EIP-DRAFT: Carbon Credit Standard for Tokenized Environmental Assets

Simple Summary

A standardized interface for tokenizing, trading, and retiring carbon credits and other environmental assets on the Ethereum blockchain with full lifecycle tracking and verification.

Abstract

This EIP proposes a comprehensive standard for carbon credits that enables: - Tokenization of verified carbon credits as NFTs or fungible tokens - Lifecycle tracking from issuance to retirement - Integration with carbon registries and verification bodies - Automated retirement and offset mechanisms - Fractional ownership and trading capabilities - Compliance with international carbon credit standards

Motivation

The carbon credit market lacks standardization and transparency, making it difficult to verify the authenticity and prevent double-counting of credits. A blockchain-based standard can provide immutable tracking, automated verification, and seamless integration with DeFi protocols while maintaining compliance with existing carbon credit frameworks.

Specification

Core Interface

interface ICarbonCredit {
    enum CreditStatus { ISSUED, ACTIVE, RETIRED, CANCELLED }
    enum CreditType { REMOVAL, AVOIDANCE, REDUCTION }
    enum Standard { VCS, CDM, GOLD_STANDARD, CAR, ACR, CUSTOM }

    struct CarbonCreditData {
        uint256 creditId;
        string projectId;
        Standard standard;
        CreditType creditType;
        uint256 vintage; // Year of carbon impact
        uint256 quantity; // Tonnes of CO2 equivalent
        string methodology;
        string verifier;
        string registry;
        uint256 issuanceDate;
        CreditStatus status;
        address currentOwner;
        string metadata; // IPFS hash or URI
    }

    struct RetirementData {
        uint256 creditId;
        uint256 quantity;
        address retiringEntity;
        string beneficiary;
        string retirementReason;
        uint256 retirementDate;
        string retirementCertificate; // IPFS hash
    }

    // Events
    event CarbonCreditIssued(uint256 indexed creditId, string projectId, Standard standard, uint256 quantity, uint256 vintage);
    event CarbonCreditTransferred(uint256 indexed creditId, address indexed from, address indexed to, uint256 quantity);
    event CarbonCreditRetired(uint256 indexed creditId, address indexed retiringEntity, uint256 quantity, string beneficiary);
    event CarbonCreditCancelled(uint256 indexed creditId, uint256 quantity, string reason);
    event CarbonCreditFractionalized(uint256 indexed creditId, address indexed fractionalToken, uint256 totalShares);
    event OffsetClaimed(address indexed entity, uint256 totalQuantity, uint256[] creditIds, string offsetClaim);

    // Core Functions
    function issueCarbonCredit(CarbonCreditData memory creditData) external returns (uint256 creditId);
    function transferCredit(uint256 creditId, address to, uint256 quantity) external;
    function retireCredit(uint256 creditId, uint256 quantity, string memory beneficiary, string memory reason) external returns (bytes32 retirementId);
    function cancelCredit(uint256 creditId, uint256 quantity, string memory reason) external;

    // Fractionalization
    function fractionalizeCarbonCredit(uint256 creditId, uint256 totalShares, string memory tokenName, string memory tokenSymbol) external returns (address fractionalToken);
    function redeemFractionalShares(address fractionalToken, uint256 shares) external;

    // Offset Claims
    function claimOffset(uint256[] memory creditIds, uint256[] memory quantities, string memory offsetClaim) external;
    function getOffsetHistory(address entity) external view returns (RetirementData[] memory);

    // View Functions
    function getCarbonCreditData(uint256 creditId) external view returns (CarbonCreditData memory);
    function getRetirementData(bytes32 retirementId) external view returns (RetirementData memory);
    function getCreditsByOwner(address owner) external view returns (uint256[] memory);
    function getCreditsByProject(string memory projectId) external view returns (uint256[] memory);
    function getCreditsByVintage(uint256 vintage) external view returns (uint256[] memory);
    function getTotalSupply() external view returns (uint256);
    function getTotalRetired() external view returns (uint256);
    function getAvailableCredits() external view returns (uint256);

    // Verification
    function verifyCreditAuthenticity(uint256 creditId) external view returns (bool isValid, string memory verificationDetails);
    function checkDoubleSpending(uint256 creditId) external view returns (bool hasDoubleSpending);
}

interface ICarbonCreditRegistry {
    struct ProjectData {
        string projectId;
        string name;
        string description;
        string location;
        string methodology;
        address projectDeveloper;
        Standard standard;
        CreditType creditType;
        uint256 estimatedCredits;
        uint256 issuedCredits;
        bool active;
        string verificationBody;
        string registryUrl;
    }

    // Events
    event ProjectRegistered(string indexed projectId, address indexed developer, Standard standard);
    event ProjectUpdated(string indexed projectId, bool active);
    event VerificationBodyAdded(address indexed verifier, string name);

    // Core Functions
    function registerProject(ProjectData memory projectData) external;
    function updateProject(string memory projectId, ProjectData memory projectData) external;
    function addVerificationBody(address verifier, string memory name, Standard[] memory authorizedStandards) external;
    function isAuthorizedVerifier(address verifier, Standard standard) external view returns (bool);
    function getProjectData(string memory projectId) external view returns (ProjectData memory);
    function getAllProjects() external view returns (string[] memory);
}

Key Features

1. Comprehensive Credit Tracking

  • Full Lifecycle: Track credits from issuance through retirement
  • Immutable Records: Blockchain-based immutable tracking
  • Status Management: Clear status transitions and validation
  • Metadata Integration: IPFS integration for detailed documentation

2. Multiple Credit Standards

  • Standard Compliance: Support for VCS, CDM, Gold Standard, and others
  • Flexible Framework: Extensible to new standards and methodologies
  • Verification Integration: Integration with recognized verification bodies

3. Fractionalization Support

  • Fractional Ownership: Enable fractional ownership of large credits
  • ERC20 Integration: Create fungible tokens for fractional shares
  • Redemption Mechanism: Convert fractional shares back to whole credits

4. Automated Offset Claims

  • Batch Retirement: Retire multiple credits in single transaction
  • Offset Tracking: Track offset claims and retirement history
  • Certificate Generation: Generate retirement certificates

Credit Lifecycle

// 1. Register Project
ProjectData memory project = ProjectData({
    projectId: "PROJ-001",
    name: "Reforestation Project",
    methodology: "VM0006",
    // ... other fields
});
registry.registerProject(project);

// 2. Issue Credits
CarbonCreditData memory credit = CarbonCreditData({
    projectId: "PROJ-001",
    standard: Standard.VCS,
    creditType: CreditType.REMOVAL,
    vintage: 2024,
    quantity: 1000,
    // ... other fields
});
uint256 creditId = carbonCredit.issueCarbonCredit(credit);

// 3. Transfer Credits
carbonCredit.transferCredit(creditId, buyer, 500);

// 4. Retire Credits for Offset
bytes32 retirementId = carbonCredit.retireCredit(creditId, 250, "Company XYZ", "Annual carbon neutrality");

// 5. Claim Offset
uint256[] memory creditIds = new uint256[](1);
creditIds[0] = creditId;
uint256[] memory quantities = new uint256[](1);
quantities[0] = 250;
carbonCredit.claimOffset(creditIds, quantities, "2024 Carbon Neutrality Claim");

Rationale

NFT vs Fungible Token Approach

The standard supports both approaches: - NFT Approach: Each credit batch is unique with specific vintage, project, and verification data - Fungible Approach: Credits with identical characteristics can be fungible - Hybrid Approach: NFTs can be fractionalized into fungible tokens

Immutable Retirement

Once credits are retired, they cannot be transferred or used again, preventing double-counting and ensuring offset integrity.

Registry Integration

Integration with existing carbon registries ensures compliance with established standards and verification processes.

Metadata Standards

Using IPFS for metadata storage ensures decentralized, permanent storage of verification documents and project details.

Implementation Details

Credit Issuance

function issueCarbonCredit(CarbonCreditData memory creditData) external returns (uint256 creditId) {
    require(isAuthorizedIssuer(msg.sender), "Unauthorized issuer");
    require(registry.getProjectData(creditData.projectId).active, "Project not active");

    creditId = nextCreditId++;
    creditData.creditId = creditId;
    creditData.status = CreditStatus.ACTIVE;
    creditData.currentOwner = msg.sender;
    creditData.issuanceDate = block.timestamp;

    credits[creditId] = creditData;
    ownerCredits[msg.sender].push(creditId);

    emit CarbonCreditIssued(creditId, creditData.projectId, creditData.standard, creditData.quantity, creditData.vintage);
}

Credit Retirement

function retireCredit(uint256 creditId, uint256 quantity, string memory beneficiary, string memory reason) external returns (bytes32 retirementId) {
    CarbonCreditData storage credit = credits[creditId];
    require(credit.currentOwner == msg.sender, "Not credit owner");
    require(credit.status == CreditStatus.ACTIVE, "Credit not active");
    require(quantity <= credit.quantity, "Insufficient quantity");

    retirementId = keccak256(abi.encodePacked(creditId, quantity, block.timestamp, msg.sender));

    RetirementData memory retirement = RetirementData({
        creditId: creditId,
        quantity: quantity,
        retiringEntity: msg.sender,
        beneficiary: beneficiary,
        retirementReason: reason,
        retirementDate: block.timestamp,
        retirementCertificate: "" // Generated off-chain
    });

    retirements[retirementId] = retirement;
    credit.quantity -= quantity;

    if (credit.quantity == 0) {
        credit.status = CreditStatus.RETIRED;
    }

    emit CarbonCreditRetired(creditId, msg.sender, quantity, beneficiary);
}

Security Considerations

  1. Authorization: Proper authorization for credit issuance and management
  2. Double-Spending Prevention: Mechanisms to prevent double-counting of credits
  3. Verification: Integration with trusted verification bodies
  4. Immutable Retirement: Ensure retired credits cannot be reused
  5. Registry Validation: Validate project registration and status

Compliance Considerations

  1. International Standards: Compliance with VCS, CDM, and other standards
  2. Regulatory Requirements: Consideration of emerging regulations
  3. Audit Trails: Complete audit trails for compliance reporting
  4. Verification Requirements: Integration with recognized verification bodies

Integration Examples

With DeFi Protocols

contract CarbonOffsetDeFi {
    ICarbonCredit public carbonCredit;

    function offsetTransaction(uint256 creditId, uint256 quantity) external {
        // Retire credits to offset transaction
        carbonCredit.retireCredit(creditId, quantity, "DeFi Transaction Offset", "Automated offset");
    }
}

With Corporate Sustainability

contract CorporateOffsetManager {
    ICarbonCredit public carbonCredit;
    mapping(address => uint256) public annualOffsets;

    function executeAnnualOffset(uint256[] memory creditIds, uint256[] memory quantities) external {
        uint256 totalOffset = 0;
        for (uint256 i = 0; i < quantities.length; i++) {
            totalOffset += quantities[i];
        }

        carbonCredit.claimOffset(creditIds, quantities, "Annual Carbon Neutrality");
        annualOffsets[msg.sender] += totalOffset;
    }
}

Test Cases

Comprehensive test cases should cover: - Credit issuance and lifecycle management - Transfer and ownership tracking - Retirement and offset claiming - Fractionalization and redemption - Registry integration - Verification and compliance - Edge cases and error conditions

Reference Implementation

The reference implementation includes: - [Carbon Credit Facet ../smart-contracts/facets/carbon-credit-facet.md] - Core carbon credit functionality - [ICarbonCredit Interface ../smart-contracts/interfaces/icarbon-credit.md] - Interface definition - [Carbon Credit Lib ../smart-contracts/libraries/carbon-credit-lib.md] - Supporting library functions

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