September 16, 2022
There were approximately 672,000 tonnes of HFC-23 credits within the BCT pool, KlimaDAO’s community voted to remove them from the pool to improve the quality of contained credits.
(San Francisco, September 15, 2022) - KlimaDAO has announced that it has allocated a limited amount of its treasury holdings to remove the 672,000 HFC-23 credits from the Base Carbon Tonne pool and ‘burn’ them – an act which means that the environmental benefit of these tokenized carbon credits cannot be claimed by any entity or organization.
The completed transaction to remove the HFC-23 credits can be seen on the Polygon blockchain explorer.
HFC-23 carbon credits were phased out from the Verra Registry in January 2014 after they were banned in the compliance markets, with concerns cited around HFC-23 facilities gaming the system to create new carbon credit issuances that could be sold on into the market for a profit.
Two carbon projects had been registered with the Verra Registry prior to the phase-out, with issuances made only from the Yingpeng HFC23 Decomposition Project of 4.5mn credits. A number of these credits remain live on the Verra Registry, meaning their environmental benefit can still be claimed through the retirement of the credits. Data from AlliedOffsets shows that up until 2020, these credits were being retired by a number of entities to claim their environmental benefit.
The initial design of the Base Carbon Tonne pool by the Toucan Protocol allowed a broad range of carbon credits to be deposited in the pool, providing they had a vintage of 2008 and onwards. It wasn’t until a number of HFC-23 credits had been deposited into the pool, and concerns were raised about the quality of these credits, that the depositing of HFC-23 credits were blacklisted by Toucan.
Today, KlimaDAO holds over 90% of the Base Carbon Tonne pool within its treasury reserves and its liquidity pools on the SushiSwap platform. The primary function of the credits within the liquidity pools is to enable users of on-chain carbon to acquire tokenized carbon credits and claim the environmental benefit of them efficiently and transparently by retiring them on the blockchain using KlimaDAO’s retirement aggregator infrastructure.
To address concerns around the quality of these credits, KlimaDAO utilized its decentralized governance process to host a discussion with its community members on its Forum about the removal of these credits from its ecosystem. A token vote of the community members on the Snapshot platform passed with 83% approval to destroy the credits.
The approximately 672,000 HFC-23 credits in the BCT pool have now been burnt and removed from KlimaDAO’s tokenized carbon credit ecosystem.
Drew Bonneau of KlimaDAO said:
Both market commentary, and the available data on the HFC-23 credits demonstrates to us that this credit is considered at best low-quality, and at worst valueless. After discussing the issue with our community it is clear to us that removing these tokenized carbon credits from our ecosystem is the desired approach.
One of our strengths as a DAO is that we are able to bring in the perspectives of our 70,000 strong community, which includes a number of advisors from across the carbon market – we are grateful for their engagement and encourage continued participation with our DAO’s governance processes as we develop our ecosystem in line with market needs.
KlimaDAO is an on-chain scaling solution for the Voluntary Carbon Market. By combining tokenized carbon credits with a blockchain-enabled technology stack, KlimaDAO aims to open up the market to greater transparency and efficiency.
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