from Carbon Offsets Daily


Carbonflow, a venture dedicated to bringing automation and transparency to the carbon market, is a web-based software technology that works to drastically lower the cost and time it takes to create a carbon credit. We took some time to connect with Neal Dikeman, Co-founder and Chairman of the Board of Carbonflow, to learn a bit more about this revolutionary product.

COD: How does Carbonflow help developers of GHG reduction projects?

Neal: We built this platform with the help of the major DOEs, DNV and SGS as a way to solve the CDM bottleneck issues.  Basically an electronic fast track program that also happens to do your “carbon ERP” on the web.  As an industry, we are still in the early days of carbon, and we just outgrew our infrastructure.   As a result, the transaction costs, time frames, and uncertainty of developing/validating, running, monitoring, and verifying GHG reduction projects are way too high.  Carbonflow helps drive up transparency, enables developers to shorten the time frame and increase the certainty of getting projects through, and reduces the transaction costs.  In short, we allow developers to cut the cost of carbon projects.

Let’s do some simple math – carbon projects burn 1-3% per month in value, and take 2 to 4 years to get through to the first check.  Small mistakes can costs a fortune, and once you get to the monitoring and verification cycle, every day to issuance is lost cash.

And worse, carbon projects are multiparty and global by nature.  Every project involves people in multiple continents, 5 to 10 organizations, and across lots and lots of time zones.  If they each work on their own IT platforms which don’t communicate electronically (and none of them do), it’s no wonder the costs blow out.

Here’s how it works.  Carbonflow’s eRecord maintains everything known about the project, all documents, emails, data in a single electronic record.  Each party, whether it’s an asset owner, developer, consultant, buyer, Designated Operational Entity (DOE), Designated National Authority (DNA), or the UNFCCC, can access the project and put in and see their part.  As project moves through its lifecycle, the Carbonflow eRecord guides and tracks it step by step.

It operates through web and email, and sits “in the cloud”, and since everything in carbon is global, you are able to take it with you.  We then add “carbon smarts” to manage the process through validation, monitoring and verification, and roll it all up so you can see your whole portfolio at once
And of course, the software reports virtually everything that happens with the project back to you.

I believe if you’ve got 1 project or 115 projects ranging in stage from PINs to waiting on issuance, you should know exactly where everyone of your projects is, what needs to be done, and who needs to do it, at all times, whether it’s with your analyst, a pending approval by your DOE or the DNA, or waiting on a consultant report.

Imagine being able to see the status of very project you’re involved in at all times, see its performance, and click through and find every document or data item, who did it and what needs to be done next.  Carbonflow allows you to complete all that before breakfast.

COD: Does Carbonflow feature any tools to assist project developers build credibility for the compliance or voluntary market?

Neal: Absolutely.  It’s called transparency.  The only way to build credibility is to enable trust.  Similar to the way eBay blew open the online auction market with their user feedback system enabling trust, Carbonflow’s eRecord for the project enables everyone to know, when a project comes out of Carbonflow, the data is there, and the speed is there.

COD: Carbonflow recently launched a new tool, CarbonCompare(tm), which offers a large database of carbon projects using publicly available project information from UNFCCC. How do you see this tool being used?

Neal: As a corollary to the eRecord, I think everything in business works better if it’s benchmarked.  The carbon world has been using very basic benchmarks, like project performance rate.  That’s great, but it’s just the tip of the iceberg.  We take data publicly from the top CDM data analysts in the world at UNEP-Risoe and IGES who work off of UNFCCC data, plus any data you want to put in adding analysis from our own experts, and run it through our Carbon Compare engine. Pretty much Carbon Compare will let you build a series of comps, and tell you the minimum, mean, maximum and standard deviation and comparison for your project and that compute comparative stats for any variable in those data sets, plus a range of ratios that we calculate.  And it will let you take the answers and transfer the reports to excel. In many cases Carbon Compare will link directly to the underlying documents.

For example, if you are looking at a hydro project located in China and trying to assess its likelihood of meeting additionality tests, Carbon Compare can tell you in seconds whether the IRR (or a whole range of variables) you’re using is within the norm for registered projects of that type, and give you links to the PDDs and analysis spreadsheets for recently registered projects to compare it to.

As far as I’m concerned, both for very granular benchmarking and prediction of where your portfolio is in monitoring, to catching mistakes and evaluating the likelihood of additionality issues, to due diligence for a buyer, this is a must have.  We designed it with input from the Climate Change Directors and Technical Directors of the top DOEs, basically working backwards from what they’d want to see to get the validation or verification job done faster.

COD: Who would use CarbonCompare?

Neal: Pretty much anyone developing, buying, selling, validating, verifying, consulting, thinking about or touching a carbon project.  And it’s free in the beta period.  To date the only tools available have been either very high cost, or simple spreadsheets.  CarbonCompare is web 2.0, running “in the cloud” as a web based application. We’ve already got hundreds of users in the first 45 days of the beta.

COD: Once a project developer has created their carbon credits using Carbonflow, what’s their next step? Does Carbonflow support the marketing and sales side of carbon credits in some way?

Neal: We get asked this a lot.  We’re not brokers, nor are we developers, but we can certainly give you a platform to make the brokerage part easier to execute, and more transparent, just like the development part of carbon.

For example, let’s say you are looking to sell a project or tons off a project that’s in pre-registration.  What are the first questions you’ll get asked, where’s the PDD, where is it in the validation process, who is the DOE, how does it compare to other projects, etc, etc.  All that information already resides in Carbonflow and you can make it available to your customers at the push of a button.  And which future project are you going to contract a higher price per ton for?  The one from the developer that’s all electronic and lets you see status in your email every morning, or the other one?

We do have plans to roll out more functionality to support marketers, buyers, brokers and developers, and have had many discussions on partnering with traders and exchanges.  So watch this space.

COD: In a Sustainable Industries column (06/30/08 “Putting carbon offsets in their place”) you wrote that carbon offsets “drive the carbon out of the economy in the cheapest possible manner.” Yet, carbon offsets continue to receive a good deal of criticism in the media and mainstream seems wary. What’s the bottom line, are carbon offsets a useful tool or not?

Neal: Definitely.  To be clear, fighting climate change takes a range of policies.  Offsets are one weapon in the arsenal. One of the huge hidden dangers of climate change policy is unequal prices of carbon in the economy, which can cause economic collateral damage.  Basically, if my region or industry has a higher price of carbon than other areas, production will flow to that other area, unless I can buy my carbon from that area, which offsets effectively permit, equalizing the price.

In addition, our policies should be catalyzing fast, large, cheap and early action on climate change.  Since cap and trade takes years to get up and running, and years more to enact across all sectors and regions (think China), we need a path to get started, and to keep pressure on the regulated industries.  Offsets, provide an excellent mechanism to mobilize the private sector capital and people to find the biggest and worst offending GHG externalities, and smash them with hammer first.  Cap and trade without offsets does not do that.  One can argue that the biggest areas of concern in Clean Development Mechanism offsets were the massive industrial gas projects in Asia, where some carbon project developers made a ton (no pun intended) of money.  Critics complain that looks like “climate profiteering”.  And there’s some truth to the concerns over good validation.  But in fact, that’s cap and trade working to a “T”.   The largest, most egregious, cheapest to reduce GHG abatements happened first and fast, because of the carbon offsets, even in the markets like China that may be regulated last.  That’s exactly what we want our policy to do.

The other big concern is speed. Without offsets, climate abatement generally would get backended to the end of the early commitment periods.  Offsets drive carbon projects early in the process, and keep the pressure up on carbon regulated companies by enabling immediate and lasting competition to find the lowest cost ton.

I’d argue anyone against offsets either doesn’t understand economics or trade, or is really trying to argue for a high price of carbon – which you and I will pay for.

COD: What will Carbonflow be doing in five years from now?

Neal: Hopefully launching a suite of new products, working on taking the cost of carbon abatement to <$10/ton, and the scale of abatement to billions of tons per year.

Our mission statement is simple:  help cut the cost of carbon abatement and save the world.

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