BetaCarbon’s blockchain carbon-trading platform rides ‘massive tailwinds’ of change

Sydney-based fintech BetaCarbon this week launched its blockchain-supported carbon trading platform that company founder and CEO Guy Dickinson says is capitalising on ‘massive tailwinds’ driving the sector.

With the implementation of aggressive net zero targets at the government and corporate level, Dickinson says the timing is right to ‘democratise’ an asset class that until now in Australia has been the domain of about 60 institutional investors.

Dickinson, the former Australian and New Zealand head of markets and treasurer for HSBC, has worked with carbon credits for some time during his corporate career. But it was 2021, at the height of the pandemic as he spent six months cloistered in Bowral, that Dickinson took a ‘deep interest’ in the asset class.

“We had recently purchased some reef credits with the Queensland Government which was helping a carbon scheme to help the Great Barrier Reef,” Dickinson tells Business News Australia.

“After investigating how hard it was to access the Australian Carbon Credit Unit (ACCU) market, even as the treasurer of a bank, I realised there was an opportunity there. That’s where it began and then that morphed into a realisation that we had a very limited demand (for carbon credits). That is, the same 60 institutions were trading this asset among themselves. How can you truly price pollution when only 60 institutions are deciding what the value is?

“For me, that’s when it became clear that blockchain could be used to democratise the asset class and give people a voice.”

Over the past four months, ahead of the platform’s launch yesterday, BetaCarbon boasted a growing waiting list of investors keen to explore the merits of carbon trading as an asset.

In that time, Dickinson says some $4 million in BetaCarbon’s Australian Carbon Tokens (BCAUs) were sold to investors on an over-the-counter basis representing about 93 million kilograms of captured carbon.

“The average ticket size was $30,000 and we had a range of people from $10,000 up to $500,000,” says Dickinson.

However, many investors were testing the waters with investments of between $100 and $1,000.

The BetaCarbon platform allows consumers to invest as little as $1 in Australian Carbon Tokens, with each token representing 1kg of CO2 emissions captured or avoided.

BetaCarbon raised $3 million in seed funding last year from several high-profile funds, including Tribeca Investment Partners, Twynam Investments and Tectonic Investment Management to establish the platform. Among the company’s advisors is former ASIC deputy chairman Daniel Crennan. Dickinson is currently pursuing a second round totalling $2.5 million.

BetaCarbon initially buys the carbon credits in the market using its own cash, then uses blockchain to mint the token and to sell it via the platform.

“We are the only token on the market in the Ethereum blockchain that has a regulated credit backing it globally,” says Dickinson.

“The carbon that we buy on behalf of a project gets moved into a custodian, so it gets separated. That’s important because we get third-party assurance work done to make sure the amount of carbon backing the token notionally is secured. That sits in a registry owned by the government. It’s a closed bubble.

“The backing can never leave the bubble and that’s a real safety feature that exists in regulated carbon markets.”

Dickinson is keen for investors to educate themselves about the merits of carbon trading as an asset.

“I don’t want people to rush in; I want them to understand the asset class and what they are getting into,” he says.

“There are only two things you can do with carbon credits. You can own them as an asset class and on-sell them, or you can retire them. The Australian Carbon Token is a way for people to have participation in the price of carbon. If you are a wholesale customer, we can get wholesale customers to buy the Australian Carbon Tokens, bring them back to BetaCarbon and we can retire those units.”

BetaCarbon has a wholesale Australian Financial Services License (AFSL), allowing it to work with business customers seeking financial services related to carbon credits, including retiring credits for carbon neutral certification.

While most offsetting origination comes from businesses, Dickinson forecasts greater participation by consumers as carbon mitigation strategies intensify.

“The Australian carbon market is maturing quickly as the federal government and the corporate sector alike ratchet up their commitments to decarbonisation,” says Dickinson.

“I saw the writing on the wall before the change of government, but the new government has now really accelerated that whole movement from a timing perspective.

“The price of Australian carbon credits has risen significantly in recent years, as more companies voluntarily seek carbon offsets to reduce their emissions. But still the Australian Carbon Token is priced today at a mere fraction of its European Union and New Zealand equivalents.

“At the end of the day, we have launched a business into what is massive political and environmental tailwinds, global tailwinds.”

Dickinson is also forecasting BetaCarbon’s entry to the sector will help stem volatility in carbon pricing. He sees the ramping up of participants from 60 institutional investors at present to 6000 or more new entrants to the market as essential in smoothing out volatility by injecting more demand and supply to a market that is currently constrained.

“We are all influenced by greenhouses gasses, in my view, and it takes a little portion of everyone standing up and saying they want to have an influence on the price of pollution. That’s really what the Australian Carbon Token is trying to do.

“As the demand for Australian Carbon Tokens increases, so too will the demand for Australian carbon credits, as BetaCarbon purchases ACCUs to mint new tokens. The more demand for carbon credits, the higher the need for new green projects for businesses to offset.”