Pitch

BitTrade makes Cap and Trade easy and inexpensive to operate and returns dividends by utilizing blockchain technology to sell carbon shares.

Description

Summary

First and foremost, this is not Sno-Caps. BitTrade would be a private organization that contracts with the government (either a state or nation) to run a fair and inexpensive Cap and Trade program.

The blockchain is a public ledger that records every Bitcoin transaction globally. Relating this technology to Cap and Trade provides complete transparency of all transactions of carbon shares. This allows a fair system of bids, and can allow 'miners' to confirm that corporations have the proper amount of shares relative to their emissions. By legislating that corporations must publish their emission numbers, miners will carry out proof of emissions calculations, and be rewarded for each block of transactions they chain to the blockchain.

The number of carbon shares is determined by the number of citizens under the government's jurisdiction, plus additional shares for miners' rewards. The process of distributing the shares is done entirely by the software.

Companies can later exchange shares between each other to match emissions needs. When the trading for the year is finished, the profits are divvied out so that each share is equal in value. This system is not unlike what Alaskans receive for oil.

The sole purpose of the government is to randomly audit corporations to make certain they are being honest with their emissions reports. This will make it an inexpensive and attractive investment.

What actions do you propose?

The advantage this has over a program like Sno-Caps is that it elegantly solves the issue of enforcement. By incorporating proof of emissions and random government audits, enforcement will be inexpensive and very effective. Corporations must publish emissions data. Of course, the penalty for a corporation not in compliance will need to be stiff to discourage falsifying data.

The blockchain technology is not groundbreaking. It would take just a few programmers, perhaps myself included, to make this happen. It could even be outsourced to companies that are already working on smart contracts using blockchain technology. 

The profit sharing is both egalitarian and meritocratic, entitling everyone to a share, but granting greater shares to those who contribute to the maintenance. 

As you can see, getting the government involved will ease adoption, and keeping them only minimally involved will make it a less controversial investment. Allowing the trading to be automated also allows citizens without sufficient technical knowledge of private keys to claim their share of profits from the program. Furthermore, the share structure solves the problem of eliminating coins for the deceased and creating them for newborns, as all shares are fungible, and no person owns any specific share. 

Who will take these actions?

The government (either state or national) will need to enact this legislation. The rest of the work will be done by a private organization to create this system. From that point on, the only role the government will need to play is that of enforcer, to ensure that corporations are not falsifying emissions data.

The private organization will consist of just a few programmers, as the technology itself is not groundbreaking. It will not operate for profit.

What challenges will be faced in implementing this proposal and how will they be overcome?

The government must be willing to trust these technologies, which will be difficult as few bureaucrats understand the blockchain. A more in-depth white paper can go a long way.

How much will emissions be reduced or sequestered vs. business as usual levels?

Previous Cap and Trade programs have traditionally reduced the total value of shares by roughly two percent per annum. A similar reduction would be in order.

What are other key benefits?

It goes without saying that reducing carbon emissions is desirable. But more than that, the inexpensive nature of this project is a major advantage. Furthermore, there will be a small kickback for every citizen, regardless of technical understanding. There will also be maximal transparency in Cap and Trade. 

What are the proposal’s costs?

The cost of creating and implementing this is essentially nothing. Some corporations, however, will have to find ways to adapt to the curtailing of their carbon emissions. Also, if it is implemented, it is conceivable some corporations may move operations elsewhere.

Time line

This can be implemented within a year or two. Every corporation in the jurisdiction of this program will be trading with BitTrade, and every citizen will receive a dividend. 

In the longer term, the total carbon emissions will be slowly reduced and each share will correspond to less carbon. This will happen annually, perhaps at a rate of two percent. At this rate, emissions will be halved within 35 years.

Related proposals

Sno Caps is a related proposal, as it utilizes blockchain technology to allow citizens to trade their individual carbon share. 

BitTrade is distinct in that it utilizes the government to ensure the cap is enforced. It also allows for a more egalitarian profit sharing, as every individual can profit from the shares, regardless of their knowledge of private keys. Taking the citizens out of the selling is the right idea, and including the government in enforcing the cap is also the right idea. I loved Sno Caps' forward thinking, but BitTrade solves its obvious shortcomings.

References

Company using smart contracts: http://www.smartcontract.com/

CA Cap and Trade: http://www.c2es.org/us-states-regions/key-legislation/california-cap-trade

Alaska Oil Dividends: http://www.csmonitor.com/Environment/Latest-News-Wires/2013/0918/Alaska-dividend-Oil-revenue-means-900-for-each-resident

Proposal summary
BitTrade: Fair and Inexpensive Cap and Trade with the Blockchain (w/Dividends)
Team proposal: Only members listed on the proposal's Contributors tab will be able to edit this proposal. Members can request to join the proposal team on the Contributors tab. The proposal owner can open this proposal for anyone to edit using the Admin tab.
Contest: U.S. Carbon Price 2015
How could a national price on carbon be implemented in the United States?