Web3 and Climate Change
How web3 can solve the root cause instead of the symptoms
Note - this article first appeared on Nuance, an IC-hosted blogging site. As part of my move to support IC-hosted apps, I’ll be slowly moving away from Substack to Nuance. Follow me there: https://exwqn-uaaaa-aaaaf-qaeaa-cai.ic0.app/kylelangham
TLDR:
Web3 may be the solution to solve the root causes of climate change by addressing the Tragedy of the Commons and coordination problems at the core of ecological crises.
Background:
The US just signed into law a ground-breaking, bi-partisan bill to address climate change. This is an incredible achievement for the US and puts the US closer to meeting its obligations within the Paris Agreement through investments and tax incentives in carbon-reducing technology and energy creation. However, despite this successful achievement, many scientists believe the bill doesn’t do enough to combat climate change. The compromises required to properly combat climate change are untenable within our society today, and perhaps forever. And it is important to remember that climate change is only one of a plethora of ecological crises and problems in our world.
The fact is, we humans will never be able to safely manage our planet until we are able to address the root causes of ecological problems, including climate change, instead of addressing the symptoms of ecological problems.
The Root Cause
The root cause of ecological problems is an issue well understood by economists - it’s called The Tragedy of the Commons. It’s a term that describes a situation in which people are allowed to operate unhampered and in their own self-interest within a shared and limited resource. The end result of tragedy of the commons is that the shared resource gets abused due to over use and improper use. In the case of climate change the shared and limited resource is a carbon-balanced atmosphere. In the case of drinking water, the limited and shared resource might be a river that runs through multiple towns. Almost all ecological problems our world faces today have at the root a tragedy of the commons origin because ecological resources are limited and we lack the social and technological capabilities to manage resources on the scale required to solve many of today’s problems.
Tragedy of the commons issues are best solved through coordinated effort of the stakeholders of the shared and limited resource to ensure that the resource is used in a sustainable and proper way. The classic tragedy of the commons hypothetical example, a shared grazing field for a town, is easily solved through an elected body managing the grazing field with rules and laws. However, there exists two limiting factors to solving today’s ecological issues through coordinated efforts: (1) the shared and limited resources have huge stakeholder bases, often as large as the entire planet’s population, making coordination extremely challenging; and (2) representative solutions (a solution to #1) tend to invite sub-optimum solutions, including corruption, apathy and agency issues.
Web3 is perhaps the first time humanity has had the technology at hand to resolve tragedy of the commons at a large scale.
What Success Looks Like
Humans have solved ecological issues before. Many endangered species have been protected due to human organization and regulations. Towns routinely solve drinking water issues by working with other towns who share their water resources. Land trusts help conserve resources useful to local communities. Invasive species are controlled through smart hunting laws and enforcement. In all of these cases, coordination between communities of people has demonstrated that it is possible to resolve tragedy of the commons. Today’s climate change and other ecological issues are no different, just much larger in scale.
Successfully solving tragedy of the commons issues has 5 defining features:
Coordination - The ability for stakeholders of a limited resource to coordinate their actions.
Externality Identification - The ability to identify all the externalities caused by the poor use of a resource. An example of a negative externality is when Person A drives a car and it creates pollution for Person B who now has worse air quality.
Externality Cost - The ability to charge the users of a resources for the negative externalities they create.
Externality repayment - The ability for externality stakeholders to receive payment for compensation of externalities or to offset the negative externality.
Resource Control - The ability of stakeholders to control the limited resource in a sustainable manner.
How Web3 Solves Climate Change
As stated above, humans have been solving ecological tragedy of the commons issues for a long time, however today’s issues, including climate change, have required a level of social coordination that was previously impossible. There are too many stakeholders involved in today’s ecological problems and current societal structures (governments, non-profit organizations, ect.) are ill-equipped to handle the immense differences in stakeholder incentives and needs. That’s where Web3 can provide a solution.
The following features of Web3 are particularly useful for resolving ecological tragedy of the commons:
Decentralized Control - DAOs have made it possible to expand the control of a resource beyond a small group of people and provide control to every single stakeholder of a resource. This helps resolve agency issues where the group of people empowered to protect a resource may have different objectives than the stakeholders of that resource. It also helps empower the stakeholders of a resource to be more involved in managing their shared resource and advocating for needed changes to ensure sustainability. DAOs, through decentralized voting and ownership, can make resource management more aligned to the benefit of many.
Digital Ownership of Physical Goods - Often times ecological issues affect only persons who are geographically located near the issue. However, current ownership models make it challenging to apply ownership based on geographical proximity. Digital ownership drives the costs and infrastructure of maintaining ownership of physical resources (like a pond used by the community) to near zero, enabling smart contracts that transfer ownership based on events like moving into/out of the geographical area.
Micro-payments - One big problem with resolving large ecological tragedy of the commons issues is the negative externalities tend to be extremely small in cost, but high in volume. Current transactional payment rails are too expensive on a per-transaction basis to make sharing the cost of externalities feasible. For example, when Person A drives their car, the resulting pollution is extremely small for Person B, however the cumulative cost to all persons in a city may be quite large. Micro-payments in Web3 drive down the per-transaction costs, making externality payments for feasible.
Borderless Action - Web3 facilitates coordination and (in some cases) enforcement that is not dependent on government officials. Web3 makes it possible for citizens of different countries to coordinate action and ownership of shared resources without the need for their collective governments to come to agreements.
Specific Examples
To demonstrate more concretely how Web3 empowers humans to resolve ecological issues that were previously beyond our societal and technological capabilities, below are some specific examples. However, these are just examples generated from one person; the true power of Web3 is the collaborative and innovative space it creates and therefore it shouldn’t be surprising if solutions emerge that were not predictable.
Externality Repayment - One of the more unfortunate aspects of climate change is that its costs are usually paid by those least responsible for it; specifically persons in developing world nations, who contribute the least to greenhouse effects, tend to suffer the most as a result of extreme weather changes. Web3 micropayments makes it possible, for the first time in history, to perform mass repayment across borders. Combining micro-payments and proof-of-humanity could create a system in which the heaviest polluters in the world (whether it be individuals, companies or countries) are charged for their negative externalities and those most affected (again, either individuals, companies or countries) compensated. It is possible to operate a derivative of a carbon tax on a global scale, with repayment going directly to individuals or organizations offsetting carbon.
DAO-controlled Resources - Often times groups are formed to protect a natural resource (either elected or otherwise), which was the best option in a pre-Web3 world. However, it is now possible to remove the middle layer and allow natural resources to be governed directly by the stakeholders of that resource. One example could be the Keystone Pipeline in the United States, a proposed oil pipeline through the middle of the country to Canada. The Keystone Pipeline project starts and stops based on the political party of the President of the US, with each political party aligning to one set of stakeholders in the project. However, it is possible to form a massive DAO, comprised of the citizens in the areas affected by the proposed pipeline. This DAO would be responsible for (a) determining if the project should proceed, (b) the conditions of the project moving forward, if applicable, (c) the financial gains of the project and their distribution, (d) rules and regulations associated with building and maintaining the pipeline, (e) policing and enforcing those rules and regulations. The outcome of moving the Keystone Pipeline from a government decision to a DAO decision would result in more power held by the persons who are most affected by the project.
Digital Ownership - The above example takes for granted that it will be possible to create a DAO comprised of the citizens affected by the project. That assumption is challenging in practice. However, by creating digital tokens for ownership of shared resource (in the example above, the land that the pipeline would travel over and near) it should be possible to manage participation in the “pipeline DAO” (or any other DAO managing a shared resource). For resources that are geographically-focused it could be common practice that buying a home also involves the transfer of the previous owner’s digital token.
Online Communities over Country Politics - One of the biggest hurdles to solving ecological challenges is the need for global cooperation. Most global ecological solutions fail without country-level agreement throughout most of the world. It can be challenging to get political leaders to agree to and enforce global standards because they often create winners and losers between the countries. However, with Web3 we can move beyond country-specific leadership and create and enforce standards that apply to digital goods. An example of this could be the persons living around a lake that is shared by multiple countries coming together online to enact their own rules regarding fishing or boating on that lake. This online community, if sufficiently large, may be able to enforce those rules through cohesive action as a community or through controlling certain physical aspects like boat ramps or entry points.
Conclusion
Human society has never had the tools for addressing global tragedy of the commons problems, until now. Web3 could be the backbone to resolving many of today’s climate issues through facilitating innovative ways to collaborate, control and manage shared resources.