Patrick Arnesen, Sept 2022

This page isn’t related to Arcologies, but is my idea of a carbon pricing and reward model for the regular economy, that overcomes some of the current issue with carbon pricing.

What if the price for any product or service were a vector of difference currencies?

• One dimension for fiat $
• One dimension for the Units of Carbon UC
• (eventually/later-on) One dimension for Units of Ecology UE ??

• So when you buy something, even as an individual consumer, you see the price as a vector:
  • (Price: $20.34, Carbon: UC 2.65)
  • …and you need to pay all the coins in the vector/tuple to buy the product.
  • IE in your bank, you’d have $, UC accounts.
  • A credit card transaction would concern a vector instead of a unitary dollar value.
• Pricing: 1 UC would = 1 (mass-value) of emitted C02, UE would = 1 (unit/quality unit) of ecosystems cost.
  • you’d need to compute UC by adding up all the supply-chain inputs, and then adding any UC you need to spend in production yourself.
  • by law, the UC price attached to a product must accurately reflect the carbon and ecological cost incurred in producing the given unit of product or service. The sales team can’t tweak the price. there’s no half-off UC sales or limited-time offers.
• Any carbon you directly emit, you need to pay the ‘carbon bank‘ in enough coin to cover the emission
  • when you sell your product, you collect the carbon coin price and also the dollar price.
  • you can use the coin you collect to pay your suppliers.
• Any carbon you directly sequester, the carbon bank pays/awards you UC.
  • You can then trade those coins for dollars on an open exchange
  • For example, a forester can be paid for the increased mass of their forest, but are still free to cut it down at will: they just need to pay the carbon bank the corresponding amount of UC when they do.
• For carbon fuels
  • the UC price would reflect the carbon cost of burning it, and the fuel producers would need to pay the UC collected to the carbon bank.
  • that way, individuals don’t need to keep track and pay the carbon bank themselves when they burn the fuel, and they can’t cheat.

 

Advantages of this Approach

• It’s unambiguous
  • It tracks only real emissions and sequestrations. It doesn’t mint coin for theoretical reductions (difference between a new course of action vs business as usual), so doesn’t get into that murky territory, which has been plaguing current carbon offsets markets.
    • for reductions, it instead relies on a strong pricing signal, that goes all the way up to the consumer level.
  • It’s the direct emitters or sequesterers that pay or receive UE to/from the carbon bank.
  • The coin isn’t a promise of future behavior (not cutting trees or whatever), that may be broken in the future. the currency represents actions in the present. An emission today, or a sequestration today.
• It’s a strong price signal (unit of account)
  • The cost becomes visible at the consumer level.
  • every time you buy something, you’ll clearly be aware of its deep carbon cost.
  • the cost of carbon doesn’t get buried in the $ pricing signal.
• It’s easy to manage
  • accountants already know how to manage supply chain costs and handle balance sheets.
  • Tracking carbon like this would be familiar territory for the world’s accountants, and instead of fighting the bean-counters every step of the way, you’d mobilize them en-mass to reduce carbon.
    • You align the company’s natural motivations of offering a compelling value proposition to the customer with the need to reduce carbon.
  • Analyzing deep supply-chain carbon costs would be easy: Just add up the UC of all your direct inputs
    • and maintains corporate privacy.
• Central banks can carbon-QE on their own terms.
  • They hold no carbon liabilities on their books, and aren’t on the hook to support a market price, but they can elect to carbon-QE on their own terms by buying and holding UC.
• You can set up this system on the national level. You don’t need international cooperation:
  • with the oversight of a regulatory agency, an importer would attach an estimated UC price to the imported product, and would pay the collected UC to the carbon bank.
• It’s compatible with social justice
  • Regular carbon pricing is considered unjust by many, because it increases prices for basic goods needed by financially vulnerable people.
  • This means you get stiff political resistance to any carbon tax, and you get an alliance of enterprise and the political left against carbon pricing.
  • This can be avoided with UC as it maintains UC as a distinct currency all the way through the economic supply chain
  • the carbon bank can therefore sell UC directly to consumers using a progressing pricing model.
  • The purchase price in fiat $ can be calibrated to make the cost of decarbonization easier to bear for the poor. The rich pay the market rate, while the poor pay a steeply discounted rate, but they still pay a little, so that the pricing signal can still affect their buying habits.
  • the market rate for UC in poorer countries can be kept lower by their national carbon bank.
• The UC price and money supply can be managed
  • the carbon bank both collects and creates UC as needed, so you don’t get a huge buildup in the money supply and has an opportunity to retire UC.
  • Since the carbon bank is the main market maker, and sells directly to consumers, it controls the market price.
  • Price can be set at a point the markets can bear, and can be ratcheted up if PPM isn’t coming down fast enough.
  • carbon banks in poorer countries can set a lower price for their national UC.
  • like the central bank, the carbon bank should be an independent entity, so that political interference can be minimized.
• It works at each stage of decarbonization
  • While atmospheric carbon is
    • increasing (now)
      • the carbon bank mints UC and sells it to corporations and consumers who need it to pay for their goods and services, while building up a warchest of fiat $.
        • the warchest would be used to:
          • fund decarbonization projects and research
          • build up a reserve to support the UC price later on (see below)
          • Pay for regulatory oversight and verifying sequestrations.
        • the warchest would be bolstered by private investors who wish to buy UC as a store of value.
    • net-zero
      • the carbon bank can keep the money supply stable (not minting new coin), and UC would circulate from the bank->sequesters->emitters->bank
      • Central banks can carbon QE by buying UC and raising its price, thus increasing sequestration activity.
    • decreasing
      • since there are now more sequesterers than emitters, the price needs support, and the warchest built up while PPM was increasing can now be drawn on to support the UC price.
      • central banks, government and philanthropy can also get in on the action by buying and holding/retiring UC.

 

 

 

Extended Thoughts:

 

What this means for consumers

• Bank accounts would have accounts for $ but also for UC
• To see an accurate statement of your carbon footprint, you’d just need to look at the UC column of your’ bank’s monthly statement.
• Thus virtually anyone can view their carbon footprint just by reviewing their monthly bank statement
• This is also true for any company that doesn’t emit directly. They can just look at their expenditures to see their carbon footprint.
• Thus a UC would function as an excellent unit of account, making it obvious how much carbon various economic activities incur.
• When considering a price, one would be interested in minimizing both the $$ and UC aspects
• When comparing 2 products you might see:
   

Product	$	UC
Whatever 2000	59.99	4
Wizbang X	55.98	7

• Based on that, you might decide to go for the Whatever 2000, since you have dollars, but you’re a bit short on UC , or just on principal you prefer to burn less carbon, or because the total cost to you is less.
  • The consumer is now empowered to participate in world decarbonization.

 

What this means for enterprise

• If implemented, I think this approach sets up a situation where companies would be happier to comply, because they can balance their carbon books and pass costs along to their customers.
• ultimately it’s the consumer that’s responsible for the carbon emissions, as all the carbon is emitted on their behalf. By accurately reflecting the carbon cost in the price, we’ll create a powerful incentive at the level of consumption to reduce C02. Products that are C02 heavy will hit consumers more the pocketbook than those that produce less C02.
• for enterprise, I think we’d set up a situation where we’d activate the power of the world’s accountants to drive down decarbonization.
  • they’d see it every day on their books.
  • they’d pressure their suppliers to lower the UC of inputs, so that they could sell products with less UC
  • unlike dollars, they would not be allowed to set the price of UC on their products arbitrarily. It needs to be an accurate reflection of the true carbon cost.
• Summing up the UC through the deep supply chain becomes as easy as summing up the production cost in dollars.

 

Why introduce an ecology (UE) currency as well?

• UC is a measure of ecological cost: Habitat destruction, fishing, trawling, deforestation of natural forest land, polluting water etc…
• Protecting natural habitat and ecosystems and stabilizing the climate are likely the two most essential tasks for protecting the eco-services that underpin civilization.
  • We’ll need to do both to preserve a society worth having.
• If we introduce UC without UE we risk triggering habitat destruction via sequestration activities. Sequestration activities that maximize negative externalities can be cheaper to produce, and UC is fungible
• UE will be harder to implement because it would be so much harder to define, but if we’re going to pay the cost of retooling our pricing system to accept a price vector, much better to pay the price once while retooling than twice, which we’d need to do if we introduce UE later.
• At first, UE could just be added to the software systems at the same time we add UC, but not activated until we have UE up and running and then have time to focus on UE.
  • that way we only need to pay the IT retooling costs once, especially at the API endpoints, where systems interface with each other, and where it’s the most expensive.