Wachsman spoke with Bo Bai, Executive Chairman and Co-Founder of MetaVerse Green Exchange (MVGX) about challenges facing the carbon markets, how blockchain can stop greenwashing, the importance of inclusive policy, and how MVGX is focussing on accuracy and transparency.
Sitting at the intersection of blockchain and carbon markets, can you tell us more about your background and how this led to the inception of MVGX?
Physics and Finance have always been central to everything I’ve done. My interest in green energy and environmental research intensified during my PhD at MIT and this led me to roles at leading traditional financial services firms such as Warburg Pincus, First Reserve Corporation, and Goldman Sachs where I was heavily involved in the early days of impact investing in clean technology and renewable energy. My experience eventually led me to form my own green impact private equity firm, Asia Green Fund, which today has around US$2 billion in assets under management. Our focus is on sustainable investments in leading institutions and enterprises that are driving the transition to a low-carbon and green economy.
I could clearly see the market opportunities in the voluntary carbon market but found that what was ultimately lacking was the infrastructure to enable greater transparency and trustworthiness that would drive green investments and legitimize their use to achieve net-zero emissions. This is the core of our mission at MVGX as we look to solve rampant pain points in this sector — from gaps in carbon credit accounting methods to carbon credit credibility claims.
Today, MVGX has partnered with some of the most influential players in the banking and finance sector — such as Southeast Asia’s second-largest bank, OCBC, and the national bourse of Indonesia, the Indonesia Stock Exchange — as we endeavor to fast-track the global movement towards a greener future.
Following discussions at COP27, it’s clear that addressing the climate emergency and meeting net-zero targets remains top of mind for governments around the world. However, greenwashing is at the top of the agenda amid criticisms leveled at Verra. What are some of the key challenges facing carbon markets today and what do you think is needed to bring greater integrity into existing systems?
For decades, accusations of greenwashing have been leveled at businesses that leverage carbon credits to offset their emissions. The recent allegations made against Verra only serve to show that the industry has failed to address the issue of transparency and standardization at scale. This is despite the fact that the Paris Agreement specifically outlines the need for “high-quality carbon credits” that can be appropriately monitored, tracked, issued, and standardized so as to better regulate carbon offsetting.
Another problem is how to assign carbon a ‘nationality’. Some countries are able to create carbon credits through green projects to sell to buyers on the open market, but who then claims this reduction? The country that produced the carbon credit, or the country of the buyer? This issue of reconciling voluntary action with Nationally-Determined Contributions (NDCs) is leading to challenges such as “double-counting” where two countries claim credit for the same climate action. Blockchain technology can resolve this, but it will need buy-in from the producers and buyers of credits, as well as the governments who oversee the frameworks.
2022 also saw the landmark passing of the EU’s Carbon Border Adjustment Mechanism (CBAM). What are your thoughts on such regulatory frameworks, especially when taking their impact on emerging markets into consideration?
The European Parliament introduced the CBAM to address “carbon leakage” — the practice of transferring and outsourcing high-polluting activities to countries with comparatively lax carbon emissions constraints. While this certainly holds countries within the bloc accountable for their emissions, some critics have argued that levying an additional border tax on emerging economies whose goods are entering the EU is inherently protectionist and discriminatory. This added layer of complexity and cost for importers will ultimately lead to EU businesses prioritizing manufacturers and producers within the EU to avoid additional levies.
Driving a just green transition means enacting policies that are inclusive, rather than unjustly disadvantaging emerging economies that rely on cross-border trade for growth. I believe the solution lies in providing trustworthy verification. To address this, MVGX allows producers to ensure that their emissions can be offset with voluntary emission reduction credits that have been verified according to standards endorsed by the EU.
The voluntary carbon market is getting especially crowded, with many other blockchain-powered players having debuted in the market last year. What makes MVGX different?
Unlike the other blockchain-powered players in the voluntary carbon market, I would argue that our difference is ultimately our approach to addressing the needs of the market. Many marketplaces consider themselves a solution for governments to adopt and participate in — all concentrated in one platform.
However, our ethos is such that we want to be a tool that enables governments to build their own carbon markets and build their own registries with technologies that enable transparency by design. Our goal is to give governments the technology and infrastructure they need to ultimately power a global network of interconnected carbon markets and registries.
The word metaverse stands out in your company’s name MVGX. Could you share how the metaverse and services intersect with each other?
As our name suggests, the metaverse underpins MVGX’s service offerings aimed at accelerating net zero goals in Southeast Asia and beyond. We combined blockchain with our proprietary Non-Fungible Digital Twin (NFDT®) technology, creating a virtual representation of objects in the metaverse. There are so many uses for this technology, but we’ve been focused on leveraging it for green finance. We’ve designed Carbon Neutrality Tokens (CNTs®) which can be used to offset carbon footprint precisely by integrating real-time data into non-fungible tokens, offering a continuously updated record of carbon performance.
This is the real-time digital equivalent of a physical object or process — in this case, of a carbon credit, allowing investors to track the performance of the credit or the green project it is tied to over time. Putting it simply, it reflects live updates of real-world green assets which change with time as opposed to NFTs that are merely representations of unchangeable “dead” assets that may be unrepresentative of changing physical objects. As such, MVGX is able to provide greater accuracy and transparency of data, enabling the highest quality of carbon credits and injecting integrity into the carbon market space.