Frequently
Asked Questions

Any project whose activity can be accurately remotely monitored, and whose carbon removal/reduction remotely quantified will be able to join Cavex.

Cavex will be open to any legal entity willing to buy high-quality carbon credits. The initial focus of the platform and its functionality is companies and organisations offsetting their carbon footprint to reach their climate commitments. However, individuals are equally welcome to purchase credits on the platform.

Cavex will have a set of project-specific “methodologies” that will dictate what data are to be submitted by a project, setting out these criteria project-type by project-type. These methodologies will obviously include the data reporting requirements for joining the platform at the outset and on an ongoing basis, but will also set out what other project details will be required, including baseline establishment (for additionality), beneficiaries, co-benefits that might accrue etc. These are information points that may help inform a potential credit purchaser to understand the projects’ context and overall impact. Testing what is acceptable to buyers in terms of additional project information will be an essential part of the pilot phase.

The methodologies will be made available to projects online so that they know exactly what they need to submit to join the Cavex platform. The criteria and data reporting protocols for joining the platform must be consistent (within project types or categories), independent of the project size. We are keen to make sure that we cater for smaller projects, but there must be clear ‘quality’ criteria to get onto platform.

Cavex is currently focused on the methodologies of four initial use-cases but we are anticipating many more based on the backlog of projects that have shown an interest to join the platform.

In many ways, the data requested by Cavex will be similar to what is required under current standards, but the format will be tailored to streamline verification and thereby support the overall goal of democratising access to carbon markets.

Current verification standards such as Verra and Gold Standard request a range of information such as location, ownership proof and project size in a project description, a lengthy written document describing the project. Similarly, a monitoring report to prove emissions reductions during a specific timeframe is produced by the project. Both documents are audited before the project is verified.

The Cavex verification process follows the same principles as set out in key guideline standards, namely ISO 14064. It will therefore request the same information, i.e. a project description, but in a transparent, digital format. The monitoring report will be substituted by ongoing data submission by the project, so that emission removal, reduction and avoidance data can be checked in real time, compared to other similar projects and immediately checked for errors.

There must be some “barrier” to entry or we risk bringing poor quality data into the system which will either fail against the reporting protocols or not engender confidence in a buyer. We are therefore looking at incorporating an ‘on-boarding’ fund mechanism to support prospective Cavex project applicants with funding and Technical Assistance (TA) to put in place the right reporting methods and technologies where required. The arrangement will be that the project commits to repaying the ‘on-boarding fund’ from some of the proceeds from carbon credit sales.

There are some interesting variants to this ‘on boarding’ funds model, for example, where Cavex can unilaterally direct funds from its charge fees to support new projects, or where investors chose to allocate funds to a general onboarding process in return for future revenues. All of these models will be tested during the pilot phase.

Cost and time are the two main hurdles to accessing carbon markets today. Cavex wants to erase these while raising the bar of the data quality underpinning carbon credits. Through its data-centric approach, Cavex can bring the cost of accessing carbon markets down, while improving the quality of carbon credits. Accessing the right technology for data collection will with certainty be quicker and cheaper than going through current verification standards.

From a perspective of know-how, and when operating at scale, Cavex will ultimately include country teams that can support projects appropriately on the ground. Developing hardware and software tools for popular use-cases, that can be easily set up and help onboard projects will be important to explore and build work programs around.

Projects on Cavex will be categorised by project type and location and priced by the project owners. A price indication will be set by Cavex, which is based on the two categories, namely project type and location. The limitation to just two variables in the indicative price is done for the purpose of limit the variability in pricing between projects on Cavex. Greater standardisation may lead to clearer pricing, which may increase liquidity in the marketplace.

For an issued carbon credit to be valid, the issuer must ensure that the carbon reduction, avoidance or removal will never be reversed (meaning, it will last forever). Permanence targets removal projects (forests, agriculture etc.), as reduction and avoidance are permanent by default. A forest, however, can burn down in a fire, be cut down after 25 years, or the land it stands on can be sold, etc.

It is impossible to guarantee that none of these events will happen, but there are preventative practices, incentivisation methods and hedging systems that minimise the risk of impermanence. These will be addressed during our pilot phase and 4R Digital will work with relevant experts and specialists to consider how these issues can be managed in the overall Cavex proposition.

• Financial incentives/mechanisms for minimising the risk of project discontinuation due to ownership change and other external factors can be built on the back of carbon credits and the payment connection made with Cavex.
• Forward financing land investment and forest plantation using future carbon credits as collateral is one option.
• Another option is to “mortgage” the trees, where landowners are offered low interest credit using trees as collateral.
• Project owners can be offered other payment options than cash and access offers through Cavex.
• In communities, social collateral (used in microfinance) could be explored.

To guarantee permanence of all credits sold on Cavex, the platform will feature a “permanence buffer account”. All removal projects will receive a non-permanence risk score which determines what percentage of carbon credits issued they should contribute to the buffer account. These carbon credits will not be sold. In case a reforestation project burns down in a forest fire, carbon credits from the buffer account will be retired, to compensate for the credits sold by the project. In this way, all credits will remain permanent.

This is a method used by all major standards. The added benefit of Cavex is that risk can be determined accurately, and deforestation can be detected and mitigated much quicker due to our strong use of remote sensing and land change detection algorithms.

Furthermore, additional insurance products can be attached to long-term projects on Cavex such as forestry, that protect the assets from external impacts such as temporary financial instability of owners.

Every credit created on Cavex will be registered on a distributed ledger. All activity data that underbuilds the creation of the credit will be on a ledger as well. This will ensure the veracity and traceability of credits on the platform. At the time of purchase, another ledger entry will be recorded, in which the credit is retired. This will mean that there will be no secondary market of Cavex credits and that the buyer pays for the retirement of credits towards their climate goals. In this way, credits cannot be sold multiple times by the project owner nor resold multiple times by buyers and the risk of double-counting is resolved.