Solar Dollars: The World Currency to Price and Finance Carbon Mitigation by global4c.org

RESPONSE TO JUDGES COMMENTS

On behalf of authors and supporters, thank you for your feedback and questions.
I have provided our ideas to address the judges additional comments:

Judges Comments-

"We found this to be a very innovative and creative idea, the feasibility of which will be premised on (1) who would issue such currency, (2) who will be the regulator, and (3) how will institutions such as the International Monetary Fund and Central Banks get involved in it. It is well thought through, and two additional minor points that need further elaboration are: 
- how to finance the auditors, 
- how to ensure that the CO2 basis for the SOL is not sold again on the market."

Proposal Response -

Answering the first question involves a business model and contracts that micro-manage the partnerships and prevent free-riding and corruption. The approach involves specific steps, and so there was not space to explain this on the website.

Answer 1 - How to finance the auditors and control the currency supply?

1) Enterprises that abate or sequester GHG emissions can voluntarily join the global reward scheme to earn Solar Dollars (SOL) as proportional rewards for the mass of CO2-e verifiably mitigated. They agree to provide their data to a public domain database (for instantaneous market knowledge). They are bound by digital contracts, most of which are actually imbedded in the SOL digital currency.
These digital contracts enforce the conditions and assessment rules, including things like duration of safe storage (i.e. for sequestration).

2) Auditors' commissions will be a fixed percentage of the Solar Dollar (SOL) rewards given to enterprises that mitigate. For example, auditor commission may be 4% of all SOL that they award to enterprises. 

3) A percentage, say 0.5%, of all SOL rewards will be given to the administrators (shareholders) who own and operate the digital administrative system. 

4) The enterprise that undertakes mitigation will first do a self-assessment, and this will be used to define the fixed commission for the auditor. They may be inclined to assess kg CO2-e slightly on the low side, because this will reduce their administration costs.

5) The enterprise has a contractual obligation to do their self-assessment within, say +/-20% accuracy, otherwise they will be penalized an administrative fee (a deposit).

6) The administrative system will chose the auditor for the assessment work, based on skills and capacity, and to reduce the likelihood of collusion and free-riding.

7) The auditor's commission is already fixed before starting the assessment, so the auditor has no incentive to bias their estimates high or low - they are paid a set commission.

8) The administrative system will do automated and random checks on the assessment to seek out errors or free riding (much like the tax department will do automated checks). With an advanced system, the data can be cross checked with other databases. Also, electronic field monitoring equipment can transfer data directly into the assessment process.

9) The public has access to the mitigation database for oversight and checking. Private whistle blower forms will be available for reporting corruption.

10) Everybody working in the system (people who trade with SOL) can vote on enterprises and auditors with 'trust' and 'quality of work' metrics. Much like people vote on each other in Ebay and Airbnb etc. 

11) If enterprises happen to default on their obligations, or are corrupt, the system has methods to either recover the SOL or declare it void through the digital contracts embedded in the SOL.

12) Enterprises and citizens who earn SOL are allowed to trade it into the global marketplace for fiat currency. Therefore there will be a percentage SOL in circulation that was issued for mitigation that is declared 'void'. This 'bad money' will be taken out of circulation with a uniform 'demurrage fee' applied to all holders of SOL. Hence the 'bad money' is removed from the entire SOL supply as a percentage of all money, and not from individuals who happen to buy SOL that should have been voided. This allows everybody to trade SOL without taking other peoples' risk.

13) The demurrage fee represents a social and physical inefficiency of the policy. This is not a fundamental problem, because the monetary protocol will adjust the SOL price higher in response to the inefficiency (i.e. to increase the global rate of mitigation). In other words, when people who own SOL see that their holdings of SOL are reduced (the demurrage fee) the rising price of the SOL will make up the difference.
This process will ensure that the unit of account for SOL is upheld.

14) The assessment rules require more discussion.


Answer 2 - How to stop CO2-e being sold again on the market?

1) The enterprise that has carbon mitigation to sell, can chose between SOL rewards or a carbon offsets in a carbon trading market. The enterprise will likely chose based on price.

2) The enterprise that mitigates for SOL rewards will enter into digital contract that they will not sell the same carbon to another market (this would be a breach of contract and may be enforced by international counterfeiting laws and criminal charges).

3) Carbon trading and SOL databases can be connected for cross-checking of double issuance. The system can perform all types of database cross-checking to seek out anomalies (i.e. like the tax department).

I hope that answers the question.

Best,

Delton