Toucan unveils 'liquid' market for biochar carbon credits

Quantum Commodity Intelligence – European digital platform Toucan.earth is readying the world's first 'liquid' market for biochar credits in response to growing interest from buyers of carbon credits and developers, it announced this week.

Biochar carbon removal (BCR) credits have been in high demand and the International Biochar Initiative, the industry's main trade group, reckons a six-fold increase in biochar material output is possible over the next two years.

However, many investments are hindered by the lack of a liquid - meaning, commonly traded - market for these credits.

In the wider voluntary carbon market, standardised contracts on exchanges have lost momentum following a sharp fall in price, while over-the-counter (OTC) trade for individual projects is active but remains highly bespoke.

"Everyone is trying to understand how we can have the best of the standardised and the OTC worlds...The pool is our answer," said Raphaël Haupt, Toucan's founder.

The firm made its name in 2021 by enabling 'tokenisation', a digital process involving the transformation of carbon offsets into assets that can then be easily transferred on the blockchain and used in a myriad of financial applications.

Toucan's software connected straight to existing registries, enabling the movement of more than 20 million carbon offsets into the crypto space in just a few weeks, amid booming interest from that community for the energy transition.

However, even as the practice became widely popular, fuelled by global interest for crypto assets and brokers' thirst for profits, some doubts emerged about the quality of the credits thus transferred and the practice was later banned by US-based registry Verra.

Char pool

Last year, Toucan created a connection with the Puro.earth registry, enabling the smooth transfer of credits between its platform and Puro's, and it said it has built additional 'safeguard' mechanisms to avoid manipulation by ill-intended individuals.

The digital firm has now created an additional filter on Puro.earth projects based on its own preferences and on top of that, it is about to launch a marketplace for BCR credits from these projects.

The company said the value proposition is simple: "Project developers need a reliable way to turn credits into working capital, so they can keep scaling. Buyers need a low-risk process to acquire credits."

Toucan has onboarded its first project developers, including the US' Oregon Biochar Solutions, which provided a set of Puro certified credits to kickstart the pool.

"Such infrastructure, combined with thorough due diligence, is a necessity to scale the market to reach planetary goals," said Oregon Biochar, in a statement.

The developer worked with Quebec-based GECA Environnement, the largest consultancy in the biochar industry, to identify the right volume of credits for Toucan's initiative, thought to be in the hundreds of tonnes of carbon dioxide equivalent initially.

Other developers, such as Bolivia's Exomad, American Biocarbon and Canada's BC Biocarbon, are also providing carbon credits to the initiative.

Toucan's Char pool will generate one headline price for BCR credits that can be accessed online 24/7, providing more transparency to the industry, it said.

Buyers will use cash and have the ability to redeem credits from individual projects at a discount or premium to the main price based on an algorithm devised by Toucan, thus maintaining the attractiveness of the pool for buyers, said Haupt.

"Due to the inherent differentiated nature of carbon credits, standardised contracts have historically not worked well in the space. We enable a new form of standardised contract that allows buyers to select specific projects while still benefiting from the liquidity of the market," said Toucan.

Thanks to the direct link with Puro's registry, buyers will also have the option to permanently retire the credits in question, sell them into the pool or transfer them back into their Puro account.

A sale in the Char pool will trigger an automatic payment to the original project developer in the form of 'royalties', giving them potential upside if a project becomes particularly well traded.

Meanwhile, a project's given price premium or discount in relation to the headline BCR price will move based on the demand for its credits and the supply available at any one given time inside the pool.

"Instant access to liquidity is the biggest selling point for projects," said Haupt, who calls biochar "the most affordable form of highly permanent carbon removal right now".