Climate change, driven by greenhouse gas (GHG) emissions, poses one of humanity’s greatest existential threats. The world must urgently reduce these emissions to avoid the worst impacts of climate change.
The common unit for measuring GHG emissions is ‘carbon dioxide equivalent’ or ‘CO2e’. For any quantity and type of greenhouse gas, CO2e represents the amount of CO2 that would have the equivalent global warming impact.
Climate change is a consequence of the price of goods and services not reflecting their true cost to society. This is what economists call a negative externality – a cost caused by a producer that is not financially incurred by that producer.
Instead, the impact is borne by the world at large, for generations to come. The adverse effects of GHGs are external to the market: there is no economic incentive for businesses or individuals to reduce emissions, only an ethical responsibility. As a result, the market has failed by financially incentivising the continued over-production of GHG emissions.
Despite commitment by countries, companies and individuals to become carbon neutral, efforts are largely failing. We currently do not meet The Paris Agreement goals to reduce greenhouse gas emissions (GHGs) and limit global warming to the 1.5°C target set by the international community.
Carbon markets turn carbon reductions into tradable assets which can help correct the negative externality - producers not having to factor in the true cost of their productions.
Unfortunately, to date, carbon markets have proven largely ineffective because the types of international agreements and policy coordination required to address the problem have proven too difficult to implement.
An independent global institution is needed to place a value on carbon emission reductions and to provide an efficient carbon market infrastructure for the global community. This will increase the demand for, and price of carbon mitigation assets, thereby increasing the incentive to invest in carbon mitigation activities.
We believe a global currency backed by carbon mitigation assets held by the Carbon Reserve, can grow an effective carbon mitigation economy. Through market operations the Carbon Reserve will support carbon prices, manage liquidity, reduce volatility, and ensure that price increases happen in an economically responsible manner. This will have the following benefits:
Individuals and organisations can purchase and conduct transactions in the toco currency. This broadens the existing market and drives global participation.
The Carbon Reserve links previously disparate jurisdictions through a single global currency.
Because the currency is backed by a pool of reserves, the heterogenous carbon assets are made fungible and can act as a universal unit of trade.
Through the application of blockchain technology, transparency, accounting, and asset quality are improved, while the potential for fraud and other criminal activities is eliminated.