It’s high time for Market Ecology
A good system consists of a set of rules and principles which incentivize participants with different profiles, roles and interests to devote their efforts, time, energy, capital, etc. to contribute to the sake of the system itself, their own sake, and possibly the sake of other participants, or even entities outside the system, such as the environment. In our current economic system, it is beneficial for the three main groups of participants, i.e. individuals, organisations and governments, to destroy the environment to be successful in this system, i.e. to gain or spare money. We must develop and switch to a system in which the interests of the economy and those of the ecology are aligned, not opposed as is the case today, as each of the system participants (individuals, organisations and governments) acts above all according to their own interests.
The market economy is and remains the dominant value exchange system of mankind because it best expresses the interplay of supply and demand, provided it is equipped with good currencies, while ensuring the freedom of its participants. An environmental component must be added to the price in order to consistently integrate the environment into the market economy. To do this, the environment must be transformed into something that is compatible with the market economy: measures that are transformed into assets that are expressed in the form of currencies. The good thing is that we can measure the GHG footprint of pretty much everything. We can agree that the higher the GHG emissions of a good or service, the more ‘undesirable’ it is for the environment and the more its purchase or consumption needs to be restricted. We have two options for converting GHG emissions into value: in the form of a tax or in the form of a reward.
Market ecology is a monetary and economic system in which the price is based on two realities: the economic one which is the only reality which is considered in our current economic system, and the ecology through GHG emissions converted into a negative or positive contribution to the price. We will see through two examples that digital currencies are the most suited technologies for making the market ecology come true, thanks to their three USPs: they can be programmed, they enable fast and low-cost micro-transactions, and they can be dedicated to a usage.
TCS: a consumption tax purely based on GHG emissions
Imagine that an impermanent currency is created for every component of everyday products: groceries, cosmetics, detergents, etc. Each currency would be dedicated to an ingredient and coded so that a tax rate depending on environmental criteria could be applied: ingredient type, mass, production method (organic or not), origin. Any product purchase would trigger a conversion into as many currencies as there are ingredients in the product, which together would form a consumption tax that would depend directly and solely on the carbon footprint of the ingredients that make up the product. The system is called TCS for “Tailored Contribution System”. For example, we would have the following payments:
To motivate manufacturers to participate in the system, it would be designed to use unfavorable default assets in the absence of information:
⦁ A product with no reliable source information would be considered to be from the other side of the world (default distance = 20,000 km).
⦁ A product would be considered non-organic by default (default production method: conventional).
⦁ The exact composition of the product (in %) may also be hidden to protect manufacturing secrets.
Every product and service has a carbon footprint. Intuitively we think of consumer goods, furniture, groceries and transport modes, but the digital identity of all products and services tomorrow will contain a carbon footprint that will have a positive or negative impact on the price. For example, the carbon footprint of the following services could soon be calculated:
⦁ A cinema screening, depending on the CO2 emissions caused by the production of the film.
⦁ A day for your child in kindergarten, school, junior high school or high school, depending on what they eat there and how the premises are heated.
⦁ A candidate for an election based on the carbon emissions caused by their campaign.
This system uses the three basic properties of digital currencies:
⦁ Each currency is programmed to be used when the corresponding ingredient is part of a product purchased by the consumer.
⦁ Each payment is divided into many micro-payments to ensure high accuracy.
⦁ Each currency is dedicated to an ingredient and has a name that allows its identification to serve as an information carrier; for example, IECOSNA is used to levy environmental taxes on the components of sodium-containing cosmetic products in Ireland.
TCS would be an application of the technologies and concepts presented so far to make our consumption model fairer, more sustainable, more accurate and more transparent. One could also imagine that a government setting up this system would periodically, for example every month, distribute a certain amount of another impermanent currency called IRTP (individual rights to pollute), which would be programmed in such a way that it could only be used to pay TCS taxes. If Switzerland allots 12 CHIRTP per month to its citizens, one could imagine that a person who obtains a visa for a three-month stay in Switzerland would receive 36 CHIRTP. If TCS currency transactions were transparent, that is, if anyone could see them, but without being able to identify the issuers (consumers), the media or the Ministry of Health could classify the outlets where most meat, sugar, palm oil, etc. are consumed and take appropriate measures. The monetary system would also become a gigantic data factory.
Common: a new generation loyalty system
Now let’s reverse the TCS system and consider an impermanent currency called “ Greencent” (GC), which can only be earned by being environmentally responsible and can only be spent on purchasing environmentally friendly products and services of the environment, and which can be converted into certificates of “non-emission” of CO2 after it has been spent. The Greencent is a reward for 1 kg of non-emitted CO2: every time I avoid emitting 1 kg of CO2 through my actions and decisions, no matter where I am and what I do (move, shop, eat, etc.), the system automatically grants me a Greencent, which can be considered as a loyalty point. The point here is not to describe in detail the entire project and the economic model around the Greencent, which is called Common and available in the form of an application currently available on iOS and Android, but to see how digital currencies and registers can make our consumption model more sustainable. In summary, Common is a loyalty program that rewards its members not for the money they spend, but for the kg of CO2 they avoid emitting through their activities and purchases, always in a 1:1 ratio with the Greencents that the system allocates them. To do this, we can further explore how digital registers can help us measure the “environmental behaviour” of Common members, how Greencents can be awarded, and how they can be spent.
Common evaluates the environmental behavior of its users in all areas, i.e. all activities that individuals can carry out:
⦁ urban and long-distance mobility
⦁ the consumption of food and drinks in restaurants, cafes, hotels, etc.
⦁ the consumption of bandwidth and online storage space
⦁ waste management
⦁ online and offline shopping of non-edible products (clothes, etc.)
⦁ the purchase of consumer goods
⦁ energy consumption
Let’s examine two very different examples to explain how the application works: urban mobility and the consumption of food and drinks in restaurants.
When a person moves around the city, if they do not walk, they use a means of transport, ranging from private bicycles to public transport, including scooters and other rental bicycles. Each of these vehicles will be uniquely identified in a digital register in the foreseeable future, and the user will interact with the vehicle’s wallet through this register, for example to pay for their ride, except in the case of the personal scooter or bicycle, which can already be reliably tracked, without the need for digital identities, currencies and registers. The common system will therefore not only know what vehicle the user is using, for how long and over what distance, but also what the CO2e emissions of that vehicle are (e.g. bus route 52 may be equipped with hydrogen buses, while the 57 continues to run on diesel; the Düsseldorf tram may use less electricity per km than that of Hanover) and even how many passengers are on it, by connecting the system to the user’s and vehicle’s wallet, which contains the respective digital identities. As a reminder, Common allocates a Greencent to its users as soon as they manage to avoid 1 kg of CO2 emissions through their activities and decisions. How do you avoid 1 kg of CO2 emissions in the mobility sector? And in relation to which measure? To measure this in urban mobility, Common calculates the difference between a reference activity, such as driving a car alone, and the activity that the user performs. According to the European Environmental Agency, 130.3 g CO2 per km are emitted on average if you drive a car alone in the city. That number is an average, and it’s trending down as internal combustion engines get better and EVs gain market share. If a user travels 5 km on the tram and the tram emits 12 g CO2 per km, then this user has avoided the emission of 5 x (130.3–12) = 591.5 g CO2. So he automatically gets 0.5915 GC since 591.5 g = 0.5915 kg.
Now let’s take an example in the dining area. Imagine a person wants to order a Thai curry and has a choice of five protein sources with a corresponding carbon footprint:
⦁ chicken and 3.76 kg CO2 emission
⦁ Fish and 4.12 kg CO2 emission
⦁ Beef and 5.75 kg CO2 emission
⦁ Duck and 4.51 kg CO2 emission
⦁ Tofu and 0.61 kg CO2 emission
The average CO2 emission of these dishes of 3.75 kg is taken as a reference to calculate the reward in Greencents. Of course, only the tofu dish is rewarded: 3.75–0.61 = 3.14 GC.
In a few years, the Greencent could be programmed in such a way that it cannot be used to buy products and services, even partially, whose carbon footprint is greater than, for example, 152 g. This information will be included in the digital identity of the products and services and will be retrievable according to the “Who buys what and with what?” principle. Payment would then be technically impossible.
This system is already a reality in Munich and Budapest: you can spend your Greencents at certain partners (restaurants, bicycle repair shops, cafés, etc.). In other words, thanks to Common, you can already pay with your environmental friendliness.
So here we see again that the system leverages the three fundamental properties of digital currencies to help make our consumer society more sustainable:
⦁ The Greencent is programmed to be awarded when a person carries out an environmentally friendly activity and can only be spent to pay for products and services that have a carbon footprint below a certain value, which must be set and communicated transparently
⦁ The Greencent is allocated and issued through several transactions, sometimes in the amount of a few cents or less, in order to systematically reward the virtuous environmental behavior of Common users and to be usable even with small amounts by Common partners who accept the Greencent as a means of payment.
⦁ The Greencent is dedicated to a very precise use: it is intended to always represent a reward for 1 kg of non-emitted CO2, whatever the activity, whatever the place, according to precise and transparent measurements and rules, to serve as an information vector: if, for example, a pack of cereal offers 0.83 GC and another of the same mass offers 1.26 GC, everyone immediately knows which of the two has the lowest carbon footprint.
By allowing shops, e-commerce websites, banks, public or private transport companies, etc. to accept the Greencent as a means of payment, Common lets the law of supply and demand determine a value for it, i.e. the reward for not having emitted 1 kg of CO2, which is the opposite of the EU carbon permits which are a CO2 emission allowance for industries (which for your information are currently around €84 per tonne). Pricing is fundamental in a market economy and should be left as much as possible to the natural mechanism of supply and demand, taking into account the most important components that cannot only come from the economic sphere.
If one bakery sells a bun for 3 GC and their competitors in the area do it for 2.5 GC, assuming they are of the same size and quality, then the “more expensive” bakery may eventually price their bun down to 2.5 GC to stay competitive. If the bun is normally offered for €1, then Common has made it possible to establish a relationship between a reward for not emitting 1kg of CO2 and a value in local currency. In this example, 1 GC is worth €0.40. Common has made it possible to monetize CO2 and thus integrate the environment into the market economy: the market ecology has come true.
Economic history is characterized by long periods of growth triggered by technological advances that lead to major crises and then to social advances, such as the abolition of slavery or the Welfare State. I believe that consistently connecting the environment with the economy, thus aligning the interest of these two systems, is the best way to effectively combat climate change, and that is why I believe that the market ecology will be the next system change that we need to implement in order to mitigate what we have done since the end of the Second World War. Money is the main cause of our economic and ecological issue, and also potentially the solution. The major ecological crisis we caused and are still causing as we evolve in an outdated economic system makes the advent of the market ecology necessary, while digital currencies and registers make it possible.
