Joint HFC-23 Cleanup Operation with KlimaDAO


Partner with KlimaDAO to jointly fund a ReFi cleanup initiative: remove the problematic HFC-23 credits from the BCT pool and properly dispose of them.

Motivation & Context

Per the KlimaDAO Tokenized Carbon Dashboard’s BCT page, there are approximately 672 thousand tonnes of TCO2 in the BCT pool bridged from Verra’s deprecated HFC-23 methodology (Phasing out of HFC-23 projects - Verra), AM0001:

While many have rightly pointed out that these credits should never have been retireable within Verra’s registry - which would have prevented them from being bridged - they met BCT’s initial vintage and methodology criteria and were de-facto allowed into the pool. Once the problem was identified, Toucan promptly excluded the methodology from the BCT pool requirements (Blocklist - Toucan).

The ReFi community has taken efforts to prevent the use of HFC-23 credits by excluding them from the no-fee automatic redemption function on Toucan’s TCO2 contracts, so anyone trying to consume the HFC-23 credits would have to pay the steep selective redemption fee. They have also been disabled in the KlimaDAO retirement aggregator. However, the presence of these credits is still a limiting factor for the integrity, demand and adoption of BCT as a ReFi building block.

As part of the fee structure for BCT, Toucan has committed to utilize 80% of the redemption fees for regeneration of the pool, first and foremost to remove the HFC-23 tonnage from circulation: Expediting bridge approvals, BCT quality and selective redemptions.

To speed this regenerative process, KlimaDAO proposes to split the cost of this cleanup operation equally between the two largest stakeholders in the BCT pool (KlimaDAO and Toucan).

Suggested Course of Action

Taking the total number of HFC-23 credits (672,248.9993) and dividing by 2, each party has a burden of 336,124.49965 tonnes.

So far, there are ~2858.759 tonnes of BCT in the Toucan regenerative fee multisig wallet: Contract Address 0x222aadfaf8ffa6cc7d89f7e99cf94963b121adbf | PolygonScan. In addition, Toucan would need to procure ~333,265.75 BCT for the remainder of their share.

If Toucan agrees to the terms of this proposal, KlimaDAO would put forward a KIP to utilize the necessary amount of BCT from the treasury reserves to redeem half of the HFC-23 tonnes and properly dispose of them. Assuming that KIP passes, the required BCT would be withdrawn from the treasury and the HFC-23 TCO2 tonnage redeemed via the KlimaDAO multisig and then destroyed.

NOTE: Since these credits are no longer recognized as legitimate, the TCO2 should NOT be properly retired, but rather sent to the 0x0 address directly to prevent future use without claiming the credit as a retirement.


Toucan exempts itself and KlimaDAO from the selective redemption fee for the purpose of extracting the problematic credits from the BCT pool at minimal cost.

Split the burden of cleaning up the HFC-23 credits 50/50 between Toucan and KlimaDAO. If the terms of the proposal are agreed:

  • KlimaDAO proposes a parallel KIP to utilize BCT from the treasury reserves for this operation.
  • Toucan utilizes the BCT that has accumulated so far in the regenerative fee multisig and acquires the remaining BCT required.

Each party redeems the appropriate amount of BCT for the HFC-23 TCO2 using the no-fee redemption mechanism, and sends them to the 0x0 address.


If Toucan is unable or unwilling to partner with KlimaDAO on this initiative, KlimaDAO will be forced to bear more of the burden - either the additional cost of the redemption fee, or half the tonnage, or both.

For reference, KlimaDAO unilaterally cleaning up the HFC-23 tonnage with no assistance from Toucan would require nearly 3 times as much treasury BCT to be utilized:

  • ~670k tonnes total of HFC-23 TCO2
  • +25% additive fee => to selectively redeem 670k tonnes, the user must provide ~33% more tonnage
  • => ~900k BCT required for KlimaDAO to unilaterally clean HFC-23 credits out of BCT

Example calculation from KlimaDAO selective retirement interface:

Timeline for Execution

Discuss amongst the community over the next week or two, finalizing terms so KlimaDAO can put forward a KIP.

Assuming the KIP passes the 6 day KIP process (3 days on the forum, then 3 days for Snapshot vote), coordinate execution of the cleanup operation - ideally by the end of June 2022.



Great initiative! Very excited to see this come forward. Would be really great to see Toucan joining us in this effort!


This is a great opportunity to show strong collaboration in the ReFi space. :muscle: :brain:


Strongly support this. We can draw a line under the HFC-23 issue forever by taking this decisive - and fair - action now.


It’s time to put this HFC-23 issue to rest, together Toucan and KlimaDAO can make it happen :muscle:


What a great proposal and opportunity for collaboration between Toucan and KlimaDAO. Also such a positive story of two leaders in the crypto x climate space doing the right thing even in these bear conditions. Let’s do this! :green_heart: :muscle:


Hope for a collaboration like this between the leaders in Refi!


Hey everyone, thanks for your proposal. We are discussing it internally. We have some key people out on holiday right now, but expect to be able to respond around the 22nd.


Sounds like a fair and realistic proposal to draw a line under the HFC-23s


This is great!

It goes without saying that quality matters in carbon markets, but I’ve always defended BCT, and I still see it as Toucan’s flagship product. To be honest, I have been a bit disappointed to see some representatives in ReFi distancing themselves from BCT publicly.

We shouldn’t have to! Ultimately, a fair & liquid market would not be complete without a realistic price floor. A Base Carbon Tonne. Unfortunately, because of the inclusion of these deprecated credits, BCT does not currently represent a realistic price floor. The inclusion of these credits make it harder to market BCT as a viable low-cost infrastructure for on-chain offsetting.

This cleanup operation, along with the updated BCT inclusion criteria, would send a strong message to ReFi and to the carbon market at large! We own our mistakes, we collaborate, and we invest in the additionality and positive climate impact of our respective protocols. As KlimaDAO continues to bring new off-chain demand, the legitimacy of BCT and all other carbon pools will only continue to increase.


Great proposal. The clean-up operation is a necessity, and the time to do it is now.


Great proposal, thank you :slight_smile:

Note, it’s not possible to sent to the 0-address, but we are ideating to implement a direct burn mechanism for these fraudulent credits that takes them out of the supply tracking mechanism used by block explorers.


I support this proposal. It would be right thing to do. Would increase credibility of BCT and onchain carbon market. How would Toucan finance this? Should they market buy the needed BCT tokens?


I support this proposal to collaboratively destroy the aforementioned HFC-23 credits and regenerate BCT pool quality. Even though BCT was initially designed for KlimaDAO, it still is Toucan’s flagship product that has significantly helped in pushing the development of the on-chain carbon market since last Oct. This collaboration between the two big players of on-chain carbon - Toucan and KlimaDAO - would send a strong positive signal to the legacy players that we are truly walking the talk of building quality and meaningful ReFi in Web3.


Fantastic proposal.

Let’s do what we can to move forward and clean this up together


I’m very happy to see this initiative. I didn’t know much about the HFC credits until I saw a few media mentions about them. If Toucan and KlimaDAO can work together to clean up the BCT pool, they should!


this is amazingly well written. exciting to see KlimaDAO leading from the front on these initiatives and I’m pretty sure Toucan will be excited to join in!


I think we can all agree that destroying the HFC-23 credits would be a positive outcome. It would lend credibility to the onchain carbon market and signal our dedication to improving the quality of carbon credits in general. The proposed joint cleanup operation is an excellent opportunity for collaboration between KlimaDAO and Toucan Protocol.


Supportive of this initiative and hoping we can generate some positive media coverage on this type of collaboration in ReFi!*


This is a no-brainer. Let’s get it done, Toucan.