The state-funded and corporate models that dominate our current response to the climate crisis aren’t working. How can an ecosystem that facilitates accurate, accessible carbon reporting help, without a bank account to pay money into, or out of?

This graphic shows how the See Through Carbon ecosystem benefits all parties. This article explains why this is the best solution to accurate carbon reporting. It reveals how third parties benefit by contributing no-strings donations to speed up its development.

Compulsory, at last

We’re still a long way from treating greenhouse gas emissions as seriously as we treat money. 

Regulators, however, are taking the first steps. From the EU to China, major emitting countries are finally getting serious. New regulations are nudging big-emitter businesses away from their comfort zone of self-regulation greenwash, and towards the cold shower of mandatory carbon reporting. 

The journey to strict carbon regulation is unambitious and slow. But its direction of travel and destination are clear.

• First normalise compulsory carbon footprint reporting.
• Next, use the carrot of subsidies and the stick of taxation to reduce emissions.

Corporate responses fall into four main categories:

1. Sabotage: the choice of fossil fuel-addicted businesses
2. Dilute/Retard: the response of lazy businesses
3. Ignore: the preference of complacent businesses
4. Embrace: smart businesses see opportunities to get ahead of the curve

Whichever path a company chooses, they’ll be obliged to comply, sooner or later.

So what do Embracer companies need to know about carbon reporting?

The Money Model

As a reference, let’s use something we’re all familiar with – money.

Financial tax systems are a useful model to explain carbon reporting – but with a critical difference. 

Unlike the market forces governing zero-sum money accounting, carbon reporting requires an impartial, universal, accessible, free ecosystem in order to thrive.

Three decades of self-regulation (the first carbon trade was in 1988) have proved commercial or state entities alone are not enough. 

But finance helps explain carbon reporting basics.

Money, being an imaginary thing, is necessarily a closed-loop, zero-sum system. It only works if everyone obeys the same rules, balancing every asset with a liability. Breaking the rules guarantees system failure, hence: 

• If countries print money they can’t back up, they’ll suffer hyperinflation. 
• Individuals running Ponzi schemes will get rumbled in the end.

This doesn’t stop anyone from trying to game the system, exploit loopholes, and profit from the unaware or naive, but this proves the point. The financial system must punish violators in order to maintain the integrity of its promissory balance sheets.

Modern financial systems are way more complex that the first cowrie shell tokens that replaced barter, but share the same principle. 

Money only has value if the same rules are enforced, everyone abides by them, and violators are punished.

That’s why we have banks, regulators, accountants, auditors and tax collectors. They police and enforce the system and keep the imaginary plates spinning.

The Tax Model

Consider the following money-related truisms:

All businesses must pay tax, but their arrangements depend on their resources, scale, and needs:

• Tiny businesses can’t afford to pay an outside tax accountant. Calculating tax is just one of the many tasks tiny businesses must attend to in order to stay in business.
• Small businesses may employ a tax accountant, part-time or full-time, to work out their tax as they go. They may also hire a tax specialist annually to calculate their taxes.
• Medium businesses must employ in-house tax accountants to work out their tax compliance.They may also hire outside tax specialists for annual submissions.
• Big businesses must employ in-house tax accountants. Shareholders/investors/regulators also require them to hire third-party tax auditors.

So far, so straightforward.

Now insert the word ‘carbon’ before every instance of the word tax. You now get the picture of where carbon reporting is heading.

Businesses routinely compile internal-only accounts for internal management. They then publish external accounts to comply with regulatory or investor oversight. 

Now they’re also starting to do the same to transparently and honestly report their real carbon footprints.

• Companies that reduce their footprints over time will prosper
• Those that don’t, will wither

Carbon reduction is just a mirror image of profit increase.

The sport model

In football, the higher your score, the better. 

In golf, the lowest number wins. 

Carbon is like golf. Only rather more important.

The big difference

Now the big difference between accounting for money and carbon. 

• Money, being a made-up thing, requires concerted human vigilance to maintain its integrity. Everything must be made to add up, reconcile and balance.
• Carbon, being a real thing, obeys the laws of physics, chemistry and biology whether we like it or not. We can only measure emissions accurately, and endeavour to lower them.

Carbon accounting is not a game played by various parties who’ve agreed on a set of rules. It simply documents the minutiae of the Greenhouse Effect at whatever scale we set to zoom in: country-by-country, sector-by-sector, business-by-business, or individual by individual.

For carbon, the calculation’s difficulty depends only on the complexity and scale of the entity, and how accurately current science permits us to measure its emissions. 

Human activity, in groups from one to billions, generates carbon emissions. Calculating the footprint of any entity follows the same procedure:

1. List all the activities that generate emissions that wouldn’t have been emitted if that entity didn’t exist.
2. Calculate the values of those emissions by multiplying them by the best available conversion factors.
3. Tot them up

It’s slightly more complicated than that, but not much. 

Certainly much simpler than collateralized debt obligations. Or your tax return.

So what’s stopping us?

The messy human reasons (laziness, corruption, fear of change etc.) aside, there’s a more technical obstacle to universal, accurate, transparent carbon reporting. 

The lack of an ecosystem to facilitate it. 

Who benefits?

An ecosystem benefits everyone inhabiting it.

See Through Carbon’s free, accurate, open and transparent database would enable all key parties to prosper:

• Regulators: can receive more accurate, easily-auditable reports
• Big Businesses: the first to be required to report, can submit compliant reports at minimal cost
• Medium businesses: who form the vast majority of big businesses’ emissions via the latters’ ‘Scope 3’ indirect emissions can provide accurate data for big businesses’ supply chain emissions. They will also be pre-compliant when regulators require them to submit carbon reports.
• Small businesses: no matter how small, can submit accurate Scope 3 data to big clients at no cost. In doing so, they’ll provide regulators with real-world data for the estimated 70% of business emissions that come from SMEs, but are not addressed by the commercial carbon business.

Whose job?

Who can fulfil this critical role of collecting, calculating and publishing carbon footprint data?

Not commercial enterprises. Since the first carbon trade was made in 1988, commercial carbon standards have proved ineffective. Carbon markets have created dozens of competing proprietary standards, but they all hide their IP in black boxes and their data behind paywalls. Market forces push them to provide the lowest number at the lowest cost. Good business, maybe. But not accurate carbon accounting.

Nor individual regulators. Tariff wars and multilateral trade agreements have taught us that big countries want to determine their own tax systems, standards and regulatory regimes. Small countries, if they don’t go it alone, join competing blocs. There’s no reason to suppose that carbon reporting should be any different.

That only leaves an ecosystem.  An ecosystem can be transparent, and consistently apply the same open source standards, making both its methodology and data transparent by default.

What about money?

Ecosystems work without money in various ways. 

See Through Carbon does it by facilitating third parties to fund the parts of the system that need money.

Accountants, businesses and regulators all benefit from the open source IT underpinning the ecosystem. Volunteers are coding and administering See Through Carbon, because they want to. But this doesn’t prevent any third party from paying them to accelerate it.

For the system to maintain its integrity, this funding must have no strings attached. It cannot ‘buy’ any control or IP.

If See Through Carbon made money or even had a bank account, any form of funding would imply some degree of compromise of its independence. ‘Invest’ money, and you expect a financial return.

This is why See Through Carbon has no bank account. Instead, it creates virtuous cycles of mutual benefit for commercial parties who benefit from its existence. The See Through Carbon ecosystem nourishes itself by engineering win-wins. Some examples:

• Accountants and consultants: this agricultural consultancy and this carbon advice and educational consultancy, have signed Memorandums of Understanding (MoUs). These documents describe their marketing and IT contributions.
• Commercial databases: this specialist materials data provider is providing free access to advanced conversion factors. These would usually cost thousands of dollars per enquiry.
• Tech specialists: this advanced computing provider donated US$500,000 worth of supercomputer-grade cloud computing. It formed the prize fund for the See Through Carbon Competition.

What about you?

To join the team developing the See Through Carbon pilot, email: volunteer@seethroughcarbon.org

To enquire about donating goods or services to See Through Carbon, or funding partners to accelerate its development, email: donate@seethroughcarbon.org