Protected: The Global Carbon Reward: Innovating Climate Finance

After several discussions with Delton and a podcast on 177Pod, a diverse group of people gathered in TESOBE’s office in Berlin on September 5th, 2024, to learn about and discuss the Global Carbon Reward (GCR). 

Dr Delton Chen, the Founder of the GCR, had travelled to Germany from his native Australia to present the GCR at a banking conference. He decided to visit us in Berlin to explain how the GCR could introduce a new carbon asset for addressing the Paris Agreement.

Delton is a civil engineer and geo-hydrologist by training, whose policy initiative synthesises carbon cycle science with economic theory. His approach addresses the need for humans to get actively involved in the carbon cycle, lest we turn the Earth into a Venus-like planet.

Attendees came from a wide range of backgrounds – from academia
and entrepreneurship to NGOs – reflecting the global interest
in finding innovative solutions to climate change.

Current measures and policies have limitations and shortcomings that compromise their effectiveness in reducing carbon.

Carbon taxes and cap-and-trade systems have direct cost implications and economic impact on industries, so they are also met with strong resistance. There are concerns about the effectiveness of carbon offsetting, and subsidies for renewable energies can be skewed by personal favouritism. 

As explained by Dr Chen during his presentation, the Global Carbon Reward offers a compelling alternative by introducing a tradeable carbon currency (XCC), whose unit of account reflects the amount of carbon reduced, while its price floor would be guaranteed by central banks. 

The XCC serves as a store of value rather than a medium of exchange, meaning that it operates more like a carbon-backed financial asset than a traditional currency.

Unlike existing measures, the GCR directly incentivises carbon reduction by making it profitable, thus aligning individual interests with broader societal goals. This new approach ensures that individuals and organisations acting in their own interest will also promote societal good, a concept that echoes economist Adam Smith’s famous notion of the “invisible hand”.

By aligning individual profit with societal benefit, central banks and the GCR could be the hands that create the systemic change needed to mitigate climate change.

Founder of OBP, Simon Redfern, remarks, “In a sense, the GCR is an acknowledgement that, just as nature’s carbon cycle has phases which capture and store carbon, we as humans must proactively invest in processes and technologies that play a similar role. Recycling or even degrowth just won’t be enough. 

We need policies that actively reward organisations for removing carbon from the atmosphere or reducing emissions. The GCR will be administered by a newly formed Carbon Exchange Authority—or “Ministry for the Future”, if you like— which will target large-scale projects eligible to receive the GCR in exchange for contracts that ensure carbon remains stored or avoided for at least 100 years. 

The value of the GCR would be supported by central banks worldwide, maintaining a floor price against fiat currencies and making it an attractive asset. The GCR will not be a carbon credit, so BP won’t be able to buy XCC from Shell to make its own mitigation efforts look better. Oh, and each contract will stipulate that if you sell the GCR, you will need to invest a significant proportion of that cash in Net Zero projects. In this way the transition to Net Zero is supported.” 

The discussion highlighted several key challenges for the Global Carbon Reward. Enforcement is an important aspect, as the system relies on a centralised authority and strong legal frameworks or standards, which may not exist in all countries.

Additionally, while rewards go to entities currently controlling the resources—which may be polluters—the broader strategy encourages renewable energy investment and incentivises governments to retain control over these resources.

Several other key discussion points arose during the event:

1. It could unlock over US $4 trillion for climate action;
   
2. The mechanism takes into consideration long-term carbon removal, reductions, and avoidance over a 100-year period or more, ensuring that the mitigation is effective;

3. Developing countries would be able to earn a financial asset backed by central banks, thus reducing their debt levels;

4. Recipients of the reward could also be individuals, if it’s managed by a collective, extending the opportunity to a wider audience;

5. The Global Carbon Reward is designed to be highly scalable. It can be implemented globally and can complement other policies and strategies.

So what are the next steps? To move forward, the Global Carbon Reward requires broader awareness and support from key stakeholders, and enough funds to initiate a demonstration.

As Dr. Sven Vittorelli noted, “This idea is more famous among the science fiction community than it is within the sphere of people who should actually hear about it!”

Central banks, regulators, and other stakeholders are invited to engage with this initiative and be part of the ongoing conversation. 

What you can do today:

1. Watch the recording of the event: Transforming Economics for Net-Zero Carbon
2. Read the Working Paper
3. Explore opportunities for partnering
4. For accurate and up-to-date details please see here https://globalcarbonreward.org/

“He intends only his own gain, and he is … led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he promotes that of society more than when he really intends to promote it.” 

 

– Adam Smith, The Wealth of Nations, 1776