Green coin, the currency that can make the carbon market credible

Widespread activities such as carbon farming (agricultural and land management practices designed to capture and store carbon dioxide from the atmosphere in soil and vegetation) or afforestation (the process of creating new forests in areas that were not historically forested) contribute significantly to CO₂ absorption, but they remain difficult to measure and therefore to value economically. Meanwhile, the carbon credit market largely relies on ex ante estimates, with limited verification, exposing it to errors, abuses, and loss of trust.

A study by Mariano Massimiliano Croce, Nicolas Guinez, Alejandra Inzunza Méndez, Thien Nguyen, and Claudio Tebaldi proposes overcoming this problem through green coins, digital units issued only when a quantity of carbon dioxide has actually been absorbed and verified. Relying only on measured data, green coins promise to transform CO₂ from an estimated quantity into a fully tradable commodity.

Measuring and integrating into the financial market

If a large share of the carbon credit market is based on estimates and forecasting models, with limited verification capacity, it is reasonable to ask whether it is possible to build a system in which sustainability is measured objectively, continuously, and in a non-manipulable way. Moreover, can these data be transformed into liquid and accessible financial instruments?

The problem is both technical and economic: existing markets combine public regulation (such as the European ETS) and private credits, often opaque and difficult to verify. This opacity generates distortions: firms have incentives to claim offsets that are not fully real, while investors and banks struggle to distinguish between genuinely sustainable activities and greenwashing.

The research, therefore, asks whether it is possible to build an infrastructure that makes offsets not only verifiable but also immediately integrable into financial markets.

Monetizing actual offsets

The researchers start from an existing but underused technology: sensors capable of measuring the net exchange of CO₂ between soil and atmosphere. These devices, already widespread (around 1,500 worldwide), make it possible to detect in real time the actual amount of carbon absorbed. The idea is to install them, for example, on farms and use the collected data to issue green coins: each coin represents a quantity of CO₂ that has been effectively absorbed and verified.

This is the key leap forward. In traditional models, carbon credits are promises: tons of CO₂ that are expected to be offset. In the proposed system, instead, green coins are generated only after the actual absorption has been verified. This makes them comparable to a measured commodity, such as electricity, and therefore tradable with confidence.

The system provides for several levels of verification. Data must comply with physical laws (for example those related to atmospheric flows), automatically checked by algorithms; any anomalies block the issuance of credits. In addition, the information can be recorded on a blockchain, making each transaction transparent and verifiable by third parties.

In the theoretical model developed by the researchers, this process is managed by a sort of “green central bank” (Green Coin Central Bank), which oversees the platform and can intervene in the market by buying or selling green coins to stabilize their price, similarly to what central banks do with financial assets.

The result is a system in which:

• the supply of green coins reflects real-time actual offsets;
• firms can purchase reliable credits to meet environmental constraints;
• even small operators such as farmers can immediately monetize their sustainable activities.

From an economic perspective, simulations show that a system based on green coins can drastically reduce the inefficiencies of current markets, almost entirely recovering the welfare losses generated by existing systems.

A better future

In this way, managers could rely on emission offset instruments that are truly credible and integrable into financial processes and risk management. For policymakers, the project offers a technological foundation to standardize carbon markets, reducing distortions and increasing the credibility of climate policies.

If CO₂ becomes a measurable and tradable currency, a global market could emerge in which capital and incentives flow toward the most efficient activities in reducing emissions.

Mariano Massimiliano Croce, Nicolas Guinez, Alejandra Inzunza Méndez, Thien Nguyen and Claudio Tebaldi, Green Coins (February 15, 2025). Available at SSRN. DOI: http://dx.doi.org/10.2139/ssrn.5139356.