Cryptocurrency traders move to carbon markets

In recent months, millions of credits have been tied to newly created cryptocurrency tokens and removed from circulation to offset greenhouse-gas emissions. Some market participants say the technology is bringing transparency and helping to create new incentives for projects that benefit the climate, but not everyone is convinced.

Many companies aiming to offset their emissions purchase credits representing reductions in greenhouse gases. These credits, each standing for one metric ton of carbon dioxide, come from projects such as planting trees or setting up renewable-energy farms that have third-party certification of climate benefits. These are traded in unregulated markets at different prices depending on the carbon removal activity.

Some participants in this fast-moving market want more transparency and general rules, saying standards and unclear prices make it difficult to compare credit and ensure that projects actually benefit the climate. An industry group, the Taskforce on Voluntary Carbon Market Scaling, says that making it easier to trade and trace credits, such as by publicly recording transactions, will mean more companies to meet their climate goals. Offset can be used.

Toucan, a decentralized finance, or DeFi, project that launched in October says its technology could help. Tokens lets users who have carbon credits link them to digital tokens. The token, called BCT—for the base carbon tonne—can then be traded on cryptocurrency exchanges. It won’t change the nature of the underlying projects, but Toucan says it will create a platform for trading and improve transparency by providing real-time pricing data and a public record of trades tracking who is funding climate-benefits. takes credit for. projects.

“The world’s rapidly growing voluntary carbon markets need to run on a transparent, digital and neutral system to maximize their impact,” said James Farrell, Toucan’s head of technology.

Toucan, a non-profit based in Switzerland, is one of several initiatives, not all use crypto technology, aimed at overhauling the voluntary carbon market with clearer pricing and ownership data. So far, over 17 million carbon credits have been linked to the BCT token. BCT was recently trading at around $5.50, meaning those carbon credits are now worth over $90 million on cryptocurrency exchanges.

However, the companies accounting for their carbon offsetting are not the main users of Toucan. Since BCT went live in October, trading has been powered by Clima, another new crypto asset that was launched on the same day as Toucan. Toucan’s website states that the two projects operate independently, but have a “friendly and symbiotic relationship”.

Klima is a decentralized autonomous organization operated by KlimaDAO, a group that collectively organizes crypto projects.

KlimaDAO lets people buy Klima tokens using BCT tokens. BCT tokens are kept in KlimaDAO’s own treasury, effectively removing them from circulation so that they cannot be used to offset carbon emissions. Meanwhile, Clima tokens are traded on cryptocurrency exchanges, allowing traders to speculate on Carbon-backed crypto assets.

The cryptocurrency has a poor environmental reputation due to the energy consumption of bitcoin mining. The mostly anonymous developers of Clima, who chat on the Discord messaging app, say their tokens help the climate. By reducing the available pool of carbon credits, he says, Clima should raise the price, make carbon-offsetting projects more profitable and encourage more of them.

But Margaret Kim, chief executive of Gold Standard, one of the main carbon-credit registries, said the clima undermines efforts to make the market more transparent.

“We support the transparent and energy-efficient use of blockchain technology in carbon markets, but caution strongly against those that are speculative in nature.” “With regard to Clima, we are also concerned about the fact that the founders are anonymous, which runs contrary to the need for transparency in climate action in general and carbon markets in particular.”

Credit may not last forever in Clima’s treasury. The KlimaDAO website describes the Treasury as a “black hole for carbon,” but the protocol governing the project does not prevent the issuance of credits if the price of Klima falls below BCT. So far, Klima has traded at a large premium to BCT.

Toucan’s Mr Farrell said that while ClimaDao’s creators are anonymous, “their actions are completely transparent,” adding that ClimaDao has directed millions of dollars to climate-benefiting projects.

More than 14 million BCT tokens have gone to support the Clima token, which accounts for the majority of the more than 17 million BCT tokens in existence.

Crypto traders are mostly buying a specific type of carbon credits: offsets that were generated by renewable-energy projects and certified by registry operator Vera, such as Gold Standard. According to KlimaDAO, roughly 4% of Vera-certified credit is tied to BCTs.

Robin Ricks, Vera’s chief policy and markets officer, said: “Organizations and individuals who buy and sell these tokens do so at their own risk. Vera certifies that carbon-removal projects meet its standards and is credited on a registry. But never mind what happens to them after purchase.

Ingo Puhl, co-founder of carbon-offset provider South Pole, said Clima has already made an impact on the market. He said that the price of the credit Clima is absorbing has gone up since the clima appeared.

,[Klima] Raising sellers’ price expectations and providing additional incentives to develop new carbon projects,” he said.

KlimaDAO says that there were approximately 62,000 cryptocurrency wallets holding Klima tokens as of Sunday. According to pricing website CoinGecko, the coin has recently risen to over $3,000 in price at the time of the launch of Klima. Market participants say the increasing number of climas in circulation has weighed on the price, while bitcoin and other cryptocurrencies have also declined in recent weeks.

The novelty of Clima and the software protocol that governs it make it difficult for early buyers to assess the financial performance of the token. People who use BCT to buy Clima get a discount on its price on cryptocurrency exchanges, where they can potentially sell for a profit. Clima Protocol regularly distributes new tokens to those who hold their existing tokens.

Billionaire owner of the Dallas Mavericks, Mark Cuban, says he holds Clima tokens, but declined to reveal how much or what profits he made.

“While anonymity was not optimal and it takes little learning experience, if it works, the environmental impact could be consequential,” said Mr. Cuban.

This story has been published without modification to the text from a wire agency feed