Toco believes its novel monetary system is a solution for the climate crisis that doesn’t compromise economic growth, but sceptics question whether a lack of oversight will undermine its impact.
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00:00Imagine if the world's monetary system was built to fight climate change, so that every
00:05time you spend money, you're helping to protect the planet.
00:10One company claims to have developed the world's first digital currency that offsets carbon
00:15dioxide emissions.
00:16You could fundamentally change the economic system because your underlying value is no
00:21longer essentially debt, which is fiat currency is based on.
00:28It's now something that we depend on, our world literally depends on.
00:35This carbon currency is already accepted at shops and cafes in Switzerland and Denmark.
00:41Its developers say this is a solution for climate change that doesn't compromise economic
00:46growth.
00:47The problem that causes climate change is inherently built into our economic system.
00:55We need to find another way in which we value and exchange value with the underlying value
01:02being carbon mitigation, the removal of carbon from the atmosphere.
01:06And linking that to a currency was for us a brilliant solution that already existed
01:12out there in the world.
01:14The idea of linking money to carbon removal might sound novel, but the practice dates
01:18back to 1997 when the UN Framework Convention on Climate Change adopted carbon credits.
01:25Carbon credits are based on projects meant to remove or reduce the amount of carbon dioxide
01:30in the atmosphere.
01:32Companies can trade these credits to offset their own emissions.
01:35For Tocco, the certificates back up the currency as underlying assets.
01:40Tocco says its system is safe and regulated.
01:44Its permissioned blockchain allows for transparency in tracking transactions.
01:48Unlike some cryptocurrencies where ownership is harder to trace.
01:53It differs from cryptocurrency because it's safe and secure, it's centralized.
01:58So the carbon reserve performs its function and determines the value of the currency.
02:05The currency is not determined by market movements and by sentiment, essentially.
02:12But some experts are skeptical that a digital currency like this can have a meaningful impact
02:17on the environment.
02:18I would urge caution, both to investors and public policymakers.
02:25These coins are not the answer to our prayers to contain climate change.
02:31They just multiply financialization of a common good instrument, like the carbon certificates,
02:43adding volatility to both markets.
02:45There's also a question about whether carbon trading is effective at all.
02:50According to a recent report by the German UECO Institute, fewer than 16% of the carbon
02:55credits issued to investigative projects actually reduce carbon emissions.
03:00The temptation to game, to arbitrage between carbon reduction targets and the purchase
03:10of carbon offset certificates is very strong, which means the market for the token can
03:18also be gamed.
03:22And it also creates a very strong incentive for nefarious interests to corner the market
03:33or squeeze the market, creating a market manipulation of the underlying asset market,
03:41meaning serious price dislocations.
03:45Toko says there are currently about 1,000 users in Switzerland and Denmark with plans
03:49to expand in Europe.
03:51So is this the future of climate finance, or just a risky gamble?