deCarbonized #19: Verra challenges credit tokenization; Increasing forest carbon integrity

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💡 Spotlight story

Verra seeks new approach to tokenizing carbon credits

Last Wednesday, carbon registry Verra announced that it would be halting the retirement of credits on its registry for the purpose of tokenization.

This has been the approach taken by web3 projects to tokenize credits to date, as it avoids the double counting of the credit in traditional and blockchain-based markets. This process of retirement can create confusion however, as this action is normally associated with the release of a credit's environmental benefits, as opposed to it moving onto the blockchain.

To overcome issues associated with this, Verra are now seeking to develop a new approach in which tokenized credits will instead ‘immobilized’, remaining within their registry while transparently moved onto the blockchain.

This will create exciting new opportunities for bi-directional credit tokenization, representing ongoing innovation in the space and a move towards greater regulation and integrity. We look forward to ongoingly participating in and supporting dialogue around the role of web3 in scaling a high integrity VCM.

Check out TIME or Carbon Pulse coverage for more details and responses from the web3 community.

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⛓ Market action

Weekly carbon stats

Toucan Protocol is building carbon market infrastructure to finance the world's best climate solutions. These are our on-chain stats from 19.05- 26.05.22:

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Carbon prices as of 30.05 with 7 day change:

BCT - $2.13   -15.5%   |   NCT - $4.61  -8.7%

NGEO - $10.98  +7.3%   |   GEO - $4.77  +1.5%   |   EU-ETS - $83.98  +7.4%

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🔍 Research in Focus

Improving the integrity of forestry carbon credits

Integrity was a key theme to emerge from IETA’s recent European Climate Summit, especially in relation to scaling the VCM. This exciting new initiative recently caught our eye…

The Tropical Forest Credit Integrity (TFCI) Guide was developed by eight major environmental and Indigenous Peoples organizations to assist companies interested in purchasing high-integrity, forest-based carbon credits. This is with the aim of driving demand for credits with higher social and environmental co-benefits, and ultimately improving the VCMs climate impact.

The Guide is part of an evolving ecosystem of initiatives and resources focused on VCM governance, which it seeks to complement.

The Guide provides five key recommendations for how companies can direct demand towards high-integrity tropical forest carbon emission reductions and removals:

  1. Include tropical forest credits in climate strategies beyond mitigating supply chain carbon, moving towards more ambitious science-based decarbonization targets.
  2. Ensure that essential components of social and environmental integrity are met for all credits purchased, paying attention to indigenous rights and conducting additional company-level due diligence.
  3. Align corporate reporting of forest carbon crediting purchases with the Paris Agreement’s transparency and accounting requirements.
  4. Rapidly shift demand towards credits from regional-scale projects, which allow for greater control over governance, social engagement and create more robust MRV opportunities.
  5. Prioritize the purchase of credits from projects that reduce threats to existing tropical forests, protecting co-benefits provided by biodiversity and ecosystem services. Removal projects will increase in importance in the future.

Given issues currently associated with forestation projects relating to additionality, permanence and rights of indigenous communities, this approach could best enable the generation of ongoing sustainability co-benefits while ensuring the highest possible credit quality.

Read the full TFCI Guide and recommendations here.

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