The Base Carbon Pool was launched in collaboration with KlimaDAO using the criteria that Klima core wanted to see in the pool
It was optimized for fungibility and deep liquidity, and as such was a permissive as possible, and it was deemed that post 2008 meant that the credits were of sufficient quality to be allowed into the pool.
Since then it has become clear that many renewable credits, which had up until before the launch of the carbon bridge and KlimaDAO remained dormant and uncertified, or otherwise forgotten about began to wake up and be issued. This is clear through the many recently issued credits appearing on the Verra registry.
The Toucan team got behind the ‘sweep the floor’ narrative of Klima DAO for BCT, but given our mission we want to shift the narrative and focus on financing higher quality projects.
However this narrative and effect only works in the case where there is a finite supply of these lower credits that can be ‘swept up’, and with the constant issuing of cheap renewable credits which are continually brought on chain as soon as the price of on chain BCT develops a premium over the lowest cost of production.
The Toucan team would therefore like to increase the quality of the Base Carbon Tonne by moving the earliest vintage start date from 2008 to something like 2012 or 2014, in order to increase the lowest cost of production, and the minimum quality TCO2s permitted into BCT.
We invite input on this topic in helping us to figure out how best to do this.
Note: This previously proposed 2014, but we are open to figuring out what start date would best serve BCT holders.
I like making the vintage start date more strict to ensure the quality of the carbon credit types.
It seems like these carbon credits that are being issued onto Verra, which as far as I understand is the more strict and higher standards carbon credit registry, are even making it into Verra.
From the perspective of what we as the crypto-native on-chain ecosystem can control–this seems definitely like a good way to ensure quality credits regardless of the quality types that Verra is choosing to issue.
As an aside, do you know the reason why Verra is still choosing to issue lower quality carbon credits? If the reality is that more and more carbon credit floor quality types are being ‘woken up’ and issued, this really does seem like a problem for the ‘sweep the floor’ approach.
I’m interested to see if you have any insights here!
First it will be great to add more data in the RFC. By increasing to 2014+ vintage, how many Verra credits already issued would be eligible to BCT? And 2012+? How many Verra credits with this criteria are not issued yet? It’s important to have this data to assess when ReFi will really have an impact on carbon prices. I don’t think we’ve increased prices yet.
Second, I think you should also discuss methodology restrictions like C3 is doing with UBO. What are the pro and cons? Should the new BCT pool be aligned with UBO for a fungibility between ReFi tokens?
We are pulling data together for this, to support this exploration, and will revert with it. I strongly believe that we impacted the price before, but that this leaky bucket issue needs to be addressed.
I’m posting here for one of our community members:
I think it should be 2012+ mainly because that is the criteria for the NCT pool and also CBL’s Core GEO trailing contract as well. The C-GEO Trailing contract is also a rolling vintage system so its vintage requirements change every year and would match up nicely with the BCT vintage requirements if Toucan decided to go with a rolling vintage route as well.
I agree. To make companies and institutions trust BCT as a way to offset their emissions the quality of the pool should be good. Now its trading low below 3$ so it does not seem that there is much appreciation and buy pressure. Picking high quality offsets from pool should cost more like you proposed in another post. And we should also find a way to burn the low quality credits like HFC-23 and increase quality from the low end.
Starting the program at 2008 was the right decision at the time, to raise the floor and bring as many people to the project as possible. However, now, allowing 14 year old credits into BCT doesnt serve the future goals.
At COP26, the decision was made to use 2013 as a cut off for CDM projects that can make it into Article 6 transactions.
The UN / ICAO set 2016 as a vintage cut off for the CORSIA program.
There is UN support for a vintage cut-off between 2013 and 2016.
I notice the average vintage of BCT has aged in Jan, Feb and March and so I encourage action on the question.
Vintage is a crude, but potentially helpful tool to increase the quality of credits. project start dates of 2013 or 2016 seem most reasonable of a bar to set. the Article 6 guidance text from COP26 says “The CDM project activity or CDM programme of activities was registered on or after 1 January 2013”. . CORSIA allows “activities that started their first crediting period from 1 January 2016” and will cap the timeframe for programs depending on CORSIA’s assessment of the program.
Picking one of these two vintage dates will help improve quality of credits, but honestly there are a lot of credits that are pretty suspect that could still have been started after 2013 or 2016. This is why a more nuanced quality screen really needs to be applied. The only source that seems like it will have publicly available scores/ratings on carbon credit quality will be Carbon Credit Quality Initiative: https://carboncreditquality.org/. They have not released scores yet, but as they do the could be integrated into BCT or other pools that Toucan sets up. In the meantime, the annex in this document is quite helpful to understand quality levels relating to common project types: http://www.offsetguide.org/wp-content/uploads/2020/03/Carbon-Offset-Guide_3122020.pdf
This is true, and we would like to address that, for example via the mentioned scoring, which we have been looking into.
For now though, the vintage start date increase is a simple instrument that can filter out low integrity credits and prevent further issuance of old credits, which we can agree, does not help the climate at all.