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Developing an API for Carbon Emission Accounting
Last Updated: 7/10/2024
Published by: Evan Gabrielson
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Our primary objective at Carbonlink was to build tools to improve the accessibility and transparency of the carbon reduction credit market. As a broker of carbon reduction credits, Carbonlink had to balance supply-demand relationships with our credit suppliers and enterprise customers. In order to trade the most high quality credits on our marketplace, we needed to prove to suppliers that our marketplace customers were consuming credits. It was this challenge that led Carbonlink to centralize its backend into an API that would become our primary revenue source later on.
After launching a business-facing platform housing our carbon credit marketplace and services for portfolio management, we began collecting feedback on our users through interviews and platform analytics. Through these interviews, we began to understand the key driving forces behind why businesses purchase credits which helped us learn how we could extract more demand from each business. We gathered that businesses are driven to offsetting by a need to: (1) shift their public image, (2) market their products, and/or (3) comply with regulators in their industry. To extract more demand, I figured our services had to directly fuel one or more of these needs.
In a meeting with investors, I pitched the Carbonlink API as a solution to the second two needs: product marketing and compliance. My presentation was grounded in the hypothesis that by splitting our revenue channels into a marketplace for bulk ordering and an API for small-scale purchases, it would allow us to tap into a whole new class of users. Without altering our core services, we could extend our product offerings in an API that would enable businesses to schedule and automate credit purchases into their own products and services. For example, with the Carbonlink API, an ecommerce business selling shoes could add a toggle at checkout for offsetting the emissions of the purchase and even choose to pass on the cost of the offset to the user.
Fun FactThis example is not "out-of-the-blue", we actually built a full Shopify App that integrated the Carbonlink API to automatically calculate the emissions of a Shopify shopping cart and offer to users the option to offset their purchase.
The Carbonlink API supported our customers by providing programmatic access to credits on our marketplace as well as a toolkit for calculating carbon emissions based on data readily available to enterprises. We called these services the Offsets and Estimates APIs respectively.
The primary objective of the Offsets API's was to trigger carbon credit microtransactions.
We provided two endpoints under the /offsets API route, one for querying carbon credit prices and project details from the marketplace, and another for purchasing the credits.
At first, credit microtransactions triggered by the Offsets API were processed as soon as they were requested by users. However, as usership scaled, we predicted that the per-request transaction fees would both cause unreasonably large transaction fees. Each time a transaction was processed, our third-party payment processor, Stripe, took a percentage fee of up to 2.9%. But what we did not realize is that each transaction was relatively small ($0.50 - $10.00), so Stripe applied a flat-rate fee of $0.50 instead, meaning that users were spending between 5% and up to 100% per transaction for this fee alone.
In addition, to mimic the order mechanism on the Carbonlink Marketplace platform, we released a quoting mechanism that allowed API users to put credits on hold before confirming purchases. Since the price of credits fluctuate with demand, quotes guaranteed full price transparency because the price previewed to the users would exactly equal the price they were charged. If credits were not taken out of circulation during the purchase, other users' orders may impact price which would apply an additional cost to either the user or ourselves. It was our utmost goal to eliminate the notoriously high barriers-to-entry of carbon credit markets and to provide equal access with fully-transparent pricing. This quoting mechanism encouraged trust in our marketplace, which was a huge driver for many of our business customers. However, after this feature was released, we began seeing some API users put credits on a continuous hold by calling the Offsets API at specific intervals, which barred other users from purchasing them. While we were fortunate to see such demand for our marketplace credits, we realized these issues might end up causing price instability and a host of other issues.
To alleviate both of these technical oversights without upsetting our customers, I proposed that we change our pricing model and quoting mechanism altogether. We began aggregating carbon credit charges over a billing period into a single invoice so that only one Stripe fee was applied per month. By adopting this new pricing model, our internal analytics dashboard reported that we were saving an average of $63.6 per customer per year and ~$10,500 per year across all customers. Moreover, by charging users only at the end of the month, we were able to get rid of credit holds and simply aggregate credit purchases into the invoice, keeping price estimates stable.
There were three target audiences that our API had the greatest impact on. These three audiences made up 90% of our API user base (the other 10% being academics / independent developers).
Online shoppers are increasingly concerned about the environmental impact of their purchases, and the e-commerce industry is a major opportunity for businesses to positively impact the environment. To stay ahead of the curve and meet changing consumer preferences, we anticipated e-commerce businesses to opt-in to make sustainability a priority. Carbonlink's API made it easy for e-commerce merchants and storeowners to offer carbon-neutral purchasing to their customers. Businesses we worked with adopted the Carbonlink API into their online store in as little as 1 week and began offering customers the ability to offset the emissions associated with their purchases and shipping.
In Application: E-commerce merchants download Carbonlink's Shopify app to enable automated and embedded climate action into their digital shopping experience:
Example: Green Goods is an online clothing retailer that is committed to sustainability. They want to offer their customers an outlet for voluntary sustainable practices so that their brand is synonymous with positive impact.
Solution: Green Goods integrates Carbonlink's API into its e-commerce platform. This allows their end customers to offset the carbon emissions associated with their purchases and shipping.
How it works: A customer adds items to their cart on Green Goods' website. Then, they're prompted to "swipe the toggle to opt-in for sustainable purchasing." If the customer opts in, Carbonlink calculates the carbon emissions associated with the purchase, shows the customer the cost to offset, and automatically offsets on their behalf by funding projects that remove atmospheric carbon.
Value Proposition
Carbon accountants for large enterprises are essential players in the carbon markets. Businesses that aim to reduce their carbon footprint and meet set sustainability goals rely on accurately estimated measurements and reports provided by carbon accounting firms and internal teams. Carbonlink's API provided these accountants access to a liquid and high-quality supply of carbon credits to dis-intermediate accountants' reliance on brokerage firms and automate menial tasks, such as credit aggregation, data collection, and retirement. This enabled the carbon accountants we worked with to focus on more strategic work, such as calculating scope 1, 2, and 3 emissions and customizing corporate GHG reduction strategies.
In Application: Carbon accountants utilize the Carbonlink API to automate high-quality and diverse carbon offsetting solutions in tandem with the provided emission reduction reports.
Example: Carbon Neutral Accounting is a firm that establishes carbon reports & disclosures, sustainability targets, and emission reduction plans.
Solution: Carbon Neutral Accounting interacts with the Carbonlink API to augment its overall core service. It can now search for projects to include in a recommendation, aggregate credit data, and automatically purchase/retire on behalf of clients.
How it works: An accountant performs an emission analysis/estimation of a company. When completed, this person navigates to Carbonlink to search for environmental assets and the accompanying underlying metadata/origination documents in Carbonlink's easy-to-use project modules. Then, they curate a project portfolio recommendation and seamlessly offset and retire credits.
Value Proposition
Carbon solution providers, quite similar to Carbonlink, exist to simplify the sustainability process for organizations and individuals. They offer various carbon offsetting methods to help these voluntary participants mitigate their environmental impact. Most commonly, carbon solution providers take the form of marketplaces, emission calculators, offset subscription services, etc. The Carbonlink API supplemented a solution provider's existing service by expanding its carbon supply with our own stockpile of diverse, high-quality, and liquid environmental assets. This empowered our carbon solution provider partners to offer clients a wider range of offsetting options and to meet the needs of a wider range of clients.
In Application: Carbon marketplaces, emission calculators, and offset subscription services integrate the Carbonlink API to discover, buy, and retire carbon instantly and automatically.
Example: CO2 Vendor is a carbon marketplace that helps organizations and individuals reduce their environmental impact, but the firm's client base requires a specific type of carbon credit that CO2 Vendors does not currently support.
Solution: CO2 Vendors can partner with Carbonlink to integrate the API and enable access to our supply of high-quality and diverse credits, therefore satisfying its client needs and bolstering its marketplace with new credits.
How it works: Once the API is integrated, the end-user is able to navigate the CO2 Vendor marketplace, and purchase and retire the desired credits without knowing they were provided by Carbonlink.
Value Proposition: