Global Carbon Trading on the Blockchain
The proposal of a global market for carbon emissions has been endorsed by several leading players, amongst whom:
Angela Merkel (Bloomberg News)
Europe’s biggest oil companies (Daily Telegraph)
BHP (Financial Review)
UK Parliament’s Energy and Climate Change Committee (Business Green)
Carbon emissions spread rapidly in the atmosphere; CO2 released in India affects everyone. It makes sense to approach the problem globally, primarily to avoid penalising countries who are taking the steps to reduce carbon emissions.
The principle of cap and trade is that we estimate our global carbon allowance and we issue permits that allow entities to release greenhouse gases up to the agreed limit. The permits are tradeable and the price is determined by free exchange. Given that we currently burn more fossil fuels that our model allows, it is expected that the price of permits will rise to a level where switching to clean energy or adapting carbon capture technologies makes economic sense.
At present the prices of Carbon Emissions at the various exchanges is below the switching-inducing level (€8-12 vs €30-40). The main reasons of the inadequate price are
too many permits issued
permits given free to polluters
many key industries (such as aviation) not included
Although pioneers such as the EU and California/Quebec should be praised, the timidity of the schemes (and consequent failure in provide useful pricing) can be sourced to the fear of damaging national industries. That is why a Global Trading Scheme is needed.
I am here proposing that rather than linking individual markets, with their peculiarities and deficiencies, it is much more effective to start a new Global Market from scratch. The advent of blockchain technologies gives us an opportunity to have an independent ledger of the permits to emit Earth’s allowance of greenhouse gases.
How it will work
-Yearly carbon budget agreed by an international scientific committee. Say 10 billion tons per annum. Permits (each representing one tonne of CO2) created and attached to a public blockchain.
-10 to 20% of budget auctioned at beginning of the year, or at quarterly auctions. Revenues (estimated at €30-80bn) to be used for administering the market, supporting R&D and catastrophe relief for poorest countries.
-Remaining 80-90% distributed equally to all human beings on Earth, with a minimum age threshold. Everyone is issued a Wallet, and one’s allowance is transferred into it by the International Issuing Authority.
-One global market, carbon price traded in bitcoins; when people sell their permits, they receive bitcoins. In countries where bitcoin is not used extensively
-Carbon emissions from all sources included.
Fair - permits given free not to polluters but equally shared among humanity
Universal - Climate change is a global problem, and it requires a solution that goes above national rivalries and interests
Neutral - By using blockchain technology, no nation is advantaged
Inspiring - All people on earth joined in a market to solve an existential problem for humankind.