Toco: Bridging the Gap Between Finance and Sustainability

In what has to be one of the most original episodes of the Climate Confident podcast, I delve into the world of Toco, an innovative currency that's setting a new precedent in the fight against climate change. Join me as I talk with Joe Pretorius and Paul Rowett, who share their vision of a currency that not only serves as a medium of exchange but also as a tool for environmental action. Backed by The Carbon Reserve, Toco represents a bold step towards marrying financial transactions with carbon reduction efforts.

Joe and Paul recount their journey from conceptualising Toco to its pilot success in Stellenbosch, and their upcoming expansion into Europe. They highlight how Toco enables individuals and corporations to contribute to climate action in a tangible way. Moreover, they introduce the Carbon is Money organisation, a pivotal force in advocating for the recognition of carbon reduction as a valuable economic activity, crucial for Toco's mission and broader acceptance.

For those fascinated by how innovation can bridge sustainability with everyday financial practices, this discussion sheds light on Toco's potential impact. Learn about the synergy between The Carbon Reserve, the Carbon is Money organisation, and how Toco is poised to revolutionise our approach to economic activity and environmental stewardship.

Don't forget to check out the video version of this episode on YouTube

Transcript

Joe Pretorius: 0:03

There's a whole lot of frustration, I think, with the average person saying, like, we know climate change is a problem and we would like to do something about it. But other than looking towards my government and going around and I don't know, throwing orange paint on Renaissance masters gives you an idea of the kind of frustration out there. But that's clearly not the answer. We need some other kind of means to make it really easy for people to take climate action

Tom Raftery: 0:26

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Climate Confident podcast, the number one podcast showcasing best practices in climate emission reductions and removals. And I'm your host, Tom Raftery. Don't forget to click follow on this podcast in your podcast app of choice to be sure you don't miss any episodes. Hi, everyone. Welcome to episode 165 of the climate confident podcast. My name is Tom Raftery, and before we kick off today's show. Just a few quick words about what's coming up in the next couple of weeks. So, next week. April 24th, I'll be talking to Daniel Lawse from Verdis Group about their ways of helping companies reduce their emissions. The week after I'll be talking to Julia Salant from EcoVadis about what they're doing in the space. But today, today, I'm talking to Carbon Is Money. And we have a really interesting show for you lined up today where we be talking about using carbon mitigation as a form of currency. So without further ado, my two special guests on the show today are Joe and Paul. Joe. And Paul, welcome to the podcast. Would you like to introduce yourselves, with maybe. Alphabetic order Joe going first?

Joe Pretorius: 1:44

Yeah, thanks. Thanks for having us. I'm Joe Pretorius founder of the Carbon Reserve and sponsor of the, the Toco initiative.

Paul Rowett: 1:53

Thanks, Tom. Thanks for having us. You know, my name is Paul Rowett. I'm currently leading the Carbon Is Money movement and currently in Switzerland.

Tom Raftery: 2:03

Okay. So what is the Carbon Is Money movement?

Paul Rowett: 2:09

Yeah, so the Carbon Is Money movement is a purpose led movement to bring communities together behind a solution to the climate crisis where communities can agree that if removing carbon from the atmosphere is a valuable activity, and We think about that slightly differently, we can base money off it. And I guess we'll, we'll explore that, but it's an agreement of exchanging value between communities in a slightly different way so that we can fix the system that is currently creating carbon emissions as economies grow. And it's a more sustainable way for us to all move forward together.

Tom Raftery: 2:57

Okay, give me, I guess, first of all, before we dig into this any deeper, give me a little bit of the backstory of why or how you came up with this idea, guys.

Joe Pretorius: 3:11

Okay, I'll take this one. Yeah, so Paul and myself you know, we've been sort of tech Entrepreneurs invest investors over the last sort of 2 to 3 decades. And, you know, we've come, we've become more and more concerned, obviously, with regards to climate change and start looking at the underlying data and came to the conclusion Tom that you know, really carbon emissions continue to increase every year, despite, you know, last three decades of 28 COPs. You know, carbon emissions today are, you know, 60 percent higher than what they were in 1990 when we had the first, you know, first sort of Kyoto Kyoto conference and started asking ourselves why that you know why that is. And after a lot of sort of exploration and research, basically just came down to the conclusion that it's inherently an economic, problem is that, carbon emissions aren't, priced correctly, their, their cost to the environment and their social cost is not accurately reflected in our economy because that's how our capitalist economic system has been set up. It doesn't value environmental, environmental resources. And then digging on that further, then asked ourselves, but you know, why hasn't the last 28 COPs sort of produced anything? And, and that sort of led us down a path of investigating the carbon markets, which, at the face of it sounds like a very, very good, very good idea to create a market for for carbon so that the market can can find that that price. But having looked at that market now, you know, you realize that, the volumes in that markets are still very, very small. The markets are really fragmented. They're illiquid. They're very sort of opaque and and I mean, if you read enough newspapers, you'll know that they they soiled with sort of, credibility concerns all all over the space. And that sort of lead to a place where, you know, three decades of having carbon markets and the pricing is still way too soft to sort of transmit the incentives that you need for for the kind of investment that we're going to need in mitigation activities and that then, you know, sort of produces the next question is, okay, but why are these carbon markets not working? and, you know, we realized that it's effectively, you have this sort of strange dynamic where they're just very badly designed, they're poorly governed, not well supported by the governments that have, you know, that have created them. And it's a kind of an indictment, I guess, on our institutions today that they've designed these, these carbon markets so poorly and given them, they haven't, you know, given them the right kind of rules or mechanisms to operate. By because they just haven't been able to find, the consensus to to do that. And we don't actually now think, you know, I mean, the trend is your friend, right? 28 COPs. We don't think that they're going to find the agreement and cooperation required to, to fix these carbon markets. And, and that's really what set, you know, Paul and myself off on a journey and to say, look, we have to find a way to price carbon accurately. But we can't, we, we simply can't rely on the institutions to go and do that for us. The the carbon emission problem has very sort of specific characteristics that we think makes it very hard for for our institutions to actually get to the right kind of solutions.

Tom Raftery: 6:20

What, what issues does it have that make it hard?

Joe Pretorius: 6:25

Look, I think if you look at the way that we've dealt with these kind of unpriced outcomes in the past, right? Tom is like, they typically called by economists negative externalities. And, you know, sort of the way that they that the way that they work is the fact that a producer or a consumer gets all the benefits from the emissions but suffers none of the social and environmental cost. We just sort of naturally incentivized to to overproduce them. And the way that we've dealt with it in the past is our governments have, have either used things like taxes to deal with it, or they've used legislation, or in some cases, they've set up these, these sort of pricing schemes to to deal with it. And in the past, that worked really well. I mean, if you take the acid rain problem in the United States in the late eighties, they set up a sulfur market. And I think within seven to eight years, they reduced sulfur emissions by 82 to 90 percent there. But once you start thinking about carbon emissions, you realize it's a little bit different from sulfur emissions and, you know, an acid rain in a number of, a number of factors. And in the sense that, you know, with acid rain, the problem occurs there where the sulfur is put in put into the sky. Where with, you know, carbon emissions, that's not the case. You can have one country polluting quite a lot and not suffer necessarily the impact of climate change as much as another country. I think, you know, the Maldives are, you know, good case in point. we can have huge emissions in industrialized countries like India and China and have very little emissions in the Maldives. And the Maldives will probably suffer the greatest cost to their civilization and their, their economy. So that's one problem with it. The other problem that you have is this sort of whole wealth distribution that we still have. So, I mean, rightly so you look at developing countries and they point to the Western world and say, but you guys have gotten rich off the back of cheap emissions and cheap fossil fuels for the last 200 years. And we're in we're in this problem in the first place. And now you're asking us to curb emissions. I mean, that does seem quite unfair. If you I think we're to speak to people who are still living in in, in poverty. And so they rightly demand that, you know, they get compensated by it by the developed countries for that. But now the developed countries have to figure out. Okay, you know who's paying the bill and how much and try and convince their voters of of doing that. And you overlay all of that that we're sitting in this sort of political system where, Our governments need to prioritize their positions over four year or five year electoral cycles and, and they need to balance, you know, the costs of products, which has to do with the input cost of energy, protecting the jobs, you know, job sector and unemployment, and then satisfying, you know, all the, all the climate concerns. And that's a, you take 230 odd governments in the UN, all with these factors, and I think you can see that there's just no chance. That they figure out out. How do we do this? That is that is fair. And even if I could find the agreements who polices this. So, yeah, so that's that's why I think that the carbon emission problem and and and, of course, the fact that it's. You know, unlike sulfur or unlike ozone, I mean, it's the thing that drives the economy, right? It's the thing that drives you know, political and economic power, you know, in, in, in, in the world. So, yeah, I think that football is going to be kicked around for forever unless to Paul's point, we can get together as a community and solve this ourselves.

Tom Raftery: 9:55

So how do we get together as a community and solve this ourselves?

Paul Rowett: 9:59

question.

Joe Pretorius: 9:59

well, I'll let Paul explain to you how he's trying to get, you know, these difficulties of trying to mobilize people. But, but, but I think the solution that we've come up with is it takes a little bit of mental gymnastics sometimes for I guess the man in the street to get their head around it. But we've really come down, we've, we've really sort of concluded the following is that first. You've got to make it possible for every man in the street, every business, every enterprise, every economic actor in this, in this market to be able to take climate action every day and to take that climate action in an effortless, low cost, low friction kind of way. At the moment, I mean, there's a whole lot of frustration, I think, with the average person saying, like, we know climate change is a problem and we would like to do something about it. But other than looking towards my government and going around and I don't know, throwing orange paint on on Renaissance masters you know, gives you an idea of the kind of frustration out there. But that's clearly not the answer. We need some other kind of means to make it really easy for people to take climate action. And then secondly, I think we need to we need to accept the fact that because the government's aren't going to find this consensus. We need to move beyond compliance and ethics as the major driver for demand to decarbonize or, you know, to lower carbon carbon emissions. We need to find an actual use case for carbon mitigation outcomes. So, you know, any sort of outcome that that comes from carbon emission reduction or avoidance or sequestration, we need to find an actual everyday utility for it that is useful in your everyday life to to to every person so that we have real demand and that the source of demand needs to be needs to be really large. And that's that's where we've come down to to the conclusion that what we really should maybe perhaps be doing is thinking about regulating our money supply on the back of, carbon mitigation. So have money have our money backed by carbon in the way that money used to be backed by by gold as an example. Because what then happens is. As the economy, you know, as the economy expands, so there's the value in the economy and to represent that expansion and value in the economy you need more money. But if the money is somehow tied back to the availability of carbon mitigation outcomes, then that expansion and economic growth transmits a demand signal to to the producers of carbon mitigation outcomes and, you know, reflects there in pricing. And since and since we already have, such a large money market effectively because people have everyday needs for money, right? You need it to store value. You need it to transact daily. If we can channel a portion of, of that everyday use into a currency backed by by carbon mitigation, then you're going to be channeling huge amounts of demand. And that way, every person every day can continue with their lives, transacting and participating as an actor in the economy. But every sort of contribution that you make to the economy is now having this additional effect that it's creating this really positive demand signal on on carbon mitigation. I mean, if you think about, if you think about gold just as a, you know, as an analogy and an example the world based its currency on, supply on gold since 1971, when we finally moved off the gold standard in, in totality, right. And, and what that meant was that if you think about gold as a, as an article, it has no other use case really other than as a store of value. And we have mined gold. And to this day, people will go kilometers under the ground at great expense to go and retrieve, retrieve gold because for years we've, we've said that gold is convertible into currency that can be, you know, that can be be used. And up until 1971 it's no, it's no surprise that gold mining was the biggest industry in the biggest industry in the world because the world's money supply was based off off gold. Since then, we've gone into, in, in, into creating our money supply off the issue of government debt. And guess what's the biggest industry today in the world? It's the financial industry. And we think that sort of logic, that logic holds. Just start basing a portion of the money supply, at least on carbon mitigation outcomes, and you will create pure and actual demand on the one side to expand the carbon markets. And by the same time, you know, giving everybody the the ability to at least translate their economic activity into into underlying good.

Tom Raftery: 14:44

Okay. How do we do that from a practical perspective? I mean, there, there, there's all kinds of potential issues there. I see with, first of all, you have to, you have to convince governments, and you have to convince central banks and you have to convince people on the streets and, you know, so on and so on and so on. But even setting that apart for a second, just from a practical implementation perspective, who's doing the carbon mitigation, how, and how is that being verified and then converted into some form of value?

Joe Pretorius: 15:25

Yeah. So the, so the weather carbon, I mean, this is where I think, you know, we can leverage the stuff that the carbon markets have, you know, have already there's been a lot of work done in terms of creating the practices and, and I guess the methodologies for converting a carbon mitigation activity into some kind of commodity. And you know, this is work that's been done over the last three decades for the, for the carbon market. So typically how it works is there's there's various different kinds of projects out there. Some of them are nature based, so things like, you know, reforestation and the cultivation of mangrove forests and things like that. There are also, carbon technologies out there like biochar and direct air carbon capture where you have these large, facilities that, you know, actually suck in air and then trap, you know, trap the carbon through chemical, chemical processes. And there's a host of, there's a whole host of range of, of things in between, such as accelerating the path towards renewable and, and so forth. And then over the last 30 years, these independent sort of registries and bodies have been been created places like Vera and the gold standard and the new registries coming up every, every day. And these projects that that aim to to remove carbon from, from the air or, or create some kind of mitigation outcome, there are methodologies, methodologies applied to establish what the baseline is, then there are measurements that get taken by to get taken on a periodic basis, and those are independently verified and audited. And once all of these, practices have taken place there are effectively these tradable certificates that are that are issued and, you know, these certificates have a, you know, have a face value of, so many tons of carbon dioxide that has been removed in in this particular year, they have, they come in vintages. So, you know, the 2021 or 2022, 2023, so, you know, every year, these things get measured, they get recorded, they get verified, and then they get put into tradable tradable certificates. And these are the certificates that some of the. Okay. Yeah, in the voluntary market, at least some companies who have net zero goals and are buying as, as a means to try and offset their, their footprint. So those are the, the source or those, those commodities are there. I think if you look at that market, that market, as I said, to you has certain issues at the moment, and that's because there's very, very low demand signal in there. So the market, the markets aren't very liquid, and they're quite fragmented in the way that they operate. And they sort of, you know, all the trading happens in an over the counter basis. So I'm not going to sit here and try and paper over the fact that there are definitely some actors and some moral hazards in that market at the moment. And, people have acted fraudulently in the past, but that does not, that does not mean to say that the market is that the idea of the market is bad or that the mechanisms that were created aren't necessarily so. I think just because the liquidity is so, so low in that market and the demand signal is still so weak it's very hard to find the kind of, incentives to attract, let's call it the, you know, the, the appropriate policing that a market needs like that. It needs, it needs transparency and it needs liquidity. Once it has enough participants on the market, then it's not, you know, just these concentrated actors that are doing deals over the counter there. Then I think you, you start improving that market a lot. It's like any, any market where it starts, right? I think, you know, you, if you were to, you know, buy penny stocks in 1870 outside, you know, outside a tree on Wall Street, you know, they suffered the same kind of credibility concerns initially, but you know, as the market becomes more mature you have the ability to get, get rid of the bad actors.

Tom Raftery: 19:20

Okay, so we've got these organizations who are removing carbon somehow, whether it's direct air capture, whether it's enhanced weathering, whether it's whatever, planting trees. We have methodologies to verify that they've done that, but what's next? How do we take that from there having done that to turning that into money?

Joe Pretorius: 19:50

Okay. So I will, I will give you two solutions. The one is the really easy solution practically but very hard to get people, you know, very hard to convince. And the second one is, is the one that we're proposing and that we're busy busy implementing. Look, I think practically, if you were to, if you were to look at central banks across, you know, around the world, they could do this really easily. How they would do this practically would be to create some kind of reserve mechanism where at least a portion of the money supply is based on carbon mitigation outcomes. In other words the Federal Reserve or the, you know, ECB could say to the market, listen, we will buy and hold these carbon credits and carbon allowances on our balance sheet, and then they can regulate the money supply in terms of how much they're buying and how much they're selling of these, these assets so that they can balance economic ambitions with environmental goals. So the IPCC has set a specific pathway for mitigation outcome that we can require. And the central banks could effectively use that as the, you know, as the forward guidance and saying, this is how much we're going to, how much we're going to buy, and we will issue money liquidity to the market on the back of that. So that's, that's kind of a very simple simple application. And I think if the central bank of the Fed did that tomorrow, you'll see a lot of investment channeling into into these kind of activities. The other thing that they could do, for instance, is they could maybe, you know, each of the commercial banks have reserve accounts at the federal or the central banks today, and those reserve accounts get set at certain minimums to, you know, restrict the amount of new loans that the banks can write. Another way that they could enforce this was simply to, augment that reserve account to also include carbon credits and saying, look, you know, you need to have so many carbon credits and based on that, it's the amount of new debt that you can issue to the to the market. And I think that will obviously incentivize, the commercial banks to start funding investments into these sustainable, sustainable activities. But as you rightly point out, I don't think that the central banks are going to be easily coerced. It's gonna either require a very brave central bank somewhere to take a first mover or secondly, they're gonna have to find some kind of inspecie reserve mechanism between, between the central banks. And that is beset with the same collective sort of action dilemma that, that we spoke of of earlier. So what, what we've decided to do over the last three years is we've just said. Look, maybe there's a maybe the right way to do this is just to create an independent global currency, that is entirely backed by carbon mitigation outcomes and put that in the hands of every person, global citizen out there who believes that carbon mitigation has has value and ask them to demonstrate that belief by using it as money because money is trust and money is value. A representation of value. So so we have over the last two years developed the infrastructure to power a independent global currency. And thereby asking the market to effectively drive this process because, you know, the more the market decides to use money based on carbon versus let's call it government issued money. You are, you are effectively starting to transmit money demand towards, you know, moral money or carbon mitigation actions naturally. So what have we done practically to make that possible? So we've created a new currency. We call it Toco for short internally, but it's it's really just an abbreviations of ton of carbon dioxide. If you if you've got a chemical background, you'll recognize O. C. O. Is the molecular formula for carbon dioxide. So we call it the Toco. Each unit of that currency represents one ton of carbon dioxide equivalent that has been credibly mitigated and verified. If all the currency in circulation is therefore entirely backed by a portfolio of carbon mitigation assets. And when I mean a portfolio is we buy all kinds of, we buy the market effectively. We buy all kinds of carbon mitigation outcomes and house them in a portfolio. We've taken that portfolio and that portfolio is put in the custody of something that we call The Carbon Reserve, which is a nonprofit foundation that we created in Switzerland. And that nonprofit independent foundation is effectively mandated to maintain this convertibility of the currency into the underlying and to responsibly try and expand this expand the money supply because they should expand the money supply, obviously you've got a greater, climate impact. And and the carbon reserve effectively acts like like an independent central bank, right? That that runs this this currency. And it, as I said, maintains the convertibility of the currency into the underlying, but it also will leverage its balance sheet to support any sort of risks that might happen on the in the currency and provide liquidity to the market. And then to support rapid adoption we've created a payment system for the currency is sort of peer to peer payment system that's available to anyone anywhere in the world where that has an internet connection. So that makes it immediately possible for you via an app that you download from the app store to immediately convert some of your current currency into a currency backed by carbon. And then you can use that app or that wallet that payment system in the same way that use a Tap and Go sort of payment way to go to participating merchants in your community who, you know, are prepared to accept the currency and you you can pay with the currency at the merchant. And therefore, the idea is just simply is the more people start using the currency, the more currency there is in circulation. And the more you know, currency there's in circulation. It means the more let's fiat that the carbon reserve is receiving. So money that it's receiving from people who are exchanging and it can use that to start buying carbon mitigation assets on the community's behalf and transmit that demand signal there. So that's that's sort of the scheme that we that we did. And then in February last year, we, we decided to put it into practice in a sort of real world experiment. And Paul took this whole sort of concept and took it to his hometown and, and we actually deployed it there over the last seven to eight months to see you know, how, how does it work in practice effectively? And does it work?

Tom Raftery: 26:37

Okay, okay, great. So I guess a couple of questions and I'll come to you, Paul, to tell me about the the implementation in a sec, but how do people who buy Toco, how do they know that the carbon has actually been removed? Because to your point earlier, there have been lots of issues with offset schemes and things where, you know people planted forests off the back of offsets and then the forest burned down or the forest were going to be planted anyway, or, you know, whatever it is, there's all kinds of problems with those kinds of markets. So if I buy a Toco today, how do I know that it's actually backed by carbon that has been removed from the atmosphere?

Joe Pretorius: 27:27

The approach that the carbon reserve takes is twofold. But I think philosophically, the way that we look at the market at the moment is to say, yes, we recognize, we recognize that there are integrity risks when it comes to some of these some of these carbon assets. So the first thing that we do is where we think that we add value and create higher levels of lower levels of risk for the market is that the carbon reserve basically buys a portfolio of of assets, right? So that portfolio that portfolio represents all the Tocos in in supply. So we're pooling risks that might exist on an individual level into into a portfolio. So in the same way that the central bank does that with, you know, the different kinds of debts debt that it buys. So, yes, it is still likely that you might find post the fact of owning a owning a certain kind of asset that yes, maybe the checks and balances weren't, you know, weren't as great to maybe that the forest in question was never, was never going to be additional, et cetera. But we, but what we think this allows the carbon reserve to do on behalf of the community is it can take that knock on that portfolio because it's only, it's not a single asset that anybody is exposed to. It's a portfolio. So if there's a single event the carbon reserve can write that event in its portfolio and it doesn't really have a meaningful impact on an individual, let's call it unit basis of, of the Toco. So you're getting the portfolio you know, risk effect. And then the second thing that the carbon reserve does is it looks at all of these in the assets that it buys, and it does a risk, a fairly comprehensive risk assessment on on the asset. And what do I mean by risk assessment? So we go and look at, you know, the kind of the type of project that it is, we look at the methodology that has been applied. We look at, you know, what is the potential for things like, you know, leakage? What is the potential for how permanent is it? You know, how durable You know, is it. Take a forest as an example. Yes, you can have a forest today, but it can still go up in smoke later, right? That's a, that's, you know, that's a particular risk that sits there. But that risk is different from, let's say, direct air carbon capture, where that stuff is being, stored in the ground and in the form of cement or whatever the case, whatever the case might be. So we've got, we've got these various dimensions that we look at and we, and we then apply a risk assessment on that on those assets. And what we're trying to do is we sort of trying to think of it in the same way that people think about debt today. And we write them as either triple A or, you know, triple B or a, or a C or a junk, you know, a junk credit. To say that, yes, there is probably a mitigation outcome that's being achieved, but there's a risk in that the face value is actually the value. And then after we've risk rated it, we adjust the value of that, that asset. So if you were to take, for example, let's call it some kind of reforestation project in somewhere in South America, as an example. The face value of it might be a ton of carbon dioxide mitigated, but we would only book it into the reserve at 700 kilograms as an example. So apply like a 30 percent risk discount factor on that. And that's the second level of protection that that we do. So the carbon reserve always holds a, it holds a portfolio and B, it holds far more actual credits than what it claims the, the value of those credits in terms of actual carbon mitigation outcome is. We have now also started to see the emergence of other companies such as B Zero and Renosta who are trying to offer a service to the market independent rating service, because we are aware of course, that that, you know, we're marking our own marking our own work at the moment. But then we, you know, we take into account, we look at what what B Zero is done with where we've got assets that they've rated and and other companies. But again, our view here is this is where we start. It is a little bit of scrambled eggs and not, you know, the perfectly boiled egg yet. But it definitely reduces the risk in the market from where it is now. So that's a good move forward. And then as we get enough demand into this space, we think then it really becomes possible for the likes of, you know, maybe even a Standard and Poors or a Moody's to get involved here and start rating these assets, you know, independently and publishing, it because there would be enough economic incentive for them to do that, and so that will be another enhancement in transparency. So, so how do we do this Tom? Well, we try to be transparent by publishing the portfolio that we have, by publishing the risk assessments that we have, by inviting other parties to come and criticize those, those risk assessments. And we're not saying that we're going to get it perfectly right in this, you know, perfectly right every time. But we do think that we, that we're making big steps forward in terms of lowering lowering the risk from where they're now.

Tom Raftery: 32:27

Okay. Okay. And this is obviously a a DLT technology currency. So analogous to, to Bitcoin. Bitcoin obviously has lots of issues around, for example, Bitcoin mining being massively energy intensive and also the price of Bitcoin at the moment is at an all time high or close to an all time high if it's not at an all time high, you know, so it's, it's become a speculative asset is Toco going to have those kinds of issues is, or will it have a set price? How is the price of a Toco set?

Joe Pretorius: 33:06

Yeah. So, just on the, on the point of, you know, we, we don't like really being compared to, to cryptocurrencies because we think that DLT one really needs to separate the underlying technology from from let's call it philosophically the way that you, that you approach a currency. In our case, I just want to make clear that we are definitely non anonymous. We have gone through quite extensive work to make certain that we are fully compliant with all the modern day regulations in terms of KYC and, and AMLA. And we, we believe in financial stability and consumer protections and stable banking and all that good things. I'm not personally a fan of crypto because I think any currency that's anonymous, you know, the large enough scale definitely, you know, is imbued with moral hazard. So, so that's the first thing. And the second thing that, that, that cryptocurrency suffer from is the fact that they decentralized means that their monetary policy is effectively algorithmic, right? So it's predictable. You know how the how the central bank or the decentral bank is going to, to act because it has an algo. And that means that obviously that's perfect for speculative attack. If you know exactly how the other party is going to to react and you can, you can attack that system and, and that creates, you know, that creates the volatility. The other problem that things like Bitcoin has is very hard to make it to use it every day. It takes 14 minutes now for a Bitcoin block to get get written. I'm pretty certain that you would not want to wait that long for your transaction to complete. And then thirdly, it's a Proof of Work mechanism which is highly energy intensive and not great for the not great for the environment. The one thing that we want to take from that is the kind of demand that this can create. So the same way that we've created demand for for Bitcoin miners, we want to go create demand for carbon miners. But where we're different is that A, we're fully, you know, fully red compliant. We're also central, centralized. So it's a everything on all the actors are known. You've got to go through KYC and AMLA and then we use flexible monetary policy. So the carbon reserve acts in the same way that a central bank does. In that it will from time to time decide what the exchange rate should be. It bases that exchange rate on a number of factors and that exchange rate is based on obviously the value of the underlying. So the carbon, what the price in the carbon market are for these, these assets, the risk discounts that we need to apply to ensure one ton. So what the carbon reserve does at the moment is it sets, it sets the exchange rate and it defends that exchange rate. So it will buy from the market at that exchange rate to keep the exchange rate there because we want to try and keep the currency, really want to dampen the volatility so that it is available for for every day. So I think at the moment, you know, there's no specific sort of time when it, when it changes, but the currency remains fairly stable and pegged to the Euro. You know, for quite some, for quite some time, it only just moves when we can't buy assets at, the pricing that we need to to support support the demand. So again, I think Stellenbosch there is instructive. We've we saw the currency be broadly stable. But it's sort of inched up, you know, 2 to 3 percent in value sort of every quarter. And that's just because as the more demand comes in, you need to start buying higher and higher up the price curve on the carbon carbon assets. Effectively, you gotta you gotta go from panning them. Yeah, You know, take the gold analogy, you know, you initially you buy all the cheap gold that, you know, that's being banned. And then eventually you've got to go into open groove mines and deeper and deeper to, to get there. And that puts it on an upward curve, but we definitely don't want it to be, to be volatile.

Tom Raftery: 36:53

Okay. So what's the price of one Toco today in Euro or dollar?

Joe Pretorius: 36:59

It's about 29 euros a ton.

Tom Raftery: 37:02

Okay. That sounds low.

Joe Pretorius: 37:04

Yeah, it is, it is low, but I mean, the voluntary carbon, the voluntary carbon market prices is, this is the, this is the point that we're trying to, trying to make is that the voluntary carbon market pricing where the mitigation activities are taking place is terribly, I mean, priced. I mean, you can buy stuff out there for $3, $4 because, because at the moment, this is the whole point at the moment, the only demand is based off an ethical consideration, right? So it creates this dynamic where of a race to the bottom, every, every corporate out there wants to report. Net Zero goals. I mean, they can say it as much as they like, but you know, at the end of the day, once, once, once you've gotten into various boardrooms, and accountings, and the CFO and all the decisions have been made, the market is set up at the moment to, to support kind of greenwashing and just buying the lowest poorest quality credits that, that you, that you can find. And that's what we're trying to fix by creating a significant source of demand so that we can move, the carbon price from the 30 euros per tonne now to probably about 150 euros a tonne that it should be, that should really support the kind of mitigation investments that we need to to decarbonize at decarbonize at, at scale. But you know, to do that, we first need to get people to demand, to demand to use the currency. And once that demand starts outstripping the supply, then you'd be able to transmit that, that price signal into the carbon market.

Tom Raftery: 38:36

Sure, sure. I mean, if I go today and buy 10 Toco,€290, that, that, that's great for you. That's great for me. It's great for taking 10 tonnes out of the system. But to scale it, the reserve needs to be buying it at a much higher level. Many, many, many more thousands and eventually billions of tonnes per year. Where apart from the likes of me, is that money going to come from, or has that money come from to date to, to buy the amount of carbon that the reserve has to date?

Joe Pretorius: 39:17

The scaling, the scaling of putting you and your neighbor and everybody in your community together is incredible. If, and I, let me do the mental sum for you. If you were, if every European right today that is gainfully employed, bought just one cup of coffee with a currency backed in carbon that would generate $30 billion in demand. That is 15 times the size of the carbon market today. That's just the coffee because that's the money that would need to be in circulation to, to support, to support that, that transaction. And If you extend that, if you extend that now, and you said, if you can get the like G20 countries population working population to do somewhere between seven and 10 percent of their disposable income in a currency based on, on carbon, then we generate enough demand to take all of it out. That's how possible it is. It's truly it is truly just imagine. It's truly the solution. It means you have to do you have the only friction that's that's there in your life is to wake up every morning and to buy your coffee with a currency based in carbon and maybe pay for your dinner once a week for a currency based in carbon. And if you and everybody else like you does that we generate more than enough demand that we need to take the carbon out according to the IPCCs pathway.

Tom Raftery: 41:00

Okay. And Paul, talk to me about the implementation in Switzerland.

Paul Rowett: 41:04

Yeah, Tom, I'll, I'll certainly will. I just wanted to quickly mention the proof of concept that we ran in Stellenbosch. Because often when people hear the concept first for the first time, it's kind of, you know, Intangible. It's an intangible thought. And our first motive for testing in Stellenbosch was to test that we could get past regulation and we could create a transactional currency that you could go and buy your daily transactional activities. And you could use Toco for those. The second was to test the technology. So will the technology that we had built, the DLT technology, the app on the phone, will that all work? And thirdly will will merchants accept it? And will users adopt it? And will we be able to create this ecosystem based on carbon? And, and we managed to successfully complete all of those tests. And the response was, was really quite phenomenal. We had Stellenbosch is a relatively small town in a global context. It's a small university town. And as Joe said, it's kind of on my back, back door there. And we had roughly 45 percent of the merchants in Stellenbosch in seven months agreed to accept Toco. We, as a, as a Toco community used to essentially live our transactional daily lives using Toco. We used to do our shopping. We used to buy coffee, have lunch, we could go out and have beers, wine, even nightclubs were accepting Toco, get your hair cut, buy clothes, jewelry, et cetera, et cetera. And the effect was, was, was quite amazing. We saw that we added a few merchants to start and that attracted a lot of users. So we saw a spike in, in users, and then it attracted a second wave of merchants and then a second wave of users. And each time that became broader and more diverse in terms of who joined, who joined Toco the initial kind of early adopters really scrutinized the concept, really understood the, you know, how the Toco is created, the trustworthiness of the, of the credits that are the underlying asset. And once those early adopters started using in habitual way we saw a lot more of the users come on board. So much so that towards the end, we were signing, you know, 500, you know, a couple of thousand people a day downloading the app and, and, and using it. The interesting thing was that users started to change their buying habits. And they started to, once they understood the, I guess the positivity and the benefit of spending with Toco, they used to seek out merchants that accepted Toco and kind of, they used to go for their, their morning coffee and buy the morning coffee using Toco and feel good about it. You know, walk away sipping their coffee saying, you know, this was the equivalent of a hundred kilograms of carbon that I'd just created demand for as a result of me, buying this coffee. And, and, and that created obviously the demand for merchants. We saw merchants accept the currency. And in the beginning they would they would off ramp, they would convert back into fiat currency which is, which was obvious. We expected that because there's risk in holding a currency that's new. But as time went by, merchants started holding the currency more and for longer periods of time. And then they also started to use the currency. So they started to pay some of their staff using Toco. They started to pay their suppliers. We had a couple of landlords in town that were accepting rent in Toco. In fact our, our landlord. I'll never forget when we paid our rent in Toco, it was, I worked it out. It was the equivalent of 20 years of my personal carbon footprint as an average South African. 20 years. And that was just one, one transaction of about, I think it was the equivalent of about 50, 000 Rand or 250 odd Toco. So, at the end of the project we realized that we are sitting on a very tangible solution, and once we can get past the adoption challenge, the technology worked incredibly well. We can navigate the the regulation and the regulatory landscape per jurisdiction that we launch in. And almost, the bigger challenge was to create a network effect in communities around the world where communities are demanding it, merchants are accepting it. The currency has utility. And people are going about living their, their daily lives as they did in Stellenbosch. But now the question is how do we scale it? So with that back context. I'll answer your question of what am I doing in Switzerland? So, we decided that we're going to launch in two places in Europe. The first is Switzerland and specifically in some of the Alpine towns. So I'm currently sitting in a in a small skiing, predominantly skiing village called Saas-Fee. It sits under the Fee Glacier in the kind of the Saas tile. It's quite near Zermatt in the Valais region. And Switzerland has a few attributes that's that obviously drew us to choose Switzerland as the initial rollout. Their community and municipal structures are run very efficiently and we are working with those communities and the cantonal structures to bring Toco to these communities. Obviously being on the extremes of climate you know, sitting under a glacier that has been melting for for the past 100 years. And we heard the other day that it's melting at 80 meters per year brings climate change very, very close to your daily existence. When a lot of people who live in cities around the world think, oh, it's getting warmer, you know, what's, what's, what's the problem? Is climate really changing? But here you can see it. And Joe, Joe and I have come here quite a lot and you can actually see it year on year the change in the effect of, of what the change in climate is doing. And there's a third reason that I won't elaborate too much on, but safe to say that it's, it's based in economic principles and the tragedy of the commons and the story of Eleanor Ostrom, which is a story for another day. But we will be, the other the other location where we are starting Toco is Copenhagen, and that's going to be a much different approach where we'll go for like broad based kind of grassroots broader community launch and not such focus on such smaller communities. Later this week, we will be we'll have our first merchant that is accepting Toco in Switzerland. It'll be a coffee shop in Saas Fee and it'll be the first demonstratable case where you can use carbon as money. And then we will work to gain the support of the community and the other merchants in this small community so that we can then use it as an example to the surrounding communities and the Canton, which we're meeting next week on what the potential of of this is. And then looking towards Copenhagen in April, early April, we launch there. And then later the year will be we are aiming to be live in all European countries around the world. And to also bring our technology up to the point where we can facilitate a lot of this scale through the app and through through technology and not such kind of hands on approach. But we think that the hands on approach works, especially at the beginning of the story. So I hope that

Joe Pretorius: 48:20

You need it. Yeah, we need to. We are using Switzerland as opposed to, I guess, you know, create a European, you know, European example of Stellenbosch, where you have one or two communities that are now using it on a regular basis. And it, you know, serves as a social proof. Yeah, social proof for the rest of the rest of the country. And I think if we can get, you know, if we can get fairly meaningful utility out of the currency in a place like Switzerland and and then Denmark, where it's a fairly small country, so it's a little bit easier to get the network effect there earlier then we can, we can use those two models as, you know, as examples for for the rest of the world to say, listen the infrastructure is out there. It's easy to get. Go and organize yourselves. Come. Let's join, join this movement, start demanding to pay in carbon, get your local merchants that live in your community, get your neighbors, get all of them to start doing this because it will, it leads to a good thing. It is a, and if we can get, I think if we can get enough action like that then maybe just Tom, we get ourselves into the position where the ECB or the Federal Reserve of the States, you know, actually take notice and like, we can't have these private currencies come and, you know, eat our lunch in our, you know, in our fiat currency dominated landscape. We should step in here and also start backing our currency with with climate action. And if we if we can get that done, I think that's a hell of a victory. So that's sort of I think our, you know, our approach is like we're, you know, we're a nonprofit sort of driven organization. We know people want to take climate action. We're saying there's a way for you to do that. Start buying this currency that allows you to do that. The second way to do that is start convincing the merchants in your area to start accepting it. And let's community for community. Where we trust each other and we can look each other in the eye and say, look, I believe this is important. You believe this is important. So let's just put our money, you know, let's put our money where our mouths are and that should be behind decarbonization.

Tom Raftery: 50:26

Yeah, yeah. Paul, I'm interested because you mentioned there when you were explaining the Stellenbosch and the Swiss ones, you mentioned the benefits to the users. So if I'm a user, I've got my Toco wallet and I've bought Toco using fiat currency. Is the benefit to me solely that I am reducing the amount of carbon in the atmosphere or I'm giving a demand signal, is that the only benefit or are there other benefits that I haven't picked up on?

Paul Rowett: 50:59

Primarily, that is that is the benefit. We often say internally that the world probably doesn't need another currency, but they need a solution to climate change. And there are more than we originally thought. There is a huge amount of frustration among people around the world that they see headlines, they get depressed, they can't contribute in a meaningful way. They've probably recycled for 10 years. And then they read a, an article about how only 10 percent of the recycled plastic is actually useful. It's just this, this constant kind of fear and loss of hope and feeling of, of sheer helplessness. And what we saw in Stellenbosch with our users is once they understand the good that they're doing. And and let's take individuals carbon footprint out for a second, because that's not necessarily a meaningful measure, but some people use it as a meaningful measure, and it's just the fact of your daily transactions having this meaningful impact of removing tons of carbon as you continue to spend in a sustained way creates, I don't know what the chemical process in the brain is, but it creates an immense amount of positive energy. And I honestly, I, and I'm, I'm speaking out of personal experience. I used to use all of my daily transactions in Stellenbosch in Toco. And it's, it really is a phenomenal feeling when you look at your impact at the end of a week. And you've removed, you know, 10, 20 tons of carbon. And I know that as a South African, my carbon footprint was maybe 15 tons on the high end. So every week I'm removing a year's worth of my carbon footprint, which it's powerful.

Joe Pretorius: 52:37

We had people in Cape Town, which is about 40 kilometers from Stellenbosch, and they, they'd make weekend entertainment decisions to go to Stellenbosch, and to rather go there where they could spend in, you know, spend, spend in carbon and, you know, at least feel that, that you, you're contributing. I think, yeah, so for the consumer, because, you know, money is money, and it's hard to give, especially when you're a nonprofit. It's hard to give some kind of financial, you know, financial or other award. The rewards are, you know, just this ability that you can, you can have a massive impact without costing you anything. I think for the, for the businesses though and the corporates the Toco is going to have potential massive upsides. Once it becomes a little bit more established and because what you are doing is you're making carbon mitigation fungible. So these businesses that do want to retire you know, want to retire assets, they either need to now have large departments that need to understand every single purchase and then they've got exposure on, on, you know, every single asset that, you know, every single asset that, that they buy. Where, you know, the carbon reserve, I think the Toco is well positioned to to sort of be mitigation as a service, or I don't want to call it offsetting as a service. I don't like the term offsetting. But for them, it's useful because, yes, the risks for them is lowered because of the portfolio effect. They also just have to ensure that there's one there's one counterparty risk that they need to deal with. In terms of the, you know, in terms of the Carbon Reserve, who has no profit incentive and acts independently and has entirely an environmental mandate. So that's a little bit more bells and braces braces for them. And then, yeah, they've got this fungible unit. That's not just fungible. It's also it's also liquid. So it's possible for them, to put their if you think about carbon accounting and that going that going forward, the Toco, because it's a currency, and it's also underlying mitigation asset, very easy to book that onto your balance sheet as say, this is how much potential carbon retirements I now have. These are my, you know, these are my liabilities. And you can make the whole neutrality planning, you know, as part of the part of the financial process and have a very low friction way of of gaining that and then even better, is once you have enough consumers actually using it, they can start earning their mitigation from their consumers because just to start accepting the Toco, in currency and, and, and that allows them to build two things. I think, you know, they can, they can very successfully transmit their sustainability credentials to the market, but they also build a very deep connection with their consumer because if the consumer is using the Toco, it means that the consumer has belief that the Toco represents a ton. And therefore, if the corporate or the business is using the Toco to for its retirement, you know, for its retirement needs then there shouldn't be this problem around greenwashing because you've got this nonprofit independent Carbon Reserve, you know, being the arbitrage of quality between between the consumer's view and the corporate's view. So we think there's a, there's a whole host of benefits once it gets to a certain level of size that is really useful for for corporates as well.

Tom Raftery: 55:50

Interesting. And how long do you see it going from where it is today to it being the size where it is really useful for corporates?

Joe Pretorius: 55:58

Look, I think that, I think if we can get, if like Paul said, we're launching now in Switzerland and then, into Denmark and then into the rest of the world. I think if you look at the sort of exponential growth that we had in in Stellenbosch, right? And I know it's, you know, I know it's a fairly, fairly small market. But, you know, as Paul said there, I mean, you know, we were doubling, we were doubling signups every month. To a point where we were signing, you know, literally thousands of people towards the towards the end. So I think we're quite confident that if you use, if you have that growth, same kind of growth profile that within the next three years, we can become fairly significant. And if not fairly significant and probably the biggest buyer in the carbon in the carbon market. Because you don't actually need, as I illustrated with my cup of coffee, because of the way that the carbon mitigation here is used as a, you know, as a transactional thing you know, if you can get up to, you know, even 400, 500,000 people just using it habitually every day in a couple of, you know, disconnected communities you're moving billions of dollars towards the towards the carbon market. And I think at that point, you'll be in range of, you'll be in range of corporates. We are also, interestingly enough, we are in various discussion with various sort of large retailers, at the moment, because they see the, they see the benefit of having a intermediary here, you know, making, making it more, more fungible and they, and the retailers also, especially like what we're finding with some of the retailers in Europe, which is really encouraging is that they're not just looking to make themselves Net Zero, some of the parties that we're talking about are trying to figure out how they can use their base and their customer base to leverage and create impact and drive impact. So not, let's just look at myself. It's how do I use, how do I use my, my consumer base to actually make more impact beyond myself as, as the corporate citizen, which is a, for us as South Africans is a very heartening conversation to hear that this is what they're, they're thinking of. And and those parties that we are in discussion with definitely looking at the Toco and going, well, this is very, very interesting. They, you know, the way that they think about it is like, can't I use this as my reward scheme. So instead of giving points or things like that, why don't I reward people in carbon mitigation and then they can reuse that carbon mitigation, you know, with me and with me in store. And then, I mean, if you just look at the amount of reward points that are out there in the world today, if you just converted every air mile into a carbon mitigation mile. That's not that's another 30x the market. We just really just have to reimagine that carbon mitigation is not this thing of cost that we have to go and, you know, pay so we can put some lipstick on the pig here. We've got to go think of it as an actual store of value, which it should be because our future, and our ability and our, for our civilization to thrive is value and it's intricately tied to, to, to the removal of carbon, carbon mitigation. So, so yeah, no, I think, I think to, to answer your, your question, if we plod along here within two years, I think we become significant enough that we start attracting some, some larger corporates, which would be a major injection of liquidity. And, and then you never, you know, you never know. I mean, we, we might just have a Damascus moment where Yeah, Elon tweets something and, and "This is a great currency, everybody should get behind it". I mean, if he's, if he's prepared to accept Dogecoin surely you'll be prepared to accept, you know, you know, a coin in carbon based on carbon mitigation. Maybe you can even earn some, some tokens by driving an electric car. Who knows? But you know, if that, if that happens, that's, you know, obviously I think what any sort of dual sided network kind of play is looking for and, and so our approach is going to be like, you know, like a band. We'll, we'll play all the dingy, we'll play all the dingy bars and, and places and hopefully at some point you're an overnight success.

Tom Raftery: 1:00:13

Nice, nice, and you, I mean, you were talking about talking to retailers, but the example you used was air miles, and it strikes me that the airlines would be an even more, or should be an even more interested party, given the difficulty they're having in decarbonizing. Is that a conversation you're having?

Joe Pretorius: 1:00:33

It's not a conversation that we're having at the, you know, at the moment that it's, and that's, but it's definitely a conversation that we, that we want to have. The challenge there is just always access and legitimacy. Right. And, and we're, like I said, we know we've, we're both serial sort of tech investors and entrepreneurs over the last two to three decades. And, Right. I think our approach has always been is don't go sell people an idea. Go sell people something that you demonstrated is working. And so if we can get, I think those conversations are just much easier to have if we've got, you know, 50,000 50,000, or 100,000 people in Switzerland using it, then, you know, then you can go and say, okay, right Swissair, let's have a chat. Whereas now, I think you struggle to be probably struggle to get into the door and to be taken to be taken seriously, especially with a concept such as this, which requires, as I said in the beginning, I think some mental dexterity to get your to get your head around.

Tom Raftery: 1:01:34

Yeah, yeah, yeah, yeah. Interesting. Interesting. We are coming to the end of the podcast now. In fact, we were coming to the end of the podcast about 20 minutes ago, but the conversation is so interesting. I couldn't, I couldn't stop. So we are now coming towards the end of the podcast, finally. Is there any question I haven't asked that you wish I had or any aspect of this we haven't touched on that you think it's important for people to be aware of?

Joe Pretorius: 1:01:59

No, I just I just You know, no, just just to reiterate that. Look, if you're in, if you're in Switzerland and you're listening to this, download the Tocos app from the Apple store or the Google store. Start buying your first Tocos. Yes, we don't have a dense big merchant network there there yet, but walk down the street to your local coffee shop and talk to them about it. See if they can download the app and start start accepting it. If you're in Denmark and watch out for us, we'll be there in April and and do the same. If you're listening to this, you want to bring Toco to your country because we're not regulated there yet. Please go to the carbonismoney. org website and register your name there and we'll be in, we'll be in touch. We're looking for we have the solution, we can change the world. We now just need people to, to help us do it. So if you're out there and you're willing to help us please go to carbonismoney. org and, and tell us about yourself and we'll be in touch. I think that's the only, only thing I wanted to add.

Tom Raftery: 1:02:56

Okay. Paul, did you want to say something?

Paul Rowett: 1:03:00

No, I think Joe said it. I think we, we do have the solution and we can do it if we work together as one global community. So, yeah, but Joe said that all. We are publishing a story where you can follow our, follow our story about bringing Carbon Is Money to the world. So go to YouTube and subscribe to our channel and you can get access to that. But thanks very much for having us, Tom.

Tom Raftery: 1:03:22

sure, sure. Thank you. My final question is generally, if people want to know more about yourselves or any of the things we discussed on the podcast, where would you have me direct them? You've already mentioned the YouTube channel. I'll link to that in the show notes and the carbonismoney. org website. Anything else I should highlight?

Joe Pretorius: 1:03:38

I think just, yes. Just search for the, the Tocos app at the two app stores, the Google app store and the Apple app store.

Tom Raftery: 1:03:47

Great. Fantastic. That's been really interesting. Joe, Paul, thanks a million for coming on the podcast today.

Joe Pretorius: 1:03:55

Thank you very much for having us and listening to our story and for asking such insightful questions. Thanks Tom.

Paul Rowett: 1:04:02

Thank you, Tom.

Tom Raftery: 1:04:04

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about the Climate Confident podcast, feel free to drop me an email to tomraftery at outlook. com or message me on LinkedIn or Twitter. If you like the show, please don't forget to click follow on it in your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.