Today, Klaus joins Ross, Christophe and Paul to offer his feedback on the Nori whitepaper. Klaus explains why he likes the idea of breaking the carbon offset model and offering compensation based on actual carbon removed. He also shares his concerns around Nori’s customers, the verification challenges they face, and the issue of permanency.
Full Transcript
Alexsandra Guerra: You’re listening to the Reversing Climate Change Podcast by Nori, the world’s first carbon removal marketplace. Here are your hosts, Ross Kenyon and Christophe Jospe.
Ross Kenyon: Hello, welcome to the Reversing Climate Change podcast with Nori. I’m Ross Kenyon here with Christophe Jaspé and Paul Gamble. It is the day before Reversapalooza. You will not be hearing this until after Reversapalooza, but we’re so excited. We’ve been working on this event for months and it’s going to be a great time. If you like this podcast, if you love Reversing Climate Change, the best thing you could do to help us would be to write us a good review on iTunes or Google Play. Google Play. Stitcher. Yeah, on your podcast app, if you could rate us, write us a good review, that would be the best thing you could do to help the project along.
So Christophe, why don’t you reintroduce your old mentor, current mentor?
Christophe Jospe: With pleasure. And just as we’re speaking to our audience, which we love so much, if you have a great idea for our podcast, you can email us at hello at nori.com and we will respond.
Ross Kenyon: Not all of our ideas are always the greatest, so you probably couldn’t do much worse sometimes.
Christophe Jospe: A lot of good ideas, a lot of good ones. Hopefully we’ll float around this table. It’s wonderful for the second time to have Klaus Lackner on the podcast. Klaus is the director of the Center for Negative Carbon Emissions at Arizona State University, as well as a professor in the School of Sustainable Engineering and Built Environment. And really one of the first people to talk about removing carbon dioxide out of the atmosphere at industrial scale. And so we’re very glad to have Klaus back. We’re going to save you the trouble of listening to Klaus’s story and just link the first episode in these notes.
And I think we want to jump right into it, Ross. So I’m going to pass it back to you because Klaus ended up reading a paper that you really quarterbacked. What is this paper? What is that about? And... Take us into it.
Ross Kenyon: Everything that’s formal, all the detail that maybe the more casual appreciator of the project might not want, that’s often found in the white paper. So we’ve been focusing quite hard on that. And people who attended Reversalpalooza were able to read the first official draft. So it’s not fully public yet. But Klaus was kind enough to read it and give us some notes. Yeah, Klaus... A little nervous, but you’re not going to be too harsh on us, are you?
Klaus Lackner: No, actually not. I thought it read very well. There was lots of good stuff in there, lots of stuff to sink your teeth in and think about. It also, not surprisingly, raises questions. So I found it quite coherent and you can really tell that you have come along wise. And this is not just a little idea anymore. There are bits and pieces coming together and it’s detail and that’s what I like about it. What I really like, and that’s probably because it’s also lining up with my own prejudices, is that you really are going to break the model of the carbon offset where you say, here is a counterfactual and I’m going to do better.
Unknown speaker: You mean like if I build a wind plant instead of a coal-fired power plant?
Klaus Lackner: Right. Would you really have built that coal-fired Or maybe you would have built a slightly more efficient one. I think a lot of your creativity now ended up in pushing the baseline up because what you get paid for is the difference between that counterfactual and what you really did. And so maybe it’s easier to put the counterfactual at a higher level than getting the new idea to a lower level in CO2 emissions. So there’s a lot of creativity which goes, in my view, in the wrong way. And I think what you are doing is saying, what we count, what we will pay you for, what this carbon certificate is for, is for actual removal.
So you have to show me the carbon that has been put away. And I think that will... Ultimately, greatly simplify things.
Ross Kenyon: You think a market for removing carbon dioxide and greenhouse gas equivalents is actually, the incentives are better than a market for mitigation because then people end up in these weird additionality circuits and trying to figure out how to game it a little bit.
Klaus Lackner: Yes. And I think, keep in mind too, look at the long-term goal. In the short term, that offset may help you. But in the long term, you have to balance the carbon budget. Nobody has anything to sell. The counterfactual doesn’t matter anymore. You have to be zero. And therefore, you have to put carbon away. And I think at the end of the day, you have to end up where everything happens right at the point where the carbon comes out of the ground. And what I think if you ever should be allowed to pull carbon out of the ground, you have to show at that moment a certificate of carbon removal, which balances it out.
So that is actually the big control box. If you think about it, we are putting excess carbon into the environment and we need to take it back out because that’s what we need to balance. And so carbon removal in my view is the only thing which actually can do it. So I was like, of course, really pleased to see that’s what you did.
Ross Kenyon: You’re like, finally, someone’s making this work for carbon removal people out there. They can monetize it and get paid.
Klaus Lackner: Right now. There are still a lot of open questions. I mean, who is actually your customer? Who is willing to pay for it? Why are they willing to pay for it? Are they stuck in some compliance market, which actually forces them to do it? Are you talking to volunteers? And all of that is still open, but I don’t think you really know either. That’s why you’re starting, right?
Ross Kenyon: Yeah, we’ve been actually talking about this quite a lot. Paul, do you want to do your unveiling of that or talk about it?
Paul Gambill: We think of it in terms of a roadmap and we detail this in the White We talk about different phases that we want to go through. So right now, the markets are very used to large buyers, usually corporations. And in the compliance markets, they’re usually in the energy or transportation or one of those manufacturing sectors and that sort of thing. And in the compliance markets, they’re buying because they have to. In the voluntary markets, they’re buying because their shareholders, their customers are demanding it. They want to be doing the right thing for the PR of it.
Our go-to-market strategy to begin with is to launch with something that is as familiar to the existing ecosystem as possible so that the participants can recognize it and understand very clearly what our other differences are, what the other value propositions are that we make. So we see this transitioning over a period of time. In the end, our future goal is that we want buyers to be very small microtransactions that are happening in a high volume. These things might be embedded in everyday activities in your life, whether that might be you pull up to the gas pump in your car and you’re offered the ability to negate the emissions that are coming out from the gas that you purchased.
But there are other ways that it can be done because that example isn’t actually doing any net removal. That’s just keeping things net neutral to what’s in the atmosphere. So there are other ways where things can be incorporated into small micro-purchases, in-app purchases in mobile games, or finding partnerships with different suppliers like taxis or through some sort of e-commerce shipping. Building this in So that in the end, we want carbon removal to be a background activity. It’s a thing that people don’t even think about. It just happens automatically and it’s happening and growing at a scale that’s actually sustainable because now we’re talking about much, much larger populations of people.
Like if you think about it, if we were to go after and do our business development for like the Fortune 500 companies, and those are the companies we wanted to target. Well, how many companies are there? They’re only 500 and they can only buy so much. They’re only offsetting so many tonnes of CO2 from their supply chain. So we have to move beyond that. And that’s the eventual vision to get there. But that’s a ways away. We have to figure out how to make this work for the current buyers that are in place right now.
Ross Kenyon: The average person doesn’t want to buy offsets. That’s complicated. And also I would never buy one in Paul. You wouldn’t ever either.
Paul Gambill: No, definitely not.
Ross Kenyon: Yeah. Even before I knew about it, do I have any idea that this actually works or not? Like where’s my money going to? And there’s also just that base level free rider problem, which I’m not sure. Nori really deals with the free rider problem, except in cases where like if you’re in a taxi and it said, hey, McDonald’s is willing to pay for to negate your carbon from this taxi ride. Are you OK with that? They get the ad benefit and the PR benefit. And it doesn’t cost the consumer anything.
Klaus Lackner: So they sent you an ad to watch and in return, they took a little carbon away on your behalf?
Ross Kenyon: Yeah, or not. Maybe they just said McDonald’s logo is willing to do this on your behalf or whatever company. Maybe that’s the way to go. Because having it be purely consumer driven and appealing to their, do I want to pay extra to do this? I’m not sure that’s the best way to actually end up selling those. Would you agree?
Paul Gambill: Yes, definitely. Yeah. Making this so easy that you’re literally not even doing anything for it.
Ross Kenyon: It’s almost more B2B and business to business than business to consumer.
Klaus Lackner: Yeah, but that then raises the question for me, which is exactly the market you are going to be in? And if I read your white paper, I think the important market to be in, where there are a lot of gaps today, And where you haven’t quite filled it yet either, at least I don’t see it in the white paper yet, is somebody has to verify these things and has to make sure that certificate of carbon removal which comes out there is trustworthy. And somehow that has to be done. And I like your idea that you make it transparent, but it has to be more than that.
I think you have to go method by method, example by example, and actually work it out and have...
Paul Gambill: And that’s still being worked out and we’re taking this one methodology So that anyone can come in and comment on them and give feedback on them. We can continue to iterate upon them and improve them as we learn more from Real life practice as technology improves and so on. These are sort of two separate discussions looking at what is the challenge of verification, which is absolutely our primary challenge. And then how do we go about doing business development to ensure that there are participants in this marketplace. And that sort of like long ranging vision is definitely hand waving based on the assumption that we’ve already figured out the verification challenge, which is the primary thing.
If we don’t do that, then there is no business. So that is our primary focus.
Christophe Jospe: Of course, we’re looking methodology by methodology, but the kind of commonalities is that there’s a baseline and then there’s what happened after the baseline and you measure the difference.
Klaus Lackner: Yes and no. There are examples which are like this. I realized from reading your white paper that the first things you aim for The soil carbon, growing trees, this kind of stuff. And there clearly you have a baseline. You had a certain amount of carbon in that forest last year and now you have more. And that’s what you get paid for. I get that. But think of Sleipner, right? They are injecting CO2 into an aquifer, deep saline aquifer. In that case, do you really care about the baseline? You may not even be able to measure it very well, but you measure very exactly what’s going in.
You may... Be able to stipulate in that case that carbon is gone for a very, very long time and you have some fairly simple methods of checking that you’re not grossly wrong. You don’t really have a good way of ever measuring that baseline. So there are cases where it’s one way or the other, but I would really encourage you not only to have these particular methodologies, but to begin with sort of have sort of the overarching principles laid out. On the baseline, I would say that’s for some class of applications.
For another class, you don’t have that baseline and boy, it’s much weaker. Sort of working out what are the underlying principles? What do you need to know? The other thing this raises is the permanence issue.
Paul Gambill: And I’m still a little confused about the 10-year So that’s one of the actually particular things that we’ll be talking about at Reverse of Palooza. What Klaus is referring to for the listener is that it’s traditional in the existing markets to put a covenant on the land. If you’re a farmer, you have some agricultural operation and you’re participating in soil carbon removal and you’re earning offset credits for that. You’re signing a contract that’s committing you to maintain those practices that it sequestered the carbon dioxide in your land for up to, in some cases, 100 years.
Whereas you’re only actually going to be receiving credits in exchange for the actions that you took for at most, say, 20 years. So that’s 80 years of actions that you’re doing that you’re not getting paid for. And we believe that requirement is a huge barrier to entry that’s preventing more participants from doing this sort of thing. So we’ve been talking with the folks at Colorado State University at Comet Farm who will be at the conference tomorrow discussing these practices around soil carbon and what is the minimum time necessary that people need to be doing this to ensure that So I think that’s a good point.
Unknown speaker: Yes, you want me to do that right now?
Klaus Lackner: I would argue this is very specific to this method because you implicitly say after 10 years, the farmer either sees a benefit in it or not. And so if we triggered the farmer to get that first 10 years, we did good things. But I could also be in a different situation where I can say, I can assure you that I can keep this carbon there, but unfortunately I will have to keep working on it indefinitely. And if you paid me for the first 10 years and then you tell me my baseline is now up there, I’ll give up.
And it’ll all come back out, right? So how do we count that, right? So those are the questions which are now a little more generic. And yes, in your particular example, you may actually have exactly accomplished what you wanted. So therefore, it’s really worthwhile picking this out. And then actually, and I think you are doing that, and that’s very positive, is you then make it public and transparent. So somebody can actually look at it and say, this is believable or this is not believable.
Paul Gambill: Yeah. And I think another thing that might be helpful for the listener is that we think about these different methodologies by three different categories. So there’s the ecological category, which is primarily what we’re talking about. That’s definitely where baselines are important because we’re talking about things that are storing the carbon dioxide in the earth somehow that are based on some sort of natural process. So that’s soil carbon, that’s planting trees, that’s potentially blue carbon, growing kelp, that sort of thing. Then there are the industrial approaches. So that’s direct air capture.
That’s using direct air capture CO2 as a manufacturing feedstock. That’s also including like what you’re talking about, injecting it into rock formations and mineralizing the CO2. And then there They’re hybrid approaches, which that could also sort of count as that sort of meld these two. And they require different approaches. To begin with, we’re focusing on these ecological methods because they’re tried and true. They’ve been used for a long time. People understand this. The data modeling and measuring has been going on for decades at this point. So it’s a much simpler problem, relatively speaking, to come up with these verification methods that actually work.
Klaus Lackner: Your industrial use of carbon is another good example, right? If that car lasts 10 years, chances are it Those carbon panel doors may end up in a waste incinerator, right? And then they’re back in the air. If you put a 10-year limit on it, you somehow need to, maybe I pay things in increments of 10 years. That’s perfectly fine.
Paul Gambill: For our part, it’s important to acknowledge that it’s impossible to 100% account for every single molecule of carbon dioxide or every atom of carbon that’s going through this process. And just in the same way that large retail stores We’re taking a similar approach. We’re insuring the carbon removal certificates so we’re making sure that if it is found that for some reason there’s leakage or the audits that show that the data recorded from the beginning show that there wasn’t actually as much carbon removed as was previously stated, then we’re going to back up that purchase.
And we have different methods detailed in the paper on how we’re going to do that.
Klaus Lackner: I think that’s all very good. And I think you could be congratulated on how you got on the way on that.
Ross Kenyon: I hear he’s a tough one to get praise from. Would you agree, Christophe?
Christophe Jospe: I think it all depends. Look, I mean, one carbon removal certificate is equivalent to one metric ton of carbon dioxide removed plus or minus 10%. And so there’s really kind of that range. And we like to think of things in terms of models that can allow us to assign probabilities. We can be sure X amount that this much carbon is there. And that really allows for some of this dynamic baseline. But what I think it comes down to is... What we’re building is good enough. And good enough means that we can get going and we can then learn from what we’re doing so that we can inform others and we can all do all that much more of that activity.
And that’s kind of really what Reversa Palooza is about. Klaus, were there other pieces around the white paper that kind of leave you puzzled or excited or you say, well, this is solving some problem that I think needs solving? I mean, obviously, we’re talking about pulling carbon dioxide out of the atmosphere, which we know is needed. So there’s that. Yeah.
Klaus Lackner: And the certificates, I understand, right? Then the next question is the tokens, right? And one of the things which confused me reading your paper is you’re saying the moment the certificate has been generated, it immediately becomes retired the moment you matched it with a token. I would have thought it’s retired when somebody applies it to a particular certificate.
Paul Gambill: So, it actually has already been applied. The certificates are created after they’ve been verified that the action has happened. So, let’s talk soil carbon. The farmer starts practicing. These regenerative agriculture practices, they establish a baseline. After a period of time, they submit their data to one of our data aggregator partners like Comet Farm. And then that data is verified by an independent third party. Yeah. The buyers who have these Nori tokens send the Nori token into the application and the ownership of the two swaps so that the Nori tokens, which are one-to-one, so however many tonnes and CRCs you’re buying is how many So they are owned by you.
They are in your name. They’ll show up on your account page on the Nori web app. And they can now be considered retired because they cannot be transferred anymore, which is a very different thing from the way that the current carbon markets work because these carbon markets have these offsets and credits being sold to oftentimes brokers or wholesalers who Sure, but you...
Klaus Lackner: That’s why at the end of the chain, you have to retire. So the question I had is, I may not have an immediate need for it, but I know in three weeks from now, he will have the need. Now, you could deal with it in tokens. I get that. But I could equally well say, I just purchased this certificate because it’s available. And maybe I get 10 cents extra on the ton because...
Paul Gambill: Because he needs it a little later. Well, that’s where the Nori token comes in. You can think of the token sort of like a gift card. It’s already worth one CRC. And if you’ve already paid in dollars or Bitcoin or some other currency to acquire the Nori token, then the amount that you’ve paid is already done and set.
Klaus Lackner: But that means that if you had a compliance market, which would accept it, what are they accepting? Are they accepting the certificate or are they accepting the token?
Paul Gambill: Well, two things to that. One is we’re not interested in participating in compliance markets. We’re trying to build a voluntary market. But if for some reason a compliance market wanted to or a compliance jurisdiction wanted to allow their regulated entities to purchase CRCs from within Nori and have that count towards some requirement that they have, that’s totally fine. So they would count that based on when they purchase the CRCs. The Nori tokens are just a currency. So they’re just gift cards. So I would find it unlikely that if they were to write regulations that allowed them to use Nori that they would count the Nori tokens.
It would be the CRCs.
Klaus Lackner: Right. Because you retired it. You can’t transfer them a second time.
Paul Gambill: That’s right. So it’s up to those buyers. So say you’re an energy supplier in California and you’re allowed to buy a Nori CRCs in order to count against your emissions cap, then you would need to buy Nori tokens based on whatever your own needs are. And then when you have to comply, you buy the CRCs and then they’re retired. Yes.
Christophe Jospe: And I think part of what is very exciting about building a Market mechanism is we don’t exactly know how it’s going to play out and we don’t necessarily have to. The market can emerge in all sorts of creative ways. And as long as we’re focused on, okay, let’s make pulling carbon dioxide out of the atmosphere as easy as possible and as easy to verify and lowering those verification costs, the more market activity, the more carbon dioxide is being removed. And then we’re achieving our goals. And I do believe that there will be over-the-counter exchanges that might emerge around Nori as we do this successfully, where...
A buyer may not want to have to deal with cryptocurrency or going through certain hurdles where they can purchase Nori tokens, but there could be individuals or entities that are getting tokens for the sole purpose to give them buyers who are ready to pay for CRCs. That would be a good thing because then that means that more carbon is getting removed and paid for.
Ross Kenyon: And we’ve also discussed ways of maybe making it a little more e-commerce-y because cryptocurrency is, well, first of all, I don’t know if I should ask you this on the air, Klaus. Do you own any cryptocurrency?
Klaus Lackner: No, I don’t.
Ross Kenyon: You don’t own any? Okay.
Unknown speaker: Are you surprised, Ross?
Ross Kenyon: I wouldn’t have been surprised if he had said he did. He’s a crafty one, I’m sure. Yeah. Yeah, it isn’t the most user friendly. In fact, the front end, the thing that the end user like you or I would experience feeling with cryptocurrency is very unfriendly. In fact, if you’ve ever had to explain it to any of your parents or anything, sometimes it can be quite difficult.
Paul Gambill: I mean, at best. You say go to Coinbase.com, make an account and sign up and buy it. And that’s the closest thing to thinking of it like a bank. That’s it. Yeah. That’s pretty much all there is.
Ross Kenyon: That’s pretty much it. So we’d like it to be what if you could use a credit card or do something. Part of it is a regulatory issue. Cryptocurrencies are so new and they function in a very Yeah.
Paul Gambill: The regulators, at least in the United States, who oversee those sorts of different types of assets, have all come out and declared it to be that type of asset, probably because that’s the type of asset that they get to regulate. There needs to be some clarity given to us. There are issues around if we were to take... A credit card that somebody used that credit card and in the background purchased the number of Nori tokens at the market rate that are necessary to buy the number of CRCs that they want to buy.
Well, that introduces questions. Where are those tokens coming from? Is Nori holding a reserve in supply and are we selling them to them? Does that count as money transmission? And does that mean that we now need a money transmitters license in every single state in the country in order to let people do that? Do we need that in other countries? So all these questions exist right now and are somewhat dependent on the regulators deciding it. So the route that we’re trying to take right now is only using the cryptocurrency because that’s at least a clearer way so that we can be legally compliant.
Ross Kenyon: This is Paul and I’s life too. Yes. Compliance issues are bread and butter for us. Every day.
Klaus Lackner: Well, I believe that. I came around seeing your token ultimately as indeed a cryptocurrency, but you have a funny cryptocurrency which is pegged to a ton of carbon. Unlike the gold standard, you actually cannot give back that ton of carbon because you actually consumed it and it’s retired. So you can’t give it back. So you can say, okay, anybody who wants to come back gets their carbon back. The analogy I would make, you have a currency pegged to a haircut, right? Uh, You say the barbershop, you always pay one token and you get a haircut.
And now you have the problem that you have to maintain your currency, right? And one of the concerns I have is think of countries which have pegged their currency against the dollar and suddenly saw a whole bunch of space. Speculators trying to break that link. And the speculators very often have one in these discussions. So that’s one of the concerns I see in these constructs. Yeah.
Paul Gambill: I mean, this is our biggest concern around this too. So if we create a specified number of tokens and we issue them, and if we create too many tokens, then that means that the price of the token is going to trade too low to reach some sort of market equilibrium. And if we don’t create enough tokens, the price of it is going to be too high for it to reach some market equilibrium. And We’ve been working with an economist to try to create an agent-based simulation model, putting in as much data as we can possibly acquire around possible available supply, possible available demand to simulate different scenarios and try to come up with an estimated number of tokens and also considering different ways that monetary supply might be adjusted over time because we won’t get it right.
That’s just not possible. So we need to have ways to adjust and adapt and have that be a self-reinforcing mechanism that works.
Ross Kenyon: You want to have like M1 and M2 and whatnot.
Klaus Lackner: But then you have a peg to a ton of carbon. And then I come around and I just made it easier to collect the ton of carbon. And suddenly your token is too expensive in the real world because you only need half a token to pay for what yesterday would cost you one token because my technology is cheaper.
Ross Kenyon: So how do you adjust? That’d be good though. That’s producer surplus. You’d kill all your competitors.
Klaus Lackner: No, nobody. If you’re a remover.
Ross Kenyon: Yeah. Yeah. Is that what you were saying? If you’re a remover who has good technology?
Klaus Lackner: No, no. It penetrates suddenly into the market. I was stupid about it. I didn’t capture it with IP. And so suddenly everybody is doing it. So suddenly you have a currency which has to be devalued because in other words, if you buy cups of coffee or haircuts, your currency just suddenly got cut in half because I lowered the price of...
Paul Gambill: The price that the token trades at is meant to reflect the value to the buyer of purchasing one ton of CO2 removed. It’s not related to the cost of it. And in fact, we want that cost of removing the CO2 to go down.
Klaus Lackner: But isn’t that what will happen? If you went in the middle and somehow we got a good market going and I give you the somehow and you are helping, you are helping to create that market. But there is a demand for carbon reduction. It’s voluntary or driven by compliance and there’s a supply of them, right? And if you make the price high enough, the supply will be very large, but the demand will be very small. And so somehow in the middle, the two will meet. And what I’m sitting now on a whole stash full of tokens and he over there managed to drop the price of a ton of carbon in half in dollars, not in tokens.
And so the exchange rate between the token and the dollar has to be suddenly cut in half because you are pegged to the ton of carbon. Are you going to do like Nixon going off the gold standard finally? Yeah, you’re going to say we’re not going to be on the carbon standard any longer. I’ve never, you know.
Ross Kenyon: This is the first time this has come up. We have long been interested in monetary economics and macroeconomics. And what do you think about that? It doesn’t seem like it would be a terrible thing unless you were holding it.
Paul Gambill: So in this situation, we’re talking about, okay, there’s some sort of equilibrium there. For some period of time, there’s been a maintained supply and a relatively maintained amount of demand so that the queue of CRCs available is just constantly filtering through and you’re concerned about if the price of the token goes up too high, a high Right. I feel like that’s still self-reinforcing.
Klaus Lackner: Certificates to those who hold certificates and somehow that supply has to come back. So there has to be a real currency which pays for other things running around in the background. So I’m holding, I have a bank account of my tokens. Now somebody invents a new way of collecting CO2 from the air, which costs half of what it did last week. And I make it now dramatic and say it all happens over a week, right? I now see a horrible inflation on my bank account because yesterday my token Paid for a ton of CO2, today it pays for a ton of CO2, but the actual cost behind it is much lower.
Paul Gambill: Well, but that’s irrelevant.
Klaus Lackner: Yeah, but if I now buy a milkshake on the other side or coffee.
Paul Gambill: No, no. The concept of value-based pricing is really important to understand here. So let me give an example. If you think about the problem of trying to deal with a clogged drain at home, you have several different options for how to deal with that. You could go to Home Depot and you could buy a bottle of Drano or Liquid Plumber. Or you could go and you could buy one of those long snake things that have teeth coming out the side. And you could do either one and you could take both of those home and they would both solve your problem by removing the chunk of hair that’s stuck in the drain.
The Drano is significantly more expensive to manufacture than that just simple injection molded plastic that is this long snaky thing. But if the manufacturers of the snake thing are smart, they’ll price it similarly to what Drano is being priced at in the market because it’s providing the same value to the customer. The customers are buying things based on how much they value the utility of that object.
Klaus Lackner: That’s a fundamentally uncompetitive world, right? Because if there were another snake producer, he said, well, I can be cheaper than the other two and I can go to the market.
Paul Gambill: No, it’s the opposite. It’s a more competitive world because it’s constantly forcing different carbon dioxide removers to compete with each other to try to reduce their costs. Because if the value of the token stays the same or goes up and their cost goes down, their profit margins increase.
Klaus Lackner: Well, but it used to be that if you really are competitive, the price comes down, right?
Paul Gambill: So you’re saying at the market level. Well, but there’s also going to be a weird sort of ramp up period in this because right now the demand for carbon removal certificates isn’t really clearly indicated in any sort of market price anywhere.
Klaus Lackner: That’s why I... I grant you’re being a big, big step forward, right? Because you are creating that market. I have no trouble with that. I’m just, I’m looking a few years further.
Paul Gambill: I think it’s very unrealistic to assume that the value the token Token is just going to continue going up forever and never reach some sort of maximum ceiling. I think it’s very likely that it will reach some sort of maximum ceiling and then perhaps decline over time. But it should reflect where the supply and demand curves meet. And that demand level right now is sort of unrecognized.
Klaus Lackner: Right. And you are being the price finder, right? But I’m arguing you’re finding the price two different ways. They may or may not match. I’m positing right now that your currency, because you pegged it to the carbon, is subject to changes in its value compared to the rest of the world. Because the technology underlying the carbon removal It’s changing over time. And if that technology gets better and better and the market is reasonably competitive, then you will see more and more entries and therefore this will become cheaper. And now therefore your currency in terms of buying cups of coffee will be coming down, which is what it should do because if I had been sitting on a stash of those tokens, I’d be very unhappy.
Because he just told me, hey, welcome to our life class.
Paul Gambill: Yeah. I mean, this is cryptocurrency. And there are ways that market participants deal with this. So in traditional commodity markets, you have groups of people that are known as speculators and you have groups of people who are known as headsets.
Klaus Lackner: And so if you are a holder of a large In this part of your white paper, I see you as creating... A currency, a cryptocurrency, which runs its own market, which happens to be pegged to the ton of carbon. On the other part of the story, I saw you as creating certificates of carbon removal and your life revolves around that. And then the hope is that the cryptocurrency speculation, which is independent of the peg to the carbon, is not I mean, that’s actually totally acceptable.
Paul Gambill: That’s how all of the major markets work for any sort of commodity, whether it’s wheat or oil or pork bellies. This is already a thing that functions in markets all across the world today.
Ross Kenyon: What, derivatives markets? Yeah. Oh, yeah. You have to have that too because if you hold something, you’re essentially long on it, right? So you just have to make that bet. You need speculators, yeah. Do you guys still want to fight over Drano? Field trip to Home Depot?
Unknown speaker: No, I think we’re fine about that. Get into a long debate about value pricing.
Ross Kenyon: We like talking to you because the concerns are often not the same ones that we hear elsewhere. They’re always coming at us from a new angle. That’s definitely.
Klaus Lackner: Well, that’s my job, right? I’m helping you here. I’m trying to give you some good advice. And so my job is to come up with something you haven’t thought about. If I just say, this is what you always talk about, well, I’m not doing my job, right?
Unknown speaker: Yeah, that’s right.
Paul Gambill: We don’t want a yes, man. The best ideas come out of creative tension.
Ross Kenyon: We have a number of hedges built into the team, too, where people come at things from very different perspectives. And while some people might think that is a weakness, we tend to like it. Because if you all think the same way, then you make all the same mistakes. Yep. It’s good to have that and you go over the cliff in lockstep. Yeah, exactly. Let’s call it here. We have to start getting to the hotel, getting Reversa Palooza ready. It’s great. And remember, if you are a fan, if you’re not a fan, please ignore the following.
But if you are, please give us a great review and rank us highly on your podcast app. We would really appreciate that. Thanks for listening and being a fan.
Paul Gambill: I want to add one more thing, which is that we’re planning to record the talks and panel discussions that happen at Reversa Palooza. So we’ll have those available up on the website on nori.com shortly after the conference. So we’re not trying to hide this from you guys. We’ll make it all public.
Ross Kenyon: There’s a couple of videos that are coming out here soon. Additionally, we have a lot of content coming. It’s great. Well, thanks, Klaus. We should just have you on the podcast every few months and catch up.
Klaus Lackner: I’d be happy to come back.
Ross Kenyon: It’s fun to talk purely about Nori for an episode. I don’t think that really happens nearly enough on this show, but thanks for being here. Okay.
