'The carbon credit market should not operate like a marketplace, but as a market of expertise.'

Interview with Thaïs Drozdowski, Co-founder & CEO @ Inuk

Carbon credits are often perceived as a greenwashing tool. And this idea lingers because it has repeatedly been revealed that companies have sold phantom carbon credits — credits behind which carbon emissions have not really been avoided.

By listening to how Thaïs Drozdowski, co-founder of Inuk, presents her company and the sector in which it evolves, it quickly becomes clear that Inuk's actions operate on two levels: supporting the companies they work with and improving its own sector. Indeed, Inuk is not short of solutions to address its sector’s challenges: using blockchain to enhance carbon credits’ traceability, supporting a project throughout its entire life cycle, from the moment it is certified, in order to guarantee real transparency, or extending its impact over the long term by financing projects that are already operational and projets that are seeking funding.

In this respect, Inuk perfectly illustrates the model of an impact-driven company: a company with a holistic vision of its activities, and which impact multiplies as its economic performance increases.

Could you introduce yourself, your background and your company Inuk?

I'm a climate economist; I studied economics, public economics and econometrics applied to climate. I spent the first part of my career working for governments or public companies on energy and climate issues. Firstly, I worked for the EDF group on issues relating to the integration of renewable energies, and then for the UK government to finance major decarbonisation projects in South-East Asia. I took a strong interest in the carbon market as projects I was managing in this context were either covered by the carbon market or subject to carbon credits. I realised that this market was facing numerous challenges, which prompted me to set up Inuk just over five years ago: to tackle these challenges.

To what extent did your concern for environmental impact motivate the creation of your company? 

Working with governments and public companies made me realise that even when you're in a strong position and with important funding capabilities, it’s always difficult to know whether the projects you're dealing with are actually achieving their objectives. And even in that position, I noticed the carbon contribution market lacked transparency. 

At the time, there was also a lot of talk about blockchain and cryptocurrency, but not much about traceability. I realised that these tech solutions were opportunities to provide greater transparency and traceability, and thus ensure that capital was going to the right projects.

I also had a sense of urgency – which I still have. I knew we had to take urgent action against climate change. Working with governments, I was forced to recognise that there is a certain slowness inherent to public administrations, while the private sector is more agile. It can go further, faster and can test solutions.

What is Inuk’s core mission?

Inuk is actually a purpose-driven company (a French legal status designating companies that have defined a social or environmental purpose in their statutes). Our mission is twofold. The first aspect is to create new ways of accelerating the low-carbon transition. It intentionally goes beyond the concept of carbon credits, because we are convinced that carbon credits are a carbon finance tool. A tool that can eventually be used by companies, local authorities and even individuals. This tool must be reliable, which is why we are committed to ensuring that for every credit purchased via Inuk, CO₂ has actually been avoided.

The second aspect of our mission is to help companies take effective action on their own carbon footprint. We have thus developed a skill set in carbon measurement, using technology and artificial intelligence.

How would you define carbon contribution?

Carbon contribution is the act of financing projects that will enable CO₂ to be avoided or sequestered, as part of a decarbonisation strategy. Beyond this simple definition, there are two things that need to be understood: the first is that the carbon contribution actually refers to the concept of carbon neutrality, and that the objective of carbon neutrality only makes sense on a planetary scale. The second is that a carbon credit can not replace efforts to measure and reduce emissions. 

How does Inuk’s carbon contribution solution work and how are avoided CO₂ emissions calculated?

Our first mission is to select relevant projects and work with project developers to add value to the CO₂ emissions avoided thanks to them. Today, 80% of greenhouse gas emissions are linked to the use of fossil fuels, which is why we have chosen to focus on this issue. Once the projects have been selected, we set up a partnership with the project developer, who then grants us access to the activity data (most of the time, we are directly connected to their meter, and therefore have real-time access to data). This data enables us to calculate avoided emissions.

Our second mission is to provide advice and support to companies wishing to purchase carbon credits. We do more than just sell carbon credits; we tailor our services to the level of maturity of our customers' decarbonisation strategy. For customers that are at an early stage of their decarbonisation strategy, we establish their carbon emissions profile based on data science tools developed in-house. Based on their profile, we develop a customised decarbonisation plan, presenting a list of actions to develop what we call ‘decarbonised revenues’. For some companies, these actions can imply a big shift in their activities. If we caricature a little, one of the targets might be for an activity which represents 0.5% today, to represent 80% tomorrow. 

The solutions may differ from a client to another, depending on their geography or activities. But our expertise lies in our ability to select the right projects for them. For instance, for public works companies, we offer low-carbon cement projects so that they can decarbonise their value chain.

How do you address the issues of transparency and traceability of carbon credits?

At Inuk, we only work with a few projects, enabling us to offer our customers carbon credits that are 100% reliable. All the project owners are located in Europe and exclusively working with us. They are  carefully selected based on their independence, and technical (we need to be able to access reliable data enabling us to verify that CO₂ has indeed been avoided) and governance (the carbon credit contribution must be at the heart of the project's business model) criteria. We also look at all externalities, whether negative or positive – as to not fund a solar thermal project that aims to raze a primary forest to install solar panels, for instance.

As for the question of traceability, we use technological tools, namely blockchain. Based on the data collected from project sponsors (i.e. the conversion into CO₂ avoided), we issue a token, registering this initial data in the blockchain. As soon as this token is purchased by one of our customers, it is destroyed so that no-one can resell, reuse or duplicate it. This solution prevents fraudulent duplication of carbon certificates. Also, each time a token is purchased (and therefore destroyed), a new token is generated to fund a future project, enabling it to emerge more quickly. In this way, we aim to leverage our impact and continue to fund solutions that have a positive impact.

What are the main challenges the carbon market needs to address? How could the sector maximise its impact? 

The main challenges are linked to how the carbon credit market works. Currently, project developers must certify their own projects, which involves paying for expensive certification, reporting and using intermediaries to market their carbon credits. All these steps leave little value for the project developers, and some projects fail to emerge because of these. This is why we focus on verifying, certifying, and tracking the credits without charging project developers, allowing us to source quality projects.

In fact, many scandals have arisen from this certification issue. Certifiers, paid by project developers, have an incentive to certify as many projects as possible, leading to the certification of carbon credits with no real value — ‘phantom carbon credits’. At Inuk, we address this issue by funding project certification and carbon credit commercialisation ourselves, and by requiring project developers to work exclusively with us for several years, ensuring a strong commitment from them.

I would say that the market needs strict guidelines to prevent the creation of new phantom credits while allowing projects in need of funding to develop. Moreover, the market should not operate like a marketplace. It should be a market of expertise, with each company specialising in a particular area rather than attempting to cover multiple fields like agroforestry, agroenergy, human behaviour, or waste heat recovery. Clients should thoroughly investigate and understand the projects to be able to choose the right one for their company's activities, value chain, customers, and climate maturity.