Motivation

Understanding the Issue

Excessive carbon emissions pose an existential threat to our planet, intensifying climate change and undermining the conditions necessary for human life. Viewing the atmosphere as a shared global resource highlights the collective responsibility we have to manage it sustainably and equitably. Historically, cumulative emissions in excess of each individual's fair share represent a form of appropriation of this atmospheric commons, disproportionately benefiting some while harming others. Recognizing this imbalance underscores the urgent necessity for collective action through equitable policies that fairly allocate the remaining carbon budget. We must therefore embrace limits that ensure all individuals are entitled to a fair and equitable use of our shared atmosphere.

Existing solutions

Multiple initiatives exist worldwide to address the urgent issue of limiting excessive carbon emissions. Among these, the concept of carbon allowances—allocating defined emission quotas—is well-established. Notably, carbon cap-and-trade systems have emerged in several regions as practical mechanisms for managing emissions. Under cap-and-trade, regulators set a cap on total allowable emissions and distribute tradable emission allowances to companies or sectors. Entities emitting less than their allowances can sell excess permits, while those exceeding their limits must purchase additional permits, creating economic incentives to reduce emissions. Despite their widespread adoption, current cap-and-trade systems are not without issues.

Issues with the EU Emissions Trading System (EU ETS)

The European Union Emissions Trading System, while pioneering and influential, faces significant challenges and structural issues that undermine its fairness and effectiveness.

1. Historical Emissions as the Basis for Caps

The overall emission cap in the EU ETS is largely determined by historical emissions levels. Consequently, countries that historically emitted higher amounts of greenhouse gases—effectively appropriating a larger share of the shared atmospheric commons—continue to benefit disproportionately under the current cap-and-trade framework. This system implicitly rewards past excessive emissions by granting these countries larger allowances, perpetuating historical injustices and inequalities.

2. Inequitable Allocation Distribution

Allowance distribution within the EU ETS has favored historically high-emitting nations. Countries that previously emitted more received larger allowances, thus securing greater rights to emit and higher revenues from selling allowances. This approach:

• Locks in Past Inequalities: Nations that previously burned large amounts of fossil fuels benefit disproportionately from the current allowance system.
• Ignores Climate Justice: Low-emission countries or those with smaller industrial bases receive fewer allowances, effectively penalizing them for their past climate-friendly policies.
• Rewards Inefficiency: Countries that proactively reduced emissions early receive fewer allowances, which inadvertently penalizes their early commitments to sustainability.

3. Problematic Free Allocations

Throughout its phases, the EU ETS has widely employed free allocation of allowances to specific industries, intended to protect competitiveness and prevent "carbon leakage." However, extensive free allocations effectively subsidize companies that have historically consumed disproportionate shares of the atmospheric commons. Instead of incurring obligations to compensate for their overuse, these companies continue receiving allowances at minimal or no cost, creating an implicit ecological debt that remains unaddressed.

4. Misallocation of Auctioning Revenue

Auction revenues generated by the EU ETS allowances are primarily directed back to member states, often earmarked for climate and energy projects. While seemingly beneficial, this model perpetuates injustice: resources derived from the shared atmosphere, collectively owned by all citizens, flow back disproportionately to industries or sectors responsible for significant emissions. Citizens, despite being collective stakeholders of this shared resource, possess limited direct control or transparency over how these revenues are invested. Consequently, financial benefits from selling allowances may not directly support the public interest or equitably compensate citizens for their forgone rights to the shared atmospheric commons.

A Fairer Alternative: A Decentralized Cap-and-Trade System

Excessive carbon emissions constitute a global problem, demanding global coordination and accountability. Traditional systems, such as the EU ETS, rely heavily on complex international agreements, which often involve political and economic compromises that may limit their effectiveness or slow implementation.

A decentralized approach does not eliminate the need for international cooperation, but it provides complementary strengths: transparency, direct individual empowerment, and rapid adaptability. By leveraging decentralization and technological solutions such as blockchain and proof-of-personhood, it's possible to reinforce accountability and fairness, helping achieve ambitious climate goals alongside existing international efforts.

The O＝C＝O project proposes a decentralized, equitable cap-and-trade system designed to promote climate accountability and fair management of emissions. Its core principles include:

• Global Cap: A clearly defined global emission cap with a predetermined linear reduction, reflecting climate goals such as reaching net-zero emissions by 2050.
• Fair Allocation: Equal distribution of carbon allowances exclusively among individuals. Entities or companies requiring additional allowances must purchase them directly from individuals. Revenue from these transactions returns entirely to the individual allowance holders.
• Discourage Overuse: Incentivizing efficient and reduced use of carbon allowances, recognizing the atmosphere as a shared global resource.

Implementation

Blockchain technology offers transparency and accountability, essential for global trust in such systems. When combined with proof-of-personhood solutions such as World ID or PileumConnect, blockchain enables a truly decentralized and equitable carbon management platform.

Objective	Strategy	Implementation
Cap global use	Limit resource availability per defined time period	Carbon emissions represented as ERC-20 tokens with a controlled issuance rate per block, aligned with emission reduction targets (e.g., net-zero by 2050).
Fair distribution	Allocate allowances equally among verified individuals	Tokens are evenly distributed among verified users, employing proof-of-personhood verification. Verification periodically expires to ensure ongoing legitimacy.
Discourage hoarding and overuse	Encourage responsible and moderate use	Unused allowances can be sold, providing financial incentives for efficiency and responsible usage.

Practical Advantages

• Historical Justice and Equity: Progressive adoption of cap-and-trade systems may appear unfair, as early adopters bear initial costs while latecomers benefit from unregulated emissions. However, in practice, this situation can facilitate compensation for historical emissions: developed countries, more accountable for past emissions, actively seek allowances, while developing countries—often verified through proof-of-personhood technologies like World ID—typically have surplus allowances to sell. This naturally redirects financial resources from historically high-emitting nations toward lower-emitting countries, addressing both climate justice and global inequality.

• Reducing Inequalities: Beyond capping carbon emissions, the system inherently redistributes resources from wealthier, historically high-emitting regions to economically disadvantaged areas.

• Individual Freedom: The system refrains from dictating lifestyle choices. Users maintain autonomy in managing their allowances. The cap alone drives decisions, whether related to transportation, goods, or services, ensuring flexibility and personal responsibility.

• Supporting Essential Activities: Carbon allowances naturally prioritize resource use backed by human necessity (e.g., food production). Purely profit-driven activities without direct human benefit become more costly, encouraging market alignment with genuine human needs and sustainability objectives.

• Immediate Enforcement and Collective Accountability: Even during the early or progressive adoption stages, this system immediately empowers participants to uphold core principles through collective action:

  • Environmentally conscious individuals can directly burn their carbon allowances to precisely offset their emissions, thus preventing these tokens from entering circulation for purchase by heavier emitters.

  • Businesses committed to climate accountability can proactively avoid unaccounted emissions by either directly purchasing carbon allowances or by requiring customers to supply (or pay for) carbon tokens equivalent to the emissions associated with the products and services they consume. This ensures shared responsibility and transparent accounting of all emissions within their operational scope.

Potential Challenges and Considerations

Progressive Adoption and Fairness

Progressive adoption inherently introduces fairness concerns. Even centralized cap-and-trade systems like the EU ETS have gradual implementation phases involving free allocations, exceptions, and temporary leniency, leading to uneven responsibility across participants. A decentralized approach faces similar adoption challenges, although differently: it establishes a clear, hard emission cap from the start, but participation expands gradually. Early adopters initially bear costs or constraints others might avoid temporarily. While this can appear unfair, the inherent benefits—such as early alignment with climate goals and market incentives—can balance this initial disparity.

Accountability of Carbon Emissions

Tracking and verifying individual and corporate emissions accurately is a considerable challenge shared by all cap-and-trade systems, including EU ETS. To address accountability progressively, the proposed decentralized system could adopt phased incentives and enforcement:

• Level 0 – Voluntary Participation: This initial phase emphasizes voluntary ecological commitment based on the philosophical principle of responsibility ("Give back what you take"). Consumers and businesses voluntarily purchase and burn carbon tokens to match their actual emissions, at minimal initial cost due to lower token demand in early adoption stages.

• Level 1 – Economic Incentive: Businesses encourage consumers to supply carbon tokens reflecting the emissions of purchased products or services. Customers providing their own carbon tokens could receive discounts or benefits, reinforcing personal accountability and sustainable behavior through market-driven incentives.

• Level 2 – Regulatory Enforcement: Governments implement regulatory frameworks requiring businesses and major emitters to acquire and burn tokens corresponding to their actual emissions. This policy creates a cascading responsibility effect: companies pass emission costs through supply chains, motivating all market participants to actively manage emissions through allowances.

Additionally, a natural, sustainable feedback loop can support system growth and adoption:

• Increased verified users → Increased allowance supply → Lower immediate token prices → Attracts more buyers → Higher token demand → Rising prices → Further incentivizes active participation → Increased verified users

Conclusion and Call to Action

Addressing carbon emissions effectively demands fairness, transparency, and accountability. It's about more than environmental stewardship; it’s about rectifying historical inequalities and ensuring equitable use of our shared atmospheric commons. Nations historically responsible for higher emissions have both the responsibility and the opportunity to lead by example, promoting systems grounded in these essential values.

Joining early can be challenging, but early adopters inspire broader participation and collective action. We invite you to support and advocate for these principles, fostering a positive feedback loop of climate responsibility and global equity.

We need you to help kickstart this virtuous circle. Join us.