In recent months, millions of credits for offsetting greenhouse-gas emissions have been virtually tied to newly created cryptocurrency tokens and removed from circulation.
These credits, each standing for one metric ton of carbon dioxide, come from projects such as planting trees or setting up renewable-energy farms that have third-party certification of the climate benefit.
Some participants in this fast-growing market want more transparency and common rules, saying a hodgepodge of standards and murky prices make it hard to compare credits and ensure the projects actually benefit the climate.
That wouldn’t change the nature of the underlying projects, but Toucan says it would create a forum for trading and improve transparency by providing real-time pricing data and a public record of trades to track who gets to take credit for funding climate-benefiting projects.
Toucan, a nonprofit based in Switzerland, is one of several initiatives, not all using crypto technology, aiming to overhaul the voluntary carbon market with clearer pricing and ownership data.
Since BCT went live in October, trading has been driven by Klima, another new crypto asset that was launched on the same day as Toucan.
The BCT tokens are kept in what KlimaDAO calls its treasury, effectively removing them from circulation so they can’t be used to offset carbon emissions.
By shrinking the available pool of carbon credits, they say, Klima should push up the price, making carbon-offsetting projects more profitable and encouraging more of them.
The KlimaDAO website describes the treasury as a “black hole for carbon,” but the protocol governing the project doesn’t stop credits from being released if the price of Klima falls below that of BCT.
The crypto traders have been mostly buying one specific type of carbon credit: offsets that were generated by renewable-energy projects and certified by Verra, a registry operator like Gold Standard.
“Organizations and individuals buying and selling these tokens do so at their own risk,” said Robin Rix, Verra’s chief policy and markets officer.
Ingo Puhl, co-founder of carbon-offset provider South Pole, said Klima has already made an impact on the market.
The rising number of Klima in circulation has weighed on the price, market participants say, while bitcoin and other cryptocurrencies have also fallen in recent weeks.
People using BCT to buy Klima get a discount to its price on cryptocurrency exchanges, where they could potentially sell for a profit.