Why is "verte" incorrect here?
Because we're talking about the color green, and colors are masculine in French (that's why we used "ce" and not "cette").
Beware though, the noun "couleur" is feminine, not masculine.
And if you got the exercise of writing what you heard (we all get different exercises on the same grammatical point), you would hear [vɛʀ] vert, not verte [vɛʀt].
and why not "Ça vert"?
"ça" is not a demonstrative adjective.