This founder is using blockchain to fight carbon credit fraud

In this Q&A series, we suss out the opportunities, thinking, and motivations behind some of Asia’s promising startups. You can also catch our full startup coverage here.

More companies are looking to go green by buying carbon credits. A big deterrent though is that carbon offset markets are rife with fraud.

Takeshi Nojima, founder and CEO of Xels / Photo credit: Xels

To address this, Takeshi Nojima started the company Xels in 2018 with the goal of building a blockchain-based platform where corporations and individuals can buy tokenized carbon offset credits easily and transparently (His responses have been translated from Japanese).

Tech in Asia: What’s the problem that your startup is trying to solve?

Nojima: The core goal of Xels is to promote a greener, healthier planet. We’re working toward that by increasing both participation and transparency in carbon offset markets.

Carbon markets are complex and standards can vary wildly, but generally there are two main kinds of credits.

“Compliance” credits are heavily regulated and required under cap and trade systems.

“Voluntary” credits, meanwhile, are available to anyone and are popular with companies who want to show consumers they are serious about tackling climate change. They are also attractive to individuals who want to decrease their carbon footprint and simply do right by nature. We are initially focused on boosting access to the latter, while also protecting people and businesses from fraud.

Since the birth of carbon offset markets in the wake of the Kyoto and Paris agreements, fraud has been a serious problem. Bad actors have been known to sell fake or expired carbon credits. Such credit “recycling” fraud can lead to double spending of unretired carbon credits (see here for an example of one of the biggest fraud cases to hit carbon credits, which had even ensnared Deutsche Bank).

Blockchain’s distributed ledger technology is the perfect use case for carbon credits, as it cannot be changed, reversed, or double spent. Digital assets can also be “burned,” along with a transaction hash that proves the associated credit has been retired forever.

We’re initially launching the eponymous Xels token as a platform token to access a future suite of stable tokens that are pegged 1:1 to various industry-standard voluntary carbon offset credits – think of these as being the USDT of carbon credits.

Who is your target customer?

Anybody can get involved in carbon offsetting, from individuals right up to the largest global corporations. Carbon offsetting is now a major goal of companies such as Amazon, Microsoft and Nike, who are no longer interested in waiting around for governments to take the lead. They’ve set out to neutralize their current carbon footprint, or even their entire historical footprint, on their own initiative.