Raphaël De Ry

Raphaël De Ry is the CEO of ALLCOT. ALLCOT is a veteran project developer that offers knowledge, experience and management to greenhouse gas emission reduction initiatives to actively combat the climate crisis. Since 2009, ALLCOT provides innovative solutions to combat climate change and promote sustainability through project development, carbon markets, and advisory services.

I think it's just a barrier to success if you don't think outside of your existing systems. The best way to beat that is to travel and go to different places. It's the same way that media portrays a lot of things in a frame that suits them. We can really develop different beliefs when we talk to people and exchange ideas. When I go back to the reaklworld and digital markets, and start talking to people, some of them tell me that these are like shitty credits. But there are still a lot of things happening on the ground. It's not necessarily working well on the market side, but on the ground, there is still action that works, even though maybe it's not reaching the initial objectives.

— Raphaël De Ry

Interview transcript

Do you also want to just introduce yourself, and what you currently do and some of the things you're thinking about and acting on at the moment? Sure.

My name is Raphaël de Ry and I moved to the UK about 18 months ago from Hong Kong, where I lived for 17 years. While in Hong Kong, I began working with a new company called ALLCOT, which stands for All CO2. We were looking into projects in the Asia Pacific region. Unfortunately, at that time, a huge VAT fraud in Europe caused the price of credits to plummet from 6 to 8 euros to just 50 cents. As I became a new dad, I decided to split ways with Alexei, the founder of Rocket, as the job was not compatible with my needs.

Recently, we joined forces again to address two pillars where we could make an impact: sports and tech. We are addressing environmental assessment for sports entities, which is one of the most significant echo chambers. When a sports figure like Ronaldo pushes away a bottle of Coke and takes a bottle of water, he instantly reaches 600 million people. In contrast, a scientist who comes up with an innovative solution for climate action may only get 10,000 likes on YouTube.

The second pillar is tech. I saw a lot of investment going into clean tech, but at that time, carbon markets were not leveraging these funds to deploy them into their projects. Along the way, we explored another initiative produced from the tokenization of carbon credits. The whole mechanism can be attached to Refi Regenerative Finance. We started to explore that space and map out the different initiatives. What we saw was that the tokenized credits should be digitally native, which means that all the digital platform's tools should be embedded from the start or retrofitted into the project to create more beneficial role streams going back to both the project developer and the communities that are at the center of the projects. This is what is really interesting in this ecosystem.

For me, there are one or two silver bullets that decided me to go in this direction. The first one is when it comes to redistribution back to the community, which falls into the category of payments for ecosystem services. In the traditional market, when we produce carbon credits and redistribute 50% to the community, we have to travel through different systems that all extract a small part of the mechanism. However, with digital markets, this process of redistribution could be automated through smart contracts in a much more efficient way. This could bring a lot of relief in terms of operation and leave more initial capital back to the community. Additionally, it could be independently audited, so that if it's on a permissionless blockchain, it could be seen by the buyer of the credits.

Another mechanism that we saw that could be very interesting is the limitation when we sell this credit at $10. After that, this credit can be sold to a broker that can sell it to another broker, and maybe sometimes, a credit that is initially sold at $10 can end up being retired at $20. This $10 difference has no way to be attached to it in the traditional markets. But if we use a tokenized system, there is still a royalty mechanism that can happen that can help to channel and at the moment, the ratio is set at around 2.5%. This would mean that every time the credits change hands, 2.5% of the exchange price could channel back to the project owner entering the community. This is something that we have a lot of interest in, as one of the interests of the digital community and especially the decentralized finance scene in tokenizing carbon credits is the fact that they can do many things with them. One of the big pillars they're working on is using tokenized carbon credits as collateral for stable coins. After that, this pool will actually continuously circulate the credits through different mechanisms.

This is one of the first criticisms of tokenized carbon credits. It's like you basically create an exchange mechanism, but you do not retire the credits. It's a question of what incentives there are to do that. If we have a way that every time the credit is traded, a portion of the profits generated can go back to climate action, then we have something that is working. I'm glad that many big crypto players are building a lot of stable coins. This is one of the first pillars on which we believe that they can be really impactful at scale. We can plug in this system, one of the biggest shortcomings of the existing carbon market, which is the lack of transparency and integrity. As I said in the example, from $10 to $20, this money is not channeled back to the projects and its beneficiaries but stays in the hands of the traders. This is one of the biggest shortcomings.

So when we say impact at scale, what is that impact? I mean, what is the kind of the top three impacts? And particularly at scale, I guess, how do you define that?

So, I want to touch on a few things. For example, going to the market in Colombia, where ALLCOT is very involved. It's a mature market with a taxonomy in place. When the new government came into power last summer, there was a radical shift from the right to the left. When they looked at the Carbon Project, there was a huge wave of discontent because the community was not receiving as much money as they were promised. This was due to the different functions that are collected throughout the process and the fact that, even though it's required by law to redistribute a certain amount of money, the market tends to shorten these proceeds to the minimum that is viable.

Regarding the three pillars you mentioned, I think that first, we need to exclude governance. This community needs money to perform their actions, and they need to be rewarded for the positive work they've been doing. The scope that we envision for a project in Colombia, which has been defined with both the community and the local municipality, is that there are programs of activities defined by the community. Whether they want to invest in healthcare or education, which are normally the two strongest pillars, they have to define clear programs on how they would spend the money. This could be to expand facilities within the local hospital or even to build a hospital, or to make sure that it goes into a better answer to the local needs. That will be defined as a proper program so that we can really make sure that the money channels all the way there and doesn't get collected by other actors.

After that, it can be for other needs. For instance, one of the communities is asking to find money for a road because they actually want to have a better path than the mud path that they have. This could benefit them economically because they could travel more easily and make other improvements to their lifestyle. This is also where the carbon markets could be an additional value. For instance, if we are able to replace sources of energy that are highly polluting, like external energy generators that are based on diesel, with renewable energy, then that should be rewarded by different mechanisms. At the moment, this is still very difficult to operate when it comes to switching sources of energy.

Okay, so what I'm hearing is that the distributed nature of cryptocurrency allows for the creation of impacts in different communities without losing too much to arbitrage or to traders in the market. This is ultimately what distinguishes the future web three market from the current market.

That's similar to the fact that, like, this is all I mean, we can almost audit all the way. Yeah, which is not possible at the moment. And which is like stealing. I mean, I think people are very creative when it comes to stealing money. And definitely, we evolved in geographies where, even culturally, some people are meant to take a share of the proceeds. So it remains to be seen how it's going to go. Because there is always this iteration. And it's very specific to the place where you develop these programs, but ultimately, some people say that maybe the goal is to distribute money directly into the wallets of the people. But this can also be heavily criticized in some other ways because it creates incentives that are not beneficial to the project itself. But there are also ways that we could indirectly incentivize collective action. For instance, I'm thinking about cookstove programs, which replace traditional cooking methods with more efficient and environmentally friendly ones that can be rewarded with carbon credits. Currently, over 2 billion people lack efficient ways of cooking their meals, and the clean cooking initiative aims to provide them with a more efficient way to cook. This has social benefits, especially for health, and environmental benefits because it reduces the amount of smoke generated. One of the projects we're looking at is to provide clean cookstoves to communities so that they can improve the way they cook and be rewarded with carbon credits. We could provide them with biomass that comes from cashew nut shells, which are abundant in the region. We could process these shells to make them a kind of biomass charcoal. We would use the money generated from the carbon credits to subsidize the price of the biomass so that they could pay a cheaper price for it. This would be a redistribution of the proceeds. If they pay 50% less than what they used to and it has a positive impact on the environment, that is taking a lot of boxes for us.

Yeah, did you have any thoughts? As we delve deeper into the topic, I believe it's vital to discuss fundamental shifts in redistribution and incentives, and how they affect the system. If you have any examples, please share them. However, if you don't mind, I'd like to steer the conversation towards a related topic.

What about the impact of certain projects? For instance, the cookstove or mangrove projects that have been implemented in various communities. Do you have knowledge of a successful outcome from one of these projects? What elements contributed to its success? Could you walk us through it?

So you mean, like a project that we developed that really stabilised the return to the community? Yeah,

I think that when you consider a service like this, there are two types of impact to consider. The first is the future impact that can be created with some of the web three refi technologies. The second is the current model that ALLCOT has been working on for a long time. Can you think of any examples of past or present efforts that you feel have done a great job of meeting the necessary requirements?

The flagship project that we have is located in Colombia, a former conflict zone where revolutionary forces were fighting against government forces. The area was also plagued by narcotics gangs that were burning the forest on a massive scale. There were conservation efforts in place to protect the forest, but they needed an opportunity to develop. We made sure that the community could be involved and receive some of the proceeds, with 60% going to them. However, trust was a major barrier to this. We had to prove to the community that carbon markets could actually provide additional revenue for them to take positive actions for the forest. We created a program of activities that they could perform to create better environmental outcomes, and these actions were rewarded with financial redistribution. It took five years to build, but the project has now been registered and is starting to issue credits. The community is now seeing the rewards of their efforts, and they are incentivized to keep working in the right direction. Education was one of the most popular pillars of the program, as it allowed some people to start working towards jobs that would be rewarded through this mechanism. Agroforestry was another popular activity, which aimed to increase carbon sequestration in the soil. The feedback from the community was very positive, and many wanted to participate, but needed guidance on how to do so. We partnered with organizations that provide financial education, especially for women, so they could participate in collective savings and create more independence. This has created a micro community where knowledge is shared, and digitalization has been key to deploying this at scale. Smartphones have been instrumental in this, with tailored video content explaining everything in terms that even those who cannot read can understand. I believe this creates a ripple of impact that can be felt throughout the region.

How do you develop a carbon credit from microlearning?

I wish we could, but we don't. However, there are positive effects. For instance, the program we work with on this microfinance side can contribute to the cookstove program. The cookstove program still needs to be bought by the participant; it's not a free item given to the community. There's also something very important in the way these programs are approached. It's important that they empower the community rather than just frame it as a program that helps the community. Programs that empower have much better outcomes because they push up instead of pull up. When we work with microfinance programs that create economic resilience for a group of women, these women have access to programs that have other added benefits. They become independent and happier because it's not just coming from their own effort, and they get their own reward from it. It creates chains of success.

It's interesting what I'm hearing as you speak. When we're creating, we strive to redistribute more money to the pockets closest to the ground. However, it's more nuanced than that. Essentially, there's a money component, a capabilities layer that creates positive feedback loops, and another layer that involves building coalitions, partnerships, and communities. Let's explore this topic a bit more. For example, when dealing with parties that have very different interests, how did you bring them together and build a coalition? Can you share more about the success story in Colombia and the parties you worked with?

So, I mean, with the structure of carbon projects, you have to rely on existing entities that are operating in the place of activity. Most of the time, these are different NGOs that have already identified some of the issues that are happening. Basically, you rely on them to be the chain of information in order to identify what the issues are and how to take the best course of action. After that, there's an exchange between these NGOs and our internal team to find out what is the best PLA (programme of activities).

For instance, for some types of projects, such as REDD+ (which works for conservation and reforestation of forests), there are requirements for the registry to actually implement a theory of change. This is to explain how the money flowing back to the participants of the project and the community will positively impact not only the ecosystem from an environmental point of view, but also from a social point of view. NGOs are really helping to frame a theory of change that brings benefits to all members.

Within the scope of the project, which is normally for 20-30 or 40 years, we also have to consider the issues associated with climate change, such as the rise of the level of the ocean or the increase of climate. We need to prepare the population in the best way to be resilient to that.

You cannot just have the "white man syndrome," which is like saying "Africa, you have a problem. We're gonna come over here and say, hey, that's the solution you need. You need to have your SUV, and you need to have full internet and electricity at all times and everything." What we find over there is that people have created their own mechanisms to adapt to their environment. We need to collect as much information as possible to adapt and also to go in the right direction.

There is a famous example in this field about an NGO that is building wells to pull out water from under the soil. They identified a community where the women had to work about 12 or 15 kilometers every day to get the water back to the community. They implemented a well in the middle of the village, and it worked. They were very proud of themselves. They came back three months later expecting to be greeted with hoo-ha and everything. They asked the community, and the men said, "Yeah, that's cool. We have water." Then they asked the women, and they said, "We hate the well." The people from the NGO were like, "Why?" The women said, "That work was the only moment we could get away from men. That's where we were taking the family decision. That's where the little girls were getting their education, because we had this time away, and we could walk." That's one of the greatest examples I know of coming up with what you think are good intentions, but not delivering the results that the community is actually looking for.

One thing I've noticed in some of the things I've seen with ALLCOT, like the workshop in Senegal, for example, is that lots of different partners are involved, from grassroots organizations to government officials. Even on the Colombian side, I've seen ex-ministers involved. It seems like coalition building is central to the work. Is this a way to prevent "white man syndrome," especially when you're a white man yourself? How do you navigate this?

Well, that's a tough one. Are you in the same league as Mica? I mean, how can you prevent that? I think it's just a barrier to success if you don't think outside of your existing systems. The best way to beat that is to travel and go to different places. It's the same way that media portrays a lot of things in a frame that suits them. We can really develop different beliefs when we talk to people and exchange ideas. When I go back to the reaklworld and digital markets, and start talking to people, some of them tell me that these are like shitty credits. But there are still a lot of things happening on the ground. It's not necessarily working well on the market side, but on the ground, there is still action that works, even though maybe it's not reaching the initial objectives. One great example is from the workshop we did in Senegal. We had someone from New York participate in the activities and exchange ideas. Afterward, he told me one thing that really made me happy, which was that he would never look at the cookstove program in the same way again. For him, all the cookstove programs were coming in an Excel spreadsheet, and you don't see what is coming up on the ground because it's siloed in. There is definitely a door to open in order to showcase what is really happening there. Even though we talk a lot about blockchain and making this market transparent and auditable, yes, that is true in terms of data. But this data can also be expressed in many other ways. For instance, when it comes to payments for ecosystem services, there are some programs where people are incentivized to go into the forest and measure the trees so that we can calculate the growth and how many carbons have been sequestered. This activity, even if you add just one thing and share the pictures that people are taking over there, you get very granular data. Maybe the person taking the photo is wondering why you care about this tree in the middle of the jungle, but someone who's thinking of perhaps buying this credit has an interest in seeing it. The same way that technology, for instance, IoT, is used in forestry projects to put sensors in the forest. A sensor that captures sound can detect fire earlier, but it can also be used to detect chainsaws or trucks that are coming for logging. You can also measure biodiversity through sounds, and after that, machine learning can help to define which species are coming at what time. Perhaps you can create a radio channel that listens to the forest in light, and some people can do a yoga session with it and be happy about being able to travel through that. This digital linkage is so powerful because there are still many ways that we can help to interconnect people. Today, I saw an initiative in cities where they installed some big portals where you have a video. For instance, there's a video in London, where you actually have another portal with another portal like this in Hong Kong, and people can interact together live. That's fantastic. I've been hearing a lot about carbon projects where people can interact with the indigenous community, and I'm like, okay, that's a little bit exotic, but why not? We are social animals.

Those are the layers of impact, in a way. I love that. When it comes to listening to the birds, how do you measure the impact? What are the key things that you look for? I suppose carbon credits are supposed to be a measure of impact, but nobody would claim that it's perfect. So, how do you get as close as you can? And how would you measure it in general?

Um, so in the lifecycle of the carbon projects, there are actually milestones that serve as a verification period. The first stage is actually the hardest, as you have to register the project and start issuing the first credits. But after that, the project is independently audited every two years. This audit measures the success of the project in very granular and auditable terms. There are rating agencies that look at different elements in order to give a rating to the project. To measure impact, we look at how well we sell the credits. If the project displays a lot of positive impact, this can be measured, for example, in an SDG report, which showcases that you've been working on the biodiversity pillar. This brings value to the credits. If you're able to demonstrate all this and how your credits have taken off, then that's proof of success. There is also a false belief that as soon as you issue credits, you're going to sell them. This is not the case, far from it. It's a question of really demonstrating that you are able to showcase a project that has accomplished its objectives.

Sure, are there any specific metrics you have in mind? Perhaps CO2 savings or any other metrics?

That's kind of like in theory, CO2 savings are similar to credits that are issued. So, I mean, it's one of the projects we're currently working on, but we haven't been able to publicize it well yet because it's a recent partnership. However, we partnered with a microfinance institution that has been following up on their program enrollment in Ivory Coast for three years. They collect a lot of information, and we're able to see the economic independence of the people, how much money they have in their wallets, and how much money they've been able to save. This information allows us to match the progress of individuals with our educational framework, which is very positive. Our goal is to involve these people in carbon projects to increase this reporting. For instance, some of our programs, such as cookstoves, have been identified as one of the biggest sources of CO2 emissions in neighboring countries. If we can implement this project successfully and demonstrate a reduction in CO2 emissions, we can correlate it with the number of cookstoves we've deployed. This can lead to additional issuance of credits, which are normally verified through the size of the canopy of the forest coverage. If the community has done an excellent job and the trees have grown more than predicted, they are rewarded with carbon credits. After that, we can put sensors in place to monitor biodiversity and reach key targets.

That's interesting. So basically, you find ways to measure those positive externalities.

But, I mean, these are ways that are not leveraged in the legacy markets.

And the power of the loop itself is also immeasurable in a way. Within traditional markets, there was no digital element that helped with scalability. This is where data becomes a key factor, because a sensor designed to detect chainsaws can be used for many purposes, from the moment it is implemented until the end of its life. It has a significant impact.

In a way, the enabler of the digital layer is a flywheel situation, not to use cliche jargon, but it has this kind of effect.

It's a multiplier. For instance, we're looking at putting sensors in the water at different points for the mangrove plantation to see how it's doing. Through this data collection, we can refine the way we plant. After that, we can find additional data, such as measuring the amount of fish that are now traveling through this mangrove. This is something we can act on.

If you had a magic wand and could have a significant impact, what is one thing you would change that we need to change tomorrow?

Well, I think unfortunately the magic wand at the moment is relying on the funding of the project, which is still difficult. But if I had a magic wand that could have more impact on the community, it would be to build highways of redistribution. One of the projects we're working on is to create a gateway for redistribution. The dream is that it would become a universal standard and all carbon projects would be equipped with this kind of tool that could channel back to redistribution at scale. This would be a positive way to bring validity to the projects and redistribute the money to the people at the core of it. If I had the magic wand, I would make sure that the project belongs to the community involved, not the project developer. The market is structured in a way that you still need to be a project developer to make it happen. For instance, one of the best projects we've seen is a mangrove project from Conservation International, where they redistribute 90% of the proceeds to the community. But our business model cannot work if we do that. A lot of people working at ALLCOT have a belief that we are an NGO, but we still need to make money. As much as we don't need crazy money, we still need to be for-profit to make it happen.

It's interesting to consider if there was one button or solution that could wipe away the biggest pain point or blocker in your job. What would that be?

Um, I don't know, I don't think I have a good answer for that one.
That's OK.

I'll tell you exactly what it is. The world of granting money, not like grant institutions, is incredibly disorganized. There's no central repository, and every group is doing their own thing. It's amazing how little efficiency there is. Right now, we don't have the bandwidth to focus on the problem, although we've tried to do it a little bit. This is probably the most frustrating thing to me.

Overall, the entire industry is interesting because the profit is in market making. Essentially, these projects can be implemented into a system where funds, pension funds, and ESG investors can invest. The integrity of the system depends on the change happening at the community level and CO2 actually being taken out. Moreover, the world remains interested in ESG investments. Do you have any comments on the system as a whole?

Yeah, I mean, like, it's a whole ecosystem. And that's the thing is that it's like, on one side, you can have like, like corporations that are asking to invest in projects, but like, they, they're not looking for carbon outcome. It's just as part of their budget, they want to have something that they can deploy capital to have an impact. And, on the other side, you have some sort of, like, let's put it like, in another way, you know, it's like some companies have, like, now were pressured to pay back for some of the actions that they did in the past. And in order to have, like, a clean proposal for investors or like even regulatory markets, they need to participate in carbon markets, they need to be carbon neutral, they need to reach the net zero objectives. And, they need to be able to report to the tcfd or CDP and things like that, but at the same time, they still want to make money out of it. And this is like a valid proposition and like, it's kind of like let's say, someone has to buy like a million tonnes of credits for a fund that they are pushing out. And they want to invest in the project. And out of this, they definitely want to find a better, better ratio of like investment and return on investment that they can express from that. And so that's where we have this, this duality of the things that like, the projects on the ground, should actually be working financially, thanks to the carbon credits that will generate the additional functionality that is needed to make the project financially sound. But like some of the projects that actually need to be sorry, I got the son doesn't happen very often, but like. So the question is, like, how should you run these projects, like, for instance, if you run a cookstove project, as a business, strictly business without the carbon credits, it would not be viable, but like, you actually get like proceeds from the environmental benefits that you provide, and the social impacts that that that you do, because like a large part of it is also like the health benefits. And this is like, I mean, you're not going to be able to charge like a country by saying like, hey, actually, because we produce much less smoke. And actually, the kids growing up actually are not going to develop lung cancer. Because they are exposed to smoke from the youngest age, and they're going to live longer, and then your population is going to benefit from it. Because they don't have to take care of someone who's sick. I mean, nobody's paying for that. Yeah, but like, at the same time, it's like, it's something that brings a lot of benefits. So it's, yeah, that's where, like, it's a complex thing, the same way that like, I mean, you you have this, this difficult thing for like, like funding these projects that comes from first, the risks that is associated to it to make sure that it works, the geography in which they evolve. And then the political stability, where they evolve. And this is like all things that like it has to be run like a business, it has to be profitable, and it has to be incentivized by the carbon credits. But like, it's, it's kind of like, how can we make money out of it from the financier side, and there are still ways to make money, but it's just like, it's, it's a complex one.