The Toucan Protocol bridges the world's voluntary carbon markets onto public blockchains where open, transparent markets can securely flourish at scale. Healthy carbon markets are a key component to support humanity's efforts to address the climate crisis — climate finance connects planet-positive projects with the capital needed to create ecological impact.
Carbon markets have been evolving over the past decades, with key ecosystem players constantly working to improve the quality and integrity of carbon credits. At times this has meant ceasing to approve carbon credits that were previously valid.
Specifically, in 2014 the Verified Carbon Standard announced that it would stop issuing credits for projects related to HFC-23, a byproduct of the refrigerant manufacturing process. This decision was based on Verra's acknowledgement of the misincentives created by these methodologies. (9 January Program Update)
However, HFC-23 credits still existed on the Verra registry. Toucan provides open, neutral infrastructure to bridge the world's carbon markets to public blockchains. The Toucan validation process checks to ensure that the bridging process was completed properly from a technical perspective.
These HFC-23 credits are still active in the Verra registry. It was brought to our attention that these phased-out credits were being bridged after a number of batches constituting ~600,000 tCO2e had been approved. Upon learning that these credits were being bridged, the two projects employing this methodology were immediately blocklisted to prevent further credits from these projects being tokenized. Toucan has also updated the gating criteria of the Base Carbon Pool to prevent these phased out credits being deposited into the pool in return for BCT tokens.
We feel this action is important and justified — our objective is to create a high-integrity carbon market. The Toucan Bridge builds on Verra's role verifying the integrity of carbon credits. Verra's public statements indicating their decision to stop issuing HFC-23 credits in 2014 serves as our basis for blocklisting these credits on the Toucan Bridge without undermining our neutrality. We will not approve any further HFC-23 credit batches over the bridge or the BCT pool.
We are exploring to what degree we need to develop further governance processes to manage risks related to low-integrity credits.
Toucan's overarching objective is to provide infrastructure for a regenerative economy. We believe that care for the Earth should be embedded in the ways we transact value — that planet-positive actions should be the default, not the exception. To get there, we are building open infrastructure and doing everything we can to build and scale in line with our values. After considering this deeply, we feel strongly that this action is warranted, mainly because Verra itself deprecated support for these credits.