Host: Ross Kenyon
Guests: Aldyen Donnelly | Co-Founder | Nori &
Paul Gambill | CEO | Nori
Category: 📄 Carbon Policy
Podcast’s Essential Bites:
[2:03] PG: “Prior to COP26, there was a big problem when it came to international carbon accounting. So Paris 2015 was when the international climate agreement was adopted and there was a piece of it called Article Six that was there to define how you would actually measure the impacts of different carbon projects that were being accounted for by different countries. So prior to COP26, the way it worked was that if a carbon reduction or removal project happened inside a company's borders, that carbon could be counted against their own Paris Climate commitments. But then if that carbon credit was generated and was sold to some private buyer in a different country, then that country could also count that carbon reduction relative to their Paris climate goals. And then that could just continue on and on and on. So you had a situation where there was no such thing as double entry bookkeeping, when it came to international carbon accounting. And that's just ridiculous. […] So what happened with COP26 was they finally did adopt new rules […] that are going to implement double entry bookkeeping. So that if a carbon reduction project happens in Brazil, and then that gets sold to a buyer in Germany, then Brazil takes a minus one and Germany takes a plus one.”
[13:41] PG: “[If] there's a large supply of carbon removal that's being created inside the US, but then those are being sold at some percentage to international buyers, that means that the ones that are sold to buyers and other countries won't get to count towards US reduction targets. And so we could find ourselves in a scenario where leaders of the federal government say there's too much export happening, we're not meeting our goals, therefore, we're going to limit the amount of carbon credits that could be sold to international buyers. And then you can actually see that happening down at the individual state level as well. […] That would be bad, because […] we support free trade, the notion of being able to find the best buyer and the best price for the product and good that you're trying to sell. And so if there are export controls being put in place by the US, then you can bet your bottom dollar that other countries will follow suit. And so we could find ourselves in a deeply mercantilist future, where carbon is only being sold inside national borders and not across borders. And that would necessarily limit the size and scope of how much economic activity could actually happen.”
[15:06] AD: “[Carbon protectionism] is inevitable without a fundamental change in the market design. And it's a simple thing. We now live in a world where most nations in the world have said, we are going to at least try to live with an absolutely limited nationwide greenhouse gas emission budget for 2030, and 2040, and 2050. And every nation's greenhouse gas budget, by definition, constraints that nations combined rights to produce and consume fossil based fuels, produce uranium, produce building products, so iron, steel, aluminum, glass, plastic, produce, and use fertilizers and produce food. So as long as any credit or government issued allowance is perpetually bankable as they are right now, then it would never be prudent for any government to approve the export of a credit or an allowance. Because in a future where all nations are committing to reductions, the way to derive significant competitive advantage in a global market is to hoard all of your credit, is to buy all the credits, […] and ban the export of any credits you can accumulate.”
[18:29] AD: “60% of the global potential to draw down and sequester incremental carbon in soils and root systems are in 10 countries. And six of those 10 countries are the largest national greenhouse gas emitters in the world. So it's kind of lucky for those 10 countries that the demand for their natural solutions credits […] will match the supply in terms of within country boundaries. But the developing nations who want to have a global market that is delivering value to [...] nations that are outside that group of 10, […] you can't make this market work for that.”
[19:13] PG: “Let's say you're a country in Africa or South America and you have large forestry reserves and you're in this situation where carbon credits are not being exported by countries. That means that if you're a supplier in that country, you're going to be largely dependent upon buyers in your country. […] We can all agree right now that carbon prices are too low to create the financial incentive that we need in order to maximize the amount of carbon coming out of the air. So in this sort of mercantilist protectionist scenario, it's the rich countries screwing over the poor countries of the world, yet again, even though they're doing it from this high minded righteous perspective of thinking that this is actually going to help solve climate change.”
Rating: ⚡⚡⚡⚡
🎙️ Full Episode: Apple | Spotify | Google (Original Title: "Climate-Crypto, COP26 & Carbon Accounting Rules")
🕰️ 46 min | 🗓️ 02/01/2022
✅ Time saved: 44 min
Additional Links:
Nori