Animoca Brands invests in NFT carbon offsets

Animoca Brands has just invested in a project that wants to weave tokenized carbon credits into NFTs and GameFi. Can it work?

Crypto venture capital giant Animoca Brands, the primary investor behind The Sandbox and Axie Infinity, reportedly led an early-stage financing round for Meta Carbon, a little-known NFT and GameFi project leveraging carbon credits to combat the climate crisis.

The investment adds to VC’s growing interest in climate-related crypto companies as investors spooked by the current bear market look for novel, long-term use cases for the blockchain technology.

Other recent investments include Allinfra with $6 million raised in a round led by Japanese brokerage firm Nomura, and Flowcarbon, which attracted $38 million in funding from Andreessen Horowitz (a16z), Samsung Next and Invesco, among others.

What are carbon credits?

Tokenized carbon offset credits are by far the most popular climate-related blockchain application, attracting guilt-ridden crypto miners and traders looking to balance their carbon footprint.

Also known as regenerative finance (ReFi), it’s a crowded field, with Toucan, KlimaDAO, SavePlanetEarth, and Moss among the most active players.

Crypto Climate Accord's program, which includes carbon offsets.
Carbon offsets are part of the Crypto Climate Accord's program. Source: Crypto Climate Accord website

The basic idea of carbon credits and the voluntary carbon offset market were developed back in the 1990s. Essentially, the goal is to finance eco-friendly projects, for example forest conservation groups, that mitigate the environmental cost of the greenhouse gasses emitted by the buyer by sequestering the same or a greater amount of carbon elsewhere.

Carbon credit wars

In theory, offsetting mitigates the negative impact of human energy consumption, because at a global scale, it doesn’t matter if carbon dioxide is sequestered near the location where it was emitted, or far from it. Carbon credits are currently used by passenger airlines, Google’s parent company Alphabet, Microsoft, and even governments, including California, European Union member states, and Australia.

Some experts claim that carbon credits are essential to reaching the goal of net zero emissions, which climate scientists agree must be done by 2050 if we are to avert the most catastrophic consequences of climate change.

But carbon offsets have earned a good deal of criticism, too. They’re often based on assumptions that a project will sequester carbon, rather than evidence that it already happened, because the idea is to reduce emissions where they would not have been reduced without the credits.

And assumptions often go awry. Forests burn, local communities block environmental projects, and actual levels of sequestration can differ from forecasts.

Gamifying carbon credits

Carbon credits are easy to tokenize, but Meta Carbon wants to go one step further by integrating them with the NFT space and blockchain gaming experiences.

They operate an NFT marketplace called Carbon Creatures, still in early stages of development, which runs on Polygon, an environmentally-friendly alternative to Ethereum. No details on the gamification component have yet been offered.

Yet gamification might have been the reason Animoca Brands decided to chip in. It’s unclear if Animoca’s primary objective is, as the company’s co-founder Yat Siu said in a statement, to “create a green ecosystem of companies,” or just add to their body of GameFi investments. Animoca did not respond to a request for comment by press time.

According to Meta Carbon, the new funds will be used to drive community engagement and improve transparency by providing proof of impact for “every dollar spent.” Instead of issuing carbon credits themselves, the company partnered with Stand for Trees, a California-based Code REDD+ initiative.

If Meta Carbon does develop a reliable mechanism for ensuring that they're selling verified carbon credits, it could help refute the frequent concern that blockchain-based carbon credits are often sourced from poor quality projects.

But to say that it will have a significant impact on the fight against climate change is at best far-fetched.