What is a commodity warrant?

A Commodity Warrant is a Bearer Document that allows the holder to demand the actual asset listed in that document to be released to the bearer. The 'asset' would normally be, for example, a fixed tonnage of copper, coffee or sugar that is held by the authorized warehouse keeper. In NAGEX's instance, the 'asset' is a specific Carbon Credit that will be securely digitized onto the Blockchain and this Carbon Warrant Passport "CWP" will be the asset traded and priced on the North American Global Emissions Exchange "NAGEX".

What is a Carbon Warrant Passport (CWP)?

A CWP is simply the validated and immutable storage of the commodity warrant on the blockchain. The immutable nature of the CWP gives buyers confidence they are buying the real asset behind it and that it hasn't been double spent.

Aren't carbon emissions a negative externality? Why would businesses purchase a CWP?

The production of CO2 is generally referred to as an emission, and an emission is treated by most governments as harmful to the environment and, as such, they impose a penalty on each ton emitted. However, a fractured market has been emerging where a penalty (normally expressed in $'s per ton) is imposed on the producer of such emitted CO2.

In order for any producer to avoid such a penalty, they can arrange for the CO2 to be captured and stored indefinitely. This process is known as Carbon Capture & Sequestration "CCS" with a Carbon Credit being awarded by the government to the producer of that stored CO2, thus avoiding the penalty. These Carbon Credits are, therefore, valuable to all holders in possession of one. In NAGEX's case, these Carbon Credits will be digitized by the NAGEX with those CWPs forming the basis of the trading and pricing mechanism.