Carbon credits purchased in the voluntary carbon market allow
unavoidable emissions, such as international flights for essential
travel, to be offset by an equivalent climate benefit, such as
avoiding emissions from tropical deforestation. However, many
concerns regarding the credibility of these offsetting claims have
been raised. Moreover, the credit market is manual, therefore
inefficient and unscalable, and non-fungible, therefore illiquid.
To address these issues, we propose an efficient digital
methodology that combines remote sensing data, modern econometric
techniques, and on-chain certification and trading to create a new
digital carbon asset (the PACT stablecoin) against which carbon
offsetting claims can be transparently verified. PACT stablecoins
are produced as outputs from a reproducible computational pipeline
for estimating the climate benefits of carbon offset projects that
not only quantifies the CO2 emissions involved, but also allows for
similar credits to be pooled based on their co-benefits such as
biodiversity and jurisdictional attributes, increasing liquidity
through fungibility within pools. We implement and evaluate the
PACT carbon stablecoin on the Tezos blockchain, which is designed
to facilitate low-cost transactions while minimizing environmental
impact. Our implementation includes a contract for a registry for
tracking issuance, ownership, and retirement of credits, and a
custodian contract to bridge on-chain and off-chain transactions.
Our work brings scale and trust to the voluntary carbon market by
providing a transparent, scalable, and efficient framework for
high-integrity carbon credit transactions.