Toucan’s Raphaël Haupt on Coordinating Climate Action through Decentralized Protocols

Toucan builds technology to unlock climate action at scale and bring environmental assets on the blockchain. Signals recently spoke with co-founder Raphaël Haupt about the possibilities Web3 offers to the fight against climate change.

Hannah Scott: Tell us more about who you are and how you came to found Toucan.Protocol.

Raphaël Haupt: I studied engineering in the kind of context of energy markets, and ended up completely randomly getting into crypto around 2017, like so many others. With my focus on electricity markets, I was really interested in this intersection of energy and web3. There were all these projects like the Brooklyn Microgrid, or other kind of peer-to-peer electricity or energy trading ideas around prosumers producing electricity, buying and selling electricity from each other without any intermediaries — the early dreams of what web3 could unlock. That was the niche that I got really, really excited about, and I ended up building an electricity market auction mechanism on the blockchain. I then got really into DAOs, decentralized autonomous organizations, back in 2019, mostly because I was excited about the kind of coordination tools that they provide. Given that climate change is the biggest coordination failure that we have in front of us, I thought, hey, we should be able to apply some of these new coordination mechanisms to address the environment as well. That was the initial drive that led to starting Toucan, which was actually birthed at a hackathon at ETH London back in 2020. I wanted to combine this idea of a DAO that would basically issue carbon credits on-chain to create a green solidity modifier, or a smart contract that could automatically offset other smart contracts to address the environmental footprint of the blockchain. I almost feel like the idea kind of dragged me along. It was at Deep Science Ventures, which is a London-based venture builder, where we really kind of took this idea and decided to launch a company that would address some of the challenges I saw in the wider market and taking it from “hey, it could be cool to make blockchains carbon neutral” to actually really understanding all the problems in the carbon markets.

HS: Before digging into the more philosophical questions, I’d love to hear more about what it means to have blockchain-enabled carbon credit markets?

RH: I’ll try to break both parts down. Carbon credits are essentially vehicles for financing positive externalities being created somewhere. I will use the term carbon credits to refer to voluntary market carbon credits, and not emission allowances, which are two very different instruments. Emission allowances are basically issued by a central authority like the EU, or California, as part of an emissions trading system. Toucan.Protocol operates in the voluntary market, because that’s where we think the problems are biggest, and the tools we have at our disposal can actually solve these problems. So voluntary carbon credits are just a results-based finance mechanism. Somebody is creating some positive impact that can be measured in the form of one ton of carbon that has been reduced or removed, and that often comes with additional positive impact. Only once that impact has been created and verified, they get issued a carbon credit. Then there are different uses of that carbon credit, the most common of which is to use it to balance your negative externalities against it, which we call offsets. But carbon credits don’t necessarily need to be used to offset their own emissions, carbon credits can also be used to verify that whatever money you sent somewhere actually had the impact that it claims it had. The difference between a claim that I have planted 1,000 trees and the carbon credit is that the former will never give you the certainty that the trees still stand. On the other hand, with carbon credits, there’s a mechanism to make sure that they stand over the period of around 60 years. The nature of the carbon credit, as a consequence of what I just said, is that it’s a bunch of data and signatures. It’s a chain of trust, essentially. If we take the example of a reforestation project in Brazil, you need to make sure that the land rights are in place, you need to make sure that the local communities are actively involved and participate in the project, and are not being displaced as a consequence of this project, you need to measure that these trees actually grow and then get cut down over time. There’s a lot of these things which kind of translate into this very intangible asset of a carbon credit. The value of that carbon credit comes from the data that you could collect and the verification of that data by trusted third parties. So carbon credits really are a package-positive externality and an intangible asset, which is why I believe that blockchains are actually the perfect ledger, the perfect system to keep track of that data and the signatures that are attached to that data in order to increase the transparency in a claim. In a nutshell, Toucan is trying to scale this kind of system, so that we can have a more efficient market that actually delivers true impact on the ground, and that more of the money that is being directed towards mitigation activities actually lands in the hands of those working on the projects.

HS: The Toucan Protocol seems to operate with the thesis that technology can be used to coordinate actions that support the health of the planet. Can you talk more about the role technologies like blockchain can play as a facilitator of global, real-time coordinated action?

RH: Blockchains, for me, are a way to collectively agree on the state of a system across the globe, and then the coordination really comes from smart contracts. Smart contracts really unlock coordination of scale. Think of a protocol like Uniswap, which is coordinating the exchange of value for millions of people and billions of dollars of value, and it’s just a few lines of code. That’s quite amazing, right? The other way I look at it is more on the side of human coordination and community governance, where DAOs come in. Good governance needs to create resilience. It turns out that democracy is a really inefficient system of moving forward. The data shows us that democracies don’t perform better than dictatorships in periods of good periods, but they perform particularly better in moments of downturn or catastrophe because they’re more resilient as a system. I think the same is true for on-chain governance: whenever you have a really valuable protocol, and you want to protect against rapid changes, that’s when this idea of decentralized governance makes a lot of sense. Another use-case of blockchain for coordination is when communities come together and need to find a way to coordinate to create common goods. I think that DAOs can be really helpful in coordinating efforts and measuring contributions that are being made in different forms that don’t need to be exclusively financial. Things like time and work and other intangibles. We can use these tools to codify rules and measure value, and use token design and economics to align incentives within a community, and I think that’s really powerful.

HS: Beyond revolutionizing how we humans coordinate our actions toward planetary health, do you see any opportunities for utilizing blockchain to expand decision-making to non-human entities? In other words, can new technological protocols shift how we relate to the planet in addition to changing the economics of environmental footprints?

RH: There’s a great research project called Nature 2.0 that revolved around the idea of equipping nature with sensors through IoT and remote sensing technologies. From there, you can assign natural entities legal personhood, so that groups can go to court and defend the rights of that legal person. There’s another project called Interspecies Money, which proposes allowing other species to fund people that are doing good for that species.

In general, I don’t think we’re at the point yet where we’re going to say “let’s use AI to put decision-making in somebody else’s hand.” I think the biggest reason is the lack of data. We still have so little data on the world. The other part is the specificity such approaches require. We’re ultimately dealing with complex systems, and any model of a system is a simplification of reality. Reality is complex, it’s hard. I would be afraid of what happens if we just give this power to AI to make decisions on behalf of nature. But I do think there is great potential for AI as a tool or as an assistant for a community to make better decisions.

HS: What does “protocol” mean to you? How does thinking of technological tools as “protocols” open up different modes of relating to and building technology?

RH: I think “protocol” describes a fundamentally different approach to building software, and technology in general. I do think it’s probably one of the most powerful things that Web3 has brought to the table. It’s having one piece of a technology stack, and being able to plug it into the next piece of the stack. Some people can come and put it all together, and then you have a very complex application, which is just made up of a lot of very lean bricks, like Legos. What this allows us to do is to create something like a public good that is governed by a community. This is really powerful because we can create business models around public goods. The way that I look at Toucan, the idea is to create a protocol that allows us to keep track of environmental assets, independently of where they come from. I talked about the fragmentation of the market earlier. How can we create a standard to represent environmental assets on blockchain in a way that allows other people to tap into that and build new things on top of it. It’s open and anybody can build on it. It’s not like a SaaS solution which is hidden behind a paywall. It’s a smart contract. You get this out-of-the-box interoperability and a really powerful way to better align incentives in an emerging market.

One of the core values behind what we do at Toucan is to break down the barriers to enter this market. Carbon credits are really complex, really difficult to get into — I’m learning new things every day and I’ve been doing this for many years now. By creating a unified user and developer experience, we hope to unlock new ways of innovation to lead the next generation of builders to create a solution that we could not even have dreamed of. Our hope is that by solving one of these deeper infrastructural problems, we’ll make it really easy for others to build their own applications, protocols, or products on top of it.

Whenever you have a new transformational technology that hits the face of the earth, the first instinct is to recreate what we already know… I do think it’s the same thing with Web3, where Web3 is not just a technology, it’s also a change in how we operate. It can be a tool to regain control that we have given away — control of our systems, but also control of our data.

HS: Thinking about interoperability alongside the points we raised earlier about coordinating action is really interesting — instead of interacting with pieces of software in their respective silos, one can join them up together.

RH: It’s a bit of a bet, because if you look at the carbon market today, it’s completely vertical. The players do project development, they own the whole stack, and they sell to corporations. So it’s going to be interesting to see if we can actually break it up. By providing a horizontal piece, can a collection of different things that plug into each other, provide an equally satisfying user experience, and at lower prices?

The idea for Toucan started in February 2020, and we launched in October 2021. Our launch was followed by a lot of craziness in the beginning. Then roughly a year ago, the incumbent carbon standards changed their terms of service to basically force us to stop the whole tokenization bit. Now we’re entering this phase where the product needs to be fully integrated with the existing world, which is the hardest part to do in Web3 — this connector between the real world and the on-chain world. I think this is still something that the whole field needs to prove, not just Toucan. Web3 needs to prove that it’s actually delivering real value outside of the crypto bubble.

Whenever you have a new transformational technology that hits the face of the earth, the first instinct is to recreate what we already know. If we look at the internet, the first instinct was to have your restaurant menu but on the internet now. My early days of internet experience were very much what we already knew, but just on a screen. It took 10-15 years to have something like Amazon Web Services pop up and completely change the way we work. I do think it’s the same thing with Web3, where Web3 is not just a technology, it’s also a change in how we operate. It can be a tool to regain control that we have given away — control of our systems, but also control of our data. I do hope that this kind of AI boom that we’re witnessing right now may sensitize people to the value of their data, and that will then trickle back into the Web3 ethos, where one of the core ideas is to regain control of your institutions and your data.

HS: There are these various movements within artistic communities to opt out of having your data, your artwork in model training datasets, which seems like a useful instantiation of a public ledger.

RH: There are also interesting things around data unions. You know, your own data is not worth a lot, but if we all collectively group our data and put it in a data union, we now suddenly have negotiating power relative to Facebook or Google or other Big Tech companies, because we actually have pretty significant datasets that we can share. I think we are going to have a really interesting decade ahead.

HS: Any final thoughts that you want to leave us with?

RH: To give you a sneak peek on what Toucan is working on now, we’re working on solving the supply problem. Most of the on-chain carbon market right now is standing still as a consequence of the lack of high quality supply. The way I’m looking at it is that if we take this idea again of composability and building blocks, I see it also as our responsibility to give the people that build on top of Toucan the best materials to build with.

The last thing to leave with is to stay curious and open. Things are complex, carbon markets are complex, and they’re not perfect. It’s easy to disregard their potential, and the same thing is true for Web3. But I think we need both. I always appreciate people coming in, building, and contributing, rather than just pointing fingers at all the things that don’t work, which are plentiful, but we have to start somewhere.