interviews
The Uniqueness of Electrification in The United States
by Gretchen Bakke
September 10, 2021
This interview with Gretchen Bakke, author of The Grid, and visiting professor of anthropology at the Integrative Research Institute on Transformations of Human-Environment Systems at Humboldt University in Berlin. , Humboldt University, Berlin Germany, was conducted and condensed by franknews. This interview was originally published in February 2019.
frank: I have your book here, it's such a great framing piece that simplifies something so complicated.
GB: Incredibly complicated.
I would love to talk about energy democracy. How people want to move forward, and what sort of policy needs to be in place.
I think when you talk about energy democracy, it's not quite the same thing as equity.
I've spoken to some people who incorporate equity into their definition of energy democracy. They say, in trying to fix certain systems, we need to also engage people who have been marginalized from energy systems in the past. But it is also definitely its own issue.
One thing that's remarkable about systems everywhere, is that there's some sort of universal electrification. Just the idea. That idea seems to be an early 20th-century idea. Places that didn't get a grid in the early 20th century have a very partial and elite system. If you look for example, at Lagos in Nigeria, what you have is rich people on the grid, and poor people on a generator system. Even poor people means middle-class people, right? There's still a grid there, but it's like two or three generators, a bunch of cables, and it runs for one building or maybe two buildings. It uses heavy fuel oil, usually diesel, so it's a much more polluting thing.
The fact that there already is universal electrification, even though it's not profitable for companies is something that in my experience, everybody wants to preserve.
I never talked to anybody, the entire time I was doing research, that thought some people should have electricity and other people shouldn't.
I did talk to people who thought it might be wise, as the system is redeveloped, overhauled, or given a new shape at the lowest levels, to think more about the quality of electricity as being matched more closely to the needs of the user. This is maybe true, but it's also a sneaky way of saying Facebook should have more reliable, more stable voltage, with no interruption whatsoever, and the home user should not.
The question is, once you open that door, how far can you go with it before you start to actually develop two parallel systems? It might be true – it might be that I personally don't need to have the same quality of electricity as the US military. But give an inch and they take a mile. You don't want that to happen. I think that's one question. I think the other thing, and this is what I would guess you're interested in talking about democracy, is thinking about the way in which the electricity systems are becoming more individualized, especially with rooftop solar, and how that sense of ownership, or control, over the electrons that you make can be produced, while maintaining this universal system.
Absolutely.
The dream version of it is that everybody has solar, everybody has some kind of small wind, everybody is connected to a big grid, and everybody has some kind of storage, and thus has the capacity to run off their own electricity when they want, when it's cheaper, or when the big system is down. But also has the capacity to feed into a public electricity system. This is perfect. It's hard to manage, and it's hard to figure out how to pay for the grid if you do that, because you still have exactly the same giant infrastructure, but the way you make money off of it is removed.
In this ideal, is it a combination of public and private sectors maintaining the larger infrastructure, and the individual running their personal solar on the home?
If it was really ideal, the individual could choose to run it or not. The only way that that kind of system can actually work is with some pretty serious AI. When I was finishing the book, people were always talking about an orchestrator. What we need is an orchestrator to make all of this complexity work together. It was still this idea that it would be a person. What I’ve found in the three years since, is now there’s an assumption that computers can do this. Computers can make it so that whatever is happening on the level of the individual, the small scale producer doesn't actually take down the larger grid. You could just have a button that said, “I'm available to go off the grid if needed”, on your phone, I guess. I always imagine a real button on the wall, but this will be on your phone.
Then if there is too much demand, the orchestrator can just flip you off, and you can run on your own system, because it's two o'clock in the afternoon and you live in Phoenix, you need air conditioning. You have your air conditioning, but you also have your solar. Solar and air conditioning are so nicely married to each other. That's the ideal, but then the question is, where are all the ways that it can go wrong? Where we lose democracy, actually, and we lose equity. Even though there's some sort of dead reckoning sense of where we want to get to.
We tend to think of renewable energy as good, but eventually those companies will accumulate the same amount of wealth and power as coal or oil. The question becomes, like you said, what are the challenges and how do you move forward?
And how does democracy need to be reformed? Because if you think of it as kind of old school democratic, then a house can be an entity that can vote somehow forward into a management structure, which then represents it up. Along the way, you can do that with little company forms. Like I have my own little electricity company, and this is how much I make. My block is represented by this other kind of electricity company, and that goes up. It's not rocket science, we know how to do democracy in that way.
The question is, does democracy in that way work? Does it only produce a trickle up of funds and a trickle down of responsibility and risk?
As we move forward do you think we continue to use the grid as our primary infrastructure? Or do we move away from it?
The premise is, and the fact of the matter is, it's not replaceable at this point. It's simply not. We are replacing little tiny bits of it all the time, but the bigger system, you can't just build a parallel system next to it. It's too expensive to do that.
The thing that I really understood about the grid when I was writing the book is that nobody understands it.
There isn't any one person who understands how it all fits together. People understand their tiny little piece of it, and they understand the thing on either side of that tiny piece, and that's it. The expertise and the technology has the same structure. If we have 80% solar feeding into this grid, here's what happens when a cloud goes over at the level of five seconds. Now, this is a giant problem, and there's electrical engineers working on figuring out how to make the grid function in this case. There's a push behind the expert. At the expertise level, people are interested actually, in the larger infrastructure. And nobody else knows enough to get around it. It might just be like inertia when you sit there. One thing that I really have seen is that the way in which reforms are happening in the western part of the US, and the way that they're happening in the northeast are quite different. There are different logics at work that might actually, in 100 years, if we're still here, and not completely roasted to death, produce two systems with fairly different underlying structures.
What is the difference?
The west is inter-regional cooperation. The west is really like, how do you deal with the fact that you have hydro in the Pacific Northwest, and you have wind in the Dakotas, and you have all this solar on the south. It turns into this regional balancing of renewables that then depends a lot on people being able to take themselves off the grid in order to manage that in a reasonable way, but it's huge. That's why you have all these fights in California saying, we don't want to import any coal power from Idaho, and Idaho is saying, "We don't want to be part of this thing. You're going to force all of your renewables on us." The reason those fights are happening is because what's developing is, in fact, a very large regional balanced, renewable system.
What's happening in the northeast, because it's so much denser is, micro grids that can island themselves, but for the most part are interoperable. It's a very different shape. It's like a foam in the northeast, all these little bubbles that are stuck together. If this will happen, we'll see, but that seems to be the direction it's going. Whereas there's very few little bubbles developing in the west. What happens in the south is up for grabs.
Is one better than the other?
The grid is always about geography. It's always a local system. What you have available to you geographically determines what you're capable of doing. You can have pumped air storage in Alabama or Mississippi. The way in which the weather affects the grid is interesting. During Hurricane Harvey, one of the things they learned was that the solar panels stay on the house if the roof stays on the house. Really the weaker link is not how a solar panel connects, it's how the roof is connected to the building. These are things that in the West Coast, with the possible exception of the Pacific Northwest, are just not problems. The storms aren't that ferocious, but on the East Coast they are. There needs to be a reaction to that, that provides the resilience they all like to talk about. What they also found after Sandy, is that communities that had one house on a block that had electricity came back much more quickly. They had a sense of cohesion, of social cohesion, of neighborliness, and there was less sense of trauma, things will rebuild quickly, and everything worked better. In that in that case, you want to be able to have a micro-grid even if it's at the level of the home.
The idea of being islandable seems like a very good thing. People like to point to Wall Street during Sandy, which seemed islanded off.
They actually had generators in the basement, so everything was out except this one building, and people were really mad because they saw the lights on, and they're like, "Why do those guys have it?", assuming that they were prioritized to get electricity, but they actually had a generator system in their skyscraper, and on the ground floor in that skyscraper were all kinds of shops and restaurants that then served everybody. Everybody talks about this like, "We could go there, we could have kebabs."
At least we have kebabs!
They weren't islanded properly speaking, it's just that they had giant diesel generators in their basement.
They weren’t on their own grid.
Problem with that is, of course, you run out of gas.
Now, there's a race in the technology sector to figure out how to store renewable energy. I mean, we have batteries –
People love batteries. There's a lot of ways to store electricity that are less detrimental to the environment, but people do love batteries.
What was your initial motivation in writing The Grid?
The original motivation is kind of twofold, but they go together. One is that I felt like I saw a lot of people trying to intervene in the system who didn't understand what that meant, didn't understand what it was as a system. Those interventions were people putting solar on the roof, and then they're super mad that when their house blacked out. I know a lot of people who have bought diesel generators instead because during a blackout you get to have power.
It was also just this idea that you could make electricity into a commodity and make money off of it like anything else that has been so damaging to the system. There were a lot of interventions happening in the grid, and I just thought well, we need a primer. That's a super practical side of it.
The other side was this desire to try to tell the history of America in a different way. I was surprised how much the book ended up being a business history. I did not intend it to be that way, I was really like, "I'll have a technology history chapter, a business history chapter, legislative history chapter, and then we'll just sort of go forward.”
But the uniqueness of electrification in the US is that it's always been for profit.
There are pockets that are not that way for historical reasons, and ideological reasons. The fact that the business community has been so interested in the book, I think it's been really good, I hope. I hope it's really good. Those were the two pieces. It really is this American story of a battle between freedom, independence, self-reliance, big money, and big government.
How do we determine what energy is worth? As you wrote, it's not tangible. It's not a banana.
One of the problems I have with the way these arguments are happening in the US is that what is it worth always, somehow only has one metric, and that metric is money.
But what is it worth to you that you have energy security? If there's a way you can have solar and not lose your power, which is not that complicated, what is that worth to you? A lot. What is it worth to stop carbon emissions? If you just get a lot of solar up, all you've got are the emissions that go into making those panels, and getting them on your roof, from China or wherever they come from. The singular metric is a part of capitalism – that we're not allowed to measure anything any other way. That's not true everywhere.
Not to glorify China because it does not need to be glorified at this moment, but I did see one talk by a Chinese electrical engineer, whose job was to make a new green city from scratch. Everything he presented had two metrics, how much it costs, and what the carbon emissions were. I was just like, "Okay, great, I don't care what the metrics are, but I'm so happy you have two of them so that then there's this possibility of saying, "Okay, how do I, in fact measure worth?"
Right. It's actually a much deeper conversation than just what technology is available, how much does it cost, and how much money can you make?
I think you really see that with the fires in California. How can you maintain a system that doesn't spark? What is the cost of that? It's not about just money.
I was thinking about how relevant The Grid is in relation to these California fires.
I think the thing to look at is the difference between the way in which Southern California Edison has been upgrading their system, and the way in which PG&E was not upgrading their system. At this very basic level of how a wire connects to a pole, how a wire connects to a transformer, if you're in a situation where any spark creates a fire, what's the necessary technology to not have any sparks at all, ever?
PG&E was just neglecting that sort of upgrade?
I don't know if they were neglecting it, but they weren't prioritizing it to the same degree that Southern California Edison has, and I would say at this point, it might be interesting to talk to Southern California Edison. Because there should be fires in Southern California too. It's not just bad luck that they're all happening in PG&E territory. There are sometimes fires in Southern California, but it's not the same. With the same frequency.
This is where energy democracy becomes a question. This is a public thing, this grid. I embrace this, the infrastructure, but also what it gives us, what it affords us, and if I'm the master of my house and I have my solar panels, and I live in Southern California or Northern California, I do not want to be the one responsible for hooking that system up, because I'm going to burn down everybody.
It's not like this Occupy Wall Street movement of electricity independence, we'll just destroy the entire country. One spark at a time. Even the companies do it wrong, and they're well trained people. I think there's a place for expertise in the future. If you want universal electrification, there's a place for expertise in there.
In terms of policy in the U.S., what do you think we need in order to move towards a more ideal scenario?
We need to stop using fossil fuels. I think what Governor Brown did wasn't little. It will be interesting to see if it sticks, but it was an interesting first trial, which is just, here's the date we'll be done. We're not going to put it in our cars, we're not going to put it in our electricity system, we're not going to extract it, we're not going to burn it, we won't import it. The fossil fuel businesses will be gone.
I recognize the current government does not want to do this, but the reason I say it has to happen at the level of policy, is that as soon as that kind of thing gets said seriously, there's a lot of innovation that starts to be funded. Things begin to change. I don't know if you've seen this yet, but you should, you will – you stop seeing a house with like two solar panels on the roof. Every single rooftop should have solar. Where you're moving away from private decisions about household electricity use being mimicked in the infrastructure into a larger, statewide decision. For example, if the car becomes electric, how do you deal with that? You need some people who conceptualize it, but you also need a lot of tiny little machines that are going to make these things interoperable with each other. This is a wonderful thing, you have the car, it can store electricity, and then it can charge at work, and then you drive it home, blah, blah. But it turns out that the cars are using their own electricity at precisely the same moment the sun goes down. Actually they are not a storage resource to a solar power grid, not at dusk at least. These little things, where you're like, "Oh, weird, that's not going to work." It was a great idea, it won't work. But those kinds of studies, and the kind of investment, if we're keeping capitalism for right now, that's necessary to make major change happen, will only happen when there's laws in place.
Right. And laws that say no fossil fuels?
I think law saying no to fossil fuels. That's what I think. The issue is, does it need to be across the board, like what California did? I find that interesting, in a good way. Does it need to be sector by sector? If there was no global warming, I think by 2100, we'd have renewable electricity anyway because once you build it, it's free. This is something that has been a shock to everybody that I've talked to. That the price per kilowatt hour is coming down to about zero. You still have to build the thing and there is some maintenance, but essentially, what you're paying for is the labor power to make it, and continue to make it work. I think that transition would happen, we'd figure out how to do it, we'd be at 100% renewables, people would start having electric cars because it's cheaper to use free electricity than it is to pay for gas. The shift would happen slowly.
Without global warming, we will be doing this anyway. The question is if we need legislation to make it happen, because we need it to happen faster.
That's a really interesting way of framing it because that doesn't seem to be the debate. The debate seems to be why should we do these things? Is global warming real? Who cares? This is how things function, any alternative seems impossible, new policy that’s ambitious is wild idealism, etc. etc. But framing this as what is already happening, climate change or not, is really interesting.
I guess the problem is just like when we lose coal – we should all be super attached to coal. But industries change.
Everything is an issue of perception. I like your idea of working backwards.
I think we'll move that way with capitalism completely intact. There's a lot of reasons to challenge the current world order, but we don't even have to challenge it.
It's like getting ready to go to the airport. Your flight is at 10, you need to be there at 8, so you leave your house at 7. If we're going to move to renewables by 2050, what are the steps that need to take place right now?
Exactly. But something needs to happen, and that's the thing, any kind of law is going to make a giant difference, but it seems to be very difficult to make a law.
Do you find one argument most compelling after all this research?
Of why we should have a law?
Of why laws should change? Of why our energy systems are important to focus on period.
No. I feel like I don't talk about things in terms of climate very much. Sometimes because I've been explicitly told not to, but sometimes because everybody gets really anxious. When you're talking about transforming the electricity system, people are like, "That's a funny problem". Engineers are all super excited, because they have a good job again, and they used to have a boring job, and the utility people are kind of scared, but they're also excited, because maybe they can change the way the company works.
The transformation of the electricity system is producing all of these very exciting problems for people who are in the industry. I think it's producing a lot of exciting opportunities for people outside the industry. There's a kind of hopefulness.
It hits the desire to tinker, that a lot of people have. There's not an ideological argument in it.
Part of that is, we need to retire all of our coal fired power plants for 2050 anyway. They've been retiring for a while, we've been replacing them with natural gas for a while, natural gas works differently than coal fire plants. We've already had to adapt the system to that, now we're not building as many, and we're building more renewables. But it's all outside of a conversation about good and bad people.
I feel like 2018 has made climate change a much more mainstream conversation than it was before. The weird weather piece of it, like, "Okay, we don't know about climate, but weather", we can tell you that it's weird. That might be just the beginning of a way in, where it stops being about having this abstract conversation about what lefty people believe rigthy people should do.
I feel like there is a holier than thou attitude that gets rolled in. People have a lot of other problems and desires, so for now, how can an energy transition not be about climate change? That's the slow path. But if we want to speed it up, then it has to be about climate change, and after that, it just turns to politics, and that's hard. I don't have a solution for that one.
We'll talk in five years.
Who knows what anything will look like in five years! The slow way is avoiding climate change in conversation, and the fast way is folding it into the conversation, and risking politicizing everything.
Really. I think what you said about the airport is really nice because there is the sense that the airplane will leave if you're not on it. That's essentially what the IPCC's latest report was – we have 12 years to do this. What do we do?
Do you feel optimistic?
I have decided that being optimistic is a more interesting story. I think it's really easy to talk about how you would fold up your life and future generations of your family and call it the death of humanity and all that. That may be where it all ends up, but at least for now it's not the more interesting story to tell or to investigate. Until it's hopeless, I would say I'm kind of in the, what are we doing? What is working? What is stopping us? How can we get around that? I feel like there are people who have believed that climate change is happening for a while, and now what they really want is action, and that group is growing every single day. People are just like, "Could somebody do something, please? Someone."
Anything.
Anything. Anything will be fine. I believe that each of those anythings, if they can be done, then opens up a whole new world of possibility. I can say, "Yes, we just need to get rid of fossil fuels, no extraction, no sale, no trade, no use." You can say that. I would be fine with just, we're going to stop having cars with engines in them.
Yeah.
I mean France said that. France is all nuclear, so they can. I guess it's still kind of how do we knock down a giant fireball, and while, by the way, we're doing that, try to make the world a little more equitable. The number one thing I would say needs to happen at the small level is that people with rooftop solar or small wind, need to be able to keep their lights on. That just has to happen.
How does that happen?
Essentially the problem is that if there's any electricity feeding into the system, when the men working on the system try to bring it back up, they get electrocuted. There just needs to be a switch, essentially, that automatically takes anything generating electricity off the system. There are places where this is being discussed more seriously, but if you have a diesel generator that already happens. You can do it with solar.
You can do it...
Yeah. To run a microgrid with solar power is more complicated technologically than with a diesel generator. With diesel, you actually have to go turn it on, and in that act of turning it on, you make a signal that says this house is an island. But with solar, it just stays on, there isn't any break. There would have to be some sort of artificial break put in, like maybe your power goes out for 45 seconds and then comes back on again. I don't know how it would work, but I could tell you that it's not so complicated.
It's a legislative problem, and it's a systems engineering problem, but it's not a technological problem.
I think the argument that everybody starts with is the good one, which is that electricity is everything – it's money, it's information, it's family, and some ways it's communication. It's the sense of how you're connected to the world. Just the idea of a blackout is a ridiculous misnomer, because the lights are not what matters anymore. If the electricity goes out you don't have running water anymore in your house. It's become this completely essential substructure of everything that we are and do.
Of course we should be interested in it.
We can't remove it anymore.
interviews
Blockchain For Climate
by Joseph Pallant
January 29, 2020
frank | Hi Joseph! Excited to speak with you. Will you start by introducing yourself?
Joseph Pallant | Sure! My name is Joseph Pallant and I am the founder of the Blockchain for Climate Foundation – our goal is to put the Paris Agreement on the Blockchain. I am also the Director of Climate Innovation at Ecotrust Canada and a community scholar in Blockchain for Climate at the Dahdaleh Institute for Global Health Research at York University. This confluence of roles and really is a mashup of my 15 years of work in carbon offset development, and my excitement for using emergent technology like blockchain that can help solve a bunch of the problems we encounter in the climate space.
In layman's terms, what do you mean by your “excitement for using emergent technology like blockchain that can help solve a bunch of the problems we encounter in the climate space?”
Climate has been my day job for 15 years. And about three years ago, in the spring of 2017, I read an article about blockchain and about initial coin offerings that coincided with the start of the ICO boom. It was a really long read, and by the end of it, I had three burning thoughts:
My first thought was, "Oh my gosh, I need to drop everything and get into crypto." And my second thought was, "Heck no. I have a months-old baby, a mortgage and I love my work. I really need to NOT just drop everything." Then my third thought was, "Well, if we could put the Paris Agreement on the Blockchain and operationalize Article 6 (the carbon trading aspects) of this international agreement, THAT would be the killer app for blockchain, vis a vis climate.”
You see, a major issue with achieving the vision of the Paris Agreement rests on the ability to pay for the economic transformation that needs to happen to actually beat climate change. Carbon markets and “Article 6” can help achieve this by connecting countries so that you could have capital flow from one country to another where it was more cost effective to reduce greenhouse gases, and then have environmental assets, these carbon credits called “Internationally Transferred Mitigation Outcomes” or ITMOs under Article 6, flow back in the other direction in return. The opportunity that I saw in Blockchain was a tool built for the making and keeping of distributed ledgers, but moreover creating digitally scarce token, digitally scarce units that can be bought, sold or traded and really have that portability and verifiability of value.
So, over the next year I got to explore a lot of different models using Blockchain for selling carbon credits or for verifying and auditing of projects, but I kept coming back to where I started, focusing on this last mile of connectivity between countries to enable this key part of the Paris Agreement. We've subsequently received a lot of good feedback and buy-in on this use case, so we remain hard at work to make it a reality.
Amazing. Can you break down this portion of the Paris Agreement and who the buy-in is from? How do you get people to participate in this? I think my barrier to fully wrapping my head around how this all works is that the Paris Agreement is policy driven – and when I look at Blockchain and how Crypto works, policy seems behind.
Yeah. So. You make a really great point. Basically, the part in the Paris Agreement that we're really trying to address is Article 6 of the Paris Agreement, which lays out the rules for trading of carbon credits from one country to another. So, kind of at that simple level, the Paris Agreement sets rules around doing those trades internationally.
What we're trying to do is build a piece of infrastructure to enable that to happen, transparently and effectively.
Over the last few years, lots of people have tokenized intangible assets on the Ethereum blockchain using the “ERC20” token standard, where they're tokenizing any manner of things. We're basically building a tool allowing governments to tokenize carbon credits that they're approving for transfer out of their country.
Can you define what a carbon credit is?
At its simplest level, a carbon credit is an environmental asset created by implementing a project that reduces or removes one tonne of carbon dioxide emissions from the atmosphere. In our case, there's a couple of ways it could happen. But theoretically, a project developer could say… Hey - this is probably way too much detail?
No, not at all.
Ok! Thank you. If you were to do a carbon credit project here in Canada where, for example, we could go and work to improve forest management practices in a logging tenure in the province of Ontario and go from releasing a million tons of carbon dioxide per year, down to 500,000 tons per year.
After going through the credit project development and verification process you could be issuing 500,000 tons of carbon credits per year. We have well established processes for doing this domestically, and for that we don’t need the blockchain. But say now Canada wants to trade those carbon credits to Norway?
If we then take those 500,000 tons of carbon credits and sell them to Norway, their total carbon footprint is reduced by half a million tons. But what we now need to do, and this is really the crux of our work, is to make sure that Canada is adds those 500,000 tons back on to their carbon inventory and basically increase our footprint in Canada by 500,000 tons because we sold those away. Does that make sense?
So you're tokenizing the carbon credits.
Yeah. What we want to do is tokenize the 500,000 tons of carbon credits, so Canada in that issuance and tokenizing event would be taking them off of their national carbon inventory and readying them for transfer to another country.
And then why this is important is because the carbon credits might get sold to Norway, but then Norway might sell it to England might sell it to Germany, might sell to Japan. And so these units are going to be potentially, quite widely traded. And that's good in a lot of ways because it allows for a bigger market, allows for more capital invested and greenhouse gasses reduced.
Countries will be able to see how many tonnes of carbon dioxide they’ve bought and sold, and then they compare that against their actual national carbon footprint that gets calculated and reported to the UN. So, you might see Canada starting off with 730 million tons of emissions this year. And then we might sell off 5 million tons of carbon. So, we'd actually have to increase our footprint to 735 million tonnes. Then we might buy a hundred million tons of carbon credits to get us toward that Paris commitment. So then you'd subtract that off our inventory and so on. We’re excited about the building our platform because it really leverages the nature of Blockchain, natively in tokenizing that environmental outcome and making it into a digital asset. This supports clarity in that bookkeeping and clarity of ownership, all of which we're doing to support getting more capital to reducing greenhouse gases.
How did you start Blockchain for Climate? Again, how did you start getting people to buy into this idea of getting carbon credits onto the Blockchain?
There's so many different things to do in Blockchain and so many different things even to do with climate and Blockchain. I was able to really grasp a moment of clarity and focus and say, "We're just going to work on this one tool to operationalize the Paris Agreement." We had an original team of five folks, including myself, that actually met down at DCTRL, which is literally an underground cryptocurrency members club here in Vancouver, British Columbia. So, we met there, I think, in December, 2017 to just kind of talk about what was going on here.
Basically that initial team came together and then we kept it at five for about another year because we were still just sort of fleshing out exactly what we needed to do. We had an early blockchain developer, a person from the climate space, a person from governance and then also another crypto-native and an awesome individual from the clean energy space. And so the team really started to figure out what type of Crypto tools we need, started to figure out how to really craft the use case.
It was really the launch of CryptoKitties that helped me realize kind of how to make Crypto work for carbon credits. Are you familiar with CryptoKitties?
We did an interview with Blake Finucane about crypto art, and she spoke a lot about CytoKitties.
That's awesome. CryptoKitties was created here in Vancouver, and it's an amazing story for a lot of reasons. But the part cogent for my story was how each CryptoKitty has eight attributes like eye shape and background color and fur color and so on, displayed on the kitty’s token page and coded on the blockchain. And I'm like, "This is exactly what we need to be able to have each individual carbon credit token carry all of the information of its genesis carbon offset."
A quality carbon credit is valuable and credible because of the information that backs it, all of the project information, scientific detail, auditing… Instead of eye color, we could have the name of the credit project. And instead of background color, we could have, which country was this project developed in? And what sector is it? Is it forest carbon, and so on and so forth.
So that was an "Aha" moment, because we know about Bitcoin, Ethereum and Dogecoin and the fact that people are starting to tokenize things on Ethereum. But for our project to really work, you needed to be able to know everything about that credit from that token. It was really CryptoKitties and non fungible tokens that was the first foot to fall and set us on our way.
In March 2018, I sat down and spoke with one of my collaborators, one of the five, Matt Lockyer here in Vancouver. He had just submitted ERC-998, which is an improvement or a tool proposed to the Ethereum blockchain that allows you to create “crypto composables.” This would basically allow your non fungible token, like your CryptoKitty, be able to own other non fungible tokens, like other CryptoKitties. Or you could tokenize bags of CryptoKitty cat food, and have them belong to your CryptoKitty token. Or your CryptoKitty could hold an ether token. That ability to nest other non fungible tokens within other non fungible tokens was the other foot to fall. Because of course the thing that created the huge slowdown in the Ethereum network near the end of 2017, and a lot of ruckus about CryptoKitties was that you can actually only move one of them per transaction on the blockchain. And so that wasn't going to work for our climate system where we're going to have billions of tons moving all the time. But that ability to do that composability where we could say, issue a project token that could then issue and hold 50,000 individual carbon credit tokens? Now we're talking.
So as that got clear and we moved forward, then we opened up the gates for more team members. Since then we've grown to a team of around 20 kind, generous folks, contributing from a wide variety of life experiences and professional expertise. Because you know, we have a subject matter focus on blockchain and climate, but building this into fruition takes a lot of other skillsets. We’re really lucky because these folks are all profoundly skilled, and leaders in their respective fields. It brings home the fact that we’re working on a critical task, and bringing compelling tools to the job of getting it done.
Conceptually, I understand. So there's what, 196 countries in the Paris Agreement?
Yeah.
When you say that you have people buying in to the project who are you talking about exactly? If country is the answer, how many of the 196 are currently operating on the blockchain?
Right. So that's our next frontier. It’s been neat just getting people in the space to understand and get on board with this idea. Those are kind of the precursors to the other types of buy in which we'll need ultimately to get some or all of the 196 countries on board. I think a stretch goal is to create like the tool for everybody to use the tool for Paris Agreement-compliant issuance and exchange of carbon credits . But what's more likely is that we'll have a smaller number as few as two, two's our minimum, one buyer, one seller, to trial this. And so right now we've come back from the UN COP25 in Madrid, and we're working on building a national party working group of countries to co-create, utilize and champion our system. We have a notional goal of six varied countries interested in working with us over the next year and a half to try to refine and support the building of this tool so that by this time next year we are actually able to allow countries to trade carbon credits through our system. We're hoping to get countries that are keen to use the tool and will say, if you build it and it works, we'd like to use it. We also want them as users to really provide their feedback. What do they want to see? What are they allergic to?
Why is this a blockchain manifestation of the Paris Agreement a better option than what's happening right now?
With the slight caveat that I'm still learning, and there's always a risk that I'm smack talking a little bit, which is really not the goal. But basically, Article 6 in the Paris Agreement, which is the one around international carbon trading, started out as only one page. Before work could start to build a tool like we’re building to enable really clear transparency around these international trades, countries have to do a bunch of work around hammering out the Article 6 rule book. By 2018, all the other Articles that have solidified their rules and might be like 40, 50, 100 pages. But active opposition to critical parts of a rulebook for Article 6 has meant that, even though the rules are looking a lot better now after COP25, they’re still not complete and universally agreed upon. This has a number of impacts, including that further building of a transparency tool like ours by official channels has paused until some future date.
Under the earlier Kyoto protocol, there was a system of carbon credits called the Clean Development Mechanism (CDM). International trade of these credits was registered on the International Transaction Log or the ITL. Every two years the ITL recorded the sum total of all the pluses and minuses, all of the trades that each country would do of carbon credits. An interesting nuance under the CDM, was that the “developing world” could create carbon credits and sell them to the “developed world.” And that would lower the footprint of the purchasing country, usually in Europe or Japan, but they didn't actually add the corresponding emissions back onto the carbon footprint of the selling country. It was really a one way flow.
Now that all countries of the world have committed to reducing emissions, if you are going to sell a carbon credit and somebody else is going to remove it from their footprint, YOU have to put it back on your footprint as the seller. And so this International Transaction Log, my understanding is they're not going to even start building it or its replacement until Article 6 has been finalized, which will hopefully be this November in COP26 in Scotland, but we don't really know. The fact that they can't start building that till all the rules are made and the fact that we hear it will take around three years just to build that once all the rules are made, really slows down the ability to roll out to a carbon market and mobilize capital to fight climate change. Those are some of the reasons why we decided we needed to do this.
The other main reason that's kind of intangible, or emotional, or maybe I’m just being overtaken by crypto geekery, is that if the world goes with the old way, they're locking in this old technology and it’s not really sufficient for the task at hand. If we’re going to mobilize the billions of dollars of capital and deploy it in every corner of the world to fight climate change, we’re going to need the technological advancement of tools like blockchain. So really we're building our platform to enable corresponding adjustments between carbon accounts to happen in real time rather than every two years.
It’s a mis-fit. It just doesn’t feel right. Also, this use case really jives with the nature of crypto and of blockchain, which tokenizes values or tokenizes an outcome. This is exactly what was needed to solve this problem of how to issue, exchange and reconcile carbon credits under the Paris Agreement. When you have a tool that fits the task so well, it just kind of calls use it. So that's a cluster of the reasons why we are.