Explained: Why Verra suspended conversion of retired carbon credits into blockchain tokens

Toucan, a Web3 organisation launched October 2021, planned to set up an infrastructure to facilitate the buying of carbon credits issued by Verra. The credits would be retired and then placed on-chain in the form of a new token, known as a Base Carbon Token, or BCT, which would be stored publicly and safely and traded like any other crypto asset.

Since their launch, Toucan has bridged on-chain around 22 million Verra-issued credits, representing around 4 percent of all issued credits, a report by S&P Global said.

Most of the credits came on the back of a campaign by crypto environmental group KlimaDAO. However, most of these credits were attached to low-quality, long-dormant projects which hardly had any positive impact on environment, Bloomberg reported. This impacted market prices, triggering panic among traditional carbon-credit issuers and buyers.

Also, many blockchain and crypto platforms offering tokenisation marked the Verra-registered carbon credits as ‘retired’ on the registry before creating a token to prevent double spending.  Some platforms left the credit active.

Verra took the decision to ban the conversion of retired credits into blockchain tokens to eliminate the confusion. The Washington-based non-profit wanted to ensure that when a carbon credit is retired, it would mean that the credit's environmental benefit has been exhausted on being used to offset a company's emissions. Toucan’s plan distorted this belief by giving life to a digital ghost of that credit in the form of a BCT.