 We're going to get started. I'm going to do a little welcome here to set the stage. And then we've got a great program for you. I'm really excited for the evening and appreciate those of you tuning in who aren't getting credit. So just quickly, what is a policy practicum for those of you who aren't familiar? This is a relatively new curricular activity at the law school, modeled after law clinics, but where the client and the student teams are working on issues of policy. And that's what we're here today to explore and discuss. We've been focusing this spring's policy practicum on structuring effective carbon markets. Do keep in mind, at the end of the day, this is a class. We have two goals here. Our first goal is education. So I think and hope the students have learned a lot over the course of this quarter. We have learned from them. I hope you will learn something this evening. And then our second goal is impact. We want this work to matter. We want to be advancing the field of practice with new ideas, innovations, diagnoses of what's broken. So we hope we accomplish both this evening. Do keep in mind, though, that they are dual objectives. We threw our students into the deep end this quarter, as we like to do. So this is the frontier of practice, the thorniest of the thorny problems that are holding back the scaling up of the voluntary carbon market. Our students, our graduate students, they have, many of them have been practitioners in these markets or come with other market or science backgrounds that gave them a head start to swim in the deep end. So we're excited for them to be able to share their learning and their recommendations. And then just to kind of level set on substance where we started from is the voluntary carbon market or BCM, I'll do an acronym kind of preview here too, framework, which is of the moment where the BCM is trying to fix itself through these various integrity, and I use that in quotes, initiatives that are trying to bring integrity through the lens of terms like permanence, additionality, leakage, or this kind of concern of a race to the bottom with credits. This is the same conversation we've been having for three decades in the trading of carbon credits. We have not yet found paths out of those eddies. And our hypothesis at SFI and the Steyer-Taylor Center is that we're not asking the more fundamental questions of market integrity. What's the accounting? What's the science of measurement? What are property rights and legal frameworks? What's the market structure and capital structures and trading infrastructure? And then what does regulation look like in the role of government? And so that's been the investigation and the journey of this quarter. And into that soup, we have put two big ideas which you're gonna hear about tonight and their implications. And the first big idea is actually more evolutionary than revolutionary, it's the idea of carbon accounting. And moving from this system we have now with the greenhouse gas protocol that counts carbon in the parlance of scopes into a system that accounts for carbon in the parlance of cost accounting that has been tried and true for centuries. And that's a fundamental shift that again is more evolutionary than revolutionary but that's one big idea. The second big idea which is even bigger is this concept of emissions liability management or ELN. And that is a framework within which carbon can be managed and it's basic thesis or premises is that with these emissions liabilities or ELI abilities that can then be measured using real accounting, firms have an obligation to match those long duration liabilities with duration matched assets. And that is the foundation on which what we know of as carbon markets today might thrive and evolve, which is to say it creates a rational structure for carbon removals, price discovery for carbon removals and brings the whole suite of activities around avoided emissions into business as usual investment decision making for firms and asset owners to invest in decarbonizing their supply chains as long as that investment is less expensive than the price to permanently remove their liabilities which is their alternative. So within that kind of VCM framework we have introduced these two big ideas of carbon accounting and emissions liability management you will hear a lot more about it. I'm gonna leave it there with just the little table setting I did a little bit on structure. I sent this on the email. We've got five teams, one, two, three, four, five, six teams that are gonna be running through to different duration summer 20, summer 10 depending if they're individuals or groups. We're gonna cover the state of insurance. We're gonna cover MMRV. We're gonna cover the science of carbon management. We're gonna do two case studies, one on what we call the coal problem, the other on what we call the tree problem. And then we're gonna look at the supply capacity and legal frameworks. Tom is gonna wrap us up for the last 15 minutes. As I said, we will keep time. I promise you that. What you probably don't see in here is questions. Where do you ask them and how? The student teams have prepared their presentations in the time allotted. They have not prepared them for Q&A in each session. So please ask questions in the chat. We will, the teaching team will be capturing them, advancing them. We will either address them in the wrap up or we will send them back to the teams at the end but we're gonna run through these presentations without interruption but we do wanna hear from you. So that's how we will capture your questions. We can also follow up after the session if we don't get to it. And so with that and then the spirit of keeping us on time, I'm gonna turn us over to our state of insurance team. Okay, excellent. Well, thank you so much for the time and for joining this call. So today we want to speak to you about insurance in the VCM space. But before we delve into it to set some context, think of anything. Think about your life. Think of any major asset that own, whether that be your home, whether that be your own health or cell phone, you are able to go out and buy insurance for it today to cover for any loss, damage, and be reimbursed for it in some shape or form. So the premise for us is why is it that for a market of this kind, there is no well-versed insurance product out there. There are just a handful of firms out there that offer insurance and that also very bespoke. You're not able to pick and choose the kind of losses that are covered, but rather you have to take what the insurance products offer. So our goal was three-fold. Julia and I sought to understand first, what's the state of insurance industry? Second, to understand structural deficiencies in the frameworks, the VCM frameworks, and also in the insurance industry, and to understand, have some understanding of what needs to structurally happen to actually see some insurance products come through. So to kick things off, I just want to talk briefly about why insurance. Well, some of the trends in the VCM space that you are familiar with are first, it's a growing market. People often quote the ecosystem marketplace report which say that the market is worth 2 billion. I actually feel that's a gross understatement. If you see most of the markets in the world, the size is based on notional traded, and most of the trading, and this actually happens on OTC markets, platforms like expansive. The market, if you follow that trend in 2022, did not shrink, it actually went up. It's just the credits are far more, change hands more often. The second is price divergence. For the same type of credits, you see a wide range of prices between $8 and $80, depending on the kind of project. And you see that actually increasing because of the fragmentation of marketplaces. The third is heightened focus on quality. This is not new, but increasingly all the press coverage has been negative around carbon credits, which has made corporate buyers often think about quality. And obviously there is no uniform definition. People speak of permanence and additionality, but you can't actually point to anything that is universally agreed upon. And lastly, there's no rocket science, but climate change itself is exacerbating reversal. So for us that would have remained standing, were it not for climate change that increasingly going burnt down, so the credits become a little worthless. And why does this matter for insurance? The first is that of course, as the market grows, the ability to actually have risk transfer allows increased participation. You know, any corporate would want to make sure that if they buy an asset, there is an ability to transfer the risk of anything going wrong. So that's why insurance matters. Second, if you look at historically markets like commodities markets that I'm familiar with, pricing actually, insurance actually sends a very strong pricing signal. The premium that you are charged for actually has a lot of informational value when it comes to pricing, even for commodities that may not be directly fungible, it I think that it serves as a strong indicator and same as true in carbon. Three, it is just perceived all else equal. If you have insurance on a credit, it's considered higher quality. So that's why insurance is important. And the last one is in the event of a reversal, currently there is no financial reversal, financial flow reversal that happens. So it leads to perverse incentives that are not good for the market. Now I just want to briefly touch upon the structural deficiencies in existing frameworks. The first one is in the current framework, emission liabilities extinguish the moment you retire a credit. So I don't need to elaborate on that, but that is how the frameworks are established today. The emission liabilities do not live forever. Second, assets and liabilities actually just matched on quantum, not on duration. So if you have a liability, you emit one ton, you are able to buy a credit for a ton and then they offset each other even though the asset may be from something that's short-lived, but the liability, the CO2 you put in the air lives forever. But that's how assets and liabilities are dealt with today. The third one is the view of emissions really is, if you look at the financial statement point of view, they are treated from an income statement kind of lens, which is periodical. 1st January to 31st of December, you wipe the slate clean and you restart from zero. Whereas emissions, because they're actually permanent, the view that we actually need is more of a balance sheet view. And if you see the way net zero works today, you have a certain amount of emissions, you buy certain credits, the resultant is what your net emissions are. And then 1st January comes in and you wipe the slate clean. It actually detracts from the holistic emission that a firm has put into the atmosphere and the current BCM frameworks perpetuate that view. Fourth is buffer pools are treated in insurance, but buffer pools are actually not capitalized like insurance companies. Most insurance companies are required by the respective regulator to hold capital to actually absorb losses. And there is actually nothing underpinning the buffer pools besides the actual credits that sit in there. And the last is something that we all know, but offset registries have a significant conflict of interest. They are the asset generators and also the protectors. And those are two important rules that should actually be segregated that leads to perverse incentives where our makes money by issuing credits regardless of the quality. So at this point I'll just pass it to Julia to talk about other things. Hi, everyone. So just stepping over now, now that we've covered some of the issues around the BCM in general, we started looking at some of the structural challenges for insurance in this market. And I think there were a couple of main points that came out throughout this research, some of which are somewhat related, but I think still important to separate out. So first is that we're still facing a nascent state of certain carbon removal processes. So what this means is that while we may have good information on some types of carbon removal, we don't have good information on all types of carbon removal. So there's kind of a challenge in terms of really understanding the science behind it and the data behind that, which then leads to the fact that ensures struggle to develop really methodologies for these many different types of removals that they gain some sort of comfort on. And then that, you know, relatedly to this point on data is this idea that for insurers, the underwriting models really depend on a strong history of losses, reversals, all the types of risks for them to be able to model out all of these components for insurers, competitive advantage really comes from their underwriting models themselves. And so this lack of data or rather lack of confidence around this data because some could argue that the data does exist is what leads to kind of very conservative behavior around ensuring carbon credits. Related to that is also this idea that the obligations are long-term. And even if we think about the longest-term insurance that we have, perhaps life insurance, the types of products that we're thinking about here would at a minimum be, you know, 100-year timeline, which also further complicates or puts this in the territory of unknown or uncertain types of products for incumbents. And then as a result of all of these factors, you have a situation in which the capital at risk, you know, the capital that insurers have to set aside for different types of risks to match these uncertainties and this volatility can make these models uneconomical. So we heard of a case where that was as high as 40%. So imagine if you were insuring $100 million worth of carbon credits, you would have to set aside something like $40 million for that capital at risk. So that really kind of puts into perspective how all the previous factors that I mentioned contribute to a really difficult economic decision. And all of that, I guess, and perhaps most important as a result of all of this is that you see current insurers are the incumbents when we think about the big balance sheet players and are therefore largely conservative to innovation. And to some extent that even makes sense, given that carbon, we mentioned it's a $2 billion market and yes, it's growing, but that really only represents a tiny percentage of their portfolios today compared to the portfolio of life insurance and other types of products. So even from a business perspective of them kind of internally dedicating resources and capital to this is difficult to just justify in house. So that's kind of the general big picture. We try to put some faces to the people who are trying to build out VCM insurance products. And here we kind of present a brief summary of those. I think the first message here is that there aren't many for the reasons that I mentioned on the previous slide, the large incumbents are largely not interested in entering this market. So what you have is startups increasingly trying to operate this space or sometimes kind of one-off partnerships as you see with Howden and Raspera offering some products on a kind of pilot basis. We put together this matrix really to try and demonstrate first also for us to understand the insurance market a little bit better. You have on the X axis really the spectrum of players that are MGA's or in other words, intermediaries. So they don't hold the risk on their balance sheet. They're really maybe just specialized in certain ways but they depend on a large insurer for that balance sheet to be able to ensure these products. All the way to full stack. So companies that are trying to provide also the balance sheet mechanisms to ensure the risk. The difference if you look at kind of the spectrum between these two, if you're depending on a large insurer for your balance sheet you will quickly be forced in many ways to operate under more conservative products for all the reasons that we mentioned earlier. Whereas if you're going more the full stack route you have all that risk on your own balance sheet. And so suddenly the main challenge becomes really understanding the market, really understanding price and gaining confidence around that. So that's the X axis. On the Y axis we also discovered that there's quite a big divergence in terms of what people are actually insuring. So on the kind of most macro level we have certificate insurance at the bottom of the Y axis here. So these are really players that are looking at providing insurance to the certificate that's been given. And what that really means in the most simplistic terms is making sure that it kind of covers fraud, counterparty risk, reputation, et cetera. It is somewhat removed for many of the things we've already discussed in class from the actual carbon of that project. So that's kind of an important distinction that we found talking to some of these players. And then at the top of the Y axis you have what we're calling here carbon insurance or the actual insurance of the carbon credit that at least in terms of a goal or of an effort ensures or trying to ensure the actual carbon stored in a given project, which is different from ensuring the certificate of carbon being stored in a project. That kind of lays out a little bit the lay of the land in terms of the different players. And so to kind of summarize that in terms of the conversations we were having with people trying to seek solutions to this three things came out. First was the mutualized risk model which really is an effort to pull risk. So I guess perhaps the most simplified way to think about this would be if we took buffer pools today and kind of pulled them all together and had a hundred different projects together what would that look like? This is a model that's used by the shipping industry historically that had a lot of open-ended risks that they didn't know how to ensure. And so then they kind of pulled these risks together as a means to cover those open-ended risks. We have more on that in our report if people are interested. The second is this concept of insurance wrappers. So this is really trying to have the sale of the carbon credit itself directly tied to an insurance wrapper so that when you buy a carbon credit you also buy it already with an insurance tied to it. Here as we mentioned earlier this is really within an objective to ensure the carbon that is being stored. And AUCA is one of the players in this space that is really seeking to ensure everything from fraud all the way to methodology change to carbon reversal. And then finally, you have more macro policies than I mentioned earlier. These are the key does of the world more of the intermediaries that are trying to provide partial coverage for certain aspects of the VCM risk profile that are not tied directly to the carbon credits themselves. But I'll stop here because that's a lot of information pass on to Adam. Thanks very much, Julia. So how does ELM help with this? Well, a lot of it's got to do with the fat liabilities will be recorded and will be kept on the balance sheet. And as a result of that, that will create a market demand and a discipline in the market which will then enable a number of different attributes to occur which will then also enable better pricing of the risks. So if we think about that for a second the drive duration matching is going to require duration matching. So rather than having annual targets offsetting long dated liabilities, you're going to be able to, you'll need a mismatch or you'll need a match of that rather than having the mismatch which is the way obviously banks are funded under different types of capital adequacy ratios. Recording these liabilities on a balance sheet will provide a much better view of the overall risk picture of a significant corporate. And again, looking at the duration of that will then encourage better pricing both by the corporates and better understanding of the risks by the corporates and better pricing by the insurers. And finally, all of that should then lead to a better ability to build a forward market and to a whole less capital against the requirements for building a forward market. And where do we go from here? Well, what we need to do is really sort of categorize and calibrate the different types of credits that would be part of this market. So avoidance, time-weighted and permanent removals and see how those then offset these long dated liability. Insurers are going to have to start modeling some of the newer risks such as what Zimbabwe did recently, things like nationalization and somehow take that into account when it comes to pricing these risks. We'd have to dig into some of the other models and the more innovative ideas that Julia came up with to mutualize risk models, insurance wrappers and those annual insurance policies. And then finally, we're going to need to do more research onto into the risk-based charges to make sure that the insurance is viable and there's a sound economic model here. Great. Thank you. I guess we have a couple of minutes for questions. I don't know if anyone has anything burning or we... Fantastic. I can't see the gallery, but if anyone has a question, we do have a couple of minutes here. See now. Any questions from the gallery? We've solved insurance. We've solved it, yeah. Great. And we will take the time, we'll keep moving. Thank you, Julia. Thank you. I think Pa-1 and I will now have to step off because we have class, so I'm sorry that we'll be missing the rest of the presentations, but hopefully they'll... And Adam, and thank you Adam, and I don't know if Adam has to jump to you, but thank you all. Yeah. Yeah, thank you. Thank you. Cheers guys. Cheers, thank you. All right, so we've got our VCM EOM and MMRB acronym SUP team up next. Great. I think that I can kick us off. So as Alicia said, we're the alphabet SUP team. We wanted to think about the way that MMRB is going to be playing a role in the future carbon markets and how that plays into, and how MMRB will tie into ELM. So what we have taken away from our research is that basically, avoidance credits are making up the voluntary carbon market in the minute at the moment, but they're going to take on a new role as we tape on the paradigm shift to ELM. Basically, the avoidance credits will take on a role by limiting liabilities of projects and thus requiring fewer removal assets to cancel them out. We'll talk more about that in depth. So fear not. Second is that while ELM focuses on removal credits as an asset, basically we need those MMRB is going to underlie any carbon removal asset that is taking place in the market. Basically because so many different project types are so different across engineered and nature-based solutions, MMRB is going to have to set a level playing field for the different types of removals that are in the market. And although progress is being made, there's still a lot of work to be done to solve the MMRB bottleneck. And with that, I'll pass it off to Bennett. Amazing, thank you, Kim. So I'll start by just highlighting some of the recent challenges in the carbon markets. And if you flip to the next page, it's no secret that there's been a lot of negative press recently around carbon credits in particular. There was a pretty bombshell report not a couple of weeks ago about Vera and their practice of verifying rainforest carbon offsets. 90% were proven to be virtually worthless, some with more harm to the environment than actual good. This resulted in a spiral of concerns that eventually brought about the retirement of then their CEO and major changes announced from Vera to their methodology for forest-based carbon offsets. Now, while this is certainly one example of this challenge, it is more an example of some underlying challenges in the carbon market broadly. If you move to the next page, Kim, amazing. This is just like I mentioned, a symptom of broader challenges in the carbon market. In particular, these fall into three core buckets. First is a crisis of confidence in verification bodies. We've seen this already with some other news about Vera, but increasingly there's this view that carbon verifiers are behind the times using outdated methodologies to evaluate carbon credits and that there is real concern around whether these credits have viable impact on the climate or if they're greenwashing, for lack of a better word. This leads to uncertainty around the efficacy of carbon classes, in particular avoidance versus removal. There's not a clear understanding across a lot of the market about what the difference between these two is. And that has led to challenges both for corporate buyers of these credits and also for those trying to understand the impact of the carbon markets on the climate more broadly. And this is all really driven by the lack of a reliable system to account for and ensure against the risks associated with some of these carbon credits. In particular, a lacking of an ability to account for avoidance credits and a system that is focused not on maintaining a balanced registry of carbon, but rather purchasing and then retiring credits without a consideration for the duration of the carbon emitted into the atmosphere or the duration of the credit associated with those carbon liabilities. So that brings us to, sorry, this is illustrated in the market as it stands today. As Cam mentioned at the top today, avoidance credits composed the vast majority of the voluntary carbon market, over 80% the vast majority of these driven by nature-based avoidances, much like those that Vera had verified and that has come over under fire recently and also renewable energy credits, which is effectively issuing credits to funds renewable energy projects and claiming that they avoid emissions. But the problem with these credits is again that they rely on these counterfactuals. There's no way to prove that they're actually avoiding emissions. Instead, often they use a baseline of made up otherwise emissions to account for these credits, which cannot actually be matched to a real avoidance. And that brings us to ELM. Really emissions liability management is about replacing traditional carbon accounting systems with a system of emissions liabilities, which companies can then match to verified carbon assets. All this works in practice is in a year, a company might emit 100 tons of CO2, for example, from their operations. At the end of that year or across the year, the company will purchase carbon assets, that is carbon removals, whether nature-based or tech-based to balance their carbon liabilities. Now, these carbon assets could have different durations, as already mentioned. So for example, nature-based solutions may have shorter term durations than tech-based removals, which may have a longer horizon. And then these companies, this company will then balance those assets against their liabilities. Over time, as the company moves through different years, their nature-based solution or removals, for example, may depreciate this accounts for some of the risks associated with nature-based removals. And a company can then purchase additional removals to continually balance their historical emissions and solve the problem of the duration of these carbon assets. This solves a couple of the key problems in the system if you move to the next page, Cam. First, avoidance credits are now incorporated through the limitations of liabilities. Instead of saying that a credit is worth one metric ton based off an imaginary baseline, avoidances are now incorporated into liability, reducing the amount of emissions that a company puts out rather than balancing them against the emissions that a company has emitted. The second is by addressing the problem of duration for these carbon credits. Now, nature-based credits or shorter term credits can act as bridges, allowing a company to continually renew and balance their carbon balance sheets while holding for a transition to longer term assets or in the case of not wanting to move to longer term assets, allowing them to consistently renew with shorter duration solutions to balance their emissions liabilities. The third is by recognizing the longer duration of some tech-based removals and having those act as constant balances against some sort of carbon liability while not striking them from the history of the company. Instead, acting as consistent long-term balancing to their emissions liabilities. And then the last is by reflecting cumulative emissions from the company, which allows a real approach to net zero. It shows the full history of a company's emissions and the full history of their associated removals as well, allowing companies to really achieve net zero in a meaningful sense across the history of a company, not just in a theoretical sense. This is just a critical, but critically underpinning this entire process is a system of measuring, monitoring, reporting and verifying these carbon assets. In order to ensure that carbon assets durations are properly matched against carbon liabilities, you need a clear understanding of the ability of these credits to properly balance against CO2 emitted and for what time horizon they can do that. And we see our team, MMRV, as a critical part underpinning the process of the transition to ELM. And I'm gonna pass it over to Cam to discuss some of the MMRV strategies used in tech removals. Great, I hope everyone can hear me now. Thank you, Bennett, for that lovely pass-off. So when we're talking about technology-based removals, let's see, can I click through now? Basically, when we're talking about any, you know, tech-based removals in particular, a lifecycle analysis is gonna be a baseline upon which any tech-based removal can be issued. Basically, for a given project, there might be emissions associated with building out, for instance, a direct air capture plant or building out an ocean alkalinity enhancement project. There will be associated emissions with building that project. And basically any carbon removal asset or carbon credit that is issued by this firm must be on a net basis. We see this happening in the marketplace as it is. We see if you take a look at any purchase agreements that are done by Striker Frontier, all of the credits that are purchased are on a net removal basis. So basically, we'll have lifecycle assessments which, you know, carbon accounting firms tend to be able to, you know, capture many of those if you look at the likes of Watershed, they can take all of the different inputs, all of the different procurements, all of the different purchase orders to set that baseline for the lifecycle. But then you have to figure out what is actually being removed so that net removal credits can be issued. So basically when we come into the removal side, there's going to be MMRV to ensure that the right number of credits are actually being issued. So, but one of the issues is that even within a specific carbon removal pathway, let's say ocean alkalinity enhancement, there is going to be many different firms doing many different things. From conversations I've had this week, for instance, speaking with folks at the likes of EbCarbon, so they use an electrochemical process to add alkalinity to the ocean. There, I'm not going to go into the details of it, but basically they use electrochemistry to create alkalinity that's then added to the ocean and the alkalinity is measured because the alkalinity allows the ocean to draw down additional CO2. However, planetary technology, they use low carbon alkaline materials and add those to the ocean, but alkalinity, and when the alkalinity is added to the ocean, it is then measured. But even though these two companies are functionally following the exact same pathway, adding alkalinity to the ocean, they're following wildly different MMRV protocols. The sensors they're using are different. The places that they're taking their measurements of alkalinity are different. So basically there's no uniformity because there's no incentive to actually have a uniform approach. And why is this the case? I found myself asking, our team found ourselves asking, and like let's look at these one-off buyers. We have Stripe as a part of the Frontier Coalition. We have Microsoft. We have recently J.P. Morgan Chase. These are some of the largest buyers of engineered carbon removal credits, and it's very patient. And basically if you take a look, Stripe and Frontier looking at their site, for every project that they're reviewing, they have over 50 reviewers. They're taking the foremost scientists in the space and doing due diligence on every purchase that they're making. You see 50 reviewers right there. They have the list. But basically this model isn't gonna be scalable if the market is gonna reach a climate impactful scale. These are one-off purchases. These are very well-resourced organizations, but if everyone has to adopt ELM, not every organization is gonna be able to afford a group of 50 reviewers to diligence every single carbon removal purchase that they're making. So basically all of these different technologies are gonna have different methodologies to measure carbon removal. For instance, with direct air capture where CO2 is sucked directly from the air and either stored in geological formations or utilized, there's a risk of physical leakage when we're measuring capture. It's easy to measure the tailpipe and understand how much CO2 is being sequestered in the subsurface, but once it's underground, there's no way, there needs to be a uniform way of measuring whether or not it's leaking, whether or not the CO2 is being mineralized. There has to be some uniformity across direct air capture technologies and storage technologies to understand how much CO2 is actually being sequestered. In direct ocean capture where CO2 is sucked directly from the ocean to increase the ocean's ability to sequester carbon, there's a risk that CO2 depleted water sinks immediately and that that CO2, and as a result, it might take years for that, the atmosphere drawdown to actually occur. Yet there's no, and amongst the firms who are doing that, there's no standardization of where they should be measuring the water, where should it be input there and with a wide open system like the ocean, like there are so much, there are many considerations like water temperature, the extent to which it's mixing, anything like that. Ocean alkalinity enhancement, I touched a little bit, is that when alkalinity is added to ocean waters, the ocean is able to draw down additional CO2. However, if the alkalinity is not sufficiently dispersed, then the ocean, there will not be the reactions needed to actually suck down CO2. So all of these different technologies have these different risks of MMRV and because the industries are so fragmented and there's no, not yet a unified standard behind us, there's, there can't be the confidence that's needed for these technologies to scale and reach a climate impactful scale. So there could be, there must be maybe a third party who can certify that removals are happening at the scales that are necessary. There could be a self-governance method where Ed carbon, planetary, this is an example of ocean alkalinity enhancement, where the industry groups are convening by pathways in order to set those standards, what technologies are being used, what sensors are being used, where should the sensors be placed so that there is some standardization across different technology providers. There is a risk though. Many of these companies from conversations that we've been having, these companies, their MMRV is their, is basically their IP and their whole competitive business model. So there are some risks that actually these folks might not wanna convene and share that information. So they might align on the MMRV pathway on standards by a pathway, and then those standards can then be implemented and forced within a certain pathway. Another model could be governmental influence. We might have the likes of the fossil energy and carbon management or NOAA or some other regulatory body in the United States or internationally, appointing a group or an individual or groups of individuals as MMRV experts. We have those 50 plus reviewers on Frontier. Why could they not be appointed by the US government to sign off on different projects? Those experts could propose and validate MMRV methodologies on a project by project basis, making sure that when planetary is adding alphalos in the ocean that we have some experts who are signing off on what's actually going on. And then finally, those standards can be set implemented and enforced. I think having these conversations, we are more of the opinion that governmental influence could be the way forward because when we have self-governments by the likes of the ocean of linear enhancement industry, who is gonna actually be overseeing it? There could be misaligned incentives and create scenarios where the best in class MMRV protocols are not actually being followed. And thus, that's where the government can come in and help to create a standard player field across the industry. And with that, I can pass it off to Corey to talk us through nature-based solutions. Great, thanks, Cam. Yeah, so Cam covered a lot of great points. And what I'm gonna cover is gonna largely reiterate his points, but also shed some new insights using another example, which is nature-based solutions. And so starting off with the point here that nature-based solutions have really been at the heart of criticism around carbon markets. If you think about all of the classic criticisms, nature-based has been a key example. And we wanted to highlight that here to just to show what's the current state, what's not working and then where do we go from here and how ELM can kind of provide that path. And so when we talk about nature-based, a lot of the avoidance-based activities come to mind. We're talking about avoidative deforestation, we're talking about no-reload tilling in ag, we're talking about manure management, fertilizer management in ag, methane mitigation, et cetera. But as we've discussed at length here already, is these avoidance activities under ELM are covered in terms of viability management and companies having incentives to reduce their carbon footprint within their own supply chains. And I think it's really critical here to, I guess debunk some of the myths and concerns and key words that have been kind of thrown around in today's state of carbon markets. And just to pick on two of them, permanence and additionality are two that really come up all the time when it comes to nature-based solutions. I'm sure this audience is well-versed and familiar with the terms, but just simply put there are these carbon principles and in order to generate credits, permanence and additionality are key principles. But it's no secret that these terms, these principles have been around since the beginning of carbon markets. And just by the fact that we're having this presentation today and the current state of things, they're just not working. And they have really just played the development and scaling of carbon markets since the days of the clean development mechanism. And so thankfully, under this concept of ELM, these concerns really do kind of fall away. And so we move on to the next slide here. As we start thinking about going into that, that ELM state of the world, the focus must be on removals, right? And within nature-based, there are a number of current and developing practices that do have potential to sequester carbon. And ag, those are practices like cover cropping, ag or forestry. And then there's also some overlap with some of the technologies that Ken mentioned in terms of enhanced weathering. And then also biochar, which is basically a material that's created through the process pyrolysis of biomass and it traps organic matter into a pretty stable carbon-rich material. And so a lot of different kind of developing and current tech approaches. But the underlying point here is that just as in tech-based solutions, nature-based solutions that are focused on removals must rely on reliable MMRB to scale. So if we move on to the next page, we highlight some of the key MMRB challenges, current states across kind of three major buckets, Climate Smart Ag, Reforestation or Regeneration, and then kind of the biochar enhanced weathering space. Want to be mindful of time, there are, you know, don't want to kind of read off the slide, but the high level here is that MMRB is certainly improving, but it's still a work in progress. See, David Hayes in the audience and he and a group of Stanford graduates also published an article recently about kind of the key MMRB challenges in the field of Climate Smart Ag. They're working on forestry this quarter. It's a great paper, would recommend. And it focuses on kind of what is needed from kind of a government level, kind of data management perspective, both in terms of funding, leveraging kind of the recent, you know, IRA and Climate Smart Commodities program initiatives to help kind of remove this bottleneck in the system. And so it's very aligned to Cam's point about needing a higher level kind of standard in order to bring a little bit more order to the heterogeneity that we see in the space. And then moving on to the last slide here, to be intellectually honest, we also wanted to highlight a couple of open questions that we still have in nature-based solutions. One being kind of the tree problem is what we've been kind of calling it in our practicum, which is, you know, the issue of deforestation, right? Where while most of one's activities will be internalized into company supply chain, deforestation and forestry are kind of left questionable in terms of who supply chain will cover that very important activity. And the second question is around ownership where there's a question mark around the ability to separate carbon assets from the natural capital basis and how that imposes upon property rights and also international borders. You know, we could potentially draw from lessons from water markets, you know, Australia deregulating and separating water from land in the 90s. In the U.S. it's a little bit more complex across, you know, Western versus Eastern states. But there's the question of like, hey, you know, this carbon sits in natural capital bases and that raises certain property rights and legal questions with them. So I'm gonna pause there. I think we're right on time. It's on. Yeah. Hold on. Great. Thank you, Cam, Bennett and Corey. Thanks work. Thanks, Eva. All right. Abigail. I am here to talk about the scientific measurement of carbon. I am the sole engineer in this class and I'm really interested in the idea of uncertainty in my own research, which is not carbon market related. But I really wanted to focus on that today. And just to kind of scope the project that I've been working on so far is I thought because about one third of carbon credits issued in the voluntary carbon market are in frustration. And therefore, I thought it would be important to focus on measuring forest carbon, specifically measuring above ground biomass. So above ground biomass is in the carbon pool of every kind of large carbon standards, whereas soil carbon would products below ground biomass is not included in the quote unquote carbon pool of the large carbon standards. So I wanted to focus on a generalizable problem that has its own pros and cons. But perhaps this could be inferred and scaled based on that. Above ground biomass, we're referring to anything essentially above the soil. And roughly the carbon content of above ground biomass is about half. So let's say the biomass of this beautiful tree on the screen is 100. The carbon content would be 50 of whatever units we are using. And the above ground biomass very significantly by forest type and by region. In a borough forest, there are perhaps is 64 tons of metric tons of carbon per hectare, where in croplands it's only two. So we can't say in remote sensing that this square hectare of land holds 100 tons of carbon. As that is varying by region, by species, by forest type. And again, this is particularly important with these red plus projects and other aborted emissions and preventing deforestation in carbon, market the carbon credits. So my main question of interest is how can we reduce uncertainty in the measurement of above ground biomass? And we're really looking at uncertainty with one, the accuracy of the measurement itself. Two, the choice of the allometric model which is essentially converting the measurement to a volume to biomass. Three, the sampling uncertainty related to plot sizes we choose to sample. And for the uncertainty and statistical representation of scaling our measurements, we can only sample so many plots. Therefore, how do we choose those plots to sample? So our four major sources of uncertainty. More or less, if we wanted to accurately measure carbon approaching 0% error, we would have to cut down all the trees, dry them and weigh them. And that would give us an accurate estimate of carbon in a forest. So this is time consuming, impractical, labor intensive and not scalable. Perhaps we could do this for some trees and not others, but then we're estimating the amount of above ground biomass and that ruins the accuracy gains that this destructive sampling method provides us. So as a solution from the mid-60s through the early 2000s, field measurement was really popular. Field measurement is essentially just going to the forest and measuring the trees, we're measuring the height, the diameter and the crown area. This is giving us an uncertainty between 15 and 30% of accuracy of how much carbon we know is actually in each plot of each forest plot. So the accuracy comes in two parts largely. One, the measurement itself, any measurement we take as we know is going to have some uncertainty is the ruler being held right, is the wind blowing one way, et cetera. And then the larger source of uncertainty is the allometric model. That is the regression model that we use, the height, the diameter and the wood density to compute the carbon. And that very varies through region and data, specifically data on wood density, so species specific. And this is providing high levels of uncertainty, but accepted through the literature process and literature review that I conducted of perhaps 60 different studies. And accuracy or fruit mean square error of around 20% was okay, being that that is for practicality logistics. So carbon actors in the market right now we're operating with around 15 to 30% accuracy of what their stock was. There are a few different remote sensing technologies, of course, I am going to focus on LiDAR. So LiDAR is a measurement of vial laser pulse to kind of visualize the volume of a space. And this is used beyond above ground biomass measurements, particularly in my field, we use it in building energy a lot, but been very popular in the past 10, 15 years in measuring biomass. There is the misconception and particularly at the small scale, this is inexpensive, I have a later slide on this, but recent studies have shown us that this is actually perhaps four times cheaper than the field measurement method when you're thinking of labor costs and time. And this is possible to give us 90% accuracy, so only 10% error at the one hectare scale and 95% at the half acre scale from a few studies done in the last 10 to 15 years. Particularly LiDAR is really high accuracy in temperate forests and borough forests and tropical forests. Some shrublands, et cetera, with lower density and lower heights, this accuracy is not being reached. And solutions have been being worked on there, pairing this with other satellite imagery and machine learning models to get that accuracy up there, but in those other scenarios, accuracy is perhaps only down in the 60 or 70% ranges. I would say we're about two minutes. Great. So more or less with the allometric models, that is the highest source of uncertainty for our LiDAR measurements. A literature review of 402 of ground biomass studies found that allometric equations to convert volume from LiDAR to carbon exists for some, but not all forests, as they're saying, and also does not exist for many countries, many regions with high forestration do not have these models built. Therefore, we cannot accurately represent these in time. So what approach should carbon mark take? One, LiDAR is cost effective at a large scale, a national scale, it could cost only one sense per hectare. So building this and scaling this and focusing on the allometric models to more accurately convert very accurate LiDAR measurements to very accurate carbon measurements is necessary. So what's next? It's building trust, transparent supply chains of what uncertainty is in the purchase of a hectare of forests and legislators need verification methods, developing standards, standardization of these allometric equations and sampling techniques to minimize bias and to increase precision. And finally, sharing knowledge, open data repositories. So if these allometric equations already exist, they are shared and folks using LiDAR can scale their solutions. I see a future of measuring forest and above ground biomass at the one hectare airborne LiDAR scale with species specific allometric models can build trust across actors in the carbon market, can be harmonized and standardized to be cost effective and accurate. Thank you so much, Abigail. That was great. And some groups I'm able to chat the time warning and some I'm gonna give it verbally. So since you guys are on the same screen, Claudio and Norio, you're gonna get the two minute warning audio style. We're looking forward to your presentation. Thank you, Abigail. That was terrific. Thank you, Alicia. Hello, everyone. We are presenting our project on scaling co-face-out with carbon market financing. I am Claudio Guadalu. Nice, Norio. So we will be talking about just like the problem we have in front of us in terms of coal assets and the business case that is behind these assets and how to face them out. We'll talk about a couple of case studies. We have one from Chile and one potentially from Indonesia. We will talk about how a BCM model will work with co-face-out and how ELM also can help boost the co-face-out. So starting on the context, it is crucial to face-out coal assets just because this is the main source of CO2 emissions from the energy industry. So it's a critical component of the energy transition. In order to achieve the Paris Agreement goal, we will need to retire one co-unit per day or 100 gigawatts per year until 2040. There are several challenges in order to get there. There's a lack of fiscal incentives, political will, and also we have a booming energy demand in different regions, especially in developing countries. So we can see on the right side of the slide how the coal electricity generation has just increased and the challenge we have in front of us is huge, especially thinking about the developing economies growing in coal energy consumption. So here we have the Engi Chile case study. Basically, the methodology they follow was raising money from investors, especially the IDB investment fund with a 125 million loan package. Engi managed to invest this money in a wind farm in Calama that operates 150 megawatts. And at the same time, this will enable the phase out of two coal plants they had in the Tocopila region. So this is a way they were connecting not only facing out coal assets, but also wind farms. And at the end the mechanism they were using was monetizing the avoided emissions to our reduction in the interest rate of 15 million of the loan that IDB invested. The baseline they were using is mainly that gap between producing energy with coal and with wind. So far, right now, they have already deployed the wind farm. They have retired a couple of coal assets in 2022, a total of 5.16 million tons of CO2 are expected to be displaced. But the efficacy of this methodology has yet to be determined. Another case that we analyzed was the energy transition mechanism that is happening in Indonesia. Basically, the main difference with the previous case is that the asset ownership here will change and the investor will become the owner of the asset. Whereas in the Engi case, Engi was still the owner. The MOU was signed to pilot this in Indonesia and this is just a similar effort happening in a different part of the world. So at the end, the problem statement we have in front of us is understanding if carbon finance can help scale coal, phase out renewables in developing countries. So to answer that question, then we explore two options to see whether it could work out. So option number one is let's see if we can do carbon phase out under volume 3 carbon markets. That's the case then how would it actually look like. So in front of you, we have a transition structure on how carbon markets can be plugged in into the whole financing mechanism that is being done at the moment in terms of retiring coal early. So you'll see on the gray boxes, it's pretty much similar to Engi case, or the ETM adb case in Indonesia. So you have the investors coming over and taking over the coal asset and try to retire early. Now the question is how can carbon markets come into play and here we can see the money can come from carbon markets through prepaid forward contracts where the funding can be raised early on before the coal plants being retired and once the carbon is being avoided as time passes by, then these emissions will be delivered to the owner of the forward contract. So that I would imagine how, hypothetically how that kind of carbon markets being plugged in into the transition mechanism here. So what are the issues with this kind of approach? So on the next slide we have the typical issues that have been plugged in BCM all this while and we just further look in depth. In here we have three issues that we thought of can be solvable, can be solved if we have initiatives in place. So for example, the issue is about having well, when you shut down existing coal plants new ones will crop up and then how it can be combated that is by getting the host countries commitments or by getting commitment from the existing investor that we have bought them out to no longer invest in new coal plants. So in that way then you sort of plug the leakage. Another way is also you can replace that with renewable plants so any gaps that have been left out by retired coal plants will be filled up with renewable books. Second on the permanence issue again I think this is pretty much straightforward you can see the coal plant being passed out so no more emissions coming from that plant. On the MRV side is in terms of how do you estimate amount of emissions coming from the plant. I think this can also be solved by having a specialized MRV focusing on what type of coal or what type of coal plant is it subcritical, supercritical and sort of measure amount of emissions that can be avoided from this plant. However the next issue is not easily addressable so the next issue is about additionality so additionality is about would this transition have happened if. So when we try to look at when we try to answer this question with regards to coal plant in Indonesia it is really tough to answer this question and this could be the reason why it will not work out under the BCM. So number one is what this transition have happened if the owners change and our argument is that yes it can happen if the new owner is very intentional and they can run the coal plants economically better than the previous owner. So it can be done in a way for example the PPA can be renovated or the new owner is much more efficient at running the plant for example and when those conditions are satisfied then there's no need for having coal markets to come in and there's no additionality element here. So that's the first problem with regards to BCM the second problem with regards to BCM is coal subsidies. So again the question that we asked ourselves would this transition have happened if or under the policy regime in the energy sector. So in Indonesia at the moment Indonesia is actually the second largest coal exporter and six largest coal reserves and they have a regulation that really restricts the coal mines such that they are required to sell to domestic energy sector minimum amount at a very highly subsidised price. So at $70 per tonne and we know the average price of coal is about 200 to 300 tons. So definitely by having this what we call as administered price then running coal plant in Indonesia is very economical rather than running renewable energy. So in some ways you're creating this artificially depressed price for coal that allows this plant to continue operating. Now the question is if you remove that then would coal plant naturally be faced out and the answer is definitely yes because because of the price of the coal. Again this raised that additionality questions of the value act of of VCM in this case. The third question that you asked ourselves is would this transition have happened if cover savings were not commercialised? Again in this case we looked at Indonesia like they have they have no zero pledges they have regulation in place that sort of imply that even without coal markets that this industry will need to be faced out anyway. So with this in mind then is there a need for VCM to come in because the question is what is the additional value act of VCM in terms of regulation anyway coming in place. So it's all about enforcement issue. So again this sort of perspective raised the question is there a role for VCM for coal faced out. So we've seen the issues and we tried to look at the second option on coal faced out under ELM and see whether there is an answer there. And unfortunately no. So we looked at we looked at offset accounting and given that coal faced out is naturally a carbon avoidance project it cannot fit in the ELM framework because certainly ELM doesn't speculate on potential emissions avoided. There are many issues around this for example double counting when the new coal owners reduce their emissions then would the credit purchaser also enjoy the same benefits of their reduction so there's double counting element there. So there's also a moral hazard in terms of calculating will there be will it be susceptible to manipulation or gaming such that the whole country can read that so that they can maximize the amount of offsets that they can issue when they retire coal failure and of course the additionality problem that I have described as well. Then the question arises then what are alternatives available under ELM? Perfect you got two minutes to give us the alternatives. Perfect just to wrap up we have been discussing three alternatives one is the global carbon permits to enable money flow from rich countries to developing countries through a global budget of CO2 emissions then the second option is having a non offset incentives by creating a fund that could generate reputational PR and satisfaction for customers of companies and in this way we could fund these kind of projects and the third option is similar to the first one but these countries compliance carbon market to enable an emission allowance system within a specific country so our conclusion is it is needed to do the coal phase out and replace it with renewables in developing countries in order to achieve the net zero goals the problem is that carbon credits generated cannot be traded primarily as offset because of the additionality and the other issues that we just discussed and at the end we consider the three solutions that we just shared on global carbon permits regional constitutional funds and a national carbon market to enable this transition thank you that's great thank you Claudio and Nor well done and right on time we're in the home stretcher we got two more that was the coal problem and we found some alternatives thank you we're going to deal with the tree problem and that's Hayley let's talk about the tree problem because we've all heard how tricky avoided deforestation credits are, how low quality highly suspect avoidative deforestation credits are so I'm going to dive right into this tricky problem and talk about the a case study within Ghana and the red program which aims to avoid deforestation in Ghana the purpose of this presentation is to avoid deforestation and it's not that's not what you want to see it's a pretty picture that's actually not my desktop I sorry I'm trying to oh that's your okay oh it's so funny okay the one time I didn't ask can you guys see my screen you guys couldn't see my screen well now you know people will tell you yeah Okay, now we can share it out. Yes, now we see it. Okay, perfect. So the purpose of this presentation is twofold. One, to characterize the Ghanaian Red Plus program and second, to compare how this would look a little bit different under ELM. So starting with some background and deforestation in Ghana, I'm going to breeze through some of the background just because I'm a little worried about running over on time. But suffice to say deforestation in Ghana is a significant problem. Ghana has lost more than 60% of forest cover since 1950, and this is only increased in recent years. The current deforestation rate is 3.2%, which equates to 25 million tons of carbon emissions each year. You can see in one of the recent studies they are showing the deforestation of one section of Ghana from 1990 to 2015, significant amounts of forest loss. This is primarily driven by agriculture. So cacao farming to produce cocoa accounts for 13% of the loss of Ghana's forests. And this is primarily due to expansion of cropland. So as cacao forests, the land has been used over many years. It's no longer fertile. Farmers will expand into fertile forest land slash and burn and expand their cropland in that way. There's other drivers of deforestation, logging, mining and wildfires, and overall just a lack of enforcement that's leading to this significant amount of forest loss. So looking a little bit at the Red Plus program, the idea is to provide results-based payment and financial support to stop deforestation and avoid the further emissions from deforestation. So looking a little bit about how the program is structured, the sources break down into the majority of sources of the fund coming from private sector investment. So this is a lot of the big chocolate players who are in the area who are already investing in the space and directing that towards more climate smart agricultural practices. And then the carbon fund, that's where you see red credit sales carbon offset credits coming in and funneling through the carbon fund to pay for this program as well. And then there's also a mix of government funding and grants. What is the funding used for? So the largest component of this is the subtitle referred to as increasing yields via climate smart cocoa. And this is actually through farmer engagement practices. So as farmers are transitioning over to using more climate friendly agricultural practices, they're being compensated for that and then also have access to credit and yield insurances to support as they're making the transition to using fertilizers as opposed to expanding into new land. Another way that they can do more climate smart agriculture is through shade grown cacao. So that's actually growing cacao under shaded forest lands as opposed to slashing and burning. And it's actually shown to have higher yields in the long run. But unfortunately in the short run, there are better yields from direct sunlight grown cacao. And so there's a bit of misaligned incentives there and the financing is supposed to help bridge that gap to moving to this more climate smart agricultural practices. There's also funding for MRV, which is a key part of the results based payment piece of this transaction. And so if we look through what the actual transaction looks like, it started with collecting data early 2010s to be able to create a baseline for what emissions looked like in the specific region of Ghana from 2005 to 2014. They essentially through a variety of field measurements, satellite imaging, other estimates using a lot of research to come up with what is the baseline for the number of emissions on average within that period. And so that's what they're using essentially as their counterfactual to be able to compare and contrast that with what is being done after these red incentives are implemented. So after a period of time, they started in 2019, measuring over a six month period of time, what are the current emissions after the red program has been implemented. And then they calculate the difference between what the baseline is, what the current emissions are estimated to be and use that to determine the amount of emissions that have been reduced through the program. At that point, they then take two discounts. So one being an uncertainty discount, which is uncertainty in the measurement itself and how effective they are at actually measuring the amount of emissions that have been reduced. And then the second is in a reversal potential, which is knowing that in the future, this, this could be reversed and the lands could end up being deforested. So they have some justification for why they chose both of those numbers to discount the emission reductions. So those are then sold at $5 per ton of carbon that is not emitted, so the avoided emissions. And those are transferred to a trustee. So at that point, there's then two tranches, one of which goes to the trustee and can be used for their own carbon accounting and emissions reductions. And actually a vast majority that is re transferred back to Ghana to be able to use in their own carbon accounting and national determined contributions for reducing emissions. So as we've all heard, there are some questions of the legitimacy of these types of carbon offset credits, given that they're for avoiding deforestation, the first being additionality. A couple of things here. One, we don't have the counterfactual for the future. We're basing it on historical projections. If we notice that the actual transition to climate smart cacao would actually be profitable, it's hard to know whether or not this transition would occur with or without the red program leakage and permanence as well. There's a lot of research out there, mostly coming from Brazil, showing that when payments end, that the deforestation recurs again, or that if the actual demand for these commodities isn't decreased, then it leaks into deforestation in other areas. So in the case of Ghana, that could be the Ivory Coast, for example, where if or even other regions that are not being tracked under this program, that would end up being deforested. So some concerns on additionality, leakage, permanence, and measurement that we've all heard about. What would this look like then under ELM? And as we noted, the trees don't necessarily fit perfectly under the ELM framework. But if we were just to imagine that tomorrow ELM is implemented, what would happen is that all standing forests would be capitalized as carbon stocks and nations would be required to maintain those carbon stocks. So if they were to slash and burn a forest, the resultant degradation of their carbon stocks would need to be replaced with some form of carbon removals. As has been mentioned many times before, eliabilities can only be balanced by carbon removals, not by offsets. And so under this framework, you could think that maybe this would end all sort of payments and financing for avoided deforestation. Because the idea is that preventing the release of carbon into the atmosphere shouldn't give permission for someone else to emit. And if you're wondering why there's a cookie emoji on there, that's because this is the cookie jar is my way of wrapping my head around this problem. If you think of carbon stocks as a cookie jar that you always want to keep full, me preventing my sister from taking a cookie out of the jar shouldn't give me permission to then take a cookie out of the jar. I have to be able to replace that cookie through what would be a carbon removal for that to be effective. So one minute, just yeah, okay. So the idea is that you can't use avoided deforestation in order to be able to give yourself license to emit. But a potential solution to this as a benefit of trees is that they're carbon stocks, but they're also a source of carbon removals. And so if you allow a forest to grow and continue to photosynthesize, you then have additional carbon removal and carbon that is being stored, and that can become saleable. So if we flip this problem on its head and say, we're not going to think about this in terms of avoided deforestation, but instead, we think about if we leave the standing forest that continues to grow and remove carbon that can actually be saleable carbon removals, which could then make them even more value for the standing forest and lead to avoided deforestation. So wrapping up really quickly here, the idea is that if you can then leave the standing forest, sell those carbon removals. There's a lot of benefit here with the time value of carbon standing forest can remove a lot more carbon than planting trees that will eventually remove carbon in the future. Ilama eliminates all the concerns of permanence, additionality, and leakage. Some of the main questions are, you know, driving up the price of these nature-based removals and whether or not the market will tolerate the necessary increase to be able to overcome that opportunity cost of growing cacao and eventually are in ultimately removing the trees. But I will end there because I think I'm over on time. So thank you. That was great. Thank you, Hailey. So we've got some solutions to the coal problem. We've got some solutions to the tree problem. And now we're going to look at our last group is going to look at the capacity of current markets on supply and some legal frameworks. And then Tom's going to wrap it all up. Yeah, so I'll kick us off. So our project looked at the state of current markets from a study of both carbon offsets and in terms of proposing legal framework for ELM. So we'll actually start off from a really similar perspective as some of the other teams, which is in avoided offsets. And so we'll first talk about the current under supply of ELM valid carbon assets. Second, the legal framework for carbon offsets under ELM and wrap up with some recommendations for governments, businesses, and individuals. So I'll kick us off with talking about the current under supply of ELM valid carbon assets. And the takeaway here is just that current voluntary carbon markets are reliant heavily on avoidance offsets. So if we look at this year by year breakdown of each of the carbon offset types starting from 2010 and going to 2021, we see that what would commonly be termed avoidance offsets make up a vast majority of the offsets that are currently on the market. And the thing is that avoidance offsets don't exist under ELM. But many of the supply chain incentives will remain without the faulty accounting. Now let's break that down. So in the status quo of voluntary carbon markets, avoidance emissions can create avoidance offsets that can be used. We just heard a really great analogy of the cookies. If we prevent someone from taking a cookie, we suddenly in the status quo have authority to take a cookie. And so this means that companies are incentivized to collect credit for avoidance offsets. But over counting and faulty baseline projections, which have also been talked about, plague accounting and offsetting schemes that currently exist. Now under emissions liability management, avoided emissions reduce the emissions that a company is held liable for offsetting, but doesn't actually offset any emissions that they do release into the atmosphere. Now the kicker is that most current avoidance offset activities are still incentivized. So the activities that avoidance offsets are counting for in the status quo don't just go away. But they're just still incentivized by ELM to lower emissions earlier in supply chains and only direct actors are held liable here. Now if we go back to the chart that we were seeing on the previous side, we see that the dark yellow bit is the tech-based carbon capture, which is really the gold standard of offsets that we want to be shooting for in an ELM scheme. And the part that goes away is the nature-based avoidance, which has an entire presentation dedicated to it. And all of these yellow boxes are things that are currently cook count as avoidance offsets and activities that would still be incentivized under the ELM scheme just not by actually accounting as an offset. And so the counting shifts, but the incentives remain. And that's the key part here. Now another good part of ELM is that it's really creating fresh demand for removal offsets, which is the gold standard tech-based offset that I was highlighting in the previous slide. And this incentivizes the growth of the removal offset supply. So again, looking at the status quo, which recognizes both avoidance and removal offsets, we see that this contrasts with the ELM case because ELM will only recognize offsets that directly affect the carbon balance of the atmosphere. And as we discussed, avoidance offsets don't do that. Now in the status quo, avoidance offsets dominate. And that's because their cheaper and current carbon accounting schemes don't really take permits of offsets into account, where a ton is just this ton. But under an ELM scheme, removal offsets are going to be experiencing a sharp growth because essentially they're longer lasting and companies have to account for every ton of emissions liability. So essentially every year that the carbon remains in the air. And so we see that we're not only removing the disambiguity of avoidance versus removal offsets, but also creating fresh incentive for tech-based removals here. Now the last kicker is that we really do need more removal offsets to meet the demand of corporations if they were to commit to ELM tomorrow. So in the status quo market, there simply isn't enough removal offset supply to meet the demand for companies should they attempt to meet their true emissions liabilities. And right now offsets and net zero commitments are also suffering from poor differentiation, where one net zero commitment is much the same as another. And so the next steps here is first to better differentiate net zero commitments by emissions liabilities. And essentially all this means is we want to make sure that we're differentiating between companies that are accounting for their emissions by truly depending on tech-based removal offsets, as opposed to a nature-based removal, for example, that might go away in five years. That's okay, but we need to make sure that that removal is continuing to be held liable for the company. So that's the really big part for ELM. The second part is to use ELM accounting to only consider activities that are directly balancing the atmospheric carbon balance. And finally, to increase the demand for and money available for developing removal offset technologies. And here I'll pass it off to Kali. Thank you. I also want to take a moment to appreciate your background. I like the forest. I think it's a good theme. Okay, hello everybody. The resident lawyer squad, me and Drew, kicking off. We did a little bit more kind of information gathering about the relevant legal issues in the carbon offset market in terms of ELM. I think most of the framework that we all discussed briefly is stuff that's well established. And I wouldn't say Drew and I are ideating new legal challenges, but here's a little bit of an overview. So the current legal framework is complicated and fragmented. As is very par for the course in international law, there's no real standard international agreement that holds weight. And there are a bunch of different national, regional, local schemes that regulate the trade. This then makes it complicated not only for governments and enforcement mechanisms, but also companies to trade removal assets across borders, assess the quality, and invest in removal projects due to uncertainties described below. Next slide, Lana. So when we are looking at the potential updates for this system, a couple of the important principles that we have kind of come across are transparency, quality assurance, and legal certainty. Yes, next slide. Okay, so it is in a lot of the literature, there are kind of three options for the legal status offsets that have kind of been discussed extensively, one being removal offsets as intangible property. And then here's some US code that would kind of fall under, and then obviously that would then have to be translated into different jurisdictions. The second option would be offsets as a bundle of contractual rights. And then the third would be removal projects being distinct from transactions of removal offsets. Next slide, Lana. Important properties when we are considering these different legal frameworks and deciding between them would be fungibility, security of transfer, and standardized documentation. So there's much more to go into in each of these categories and different frameworks that can enforce one of these principles over another. But there is just this idea of it being effective, it being a sure thing, and then it having some sort of kind of standardization across the board. That would seem to be simple, but maybe it seems more complicated, but it's just something that's not been achieved in any of the current structures. Next slide, Lana. Okay, so then here's some just broader ideas for updating the legal framework, creating a uniform public disclosure regime that would give buyers and suppliers a transparent network and information disclosure opportunity. Developing a standard for accounting methods, setting higher requirements for capitalization of buffer pools, for instances where the offsets might be disrupted or questions of liability are brought up. More frequent enforcement actions against individual projects and companies who are knowingly or perhaps not knowingly violating the market laws and perhaps perpetrating fraud, and then allowing certification of only high quality offsets. And that is something that is also hard because it's those are again those are disrupted by time or whatever, but at least having some sort of baseline that's uniform and standardized across the different registers would be great. Next slide, I think now I'm handing it off to Drew. All right, thanks, Callie. It's good to be part of the aspiring legal lawyer squad. Just to be clear, I'll run through some, here we go, some more legal proposals. We need a clear definition of minimum standards to ensure like these are broadly tradable to ensure there's liquidity. We also recommend locating registers in jurisdictions that have that clarity and in jurisdictions where there isn't that clarity, but that might be important. We recommend legislative amendments. Next slide, Lehmann. Yeah, we also need agreements to dispute mechanism, basically something that works that's reliable. So businesses can, yeah, can have predictability, which is essential for them to invest in this space. Slide, please. Yeah, and I'll go through a few sort of general sets of recommendations for government's businesses and individuals. Slide. For governments, yeah, governments have the huge role here for trying to create a liability that we're going to basically be taking what we now have as shareholder value and reduce that. Governments are going to need to be the ones to make that happen. So, yeah, the first point and the last one on this slide are really essential. The, yeah, governments have to cooperate with each other to make this happen. It's going to be tough, particularly with international cooperation and the idea that there can be sort of defectors or freeriders, right? Countries that have weaker regulatory regimes and companies can engage in regulatory arbitrage. So we think that an environment or a global type of international solution would be important here. Slide, please. Yeah, so for businesses, what they can do is participate actively in removal projects. They can promote transparency by themselves being transparent and disclosing their liabilities and their removal actions and pressuring other businesses to do the same. They can stimulate demand for removal offsets by committing to their net zero emissions targets, which they've many of them have done already, and they can contribute to the development of removal offset standards by collaborating with governments, NGOs and other stakeholders to create robust, transparent and reliable standards. A little bit on this point, we recognize that this is going to benefit companies that are already established, like any sort of existing regulation, they're going to be incentivized to have regulations that they can follow and that smaller businesses might not be able to follow. So that's something we will, as policy makers, want to keep in mind. Slide, please. Yeah, for individuals, individual action is important here. People can purchase removal offsets, excuse me, on their own to neutralize emissions. They can create pressure to incentivize corporations to offset their emissions, their emissions through their spending, and they can create pressure through contact with policy makers, like call your senator, call your congressman, etc., to sort of get the ball rolling in this direction. Yeah, and finally climate education initiatives we think are important to sort of, yeah, to increase public understanding and move the ball forward in this area. Slide. Okay, that's the call to action I sort of went through already. Slide. Okay, and this is what we spoke about. We have, I think, a little time for questions. Yeah, thanks. Thanks, Lina, Callie, and Drew, you do have five moments and there are two questions that have popped up. Do you guys want to start on answering those? And then I'm going to turn it over to Mark and Tom at Quarter Tail for the wrap up. Yes, I'd love to. I think the first question that I saw from the chat was on creating computational connectivity between avoidance and removal. Nick, do you think you could expand on that question a little? Yeah, sure. Markets need to price efficiently avoidance today and removal tomorrow or removal today, avoidance tomorrow under ELM or any other accounting scheme. Like how can we efficiently apply a discount rate or something that doesn't think of these things as distinct but integrates the value of them in a way that is like computationally efficient? Yeah, I think the key to recognize here is that we're actually trying to do precisely that, of like make the point that avoidance or removal are actually like two entirely different things. Like avoidance just means that the company is doing something to reduce the amount of emissions that they're releasing and that's held liable for. And so the company is able to actually like internally price, like how much does it cost me to install, I don't know, more efficient AC units, for example, and reduce our emissions that way versus if we just kept the same AC unit and just had to buy more removal offsets. And so we're actually internalizing a lot of that rather than separately pricing what an avoidance offset costs or what a removal offset costs. Does that begin to answer your question? I guess to add on real quick, Lina, to that point we recognize that the term avoidance here is being used maybe differently than it's been traditionally used because we're focusing on the company and we're not focusing on for deforestation that would have otherwise occurred. For example, we're sticking to the company and the liability that they've created or that they will avoid creating when we say, well, does that answer your question? I guess another way of phrasing it is what prevents the perverse incentive of if I don't get money for an avoidance credit, because I'd like to be paid for not chopping down my trees. I prefer to get paid for chopping down my trees and then planting new trees and farming in between. So there's obviously a bridge. I think it's hard to say that avoidance and removal are two different asset classes or categories. They're clearly related in incentives and there should be a financial mechanism that links them. Maybe it's just food for thought. Yeah, we agree. Yeah, sure. We agree and noticed it and yeah, don't have a clear answer there. It is easier to handle removal than avoidance. I'm not sure if somebody, if one of the professors has comments on it. Yeah, let me jump in very briefly, because this is an ongoing debate amongst all of us. If you think about, first of all, avoidance versus an incurred liability, it's a very different accounting exercise. One is a forecast and one is things that have happened. But more importantly is if we're doing carbon accounting correctly, then if I say I need to cut down a whole lot of trees to plant my cacao plants, then I just incurred a whole lot of carbon emissions liabilities in order to deliver to someone chocolate. If we correctly attributed deforestation activity to a supply chain, it would be an expense or it would be a carbon emissions activity that has to be absorbed into a product. So that's probably the best way to think about linking the two is that if you have a product that causes deforestation in your supply chain, one could argue that's fine. You just have an obligation to undo it. The logical result though is that you would end up with very, very expensive chocolate if you were correctly dealing with the emissions liability. I think one more point I might add on to that is it just ensures that someone is held liable. Like for example, if deforestation is accounted for as a carbon stock, that would be another way we could go about it of like either we can hold someone in the supply chain accountable or we can hold someone accountable for protecting this carbon stock. And either way, like I think this is definitely an open question, but I do think there is this room within ELM to begin to tease out how to create that equipment. Okay, great. I want to turn it over to Tom. I think what I do want to do at the outset is just offer to Bob and Mark who have been so deeply involved in this and working with the students a bit of opportunity to comment. And then I will try and deliver in a shorter time than 15 minutes, just some points that seem to me to characterize the problem as we're now seeing it. And most importantly where we hope to take this work in collaboration with those of you who are are watching on the on the gallery, but also with a number of other people who have have interested indicated a very strong interest in seeing this work go forward. Mark, do you want to pick up first and then I'll ask Bob the same question on your sense of where we are and where we're going to go from this initial practicum? Sure. So I think that the one of the core messages that we're trying to get at is understanding how we can possibly move from a voluntary regime to a compliance regime. And one of the important underlying steps to that is getting accounting working in a reasonable and effective way. And first and foremost, that means understanding embodied emissions and emissions in a supply chain and constructing eliabilities. This is a very different approach than scope one, scope two, scope three. In the most generous view, we could call it correctly reporting scope one, understanding how scope two arrives at my doorstep and then dealing with upstream scope three emissions. But as I think we all agree, in the long run or in the intermediate run, we need something that's a compliance regime, not a voluntary regime. And compliance about hypothetical future things such as downstream emissions is just never at least in this country in a fit in a compliance regime. So then we're left saying, well, you know, what do we do once we understand the emissions? It's construct a liability. And once we construct a liability, then in many ways, the assets necessary to match that liability sort of all fall into place. The question is, are you removing the damage you are doing? Are you undoing the damage of your emissions? Are you recapturing the CO2? However you want to go about doing that, just internalize it. We're internalizing it with an endogenous price based off the cost of removals and that price will fall. This gets us around the difficult debates around social cost of carbon since we're simply saying, you know, if you want to emit the carbon, emit the carbon, just pay the price to remove it. And like one of the things we're finding, we think is most attractive about this system is it sort of puts, as one of the people we've been talking to at a corporate says, we have the only system that sort of puts everything in a nice box, puts a bow on the box and says, here's exactly what you need to do. And we can do it in a voluntary regime. We can also move it to a compliance regime. And that's why, you know, we're excited about this different approach. And with that, I'll pass the baton. Bob, you want to sum up how you're looking at where we're heading with all this? Yeah, well, I come at it maybe from a little bit of a higher level perspective focusing on price and carbon. And from that perspective, what makes these markets so interesting is that they're the ones that are, you know, in some sense, the cheapest if we can get them to become real. So if we can address the issues of additionality, permanence leakage and so on, and create a commodity which is carbon flux that can be measured and, you know, reported, verified, audited and so on, all of which requires, I think, governments to get involved. And I think that's something that everyone here agreed on. So I think it's very important that we move quickly. And that's one of the issues here. We've got to move quickly in terms of price and carbon. And if this is going to be the market that's going to move first, because it's the one that's able to scale at the lowest cost, then we have to address all these issues. So I congratulate you and all the students who have done a remarkable job of tackling these difficult and complex issues. Thanks. So let me just sum up quickly and build on what people have said. I'm sitting here in Singapore right now, as some people know. Yesterday I spent a good bit of time with the largest bank in the region and their sustainability officer. And the message that he gave to me is about what he's being asked by clients, I think, is at the heart of everything we're saying. He basically said every client he has is coming to him, corporates, financials, anyone, and saying, help me to set up myself as an issuer of carbon credits. I want to, everything that we can do to enhance sustainability, we want to sell into this market. And the protestation from the bank is that it can't work that way. You can't sell everything into these carbon markets, but that's absolutely not what clients want to hear. They simply, if I were to describe the penetration into Asia of carbon activity, it's how can we sell whatever we're going to do to some unnamed buyer, usually in another part of the world, who is going to pay us to take whatever steps, whether it's reducing our energy emissions or protecting our carbon stocks. But this is not just in the private sector. The discussion that we had a bit earlier about the carbon credits for accelerated coal reduction in much of the world in Chile and Indonesia, but focusing for the moment in Indonesia, it's that as we have seen interest rates rise and uncertainties about an energy transition take place that make governments cautious about closing down proven technologies and institutionalizing large scale unproven systems. What is generally happening is that these changes, which at one point were being justified simply as a custodial problem, as our group described, where it was simply going to be cheaper to do renewable energy and the cost of capital that was included in power purchase agreements was very high. So you were just going to restructure and change ownership in order to shift from high fossil fuel use to low carbon. That gradually has changed and the underlying transaction is not going to be done on a voluntary basis. So everybody began looking for commercial, for concessional finance from governments. But as governments in the West began to say, where is this concessional finance going to come from? The banks are not seeming to be willing to put it up in any magnitude. Now we see everybody substituting carbon markets for concessional finance. So both in the public and private sector, there are deep instabilities here and the fundamental problem that I have heard discussed again and again today and certainly in our concentrations going forward has to do what is the relationship between these markets and a system that adds up to something like the objectives and goals that we have created that are represented by global carbon budgets. And the problem is just a bit of aggression's law problem in the sense that if we have decentralized issuances of currencies that are invariably, we don't see any financial flow unless there are offsets, people are only paying to substitute one carbon emission for another, then this can't possibly add up and there has to be a relationship that's being represented by both what Mark and Bob said. Which is that governments are going to become active here to prevent both the inflation tendencies that we're currently seeing in the market for carbon markets now with endless issuers. But in effect, there has to be some relationship that we have never been able to establish adequately since we started dealing with carbon in 1992 at a global level. There has to be some kind of an allocation process between what countries are doing when they make pledges, whether these are net zero pledges or which is the most current version of country commitments and the allocation of that budget. And I think this is becoming even more complicated because if we look at what countries are doing, they are essentially saying we're going to overshoot any reasonable allocation of the global carbon budgets that would come to our country by combusting more fuels over the next period of time, combusting more fossil fuels than any reasonable estimate of our allocation. But how are we going to deal with that? We're going to essentially use nature-based removals through forestry, reforestation and afforestation to make up for our fossil fuel overshoot. In effect, they are nationalizing the nature-based removals. And so they can't be available for private sale through exchanges. Any more than nationalized oil stocks or nationalized gold stocks could be available for private sale by those who don't really own them. So we're in a very difficult position where we do have lots of measurement in R&V structures, but the government structure is not there. So just to wrap the whole thing up and make a plea to all of you who are listening and those who will listen for engagement in this work, we need to answer two questions. One is every time we think about eliabilities or ELM management, people say it's too late to shift. The world is running down the current track with greenhouse gas accounting. And the only thing that we can say is whatever else is happening, the instabilities in the carbon markets that we are describing here are going to be one source of suggestion that the track we are on is not necessarily the track that we can successfully follow. And I think this question of the instabilities of the carbon market has to stand for a larger set of instabilities in accounting and in some of the measures that we're about to see occur with regard to carbon border adjustments that are going to destabilize the current system and make something like ELM a necessary structure. And the very last remark in the last 60 seconds is that there are three great challenges. The biggest challenge is getting countries in the world and to recognize that there are liabilities here. We are not talking about voluntary games in any successful pathway. And we have some interesting idea about how to manage those liabilities. They may involve time limited securities or that for carbon markets and forward looking curves that can be managed in other segments of the capital markets like pension benefit trusts but beyond that the standing trees problem and the coal problem particularly in Asia where the vintages of coal plants are very young and not amortized do need to be treated. The point is that they cannot be treated through offsets and still make this work at least as offsets are currently involved. There will have to be other forms of income transfers and support and those are very much a part of our project as well. So with that summary of where this is going and again a repeat of my plea that we gather as much of a community as possible to look at particular instantiations of these issues. Let me turn it back to Alicia to just close us off. That was terrific. Thank you Tom. Really appreciate that summary and thank you all. Thank you to our audience members. Thank you to our students for the great presentations. This is recorded. We will make it available. We also will have the slides and a final report and we invite you to join us on this journey. Thank you all. Have a good night.