Decoding the carbon credit market: Q&A with URECA’s Orchlon Enkhtsetseg

The carbon credit market can play an important role in achieving environmental sustainability goals. However, despite its potential, it is riddled with complexities and challenges, especially for startups trying to establish themselves.

In this intricate landscape, URECA, a Mongolian startup, has developed a platform for retail level investment of carbon credits to make significant advancements in the carbon credit industry. Leveraging a combination of internet-of-things, machine learning, and blockchain technology, URECA’s platform facilitates global access to carbon credits and enables their trustworthy and transparent trading.

As the carbon credit market continues to evolve, KrASIA had the privilege of interviewing Orchlon Enkhtsetseg, the founder and CEO of URECA. We delved into the current state of the market, the challenges faced by companies in this field, and gleaned valuable insights for those aiming to navigate this intricate yet promising terrain.

The following interview has been edited and consolidated for brevity and clarity.

KrASIA (KR): What is the problem that URECA is trying to solve?

Orchlon Enkhtsetseg (OE): The key problem that we’re trying to solve is to make carbon financing accessible to developers and people that need it the most. Carbon financing could be a great instrument to direct funds where they are needed the most, to accelerate the fight against climate change.

The carbon financing framework was established in 1997 under the Kyoto Protocol, so it’s been around for a long time. Unfortunately, we feel that it hasn’t had the potential to unlock green financing and marshal the funds to where they need to go. Due to the lack of access to and transparency as well as understanding of this financing system, developers face barriers of entry when attempting to tap into this industry, especially small, community-based developers that are operating in developing countries.

KR: How does URECA differentiate itself from competitors?

OE: We are really focused on the project developers. There’s a thorough due diligence process that we undertake to come up with a shortlist of the best projects, and then we reach out to them. From the moment we initiate contact, it’s a three-month process to ensure that these project developers can deliver impact in terms of CO2 reductions and community co-benefits.

Once onboarded, we provide these project developers with tools to help them understand the overall credit markets and where they fit in, as well as tools to narrate their stories better, which I think is important.

The number one priority is the project developer and that’s been something that we haven’t really seen up to up until now. Everyone has been focused on the buyers, whereas for us, we feel that the most important stakeholder in the entire ecosystem is the people on the ground who are making the CO2 reductions, avoidance mitigations, and building and empowering the communities in which they operate.

Our mantra is, if you’re going to work on offsetting, be proud about it, and be transparent about how it’s being done and where the offsets are sourced from. One of the core things that we are trying to do is to make offsetting a more transparent process. For example, all employees of organizational buyers are granted access to the URECA platform and can use funds from a prepaid wallet to invest in projects on behalf of the company. It’s a transparent and empowering process.

KR: Does URECA work with a verifier or are you doing the verification based on your own standards?

OE: Based on the projects that we have onboarded so far, they are already certified either by Verra, Gold Standard or their respective national registries, such as the Spanish National Registry. We also have our own suite of digital verification technology.

We ran a pilot with The Asia Foundation to transition households away from coal use to leverage solar panels. We can continuously monitor and verify the fact that they are no longer burning coal and the energy that they are using comes from renewable sources. We’re hoping to expand that to generate up to five million credits per annum, from this program alone.

Also, we’re starting a pilot with the foundation on grassland soil carbon sequestration over the summer. We hope to use a mix of drones, satellite imagery, and IoT sensors to continuously verify soil carbon sequestration for pasture lands and grasslands.

KR: What is an example of a project making a positive impact in a community?

OE: The pilot project serves as an example. One of our participants is a single mother of three kids. She used to wake up twice a night to add new coal to the stove, ensuring the home isn’t frigid cold when her kids woke up. After transitioning to a solar panel system, she can now sleep in with her kids. They wake up at 8:00 a.m. without the risk of burns, and experience less indoor air pollution.

The other benefit that we didn’t expect is water usage reduction. With less indoor air pollution, their clothes and bedsheets require less maintenance as they don’t become as dirty as before. On average, the solar panel system reduces the family’s emissions by 15 tonnes of CO2, and the mother can now afford to enroll her kids in kindergarten, thanks to the income generated from carbon credits.

KR: Can you explain how URECA’s monitoring and reporting system works?

OE: I’ll break it down into three parts. Firstly, we work with partners such as Sylvera and BeZero Carbon to rate and assess project developers. We enter into legally binding agreements with selected developers for them to provide a batch of their credits to URECA on an exclusive basis, to prevent double selling.

To provide additional layers of verification, we’re exploring whether we can develop do-it-yourself drone kits that we can ship out to project developers at a low cost. If they could assemble these drones themselves and conduct flyovers, we will be able to perform third-party monitoring.

Secondly, we have started to develop a machine learning social sentiment analysis tool. We’re working with machine learning platform DeNA to build social sentiment and reputational scorecards for developers and their projects. They are scored based on publicly available information and social media sentiment among local communities and the press.

Thirdly, we have our own digital measurement, reporting, and verifying solutions. We have developed IoT sensors that can be plugged into households to determine the sources of electricity that they use.

We also have temperature, air, and humidity sensors, which feed data through a machine learning tool to assess if renewable energy is being used. We can ascertain if a household is burning coal or if there is any ignition happening in a household by monitoring for temperature spikes and humidity drops. Over the next three to four years, this will be the focus of our proprietary digital verification solutions.

KR: What are some recent developments and potential upcoming events for URECA?

OE: We have signed agreements with up to ten project developers. These are run by people that are doing amazing work on the ground, and for us to be able to partner with them, I think that’s been the most rewarding thing. The challenge now is for us to deliver on the promise of getting their credits to the people.

We have recently partnered with Formula E, which is the electric equivalent of Formula One. We’re in its Race Against Climate Change program, and we expect more of such partnerships to happen.

Overall, it’s challenging because I think that the ambition we now have is to kickstart a global climate investing movement. It’s a huge undertaking, but I think we’ll get there.

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