Could a carbon credit-backed digital currency help us fight climate change?

euronews (in English)

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.

Transcript

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?

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