Sustainability within a Market-based Ecological Order
Patrik Schumacher, London 2021
Published in: The Routledge Companion to Ecological Design Thinking, edited by Mitra Kanaani,
Routledge, New York & London 2022

This paper argues that architecture and urbanism have progressed and will continue to progress their ecological orientation on the basis of the soft power of markets and discourses rather than on the basis of hard political power. The current improvements in sustainability are largely a result of private initiatives like the various voluntary certification schemes that have spurned efforts and established quantitative criteria and accountability. These schemes are “enforced”, or rather incentivised, through reputation mechanisms. The self-imposed pressure to clean up and do good opens up the search for solutions. The best solutions and best practices have emerged on a voluntary basis, via scientific research and competition as discovery mechanisms. Mandated rule books and regulatory impositions arbitrarily constrain and distort this discovery process. The risk is that state power usurps and freezes these achievements and, in terms of motivation, substitutes an attitude of compliance for a spirited competitive striving. ‘One fits all’ rules only take account of ecological costs and, and in contrast to markets, cannot take account of the benefit side. Blanket rules forgo the opportunity to differentiate between the importance of the purpose of the various buildings, and do not allow the identification of institutions and life processes that would merit extra high energy consumption. Rationality implies economy, i.e. cost-benefit weighing. This requires freedom. Freedom is also a precondition for creativity and the discovery of the best science-based engineered solutions that often violate rule book parameters.

The thesis argued for here suggests that markets and discourses, not politics, i.e. neither state regulations, nor inter-sate negotiations, offer the most effective forces to mitigate climate change. The proposition put forward here is that self-imposed restrictions and voluntary contributions rather than government impositions should be relied upon to shift an unsustainable, carbon-fuelled civilisation onto an ecologically sustainable path. The argument is based both on positive empirical experiences with voluntary green efforts and on negative experiences with government interventions, augmented by theoretical insights from political economy. The key realisation is that the rationality of markets and discourses can deliver much more than the blunt political machinery. Rationality is indeed hampered by political attempts to impose solutions. For instance, the German green energy policies of recent years have severely compromised the German economy via sky rocketing energy prices and thereby compromising this economy’s further investment capacity into renewable energy. The decision to retire atomic energy led to increased utilisation of gas and of neighbouring atomic reactors. The effects on the global environment and environmental safety have thus been perverse.
The danger of allowing politics to take on and manage the climate emergency is going well beyond the danger of perverse results or the stunting of voluntary efforts: Political projects like the ‘Green New Deal’ are threatening the productivity that must be maintained and indeed expanded to allow for the procurement of the necessary investments into the ecological transformation of our technological civilisation. The danger is that the climate crisis becomes the Trojan horse for a socialist usurpation of the economy, unleashing a dynamic of interventionist spirals that can only lead to an increasing suffocation of economic vitality and thus choking off technological progress and transformation. This lack inherent of productivity of centrally regulated “economies” lies behind the seemingly paradoxical fact that socialist societies always had the worst environmental record. Ludwig von Mises' demonstration that  - strictu sensu - there cannot be any socialist economy because the socialist suspension of the price mechanism makes all economizing impossible, is relevant here and delivers the theoretical explanation of the historical experiences with socialism.

The promulgators of the Green New Deal are explicit in their aim to combine the environmental aim with the aim of job creation and with tackling economic inequality. The version of the Green New Deal that took the form of a resolution released by Representative Alexandria Ocasio-Cortez and Senator Edward Markey in 2019 proposed to transition the United States to 100% renewable, zero-emission energy sources within 10 years. This was packaged together with the call to end poverty, green public job creation, universal health care, increased minimum wages etc. The project of administratively implementing a wish list of outcomes will lead quickly to a centrally planned economy with all the systemic performance problems witnessed in the history of such attempts.
That the working masses – still the agent of historical progress in the theory of the left new dealers - will not tolerate the demanded economic sacrifices can be extrapolated from the outbursts of months of angry and often violent protests (including violent police action) in France - the gilets jaunes (yellow vests) protests - starting in the fall of 2018, only to subside with the Covid-19 lock down in March 2020. The protests were triggered by rising fuel prices that were further acerbated by a carbon tax that been progressively increased to meet ecological objectives. The latest fuel tax increase that triggered the protests had been revoked one month into the protests. The lesson learned is that only strategies which do not impose economic sacrifices are viable.
More generally, as Terry Anderson and Gary Libecap argue, the attempt to politically select and impose environmental outcomes is made difficult by the fact that there is a multitude of demands for environmental goods and services. They cite clean air and water, tropical rainforests, habitat for polar bears, open spaces, controls on carbon emissions, whales, or energy conservation as environmental goods amongst which it is not easy to prioritize from above. “The problems we face are how to respond to changing demands, how to trade off competing demands against one another, and how to balance these with the desires for other goods and services in the economy. Addressing these questions requires that environmental policies be efficient or as cost-effective as possible.” i However, without markets there can be no prices and therefore no measure of valuing environmental goods or economic efficiency.

Government Failure in Environmental Protection

Democratic governments represent the political will of the majority. This often implies that the effective political will for serious environmental protection action is lacking, especially in the case of climate change prevention where the burdens are borne locally and the effects are enjoyed globally, and where locally felt beneficial effects of each polity’s contribution are often absent or imperceptibly small. Even in the USA where the effect would not be negligible, the political will has been lacking for many years. However, even when the political will has been mustered and a government is committed to serious efforts at carbon reduction, the political route via government impositions is largely ineffective, and often even prone to make matters worse.
Governments intervene via emissions restrictions, i.e. limiting rights to pollute, or more micro-managing via prescribing methods of production and even specific equipment. They also intervene via targeted taxes and subsidies. All these methods pose problems of enforcement and trigger evasive counter measures and attempts to game regulations. Potential government solutions should be compared with potential market solutions. There are also combinations of government rules and market mechanisms, like ‘cap-and -trade’. Cap-and -trade programs have been implemented in California, China, and the European Union. Anderson and Libecap point to the advantages of letting markets come into play in allocating capped carbon allowances: “Cap-and-trade differs from traditional regulation in that it provides more discretion to parties regarding how environmental objectives will be achieved. Because trading is the centerpiece, mitigation can be undertaken by the low-cost provider. Those with high mitigation costs buy permits or allowances from those with lower costs, and overall expenses are lowered through voluntary exchange. Therefore, cap-and-trade markets can be more rapid, more flexible, and less costly than strict regulatory standards in meeting environmental objectives. Further, by enlisting the incentives of users, they can produce information about and promote the adoption of new technologies that reduce the cost of compliance with regulations and enhance the likelihood of achieving environmental objectives in the least-cost manner.” ii

Environmental pollution in general as well as the CO2 emissions responsible for climate change specifically, are usually described as a negative externality. They can also be interpreted as an example of the ‘tragedy of the commons’, a term usually identified with the depleting over-use of an open access resource like the fish in the open oceans. Everybody is trying to free-ride on everybody’ else’s expense.
Anderson and Libecap describe the logic of the tragedy of the commons as follows: “As long as access is open, parties who use it will not bear the full costs of their actions, and in the absence of trading, there will be no price signals to reveal the opportunity costs of current or future uses. As a result, aggregate production or use levels are too high and investment in the resource is too low, compared to what would be expected if an owner took account of the resource's value now and into the future. Without property rights to limit and define who has access to the resource and the right to derive value from it, parties cannot bargain with one another to constrain use, to invest in it, or to re-allocate it to higher-valued activities.” iii
The classical solution to this problem is the assignment of private property rights. While this solution for the internalisation of the externalities via privatisation could in principle work with respect to forests, rivers, and fishing grounds, this solution does not work with respect to the air in relation to the ozone layer and the climate change impact of over-using the air as CO2 dumping ground because the effects cannot be localized or contained. “Since we’re all sharing the same atmosphere, one tonne of carbon reduced or removed from e.g. Australia has the same climate impact as one tonne removed from Alaska.” iv The logic of the tragedy of the commons remains in place: “If the private costs to resource users are less than the social costs, resources will be over used, and if the private benefits of resource improvements are less than the social benefits, environmental goods will be underproduced.” v

In mainstream economics and politics these inefficiencies are usually described as market failures. However, Anderson and Libecap rightly insist that this type of situation is better described as a missing market, not a failing market. The initial locus classicus from where this questionable, one-side market failure discourse took off is the British economist Arthur Cecil Pigou’s treatise “The Economics of Welfare”, first published in 1920. Pigou provided the first systematic theory of market failures, without, however, using the phrase ‘market failure’. His solution was government intervention via taxes and subsidies.
Pigou had argued that the misalignment between private and social costs could be remedied via regulatory action. As he put it, for the case of negative externalities, the divergence in costs occurs “owing to the technical difficulty of enforcing compensation for incidental disservices”. vi Pigou further elaborates that “marginal private net product is greater than marginal social net product. Thus, incidental uncharged disservices are rendered to third parties” vii For the case of positive externalities Pigou explains that the “marginal private net product falls short of marginal social net product, because incidental services are performed to third parties from whom it is technically difficult to exact payment.” viii Market actors fail to reach the optimal level of resource use and Pigou argued that the mismatch between private and social costs can be corrected via regulatory state action. In reflecting on Pigou’s account Anderson and Libecap make the insightful remark, coherent with their notion of missing markets, that “in effect, Pigou was referring to the costs of defining property rights and promoting exchange.” ix In any event this should be the approach here. Anderson and Libecap elaborate this point as follows: “The absence of property rights due to ‘technical difficulties’ precludes contracts that constrain access and output and that promote trade to generate price signals about opportunity costs. In other words, ‘technical difficulties’ prevent a market from occurring.” x But this might often be an entrepreneurial rather than a government task.
They indict Pigou, and by extension the whole of the market failure economics following on from Pigou, with the following lack of consideration: “Rather than determining what causes the impediments to establishing rights and bargaining over them, Pigou's focus was on how taxes could raise private costs to the level of social costs… In the case of unaccounted for benefits, Pigou's logic calls for a subsidy to equate private and social benefits and increase private production of the good. Alternatively, government could directly constrain production or output to optimal levels.” xi
The difficulty with all these government interventions is the difficulty of knowing how to set caps, taxes, subsidies, mandated output levels. The required knowledge concerning the private and social costs and benefits is not available to any government agency. “How the political process would assemble such information without objectives being hijacked by special interests is not clear.” xii

Industry players would be “reluctant to reveal their private information, preferring to act strategically in the political process.” xiii As Friedrich von Hayek first emphasized more generally in relation to attempts at government economic planning, intervention or regulation, relevant information is dispersed, locally varied, and often only generated or conscious in concrete contingent situations, as and when they arise. There is no way to centralise such knowledge and information processing. The required knowledge can only be discovered in a competitive market process. Even when presuming that a tax or subsidy could improve overall social benefit, this benefit will accrue to some, while others will be burdened with costs or losses. “Such distributional effects make it difficult to create the political coalitions necessary to implement efficiency-enhancing policies.” xiv
More specifically with respect to climate change and a related carbon tax, Anderson and Libecap note the serious difficulty that “a carbon tax proposed to limit CO2 emissions may provide general benefits to the global population and generate large revenues for governments, but it will impose specific costs on local carbon producers, such as electric utilities and consumers. There then is the potential for migration of regulated entities to less-regulated settings, with the corresponding loss of production, employment and economic growth. This phenomenon is called leakage in climate change regulation, and it is a major concern of politicians and their constituents.” xv The purpose of the government impositions might therefore be thwarted and effects might even be perverse relative to the intended effect. Voluntary self-impositions are not plagued by these problems. So, while the solution of defining property rights of the atmosphere as a method for catalysing the rationality of market forces is impractical, markets can and indeed are emerging on the basis of self-imposed internalisations of the social costs of CO2 mitigation. These self-imposed internalisations take the form of industry self-regulations and corporate zero carbon commitments that can be serviced via carbon offset markets.

The Effectiveness of Voluntary Non-governmental Initiatives

In relation to building construction serious initiatives towards the voluntary rating and certification of buildings with respect to environmentally conscious design started about 30 years ago. The first, by now globally used, certification system was founded in England by the Building Research Establishment (BRE). Its system, BREEAM (Building Research Establishment Environmental Assessment Method), was first published in 1990. In the US the green building certification program LEED (Leadership in Energy and Environmental Design) was founded in 1993. This is the effort of a non-profit organisation, the U.S. Green Building Council (USGBC). By 2015 the USGBC had grown to an organization of 119,924 staff, volunteers and professionals. Its certification regime is used globally.
The motivation of certification from the developers’ or investors’ perspective is driven by pride, the promotional opportunity and by concern with social legitimacy. Similar concerns drive the corporate tenants. This ‘calculation’, if this phrase might be used here, is borne out by the economic reality on the ground: while there is no immediate, tangible use benefit associated with the extra effort and investment that goes into a high LEED or BREEAM certification (except for the savings in energy running costs), green buildings sell and lease at a significant premium (over and above the energy savings). A study measuring the effect of BREEAM certification on the sale and letting prices of office buildings in London from 2000 - 2009 found that these buildings achieved a 21% premium on transaction prices and an 18% premium on rents. xvi This premium can only be attributed to a voluntary willingness, on the part of companies, to pay extra for the sense and perception of doing the right and responsible thing. Since then these good certifications have evolved from a bonus to a sine qua non. At the same time the calculations and verification requirements have evolved too. This progress is an effect of critical discourses and competitive markets, not government mandates.

Recently, in 2021, the Royal Institute of British Architects (RIBA) published the ‘RIBA 2030 Climate Challenge’, positing performance targets for operational energy use, water use and embodied carbon for the construction industry. “The 2030 Climate Challenge is currently open to all RIBA Chartered Practices. Signatories who join the Challenge commit to attempt to meet the targets on all their new and major refurbishment projects and commit to submitting data on these projects to the RIBA, when available.” xvii The document stresses the voluntary nature of the formulated targets. On the first page it is emphasized that “the 2030 Climate Challenge is voluntary and is based on trust, there is no penalty imposed on Practices or projects that fall short of the Challenge.” xviii Further down the same page this message is repeated: “There is no penalty or consequence for projects that miss the Challenge’s voluntary performance targets. Equally by joining the Challenge, Practices are not mandated to submit data on each and every single project.” xix This ambitious initiative sees itself as a voluntary contribution to the UK’s 2019 commitment to bring all greenhouse gas emissions to net zero by 2050. Unlike the Government commitment that was passed as law - the enforcement of which remains unclear - the implementation of the RIBA targets rely on the appeal to self-respect and the motivating force of social legitimacy of chartered architects and associated industry players. It is the thesis of this paper that the latter voluntary strategy is the only viable route to a prosperous carbon neutral economy.
The RIBA recommendations recognize that offsetting efforts will have to complement energy saving and the use of renewable energy sources: “In urban areas net zero whole life carbon will likely require additional offsite renewable energy generation, with certified woodland offsetting.” xx It should be clear that it would be impractical to expect developers to deliver offsite renewable energy plants, let alone woodland offsetting. These targets are therefore inherently relying on voluntary carbon markets.

Voluntary Carbon Markets

The experiences made within architecture and real estate development mirror larger societal trends. The pressure on corporations to meet general societal expectations to clean up their act and reduce the carbon footprint of their operations, products and services had a significant impact that led to pledges and self-imposed targets significantly beyond anything mandated by governments. At least for large corporations the risk of a potential loss of social legitimacy outweighs the costs of internalizing their carbon footprint via investments in ecological improvements and via the purchase of carbon credits to meet ambitious green targets. This pressure is coming from the general public, mass media, customers, as well as from employees. A whole eco-system of research institutes, certification agencies, green solution providers and carbon sequestration projects emerged.
In the carbon market businesses purchase carbon offsets to balance the negative environmental impacts of their business practices. These carbon offset payments provide financing for green projects, including renewable energy projects as well as forest conservation and forest regrowth projects as forms of biological carbon sequestration, and finally geological sequestration where liquid carbon dioxide is pressed into porous rock formations.

We must distinguish two kinds of carbon markets: compliance-based markets and a market based on voluntary commitments.The compliance markets are mostly nationally regulated markets, although there are cases where several countries join to set up a market, as is the case with the European Emissions Trading System (ETS). The voluntary carbon market is global and governed by institutions which set standards and certification criteria. These markets are supported by private monitoring organizations publishing best-practice guidance, like the International Carbon Reduction & Offset Alliance (ICROA), Verra and Gold Standard. These non-governmental certification schemes are crucial. At the time of writing Verra had facilitated 728 million carbon offset deals since its inception. Currently about thirty carbon offset dealers are operating in the global voluntary carbon market supporting carbon mitigation and removals projects. The rapid growth of this market is being fuelled by the eagerness of businesses to internalize the price of their direct or indirect emissions.
The global carbon market is evolving with efforts at unification. Carbon markets have recently been reported on in an article on Bloomberg Green with the title ‘Wall Street’s Favorite Climate Solution Is Mired in Disagreements’ xxi and with the subtitle ‘Two titans of finance are working with hundreds of executives and scientists to set up a global trade in carbon offsets. It’s messy, and time’s running out.’ Here is how the article summarizes the essential idea of the carbon-offset market:
“Global warming is the world's biggest market failure, so the solution might just be better trading. On one side of the trade would be the companies clogging the atmosphere with heat-trapping gases; on the other countless projects to eliminate the problem by planting trees or building machines that capture carbon dioxide. Create a market that turns a ton of removed carbon into a commodity just like corn or copper, and money will flow from the emitters to the fixers. That’s the theory behind the new carbon-offset market being conceived by Mark Carney, a former governor of the Bank of England, and Bill Winters, the chief executive of Standard Chartered Plc.” xxii The article reports that in 2020 Carney and Winter set up the private-sector Taskforce on Scaling Voluntary Carbon Markets, a taskforce involving “hundreds of bankers, airline executives, sustainability experts, commodities traders, scientists and other business leaders.” xxiii Carney estimates that the envisioned unified market for carbon offsets could be worth $100 billion by 2030. “If Carney’s forecast for market demand proves correct, hundreds of companies will soon begin a buying spree for carbon offsets. Just the 18 oil majors that already have net-zero goals will eventually need to erase 3.3 billion metric tons of annual emissions, according to clean-energy researchers at BloombergNEF. That’s nearly 18 times the amount of carbon offsets issued in 2020.” xxiv The success of this ambitious forecast hinges to some extent on the credible establishment of a trusted standardized certification of the carbon off-set projects. However, the emergence of such a standard does not turn solely on whether the task force can agree on a single standard. Although this would probably be the most rapid convergence, its not a necessity. The fact that members have, according to the Bloombergr Green article “spent months arguing over the criteria for inclusion, with sharp divides over how high to set the bar.” xxvTo say - as the subtitle suggests - that time is running out due to the lack of a singular standard is misleading. An agreed united front, although helpful, is not a necessary condition of viable degrees of standardization. They can emerge via markets and discourses. In any event, this statement can be embraced: “Getting the contours of the market right could create a powerful, standardized weapon in the fight against rising temperatures—a tool that can be embraced by scores of companies that have pledged to reach net-zero emissions.” xxvi
Although the planned organised global carbon credit market referred to above is meant to be somehow gated, i.e. not universally accessible but only accessible to reputable firms who also make active mitigation efforts beyond purchasing carbon credits, there are generally available carbon offset credits. However, there are many providers offering carbon credits, like Ecologi, offering carbon footprint analysis and operating a “Marketplace for climate action” for all businesses, advertised as follows: “Buy Gold Standard (or similar) carbon offsets and fund climate action. Our low margin means our price is hard to beat.” xxvii

Green Crypto-currencies

Capital markets represent the crucial steering arena for the whole capitalist industrial civilisation. The momentous move in the fundraising and investment community towards ESG (Environmental, Social, Governance) and green investment funds is another indication for the general societal tendency towards voluntary environmentalism. The same is true for the growing carbon markets fuelled by voluntary commitments.

More recently some green initiatives also appeared in the fast growing, highly innovative world of crypto-currencies. The crypto ecosystem builds a borderless, unified comprehensive property rights and transaction rules system that invites an unlimited, permission-less construction of value propositions on a neutral, globally shared base of truth - impartial, censorship resistant and incorruptible. Access conditions, rules of engagement and governance processes apply equally on all corners of the globe without exceptions and without special interest carve outs, and thereby brings everybody into the universal win-win non-zero-sum coordination game with equal rights. This delivers pertinent conditions for the type of global coordination that the climate change challenge demands.
The founder of Maker DAO, Rune Christensen, recently posted an article on the Maker DAO governance forum entitled “The case for Clean Money”. Maker DAO is the blockchain based decentralised lending platform that first kicked off the flourishing of a whole new industry: Decentralised Finance (DeFi). Here are key messages from the article: “To truly reach its potential, Maker needs to become a purpose-driven DAO.… What does Maker and DeFi have to do with climate change? At its core the climate problem is actually a financial and capital allocation problem. The root cause is the inability of the global economy to plan for anything other than the very short term and deal with the entrenched corruption that exists in its centralized and opaque infrastructure - that’s why it allowed itself to reach world-destroying levels of pollution and continues to channel billions in capital towards it, despite the irrefutable fact that this will be its own undoing.” xxviii These are very strong words of indictment. However, the indictment is not directed at capitalism as such, but at a crony capitalism in which a centralized and opaque financial system uses captured government licencing and regulations to entrench itself. A decentralized, permissionless and thus truly open and competitive market is the antidote. As Christensen insists: “DeFi exists to deal with exactly this type of problem. … Transparency, stakeholder governance, carefully designed incentives, decentralization and the ability to turn future long-term value into present day cash flows is what the world needs, and that’s exactly what Maker, Dai and DeFi can deliver.” xxix
At this point Christensen is only proposing an agenda. While as founder he might be able to initiate a debate and might prove to be influential, there is no guarantee that his proposal will be taken up and brought to fruition. His creation is now a Dencentralised Autonomous Organisation (DAO) and as such its agenda and strategies will be set in a democratic governance process open to all MKR token holders. In any event, Christensen’s initiative is a significant signal about market environmentalism within the crypto world. Christensen gives these spirited indications: “By tapping into the fundamental features of blockchain we can develop verifiable processes to ensure all Maker collateral is in sustainable and climate-aligned assets that consider the long-term impacts of financial activity on the environment. This will unlock Dai as the coordination tool the world desperately needs - a way for people and companies to band together to directly create a realistic impact right at the core of the issue.” xxx

While Maker DAO, the oldest major (blue chip) DeFi protocol, is discussing plans for redirecting its efforts towards a conspicuously ecological mission, another brand new crypto-currency project, which sees this climate change mission as its very raison d'etre from the start, is already underway. The Klima DAO is building a market-driven system that internalizes the cost of carbon by operating an algorithmic climate investment protocol that is all about issuing a carbon-backed digital currency. The project’s website advertises its project as a “black hole for carbon” and elaborates as follows: “The treasury is the centre of the black hole. Every KLIMA token is backed by one tonne of verified, tokenized carbon reduction or removal. … The treasury only accepts certified, third-party verified emissions reductions from reputable carbon markets (sometimes called 'carbon offsets' or 'carbon credits'). Each is tokenized in a transparent and traceable way to prevent double-spending or double-offsetting.” xxxi

The goal and anticipated effect of Klima DAO is very straightforward: ““Klima DAO’s goal is to accelerate the price appreciation of carbon assets. A high price for carbon forces companies and economies to adapt more quickly to the realities of climate change, and makes low-carbon technologies and carbon-removal projects more profitable.” xxxii
The website also claims that “Klima DAO will solve the critical problems of the carbon markets: illiquidity, opacity and inefficiency.” xxxiii
The project puts additional demand pressure on carbon offset by incentivising idealistic and/or speculative investors to come into the market which would otherwise be restricted to the end-users of the carbon credits, namely those businesses that made carbon reduction or zero carbon pledges. The Klima DAO website explains: “These credits are sucked off the market and absorbed into the system through a Bonding mechanism...
Bonding is how carbon enters the treasury, and new KLIMA is created. Anyone can buy KLIMA at a discount by bonding carbon units.” xxxiv Investors might be motivated by the environmental credentials, as well as by the monetary incentives offered. “Holders of KLIMA can earn compounding interest on their KLIMA by staking. Staking encourages long-term holding of KLIMA, and allows participants to benefit from the rising price of carbon. As the protocol generates a profit through Bond sales, this profit is allocated to everyone who has staked KLIMA.” xxxv Klima should be a good choice for those who want exposure to the crypto-currency space but are worried about the environmental effects of crypto-currencies like bitcoin and current Ethereum. The Klima tokens trade on DeFi exchanges like Sushiswap. Volatility is still very high. The market cap at the time of writing had reached $798m, with a total value locked of $116m. The carbon in the treasury at the time of writing was 9,723,156 tonnes.

To summarize the basic mechanism of Klima DAO:
Investors are meant to buy up carbon credits and deliver this to the Klima Dao carbon credit reserve fund or ‘treasury’. In return they receive, at a discount, the KLIMA tokens issued at this occasion. Tokens are issued according to the formula: 1 KLIMA = 1 tonne of carbon offset as minimum backing, representing the intrinsic value of the token. The investors can then stake these tokens and receive interest on them generated by the appreciation of the carbon credits that back the KLIMA tokens. As this gains momentum the process is self-reinforcing: carbon credit appreciation drives KLIMA interest payments and incentivises more KLIMA investors to buy more carbon credits to exchange for KLIMA. This new/extra demand from KLIMA Investors drives up carbon credit prices further in a virtuous cycle (once it operates at scale. This also implies more money for carbon sink projects. The KLIMA appreciation might front run the carbon price appreciation which implies higher gains for KLIMA holders and stakers.
The potential result: raw monetary incentives (on the KLIMA platform) combine with the pressures of social legitimacy on corporations (many of whom are making zero-carbon or similar pledges) in channelling more funds into climate change mitigation. Doing good becomes a side-effect of becoming rich, or vice versa.
The momentum that Klima has already generated, as well as the growth trajectory of the carbon credit market, support the contention that voluntary action guided by markets and discourses can achieve more for climate change than coercive government impositions, without damaging economic growth and prosperity. A meaningful concept of economic growth is focussing on value growth rather than on growth in terms of physical quantities. It is therefore compatible with a continuous upgrading of the natural environment.

End.

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