidental Petroleum (Oxy) and it is a critical reason why they selected us to market the credits from their DAC STRATOS project. Oxy reviewed what we are doing with the authentication, registry, and exchange functions and impressed. As such, we have the first marketing sales agreement issued by Oxy/1PointFive.
Industry: Water Rights
What are water rights?
Water rights refer to legal rights to use water from a specified source. Water rights authorize particular entities—like property owners or private companies—to use, sell, divert, or manage the water. Laws governing water rights vary from state to state, and water permits are issued in accordance with state laws and mandates. The two main types of water rights followed in the US are riparian rights—which refers to the right of a property owner to use water that touches the borders of their property—and prior-appropriation water rights—in which the state grants a party the right to use certain waters.
Water rights can dictate the use of surface water or groundwater from a specified source. Although it varies by state water laws, surface waters like lakes, streams, and coastal waters are publicly owned, and therefore accessible to the public unless during a drought crisis. Groundwater refers to water that comes from an underground aquifer. Most water rights doctrine limits water users to “reasonable use” of a water source, meaning that they cannot exhaust the water source or prevent other peoples’ access to it.
What is the difference between surface water and groundwater?
Various types of water rights grant owners jurisdiction over either surface water or groundwater. Surface water is the water that flows atop the Earth’s surface—oceans, lakes, rivers, streams, and other water sources that are not underground. Many private surface water rights are subject to riparian, hybrid, or appropriative clauses, determined by state law. Groundwater is water that comes from an underground source that can be used for domestic purposes, agriculture, and irrigation. Groundwater is often privately owned, though public groundwater rights are often appropriated through an allocation system in which water is pumped to various destinations based on acreage.
How are water rights determined?
Water rights depend on which US state you live in and which doctrine it follows. Most eastern states follow a riparian doctrine, which dictates that the landowner has rights to the body of water that touches the borders of their property. Most of the western states follow a prior appropriation doctrine which gives permit-holders the right to divert a specified amount of water for an approved, beneficial use. California, Oklahoma, and Texas all follow a hybrid of water regulations which mix the prior appropriation and riparian doctrines, allowing permit-holders to divert water from a source except in cases of a water shortage. The US Constitution prevents the state or federal government from imposing any laws or restrictions that may infringe on a property rights owner’s accessibility or use of their water source.
What types of water rights are there?
The most common water rights in the US are riparian, prior appropriation, or hybrid rights, a mix of those two. However, water rights can take many other forms. The below list illustrates the extent of alternatives to riparian and prior appropriation:
· Absolute dominion · Correlative rights · Community water rights · Littoral rights · Navigable servitude · Overlying rights · Public trust · Right to clean water Product Questions
What is sequestering? What are the general advantages of this carbon reduction strategy?
Sequestration means to “keep it in the ground” and store abated emissions in underground geologic formations. While this may not be a stand-alone solution to the global climate crisis, it is a complementary tool to most energy transition strategies proposed today, which generally include reducing use of the “dirtiest” fossil fuels starting with coal, but eventually phasing out traditional oil & gas where possible. These components of the energy mix are slated to be replaced with a mix of renewable power generation, energy storage, and zero/low emission fuels (such as hydrogen, renewable natural gas, renewable diesel, etc.).
What is a PEAC?
Capturiant has developed Performance Environmental Asset Credits, or PEACs, as a conditional credit for a “to be developed” project. PEACs provide up-front capital to project developers in order to get carbon reduction and removal activity off the ground and accelerate the climate impact.
What is the procedure for registering projects in the EU to generate European Union
Alpha (EUA) credits?
The procedure for registering a new project in the EU, and generating EUA credits, involves the following steps:
· Determine eligibility: The project must meet the criteria set forth by the European Union Emissions Trading System (EU ETS) in order to be eligible for EUA credits. · Calculate emissions reductions: The project must demonstrate that it will result in a reduction of greenhouse gas emissions, which will be verified by an accredited verifier. · Apply for registration: The project developer must apply for registration with the relevant national authority, such as the National Implementation Body (NIB) in the country where the project is located. The application must include a description of the project, emissions reductions, and verification reports. · Obtain verification: The project must be verified by an accredited verifier to ensure that the emissions reductions are real, additional, and permanent. · Receive EUA credits: If the project is approved, the project developer will receive EUA credits, which can be traded on the EU ETS carbon market.
Can EUA credits be traded on the Capturiant platform?
Capturiant is currently in the process of verifying it meets all requirements to facilitate trading of EUA credits.
What is the U.S. Inflation Reduction Act of 2022?
The Inflation Reduction Act (IRA) of 2022 makes the single largest investment in climate and energy in American history, enabling American to tackle the climate crisis, advancing environmental justice, securing America’s position as a world leader in domestic clean energy manufacturing, and putting the United States on a pathway to achieving the Biden Administration’s climate goals, including a net-zero economy by 2050.
What are emission trading systems?
Emissions trading, sometimes referred to as “cap and trade” or “allowance trading,” is an approach to reducing pollution that has been used successfully to protect human health and the environment. Emissions trading programs have two key components: a limit (or cap) on pollution, and tradable allowances equal to the limit that authorize allowance holders to emit a specific quantity (e.g., one ton) of the pollutant. This limit ensures that the environmental goal is met and the tradable allowances provide flexibility for individual emissions sources to set their own compliance path. Because allowances can be bought and sold in an allowance market, these programs are often referred to as “market-based.”
Why are governments interested in these trading systems?
These trading systems allow governments to reduce emissions by harnessing the power of the market rather than trying to quantify the cost of their negative externalities themselves. Moreover, they have a proven track record, dating back to the cap-and-trade system placed on sulfur dioxide emissions to tackle acid rain.
As governments are considering linking their emissions trading systems,
what are some of the most important points for them to keep in mind?
First, of course, governments must decide which systems they want to link with—who do they trust, and what qualities do they want in a linking partner? Governments also need to think about the process of making the link happen: what form should an agreement take, how similar should the systems be, and how can they measure and confirm those shared qualities? Additionally, how should jurisdictional conflicts be resolved? And can each partner verify that the other is committed enough to the system that it remains a useful tool in reducing emissions?
What is the importance of engaging stakeholders early in the process?
There are two points on the topic of stakeholder engagement in the linking process that are especially important. The first is to clearly explain the rationale for linking, especially the benefits at the outset of the linking process, and to explain to affected parties—both companies and society at large—how the link will impact them. Second, it’s important to assure affected parties of the efficacy of the new system before it is officially launched.
Why is it important to have such early stakeholder engagement?
Early stakeholder engagement is important because climate policies can be vulnerable to backlash if they aren’t based on a broad consensus and inclusive process that brings in the interests and concerns of all segments of the population, especially those who would be most impacted by potential increased costs or regulatory burdens.
What are some of the issues that negotiators in the carbon markets are grappling with?
A major issue facing negotiators trying to link carbon markets is how to deal with mitigation outcomes achieved in a different jurisdiction. For example, if a US oil refiner meets its emissions goals through the purchase of carbon credits in the French market, how would that be treated? And how can that be accommodated in a way that the overall approach to environmental regulations remains robust?
Which countries have carbon trading?
The first large-scale carbon trading market in the world was developed in the EU, and following Brexit the UK has set up its own national carbon market. With the recent creation of an emissions trading market in China, that country now hosts the largest such market in the world. In the US, some carbon markets have developed at the state level, and the federal government is working on a voluntary market at the national level. A number of other countries, including Canada, Japan, New Zealand, South Korea, and Switzerland, either have markets or are actively developing them.
Could carbon trading work internationally?
Nations around the world are actively discussing how to develop frameworks for international carbon trade. In such a structure, nations that have failed to meet their own emission reduction goals could purchase credits from nations that did meet their goals. However, this would require air-tight rules that prevent “double counting” of emissions reductions, and avoid counting reductions that would have happened regardless of any action taken by national governments.
How can we be sure carbon offsets really work?
Regulations around carbon offsets are new and can be insufficient to ensure that offsets meaningfully contribute to reduced emissions. For example, some offsets have been created that exaggerate the number trees protected from logging. At the same time, offsets can provide crucial financial support to environmental projects. Offset purchasers and regulators should be careful in ensuring that those selling offsets are actually taking the actions they say they are.
What is COP27? What were the goals?
COP27 was be held in the Egyptian coastal city of Sharm El-Sheikh on 6-18 November. Every year, the different country from a different world region takes up the COP Presidency, to convene world leaders and define priorities. As an ‘All of Africa’ COP, the Egyptian COP27 Presidency has defined the summit’s four key goals as:
· Mitigation: All parties, especially those in a position to “lead by example”, are urged to take “bold and immediate actions” and to reduce emissions to limit global warming well below 2°C. · Adaptation: Ensure that COP27 makes the “crucially needed progress” towards enhancing climate change resilience and assisting the world’s most vulnerable communities. · Finance: Make significant progress on climate finance, including the delivery of the promised $100 billion per year to assist developing countries. · Collaboration: As the UN negotiations are consensus-based, reaching agreement will require “inclusive and active participation from all stakeholders”.
What are COP summits?
The Conference of the Parties (COP) is the group of nations that have signed the UN Framework Convention on Climate Change (UNFCCC), which was put together in 1992. It commits them to act together to stabilize greenhouse gas concentrations “at a level that would prevent dangerous anthropogenic (human-induced) interference with the climate system”. Since then the parties, or nations, have met almost annually.
What is ESG?
ESG stands for “Environmental, Social, and Governance,” and is a framework that helps stakeholders understand how an organization is managing risks and opportunities related to environmental, social, and governance criteria (sometimes called ESG factors). While ESG is often used in the context of investment, ESG stakeholders are not simply the company and its ownership, but may include customers, suppliers, and employees.
How has ESG evolved?
In the past, some investors used an “Environment, Health, and Safety” or EHS framework for investing with an eye towards reducing potential negative externalities. That framework evolved into what became known as the “Corporate Sustainability” movement, especially among management teams that wanted to go beyond what was legally mandated of them in terms of environmental friendliness. By the 2000s, the Corporate Sustainability movement began to incorporate ideas around corporate responses to social issues beyond the environment, and this broader outlook was known as Corporate Social Responsibility. In the past few years, ESG emerged as a more proactive way for investors, especially institutional investors, to evaluate the impact of their investment on a broad range of issues.
How does ESG investment work?
As ESG has gone more mainstream, we have seen a growing number of ESG rating agencies that that assign ESG scores and develop new and evolving reporting frameworks, with the goal of improving the transparency and consistency of the ESG information firms publicly report. Additionally, a number of ESG investment vehicles have emerged, including green bonds, index funds, ETFs, and mutual funds.
What is an IRS 1031 exchange?
A 1031 exchange, also known as a like-kind exchange, is a mechanism under the U.S. tax code that allows real estate investors to defer capital gains tax on any exchange of like-kind properties for business or investment purposes.
What is the cash boot in a 1031 exchange?
Cash boot, or simply “boot,” refers to the cash or fair market value of additional non-like-kind property received by the investor during a 1031 exchange. This is subject to capital gains tax.
What is Capturiant 1031™?
Capturiant 1031™ is an innovative strategy that integrates tax deferral mechanisms primarily with the monetization of mineral rights, specifically through the generation of carbon credits, within the framework of a 1031 exchange.
What are mineral sequestration projects?
These projects sequester carbon dioxide in underground minerals by ensuring long-term prevention of mineral extraction. They can generate carbon credits which can be sold for profit.
Who can benefit from Capturiant 1031™?
Real estate investors using 1031 exchanges, especially those facing cash boot exposure can benefit from Capturiant 1031™.
What is the process for a real estate investor to get involved with this business structure?
Investors interested in this innovative model should consult legal counsel to ensure this type of 1031 exchange aligns with their tax and investment strategy, and partner with Capturiant to locate and invest in viable carbon credit mineral rights sequestration projects.
Who is responsible for managing the mineral sequestration projects?
Project developers typically initiate and manage these projects. This encompasses everything from geologic evaluation to the installation and monitoring of equipment. Capturiant 1031™ investors typically focus on the financial aspect and environmental asset credits activities rather than the operational management.
How are carbon credits sold and who are the typical buyers?
Carbon credits are sold on exchanges like the Capturiant Exchange. Buyers are often companies seeking to offset their carbon emissions.
How does a business guarantee the legitimacy and value of carbon credits?
Capturiant ensures the legitimacy of carbon credits through rigorous validation and authentication processes to ensure quality due diligence. The value of a carbon credit is set by the supply and demand of a particular credit, seasonality, quality, and other factors affecting pricing.
Will purchasing mineral rights affect the overall timeline of the 1031 exchange?
Acquiring mineral rights through Capturiant should seamlessly integrate with the 1031 exchange process, adhering to the IRS-mandated 180-day timeframe for completion. The critical action is the designation during the 45-day period.
Is there a minimum or maximum threshold for the acquisition of mineral rights?
The acquisition of mineral rights can vary in scale based on the project and the investor's needs. The specifics would depend on the project's terms and the negotiation between the buyer and seller. Project sizes can range from $1.0 million to over $1.0 billion, however, the benefit of mineral rights and carbon credits is the fractionalization and liquidity they provide.
What are the benefits of partnering with Capturiant 1031™ vs. completing a typical 1031 exchange?
Partnering with Capturiant 1031™ empowers investors with potential tax deferment, recurrent income via carbon credits, asset diversification, portfolio liquidity, optionality of size, and an opportunity to contribute to environmental sustainability projects.