Carbon Rewards: Reality or Fiction?
Debut post. Welcome to anybody wishing to examine an alternative economic theory for resolving the climate crisis.
Humanity is not prepared to deal with the systemic risks that are accumulating in our globalised society and earth systems. We are facing an epistemic challenge over the politics and economics of climate change, biodiversity loss, and pollution.
Reality & Fiction Intertwined
What if the solution to our climate crisis lies at the intersection of reality and fiction? In an extraordinary convergence of literary imagination and real-world innovation, Kim Stanley Robinson’s ‘The Ministry for the Future’ may have predicted a revolutionary climate policy that’s now unfolding in the real world.
Robinson's novel refers to the carbon reward policy in terms of the "Chen paper" and “carbon coin”. The real-world carbon coin is not a cryptocurrency, and it would actually be a carbon-linked financial asset, called a carbon reward (XCR), as part of a real-world climate policy [1]. Currently, the XCR has not been implemented, however it is destined to be a traded in the Forex similar to other commodity-linked assets, such as XAU (gold) and XAG (silver). At its core, the carbon reward policy and the XCR represent a paradigm shift in climate finance by leveraging central banks—as financial guarantors of the XCR—to create a powerful market incentive for climate mitigation.
In the novel, the policy emerges as humanity's salvation from the climate crisis. Let’s explore the policy together, as we examine a variety of new economic ideas.
What to Expect
In the coming months, new posts will delve into a groundbreaking theory for addressing the 'market failure' in carbon and achieving the Paris Climate Agreement goals. At the heart of this innovative theory is the issue of ‘systemic risk’, a critical issue that will shape our future response to climate change. The exploration will centre around a new paper (to be released in April-May 2025 as a pre-print) that introduces the new theory in terms of a revised conceptual model of the market failure, incorporating the new idea of a 'systemic externality' alongside the traditional 'negative externality' of neoclassical economics.
See the Abstract
The proposed solution, the carbon reward policy and XCR tool, will mobilise finance without imposing direct costs on stakeholders, potentially bridging the multi-trillion-dollar climate finance gap and avoiding political conflict. By addressing systemic risks associated with climate change (from global political gridlock to localised ecosystem instabilities) this policy could offer a comprehensive solution to the climate crisis. The discussion will also cover practical applications, such as energy asset exchanges that could accelerate the clean energy transition.
We'll explore how this innovative financial mechanism could attract political cooperation and shape our view of ‘sustainability’ as a concept. I will invite economists, scientists, environmentalists, and concerned citizens to join this conversation as the ideas are transformed into an actionable policy study in the real-world. For this we will need to attract sponsorship and new strategic partnerships.
About Me: The Real “Chen”
As the real-world “Chen,” subtly referenced in Robinson’s novel, I bring a unique perspective to this policy discussion. With a Ph.D. in engineering and an interdisciplinary approach, I analyse environmental issues through a broad lens. My work uniquely applies economic and thermodynamic principles to understand the market failure in carbon – an approach I believe will eventually catalyse a paradigm shift in 21st-century economics.
I am also the founder of the Global Carbon Reward initiative, which is the citizen-led initiative to develop and advance this unique climate policy. I invite you to support this work and connect with me on LinkedIn. Together, we can explore the fascinating intersection of science fiction and economic reality, potentially uncovering solutions to the climate crisis.
Footnotes
[1] This post was edited on 8 Aug 2025 to update the naming convention for the carbon reward instrument. Previously, it was called the carbon currency (XCC). The name has been changed to carbon reward (XCR) because the term carbon currency is redundant. The new name is simpler and adds to the carbon reward’s unique identity.
References
The following references comprise the original “Chen paper” that inspired K.S. Robinson to write about the “carbon coin” in his novel. My next paper will be considerably more advanced, and it will be the focus of future posts.
Chen, D.B., van der Beek, J. and Cloud, J., (2017). Climate mitigation policy as a system solution: addressing the risk cost of carbon. Journal of Sustainable Finance & Investment, 7 (3): 1-42.
Chen D.B., van der Beek J., Cloud J. (2018) Hypothesis for a Risk Cost of Carbon: Revising the Externalities and Ethics of Climate Change. In: Doukas H., Flamos A., Lieu J. (eds) Understanding Risks and Uncertainties in Energy and Climate Policy. Springer, Cham
What is the difference between the XCR system and a similar system under which the CEA purchases carbon credits on the VCMs (according to criteria which replicate XCR grant criteria)?