Last May in Barcelona after presenting the launch of DAO IPCI for carbon markets solution at Innovate4Climate I had to answer a fundamental question: “Are the mitigation instruments, the carbon credits, the reductions in DAO IPCI real?”.
Many or even the majority of things people buy are not real. “People do not long for tangible goods as such, but for the services which these goods are fitted to render them”. The goods are for the services, satisfaction or pleasure or to ease uneasiness. For mandatory markets carbon credits serve as a renewable resource of rights to go on with harmful economic activities within the limits of available carbon compliance units. For voluntary purposes carbon credits are used to green the image of the polluter or to ease ethical discomfort of individuals. In both cases carbon credits, reductions of GHG emissions do not have to be real. For mandatory purposes they have to comply with whatever requirements the governments establish. And as Ronald Coase has observed, the government is more like normal public authority — ignorant, subject to pressure, and corrupt. And reality is the last and the least of government requirements. For voluntary purposes carbon credits have to give people the impression that they are real. In both cases most of carbon credits are “additional”, “verified” hypothetically avoided but not actual reductions. It is the government or other green establishment authority that generates the impression that they are real.
While carbon credits issued under Blockchain Climate Standard (BloCS) in DAO IPCI are much more real than any other carbon credits, as they are required to be “actual reductions” and are independently verified and issued in public blockchain as such, they need the audience, peers that would ask the question if they are real, the audience that needs transparent, peer-to-peer trustless ecosystem with unalterable data, where no one give prescriptions, imposes “prevailing opinions”, governs or administers, and people are entitled to their own free choice and actions.
Green markets, including carbon markets, whether mandatory or not, are regulated to the extreme. In fact, mandatory carbon markets are more diversified in comparison with voluntary carbon markets, which are actually monopolized by a couple of established standards.
The situation is comforting for many as people are averse to make a choice or the choice is so limited that it in fact is an imitation of options available. Neuro-psychic, intellectual efforts, costs for making a free economic choice are often so high that the issue is just put aside. Similar difficulties occur in the animal world, where, according to studies, the behavior — for example, of dogs, wolves — is not always determined by the immediate incentives and stimuli, but by mental representations or “neuro-psychic images”. Under such circumstances some of the hungry animals prefer to abandon the extrapolation problem solving even supported by positive food reinforcement, and make their choice between food demand and the need to maintain a normal level of nervous tension in favor of the latter, thereby preserving the “psychological comfort”. Evidently, neuropsychic efforts are yet another part of the transaction costs equation.
The situation much resembles totalitarianism on the side of the green establishment and conformism on the side of green community. Markets just do not work under such circumstances and discussions on green markets failure are hollow unless those become free markets.
The advance of public and programmable blockchain technology, Turing-complete systems, and triple-entry accounting allows for decentralized and truly peer-to-peer trading based on juxtaposition of individual values and inclusion of the entirety of costs. This technology is most fit for green markets, for environmental costs where direct participation of anyone willing to do so is indispensable.
Even carbon market caps imposed by the government might not be needed, if the manufacturer discloses honestly the entire costs and third party damages embedded into the product. And if the seller and the buyer jointly decide to ignore these costs that would be their conscious decision to let the third party, including their children and grandchildren suffer.
The more practical side of the issue is that objectively it is not in the interests of the green establishment to disrupt existing model, which has brought them power and revenues, by adaptation of the new, fundamentally crypto-anarchistic, decentralized, peer-to-peer “trustless” paradigm. That’s why most of “innovative” blockchain projects for green markets are based on permissioned and in fact centralized and controllable DLT solutions representing just another new tool in the old kit. However limited is the demand for such new paradigm on the other side, on the side of the people, of the green community, it is growing, especially with Centennials.
Technology implications for the blockchain solution for green markets are direct and practical. It allows for unrestricted use by anyone anonymously or pseudonymously to create a decentralized autonomy, to issue instruments to mitigate whatever quantifiable and verifiable negative externality one chooses or instruments representing positive social impacts, to trade those instruments, to create insurance instruments or to claim damages, to link or merge the autonomies or preserve independency. It in fact is as crypto-anarchist as is sounds though with universal rules embedded into the smart contracts to sustain transparency, verification and accountability. After all, social costs, values for negative or positive externalities remain largely categories of ethics and moral, and no AI or big data modelling would be capable to substitute subjective juxtaposition of these values to reveal their market price and no authority should be entitled to deprive people of their choice of values.
BlockchainCrypto AnarchismCarbon MarketSocial ImpactEconomics
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