What is a Methodology Anyway?

Much like a lab experiment you might have done in grade-school science class, a methodology specifies a detailed set of steps and procedures to reproduce a particular result.

A carbon credit methodology will typically specify: - the applicability conditions under which the activity should take place - how to define the boundaries of a project - how to construct an appropriate baseline (i.e. demonstrate that the project activities actually make a difference relative to the status quo) - how to quantify the greenhouse gas emissions avoided or removed by the activity - how to monitor the project to ensure the intended results are realized

Status Quo Methodology Development

The first verified carbon credit system, the Clean Development Mechanism, was created 30 years ago under the Kyoto Protocol. Since then, the governance mechanisms for carbon credit standards have not changed much. In particular, they tend to favor opaque submission and review processes where most activities are carried out by permissioned insiders (e.g. staff at the standards body). While standards typically feature a public comment period in their methodology development process, the submitted comments are not published in full, and it is difficult to tell if issues that were raised have been properly addressed.

Cleaning Up a Decade-Old Mess

During the joint launch of Toucan’s one-way carbon bridge and KlimaDAO, about 700,000 tonnes of carbon credits were bridged from the Verra registry issued under the AM0001 methodology for decomposition of HFC-23 (a byproduct from production of refrigerant).

This particular methodology was originally developed under the CDM, and was carried forward into Verra’s VCS. However, in the wake of the Montreal Protocol, which established mandatory commitments at the national level for preventing emissions of hydroflourocarbons like HFC-23, Verra subsequently ceased issuance of credits under any methodology related to HFC-23.

The HFC-23 methodology was also called into question because of concerns that some project developers were producing more refrigerant than they actually had buyers for, simply to issue carbon credits based on the decomposition of the HFC-23 byproduct.

After the methodology was discontinued by Verra, no steps were taken to address the millions of tonnes of credits which were issued under this methodology and remained on the books of many carbon market participants. This created ambiguity around the value of these assets, and led many in the carbon markets to conveniently forget about their existence. Nonetheless, for years after the deprecation of the methodology, transactions and retirements continued in the shadows of the over-the-counter (OTC) market.

Murphy’s Law for Methodologies

Based on this experience I propose a corollary of Murphy’s Law for carbon credit methodologies:

No methodology is perfect - therefore all methodologies will be criticized.

Criticism and scrutiny is absolutely essential to progress this market and develop the most effective and impactful methodologies. But when that data-driven, scientific criticism is wrapped up into an overly simplistic narrative and shouted from the rootops, it can disrupt the market.

Rather than abandoning a methodology wholesale based on simplistic narratives, the carbon market needs mechanisms to deliberately evolve over time. The goal should be to avoid disrupting project developers midflight, and prevent an inefficient race to the top of the price curve, which distorts the relationship between price, cost and efficiency.

KlimaDAO established a precedent to maintain support for a given methodology until market participants have not utilized that asset for retirement purposes in years. As new supply comes online and KlimaDAO integrates that supply into its ecosystem and treasury, the HFC-23 situation provides an example of progressively improving the carbon markets using public governance.

Reflecting on the HFC-23 situation

In a perfect world, could the KlimaDAO and Toucan teams have known about the HFC-23 credits and designed the BCT pool criteria to prevent them from entering in the first place? Sure. But would this have prevented criticism of other methodologies? Certainly not.

Whether the methodology is HFC-23 decomposition or renewable energy based credits, REDD+ avoided deforestation or improved cookstoves, all methodologies should and will be subject to criticism so they can improve over time. This is a feature of the open, public nature of environmental assets - not a bug.

However, there is a bug in our social infrastructure: careful, data-driven scientific criticism is undermined by academia’s “publish or perish” incentive structure, leading to click-baity journal titles like “Cooking the books”. These articles are then blindly picked up by media outlets, which have an incentive to generate impressions rather than foster nuanced understanding.

In this case of this cookstoves article, the authors misleadingly emphasize the overcrediting associated with the oldest CDM cookstove methodology, which very few new projects are deploying, while their detailed analysis indicates that some of the new cookstove methodologies may actually be issuing fewer credits than tonnes of carbon dioxide actually avoided. Instead of emphasizing that methodologies in this high-impact sector have gradually improved over time, the authors emphasize problems with the oldest version of this methodology.

This dynamic places project developers, the people on the ground doing the work, in a very precarious position: raising capital to take on a multi-year project, while having to constantly worry that the next media takedown will be about the methodology they have adopted. It also leads to hesitation among the end users who retire carbon credits, since they can never be sure when the projects they choose to support will be called into question.

This counterproductive dynamic is a problem of incentive alignment. Public governance mechanisms for environmental markets, such as that pioneered by KlimaDAO in the Digital Carbon Market, can align the incentives of diverse market actors. There is an opportunity to build more robust mechanisms for governing the lifecyle of methodologies, which will ensure the market can move on from particular methodologies through a more deliberate and decisive process.

Signs of Life

As evidence of the need for an end-of-life governance mechanism, several transactions of HFC-23 decomposition credits were recently observed once again. Despite the long controversy, with arguments for and against going back and forth for over a decade, the market has not moved on from this methodology.

Since April of 2023, almost 30,000 tonnes of credits from an HFC-23 project have been retired in the Verra registry:

While these credits are from one of the projects which operated in good faith and did not abuse the system to overissue credits, the fact remains that this methodology has been subjected to extensive criticism, and yet no mechanism was deployed by the incumbent VCM participants to exclude the existing credits issued under this methodology from the market - unlike the DCM, which has used public governance to remove these credits from the market.

Setting a Floor?

There is much fanfare over the recent release of the Core Carbon Principles (CCPs) from the Integrity Council for the Voluntary Carbon Market. The hope is that this initiative will establish a clear floor for what defines a “high quality” carbon project. The ICVCM has only just begun accepting applications on August 1st, 2023 for CCP labeling, with the first labels expected to be given out by end of year. It remains to be seen how the implementation of these unobjectionable, broadly accepted principles will be interpreted by the market, and by the media.

But if Murphy’s Law for Methodologies holds, then there will in future be specific issues raised through the normal process of scientific inquiry and consensus forming that undermines the integrity of a particular methodology. And so the CCPs themselves will need a mechanism for evolving over time to reflect that latest scientific consensus, which means they will likely need a mechanism for revoking a CCP label - an analogous problem to methodology deprecation as explored here.

The Role of Public Governance

Unlike the methodology approval or CCP label application process, it is critical that the end-of-life process for methodologies is public. Various stakeholders, from end-users to traders to project developers and carbon experts, must align their incentives through a deliberate governance process to help the market move on. The mud-slinging which has characterized discussions around specific methodologies to date undermines public confidence in the fundamental premise of environmental markets, which doesn’t help any of the market participants, nor does it lead to scalable, high-integrity climate action.

Token-based governance, as used by KlimaDAO’s community to destroy the HFC-23 credits present in the DCM, is by no means perfect. There are a variety of problems to be solved, such as mitigating the role of whales and increasing community engagement, but it does demonstrate what is possible when incentives are aligned.

Greetings

As my pseudonym gives away, I’m a philosopher at heart. I find stoic teachings very relevant given the turbulent times we’re living through - though I’d hardly call myself a hardcore capital-S Stoic.

Impending Doom; Great Expectations

Growing up in Florida, the looming impact of rising sea levels and climate instability on the place where I grew up was evident to me from a young age.

My family always said they expected me to do something great, and I love learning, so school always came easily to me. But I had no idea how I would know what great labor I should take on, and though I thought climate action a worthy candidate, the path forward was not clear.

Later on, in college, I took a class on the Philosphical Problems of Climate Change. That course made it clear to me that ultimately climate change is a coordination game, but that incentives are not aligned for long term climate stability to in our status quo political and economic systems.

In particular, at least in the United States, politicians are only elected for 2-6 year terms - but climate change is a decadal process that requires long-term planning to manage. So for over a decade I felt powerless to contribute to the global coordination problem that is climate change - I’m too pragmatic for activism like protests and marches, but I’m not a typical engineer, and many sustainabiltiy companies I had looked at previously were looking for experience I didn’t have.

Humble Beginnings in Academia

My academic background is in astrophysics and philosophy. I had the priveledge of doing research at Santa Fe Institute, where I connected with world-class transdisciplinary thinkers - and also realized the fundamental challenge I would face were I to continue in my academic career. Given the large number of PhDs being minted, and the small number of tenure-track positions available, the odds of success in academia struck me as quite unfavorable. Despite concerted effort to gain research experience during my undergrad to become a desirable PhD applicant, I did not succeed in publishing any papers before I graduated.

From my earliest exposure to philosophy, I’ve been very interested in epistemology - especially philosophy of science. How do scientific communities come to communal understanding of natural phenomena over time? How does that consensus understanding among experts come to be disseminated and integrated into the worldview of ordinary people?

So naturally when I began to pursue academic research of my own, I was drawn to verifying (or rather, in the spirit of Popper, falsifying) prominent theories in a particular niche. However, because I was comparing theoretical predictions with real-world data - and it turns out many theories in niche subfields have not been rigorously checked against data and often don’t stand up well - both my astro research and my research at SFI resulted in negative results.

My mentors and advisors always told me that negative results were not publishable, which I found immensely frustrating. How would other scientists know that this theory struggles to accurately model real data? Every researcher who tried to use this model to predict the behavior of real systems would find it doesn’t quite work, but without a paper rigorously documenting the inaccuracies that knowledge would never be integrated into the consensus understanding.

Still discouraged by these early experiences in academia, I’m keenly interested in the nascent DeSci space, as it may just offer solutions to some of academia’s problems, such as irreproducibility and gatekeeping by incumbent rent-seekers like journal publishers.

Learning to Operate in Organizations

Since school, I’ve been broadening out into an E-shaped person. Between the programming experience I picked up analyzing telescope images and working with genomic data in my research, combined with the critical thinking and problem solving skills from philosophy, made me very well suited to work in the emerging field of data science. I struggled a bit initially trying to get management consulting jobs with a data focus so I could work across a few different industries, but eventually I found a boutique data-focused consulting firm that would take me on.

Working inside of giant corporations as a consultant was a highly educating experience. While many view corporations as faceless, nameless behemoths that act with a unified heartless will, I rapidly understood how ossified and uncoordinated most corporations are internally, which explains how ordinary people “just trying to do their job” could be complicit in such horrendous decision-making.

After being pushed into management without insufficient resources and only 2 years of experience, it rapidly became clear to me I would not be able to grow and mature surrounded by people less experienced than me and led by men 30 years my senior who had no background in the technical work they were directing us to carry out.

So I left to find a software shop where my nascent data engineering and DevOps skillset would be nurtured and I could grow into a mature individual contributor in a technical organization. While I considered an offer from a crypto firm to lead the team building their infrastructure, this seemed like too much responsibility given my limited experience, so I settled into a mid-level software engineering job at a mid-stage AdTech startup building data pipelines and cloud infrastructure. The systems I built analyzed data from social media platforms to help advertisers make better decisions about what type of content to support with their ad spend, so they could avoid supporting content that might be harmful or damage their brand, as well as target content that would be likely to have viewers from their target audience.

Leaving the Ordinary World Behind

Back in 2016 or so I took a Coursera course about Bitcoin and distributed ledger technology, and it mentioned smart contracts briefly for insurance and real estate, but I didn’t see any of that actually being built at the time. Ethereum had just launched, and while it captured my imagination, it seemed more like a science fair project than a planetary-scale compute and settlement layer - so I remained a crypto-skeptic and moved on (for now).

In late 2020 I started learning more about crypto again at the behest of my neighbor - who had been participating in DeFi Summer. I fell down the rabbit hole, finally seeing real applications use smart contracts for basic financial use-cases like borrowing-and-lending (Aave) or decentralized swaps (Uniswap). I became a regular Bankless listener and started playing around with DeFi applications.

Documenting My Journey

For the past year or so, my main gig has been Core Contributor at KlimaDAO, where I focus on data, strategy and governance. I’m also humbled to represent the DAO publicly by speaking at conferences, appearing on podcasts and speaking with media.

It’s been a joy to develop my public speaking skills sharing about a movement that I’m so passionate about, and begin my journey as a leader in the space as part of a community that I came up through organically, from a quiet observer in Discord, to a moderator, to building bots and dashboards, and finally stepping up to become a Core contributor.

After having several people ask me to document my journey and share insights I’ve gained along the way, I created this blog to serve as a public journal.

While I will carefully maintain the consistency of which identity is tied to which project, I will use this blog as a place to make observations from my unique perspective as a whole person - which may occassionally blur the line between my personas. More on my thoughts about pseudonymity and identity to come.