Cute attempt, but it seems a bit naive on how carbon markets work… I didn’t go very deep, here just a few first obvious issues with your approach:
First, how are you going to “investing in compliant carbon reduction projects and re-casting generated offsets as ERC20 tokens, then distributing them through an open-loop style loyalty rewards program.” without spending millions and millions of dollars without making anything back? If a carbon reduction project is financially viable, it is not compliant to generate offsets… a problem called “additionality” in carbon-lingo. Someone needs to take a loss to create value in carbon, that’s kind of in the nature of it’s global public good characteristics.
This is not to say that there is no money to be made in EE and RE etc, but the profitable investments are already included in the Business-as-Ususal carbon scenario already and thus not counted as reductions.
“In time, people and organizations will be eligible to generate tokens”… This is pretty much impossible under the Paris Agreement, unless a national government explicitly allows you to. See http://www.carbon-mechanisms.de/en/2016/what-future-for-voluntary-carbon-markets/
In summary: Any emission reduction you achieve in any country is imidiately claimed for the national goal. Therefore if you reduce more, that only means that heavy industry in your country needs to reduce less. There are only two ways to reduce more than the NDC under Paris:
- Push the national government to increase the NDC ambition
- Find loopholes in the national reporting and reduce in those (e.g. some countries don’t account for certain types of land-use related emissions)
While a laudable idea, a global peer-to-peer carbon trading first needs a global consensys mechanism to agree who has how many allowances to begin with. One of the main failure points of the carbon markets under Kyoto was actors over-allocating, primarily by basing their emission estimates on pre-collapse sowjet union emissions. Therefore e.g. Ukraine hat billions of tons of emission certificates “for nothing”, which did great harm to the market. If you are serious about your goal, you first need to fix the initial allocation problem. Btw. if you go for something seemingly obvious as “equal per capita emission allowance just big enough to stay below 450 ppm”, this would create a massive global re-distribution of wealth from rich to poor. Again, while laudable, good luck with getting the rich and powerful to agree (see e.g. this old Guardian Article: https://www.theguardian.com/sustainable-business/personal-carbon-allowances-budgets)
Another, related problem of allocation is allocation along supply chains. Is the consumer responsible for the footprint of his steak, or is it the cattle rancher? Under Paris, it is always the country of the rancher — not saying that makes necessarily sense, but you need to define it. For fossil fuels, it’s the country where they are burned, not where they are mined.
Another point is the most basic fraud. Unfortunately blockchains only prevent fraud after data is recorded — and most cases of fraud under Kyoto happened before the data was in the registry. The classic example are the Chinese cooling agent factories that altered their production parameters to increase their output of HFC-23 (very strong GHG), so they could claim more reductions, as they burned more of it. They really did burn more, just that they frivioulsly produced it for no other reason than creating carbon credits in the first place. Your system needs to make sure fraud cannot happen, which is really tough, as carbon can be emitted in many, many different forms.