ReFi can also enable more inclusive and participatory governance, allowing stakeholders such as farmers, landowners, and local communities to have a greater say in decision-making processes. The first key component of ReFi is accounting using D-MRV approaches, comprising data collection, aggregation, and analysis. Currently, however, most climate data are still collected through analog and manual processes such as sampling or self-reporting. Such legacy MRV costs are frequently prohibitively high, particularly in larger or geographically dispersed systems, posing a significant barrier to more effective coordination (Huitema et al., 2009; Wyborn, 2015). Using digital technologies to improve MRV and thus coordination allows different institutions and actors to adopt mutually beneficial standards, lowering https://www.xcritical.com/ transaction costs, gaps, and overlaps and improving alignment (Abbott, 2014). Regenerative finance (ReFi) is a game-changing approach to finance that holds huge potential for advancing ASEAN’s sustainability and NetZero aspirations.

The State of ReFi: A Comprehensive Look at Web3 Regenerative Finance

Rather than using up public goods, like trees, until they have been depleted, Regenerative Finance is about incentivising the financing of public goods – rewarding those who create positive what is regenerative finance externalities such as planting trees. I speak for the trees, for the trees have no tongues”, advocates for ReFi are striving to speak out for the depleting public goods. Ultimately, ReFi encourages us to care a whole lot about benefiting the wider society and the world we live in. Though most remember the Lorax for his cranky nature, Dr Seuss’ story, The Lorax, actually speaks to the underlying societal and economic issue of overconsumption of shared resources – the tragedy of the commons. Despite knowing the purpose of ReFi, this financial model is not an easy idea to understand.

Sustainable investment is the greatest economic opportunity

In DeFi, services often offered by companies or other centralized parties (i.e. banks or stock exchanges) are replaced by smart contract applications. These computer programs can run and maintain different financial products such as single and joint bank accounts, lending services, or currency exchanges. Now, advancements in computing including blockchains and smart contracts mean we have the technology that allows us to realize the visions of these thinkers, and to expand on their work. Some ideas of regenerative economics include, encouraging conscious spending and consumption, promoting the efficient use of resources, and prioritizing well-being over growth.

Terra Tuscany: Sustainability leaders gather in Italy for climate summit

• This has not only boosted the company’s sustainability credentials, but it has also won access to worldwide markets.
• With the help of blockchain technology, we can lay the foundation for systems that are open, fair, and democratized.
• We’re on a mission to easily enable any individual to fight climate change with the world’s first carbon-backed NFT.
• Regenerative Finance, or ReFi, is a transparent, accessible, and inclusive alternative to traditional financial systems — an emerging concept with the power to reshape the existing financial landscape.
• Regenerative Economics theory recognises that rather than trying to completely overthrow the entrenched capitalist system, it is better to try and evolve it to the next stage before it’s too late.
• Klima lost value during the cryptocurrency crash, but the arbitrage opportunity increased the sale of carbon credits.

Allowing people access to financial services and markets that they’ve been traditionally shut out of, which could improve their daily lives, represents one of the core tenets of ReFi. Communities across the globe could make use of DAOs (decentralised autonomous organisations) for community activism, finance and social projects. These projects can assist by helping companies invest in carbon credits, incentivizing regenerative land-use practices, or even creating platforms to help organize climate-saving initiatives. The implementation of ReFi could lead to the adequate funding of public goods, thereby mitigating the detrimental effects of the tragedy of the commons. It encourages individuals and companies to focus on how their choices create positive externalities for the rest of society, rather than just on the financial profits of business decisions. Selling carbon offsets can be a significant revenue stream such as Tesla, which sells carbon credits in the form of RECs to legacy car manufacturers[xcvi].

Step 1: Pricing Natural Assets by Their Value as Carbon Sinks

It accelerates the development of green infrastructure, renewable energy, and sustainable agriculture in ASEAN countries by channelling finance into sustainable enterprises. This minimises carbon emissions while simultaneously promoting economic growth and resilience. Web3 registry-networks facilitate real-time impact measurement by capturing relevant data points throughout the lifecycle of a project. This enables investors to track the progress and impact of their investments with precision. By having access to up-to-date impact metrics, investors can effectively evaluate the success of regenerative finance projects and make necessary adjustments when required. For a long time, economists have been thinking about how to systematically embed care for our planet and for communities into the way our world works, and studying how financial policies affect social and ecological well-being.

Four Other Areas in Which ReFi Is Having an Impact

These extractive systems are no longer working for the benefit of the masses, and ReFi instead offers users equitable accessibility and distribution. Increasing cost of carbon credits have impacts on steel, cement, oil and gas, and mining, which are vulnerable to the economic implications of carbon pricing. The steel industry accounts for 7 percent of global CO2[cvi] using coal and the cost of carbon credits will increase the cost of production.

Accelerating sustainability and net-zero ambitions

External advisers with communitywealth-building and racial-justice expertise play a central role in fundingdecisions, which helps ensure accountability to the communities we’re trying toserve. Food companies, investors, multinational institutions and governments are making pledges to invest billions of dollars in regenerative agriculture. Yet in the midst of a stream of funding and interest, farmers themselves are being left behind. Whether its outdated funding structures, cultural disconnects, or outsized expectations, both investors and farmers have struggled to find the right partner for their goals.

1 Extractive and regenerative theory of economic relations

By investing in projects that promote sustainable practices and reduce the industry’s carbon footprint, regenerative finance can help the crypto industry become a more responsible and environmentally-friendly player in the financial world. An on-registry buyer who receives the purchased credits deposited into the registry buys full title to the carbon credits; but this may vary if bought through intermediaries. Additionality occurs when a project would not have occurred in the absence of the VCM. Durability or permanence is the time that CO2 is sequestered and has not been reversed by wildfire or project non-completion.

Infrastructure: The Building Blocks of ReFi

As shown by the MIT[ix] table below, every person, company, and country has a carbon footprint that can be levied as a risk charge equivalent to the carbon amount they use, leading to carbon pricing and carbon tax. Paris Agreement signatories backed a long-term target limiting global average temperatures to “well below 2°C” and limiting warming to 1.5 degrees, with emissions to reach net zero by 2050. For this purpose, the carbon market allows carbon credits/offsets to be bought and sold based on carbon emissions avoidance or removal. These assets are realised on the balance sheet by accounting procedures that are similar to capital market financial instruments. ReFi promises to take the benefits of decentralized finance (DeFi)/Web3 by integrating sustainability and inclusivity into a financial platform.

However, most experts agree that ReFi includes a collection of applications that enable digital monitoring, reporting, and verification (D-MRV) of a CPR3. Here, tokenization underpins a valuable claim to a positive impact created on a commons, thereby enabling businesses to capture a quantifiable value from the creation of public goods (George, Merrill, and Schillebeeckx, 2021). Other definitions of ReFi center around the role of ReFi in market-based conservation and other types of ecosystem preservation financing7. In general, ReFi aims to create economic systems that enable harmonious interactions between humans and natural ecosystems. In the finance area, tokenization has the potential to increase pricing transparency in the carbon offset market by creating a digital representation of carbon credits, which can be recorded and traded on a secure, decentralized blockchain ledger. Tokenization allows for digitally based ownership representations and provides a way for carbon offset projects to be financed and for the ownership of carbon credits to be transferred in a transparent and verifiable way.

All artefacts of cultural significance, from museum exhibits to religious items housed in churches, are being digitised and logged on the blockchain. This opens up opportunities for pieces of cultural artwork to be offered in a digital format to a wider marketplace, rather than relying on tourism to the area. Increases in tourism have led to demand for markets where tourists can buy mass-produced ‘cultural’ trinkets, which often incentivises the local population to cheaply commodify their cultural heritage and can ultimately lead to the culture’s dilution. It also ensures accountability, both for firms to prove they’re participating honestly in ‘green’ initiatives and for individuals to check the firm’s claims, which helps to drive genuine behavioural change and eliminate ‘greenwashing’. Regenerative Economics theory recognises that rather than trying to completely overthrow the entrenched capitalist system, it is better to try and evolve it to the next stage before it’s too late.

However, over 90% of us have heard a story about the tragedy of the commons and a world in need of a regenerative model of finance. Although the price of carbon emission allowances in EU ETS have reached US $85 to US $110[xxxiii], the price in other ETS jurisdictions is lower. Countries without a tax or ETS mean the three-quarters of global emissions are starting from zero. Globally, the average carbon price is $3 per tonne[xxxiv] so the price needs to be greater than $75 per tonne[xxxv] to meet the Paris Agreement. We hope that this issue brief will inspire this thoughtful investment, and help finance professionals discover new partnerships to help farmers, the planet, and their communities thrive.

The carbon offset will become a crypto currency that is backed by physical assets, uses green crypto mining, and has reserve capabilities like Bitcoin. Abu Dhabi is the first jurisdiction to licence, certify, and regulate commoditised carbon credits. Built on an ACX digital carbon trading platform,[cviii] this includes a futures market, clearing house, and custodian service. Indonesia, which launched its carbon exchange in 2023[cix] with caveats around the export and trading of carbon credits, is implementing an ETS/carbon tax pricing around coal-fired plants and working towards launching a carbon exchange. China is competing with emerging CCS with cooperation between oil, mining, and steel companies, with the agricultural sector plus carbon storage locations. Cocoa farmers in Ghana are improving yields and mitigating climate change by adopting climate-smart practices while curbing deforestation.

The aim is to reconfigure the current system so that rather than remaining extractive, it becomes regenerative with everyone working together to restore and conserve what we have left of the world around us. This system was shaped by free market forces without sustainability in mind, and many issues the world faces now are consequences of this unbalanced, self-perpetuating paradigm. While cryptocurrency gives the underlying capacity to restructure this system and rebalance wealth distribution more fairly, it still has its drawbacks when it comes to certain issues. Regenerative Finance (ReFi) utilises DeFi and blockchain to help reverse the effects of industrialisation and systemic financial imbalance. Ultimately the Regenerative Economy seeks to recirculate money, information and resources.

It is the concept of how to create a scalable, permissionless, and middle-man-free flow of capital and regenerate the Earth simultaneously. Serious issue that cannot be ignored, and it is essential that the crypto industry take steps to address it. The crypto industry has faced criticism in recent years for its high energy consumption, which has raised concerns about its impact on the environment. The energy consumption of the crypto industry has been estimated to be greater than that of entire countries, and it is projected to continue growing at an exponential rate. This is a crypto investment that prioritizes sustainability and environmental protection.