Verra, one of the world’s major carbon offset accreditors, announced on Wednesday that it will prohibit the practice of producing blockchain tokens or instruments based on retired credits.
As decarbonization commitments gain momentum, more and more companies are using carbon credits to offset their carbon emissions. When carbon credits are used and removed from the market, they are deemed as “retired.”
Several blockchain and crypto platforms that provide tokenization use Verra’s registered carbon credits and mark the credit as “retired” in the registry to avoid double counting. However, some platforms leave those credits alive.
Verra is concerned that this practice creates ambiguity. Instead, it intends to explore “immobilizing” credits in order to address both the double counting issue and provide transparency and traceability, providing that “it can be done in a way that prevents fraud and respects environmental integrity.”
Two major carbon-based crypto initiatives Toucan and Klima Dao both reacted to Verra’s move, with Toucan being the more supportive. It sees this as an occasion to emphasize the benefits of public blockchain tokenization, adding that integrating on-chain and off-chain registries would allow credit prices in each market to remain stable.
While Klima Dao supported the notion of immobilization, it was disappointed that there was no early warning and regretted “unilateral decisions.” The organization said in a statement that Verra has done nothing to engage with the emerging on-chain carbon market.
The International Emissions Trading Association (IETA) expressed its thoughts on the subject in March. It sees value in using blockchain to track, report, and verify climate benefits. It also supports the use of distributed ledger technology (DLT) as a repository tool as well as for credit tokenization.
However, it expressed worries about some schemes’ speculative nature, the administration of decentralized autonomous organizations, and the environmental sustainability of some blockchain platforms.