UNFCCC Kyoto Protocol article 12 ‘Clean Development Mechanism’ (CDM) is getting criticized to the extent of discarding market offsetting policy entirely. Green NGOs are especially active. Next week this is going to be one of the issues to be discussed SB48 in Bangkok.
Actual problems with CDM are used to propagate populistic but false ideas like
Offsetting creates the illusion that high-carbon activities can continue, by relying on others, most notably poorer countries, to clean up the emitted pollution;
Offsetting is at best a zero-sum game, meaning that some countries will increase their emissions while others decrease them;
The mechanism has been counterproductive, leading to an increase in greenhouse gas emissions.
These problems do exist with CDM but not with authentic offsetting policy or environmental market solutions. Here is why
Authentic offsetting policy relies not on hypothetical ‘baseline scenarios’ which deem growth of emissions but on actual baseline emissions;
Authentic offsetting policy requires reducing more than actual emissions including new source emissions, which means that new source emissions are required to be offset not only entirely but in excess, for instance at 1 to 1.2 ratio;
If a CDM approach is applied to the cases, where support is needed to avoid future emissions while new sources are still introduced, the quota (cap-n-trade) approach should be used like in the Kyoto Protocol article 6 whereas carbon credits are still deducted from the assigned amount (quota);
A commonly spread concepts that individual should make individual effort to change his lifestyle to reduce environmental footprint are well intended but in-fact are economically harmful. They distract attention from far more efficient market solutions and the fact that individual efforts are economically wasteful. The individual costs of substituting one’s car for a bicycle or a subway or abstaining from eating meat are excessive but would be worth a few tons of CO2-equivalent reduction a year at maximum. At the same time, buying out the rights to pollute the environment from large emitters or paying for actual mitigation outcomes is much more efficient and subjectively much less costly.
Blockchain Climate Standard has been launched at DAO Integral Platform for Climate Initiatives (DAO IPCI) as a Genesis Mitigation Program. The Standard clearly defines authentic offsetting and environmental policy requirements and is the only global voluntary standard that applies such rigid criteria. Other voluntary carbon standards still allow for offsets to represent hypothetically avoided future emissions.
Besides it is the only mitigation program populated in public programmable blockchain (not in permissioned quasi-blockchains) and performed via the smart contracts. In the first place, it eliminates the need for conventional registries with all their drawbacks like arbitral corrections of entries or cancelation of credits, excessive and monopolistic fees etc. Carbon markets’ OTC brokers, who devour annually hundreds of millions of dollars, are next to come.
At the voluntary markets it is entirely up to the buyer to choose what sort of offsets to use: CDM credits that are worth less than a dollar or even fifty cents a ton of CO2-equivalent, or specific voluntary offsets (including currently the most rigid of them BloCS’ Transferable Mitigation Units), or for instance EU Allowances worth more than 20 Euros now, thus constraining large emitters in EU ETS in their rights to GHG emissions. Mitigation programs settled in DAO IPCI allow for choosing and using either of the options.
Carbon emissions are negative externalities or according to Ronald Coase, a resource, and Ethereum developers’ community is thinking how to deal with externalities. Vitalik Buterin recently demonstrated a good knowledge of theoretical fundamentals related to social costs issues. These economic fundamentals should be developed to cover not only Pigouvian tax or cap-n-trade models but offset policy and transaction-based models and applied to offsetting cryptocurrencies’ carbon footprint. DAO IPCI developers are keen to do it and introduce an Ethereum Improvement Proposal in the first place.
Last but not least is a temptation to address the famous “First take the beam out of your own eye, and then you will see clearly to remove the speck from your brother's eye” (Mathew 7:5) to some of the green NGOs who deprive the market solutions of environmental integrity. Authentic environmental market solutions, especially based o decentralized integrity of public blockchain are the most straightforward, cost-effective and honest of all the options. Some of famous green NGOs, for instance WWF, at least in Russia, do not support economic, market measures as not green enough, while working for coal lobby to adjust LULUCF methodologies, participating in falsifications of tender documentation for them, etc.
