This year’s Ethereum conference in Denver, Colorado, included a half-day series of (scantily attended) presentations on Web3 technology in carbon markets. Coincidentally, on the very next day, a leading climate advisory firm held its annual “State of the Voluntary Carbon Market” (VCM) webinar.

The two back-to-back discussions offered strikingly different opinions and outlooks, presented to apparently entirely non-overlapping audiences. Each used different language, referenced different facts, and pointedly dismissed the relevance and competence of the other. The blockchain tribe and the incumbent carbon market tribe are not just talking past each other; with few exceptions, they are not even talking.

The following fictitious dialogue between two composite characters blends real opinions expressed in the last three months by senior-level individuals from a variety of companies in both tribes. A number of the lines are exact quotes.

I. Exposition

(Alice and Bob are talking outside a conference auditorium, as others exit past them towards the atrium bar.)

Alice: — So right now, the market suffers from two things. A lack of good quality projects. And a lack of confidence. Because the market has been moving forward without quality credits. Tokenization doesn’t fix that.(Crosses her arms smugly)

Bob: Agreed.

Alice: (Her face registers surprise) Wait, what?! Now you agree?

Bob: I didn’t say blockchain solves quality. BUT, once a quality credit is issued, putting it on chain makes it more transparent.

Alice: (Frowns) Hmm, perhaps…But, I hear you Web3 people make all kinds of claims that the bitcoins solve everything.

Bob: (Groaning in aggravation) Umm, you mean “blockchain”. But, yeah, there is quite a bit of noise in the Web3 impact space.

Alice: I’ll also add that I’m skeptical of commoditization of carbon credits, because they are so unique. A reforestation project in the Amazon with lots of co-benefits and uncertain carbon storage is not the same thing as a direct air capture facility storing carbon for thousands of years. You guys would have to figure out some way to account for that heterogeneity.

Bob: Well, first of all, the carbon market is kinda ALREADY commoditized. Take the N-GEO contract.[1] It’s already a commodity…without blockchain even being in the mix.

Alice: (Nods noncommittally) Hmm…

Bob: And remember that commoditization is a SPECTRUM. Existing commodity markets do have differentiation. Take the Brent Crude Oil contract.[2] One reference price, but then there are quality multipliers for variation in sulfur content and density.

Alice: Hmm. Well, I suppose cap-and-trade compliance markets already effectively commoditize emissions reductions?

Bob: That’s true. And let’s call it “standardization”, rather than “commoditization”.

Alice: Is that the same thing?

Bob: It’s on the spectrum.

Alice: Okay…Then what do you think commod — I mean standardization of carbon credits would look like?

Bob: I’m thinking like a two-by-two matrix. You’ve got avoidance/reduction versus removal. And maybe engineered versus nature for each of those. And then sub-types for durability.

Alice: (Nodding) Permanence tranches. Like Puro Earth has their standardized hundred-year and thousand-year CORCs.[3]

Bob: Sure.

Alice: You’d need a sufficient number of buckets, so price can reflect quality differences.

Bob: And risk differences. Reversal risk, operational risk, methodology risk…

Alice: Though I still worry that standardization is too difficult a bar. People will always find ways to poke holes.

Bob: You’re thinking too black and white. There’s a lot of room between every project being its own incomparable custom thing, (spreads arms out wide to show dimension) and all projects being interchangeably generic. Between a million buckets and one bucket.

Alice: Perhaps more buckets now, while carbon removal tech is still evolving, and fewer buckets as things mature.

Bob: Maybe. In any case, we’re gonna need SOME degree of commoditization in order to scale the market. Emitters doing their own due diligence on every project is NOT a scalable model.

Alice: Yeah, I agree with that part. Scale — with quality — is huge.

II. Context

Bob: (Getting more excited) It is! And we believe that carbon markets will deliver thirty percent of the solution needed —

Alice: Wait, what?! You’re STILL reciting that line?

Bob: (Nervously) What do you mean?

Alice: First of all, the VCM is a tool. You need to stop making YOUR thing seem like the main thing. The main event is emissions reductions. Primarily by transitioning away from fossil sources of energy. And by addressing land use emissions.

Bob: And carbon dioxide removals.

Alice: Yes, CDR. Absolutely.

Bob: Well, a lot of people cite that thirty percent number…(shrugging)

Alice: Yeah, that number got picked up and kind of thrown around and repeated. Actually, I happen to know that it originally came from an eight-year-old paper[4] that said “natural climate solutions” could provide TWENTY percent of the mitigation needed over the 2016 to 2050 period…and that’s IF fossil emissions were to stay flat from 2016 onward. Which, of course, they haven’t.

Bob: (Strokes chin, listening)

Alice: So, global mitigation tonnage capacity of natural climate solutions is fixed, right? But the total mitigation need has since increased. So, natural solutions are now — arithmetically — a smaller percentage of the total need.

Bob: Okay, alright. Let’s hit the reset button on numbers. How much of the total mitigation need do YOU see coming from reductions, versus from stuff the VCM covers? Meaning engineered removals, nature-based removals, and nature-based avoidance.

Alice: Well, if we define mitigation to not include adaptation?

Bob: Agreed, let’s say we’re using the term “mitigation” to mean reductions and removals.

Alice: Then, in terms of spending, we’re looking at like one hundred to two hundred trillion dollars, cumulative, still needed for energy transition, now through 2050. And like fifteen trillion total for removals plus avoidance.

Bob: (Wide-eyed) TEN TIMES as much for energy transition!?

Alice: Yes. Gotta build a new electricity grid, convert all vehicles to electric, switch out production methods for steel, cement, fertilizer, plastic…It’s EXPENSIVE.

Bob: Okay, but fifteen trillion dollars is still a lot.

Alice: It is. Though not all of those dollars pass through a crediting mechanism.

Bob: What do you mean?

Alice: We expect a good chunk of avoidance projects and nature-based removals to get funded via direct procurement, green bonds, internal action or insetting.

Bob: Well, the VCM plays an important part.

Alice: It does. (Becoming sterner) But I just want the framing to be crystal clear: The CHANNEL through which money moves between the emitters and the people doing the not-emitting does NOT decarbonize our atmosphere. An accounting mechanism doesn’t decarbonize our atmosphere. Software doesn’t decarbonize our atmosphere. What DOES move the needle are actual, on-the-ground reductions and removals. Period.

Bob: Point taken. I can see the importance of setting a wider context about impact when we speak publicly. (Takes laptop bag off shoulder and sets it at his feet, settling into the conversation) Okay, getting back to talking about how much the carbon market needs to scale —

Alice: Wait, that’s another thing that bothers me about your messaging. What “carbon market” are you referring to?

Bob: I mean…I’m always talking about the VCM. Compliance markets aren’t that big.

Alice: Wait, what?! Compliance markets are EIGHT HUNDRED times larger than the voluntary market.

Bob: (Wide-eyed) Oh. (After thinking for a moment) Well, they eventually converge —

Alice: They ARE converging.

Bob: What do you mean?

Alice: Some people are buying VCM credits for compliance purposes. And some people are using compliance standards like CORSIA as a criterion when buying credits for voluntary purposes. (Balances her hands in front of her like a scale) And we expect some VCM methodologies to become standards for good delivery in compliance markets.

Bob: Hmm. Gotcha.

Alice: And, while we’re talking about language, let’s level-set that “credits” (air quotes) is a shorthand, right? (Nodding at him pedantically) There are multiple types of environmental credits. In the U.S., you’ve got Renewable Energy Credits, Alternative Energy Credits, Solar Renewable Energy Credits, California Low Carbon Fuel Standard Credits, California Air Resources Board Offset Credits. EPA Fuel Consumption ABT Credits, EPA Fuel Manufacturing ABT credits for gasoline sulfur and for benzene…

Bob: (Looks pointedly at wristwatch, rolling eyes)

Alice: …There’s CORSIA Eligible Emissions Credits, Alberta Emissions Offset Credits, CDM Certified Emission Reduction Credits, Verified Emission Reduction Credits. (Audibly takes a quick inhale breath) Emission Trading System credits in China, in Japan, in the EU, in the UK, in New Zealand —

Bob: I get it, I get it. Words matter; be precise; do my research. Okay. But getting back to talking about how much the VCM needs to scale…?

Alice: Yes. Getting back to that. So we’re starting from a size today of like 200 million tons of retirements in 2023…

Bob: For which buyers paid about a billion dollars…

Alice: And I’ve seen projections all over the map. That tonnage volume grows 8x to 20x by 2030…

Bob: (Nodding) Or up to 40x in terms of dollar value of primary market transactions, as credit prices increase.

Alice: (Nodding) Okay, so in the high case, let’s say it’s a fifty billion dollar market in 2030.

Bob: (Raises eyebrows, seeking agreement) Pretty big.

Alice: I don’t know. I’d say that’s big but not huge.

Bob: Yeah?

Alice: That’s like a sixth of the global corn market. Or like one new tech giant, but that’s only like twenty percent the size of a Microsoft or a Google.

Bob: Still, it’s tough to imagine accomplishing that scale with the current over-the-counter structure.

III. Efficiency

Alice: Is it? I mean, we have OTC markets that large. And larger. I think the U.S. OTC equities market transacts like four hundred billion dollars a year. That’s a lot more than fifty billion. (Shrugging) And it’s been working okay all these years.

Bob: But it’s more prone to fraud. And transaction costs are high; brokers extract like fifteen percent in OTC markets.

Alice: Then are you guys working on tokenizing THAT market, too?

Bob: I mean, yeah. People are. (Pauses for emphasis) Look, we have the opportunity, at this early stage of the carbon market, to set it up well, aligned with our values —

Alice: Values?! Didn’t your main guy say, “I’m in crypto to do good in the world” and then go to prison for twenty-five years?

Bob: (Sighing in embarrassment) Yeah. But…can we focus on the arguments I’m making NOW? I am sincerely trying to help.

Alice: Fair enough. So…what I’m hearing is that you’re essentially making an efficiency argument?

Bob: Yeah. Blockchain makes things like 100x more efficient.

Alice: (Facepalms in aggravation) And there you go with the hyperbole again. Come on. If intermediaries extract fifteen percent of value in the current system, and you disintermediate it, the maximum savings is fifteen percent.

Bob: Umm…

Alice: And who has efficiency at the top of their list? VCM issues are related to policy, not software.

Bob: Well, let me ask you this. Energy and material efficiency is one of the decarbonization pathways. I KNOW you care about those?

Alice: True. Waste reduction, renewables curtailment, transmission line losses, waste heat recovery, fugitive methane, recycling… (Trails off, lost in thought, looking up at the ceiling)

Bob: So I think you SHOULD care about efficiency in the carbon market. In your position, analyzing and commenting on the market, you don’t feel the pain of the buyers.

Alice: I don’t —

Bob: Think about what’s happening in the bowels of companies like Delta, Nike, Disney…and even better the smaller companies trying to buy carbon credits. They’re operating just shy of chaos, with a million PDF contracts in a mess of nested folders on someone’s Sharepoint. And with more volume, it’ll be more of a mess. Efficiency isn’t just about disintermediation of transactions.

Alice: Huh. I can see your point. (Pausing a beat) Well, if you’re really just making an argument for efficiency…which will be more important down the road than today…then I wonder if you could be too early?

Bob: (With a wry smile) Yeah, that’s what our investors are worried about.

(They are both are silent for a moment, digesting the thought.)

Alice: So your Web3 crusade actually isn’t even specific to carbon. It’s really about efficiency. Cost and speed. Same as in all the other markets where you say blockchain is being implemented.

Bob: Welll…there ARE things about carbon specifically, where the transparency blockchain offers is a big deal.

IV. Transparency

Alice: Transparency, huh? I believe in the power of transparency. Like, think about the methane satellites just launched this year, which directly measure — versus merely estimate — emissions. Game changer.

Bob: That does sound cool.

Alice: What does blockchain do for transparency in the VCM, though?

Bob: Don’t you want to know the project details behind every credit? Provenance, geospatial site boundaries, how the money was distributed to local communities…Credit transfers, retirement?

Alice: Of course. And that can be accomplished with a serial number and required disclosures.

Bob: Well, today it’s absurdly inefficient and manual. These market research firms literally have to do SURVEYS in their own networks to produce reports on pricing and trends.

Alice: Yeah, I’ve seen that. The information isn’t very granular. And then there are different estimates out there of how many tons were even retired in a given year.

Bob: Right.

Alice: But, again, the first step is information disclosure. If the information isn’t disclosed, you can’t put it on chain. Blockchain’s existence doesn’t magically manifest data out of the ether. And if the information is disclosed, THAT may already be enough to accomplish the transparency goal. What am I missing?

Bob: I would say it’s obvious that kind of setup isn’t enough, given the VCM scandals.

Alice: (Shaking her head) The only controversies were about where the money gets channeled to. Questions about the integrity of the underlying DELIVERABLES, not about the TRANSACTIONS. It was about rules of the game, not about I.T.

Bob: Can’t you imagine that it would be better if the information were publicly accessible, on chain, for crowdsourced auditing?

Alice: We’ve got the carbon credit rating agencies.

Bob: That’s not enough.

Alice: Why not?

Bob: The VCM won’t be regulated by a central body. We need the latest and greatest digital tools to set it up right. It’s a matter of the industry growing up.

Alice: I’m obviously in favor of using the best tools. But not even the Gold Standard report[5] on carbon market digital assets tried to call this transformative change, as opposed to incremental functionality.

Bob: (Shrugging) Blockchain is cheap, so why wouldn’t you go ahead and use it, even for incremental benefits?

Alice: Yeah, that’s reasonable.

Bob: And lack of transparency inhibits trust. It’s the limiting factor in market growth right now.

Alice: Uh, no. It’s not. I think there’s pretty widespread consensus in my orbit that it’s a lack of supply of high-quality projects. And, of course, that the rules have been in process.

Bob: And WE think blockchain adoption will unlock capital to build those high-quality projects you want.

Alice: And WE would say that capital really gets unlocked in a major way when we create permanent demand by clarifying the requirements on using carbon projects to meet compliance targets.

Bob: Hmm. Well, you know…buyers DO complain about price transparency, transaction complexity, the need for standardization. All these opaque term sheets. The cognitive load is too high.

Alice: Cognitive load IS too high, I agree. And it is getting reduced via SOME degree of standardization, like we established. And carbon credit ratings. And centralized exchanges instead of bilaterals. Web2 tools.

Bob: (With a dismissive hand wave) I don’t know…

Alice: (Becoming stern) And can I just say that it’s a bit amusing to hear YOU going on about transparency. You don’t even use your last name in public, have no LinkedIn account, and won’t turn on your video during calls. By observation, you’re not committed to transparency as a principle. You’re just trying to legitimize the thing you’ve been working on. Hammer looking for a nail.

Bob: (Fidgeting with his conference lanyard) Point taken about the business communication norms. We have a culture clash with the legacy system.

Alice: (Smugly) I think you guys need to grow up.

Bob: (Rolls eyes)

Alice: Anyway… (Resets to a conciliatory tone, palms up in front of her) Let me play back what I’m hearing so far. Your argument for carbon credit tokenization is about efficiency (holds up one finger) and transparency (holds up a second finger).

Bob: Well…and also democratization of access.

V. Access

Alice: (Scratching head in puzzlement) Who doesn’t have access?

Bob: Individuals can’t easily buy offsets.

Alice: First of all, let’s get the language right, again. You purchase a CREDIT. It only becomes an OFFSET when it’s retired and used to make an environmental claim.

Bob: Noted.

Alice: Back to access. No, individuals are not responsible for climate finance. That’s not the demand we’re looking for.

Bob: Yeah, I actually agree with you there. That talking point is a habit of mine from being in the Web3 bubble. Applies better to DeFi.

Alice: Decentralized finance?

Bob: Yep.

Alice: I mean…retail consumer access is not UN-interesting as some sort of corollary feature. It’s just not the reason the VCM exists. Not the target. Not the solution.

Bob: Agreed. Relying on a small minority of individual do-gooders can only ever play at the margins of what needs to happen in carbon.

Alice: We’re on the same page.

Bob: But…let’s think about when medium-sized businesses start wanting to buy carbon credits. Unlike the large corporate first movers, smaller companies are going to have a lot more trouble with the current buying process.

Alice: (Stands up straighter and points excitedly at Bob) Now THAT’S a good argument! (Continuing with less excitement) Though…I DO think it’ll still be a while before we see demand from smaller corporate emitters.

Bob: Could be.

VI. Expertise

Alice: See, sometimes you have good insights. But the thing is, a lot of times, you just don’t know your stuff.

Bob: For example?

Alice: Yesterday, you totally botched a public explanation of how biochar works as CDR.

Bob: Did I?

Alice: (Irritably) Yes. Conflated it with enhanced rock weathering.

Bob: (Scratches head nervously)

Alice: Moreover, why on earth are YOU the one standing in front of an audience explaining CDR methods? The hubris is…astounding.

Bob: Well, I feel like I’m really good at getting up to speed fast on new topics, going back to first principles.

Alice: (Rolls eyes and shakes head) No, I’d say you’ve got a surface level understanding of the climate problem and climate response. And of energy production technologies and economics.

Bob: Hmm. What else did I do?

Alice: (Angrily) How about that rant against regulation of solar geoengineering? Standing on a stage, defending rogue experimentation based on some sort of libertarian principle. At the same time that scientists around the world are calling for an emergency conversation on the risks!

Bob: Okay, well…maybe Web3 people could understand climate topics better. But mainstream climate people don’t appreciate the finance and settlement side.

Alice: No kidding. Why would we? We’re the people who explicitly chose NOT to go to Wall Street.

Bob: But you had a SCIENTIST trying to field questions on trading market operations, right?

Alice: Fair point. But, look, there’s no compression algorithm for experience, right? You end up making mistakes.

VII. Bad Actors

Bob: Mistakes like what?

Alice: Like failing to understand that tokenized crap is still crap.

Bob: (Groans in embarrassment) KlimaDAO.

Alice: Rank opportunism, at best.

Bob: I actually agree with you.

Alice: Ha. EVERY one of you Web3 impact people have agreed with me on that privately. Though NONE of you will say it publicly.

Bob: Well, you’d have to imagine a pretty high level of incompetence to believe it was anything else.

Alice: (Agreeing) Mmm.

Bob: Though, to be fair, there were other parties involved in that whole mess. Like Toucan…

Alice: …and Verra.

Bob: Exactly. And there have been bad actors on your side, too.

Alice: Or cynical actors, at least. Opportunism, given the loose definition of what counted as avoidance.

Bob: I do tend to think that people make honest mistakes. And we should stop lobbing so much blame back and forth. Most people aren’t crooks.

Alice: Err…some people in crypto ARE crooks.

Bob: Fair. Though, it’s kinda to be expected in the early days of any new market.

Alice: Yeah, and it IS early days.

Bob: For Web3 AND for the VCM.

Alice: After all, you’re trying to disrupt something that’s not even fully set up yet.

Bob: Choppy waters on both sides.

Alice: (Chuckling) This is the rare case where I find myself agreeing with a bothsidesism point.

(Alice gestures to a nearby bench. She and Bob both take a seat.)

VIII. Liquidity

Alice: Okay. Let’s get back to the arguments for blockchain in the carbon market. I’m hearing you say it’s about efficiency (holds up one finger) and transparency (holds up a second finger). And access, which is an upshot of efficiency and transparency.

Bob: Welll…and it’s also about liquidity.

Alice: (Raises eyebrows) Now you’re getting obscure. Nobody I know cares about this one.

Bob: Well, finance people care.

Alice: I feel like you guys just like saying the word “liquidity”.

Bob: No… Liquidity is important for price discovery. Prices approach the real price if the market is fluid. Liquidity literally is, if you can’t find the other half of a buyer-seller pair, then just make one.

Alice: If it’s real liquidity, not fake liquidity by market makers. Arguably, market makers are BAD for price discovery. You only know the true price of something if you know how bad people want it when it’s gone, right?

Bob: Think about a carbon credit seller. Liquidity is how easy it is to convert to cash. And for the buyer and seller to both know what the price should be. And to count on price stability.

Alice: I’m not convinced that’s a problem that needs solving today in carbon. You DeFi people are obsessed with financializing carbon.

Bob: I mean…it IS a financial market already.

Alice: (Winces)

Bob: And emitters use financial markets for other physical commodities they purchase like fuel, so why not carbon?

Alice: (Groaning in aggravation) Because it’s not a commodity like a bushel of wheat!

Bob: What do you think it is?

Alice: It’s an ACCOUNTING mechanism. To accomplish an ENVIRONMENTAL outcome that happens to be outside a company’s operating bounds. So the company has to transfer money externally to the steward of a forest in, say, Indonesia. Instead of allocating that money internally to its non-existent “Department of Planting Trees in Indonesia”.

Bob: (Nodding noncommittally) Fair enough. Environmental asset markets DO have unique characteristics.

Alice: Thank you.

Bob: But, I mean, it’s not just blockchain people talking about liquidity. Like I said, buyers DO complain about liquidity and price transparency. Shell and BCG covered this in a report back in 2022.[6]

(Bob takes out his phone and pulls up a document on it. Alice leans over, scrolling through it for a minute.)

Alice: Alright. Then tell me, how do you envision creating liquidity? How does it work?

Bob: Automatic market makers! Which operate on top of liquidity pools. See, in traditional order book systems, buyers and sellers — the market TAKERS, right? — pay the cost of the bid-ask spread. And market MAKERS make a LOT of money. AMMs automate the bid-ask spread, spreading the market maker money evenly along a thing called a “bonding curve”.

Alice: Minus your cut.

Bob: Well, yeah.

Alice: So, it’s still extractive.

Bob: Less so than with human brokers.

Alice: (Cocks her head with a playful smile) I guess this will surprise you, but I actually do think AMMs are pretty neat.

Bob: (Beaming) Awesome. Crypto invented them!

Alice: Um, for the record, like many things in crypto, AMMs were not invented by or for crypto. I read about them in business school…way back in 2002! People thought a lot about the concept before Web3 landed on it as a target use case.

Bob: Cool. Then you see the value?

Alice: I’d say that this one feels like a super technical finance question for finance people. But I do get that sometime down the road, it’s eventually important for a smooth functioning carbon market.

Bob: Fair.

Alice: Okay, so, to recap, you’re making an argument for efficiency (holds up one finger) and transparency (holds up a second finger) and liquidity (holds up a third finger).

Bob: Efficiency, transparency, liquidity. Yes.

IX. Other Blockchain Arguments

Alice: Alright. Now your value proposition is clearer. Not overwhelmingly compelling, mind you. But clearer.

Bob: Thanks.

Alice: So then why make all these other goofy arguments?

Bob: Like what?

Alice: Ohh, the standard ideological recitations.

Bob: Well then, let’s just run through the other benefits of blockchain for carbon markets.

Alice: Go for it.

Bob: (Confidently chops hands in the air for emphasis) Decentralization!

Alice: (Shakes her head) Already decentralized. And that’s kinda been the problem.

Bob: (Snaps fingers with an idea) Climate is a coordination problem and blockchain is a coordination tool!

Alice: Uh, no. Not the type of “coordination” we mean. We needed to get global agreement on the rules. That’s a POLICY need, not a SOFTWARE problem.

Bob: Well, that sounds like a “consensus” problem. And we have a consensus mechanism!

Alice: The “consensus mechanism” to verify blockchain transactions is unrelated to the “consensus problem” of creating decarbonization polices that 190-some countries and millions of emitting companies will abide by.

Bob: Okay…How about trust!?

Alice: Nope. The VCM doesn’t have a trust problem. We had hiccups with CONFIDENCE in the market. But that’s entirely different than TRUST in counterparties.

Bob: Immutability?

Alice: Like I just said, there are no dark forces secretly changing transaction records in carbon credit registry databases. Not a problem that needs solving.

Bob: You know…2008 wouldn’t have happened if everything was on-chain…

Alice: (Rolling eyes) Uh, that was a giant asset price bubble. I mean, I know why you’re saying what you’re saying…but, still it’s a “no”.

Bob: Also —

Alice: (Holds up hand, palm out to stop him) And I’m going to stop you there. Before you get into some utterly counterfactual nonsense like “bitcoin is a battery” (air quotes). Next, you’re going to put on a tin foil hat and rant to me about perpetual free energy from black holes.

Bob: Okay, fine. You know, it’s because we all came from tech. From a movement in tech that WAS ideological. Anti-establishment, anti-regulation.

Alice: I can tell. It’s the hammer and nail thing again. And your “true believers” are discrediting whatever kernels of good ideas you’ve got for climate.

Bob: I AM starting to see that we have a messaging problem.

Alice: Yes. See, your starting point is a back office I.T. innovation you’re looking for applications for. (Balances her hands in front of her like a scale) OUR starting point is an ENVIRONMENTAL OBJECTIVE.

Bob: (Looks at her directly, thinking)

Alice: Look. If there’s another way to expand climate finance, then we want it looked at.

Bob: Okay.

Alice: But what I DON’T hear you talking much about is the climate problem. You didn’t give a crap about environmental issues until, like, yesterday! Because of that, you have a higher bar to achieve credibility and get mainstream attention. And, relative to what’s customary in my world, you’re explaining your business case at a pretty low level.

X. Ongoing Adoption

Bob: I hear you. We need to do a better job clarifying arguments and telling the impact story.

Alice: (Visibly relaxes, smiling and nodding)

Bob: But the thing is, this whole conversation is a bit performative. The blockchain thing is kinda already happening.

Alice: (Frowns) What do you mean?

Bob: No offense, but it doesn’t really matter if you’re on board or not. Blockchain will ultimately be everywhere.

Alice: (Skeptically) “Everywhere”?

Bob: Yep. Just part of the tech stack!

Alice: Really? I’ve definitely heard even Web3 people asking whether EVERYTHING really needs to be on chain…

Bob: Maybe. But we’re talking about carbon credit tokenization specifically. Done right, the digital tech is invisible to end users. Invisible to emitters who buy credits and invisible to project owners who sell credits.

Alice: Invisible?

Bob: For example, AirCarbon Exchange uses blockchain, but they don’t even MENTION that their website.

Alice: (Intrigued) Huh.

Bob: Maybe you didn’t know that the World Economic Forum has published recommendations on carbon credit tokenization?[7]

(Bob hands a paper to Alice.)

Bob: And the Taskforce on Scaling Voluntary Carbon Markets has been advocating distributed ledger tech since 2020.[8]

(Bob hands another paper to Alice.)

Bob: The White House issued a report that addressed blockchain for climate in 2022.[9]

(Bob hands another paper to Alice.)

Alice: I did see this one. It actually said that enabling distributed energy resources may be a better use case —

Bob: (Continuing without acknowledging her comment) And here’s a World Bank paper from back in 2018 that talks about carbon credit tokenization.[10]

(Bob hands another paper to Alice.)

Alice: (Tucking the thick stack of papers into her notebook) Alright, alright. Then, let me ask you something. If blockchain is invisibly just part of the tech stack, and tokenization of carbon credits is inevitable, as you say, then… why do you care whether I care?

Bob: Good question —

Alice: (Continuing her thought) Because, as I understand it, we’ve had a long history of changes to the tech stack. Like how distributed storage, virtual machines, caching, distributed workloads, LLMs each became the next new thing in I.T.

Bob: I guess I need you to understand the benefits of the technology, so that you can specify the business requirements.

Alice: (Gives him a sharp, startled look) Now, THAT makes sense! You’re burying the lead here. THAT should be your opening line.

Bob: (Talking more to himself) Yeah, I just need you guys in the VCM to have a high enough ambition about efficiency, transparency, and liquidity. Then, the only solution to accomplish that is tokenized digital assets.

Alice: (Chuckling) So, you CAN leave me out of some of the technical minutiae, then.

Bob: I think so. Though, there ARE other use cases where blockchain may be less invisible and more central to the business case.

Alice: Apart from representing carbon credits as tokens?

Bob: Definitely.

Alice: Such as?

Bob: Distributed generation management, like you just mentioned.

Alice: And?

Bob: Smart contracts. Like for load balancing on the electric distribution system. Peer-to-peer electricity trading.

Alice: Hmm.

Bob: Or smart contracts for automated dispatch of intermittent generation resources to the grid versus to outside-the-fence storage or to electrolyzers.

Alice: That can be automated now.

Bob: But it’s infinitely easier with blockchain. Especially when payments or multiple entities are involved. You avoid the expensive lawyers and stacks of paperwork.

Alice: Hmm. Disintermediating the attorneys is interesting.

Bob: Right?

Alice: I’m thinking about community solar. Shared ownership of utility-scale installations. It’s been around for a couple decades now. But I could see how smart contracts would streamline the financial processes of those projects.

Bob: Yeah, fractionalized ownership becomes cheaper to execute. And then the other big use case is crypto tokens as rewards for, like, crowdsourced MRV. Carbon validation tokens.

Alice: Hmm. Measurement, reporting, and verification. I don’t know… I imagine that local workers counting trees would prefer micropayments in local currency? Not gambling on a vision that some custom tokens appreciate.

Bob: Maybe…

Alice: You know, what strikes me is that all these use cases you’ve mentioned are so DIFFERENT from one another. Different stakeholders, different value proposition, different market timing, different technical and regulatory issues… You guys need to be talking about these SEPARATELY from one another. Making sweeping arguments for a blanket digital solution makes it hard to take you seriously.

Bob: Yeah. That comes from us being tech people.

Alice: I can tell! You people tend to frame things backwards. Talking about digital implementation TACTICS rather than the big picture of environmental OUTCOMES.

Bob: Yeah. We need to lead with the problem, not the solution.

Alice: Mm-hmm. The nail, not the hammer.

XI. Recapitulation

Bob: So let me ask you something.

Alice: What’s that?

Bob: The world has committed to an “all of the above” (Makes air quotes) strategy in climate work.

Alice: True. Everything’s on the table.

Bob: Well, blockchain is “above”. (Makes air quotes) Why single out this one technology as the one you’re not willing to pay attention to? Do you also think A.I. has no place in solving climate? Or remote sensing? Or quantum computing?

Alice: I guess you have me there. “All of the above” means “all of the above”.

Bob: Think of it this way. Digitalization is commonly listed as an enabler of decarbonization, right? And blockchain is just the next step in digitalization.

Alice: Well, the blockchain arguments ARE interesting, now that I hear them cleanly articulated. But, again, the main event — and my main focus — is reductions and removals. In my world, we have higher priorities than nerding out over back-office I.T. architecture.

Bob: (Nodding) Different priorities.

Alice: Yeah. Your number one argument is my issue number…like FIVE. (One hand above her head, one below, pointing at levels on an imaginary list) And my highest priority issues aren’t even on YOUR list of arguments. (Switches hands to opposite positions)

Bob: Makes sense.

Alice: And your thing feels pretty aspirational. You’re asking me to care about something now, that won’t be a pain point until the market gets much larger.

Bob: (Nodding supportively) It’s a bandwidth issue.

Alice: That’s true. I’m overwhelmed. The pace of change is literally unprecedented. We need to move off fossil fuels more rapidly than we ever moved ONTO fossil fuels in the first place. The carbon market is still getting defined as we speak. And we’re all working crazy hours.

Bob: And we’re behind.

Alice: (Sadly) Yeah, we’re way behind.

Bob: Still, you don’t even MENTION blockchain in your big VCM report.

Alice: Yeah, I see now that that was miss. It IS a real topic. And incremental benefits are benefits.

Bob: (Grinning, genuinely pleased) I thought we were never going to get there.

Alice: (Counts off with her fingers) Efficiency. Transparency. Liquidity.

Bob: You got it!

(They fist bump.)

Bob: You should come work in Web3! Be a bridge between the two worlds.

Alice: No, no, no. I don’t want to work in Web3. I work in climate. And if Web3 ends up providing PART of a solution to ASSIST in that, then Web3 becomes PART of what I do.

Bob: Fair.

Alice: And on your end, you’re going to ditch the ideological dogma.

Bob: Yeah, I think it’s time.

Alice: And stop overselling your enabling tech like it’s direct climate impact.

Bob: And do my homework better. Lean on the long-time experts in energy and climate. (Smiles and presses his palms together in a quick ‘namaste’ gesture)

(Alice and Bob get up and walk together across the now-empty convention center atrium, to join the lively crowd at the bar.)

END

Footnotes:

[1] “Nature-Based Global Emissions Offset” spot and futures contracts, traded since 2021 on the Xpansiv CBL exchange.

[2] Brent Crude Oil physical and futures price benchmarks are the most common reference prices for oil globally. Over the years, the mix of oil grades and field sources represented by that benchmark has shifted numerous times. “Brent” is the name of a now-decommissioned offshore oilfield in UK territorial waters of the North Sea.

[3] The Puro.earth registry issues “CO2 Removal Certificates” (CORCs) for engineered removal projects.

[4] Griscom, et al. (September 5, 2017). Natural Climate Solutions. Proceedings of the National Academy of Sciences of the United States of America, Vol. 114, №44.

[5] Gold Standard. (November 2023). Digital Assets in the Carbon Market: Maximising Impact While Minimizing Risk. (The working group behind the report included several carbon credit tokenization companies.)

[6] Shell and BCG. (2022). The Voluntary Carbon Market: 2022 Insights and Trends.

[7] Working Group on Blockchain Carbon Credits.(March 2023). Recommendations for the Digital Voluntary and Regulated Carbon Markets. Published by the World Economic Forum.

[8] Taskforce on Scaling Voluntary Carbon Markets. (January 2021). Final Report [aka Phase I Report]. And: (July 2021). Phase II Report.

[9] The White House. (September 2022). Climate and Energy Implications of Crypto-Assets in the United States.

[10] World Bank Group. (2018). Blockchain and Emerging Digital Technologies for Enhancing Post-2020 Climate Markets.