Most of us subscribe to the science of climate change, but few of us actually make strenuous efforts to reduce our carbon footprint. We might buy the odd energy-saving lightbulb, yet many of us will still board a flight to see Grandma at Thanksgiving. A single flight from New York to Denver, let us remind you, produces the equivalent CO2 emissions of driving a car 7,500 miles a year–which is to say, a lot.
Would it make a difference if we were actually incentivized to make more environmentally-friendly choices? That is, if we were rewarded in hard currency that we could spend on real things? That’s the hope behind CarbonX, a new loyalty program founded on blockchain technology.
It works like this. CarbonX buys carbon offsets under a United Nations-backed scheme called REDD+. This certifies greenhouse gas reductions from forestry and ecosystem remediation projects around the world. CarbonX converts those credits into a cryptocurrency, in the form of a token called CxT. Then it sells on these tokens to retailers and manufacturers, who use them to incentivize consumers to make more sustainable choices.
So, you might get a token for taking a ride-hailing service instead of a personal vehicle, or if you buy locally-produced seafood rather than importing it from South Asia, where it incurs lots of air miles. Consumers are rewarded with the tokens at the time of purchase, which they store in a digital wallet and can then use to buy other products and services. For example, if Home Depot offered you a token for buying a fuel-efficient lawnmower, you might be able to use that against another purchase from the store.
Now, all this might sound a little complicated and foreboding for the average consumer. But the people behind CarbonX, which is based in Canada, assure me the actual complex workings will be hidden from view. For consumers, the process will appear as a smooth user interface; the transactions between offset, token and end-products will be seamless, they say. Plus, blockchain technology will enable a loyalty scheme that’s more decentralized and less expensive to manage than today’s versions, they argue.
Blockchains are databases spread over multiple users. They were first developed as a way to track transactions of bitcoin currency but have since been adapted in many other industries, including financial services, supply chain management, music, and energy. They create permanent records of events–for instance, the transfer of bitcoin from one computer to another–and are considered incorruptible. No single person in a blockchain can amend a block (or record) without changing other blocks that refer back to it, and doing so requires the consensus of other machines making up the network. In other words, a blockchain is a consensus truth agreed among its participants. Blockchains are thought to be particularly conducive for loyalty schemes, where tracking transactions across multiple sites and multiple companies, is currently a cumbersome process.
“Carbon credits are the perfect candidate for an asset on a blockchain because they can be easily tokenized,” Don Tapscott, a leading futurist and co-author of the best-selling book Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World tells Fast Company. “For it to be peer to peer and on an open network, you need an ‘Internet of Value.'”
By “internet of value,” Tapscott means the way in which blockchains can transmute digital assets, including stocks, votes, loyalty points, intellectual property, and music, into a tokenized form by which they can be transferred instantaneously from person to person without the need for intermediaries like banks or marketplaces. Loyalty schemes, in effect, become systems orchestrated by their users, instead of being controlled by gatekeepers managing servers somewhere.
Don Tapscott is launching Canada-based CarbonX along with his brother Bill and son Alex, and Jane Ricciardelli, a veteran of the loyalty industry. They plan to buy REDD+ credits on behalf of retailers and manufacturers, taking a small fee on each transaction to cover their costs. Customers will manage their credits using an app that they hope to have ready by the second quarter of 2018. They can use the tokens to buy goods and services–for example, to pay off carbon taxes on gas at the pump (much of Canada levies a carbon tax on fossil fuels, which it returns to citizens in lower personal taxes).
In an interview, Bill Tapscott says retailers have an incentive to use the scheme, and buy the tokens, for the same reason as any loyalty program: access to information about their customers. When signing up, users will fill in an extensive carbon calculator detailing their energy, transport and housing setup. That along with transaction data created by the CarbonX network will be useful for targeting products and services to customers who are most likely to purchase them, he says. CarbonX plans to announce its first partner companies in the new year.
Personal carbon trading schemes have often been proposed as a way of paying for carbon dioxide mitigation. But, aside from the odd small-scale trial, the idea has never taken hold at scale. Tapscott says one problem is that individuals can’t make enough money to make it worth their while to participate. The average American is responsible for about 20 tons of carbon dioxide emissions a year, which works out at about $400 a year based on current prices at a carbon market like the Western Climate Initiative. Assuming people collect credits on 20% of their purchases, that means only $80 a year–hardly enough to get pulses racing.
CarbonX plans to get around this by decoupling the token value from the carbon credit value. The value of the tokens will depend on the companies offering them when consumers buy goods. For example, an environmentally-sound dishwasher may come with a five token bonus or just three–it’s up to the retailer. And those tokens will tradable in a second market, also affecting their value. The Tapscotts hope to return up to $250 to consumers a year, all told.
“Our attitude to climate change is that we can’t rely on big institutions to solve the problem,” Don Tapscott says in a phone call. “At the moment, there isn’t really an effective way for people to do something. But with this platform that everyone can use, we hope to smash things up and get it moving.”