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Rise of the 'carbon capitalist'

Crypto concept

Have you ever bought a stock based on a social media tip? Did you buy Bitcoin before it was cool? Frustrated by student loan debt? This article is for you.

Yes, this is for the digital natives, the meme stock investors, the "rocket to the moon" Dogecoin traders tired of the financial status quo. You’ve captivated us with your GameStop short squeeze and intrigued us with your crypto community. It’s time to take what you’ve learned to a table with much higher stakes. It’s time to stake your claim in the global carbon market.

Since you are younger than 40, I assume you understand how climate change works. But you may not have heard about carbon credits. Put simply, carbon credits give those engaged in the certifiable removal or avoidance of greenhouse gas emissions the ability to sell their good behavior to those attempting to offset bad behavior (emissions in excess of regulated or voluntary caps).

In 1997, the Kyoto Protocol laid the groundwork for carbon credits. Since then, the Paris Climate Agreement and other factions have helped nurture the markets where these credits trade. Carbon markets use economic forces to drive more sustainable behavior. For us to come close to achieving a 50 percent reduction in emissions by 2030 — a reduction many experts believe is required to prevent disaster — it is anticipated that the carbon credit market will need to grow by 15 times.

I can think of no more poetic justice than watching an army of young people … become rich driving up the price of credits, thereby forcing polluters to pay through the nose to honor their low-carbon commitments.

Think about that. A commodity many companies have either pledged or will be forced to buy, with limited supply, is expected to scale 1,400 percent in the next nine years. I can think of no more poetic justice than watching an army of young people — people who have watched prior generations destroy our climate in the name of wealth creation — become rich driving up the price of credits, thereby forcing polluters to pay through the nose to honor their low-carbon commitments. You can give this movement a catchy name, but if you don’t recognize this opportunity and claim it as your own, I promise you that the investment bankers of the world soon will. 

Aside from wealth creation, there will be at least two other benefits to scaling the carbon market.

  1. A deep and liquid market will provide much-needed financing for cleantech innovations. Your average technology startup can make payroll with a little angel capital and some ping-pong tables. Scaling up a carbon sequestration company that reduces coal-fired power plant emissions may cost hundreds of millions of dollars. Only with the promise of a deep and liquid carbon market will meaningful innovations emerge.
  2. At scale, carbon markets will help preserve biodiversity in the Global South. Most of the largest areas of wilderness or forest exist south of the equator. This presents a huge opportunity for southern countries to generate carbon credits either for avoiding or reversing deforestation. 

Carbon credits are digital assets that need to trade via a system people can trust with low transaction costs. Sound familiar?

A University of Wyoming white paper lays out a compelling argument that the blockchain might be the missing piece of the puzzle that will give carbon credits the transparency and fungibility needed to truly scale. Trading digital basketball cards is cool, but have you ever owned a ton of carbon locked up by a rainforest in Indonesia that did not become a palm oil farm? This is one more opportunity for tech-savvy disruptors to play a role in saving the planet.

The time is now, carbon capitalists. Set down your energy drink, and prepare yourself for diamond hands (meme stock speak for "buy and hold" investing), because we are about to help create the largest commodity market in history. Or watch the establishment build it for us. The choice is yours. Apathy may lead to a new generation someday looking at the progress you failed to make on this front and dryly remarking, "OK, Millennial."

Aside from being older than 40, Matthew Roling is an adjunct professor of finance at Wayne State University and a graduate student at the Harvard Kennedy School of Government. In solidarity with the Carbon Capitalists, Matthew does hold "diamond hands" investments in Ethereum and carbon credits (KRBN) that he has no plans to sell.

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