Why the tokenization of Carbon Credits is a terrible idea

Start-up FlowCarbon made waves today by raising $70M from a16z to “tokenize carbon credits and build an on-chain market to drive funding directly to projects that reduce or remove carbon from the atmosphere.” Here’s why this hasn’t worked in the past, in less than 200 words.

• Companies pollute. To compensate, they fund CO₂ sequestration projects (we don’t have many solutions to remove CO₂ so that often entails planting trees).

• One credit is equal to enough money to remove one ton of CO₂ from the atmosphere.

• Carbon credits are meant to be REMOVED from the market; a company pollutes but makes up for it so we’re back to square 0. Nothing to see here.

• To create 1 carbon “token” in the past, crypto-start-ups removed 1 credit from the market.

• This means every subsequent transaction of the token is functionally useless to the environment. In fact, every new transaction is money that could be invested in a new token.

• Proponents argue that blockchains can increase transparency. However, registries already exist. They could help in case of multiple transfers, but not enough to make the ecological disasters that are blockchains worth it.

Summing up : Carbon tokens are fully fictional financial products that do nothing to help the environment. They in fact actively harm it. FlowCarbon might claim to offer “live” tokens, but these are, for now, just words. In the meantime, all I see is Adam Neumann (of WeWork infamy) trying to make another grift work. FlowCarbon? More like FlawCarbon.

Good luck out there.