OpenX Platform for Contractual Automation for P2P Project Finance of Climate Actions

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= OpenX / OpenSolar: Contractual automation for p2p project finance of climate actions


Martin Wainstein:

"The climate transition requires over $1 trillion/year in financial capital to achieve the established climate goals. Part of these funds will come from international climate funds, multinational development banks, and countries. However, the lion share of climate finance needs to be mobilized by private capital. Whilst we have explored the role of linking capital from governmental funds and shared climate funds with climate action data using smart contracts (see related mentions in section 3.2.1), a focus of the Open Climate project has been the development and function integrations around project finance of climate actions. This has been primarily developed and tested with one of the integrated platforms in the Open Climate system, OpenX." ([1])


Martin Wainstein:

"OpenX is a platform developed in a collaboration between the Digital Currency Initiative at the MIT Media Lab and the Yale Open Innovation Lab. It is a partner project of Open Climate and is, in itself, another platform of platforms but with a specific purpose on climate finance. This section describes the main functions of OpenX with a focus on one of its platform instances —OpenSolar— in the context of a pilot project involving international climate financing between investors in the European Union, United States and Rwanda.

The OpenSolar platform uses the Stellar blockchain and IoT-based smart contracts for disintermediation and contractual automation in financial processes to drive community-owned solar projects and microgrids. OpenX is its underlying platform framework extendable to climate finance as whole and integrated with the Open Climate platform.

The platform is designed with a project marketplace where multiple investors can be pooled to finance a single project (i.e. crowd investment) even if these have different return expectations. This includes the blending of mainstream investors that expect market rates returns on investment, with impact investors that allow concessionary or first-loss capital as long as there are certifiable social and environmental returns.

Receivers of the project’s assets (eg. renewable energy infrastructure or other climate asset), are often the endusers of these services and local community actors. Although initially debtors, receivers pay for the services provided by the project (eg. solar kWh) through regular utility-like payments with no down payment and gain full ownership of the assets once payments accrue to cover capital costs and investors. All financial transactions and rules are automated through the project’s smart contract, hosted in the OpenSolar platform as an escrow account with capability to hold and transact stable digital currency.

Payments from receivers to the contract are driven by IoT data (eg. power meter data), which is also used by another key function of the project contract; the minting of a digital climate asset (i.e. token) as attestation of the underlying climate value. In the case of solar energy, this is a Renewable Energy Certificate (1MWh) and displaced carbon equivalencies.

The OpenX platform is designed with full integration to the Open Climate platform so that the same smart contract mechanism can be used for other climate mitigation projects, such as forest conservation initiatives.

The OpenX and OpenSolar platform has been tested in real-world projects for the financing of solar energy in schools in Puerto Rico. Since 2019, the project expanded its scope to include platform considerations to allow cross-border investments for financing distributed solar infrastructure in rural Africa. Specifically, thanks to a collaboration between Yale University and the Rwandan government, the platform is currently being tailored to deploy its first international climate finance pilot.

The pilot project seeks to show an operational proof-ofconcepts of: the use of decentralized ledger technologies (DLT) for cross-border crowd investment using a Climate Bond as its security, the use of a cross-border bank network using DLT for expedited clearing and settlement processes, the use of smart contracts to perform automation in the acquisition of financed public infrastructure by a local community, and the use of an international digital climate asset, integrated with the Open Climate platform to be included as climate accounting compatible with UNFCCC’s Paris Agreement." ([2])


Whitepaper: Open Climate. Leveraging blockchain for a global, transparent and integrated climate accounting system. By Martin E. Wainstein.