The prospect of that level of transparency is raising concerns among crypto businesses that are creating carbon tokens. “In other words, who are they? Do they have the technological capability, the legal basis, any of the applicable regulatory approvals?” “There is a due diligence aspect here,” Mr. Verra is also considering whether it wants to ask for identities of those who swap these tokens. Verra also said it would like crypto platforms to share the identities of the creators of carbon tokens or those who claim its environmental benefit, warning that without transparency the system would be vulnerable to potential fraud. In its new proposals, Verra said the retirement mechanism shouldn’t return and any tokenized credits should be “live” on its registry in special sub accounts until an environmental benefit is claimed to “retire” them. In May, Verra said it would no longer permit credits to be “retired” from its database to create new carbon tokens, saying the method was confusing the market. Carbon credits aren’t regulated, and their underlying projects have been criticized for quality controls that are lacking or inconsistently applied. “There is a very lively debate about whether or not there has to be a walled garden,” Mr. An active market for crypto tokens based on retired carbon credits creates confusion over who can claim responsibility for the climate benefit of the underlying project, said Robin Rix, Verra’s chief legal, policy and markets officer. That opened a window to crypto enthusiasts who turned these “retired” credits into digital carbon tokens. When a credit is “retired” this way, its owner gets a receipt. To count a credit against its carbon footprint, a company can remove it from circulation on a registry so nobody else can claim the benefit. The voluntary carbon-credit market rose to nearly $2 billion in value in 2021 from roughly $520 million in 2020, according to data from Ecosystem Marketplace. Registries such as Verra set standards for projects and track the credits. Companies that are looking to offset their emissions buy carbon credits-each equivalent to one metric ton of reduced or removed greenhouse gas-from projects that promise to help the planet, such as protecting forests, planting trees, or supporting wind-and-solar energy in poor communities.
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