Governments across the world are trying to tackle climate change. One way to do this is through the reduction of greenhouse gas emissions such as CO2. As a result, they have been actively seeking ways to achieve net zero carbon Emissions as envisaged in the UN climate change goal 2050- an initiative kickstarted in 1998 in the now defunct Kyoto protocol. Unfortunately, Kyoto agreement achieved little success and was restructured into the 2015 Paris Climate agreement. Basically, the idea behind these agreements was to get governments to commit to setting caps on the carbon emissions and set up markets for carbon trading. While this may have started as a corporate/government endeavor to limit carbon emissions, it is slowly spilling over to basic consumers, morphing into an attempt to track individual carbon footprints and encourage the trade of carbon credits at a household or individual level.

  Carbon Credits

Carbon Credits are defined as 1 ton of CO2 Emissions traded in the market to allow buyers emit CO2 into the atmosphere. To get a better understanding of Carbon Credits, let’s briefly look at the Carbon Market Mechanism concept: First, a country identifies its limit of total greenhouse gas emissions. It then creates permits and assigns them to different companies within its jurisdiction with allocated carbon emission limits. The companies that can emit green house gases below those limits will have a surplus of Carbon credits. Those that exceed the allocated limits will need to buy Carbon credits from the companies that ‘saved’ on carbon emissions so as to make up for their shortfall. This buying and selling of carbon credits works in the same way as stock exchanges work. Subsequently, the caps get stricter and the permits get even more expensive. This is meant to drive up the cost of emitting greenhouse gas into the atmosphere while at the same time make it expensive to buy Carbon credits from the markets. This whole scheme is also known as Cap and Trade. Europe, the US and China are some of the regions that are currently actively trading in Carbon. It is market that is estimated to be worth over $ 250 Billion annually.

Individual Carbon Credits

Recently, while speaking at the World Economic Forum in Davos, the president of Alibaba, J. Michael Evans, said that they are in the process of creating an app that will track Individual Carbon footprints. 

   ” We are developing a technology that will allow consumers to monitor their carbon footprint. What will this mean? It will monitor individuals on where they are travelling, how they are travelling and what they are eating,” he said, much to the angst of the internet population.

Individual Carbon Credits will work in the same way as Cap and trade schemes. While all this  conversation may be purely speculative at this stage, it is not far-fetched to think that this is the path the global elite may want us to take

With individual carbon credits, people will be assigned a limit on CO2 they can emit every year based on their consumption levels, wealth, age and even nationality. When this cap is achieved, you will need to purchase more credit from individuals who may have saved on their carbon emissions. Failure to do this may mean that you are grounded or may even face jail term or fines. So for example, if you are assigned a  specific quota of carbon emission in a year and you exuberantly squander it in travel and  partying, then you will need to cut back just as you would when it comes to spending money, so as not to exhaust your limit. On the other hand, if you haven’t been active for the most part of the year, say you travelled less and ate ‘green’ products, then you may have an abundance of carbon that you can sell to other consumers. All this can be done via government regulated or private apps that have been licensed to track individuals.

In Europe, companies that are currently helping corporates and governments track carbon footprints are Plan A and Planetly. There is also an app , called Klima, that is used for individual voluntary carbon offsets- basically buying and selling of carbon credits on a voluntary basis. While these companies are currently focusing on corporate entities ( and the app works on voluntary submission), it is only a matter of time before governments legislate and insist they should also start monitoring individual carbon emissions.

Is this the right way to go?

Individual carbon trading will create a whole new market for trading carbon and may ultimately help in reducing carbon emissions. It will also attract investors into this industry just as they are flooding the regulated Carbon trading markets- pushing up the prices of carbon credits and making  it harder for people to engage in emissions unless necessary. For example, if the price of credits is pushed higher, one will have to reconsider unnecessary travels and consumptions that may exhaust their carbon allowances. Cap and trade at an individual level will also encourage households to be cognizant of their carbon footprints and therefore put effort into saving energy.

While this may look rosy and ideal, it may also lead to a dystopian society where all activities are monitored and closely tracked. Discussions are rife on what this really means and what tangent it can take. Some worry that it may mimic a social system that may strive to reward good behavior and punish bad practices. Individuals may also stop engaging in economically productive activities so as to cut their carbon footprint. Done at scale, this will have adverse effects in the growth of an economy  at a macro level and may easily cascade into civil unrest. We may also experience widespread arrests as most people may find it hard to work or move within their specified limits. Just as is the case with the corporate Cap and trade systems, individuals cap and trade schemes may also cause carbon leakages- a situation where  people migrate to  countries that are more flexible and offer better terms on carbon offsetting. This will lead to talent erosion and may adversely affect economic production.

Hedge Yourself

Carbon Credits have been designed in such a way that they get harder to access and their permits also get more expensive. So in the long-term, it is safe to assume that this is a market that will grow as the price of the  carbon credits is envisaged to keep growing- with the exception of a global  catastrophe such as  the 2008 economic crisis or the Covid pandemic that hindered movement thus causing a glut in carbon credits, thereby, bringing down their prices. Savvy investors can invest in projects that track carbon credit, stock up on carbon credit or even buy CBDCs from governments that are actively legislating on carbon emissions.

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