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The objective is to create a tradable carbon security. The market mechanism will then incentive the lowest cost solution to reducing net emissions. All of thi
by scarab92 3y ago
The objective is to create a tradable carbon security.
The market mechanism will then incentive the lowest cost solution to reducing net emissions.
All of this requires the securities to be fungible, so it’s not feasible to hold the buyer accountable. The seller should be accountable however.
- tgsovlerkhgsel 3y agoNot holding the buyer accountable creates perverse incentives: The buyer is incentivized to buy the cheapest ones even if the buyer suspects it's fraudulent crap, and the seller is incentivized to provide the solution that reduces the most net emissions for the money on paper - and then when caught, the profit has already been distributed and the company is long gone/bankrupt. By holding the buyer accountable, buyers have an incentive to verify that what they're buying is actually real, so the $50/ton project that provides real reductions and can prove it suddenly becomes competitive with the $10/ton project that everyone expects to be a fraud. Also, the objective isn't to create a security. The objective is to reduce emissions. A market full of fraud does not achieve that, while forcing someone to actually deliver what was promised does. I agree that the buyer should be able to demand reimbursement for the cost from the seller, but by holding both accountable, the chance that someone actually will be held accountable increases a lot.