CROWD-SOURCING A PRICE FOR CONSERVED CARBON
Outline of a Carbon Price Creation Initiative (CPCI), through which to create a realistic price for conserved
carbon, and thereby to stimulate low-carbon and negative-carbon investment.
Julian Caldecott (Director, Creatura Ltd)
25 June 2012
Preface. I floated this idea in my talk at the University of Bath on 3 May 2012, and I have
now written it up as a consultation paper. I think the idea makes sense, although some say
that governments are more likely to want to procure carbon conservation at least cost per
tonne, for example by inviting bids to conserve particular amounts of carbon by various
means, and then funding the ones that have the best outcomes. The bids would probably
need to be under-written by a credible financier, but for maximum impact so might the
statements of intent to purchase conserved carbon described here (please step forward,
HSBC!). Meanwhile, I offer this idea to the good judgment of the people for further action.
1.
INTRODUCTION
Carbon-based greenhouse gases, especially methane (CH4) and carbon dioxide (CO2), are
accumulating in the air because of the excessive rate at which we are burning ecosystems and
fossil fuels, causing global heating and climate chaos. Many other negative phenomena are
linked to this process, and the sum amounts to a crisis of sustainability that is engulfing the
biosphere. At stake is continuation of environmental conditions to which most organisms,
lineages and ecosystems are adapted, and to which our population, economic systems and
civilisations are also adapted. Solving the global heating problem is therefore our maximum
priority, and the need to conserve carbon is absolute.
Carbon conservation means saving living ecosystems (e.g. forests and soils), and protecting
carbon deposited by living ecosystems (e.g. peat and coral), or by long-dead ones (e.g. coal,
oil and methane deposits in rock layers and sea beds). It also means recapturing carbon that
has already been released or inevitably will be, and this can most plausibly be done at scale
through the catalytic breakdown of carbon dioxide and methane and the storage of elemental
carbon under ground or water.
All of these tasks require investment to pay for protecting deposits and ecosystems, for
developing, introducing and incentivising the use of energy sources not based on fossil fuels,
and doing the same for carbon recapture and storage techniques. The amount of investment
needed is astronomical, however, and it is needed urgently. Although governments, charities
and individuals can help, direct investment in conserving carbon at a useful scale requires the
deployment of private capital. This cannot happen in sufficient quantity at present because
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there is no predictably high price for conserved carbon assets, and hence no basis for
justifying investment in them in terms to which private capital can respond.
Unfortunately, it seems that markets cannot create such a price themselves, governments
cannot agree to establish one collectively, and it is unreasonable to expect enough public
pressure on enough governments or companies to make it happen. This conundrum is
responsible for the dangerous lack of decisive action on low-carbon/negative-carbon
investment, but there may be a way out, by involving individuals, civil society and private
institutions and governments in deliberately creating a stable, high market price for
conserved carbon. Ways in which such a Carbon Price Creation Initiative (CPCI) might be
attempted are described here, involving a CPCI trigger institution that could be either a
charity (‘the Charity’) or a commercial enterprise (‘the Company’). The activities would be
the same, but in one they would be funded by donations and in the other by service charges.
2.
AIMS, ACTIVITIES AND DEFINITIONS
2.1
Aims
The overall objective to which the CPCI would contribute is low-carbon/negative-carbon
development of the global economy.
The purpose of the CPCI would be to facilitate the establishment and universal acceptance
of a stable, high market price for conserved carbon.
The results to be obtained by the CPCI would be:

Result 1 - by [time, date 1], to have collected statements of intent to purchase at a
standard floor price equivalent to at least [currency/ies, amount] a total of at least
[number of gigatonnes] of conserved carbon on [time, date 2].

Result 2 - within 30 days of [time, date 1], to have announced the achievement of Result
1 with maximum global communication effect.

Result 3 - within three years of Result 2, to have recorded the official acceptance of the
floor price of conserved carbon as stated under Result 1 as a basis for all relevant
accounting and investment purposes by at least [number] large private banks, at least
[number] large accounting firms, and at least [number] governments.
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2.2
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Activities
The activities to be undertaken under the CPCI would be:

Activity 1 - to raise funds with which to take all institutional, technical, educational and
other measures needed to achieve Results 1, 2 and 3.

Activity 2 - to develop formats by which individuals, civil society and private institutions
and governments can make statements of intent to purchase conserved carbon.

Activity 3 - to promote among individuals, civil society and private institutions and
governments awareness, interest, support and desire to participate in achieving the aims
of the CPCI.

Activity 4 - to campaign for individuals, civil society and private institutions and
governments to sign statements of intent to purchase conserved carbon.

Activity 5 - to establish arrangements for the secure long-term storage and management
of documents and information relating to statements of intent to purchase conserved
carbon.

Activity 6 - to use the existence of statements of intent to purchase conserved carbon in
the aggregate as a means to promote acceptance of the price specified within those
statements of intent as a floor price for conserved carbon in all transactions.
2.3
Definitions
Conserved carbon is carbon that has been verified by a qualified verification agent as
having been prevented from being released to the air as a greenhouse gas, or that has been
recaptured and stored permanently out of contact with the air. A realistic price for
conserved carbon which is able to sustain investment in carbon conservation is estimated to
be approximately US$100/tonne based on industry (petroleum and finance) consultations.
CPCI institution is the Charity or Company (or coalition of charities or companies) tasked
with implementing the Carbon Price Creation Initiative.
Low-carbon/negative-carbon development means the improvement of the human
condition in ways that induce the net reduction of greenhouse gas concentrations in the air.
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Qualified verification agents are those certified by a competent national or international
body as qualified to verify that carbon has been conserved.
Secure relates to the physical safety of documents, the non-distribution outside the CPCI
institution without the permission of the signatories of data relating to the statements of
intent to purchase conserved carbon made by individuals, civil society and private
institutions and governments, and the taking of all reasonable measures by the CPCI
institution to prevent the theft of those data.
Statements of intent to purchase conserved carbon confirm the intention to buy
conserved carbon at a minimum price on [time, date 2]. They will not create an obligation to
buy conserved carbon, but are nevertheless directed to the investment community in general
and are anchored in the concept of the global market that will exist at [time, date 2]. In the
aggregate, they are intended to signal humanity’s willingness to pay for a viable biosphere.
Such statements may be self-binding (representing an absolute public commitment backed by
the full faith and credit of the signatory) or aspirational (representing the hope to be able to
participate and the acceptance of a willingness to pay for conserved carbon by the signatory).
If self-binding, they may be liberal (relating to the purchase of conserved carbon in the global
marketplace without self-imposed prior conditions other than price and quantity), or exclusive
(relating to the purchase of conserved carbon in a particular market or currency, or through
a particular agent, any of which may be specified at any time before [time, date 2]).
Time, date 1 is suggested to be 0900 GMT on Monday 14 September 2015. An early date is
favoured because the sooner a floor price is established the better due to investment lead
times, subject to the constraint that it will take a while to reach and mobilise enough people.
[On the other hand, growth in the amount of conserved carbon committed to sale could be
publicised on an on-going basis - especially if there was spectacular progress early on - as this
would steadily prepare the market to accept a created price]. The total amount of conserved
carbon that would need to be covered by statements of intent to purchase in order to have a
significant price-creation effect is estimated to be at least the current annual EU production
of carbon dioxide equivalent, i.e. four billion tonnes (4 Gt).
Time, date 2 is suggested to be 0900 GMT on Monday 16 September 2030. A late date is
favoured because current institutional decision-makers are unlikely to still be in office then,
subject to the constraint that if conserved carbon is not extremely valuable quite soon, the
biosphere may not be saveable.
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3.
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CHARITABLE OBJECTS
It is expected that self-binding statements whether liberal or exclusive will have a greater
impact on investor sentiment than aspirational ones, and will appeal to commercial
institutions that have a financial interest in long-term price stability/buoyancy for conserved
carbon, and to the most highly-motivated civil-society institutions and individuals.
Aspirational statements, however, have the social utility of building participation in solving
the problem of global heating that we have all helped create, while contributing by weight of
numbers and aggregate demand to the credibility of a floor price for conserved carbon. The
CPCI will hence promote the signing of both self-binding and aspirational statements.
The self-binding/exclusive option may have particular appeal to governments that would
prefer their commitments to be made in their own currency or for the benefit (e.g. via taxes
on agency fees) of their own exchequer, and to companies that would prefer the option of
specifying that their own subsidiary or partner will handle the eventual transaction. To
preserve the exclusively charitable objects of the Charity, it would not participate in or advise
on any decision relating to self-binding/exclusive statements, but would act as a secure
record-keeper for all three kinds of statement. This constraint would not apply to the
Company (see Section 4).
The Charity would exist to encourage and enable the low-carbon/negative-carbon
development of the global economy, with a view to preventing uncontrollable heating of the
biosphere and the consequences of this in terms of climate chaos, drought, wild-fire, flood,
sea-level rise, aggravated storminess, the spread of disease, and the altitudinal and geographic
shifting of climatic zones and oceanic currents. In terms of charitable objects as defined in
UK law, its actions would therefore:

prevent or relieve poverty (because poverty includes vulnerability to environmental
calamity, crop and business failure, disease, water shortages, etc. due to climate chaos);

advance education (because awareness of and interest in environmental and
socioeconomic issues to do with climate change will be promoted);

advance religion (because many religions promote environmental sustainability as one
way to honour their gods and to preserve the created or spiritually-significant world);

advance health and the saving of lives (because numerous vector-borne and waterborne diseases thrive with climate change, and natural disasters are aggravated and wars
provoked by climate change and induced changes in human settlement);
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
advance human rights and conflict avoidance (because oppression and conflict are
aggravated by fear, uncertainty and insecurity caused by climate chaos); and

advance environmental protection (because climate chaos threatens the integrity of all
ecosystems and therefore the goods and services provided by them and the habitats of all
wildlife, and is a driving force of mass extinction and other forms of biodiversity loss).
Despite the foregoing, it seems unlikely that the activities proposed would comply with the
stringent terms of UK charity law, which focus on the provision of direct benefit to the
public exclusively within narrowly-specified areas of activity. Advice will be sought as to
whether a convincing case could be made to the UK Charity Commission, and also whether
a base for the Charity elsewhere in the EU may be more feasible. There is also the option of
proposing to an existing charity that it adopt the CPCI as a project of its own.
4.
COMPANY OBJECTIVES
The CPCI could also be attempted through a commercial enterprise, in which case financing
(e.g. for marketing, data management, advertising), would be sought through loans, the sale
of shares, and gifts. The main source of income would be charges levied to record selfbinding statements of intent. Business planning would be based on the answers given to
questions in the following table.
Questions
Answers
Why make a statement
of intent to purchase
conserved carbon?
The individual or institution concerned may experience and value
an enhanced reputation and/or a feeling of well-being.
Why pay the CPCI
institution to record a
statement of intent?
Value would be added by CPCI through the expression of
aggregate demand, which may be the only way to create a stable,
high price for conserved carbon.
Why would price
creation be of value to
the signatory?
1. Because opportunities will arise to invest in lowcarbon/negative-carbon development with greater security than
would otherwise be the case.
2. Because one’s own existing investments will be more secure if
they are vulnerable to climate chaos in general, or to instability in
carbon prices in particular.
3. Because others will also invest in low-carbon/negative-carbon
development, thus sharing the burden of saving the biosphere.
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Questions
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Answers
4. Because one’s own society, family and livelihood will be more
secure with reduced global heating.
How would charges be 1. A fee would be charged to record all self-binding statements of
levied?
intent, based on a percentage of the price per tonne times the
number of tonnes specified in the statement, with the percentage
falling on a sliding scale as greater quantities of carbon are
involved.
2. The percentage charged and the volume discount would be
adjusted to make exclusive statements more expensive than liberal
ones.
3. Advice would be offered and charged for separately on the
specifics of exclusive statements.
4. Charges would be voluntary for aspirational statements, so as to
maximise the tonnage of conserved carbon covered by them.
5. Since all statements would involve recording names and contact
details, signatories of aspirational statements could be offered an
opt-in/opt-out choice in respect of the sharing or sale of their
details, or their use in direct marketing of other goods and services.
What scale of revenues If statements are issued covering 4 Gt of conserved carbon at a
might be expected?
price of US$100/tonne, and commissions are charged at an
average rate of 0.1 per cent on a quarter of them, total revenue
would be US$100 million. Other models are possible.
How would charges be It would be made clear that an expensive global marketing
justified?
campaign is integral to the CPCI, and that charging is essential to
its sustainability and success.
How would the
business plan be
constructed?
The different market segments (i.e. individuals, civil society and
private institutions and governments) would be disaggregated and
the distribution of income streams and marketing attention would
be expected to shift with time as early investors are more likely to
be motivated by social concerns and later ones by investment
opportunities and the wish to protect investments.
What is the main risk
to the Company?
Theft of the CPCI concept by an existing charity with sufficient
resources to make CPCI effective without charging for the service.
Julian Caldecott: The Carbon Price Creation Initiative
5.
CONCLUSIONS
Although the CPCI is urgently needed and potentially viable, there is a significant risk that
the CPCI institution would be out-competed, whether as a Company by a non-charging
charity, or as a Charity by another charity with greater resources. This might be solved by
negotiating the exclusive recognition of CPCI institution records by a major government or
market actor in an early transaction of the Company. Otherwise, if the idea is to be taken
forward it may have to be by inspiring a large, established charity to implement it.
Concerned individuals are invited to comment on the ideas summarised here, and/or to
participate in making the CPCI happen.
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