Discussion: Onboarding Flowcarbon Natural Capital Assets to Mento

Hi, we’re Flowcarbon, and we’ve been part of the Celo community for a while. We’re an active member of the Climate Collective, have co-hosted events with Celo, and love being a part of the Celo ecosystem. Our mission is to leverage innovative technology to scale the voluntary carbon market. We vertically integrate across the entire carbon offset lifecycle and offer strategies & solutions ranging from carbon project origination and structured finance to marketing and carbon portfolio management.

TLDR: We propose allocating up to $7 million cUSD to fund carbon projects through Flowcarbon’s Centrifuge pool in order to diversify Mento’s asset holdings into natural capital assets and earn yield on the Mento reserves. The $7 million in capital will cover the senior DROP tranche of a $10 million pool, with the remaining $3 million being provided by junior, first-loss capital. The DROP token represents future carbon offset credits and will yield a return of approximately 5-8%. The associated risks are issuance, market, and timing. These risks may be mitigated by employing techniques such as partnering with experienced project developers, risk-reducing contractual terms and conditions, and through a senior/junior tranche structure in which the junior tranche is treated as first-loss capital.

We explain this proposal in more detail below. There’s an “in layman’s terms’’ section further down if you prefer.

Why finance the production of carbon credits?

In the last few years, over 5,000 corporations have made commitments related to their carbon emissions. This includes quantifying overall emissions and implementing a decarbonization strategy. Corporate demand for carbon credits reached $2 billion p.a. in 2022 and is projected to increase to $50 billion p.a. by 2050; indeed, a recent study by McKinsey projects that demand for carbon credits will grow by a factor of up to 100x by 2050 [1]. Due to supply constraints resulting from a lack of project financing, Ernst & Young estimates that this demand pressure will increase the price of carbon credits from under $25/tCO2e today, to $80-150/tCO2e in 2035, and $150-200/tCO2e in 2050. [2] In other words, Ernst & Young forecasts a tenfold increase in the price per ton of carbon sequestered by 2050.

It is worth noting that these scenarios only consider demand increases driven by the Paris Agreement climate goals and do not take into consideration what happens to demand if natural disaster occurrences and the visible cost of climate change continue to accelerate. In these scenarios, demand is likely to increase beyond those scenarios, in turn driving prices even higher.

Who is Flowcarbon partnering with?

Flowcarbon has partnered with Centrifuge, a protocol that allows for the on-chain financing of off-chain assets via pools of liquidity, to drive liquidity towards carbon offset projects. In other words, Flowcarbon assembles partners who are interested in exposure to carbon offsets, then sources high-quality carbon projects in need of financing, and connects the two through the Centrifuge protocol. Centrifuge’s pool architecture allows the total sum of project financing to be divided into two tranches with different risk profiles, which cater to different investor parameters.

How does the Flowcarbon’s Centrifuge pool work?

In a first step, Flowcarbon signs an agreement with a project developer, who guarantees the delivery of carbon credits in the future at a fixed price, after they are issued by a carbon credit issuer known as a “standards body.” Flowcarbon then assigns the contract to the Centrifuge pool.

The Centrifuge pool is divided into tranches that differ in risk and reward. The senior DROP token (70% of the pool) accrues a fixed APY and has the first claim to any cash flow generated from the sale of carbon credits. The junior TIN token (30% of the pool) earns any residual cash that is left. Payments into the pool are denominated in DAI.

Flowcarbon aims to create a portfolio of carbon projects with redemption windows initially starting after 12 months and then with ongoing redemptions every 6 months. Portfolio construction is subject to due diligence and availability and Mento capital will only be drawn down once projects have been secured.

What additional technical infrastructure is put in place to make this work across chains?

Flowcarbon is working on the development of a cross-chain protocol that aims to make Centrifuge pool tokens fully accessible on the Celo blockchain. This protocol will be seamlessly integrated into Flowcarbon’s existing cross-chain carbon token bridge, further expanding the capabilities and reach of the platform.


As described above, Centrifuge is a protocol that Flowcarbon uses as an infrastructure provider for the creation of financing pools, and corresponding pool tokens. These pool tokens are collateralized by contracts for voluntary carbon credits, and are exclusively accessible for wallets that have undergone Know Your Customer (KYC) and Know Your Business (KYB) procedures. Flowcarbon is responsible for managing the member list (“memberlist”) contract that oversees this process, ensuring the legitimacy and security of all transactions.

The transfer function of the underlying ERC-20 token is limited in such a way that it only permits transfers between wallets on this memberlist. This ensures that only verified and approved wallets can participate in transactions involving Centrifuge pool tokens.

Flowcarbon plans to create a smart contract on the Ethereum blockchain which will be capable of receiving DAI or other stablecoins that can be swapped on Curve. The smart contract will then place these stablecoins with Centrifuge and hold the tokens in its treasury. This approach provides a secure and efficient way to purchase Centrifuge pool tokens using various stablecoins.

Centrifuge’s TIN and DROP tokens are sent to the Flowcarbon Bridge where they are held in treasury. Using Messaging Bridges (Hyperlane and Layer0), the equivalent FCO2s tokens are then issued on CELO, reflecting the respective Junior and Senior tranches.

In addition to the Ethereum-based smart contract, Flowcarbon is also implementing cross-chain messaging protocols. These protocols will facilitate the transfer of a wrapped version of the Centrifuge pool tokens to the Celo blockchain utilizing messaging services such as Layer0 and Hyperlane. Celo will thus become the home chain for Flowcarbon based cross-chain Centrifuge tokens, offering advantages of low fees and high transaction throughput.

To fully realize the potential of this cross-chain solution, Flowcarbon is developing the necessary infrastructure to synchronize the memberlist and tokens across both Ethereum and Celo blockchains. This infrastructure will also establish the pathways for participating in Centrifuge tokens across chains, further enhancing the user experience.

By having the tokens that represent the Centrifuge pool token’s live on Celo, and allowing users to redeem them from Celo, this integration adds value to the Celo ecosystem. Newly minted cUSD increases the total value locked on Celo and potentially drives increased adoption of the Celo platform. This cross-chain solution gives users full access to the Centrifuge protocol on Celo, broadening the range of available products and services within the Celo ecosystem.

What was Flowcarbon’s first Centrifuge pool?

Flowcarbon’s inaugural Centrifuge pool was launched in September 2022 and was oversubscribed within one week of launch, reflecting strong demand for carbon assets. The financed asset was the Grand Chaco REDD+ project, an avoided deforestation effort in one of the largest and most biodiverse carbon sinks in the world. The project is expected to abate approximately ~290,000 tCO2e p.a. for 20 years, or ~5.8 million tCO2e over its life, with an AUM of $845,000 and a 6-9 months duration.

What are the risks and how are they mitigated?

Any on-chain participation comes with a set of risks. Below, we elaborate on the risks we deem most important. There might be others not outlined here. As always, anyone considering participating must do their own research.

Issuance Risk, i.e. the risk that the project developer never receives an issuance of carbon credits: Flowcarbon has a deep understanding of the various methodologies in the voluntary carbon market. In addition, we always seek to partner with experienced third parties in order to mitigate issuance risk. Additionally, where there is risk of issuance delays or non-deliveries, the risk is appropriately priced into the contracts.

Market Risk, i.e. the risk that the market does not create appropriate demand for the carbon credits at the time of issuance so that they can be sold: By tranching each pool, participants can choose to fund projects based on their risk tolerance. There are opportunities to seek discounts to market rates and stage funding according to predetermined milestones in order to further mitigate risk and ensure the return profile for DROP and TIN holders is met.

Timing Risk, i.e. the risk that the project developer takes longer than expected to deliver carbon credits: Flowcarbon intends to support projects that are further along in the development process, which reduces timing risk. Moreover, by employing stringent due diligence processes and entering into partnerships with third-party market experts, Flowcarbon seeks only to support experienced project developers with a good risk score. There is full visibility into each project.

Can you explain this again like I’m 5?

In order to stop our planet from reaching catastrophic levels of warming, we need to put a price on carbon emissions. The voluntary carbon market is a mechanism for doing that by allowing companies that emit carbon to compensate for some of those emissions through the purchase and retirement of carbon credits. Carbon credits are issued to projects that either remove carbon from the atmosphere via activities like planting trees or creating carbon sequestering substances like biochar, or activities that prevent carbon from being released into the atmosphere through activities like forest conservation. Each ton of CO2 emitted by a corporation is therefore “offset” by funding a commensurate ton of carbon that is reduced or avoided somewhere else.

Carbon projects currently have a financing problem. It can require considerable time and capital to set up and certify a project as a registered and validated carbon project with the relevant carbon crediting standards bodies. However, projects only generate revenues once are already through that process and receive an issuance of credits that they can monetize – often years after the project originated. Thus, they often require credit lines, which can be hard to come by for carbon project developers. Flowcarbon helps to fill this funding gap by identifying trustworthy carbon project developers who need credit, and pooling them together. On-chain participants may choose to purchase carbon-backed tokens that represent the carbon credits delivered when the project is up and running.

Who is Flowcarbon?

Some of you might know us - we’ve been active in the Celo community for a while. Flowcarbon leverages technology to scale the voluntary carbon market while vertically integrating across the entire carbon credit lifecycle: our activities range from supporting carbon project developers with financing solutions and carbon credit development, to corporate carbon portfolio management and sales. Within our value chain, we have identified early stage project finance to be a major challenge in the generation of the high quality supply needed to offset global carbon emissions meaningfully, and are thus actively creating new solutions to help projects access liquidity.

Our team is led by Dana Gibber, Caroline Klatt and Phil Fogel. Here’s a bit more background on each of them as well as team members involved in this initiative:

Dana Gibber is a climate tech entrepreneur and lawyer. As CEO of Flowcarbon, Dana is involved in several key carbon markets policy working groups addressing the incorporation of new technology into the market, including those at the World Economic Forum, the International Emissions Trading Association, and The Gold Standard. Dana previously co-founded and was COO of Headliner Labs, a conversational marketing platform for enterprise retail and SaaS platform for chatbot technology. After it was acquired by private equity fund The Stagwell Group in 2020, she served as Chief Innovation Officer at ForwardPMX, the largest of its portfolio companies. Dana’s interest in the intersection of new technology applications and public policy stems from her time at the US Foreign Intelligence Surveillance Court of Review and US Court of Appeals. She is a graduate of Harvard College and Yale Law School. Dana regularly speaks about the complexities and opportunities of the carbon markets, the application of new technology and blockchain to scaling nature-based and engineered removal solutions, and the tokenization of carbon credits and other real-world assets.

Caroline Klatt is the COO of Flowcarbon. Prior to Flowcarbon, Caroline was the co-founder and CEO of Headliner Labs, a conversational marketing platform for enterprise retail and SaaS platform for chatbot technology. Headliner Labs was acquired by private equity fund The Stagwell Group in 2020, where Caroline continued to serve as co-Chief Innovation Officer along with Dana. Caroline started her career as a consultant at McKinsey & Co. Caroline was awarded Forbes 30 Under 30, and is a regular columnist and speaker on the topics of corporate ESG, new technology in sustainability, blockchain technology, carbon market, and carbon offsetting and innovation with carbon credits and on-chain solutions. Caroline graduated summa cum laude from the University of Pennsylvania.

Phil Fogel is a blockchain and fintech entrepreneur, investor, and operator and serves as the Chief Blockchain Officer at Flowcarbon. Phil has been working at the intersection of blockchain and impact for years. He jumped into the proof of stake space early as a founding member of the Bitcoin Green team (now Bitgreen), an impact-focused blockchain; founded Battlestar Capital to build out the proof-of-stake ecosystem; and founded Corner3 Ventures to write seed and pre-seed checks into a number of pioneering off-and on-chain companies (including Parade, Oooh!, Purple Creator, Resonate, Mutate, and Anima NFT). He received an MBA from Cornell University, a BBA from George Washington University, and attended Stuyvesant High School in NYC. Phil regularly speaks about the innovations in the Web3/blockchain space, the complexities and opportunities of the carbon markets, the tokenization of carbon credits, and other real-world assets.

Christian Peters is the COO of Flowcarbon. Christian is a long-time software architect in the Berlin startup scene. He started his career at Rocket Internet and have built the MVPs for some of the biggest startups in germany, including the last 100 Mio+ exits of the Berlin scene - Planetly and vimcar. He went into blockchain full-time in 2017 with Chainwise Group, Co-Founded DSTOQ, and joined Flowcarbon in its early days.

Martin Kessler is Head of Business Development & Global Markets at Flowcarbon. Before joining Flowcarbon, Martin spent 24 years in investment banking working at JP Morgan, Lehman Brothers, Bank of America Merrill Lynch, and HSBC in both New York and London. He worked in Capital Markets and Global Markets, running regional and global business units focused on sales and structuring of interest rate, foreign exchange, and credit solutions to corporate and institutional clients. He partnered closely with Capital Markets teams focused on structured funding solutions across many client profiles, including project finance and infrastructure. Martin holds a BA from Dartmouth College.

Adam Shedletzky the Director of Policy at Flowcarbon. Adam has an extensive climate background, including as Senior Advisor to the Minister of Environment & Climate Change and Premier in Ontario, Head of Business Development for a carbon credit project investment firm, and Co-Founder of a not-for-profit organization. He holds a JD from the University of Toronto and a BCom from McGill University.

Alex Buskey is Director of Project Origination at Flowcarbon. Alex has over 10 years of experience working to conserve and restore threatened wildlife habitat and sensitive land used for agriculture. His direct project experience relying on carbon revenue ranges from small-scale improved forest management projects in Vermont to large scale REDD+ projects in Central America. He holds a BS in Business Administration and Economics from Saint Michael’s College with a focus on applications for climate solutions.

Andre Buiza is our Technical Manager for Climate Solutions at Flowcarbon. Andre has successfully generated over 1 million carbon offsets from managing a portfolio of more than 60 projects under 6 carbon market regimes. He has robust experience working with carbon accounting and carbon markets, first as a regulator for the Alberta Emission Offset System and later as a carbon offset project developer. He holds a BS in Mechanical Engineering from the University of Calgary.

For other team members, please visit our website.


  1. McKinsey, “A blueprint for scaling voluntary carbon markets to meet the climate challenge”
  2. Network for Greening the Financial System (NGFS), Trove Research, The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), McKinsey.

excited to see this proposal live! I found both the detailed and simple explanations helpful, and think it’s a great opportunity to bridge Centrifuge assets to Celo. Carbon forwards are among the most impactful instruments in ESG, so it’s heartening to see flowcarbon’s track record of forward financing the production of carbon credits.

Interesting proposal and use of Centrifuge. Very exciting!

Curious about the title of “Natural Capital Assets” though. Why not just call them “Carbon Assets”? As you know, Natural Capital has at least another 20 assets in the stack. However, despite all the carbon hype, Climate Regulation is actually one of the smallest in terms of annual economic value of all Ecosystem Services at an average ~ 1%. (And this even uses the Social Cost Carbon at $195 MTCO2e (in 2021 $)!)

If Flowcarbon is getting into other Natural Capital asset types or if Celo Reserve is interested, .basin has our presale going. Our RWA methodology accounts for 22 line items in the basinStack but is more of bundled approach with the unit of value being priced in $/p/a/p/y. Ping me if you want more details.

1 Like

side note: is Celo Reserve now Mento Reserve?

Is voting active on this proposal?

Thank you @flowcarbon, this is an exciting proposal for the Celo ecosystem and a great real-world use case for Mento stable assets. Before diving deeper into some technical aspects, we wanted to discuss some important collateralization implications of the proposal.

As you may know, since CGP62 all Mento assets (cUSD, cEUR, cREAL) are backed 100% with USDC/DAI alone to minimize collateral risk (everything else, including CELO, ETH, BTC comes on top of the 100%). This means that for every $ outstanding, the Mento reserve holds at least an equal $ amount in USDC/DAI alone. (@tmoindustries: Mento is now a separate protocol with a separate team so it makes sense to call it Mento reserve instead of Celo reserve). The same policy would apply to the cUSD that is invested into the Centrifuge pool via the bridging setup.

This raises two follow-up questions:

  1. Where does the cUSD for the Centrifuge pool come from?
  2. How can the 1:1 backing mandate be upheld for the cUSD that is in the pool?

Mento protocol does not hold cUSD in its treasury, it only allows the creation of cUSD and other assets by providing collateral assets to the protocol. So for Mento to participate in the pool, it would need to create cUSD against the forward carbon collateral, e.g. in a Maker-like CDP mechanism. This would require some additional technical work (it would be incompatible with the current Mento setup), so it would not be an immediate option but in principle something that has been done before (see Maker).

However, and more importantly from our perspective, such a setup may raise collateralization concerns. As some cUSD would in this case be collateralized with forward carbon credits, Mento assets would no longer be 1:1 backed with USDC/DAI. This is potentially problematic because while the reserve would remain fully collateralized (or overcollateralized) by the forward credit pool, some of its reserve assets would then be substantially less liquid (the carbon pool has redemption windows every 6/12 months, limited secondary market). This may reduce Mento’s ability to absorb larger cUSD contractions because reserve assets cannot be liquidated quickly enough, and given the proposed transaction size ($7M compared to current cUSD circulating of $30-40M) we should not ignore this risk.

In light of this, we think that instead of creating cUSD against forward credit collateral through Mento, it would be better to stick to the current collateralization policy for cUSD and to identify another source of cUSD liquidity for the pool, e.g. the Celo Community Fund.

The Celo Community Fund will soon hold a substantial amount of CELO as ‘buffer collateral’ is transferred from Mento protocol to the Community Fund. The proposal for the first tranche passed recently. So one idea could be that the Community Fund converts some of its CELO holdings into cUSD via Mento or secondary market options, and to invest those funds into the Centrifuge pool. cUSD would maintain a 1:1 backing with high-liquidity assets and the Community Fund would earn cUSD yield over time, while at the same supporting carbon projects through the forward pool. It would also help with risk diversification as the Community Fund would have less exposure to CELO volatility and it would be beneficial from a TVL perspective as the CELO would be put to productive use, while CELO sitting in the Community Fund would likely not be included in TVL metrics (a concern that was raised here).

The downside is that converting a large amount of CELO into other assets puts pressure on CELO (either because CELO is sold into the open market or because CELO is transferred to Mento and subsequently rebalanced into DAI/USDC). So if this route is explored further, it might be beneficial to split the entire transaction up into smaller tranches and to perform transfers over time. We at Mento Labs would be happy to help the Celo Community explore this further.


Thank you for your response @slobodan. The discussion post acknowledges that technical and functional changes are required by Mento for this structure to work. However, we believe that these changes are necessary in order for Mento to fulfill Celo’s vision of “natural-capital-backed means-of-payment currencies” outlined in the whitepaper here (p13). That said, we recognize and appreciate that increasing the reserve’s natural capital allocation to 40% (as mentioned by Celo co-founder @sep here, Climate Collective’s founding charter here, and Celo Foundation’s 2022 update here), and future initiatives of this kind will ultimately need the community’s support.

In response to your questions, the proposed structure does not require cUSD to fund the Centrifuge pool - technically any form of currency can be used and converted, including CELO. That said, we believe it to be an inevitable step for the Mento reserve to eventually accept semi-liquid natural capital assets as collateral, and hence see the integration with Centrifuge as an important milestone that will add significant long-term value to the protocol. With that in mind, we are highly supportive of any initiatives focused on introducing CDPs for semi-liquid assets on Mento.

As an intermediate step, however, there are at least, two possible solutions to this problem:

  1. Allocating a portion of the ETH/BTC holdings to the cUSD required to fund the DROP token. The 1:1 USDC/DAI ratio can be maintained by issuing the DROP on Celo, minting new cUSD against that DROP, and then liquidating the appropriate amount of ETH/BTC.
  2. Allocating a portion of CELO in the Community Fund to the cUSD required to fund the DROP token. This would similarly maintain the 1:1 USDC/DAI collateralization ratio but would require careful thought and coordination to minimize potential market impact on CELO. Interestingly, this setup would have a multiplier effect on the TVL on Celo as the locking of CELO to create cUSD as well as the cUSD to DROP tokens potentially resulting in an increase of 2x in TVL. Structuring with periodic drawdowns instead of a single drawdown would be a feasible option. That said, this would have the same net pressure on CELO regardless of duration.

While we recognize that the DROP token in Flowcarbon’s Centrifuge pool is less liquid than tokenized carbon such as cMCO2, the token earns a fixed APY and junior first-loss capital (30% of the pool) may help protect from dowside. This suggests that the senior return may only be impacted where the overall carbon market drops by more than 30% - not taking into account additional protection built into the contractual terms of the emission reduction purchase agreements (ERPAs) signed with the project developers.

As a result, even if the carbon markets face similar headwinds as cMCO2 experienced in the past (see “The Reserve as a Liquidity Provider in the Voluntary Carbon Market” here), the potential loss to the Celo reserve may be significantly mitigated. Hence, while the DROP token is less liquid, it is also far less volatile and arguably more impactful as capital from the pool goes directly to financing new carbon projects, vs. buying tokens that represent already-issued carbon credits. Furthermore, there is little to no exposure to “Impermanent Loss” associated with liquidity pool tokens, which is a significant risk acknowledged with spot carbon credits in the referenced forum post.

Staying true to Celo’s initial objective of introducing natural capital-backed assets to Mento and broadening the range of available climate investments products* on Celo, we are supportive of a long-term roadmap focused on introducing CDPs for semi-liquid assets on Mento. However, we recognize that this will take time and therefore propose an immediate path forward of allocating a portion of Mento’s existing ETH/BTC holdings, or an equivalent amount of CELO from the Community fund, to allow for the reserve to hold the DROP token, as outlined above.

We welcome feedback from Mento and the broader Celo ecosystem on which solution is preferable.

*Just a friendly reminder that the info and opinions in this forum post are meant for informational purposes only within the community. Please don’t take this post as legal advice or an official legal opinion. We want to let you know that the DROP and TIN tokens are securities under U.S. law, and we are fully committed to doing this the right way and following U.S. laws at all times.


Hey everyone,

Porter here with a16z. Thanks to Flowcarbon for the proposal and to the community for the very thoughtful follow-on points. At the heart of this discussion is an exciting new opportunity for carbon financing that I think could be a major step forward for carbon markets more broadly. As everyone has indicated, it just needs to be done thoughtfully.

If the community believes it’s important to onboard more natural capital assets - which are impactful and important, but newer to on-chain markets and thus less liquid than long-standing crypto assets - it might be worth further exploring the hybrid scenarios outlined by Flowcarbon above. While utilizing the Celo Community Fund is a more direct route, perhaps allocating a small portion of the ETH/BTC holdings to fund the DROP token as an initial experiment in carbon financing could be a step in the right direction. I’m curious if people think there any major downsides to trying both in a smaller amount, and then scaling one direction or another after evaluating the process later?

Open to hearing more opinions. I think this is a great topic and glad to see it being discussed here!



Disclosures: a16z is an investor in both Celo and Flowcarbon.