In the 1920s, a Cambridge University economist called Arthur Cecil Pigou came up with a novel idea: polluting factories should be taxed at an appropriate level so they bear a cost for their negative effect on society.
Fast-forward almost a century, and businesses across the world are now paying carbon credits — effectively tradable permits that “allow” them to release carbon dioxide into the atmosphere. Meanwhile, carbon-dioxide mitigation projects can actually generate carbon credits, which can be used to finance carbon reduction schemes around the world.
In short, carbon credits have become a valuable, tradable asset. The trade of these credits acts, in theory, as a market mechanism that encourages businesses to limit the emission of carbon.
It’s a scheme Pigou no doubt would have approved of. But it doesn’t take an economist like him to spot its flaws. For a start, it’s a very centralised project that relies on the skills of carbon emission evaluators — which are in short supply. Their evaluation methods are not easily scaled so it can take years for a project to become certified. More generally, the marketplace is highly inefficient, fragmented, open to fraud, and is based on low quality data.
A new tradable asset
But it doesn’t have to be this way. In the decentralised Web 3.0 and A.I era, we now have tools that enable us to collect, verify, measure, and store data relating to carbon emissions far more accurately and securely — offering deeper insights and enabling smarter decisions. We can ensure this data is of the highest quality – high-resolution data in high-fidelity formats.
For example, in many cases IOT devices can automatically do the collection work for us. Meanwhile, high-performance computing, AI-based evaluation mechanisms and software oracles can help us bring together data sources to perform intelligent evaluations.
This data can then be cryptographically hashed and signed — in other words, digitally sealed with a unique data fingerprint identifier — in ways that can be independently verified. Then a reference can be stored on a public blockchain for the whole world to see in a provable and accountable standard format.
But this type of blockchain-based protocol isn’t just suitable for carbon counting. It can be harnessed for any social, economic or environmental impact on the world.
That’s exactly what the ixo Foundation has done.
Valuing impact projects
The ixo Foundation is a not-for-profit foundation that leverages blockchain technology and A.I. to help people and organisations collect, measure, verify and value what are known as impact projects. An impact could be the administration of a certain amount of vaccinations to a village, the education a certain number of children, or the offset of a certain amount of carbon.
Ixo is building a distributed Global Impact Ledger. We hope this ledger becomes known and appreciated as a resource for the world that is accessible by everyone – ensuring transparency, measuring accountability, tracking the flow of funds, and attributing results to a particular individual or entity.
Blockchain technology gives us a more efficient and transparent method for exchanging this valuable information than the world of carbon credits has become used to. In fact it allows us to create a whole new asset class — an Impact Token that can optimise how people can make any sort of positive impact on the world.
An Impact Token is generated when an impact claim is made by provider of a service — for example, the delivery of a certain amount of immunisation injections — and is verified by an evaluator or an oracle. As a result, the funder or funders of this project (as well as the wider world) finds out how much impact their investment made. Because this information is stored in a Global Impact Ledger, the world has a resource to help make it better, more informed, decisions about how it distributes money to impact projects. Meanwhile, funds make their way to projects that get results, and corruption is reduced.
Tokens at work
ixo’s first use case, Amply, was funded by UNICEF and has digitised more than 55,000 pre-school attendance records in South Africa, which can be exchanged for government subsidies.
It is working on a number of new pilots, including a scheme that awards carbon tokens for increasing the use of clean-burning cookstoves among rural populations in Asia.
Coal-based cookstoves used can have a huge impact on deforestation, negatively impact quality of life, cause respiratory illness, and carbon emissions. The use of the clean-burning stoves via this scheme is measured using IOT sensors.
In this project, both climate impact tokens and health impact tokens can be awarded, without the problem of double-counting.
Count what matters, value what counts
It’s important to note that the value of the initial funding for a particular project is multiplied exponentially as it morphs into a token, which can be used to fund further projects.
Previously, it was almost impossible to count what matters for sustainability, and to value what counts — in ways that could easily be traded for capital. Without having reliable measures of how impact investments improve capital productivity and resilience to capital risks, these kinds of investments have been undervalued and not grown to their potential.
But ixo is now able to create a new asset class that could become the basis for a more organised, regulated form of investing in impact. There can be many types of Impact Tokens — for social development, for carbon credits, for clean water, and so on. These tokens can be traded as a crypto-asset and exchanged for fiat, or similar impact assets.
Impact Tokens tell the story of a positive impact that has been delivered. I hope they become a central form of impact capital — taking on an increasing tradable value, helping the impact economy grow exponentially, and adding enormous value to the existing real economy.
Dr Shaun Conway, founder and President, ixo Foundation
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