Toco, a new digital currency launched by a Swiss-South African start-up Toco, is looking to combat climate change. It intends to leverage the clout of carbon credits to do so. Toco recently rolled out in Switzerland and Denmark to get more users a sustainable alternative to traditional currency. Today, over 1,000 active users are working to make this collaborative effort a reality.
Toco has built its platform to cater specifically to the needs of the growing voluntary carbon market. For each token it issues, it’s removing or sequestering one metric ton of CO2 from the environment. Now worth about €26, Toco can be spent at some 50 retailers and restaurants in Switzerland and Denmark. The currency is backed by serialized certificates issued by Verra & Gold Standard. These certificates certify projects that sequester carbon or achieve emission reductions.
The founders of Toco have an incredibly inspiring vision. They think their case digital currency has the potential to provide a new way for people to reduce their carbon footprints. When users choose to “retire” their Tocos, they permanently deactivate the corresponding carbon certificates. This implementation step is a key leverage point that will certainly advance local climate mitigation initiatives.
Expansion Plans in Europe
Toco is getting momentum in its first markets. As the European start-up continues its mission to fight climate change, it has ambitious plans to deploy even further across Europe. The founders’ ultimate vision is to bring carbon offsetting to a much wider audience, making it available through the course of regular transactions.
Co-founder Paul Rowett tells us that the real revolution will come when it’s widely adopted. Imagine if every working European, 190 million individuals, enjoyed one portfolio cup of espresso per day purchased on Toco. As a result, he said, this would grow into a $50 billion (€48.5 billion) demand for carbon mitigation assets. This demand is already developing in today’s carbon markets.
Rowett hopes that Toco will help change the way value is understood in today’s economic systems. He argues that linking currency to carbon removal fundamentally changes the nature of money: “You could fundamentally change the economic system because your underlying value is no longer, essentially debt, which fiat currency is based on. And it’s increasingly become something that we take for granted; our future literally depends on.
Challenges and Concerns
Despite its innovative approach, Toco has come under fire by some environmental experts who question the viability and reliability of carbon credit systems. Emilios Avgouleas, a researcher specializing in international financial markets and blockchain technology, emphasizes the volatility inherent in both Toco and the carbon certificate markets. He warns investors and policymakers alike of the dangers posed by such digital currencies.
“I would urge caution both to investors and public policymakers. These coins are not the answer to our prayers to contain climate change,” – Emilios Avgouleas
Avgouleas stresses that Toco exists to provide one. This approach could inadvertently add greater volatility to the tectonic forces of the nascent financialization of carbon credits. “They just multiply financialisation of a common good instrument like the carbon certificates, adding volatility to both markets,” he added.
Steffen Dalsgaard, the centre manager of the new Center for Climate IT, shares such concerns. First, he casts doubt on the credibility of carbon credits. He elaborates that a host of criticisms have developed over the years with respect to the verification mechanisms established to oversee these credits.
“Critique has been levelled against carbon credits and markets numerous times and their promises of ‘robust’ verification mechanisms frequently fall short simply because the whole idea that the climate can be treated like an account in this way is fraught,” – Steffen Dalsgaard
Dalsgaard emphasizes that creating credible counterfactual scenarios for theoretical environmental harm is still a major hurdle in verifying carbon credits.
“Companies like Verra claim that their methods guarantee that these savings are additional, but how do you prove that? It relies on presenting a number of credible counter-factual scenarios of what might happen in the absence of the issuance of credits, but how can you ever prove that something counterfactual really would have happened?” – Steffen Dalsgaard
The Future of Carbon-Backed Currency
Though the idea of pegging a currency to carbon removal isn’t new, the idea dates back to 1997. Specifically, that’s when the United Nations Framework Convention on Climate Change (UNFCCC) adopted carbon credits as a mechanism to reduce greenhouse gas emissions globally. Toco is the first to bring a new, positive angle to this notion. It leverages blockchain technology and new digital assets to create an alternative currency.
The vision behind Toco seems very promising. As experts told us, transparency and accountability are essential in this fledgling market. Avgouleas insists on the need for a robust auditing process with oversight to ensure that the underlying assets are truly backing up the token’s value.
“There should be an auditing process or mechanism to verify that the underlying instrument or asset in stock [with the digital token issuer] and back the exchange rate of the token. If it’s not, obviously the token is worthless,” – Emilios Avgouleas
Projects like Toco and other climate-focused community development initiatives can only succeed if we create trust in the growing carbon credit ecosystem. Meanwhile, they need to continue advancing their sustainability agenda. As Toco moves on its future journey, it will be important for stakeholders to tread these complexities thoughtfully.
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