Senken has launched the world’s first public sale of carbon forward tokens

Editor’s note, updated 1 January 2024:

When we piloted carbon forwards in 2023, we tested pre-funding mechanisms and referenced on-chain tools. That work informed how we operate today. Senken now concentrates on end-to-end procurement of high-quality, audit-ready carbon credits for enterprises: aligning portfolio strategy with targets, running structured due diligence, executing purchases and retirements, and delivering evidence for internal reviews and external disclosures. We do not operate a blockchain or on-chain exchange, do not tokenize credits, and our product does not rely on blockchain. The article remains as historical context; for our current scope, please visit the About/Press page.

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We are pleased to announce the launch of a brand new financial instrument, carbon forwards! Carbon forwards allow pre-funding of climate projects that are still in development for a reduced price. It helps organizations to hedge their carbon emissions and manage their exposure to carbon prices. We are initiating a pilot with Vlinder, who will provide 500 tCO2 of forward carbon credits to the senken marketplace. In the future, Toucan will provide infrastructure for the process. The forward carbon credits will enable funding of the reforestation of mangrove in Kenya.

As the world continues to focus on reducing carbon emissions and combating climate change, Carbon Forwards provide a valuable tool for businesses looking to mitigate their environmental impact and future-proof their operations. In this article you’ll learn more about the pilot, the benefits and risks of carbon forwards and how you can participate.

Get your hands on a limited amount of Blue carbon and pre-fund a high impact blue carbon project.

Available from now via the senken marketplace: 500 forward blue carbon credits provided by Vlinder Climate (vintage 2025). Papariko, The Vlinder Kenya Blue Carbon project is a high impact Verra-certified restoration effort with an emission removal capacity of 726,761 tons which aims to revitalize 1500 hectares of severely degraded mangroves in Kenya.

The Guardian called blue carbon a “hidden CO2 sink that could save the planet”. Blue carbon credits refer to credits that are generated through the protection, restoration, or enhancement of coastal and marine ecosystems, such as mangroves, seagrasses, and salt marshes. Mangroves, along with other coastal wetlands, are highly effective at absorbing carbon dioxide from the atmosphere and storing it in their roots, branches, and the sediment around them. This process, known as carbon sequestration, allows these ecosystems to act as “carbon sinks,” which means that they are able to absorb and store large amounts of carbon. In fact, mangroves and other coastal wetlands can store up to 5 times more carbon than forests.

The credit type is sought after, as it effectively addresses climate change while also providing a range of additional benefits. Mangroves, in particular, serve as a natural shield against tsunamis and floods, protects biodiversity by providing a habitat for a diverse array of marine life. They can also generate new revenue streams for local communities through activities such as eco-tourism, making them popular with both environmental and social investors.

What are carbon forwards and what are its benefits and risks?

Carbon forward contracts are a way for investors to pre-fund climate action. They’re bespoke agreements between investors and project developers, where the project developer commits to delivering carbon credits to the buyer at a pre-defined price and time in the future. The funds from the issuance of these forwards then help project developers cover their overhead costs. In return, investors can access future high-quality supply at a discount from the market rates of comparable projects.

Forwards are similar to futures, both allow hedging against future price movements of a financial asset, but with forwards one purchases a future issuance of credits (e.g. 2025 credits), while a future is the purchase of any financial asset, at a predetermined price for delivery at a specified time in the future. The asset could even be an old issuance (e.g. 2017 credit).

Since you are purchasing a future issuance of credits when buying carbon forwards, you can not immediately use them to claim carbon offsets. The purchased forwards can be resold at any moment in time, but retirement is possible after the delivery date of the credits. In the case of the Vlinder Kenya Blue carbon project, the forward tokens can be exchanged for their spot counterparts after 2025 and can then be retired.

For impact leaders and financial analysts, carbon forwards can be a valuable tool to proactively address their environmental impact and plan for the future. Whether you are budgeting voluntary climate action or managing the cost of complying with carbon regulations, keep reading to find out if carbon forwards fits your carbon risk management strategy.

There are several benefits to using carbon forwards:

• Risk management: Carbon forwards allow companies to manage the risk associated with fluctuations in the price of carbon. This can help companies to budget and plan for the cost of complying with carbon regulations, which could be especially important for companies that heavily rely on fossil fuels.
• Price certainty: Locking in a price for carbon allowances at a future date, can provide price certainty and help companies to avoid the volatility of the carbon market. By locking in a price for carbon allowances in advance, companies can reduce the risk of sudden, unexpected price increases. On the other hand, forwards can also provide companies with an opportunity to take advantage of lower carbon prices if they believe that the price of carbon is likely to decline in the future.
• Compliance: By securing a fixed price for carbon allowances in the future, companies can ensure that they have the necessary allowances to cover their emissions and meet their compliance obligations under carbon regulations.
• Planning: Companies can utilize carbon forwards to plan for the future and make informed decisions about their operations and investments. By having a clear understanding of future carbon costs, companies can make strategic decisions about how to reduce their emissions and adapt to a low-carbon economy.
• Brand image: Finally, carbon forwards can help companies to demonstrate their commitment to reducing their carbon footprint and mitigating the impact of their operations on the environment. It provides a way for organizations to take voluntary climate action, while also managing their financial risks and planning for the future.

The risks of carbon forwards

Overall, while carbon forwards allow for pre-funding of climate projects, they also come with a number of risks that companies and investors should carefully consider before using them.

• Market risk: The price of carbon allowances can fluctuate significantly, which can impact the value of a carbon forward. Companies may face losses if the price of carbon increases significantly after they have locked in a lower price through a carbon forward.
• Regulatory risk: Carbon regulations can change over time, which can impact the demand for carbon allowances and the price of carbon. Companies may face losses if the regulations change in a way that reduces the value of their carbon allowances.
• Liquidity risk: The carbon market is relatively small and illiquid, which can make it difficult for companies to buy or sell large quantities of carbon allowances quickly. This can impact the ability of companies to manage their carbon risk effectively.
• Credit risk: Carbon forwards may involve the use of credit to facilitate the trade, which can introduce credit risk if the counterparty is unable to meet their financial obligations.
• Technology risk: Like any blockchain-based product, tokenized carbon credits are subject to the risks associated with the underlying technology. This includes the risk of technical errors or security breaches that could compromise the integrity of the blockchain or the carbon credits stored on it.

Forward Contracts — Terms and Conditions

Senken is committed to providing users with access to forward carbon contracts. By purchasing and/or using such contracts, users agree to the following Terms and Conditions.

I. Forward Crediting

These contracts involve the issuing of credits for projected emission reductions by the project developer, which carry an inherent over-issuing risk if the project does not realize its estimated impact. As such, Senken cannot be held responsible for any failures in the delivery of the forward carbon credits.

II. Primary Sales and Resales

At this time, Senken only facilitates the primary sale of forward carbon contracts from project developers straight to the end-users of Senken through its platform and does not yet support the resale of these credits. However, should the functionality of secondary sale become available, these Terms and Conditions will be updated accordingly.

III. Carbon Offset Claims

It is important to note that the retirement of forwards cannot be used to make carbon offset claims. Carbon offset claims can only be made from the retirement of the forward contract’s underlying spot contract, which can be obtained after the specified delivery date.

IV. Vlinder Tokens

Vlinder has developed a technical and legal framework to tokenize the forward carbon curve of early-stage projects. These tokens, known as forward carbon tokens (FCO2) are the digital representation of carbon forward purchase agreements. As soon as the carbon credits are verified, the FCO2 can be swapped for a spot carbon token (TCO2). This spot carbon token can then be retired to claim a carbon removal of 1 tonne of CO2e per token or sold to a third party.

V. Pilot Issuance of Vlinder Kenya Blue Carbon 2025 — FWD-3660–25

This specific forward carbon token (FWD-3660–25) represents the carbon credits from the Vlinder Kenya Blue Carbon Project (VCS 3660) which are expected to be verified in 2026, with the Vintage (the year where the carbon has been removed from the atmosphere) happening in 2025. This project is listed on the Verra Registry and is publicly available in the following link:

Verra Search Page.

Once the carbon credits are verified in 2026, the FWD-3660–25 can be swapped for a spot carbon token (TCO2). It is important to note that, due to their nature as forward carbon contracts, carbon offsets cannot be claimed from the retirement of these forward credits. However, with the spot carbon token, the credits can be retired to claim a carbon removal of 1 tonne per token or sold to a third party.

Senken reserves the right to update these Terms and Conditions at any time to reflect changes in the services provided. It is important for users to stay up to date with any changes to ensure they are aware of the current Terms and Conditions