COP28: Coalition launches “world’s first” blockchain-based Voluntary Recycling Credits initiative

11 Dec 2023 --- A public-private coalition launched the Voluntary Recycling Credits (VRC) initiative, a set of standardized rules and processes to enable institutions to compensate their solid waste footprint through a transparent ecosystem, at COP28.

The VRC initiative mechanism involves trading “recycling credits” on a blockchain-based marketplace, ensuring auditable and secure transactions between waste offsetters and recycling companies.

The initiative aims to boost the collection and recycling of solid materials, furthering the management of all types of waste. The full-scale platform is set to be developed and officially launched in 2024.

Dominic Williams, founder and chief scientist at the Dfinity Foundation, tells Packaging Insights that the vision for VRC is for it to be implemented beyond waste management.

“It would involve promoting the implementation of extended producer responsibility (EPR) programs and reevaluating production processes to lessen reliance on raw materials, substituting them with recycled alternatives. Consequently, this approach minimizes landfill waste, aligning with the broader goals of the Paris Agreement. We are also examining the possibility of adding carbon credits.”

The initiative, led by Roland Berger and BEEAH Group, was launched in collaboration with Dfinity Foundation and the International Solid Waste Association, demonstrating the world’s first global incentive system to counteract the solid waste footprint. It is supported by the UAE Ministry of Climate Change & Environment and the COP28 Presidency.

Web3 technology
The Dfinity Foundation, the technology partner for this initiative, will provide a solution built on the Internet Computer blockchain network that will “instill confidence, credibility and scalability into the project,” ensuring its viability as a global standard for recycling incentive, according to the company.

The rules of the VRC software cannot be subverted, so its community can trust what they see, says Williams. Blockchain technology is a tamperproof way of hosting data and computations that only gets updated according to the rules. “For example, the only way to transfer a Bitcoin is to use the private key associated with a Bitcoin account. There is no other way of making the transfer, and it is not necessary to trust anyone,” explains Williams.

The Internet Computer is a public network, representing an advanced blockchain technology evolution. While traditional blockchains can only host tokens and little bits of data and compute, the Internet Computer acts as an unstoppable and tamperproof public cloud service.

“The VRC exchange is built on the Internet Computer in its entirety. This means that effectively, the user experience, the software, its data and computation runs fully on the blockchain — something that only the Internet Computer can support today. The rules of the VRC software cannot be subverted, and there are no backdoors, so its community can trust what they see there,” asserts Williams.

Purchasing recycling credits
The VRC allows waste recyclers to mint new recycling credits. This involves uploading evidence to the VRC, which is then associated with the credits recyclers have created. Randomized auditing ensures that cheating is a losing game for minters, who will be expelled and face legal consequences if they are found out.

The mechanism allows those with ERP requirements to purchase credits to satisfy their requirements, explains Williams. “For example, a corporation required to recycle plastic associated with products they produce can purchase recycling credits rather than recycle plastic themselves.”

The VRC creates an international incentive to recycle waste since the recyclers can mint credits, which are purchased, thereby financing recycling.

Those purchasing credits do so within an environment where the minting and purchase of recycling credits is tamper proof and transparent. Once they have purchased a credit, the VRC mints a certificate for them, which they can use for ERP and other purposes.

Creating a trustless system VRC aims to boost the collection and recycling of solid materials, furthering the management of all types of waste.
Since everything is on the blockchain, all customers can be sure of what they see and what activity has occurred. The only possible way to create a certificate is by purchasing credits. The VRC ensures and proves that credits are not sold more than once and makes associated evidence and their purchase auditable by any party.

Creating this trustless system enables collaboration among different stakeholders in the waste management cycle, such as producers, consumers, recyclers and regulators, to interact and trade with each other. This creates new opportunities and solutions for waste management and environmental protection.

Every institution seeking registration within the VRC Initiative to trade recycling credits (offsetters, recyclers) will be subject to a Know Your Customer evaluation, necessitating the submission of a comprehensive list of financial, legal and operational documentation, a spokesperson at global consultancy firm, Roland Berger, tells Packaging Insights.

“In addition, stakeholders shall ensure strict adherence to the specific regulations and requisites articulated within the VRC Standard. Only certified entities are allowed to operate under the scope of the VRC Initiative.”

Changing the recycling industry
Once registered, “recyclers” can request credits based on an additional amount of material that they recycle on top of their baselined operations. “The credit request is then audited, and all required data are assessed to ensure the credit request is compliant with all requisites of the VRC Standard. Once the audit is completed, credits are issued from the VRC and made available to the recycler to be listed on the marketplace,” explains the Roland Berger spokesperson.

These recycling credits can be purchased by committed companies “offsetters” who intend to contribute to the recycling process, to compensate for the products issued on the market and the correlated pollution. The credit acts as a token that reflects the value of the recycling process, and its purchase allows offsetters to sponsor the process financially.

“Each compensation activity is then concluded by the emission of a certificate which can be included in the ESG reports of the offsetting institutions.”

“The VRC Initiative strives to bring long-lasting and effective changes to the recycling industry, and this goal can be met only through an effective collaboration of the whole value chain. It is a voluntary initiative aimed at facilitating and accelerating the adoption of EPR schemes at the global level, and bringing transparency and accessibility of offset activities for physical material pollution,” concludes the spokesperson.

By Natalie Schwertheim

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