Decentralized Finance and Carbon Offsetting: What’s Being Retired?
Over the past week, KlimaDAO made noise in the carbon offsetting markets by retiring over 7 million tCO2e in carbon credits. Klima does this by linking to the Verra registry via Toucan.earth — we take a look at what’s being retired via the blockchain.
Decentralized finance has long been touted as a sidekick to carbon offsetting: both aim to put a monetary value on something that’s less-than-tangible, and both push for transparency as a core operating principle.
KlimaDAO is one of the latest firms looking to combine the two by building a carbon-backed token whose ultimate aim is to drive up the price of carbon offsets. The motive is to force corporates to move more quickly towards real mitigation, instead of relying on cheap credits in order to delay making structural changes.
Klima uses Toucan.earth’s Bridge to retire the credits. Bridge ‘allows anybody to bring their carbon offsets on-chain in a tokenized form.’
In the niche space of voluntary carbon offsetting, Klima’s buying spree made a splash. And for good reason — in the last three weeks, Klima has retired nearly a tenth of all offsets retired from Verra projects so far this year.
But what has actually been purchased and retired? Looking through our database, we were able to identify the 106 projects whose credits have been retired to date via Toucan’s Bridge on Verra.
At AlliedOffsets, we’ve made it extremely easy to turn the process outlined in this Twitter thread into a single search in our database. By looking at retirements mentioning ‘Toucan’, we found over 400 retirements between October 11th and 31st, corresponding to over 9.7m tCO2e retired (presumably, this accounts for both KlimaDAO and others using Bridge). Here’s how the data breaks down:
The top countries from which credits have been retired are India, Turkey, Brazil and China; combined, those four make up 87% of the credits retired. More than 83% of credits have come from renewable energy projects; forestry was second with 14%.
The vast majority of credits came from the years 2011 to 2015, meaning the credits would not be CORSIA-eligible from a vintage perspective.
In other words, most of the credits were not what is considered sterling quality; only two months ago, the FT wrote about the problems with old renewable energy credits.
Indeed, that’s the point — by getting to those cheap credits first, Klima and others are preventing corporates from offsetting with them, and instead forces them to move toward more recent vintages and higher prices.
As this new market develops, we’ll continue to publish regular updates on retirements facilitated by Toucan.
We’ve made the data available for anyone interested, here.
If you have any questions about the data above, please email me at anton.root@alliedcrowds.com.
