Toco: A cryptocurrency backed by carbon offsets. What could possibly go wrong?

Paying for stuff using a cryptocurrency based on carbon offsets will not address the climate crisis.

Toco is a digital currency backed by carbon credits. The start-up company’s slogan is “Better money for a better world.” Using tocos, according to the company’s website, is a way of taking “climate action today”.

All you have to do is download the app, create a wallet, and buy some tocos. And if you’re in Switzerland or Denmark you can pay with tocos in some shops and cafés.

In a company video, Paul Rowett, the co-founder of Toco says that,

“If we can get together as a human race and agree that removing carbon from the atmosphere is a valuable activity, then the things that remove carbon dioxide from the atmosphere become assets, become revenue generating assets. So thinking about carbon as money, giving it a utility solves this problem. By ordinary people round the world spending a currency backed by carbon, it solves this problem.”

If that all sounds too good to be true, that’s because it is.

Burning fossil fuels is the main driver of the climate crisis. To address the climate crisis we have to stop burning fossil fuels. Buying petrol (or anything else, for that matter) with tocos is the opposite of a solution.

“Increase the efficiency of carbon markets”

Togo AG is a company incorporated in Zug, Switzerland. According to the Swiss corporate registry, “The purpose of the company is to research and develop solutions and platforms to increase the efficiency of carbon markets.”

That’s a lot more honest than the statements on the company’s website. Such as,

“The more you use toco for your everyday money needs, the more CO₂ you help remove from the atmosphere.”

So what’s behind Toco’s claims of removing carbon dioxide from the atmosphere?

A non-profit foundation called the Carbon Reserve was registered in Switzerland on 22 November 2022. The co-founders of Toco, Paul Rowett and Johan Pretorius, are on the board of the foundation. The Carbon Reserve buys a portfolio of what it calls “carbon mitigation assets”. Which are usually known as carbon offsets.

Here’s the list of the projects supplying the Carbon Reserve with offsets:

That’s three forestry projects (one improved forest management project in Mexico, one avoided deforestation project in the US, and one mangrove planting project in Pakistan), a wind power project in India, a landfill gas project in the US, a reduction of methane emissions from dairy cows project in Switzerland, and a biochar project in France.

By the end of December 2024, the Carbon Reserve had bought 3,585 carbon offsets.

The ratings listed for each project are not based on carbon ratings agencies, such as Sylvera, BeZero, or Renoster. Instead the Carbon Reserve carries out its own rating. (In future, it plans to hire “independent raters, supervised by the Foundation”.)

An “A” rating means that the offsets have a “high probability of achieving 1 tonne of CO₂e mitigation”, and a “BBB” rating means that the offsets have a “medium probability of achieving 1 tonne of CO₂e mitigation”.

There are three serious problems with Toco and the Carbon Reserve:

• carbon offsets do not permanently remove carbon dioxide from the atmosphere;

• carbon offsets are not gold; and

• carbon offsets are not climate action.

Let’s look at each of these in turn.

Permanence

A recent paper in Nature looks into how long carbon dioxide has to be safely stored in order to be considered a removal. The authors conclude that, “A CO₂ storage period of less than 1,000 years is insufficient for neutralising remaining fossil CO₂ emissions.” None of the projects supplying offsets to the Carbon Reserve can guarantee storing CO₂ for anything like that period of time. (With the possible exception of the biochar project. But at the end of 2024 the biochar project supplied only 0.6% of Carbon Reserve’s offsets.)

Carbon offsets are not gold

Toco AG’s proposal is to use carbon offsets in a similar way to the way gold was used in the gold standard monetary framework. The company’s proposal is “a new international monetary system (a carbon standard)”. But there’s a big difference between gold and carbon offsets. Gold can be seen, weighed, and its quality can be measured precisely.

Carbon offsets are an imaginary commodity based on a counterfactual story about what would have happened in the absence of the project. A recent meta-study in Nature Communications found that 84% of carbon offsets are junk.

The current price of tocos is €26.53. But the price of the carbon offsets that Toco buys is considerably lower than that. Exactly where the mark-up goes, or how the price of tocos is determined, is far from clear from Toco’s website and documentation. Neither is it clear what might happen if the price of carbon offsets dramatically falls or rises.

Offsets are not climate action

Toco’s marketing materials give the impression that buying carbon offsets is the same as taking action to address the climate crisis. The more tocos you use to buy stuff the better, according to the company. That’s regardless of whether the tocos are used to insulate your house, or to fly on holiday.

On the Google Play app download page are a series of images about the app. One has the title, “Measure your climate impact.” Use more tocos and you’ll be rewarded with status points and can earn rewards.

Obviously, using the toco app does nothing to stop extractivism. Neither does it address neoliberalism. Or carbon colonialism. Or over-consumption. And it does nothing to keep fossil fuels in the ground.