Introduction
The carbon reward will be issued as a digital asset, denoted “XCR” and traded in foreign exchange markets. The XCR will be backed by central banks and sovereign guarantees. A unique feature of the XCR is that it will be bankable, issued debt-free, and supported by a long-term price floor. Although the XCR will be tradable, it is not a carbon credit and it cannot be used to offset carbon emissions. Also, the XCR is not a currency (legal tender) because it would not be used as a medium of exchange.
The utility of the carbon reward may be explained as the global ‘carrot’ in a layered approach to ‘carrot and stick’ incentives. The future minimum value of the XCR—called the XCR price floor—will be advertised in relation to national currencies. For example, “XCR/USD” will define the value of the XCR relative to the USD. The XCR’s price floor will be managed to target a specific climate objective, such as 2.0°C with a certain chance of success.
The carbon reward policy is designed with a set of causal mechanisms that can enhance the rewards effectiveness. The most important causal mechanisms are summarised below, including its integration with other policies in a ‘carrot and stick’ approach.
For the most up-to-date description of the carbon reward policy, see our 2025 working paper, here.
The world currently lacks the capacity to meet the goals of the Paris Climate Agreement and support social and ecological regeneration. Is there a way to create transformative change? We believe there is.
Carbon Mitigating, Not Offsetting
The carbon reward will be offered for reductions in carbon emissions at the source of the emissions, and for removing carbon from the ambient atmosphere. Carbon offsetting is not featured in the policy for carbon rewards, because it is not needed.
Carbon Assets, Not Offsets
The carbon reward (XCR) is a new type of financial asset that will have a price floor backed by central banks. The XCR will not function as a carbon offset, and it will not function as legal tender. Trading the XCR will only result in a transfer of wealth between buyers and sellers.
Three Reward Channels
The carbon reward policy includes three channel for earning carbon rewards: (1) by carbon dioxide removal from the atmosphere, (2) by conventional greenhouse gas mitigation (reductions and removals), and (3) by providing co-benefits and reducing harm for communities, ecosystems and industry. See the policy working paper for more information.
Carbon Reward Policy
This website is undergoing major revision from November 2025 to reflect the latest version of the carbon reward policy. For more information, see our working paper here.
Reward Multiplier
This carbon reward policy includes a reward multiplier (R) for conventional mitigation outcomes, including GHG emission reductions and avoidance. R will be used to customise the reward payments to achieve cost-effective outcomes across each industry and sector of the economy. This flexibility in setting rewards is important, because mitigation costs can vary significantly by industry, technology, and location. For more information on the reward multiplier, see our policy working paper here.
Mitigation Technologies (Examples)
Some examples of climate mitigation that could earn the carbon reward is presented in Table 1.
Table 1. Climate mitigation technologies that could potentially earn carbon rewards
| Cleaner Energy | Cleaner Business | Carbon Removal |
|
Examples ◼︎ Substituting coal- and gas-fired electricity with renewables |
Examples ◼︎ Reducing the carbon footprint of buildings and industry |
Examples ◼︎ Reforestation, afforestation and re-wilding |
Footnotes: (1) CCS = carbon capture and storage; CCU = carbon capture and utilisation; CCUS = carbon capture and utilisation and storage; CFC = chlorofluorocarbon; HCFC = hydrochlorofluorocarbon; HFC = hydrofluorocarbon. (2) A fourth reward rule may be proposed for improved family planning and womens’ education. (3) Changes in the surface albedo of the Earth, whether intentional or unintentional, are not included in the assessment of carbon rewards and this is because the policy objective is framed by the anthropogenic carbon balance and not by albedo. For a discussion of solar radiation management (SRM) see Biophysical Analysis.
Causal Mechanisms
The carbon reward’s effectiveness is grounded in causal mechanisms that are social, informational, financial and political. They include (1) provisioning performance-based grants for mitigation outcomes, (2) assessing mitigation with decentralised and transparent methods, (3) transferring the mitigation costs (roughly US $3-6 trillion/yr) into foreign exchange markets for minimising political conflict and clearing financial bottlenecks, and (4) tracking carbon accounts under long-lived contracts. Another causal mechanism is (5) complementing other market policies and initiatives in a carrot-and-stick approach for maximising cooperation.