Carbon Micro-Credits: A Call for Monetizing Carbon Offsets at the “Bottom of the Pyramid” -A markets-based, self-funding roadmap for rewarding Individuals in the Developing World for smaller carbon footprints David A. Palella BioScience Ventures Inc. San Diego, Calif. Email: [email protected] Cell: 619-787-5767 Entire contents Copyright 24 Aug 2008 by David A. Palella. All rights reserved. Non-Confidential Foreword • Any part of this presentation may be quoted or reproduced with attribution, and may be disseminated by any means to further the sole interest of the author, which is to empower individuals in the Developing World and improve their standard of living as soon as possible • The concepts and systems described in this presentation are considered “obvious” by the author and therefore non-patentable, and are hereby disclosed by the author pro bono publico • The ideas presented here were conceived in September 2007 but only first reduced to writing in July 2008 Central Thesis --A Call for Carbon-Offsets Bill of Rights --- The carbon savings or offsets of Individuals in the developing world have value and these individuals deserve to realize that value --- Modern technology, in particular inexpensive cell phones and solar or charcoal cookers, should allow these offsets to be realized, quantified and verified (Ref 1 & 2) Ref 1 : "Vodafone, Safaricom and Western Union Announce Partnership to Deliver International Mobile Money Transfers; Pilot Launched between U.K. and Kenya" Englewood, Colo., London & Nairobi, Kenya, Dec 08, 2008 (Business Wire) http://ir.westernunion.com/press/releaseDetail.cfm?releaseid=352835 Ref 2: more efficient charcoal stoves, such as the well-known Uganda stove http://www.pciaonline.org/files/Proceedings/2007AfricaWorkshopProceedings/Case_Studies/Cas eStudy3-UGANDASTOVEMANUFACTURERSLTD.pdf Details on my blog posted on November 13, 2008 http://carbonmanna.blogspot.com/ The CARBON FOOTPRINT BILL of RIGHTS Carbon Micro-Credit Program Outline - 1 • Mechanism - A pro bono, Market-based system (Self-funding) - No charity nor non-profit funding is required; No benefactors nor charitable donations are required. Implementation can take place immediately - The program is self-governing, non-bureaucratic and based on free-market principals - Just advocacy and implementation Carbon Micro-Credit Program Outline - 2 • Needs - Individuals in developing worlds earn their value of US$ 87.50 of carbon credits/year/family by cooking with solar or a more efficient charcoal stove thereby reducing CO2 emissions by about 3.5 tons of CO2/year/family; Plus they also save US$ 100 - 200/year on biomass/carbon-based fuels - Assuming 5 billion people in the Developing World and 1 billion families, if only 10% of families converted to solar cooking and did not emit 3.5 tons/year/family of CO2, and assuming reduced deforestation in perpetuity from not cutting down trees (biomass), this modest conversion rate alone would offset the annual CO2 emissions of the entire United Kingdom (Ref 3). Details on my blog posted on September 28, 2008 http://carbonmanna.blogspot.com/ Carbon Micro Credits (CMCs) -- Monetizing carbon offsets at the "Bottom of the Pyramid“ November 22, 2008 Carbon-Micro-Credit (CMC) Registry Reference 3: http://en.wikipedia.org/wiki/List_of_countries_by_carbon_dioxide_emissions http://www.prb.org/Publications/Datasheets/2008/2008wpds.aspx Carbon Micro-Credit Program Outline - 3 • - Implementation of the Carbon Micro Credits monetization system Using an inexpensive cell phone, the family claims their carbon micro-credit (CMC) daily by typing in the unique serial # on their solar cooker, or using any other unique identifier - The CMC is tallied by the local cell phone company as either a cash/monetary credit or converted to equivalent value/credit in cell phone minutes, which are a universal form of noninflatable currency in the developing world that cannot be debased by central governments - The family can sell or trade its CMCs or cell phone minutes for goods or services, or use the cell phone minutes for their own purposes to communicate with family or engage in commerce Details on my blog posted on October 26, 2008 http://carbonmanna.blogspot.com/ Carbon Micro Credits (CMC) Flow of Funds Carbon Micro-Credit Program Outline - 4 • Validation & Monitoring of the Carbon Micro Credits monetization system - The Project Developer arranges for 3rd-party, independent validation of the offsets - Validation of carbon micro-credits earned can be automated and simplified by tying unique cell phone numbers to unique serial numbers on solar cookers, or by using cheap RFID (radio-frequency I.D.) or NFC (near-field communications) technology from NXP Semiconductors -- http://www.nxp.com -(chip-set cost < $2) or by issuing unique Carbon Credit Security Numbers (CCSNs) to families in the program. Duplicate CO2MC claims in a single day would be automatically disallowed - The project participants would also “police” each other to ensure compliance. A simple reward system can be implemented to encourage confidential reporting of non-compliance (e.g., additional cell phone minutes given for reporting cheaters). Or, an Amway-type multi-level governing system can be implemented to ensure data integrity - Again, the success of Grameen Bank in Bangladesh and India proves that both order and the honor system can obtain in the Developing World too. Post of December 19, 2008 at http://carbonmanna.blogspot.com/ The Foreign-Aid Micro Credit in a Time of Famine December 13, 2008 The Foreign-Aid Micro Credit (FAMC) Overall Benefits of the CMC Program • This program empowers and benefits individuals at the “Bottom of Pyramid”, in great contrast to many other proposed carboncredit schemes that benefit, for example, stockholders and management teams of nuclear power plants in developed countries, or chemical plant owners in countries such as South Korea, now erroneously classified as a “developing country” under the U.N. Clean Development Mechanism (CDM). Hard to believe, but true. Entities involved & How they benefit (1) Individuals/families in the Developing World (2) Carbon Project Developers, Managers & Aggregators (3) Climate / green house gas (GHG) exchanges (4) Cell phone companies (5) Solar cooker manufacturers & other companies producing products that reduce carbon emissions (6) Carbon-offset Validation / Audit firms (7) Companies buying carbon credits to offset their own GHG (green house gas) emissions (8) Other potential participants ? (1) Individuals in the 3rd-World • For 3rd-world residents who subsist on an average of US$ 1 per day, 25 cents additional per day gained from selling carbon micro-credits is a significant & motivating sum • Moreover, in many 3rd-world countries denuded of biomass, families spend from 25 - 50 % of their daily income on fuel to cook. This huge daily expense will be eliminated and provides even more “income” or savings to each family, as well as further incentive to stop cooking with expensive kerosene, propane, charcoal or imported biomass (firewood) • Improved Childhood Health Environment -- 100s of millions of children in the Developing World are exposed to toxic levels of smoke from in-door cooking with biomass. 10s of thousands later die as adults from years of this forced “passive smoking” • This program introduces or further reinforces the profit motive and schools individuals in the value of free markets • Cell phone minutes, CO2MCs, or e-gold earned and banked centrally at local or transnational cell-phone service providers are a universal currency that cannot be confiscated nor debased by central governments (1) Individuals in the 3rd-World (cont.) • Individuals/families in some programs could first be required to “buy” their cell phones & solar cookers with their first US$ 25 - 50 of claimed CO2MCs (the carbon project developer would decide this reasonable amount). This optional requirement would establish the concepts of financial management and installment loans at the Bottom of the Pyramid • Again, cell phones provided in the program may serve other functions such as: (1) tele-education of children (2) telemedicine or dissemination of public-health messages to parents (e.g. upcoming vaccine campaigns -- e.g., “Vaccinate your child for polio and receive 60 free cell-phone minutes!”), and (3) timely notification of national emergencies such as typhoons or tsunamis (2) Carbon Project Developers & Managers • Provides a new and almost limitless source of self-financing projects not encumbered by governmental/NGO paperwork • Allows tailoring of projects in terms of both scope/size and geographical location • Projects can be custom-tailored to appeal to end-buyers of the offsets, e.g., offsets from a solar cooker project in India could be pre-sold to an Arcelor-Mittal steel mill in Bremen, Germany (Arcelor-Mittal is an Indian-controlled company). • Such end-buyers would possibly pay a premium for credits with a known and desired provenance or origin, if this information can be used strategically to generate goodwill in the marketplace (2) Carbon Project Developers & Managers (cont.) • Projects can be based on any carbon-saving product, e.g., conversion of 2-stroke motorcycles in Manila to lower-emission versions by using Envirofit International’s (Fort Collins, Colorado) Direct In-cylinder (DI) fuel-injection retrofit kit • Examples of project developers: Carbon Capital Markets Limited (London, England) http://www.carboncapitalmarkets.com EcoSecurities Ltd. (Oxford, England) http://www.ecosecurities.com (3) Climate Exchanges • Provides a new and large source of carbon offsets for trading/sale • Credits from tailored projects can be sold more easily to end customers / companies, perhaps even to those not legally required to buy them, e.g., companies that wish to reduce their carbon footprint for strategic marketing or business reasons. For example, a Hilton Hotel in the Philippines could buy carbon credits from a motorcycle-emissions reduction project in Manila, thus benefiting the hotel’s own local environment and gaining local goodwill • Trading credits from the “Bottom of the Pyramid” would elevate public awareness and appreciation of climate exchanges, which are now mainly unknown to the average American or European • Examples of climate exchanges: European Climate Exchange (ECX) (London, England) http://www.europeanclimateexchange.com Chicago Climate Exchange (CCX) http://www.chicagoclimatex.com (4) Cell phone companies • Both handset manufacturers and cell-phone service providers benefit from a much greater installed base and economies of scale • Once provided with a cell phone, people will find novel ways to use them in for-profit ventures, besides for the CO2MC project • The disposable incomes of the project participants will increase; some of the new wealth will be spent on upgraded cell phones and paid calling time • Cell phone companies in the developing world already have software & hardware that easily allow for commerce based on earning & exchanging cell phone minutes • Examples include: MTN (South Africa) http://www.mtn.co.za Grameen Phone (Bangladesh) http://www.grameenphone.com SafariCom (Kenya) http://www.safaricom.co.ke China Mobile Limited http://www.chinamobileltd.com (5) Manufacturers of products that reduce CO2 • Manufacturers realize increased sales and receive timely cash payment from the project developer • No governmental agencies nor NGOs are involved in realizing the sale • Sales and markets expand, allowing manufacturers to more easily attain economies of scale • Examples include: Envirofit International (Fort Collins, Colorado) http://www.envirofit.org Yancheng Sangli Solar Energy Co., Ltd. (Yancheng, China) http://www.chinasangli.com/english/ (6) Audit / Validation Firms • More paying business for these companies • If peer-pressure enforcement systems and self-policing function as envisioned, the work of these firms will be straightforward • Examples include: Det Norske Veritas (DNV) (Norway) http://www.dnv.com/focus/climate_change/ Tuev Sued AG (Germany) http://www.tuev-sued.com/ SGS Group (Switzerland) http://www.sgs.com/_environment?lobId=5548 http://www.climatechange.sgs.com/ (7) Companies buying carbon credits/offsets • Industrial buyers of carbon credits can gain tremendous goodwill with their stakeholder groups by buying credits from specific 3rd-World projects that directly benefit 1,000s or 10s of 1,000s of low-income families • Carbon-offset buyers working with project developers can customize programs in specific areas/towns/cities of the developing world where they do business, again generating goodwill and a long-lived halo effect. • By paying an additional fee, obvious product or logo placement opportunities could be offered to offset buyers, e.g., a Coca Cola-branded solar cooker in a territory where Pepsi has greater market share • Compared to the many mega-projects proposed to the EU’s Emissions Trading Scheme (ETS) or the U.N.’s Clean Development Mechanism (CDM) such as wind farms or renewable-biomass energy plants, carbon micro-credit programs can be implemented in a few months versus years, and have much lower start-up costs (8) Other Potential Participants ? • Investment banks that trade carbon credits (JPMorgan or Goldman Sachs) or large charitable foundations could issue “CO2MC Performance Bonds” or “CO2MC Surety Bonds” guaranteeing that the micro-credits will be produced in the end. This would protect the buyer of the pre-paid credits in case the underlying CO2-reduction program was audited and found deficient. But again, Grameen Bank’s success indicates the risk of “default” is very low. In short, on average 98% of the bonds’ underlying assets should indeed be produced. • Other charitable organizations & NGOs that are structuring carbon-offset and sustainable-development projects in the Developing World where the underprivileged families involved are enfranchised and allowed to monetize their own offsets for their own account. Many re-forestation or rain-forest preservation programs come to mind. • For-profit companies (Obopay) and charitable organizations (The Gates Foundation or Omidyar Network) undertaking banking-expansion or carbon-reduction programs in the Developing World that seek a noncharity, markets-based funding mechanism to seed millions of new accounts. (8) Other Potential Participants ? (cont.) • Examples could include: • • • • • • • • • • • Obopay: http://www.obopay.com Bank a Bilion: http://www.bankabillion.org SODIS Reference Center: http://www.sodis.ch The WORLD RESOURCES INSTITUTE: http://www.wri.org NextBillion.net: http://www.nextbillion.net OPPORTUNITY BANK of MALAWI: http://www.oibm.mw OXFAM INTERNATIONAL: http://www.oxfam.org OMIDYAR NETWORK: http://www.omidyar.net Women for Women International: http://www.womenforwomen.org GRAMEEN BANK: http://www.grameen.com UGASTOVE Project (UGANDA STOVE MANUFACTURERS LTD.): no web site Grand Challenges of Carbon Micro Credits - 1 - post of December 3, 2008 at http://carbonmanna.blogspot.com/ (1) Low-cost Carbon-Micro-Credit Cell Phone: post of 26 November 2008 at http://carbonmanna.blogspot.com/ (2) Determine the Standard International Carbon Micro Credit (SICMC): post of 20 November 2008 at http://carbonmanna.blogspot.com/ (3) Standard International Carbon Micro Credit (SICMC) as physical constant: Lobby major carbon-credit buyers, project originators, auditors, NGOs and governments to build a consensus to accept the SICMC as a valid universal standard, just as standard as traditional units of measure such as the kilogram or Planck's constant. post of December 19, 2008 at http://carbonmanna.blogspot.com/ (4) The International Carbon Micro Credit Registry: post of 22 November 2008 at http://carbonmanna.blogspot.com/ Grand Challenges of Carbon Micro Credits - 2 - post of December 3, 2008 at http://carbonmanna.blogspot.com/ (5) The Carbon Micro Credit (CMC) Operating System (O.S.): Write the code in Linux or another open-source programming language for a platform-agnostic CMC O.S (Operating System) that easily installs on the computer systems of most mobile carriers worldwide. (6) Free Trade Zone status or Permanent Tax Holiday for CMCs: Build universal agreement among all governments worldwide that CMCs shall not be taxed, blocked, confiscated nor otherwise encumbered at all stages of their creation, bundling, marketing, sale or conversion to an alternate currency such as cell-phone minutes, e-currency or cash. (7) Unified Field Theory of Carbon-Offset Means Testing: Build worldwide consensus that the carbon offsets of Individuals produced in the Developing World take precedence in valuation and sale over any other offsets. post of 26 November 2008 at http://carbonmanna.blogspot.com/ (8) Breaking Bulk / Getting Granular / Thinking small: Build consensus among carbon offset retailers and green house gas (GHG) exchanges worldwide to distribute and sell CMCs in any quantity, no matter how small. Grand Challenges of Carbon Micro Credits - 3 - post of December 3, 2008 at http://carbonmanna.blogspot.com/ (9) Thinking BIG: Implement the Carbon Micro Credit system in the Developing World to individually empower and enrich at least 50 million people by 2015, 100 million by 2020, and 250 million by 2025. (10) MicroMedicine and MicroEducation: Organize and promote the analogous micro-fields of MicroTeleMedicine and MicroTeleEducation that are also immediately enabled by today's existing installed cell-phone base and telecommunications infrastructure. (11) Carbon Nano Credit & Carbon Pico Credit: Conceive, build a framework for, and implement the Carbon Nano Credit (CNC) and Carbon Pico Credit (CPC) -- the next generations of carbon micro credits. "There's plenty of room at the bottom" [Richard Feynman]. post of November 2, 2008 at http://carbonmanna.blogspot.com/ Carbon Micro-Credit Program --- other applications Post at http://carbonmanna.blogspot.com/ December 17, 2008 School-Lunch Carbon-Micro-Offset Program December 13, 2008 & December 19, 2008 The Foreign-Aid Micro Credit (FAMC) November 30, 2008 The Carbo or Karbo -- the First Global Hard Currency? November 26, 2008 The Carbon Micro Credit (CMC) Cell Phone November 16, 2008 ONE CELL PHONE per CHILD / The Cell Phone is the School The Path forward & Keys to Success • Women are the key to maintaining the integrity of this project and CO2 trading scheme. The 98% repayment rate at Grameen Bank is due to most of the loans being made to women • Besides among women in general, the honor system and self-policing will also obtain more strongly within faith-based groups, tribes, cohesive villages, large companies and extended families • Ownership and penetration rates of cell phones in developing countries are already quite high; much higher than imagined by many Americans, so an extensive installed base to implement this program already exists in many 3rd-world locations • The small daily value of the carbon micro-credits earned by each family is a major deterrent to fraud by individuals and to expropriation by governments. Nevertheless, the daily value to underprivileged families is great • Cell phones provide a fairly secure and direct communications link between individuals participating in the project and the local or central cell-phone service provider where CMCs will be banked or saved, again minimizing chances of fraud • In the developing world, cell phone minutes are a universal currency and a stable store of value like gold or silver that cannot be debased by central government-spawned inflation • Cell phone minutes can be easily transferred to parties in neighboring countries (especially in Africa) and thus facilitate cross-border commerce just as the Euro has in the EU Summary • The technology necessary to implement a CO2 Micro-Credit program already exists • Individuals in the Developing World have an inalienable right to monetize and benefit from their own carbon savings • This right should be recognized and morally supported by all major NGOs including the U.N., the IMF, the OECD, the World Bank, the European Commission, ASEAN, the Asian Development Bank, and others • Regardless, the profit motive should make this program selfimplementing, and no monetary support from governments, NGOs nor charities is needed Acknowledgement & Thanks for the Synchronicity and Serendipity: • Business Week, 24 Sept 2007 issue, for this article: “Upwardly Mobile in Africa” http://www.businessweek.com/magazine/content/07_39/b4051054.htm • Special thanks to Ms./Dr. Hong Ma, MBA Class of 2009, UCSD Rady School of Management, for polishing & annotating this presentation • Dr. Vish KRISHNAN, Professor of Innovation, Technology & Operations, UCSD Rady School of Management • Veerabhadran "Ram" RAMANATHAN, Ph.D., Professor of Ocean Sciences; Director, Center for Atmospheric Sciences, Center for Clouds, Chemistry & Climate, Scripps Institution of Oceanography (SIO), University of California, San Diego (UCSD) The End - Join in the Advocacy and Implementation • Every individual in the world can reduce green house gas emissions and mitigate climate change – • And they should be paid for their contribution -- Carbon credit where credit is due. • Thank you for your attention. Entire contents Copyright 24 Aug 2008 by David A. Palella. All rights reserved. Appendix -- CO2 calculation (#1) Reference: "Clean Development Mechanism (CDM) Solar Cooker Project Aceh 1, Indonesia", pg. 5, Section 4. -- undated document (late 2005, early 2006 ?) This rigorous technical proposal prepared for submission to the U.N. Clean Development Mechanism states that the average family not cooking with biomass reduces CO2 emissions by 3.5 tons/year. Value of Carbon Credits from using 1 solar cooker for 1 year: 3.5 tons CO2/device/year X $ 25/ton or credit = $ 87.50 Based on December 2008 forward contract price from: http://www.carboncapitalmarkets.com/home.php Appendix -- CO2 calculation (#2) Define a "Carbon Micro-credit" as the CO2 saved/day by not cooking with biomass = (3.5 tons/year x 2,000 lbs/ton) -----------------------------------365 days/year = 19.18 lbs/day of CO2 This carbon credit calculation is only for CO2 emitted when burning deadwood or other biomass such as dried grass, cow dung, etc.