By Chris Lang
Yesterday, REDD-Monitor wrote about Toucan and the 21 million carbon offsets it has transferred to the blockchain. Since October 2021, the company has transferred more than 21 million offsets onto the blockchain were they can be traded as Base Carbon Tonnes. The current price is US$3.31, down from a high of US$8.41 at the end of November 2021.
The offsets that Toucan is putting on the blockchain come from the registry run by the Washington DC-based carbon offsets standards organisation Verra.
Toucan is in effect exacerbating an existing problem. Toucan’s offset and blockchain nonsense does nothing to address the serious problems with carbon offsets, the most serious being that offsets do not keep fossil fuels underground.
In fact offsets are a distraction from the need to leave fossil fuels in the ground.
Verra’s “Crypto Market Activities” statement
In November 2021, Verra put out a statement on “Crypto Market Activities”. Verra states that,
Verra has recently been made aware of crypto market activities such as transacting in tokens that have been generated, minted, or otherwise facilitated by third parties and that aim to represent canceled or retired verified carbon units (VCUs) that have been issued under the Verified Carbon Standard (VCS) Program.
Without expressing an opinion as to the legal nature and environmental integrity associated with these activities and tokens, Verra wishes to emphasize that:
- Verra does not administer these activities and tokens and in any event takes no responsibility for these activities and tokens;
- Entities engaging with these activities and tokens do so at their own risk, are responsible for conducting their own due diligence, and cannot look to Verra for any matters connected with these activities and tokens;
- Tokens that have not been licensed or otherwise authorized by Verra are not verified, endorsed, or recognized by Verra as representing or equating to VCUs or an environmental benefit associated with VCUs.
Verra states that because the carbon offsets (which Verra calls Verified Carbon Units or VCUs) are retired before going on the blockchain, no party “will have any further rights to take the benefit of such VCUs or the underlying environmental benefits corresponding to such VCUs”.
Verra’s statement adds that,
Verra also reminds account holders in the Verra Registry of their contractual obligation under the Verra Registry Terms of Use not to create, market, or transact in instruments that are related, connected, or linked to VCUs or instruments that have a VCU as their underlying (“related instruments”) without Verra’s express written consent, which is to be granted in Verra’s sole and absolute discretion. Verra reserves its ability to enforce its rights against any account holders who have violated this obligation.
Clearly Verra is keen to isolate itself legally from whatever might happen to the carbon offsets once Toucan does its blockchain thing to them. Once a carbon offset is retired, as far as Verra is concerned, that’s the end of the story.
In February 2022, I asked Verra some questions about this statement and about Toucan’s transferring of retired carbon offsets to the blockchain.
I received a reply from Steve Zwick, who had recently started a new job at Verra as Senior Manager, Media Relations, after 15 years at Ecosystem Marketplace.
Zwick’s answers are published here in full and unedited:
REDD-Monitor: On 25 November 2021, Verra put out a statement on “Crypto Market Activities” referring to the Verra Registry Terms of Use which states that account holders cannot create instruments related to VCUs “without Verra’s express written consent”. Has Verra given Toucan its written consent to tokenise carbon offsets from the Verra Registry? If so, when was this written consent given? And who exactly did Verra give this consent to?
Steve Zwick: 
Toucan is not an accountholder in the Verra Registry and accordingly is not contractually bound to the provisions of the Verra Registry Terms of Use.
As we have clearly stated, any accountholder who is transacting instruments related to VCUs is acting at its own risk unless it has received Verra’s expressed written consent.
REDD-Monitor: The carbon offsets are retired before they are tokenised. My understanding of retiring carbon offsets is that a company would retire offsets in order to offset its emissions. Once an offset is retired, it cannot be used again and it is taken out of circulation so that it can only be claimed once. Could you please confirm that this is the case, and if not, please explain how retiring carbon offsets works and what it means.
Steve Zwick: The concept of retirement is set out in Clause 8 of the Verra Registry Terms of Use.
Retirement of a VCU extinguishes all legal and beneficial title and interests in the VCU and terminates the rights of any entity to take the benefit of the VCU and its underlying environmental benefits, with the exception of the offsetting claim.
An entity that retires a VCU and then creates a token is not, strictly speaking, tokenizing a VCU, but is instead creating an instrument that exists outside of Verra’s ecosystem.
REDD-Monitor: What is the value of a carbon offset that has been retired? My understanding is that a retired carbon offset cannot be sold, and it is therefore worthless. Is this correct?
Steve Zwick: Verra does not comment on the value/price of any carbon instruments, regardless of who creates them.
REDD-Monitor: On 15 December 2021, Verra released a Legal Due Diligence Questionnaire for Related Instruments. Who did Verra release this questionnaire to? Was Toucan one of the organisations required to fill out the questionnaire? Has Toucan done so? If so, did Toucan fulfil the legal due diligence requirements, and has Verra now negotiated a bilateral agreement with Toucan?
Steve Zwick: Verra has released the questionnaire to any accountholder who wishes to create, transact, or market related instruments, and who can demonstrate a minimum level of technical competence and understanding of the requirements.
The questionnaire asks the respondent to explain their structure as well as their KYC, AML, and other procedures aimed at ensuring the integrity of their activities.
If and only if they pass this due diligence stage would Verra consider authorizing any entity to create, transact, or market related instruments.
As noted above, Toucan is not an accountholder.
Nothing has been explained here. Mr. Zwick states “Verra does not comment on the value/price…”, yet three lines up: “Retirement of a VCU extinguishes all… with the exception of the offsetting claim.” Well, then, what exactly is the residual value of that “offset”? Is there any value there that can be “traded” or sold as an NFT? That is the whole question here, and it is not answered. But really, the world needs to get by on less energy consumption, by a couple orders of magnitude.
@Kathleen McCroskey – Verra is in full on CYA mode. You’re right, we need to reduce energy consumption and leave fossil fuels in the ground. Nothing that Verra does contributes to that in any way whatsoever. It is a massive distraction.