Frequently Asked Questions

1. What is a carbon reward?
2. What kinds of projects will be eligible to receive a carbon reward?
3. How will the reward be issued?
4. How will the reward be funded?
5. Why are carbon rewards different to carbon offsets?
6. Why do we need the carbon reward?

1. What is a carbon reward?

Acarbon reward is a new type of money, called a carbon currency, that will be issued for greenhouse gases that are mitigated for the long-term. A carbon reward is conditional because it is accompanied by a service-level agreement. Each unit of the carbon currency will represent one tonne of carbon dioxide equivalent (tCO₂e) that has been mitigated for a 100-year duration.

The carbon reward will be:

an incentive for climate mitigation;
a debt-free source of revenue;
a type of conditional income;
an investment-grade currency; and
a financial asset.

The carbon reward will not be:

a carbon offset credit;
a government subsidy;
a cryptocurrency; or
legal tender.

2. What kinds of projects will be eligible to receive a carbon reward?

Awide variety of low-carbon projects will be eligible to earn the carbon reward, including:

Energy companies that reduce carbon emissions by supplying cleaner energy to the marketplace;
Enterprises that reduce carbon emissions by changing their consumption patterns; and
Projects that remove carbon directly from the ambient atmosphere using natural or engineered methods.

3. How will the reward be issued?

Carbon rewards will be paid to the owners of low-carbon projects either as ex-post or ex-ante rewards for mitigated carbon. Ex ante payments will only be provided if the risk of carbon leakage and the risk of defaulting are acceptably small. The rewards will be paid as a digital carbon currency (CC), possibly using a mobile application or via an online bank account.

The assessment of carbon rewards will be similar to the assessment of carbon credits. Unlike carbon credits, the carbon rewards will be assessed under a common set of guidelines and policy rules that will stipulate the required levels of data accountability and transparency. The problem of additionality is a major issue for carbon offsets, but additionality does not apply to carbon rewards in the same way, because carbon rewards will not be used to offset carbon emissions.

The measurement, reporting and verification (MRV) for assessing carbon reward payments will be undertaken on a periodic basis in order to estimate the mass of carbon that has been mitigated for a 100-year duration. The time between each major MRV assessment may vary between 1 year minimum to 100 years maximum, depending on the perceived risk of carbon leakage, and the risk of defaulting by the project owner. Conditions for assessing the reward payments, charge-backs, and other transactions, will be detailed in service-level agreements and will be supported by policing. A novation clause will address the issue of long-term project maintenance. Other contractual provisions and digital technologies will be used to ensure that the total supply of the carbon currency will remain proportional to the global carbon stocktake for the policy.

The rewards that are given to low-carbon projects may be adjusted higher if the project provides social and ecological co-benefits, and the rewards may be weighted lower if the project creates harms for stakeholders. The assessment of the reward adjustments will be undertaken with the assistance of stakeholder groups, and these adjustments may be implemented on an annual basis, or over longer time intervals, depending on the risks to stakeholders.

4. How will the reward be funded?

The carbon reward will be paid as a carbon currency, and the carbon currency will be managed using expansive monetary policy. This monetary policy will involve the coordination of the world’s central banks. The central banks are needed to ‘print’ more national currency, and to then use this currency to buy the carbon currency. The resulting monetary inflation will be spread globally and thinly, so that the economic impact will be minimised. The carbon currency will be an investment-grade currency, so that private demand for it will help fund the climate policy.

5. Why are carbon rewards different to carbon offsets?

The carbon reward is significantly different to a carbon offset because the reward will not be used to offset carbon emissions. Unlike carbon offsets, the carbon reward will be issued as a tradable carbon currency. As mentioned above, the carbon reward will be funded with monetary policy. The carbon reward can be used to fund low-carbon projects because it will be a debt-free conditional payment.

6. Why do we need the carbon reward?

Our global civilisation needs to achieve net-zero carbon emissions by 2050/2070 approximately in order to meet the 1.5°C /2.0°C global warming limits of the 2015 Paris Climate Agreement. This will require both conventional mitigation strategies and new carbon dioxide removal (CDR) technologies. The carbon reward is needed to fund conventional mitigation, and it will also be needed to fund CDR over the long-term given that residual carbon emissions during the 21st century are expected to be very significant.

In summary, the carbon reward is needed to:

manage the systemic risks associated with the anthropogenic carbon balance;
to improve social cooperation with a carrot and stick approach;
to resolve the funding gap for carbon dioxide removal (CDR);
to financially support the Paris Climate Agreement;
to reduce conflict over cost sharing;
to manage dirty economic growth;
to resolve the inter-generational inequity problem; and
to share information on climate mitigation technologies.