Over the past few months, millions of credits to offset greenhouse gas emissions have been virtually tied to newly created cryptocurrency tokens and withdrawn from circulation.
These credits, each representing one tonne of carbon dioxide, come from projects such as planting trees or setting up renewable energy farms that have third-party certification of climate benefit.
Some participants in this rapidly growing market want more transparency and common rules, saying a mishmash of standards and obscure prices make it difficult to compare credits and ensure that projects actually benefit the climate.
It wouldn’t change the nature of the underlying projects, but Toucan says it would create a forum for trade and improve transparency by providing real-time price data and a public record of transactions to track who gets credit for the deal.
Toucan, a Switzerland-based nonprofit, is one of several initiatives, not all using crypto technology, to reshuffle the voluntary carbon market with clearer pricing and ownership data.
Since BCT went live in October, the exchanges have been driven by Klima, another crypto asset launched on the same day as Toucan.
BCT tokens are kept in what KlimaDAO calls its treasury, effectively removing them from circulation so that they cannot be used to offset carbon emissions.
By reducing the available pool of carbon credits, they say, Klima should increase the price, making carbon offsetting projects more profitable and encouraging more.
KlimaDAO’s website describes the treasure as a “carbon black hole,” but the protocol governing the project does not prevent the release of credits if Klima’s price falls below that of BCT.
Crypto traders mainly bought a specific type of carbon credit: offsets generated by renewable energy projects and certified by Verra, a registry operator like Gold Standard.
“Organizations and individuals who buy and sell these tokens do so at their own risk,” said Robin Rix, director of policy and markets at Verra.
Ingo Puhl, co-founder of carbon offset provider South Pole, said Klima has already had an impact in the market.
The growing number of Klimas in circulation has weighed on the price, according to market participants, while bitcoin and other cryptocurrencies have also fallen in recent weeks.
The novelty of Klima and the software protocol that governs it makes it more difficult to assess the financial performance of tokens for first-time buyers.
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