the times | Saturday January 1 2022 49

Business

Dominic O’Connell

The road to net zero will be bumpy, even with

green crypto enthusiasts along for the ride

charts and watching videos for hours I

am only slightly the wiser. But I

suspect not many people who buy into

klima understand exactly how it

works. What they care about is

whether they will make money and,

for the more altruistic, whether it is

having an effect on the price of carbon

and, by extension, on climate change.

The answer to the first question, at

least for the moment, is mixed. The

price of the klima token soared after it

was introduced in October to nearly

$4,000. It now trades at about $350,

but the price misses the enormous

interest payments that participants

can gather, sometimes in excess of

30,000 per cent. The answer to the

second question also appears to be

yes, although again a limited yes.

Klima has specialised in buying up

certain types of older carbon offsets,

and carbon market experts I spoke to

at S&P Global Platts, the independent

energy information provider, say that

the price of these offsets has nearly

doubled and that the spike has

roughly coincided with the arrival of

klima. Correlation is not cause, but

most seem to think that klima has had

its desired effect.

This is not a recommendation to

buy klima. It is an unregulated, infant

cryptocurrency and, as the Financial

Conduct Authority repeatedly says

about crypto assets, investors need to

be aware that they could lose all their

money, and there is no compensation

scheme if you do. But the harnessing

of these two big themes — the

proliferation of crypto and the urge to

do something quickly about climate

change — makes it interesting.

What happens if it is a runaway

success? Let’s say Elon Musk, Jeff

Bezos and Bill Gates wake up

tomorrow and decide to pour in all

their money. Whole industries that

rely heavily on fossil fuels would

suddenly find their operating costs

through the roof. Some might be able

to make a quick transition to a new

way of working with renewable

energy, but some industrial processes

are difficult to make work without

fossil fuels. Maybe those industries in

countries with emissions trading

schemes would simply go out of

business. Perhaps governments faced

with the closure of steel mills would

find a large amount of very cheap

carbon permits down the back of the

sofa, just in time to save jobs.

A test of the government’s attitude

The Cop26 climate

talks in Glasgow

were meant to have

been one of the

highlights of last

year, yet less than two months after

they finished it is hard immediately to

recall what they achieved or whether

we are closer to curbing climate

change than before. The omens are

not good. The world’s appetite for

energy is still growing quickly, as is the

production of coal.

For millennials, stirred by Greta

Thunberg’s denunciations of the

inactivity of older generations, this all

fits their conviction that action is not

being taken quickly enough. Targets to

be met two or three decades from now

are worthless in their eyes. What if

there was something people could do

now to make the polluters pay? And

even better, what if it was driven by

the popularity of cryptocurrencies,

another of the millennials’ passions?

Funnily enough, such a thing has

already been invented. Klima DAO is

a cryptocurrency whose goal is to

drive up the price of carbon. The idea

is hooked to carbon markets that have

been around for years. In Europe and

Britain, companies pay for the

privilege of emitting carbon dioxide

and there are large, well-developed

financial markets for trading the

necessary permits. The general idea is

that only a certain amount of carbon

is allowed and that this amount will

shrink over time. The permits, and

carbon offsets, which are sold into the

market by schemes that avoid carbon

production, such as solar and wind

farms, gradually will become more

expensive and it will pay companies to

find other ways to make their widgets

than using fossil fuels.

Klima DAO (decentralised

autonomous organisation) issues

tokens that are used to buy carbon

offsets and put them into a treasury.

In essence, it stops them being used. It

does not have modest goals. “Klima

DAO will become the single biggest

disrupter of the carbon markets and

set a precedent for a new monetary

system backed by carbon,” its website

claims. I would love to say that I

understand how the klima process

works — there is much, much more to

it than simply issuing a new

cryptocurrency and it includes some

extremely generous incentives to

encourage all kinds of carbon market

players to join the game — but I

confess that after staring at flow

Tencent

takes stake

in UK digital

bank Monzo

Katherine Griffiths

One of China’s biggest technology

companies has become an investor in

Monzo in a fundraising that values the

British digital bank at $4.5 billion.

The involvement of Tencent may stir

fresh interest in Monzo, which has

grown rapidly to become one of the

UK’s biggest banking start-ups,

although it remains dogged by ques-

tions about profitability and internal

controls.

Monzo has raised $600 million from

investors in its latest round, which was

led by the Abu Dhabi Growth Fund.

Tencent has taken an undisclosed,

minority holding. Sky News reported

that it had invested about $100 million

in the bank.

TS Anil, Monzo’s chief executive, said:

“With the backing of some of the best

names in the investment community,

we’re going into next year with big am-

bitions. And we’re just getting started.”

Tencent holds stakes in large Amer-

ican technology companies, including

Tesla, the electric car producer, and

Snap, the photo-messaging app maker.

Founded in 1998, it is a multinational

entertainment conglomerate and the

largest gaming company in the world.

Monzo, launched in 2015, has attrac-

ted five million customers with its

bright coral bank card and mobile app-

based services. Its founders, who

included Tom Blomfield, met while

working at Starling Bank.

It said in July that it had made a pre-

tax loss of £130 million for the year to

February, up from £114 million the pre-

vious year. For the second year run-

ning, auditors said that its continuing

losses cast uncertainty over its ability to

continue as a going concern. It also

revealed that the Financial Conduct

Authority had opened a money laun-

dering investigation into the lender.

Anil, 50, has made this year his target

for breaking into profit on the back of

rising numbers of customers paying for

accounts and the launch of revenue-

generating products. Monzo has

300,000 customers using paid and

business accounts and is adding

100,000 customers overall a month.

Last year it withdrew its application

for a US banking licence after more than

two years of talks with regulators, but

Monzo continues to seek ways to

expand in the country. Tencent’s

involvement comes weeks after Monzo

confirmed that the likes of Coatue, a

technology-focused investment man-

agement group, and the Abu Dhabi

Growth Fund had become investors.

to the price of carbon is playing out at

the moment. Prices have shot up in

recent months as plants and factories

have gone back to full production

after the lull at the height of the

pandemic. There is another big factor

— the restarting of coal-fired power

stations to meet Europe’s demand for

electricity. Such has been the spike in

electricity and gas prices that burning

coal makes sense again, even if you

have to pay more for carbon permits.

In the UK, which has its own

emissions trading scheme post-Brexit,

the cost of a tonne of CO 2 has gone

from £40 to nearly £80 since June. So

large has been the leap in prices that a

safety valve meant to protect

companies from a sudden rise in costs

has been triggered. The “cost-

containment mechanism” was part of

the market’s original design, but I

suspect its authors never thought it

would be used less than a year into the

scheme’s life. The administrators, in

essence the Department for Business,

Energy & Industrial Strategy, have the

power to intervene by releasing

carbon credits held in reserve, or by

bringing forward the auction of future

permits.

The mechanism was triggered last

month and officials took about a

fortnight pondering what to do. A

tricky call. Industry has been crying

out for relief from high energy prices

and this would be one way of giving a

helping hand. However, the Cop26

talks had just finished and intervening

to push down the cost of producing

climate-change gases is hardly on

message. In the end, they did nothing

but said they might act in the future.

The decision provoked predictable

fury. Some executives think the

decision could harm the transition to

low-carbon technology, as leaders

were less likely to invest if they

thought they were dealing with an

unpredictable government.

To paraphrase Mandy Rice-Davies,

they would say that. Business loves

certainty with PowerPoint

presentations that show steady

trends. Recent events suggest,

however, that the big energy

transition is not going to be a smooth

road but one full of

sudden bumps and

jerks — even before

the cryptocurrency

army gets to work.

‘‘

’’

Dominic O’Connell is business

presenter for Times Radio