When writing the rules for planetary regeneration

On players, coaches, referees, and the audience: a sports metaphor for rule-writing to address climate change.

Warning: this is a long post with many layers of metaphors. Michael Lewis’ podcast “Against the rules” inspired me to write this. He is one of my favorite storytellers who artfully weaves together tales highlighting the rigged system we live in and the changing landscape of fairness. He’s cut his teeth in the world of finance and sports and applies some of his observations from patterns in human behavior to other domains. In season one, he explores the death of the referee in American society including topics like sports, consumer protection, the art world, and the judicial system. Season two delves into the coaches from financial, data-driven, voice, and more. As someone steeped in the question of how to transition from business as usual to a future that allows for planetary balance that uses markets to support environmental outcomes, I can’t help but apply this metaphor to think about those who keep things fair (the ref) and those who train (the coach) and their role in improving (or worsening) rules for Market Based Instruments (MBIs, e.g., taxes, subsidies, credits) or the games we play to address climate change. In the course of writing this and getting caught up in my own wonkiness, I realized that I couldn’t just write about the referees and coaches, but also must include the players and audience.

Who are the players?

In this metaphor, a professional player is a project taking steps to be rewarded or avoid penalization in service of environmental improvement. They play for many different motivations, but they all (should) have the capacity to do less harm and more good to the planet.

How can players improve the game?

  1. Field the right players for the right game. On some level, every human on the planet is a player in any number of climate related games. From an MBI perspective, players exist in a sector, industry, or region who can be grouped into making some sizable impact who are motivated or deterred because of it. Perhaps we should ask ourselves who is in that group that isn’t currently playing the game? And why not? And who is playing (or trying to play today), and why? What are the various motivations of the different players, potential players, or non-players?
  2. Understand the “end-game”. Clarity on the above questions should shed light on the end game. This is a critical component to all participants, but especially players, because instead of starting with the rules of the game, it starts with the question of the future we want. Far too often, the MBI programs spend time on initializing the game, without asking what end result playing the game will have. This may expose bottlenecks that potential players face and realize that “the game” isn’t actually the best way to get to the end result.
  3. Break down silos between games. By understanding the end-game, the silos between games begin to become apparent. Players are most empowered to break down silos that don’t work. For instance, while self-proclaimed rulemakers like the Science Based Targets Initiative have good intentions to help the corporations (the audience) use the MBIs (the game) to get to their end goal, they may be missing the point by over-optimizing rules. If a cotton producer wants to sell a carbon credit (one type of game), then a well-intentioned brand can’t claim emissions reductions in their scope 3 greenhouse gas emissions reports (another game). By starting with a cotton producer (one player), one can extend to players who fiber, spin, weave, dye, cut, and sew, to achieve the desired end goal — more sustainable garments — can the game actually work, yet games are occurring in silos that don’t work in cohesion. Beyond this example, breaking down silos means sharing with others how to best play the game, nesting the impacts in a broader system beyond just one type of game, working together for collective bargaining power, and ensuring that the data to inform an MBI doesn’t live in a black and proprietary box. Across all of these opportunities this becomes possible when the player owns the data and has the power to wield it wisely.
  4. Understand the complete impact from player activities. In the MBI world, players should work to understand not just what marginal changes they can make, but what system they operate in and the complete impact they provide. A project on a farm for instance, could approach an MBI to only think about carbon credits that might be generated from accruing soil carbon for one type of reward, or could think about the entire impact along the supply chain. This would mean that addition to determining improvement potential for carbon stock change, or the whole supply chain in the garment example above, a project would be assessing ways to improve the impact from inputs that go into producing food (machinery, fertilizers, pesticides, herbicides), the irrational and highly subsidized market they sell into that forces a continued monocrop, the distance food travels, the amount of food that’s wasted from overproduction, the nutritional quality of the food, other ecosystem services (water quality, quantity, biodiversity), or other ways the project activity builds toward a more regenerative society (jobs, training people).
  5. Leverage data for game to find multiple avenues to capture value. Sticking with the farm example, collecting data only to track an improvement useful to an MBI, like a carbon credit, is leaving money on the table. It would be useful to banks, insurers, consumer packaged goods companies, the government, to a coach, and last but certainly not least, themselves, for discrete, but interrelated reasons. In return, this can translate into greater rewards for the players for the good work to create an even greater impact.
  6. Make it work for them, and the environment. To make the game work for players they need to contribute more to rule-making. In my career working in carbon markets, I have come across instances where the activity occurring makes zero sense other than to comply with the protocol or statute in place because there’s payment at the other end of it. This includes cumbersome, impractical, virtue-signaling and irrelevant reporting requirements, producing artificial baselines just to meet the standard, or misaligned incentives. Players can create entirely new and better ideas, rather than those disconnected from actually playing the game. Practically speaking, to stick with the farming example, this means that any farm-lead (and owned) initiative will far outpace a top-down, industry-led, or academic derived initiative to best support environmental outcomes.

Who are the coaches?

Coaches in the MBI world usually, but not always, have a financial interest in the player succeeding. They can originate, implement, and commercialize projects to deliver an environmental and social return under MBI standards. For a US farmer, these arrangements could range from the player paying the coach for advice (e.g., agronomic services), buying something from the coach (e.g., inputs), or sharing in the upside of the wins (e.g., carbon credits). Typically, this role falls into the camp of project developers, but can also extend to any individual or entity who plays a role in aligning the player’s ability to access an MBI reward.

How can we improve coaching?

  1. Get rid of black-boxes. It is critical for coaches not only to repeat optimal performance, but to help others get there as well. Proprietary algorithms and data sets lend to black boxes which are unable to talk to each other. Ideally, open source algorithms and common pools of data sets can work together. Open-source technologies in environmental space used by coaches will go a long way.
  2. When relevant, coach for multiple games. An initiative out of India called Blooom recently came on my radar. Their business model effectively relies on having a coach (a trained advisor) who can use data to support smallholder farmers to adopt climate improving practices while also making it easy to access financing, insurance, a market advantage, sustainable inputs, and carbon credits.
  3. Make it possible for players to change games that serve environmental improvement. If a game isn’t working for a player, they shouldn’t be stuck in it. They should be free to transition and leave. Hence the rationale for the point above. MBI’s are oftentimes about selling a derivative from an environmental outcome. However, as I’ve previously written about, “selling it” is a subcategory of “doing it”. Coaches should always optimize for “doing it.”
  4. Make the referee’s job easier. When coaches have the ability to connect to a source of truth that doesn’t require the referee to go out and find it, the cost of admission to play the game will go down. An example of a company that does this well is Pachama, a project developer who can use remote sensing and machine learning to improve forest management. Effectively, the effort being spent to prove the activity — known in the industry as MRV (Monitoring, Reporting, and Verification) — instead is being used to optimize performance. In this way, MRV becomes a function of, not the basis for, a functional system of playing the game.

Who are the referees?

In the climate space, the referees are the auditors or VVBs (Validation and Verification Bodies) who assess players against program rules and requirements set by standards bodies created by non-profits, the private sector, and governments. They are accredited by a standards body (the administrator who makes the rules). Their work includes following the rules and procedures of a program and ultimately putting a certified seal on the estimates that allow players to take advantage of MBIs. They play the role of giving faith in the system.

In theory, the referees should be connected to a common rule book that maximizes planetary and societal health while understanding local dynamics. In practice, special interests, red tape, and a complex and siloed system can override what serves our planet best. The fact that there are multiple games being played results in a lack of coherence and standardization making the refs job more difficult. If one player can earn more Carbon credits under one voluntary standard versus another, the rational decision is to go play in the arena where you can earn more. This type of “registry shopping” already happens between existing Carbon markets. Since many of the same VVBs have the same refs, they are essentially beholden to following the rules and procedures for different games over the same player activity resulting in potentially different scores.

How can referees play a more constructive role?

  1. Provide verifiability for interplanetary accounting. Most rules follow creating one baseline and comparing it against a hypothetical and business as usual baseline. This works to a certain degree, but when the game only exists within a certain stadium, it’s not actually useful for enabling the reality of change. Refs can play an additional role to verify games in terms of planetary carbon stocks and flows which suddenly makes the game way more useful.
  2. Provide tools for replication. Most referees have their proprietary auditing tools and sampling techniques to get to a certain end result. However they all do it slightly differently. This lack of standardization could be reduced with common tools, as well as
  3. Question the rules of the game. For those unaware, carbon credits have a long-standing and continued problem of issuing saleable commodities that aren’t real from the perspective of the environment, but certainly real from the perspective of the game. The refs who verified the carbon credits that overissue credits technically did nothing wrong; they reffed the game exactly how it was designed. Yet as pointed out by a Proceedings in the National Academies of Sciences study and discussed in a recent Planet Money podcast episode, some avoided deforestation projects in Brazil overestimated avoided emissions by 60 times! Or in a recent Politico article resulting from research from Carbon Plan showing California Air Resources Board’s protocols enabling much inflated credits or “ghost” credits. While the refs followed the rules, they were also in the best position to scratch their heads that the rules of the game are poorly understood.
  4. Have aligned incentives that can improve the game. To the above point, with aligned incentives, the refs would be motivated to question the game in service of supporting the environment.

What about the audience?

The audience includes the corporations and governments who foot the MBI bill. They do this so they have a social license to operate at their own game from anyone who engages with them.

What can they do to be better?

  1. Listen to the watch dogs. A lot slips through the cracks in the world of MBIs. Groups like Carbon Market Watch and Carbon Plan contribute to solid reports that can inform audiences to understand what games they want to actually play and how to fairly, and equitably use their money to maximize impact.
  2. Acknowledge when games aren’t working. As the ones who give credibility to games, the audience should be empowered to stop games once they get off the ground. Some sports created with good intentions have really bad outcomes. It’s not too late to stop them. Someone should tell this to whoever made the regulation in Germany that is resulting in the destruction of Southern US forests for wood pellets to meet their “renewable portfolio standards”. Further, the game should merely be thought of as a means to the end. If the means isn’t working, there are plenty of other means to get to the same end.
  3. Make space for new sports. When acknowledging the failure of some games, audiences can give themselves freedom to play new sports to get to a similar end result. One example of an audience trend in creating new games is Apple’s recent establishment of a $200M fund, where instead of buying offsets, they are directly investing in conservation. Ultimately many carbon credits and other MBI’s should have a planned obsolescence. They are an imperfect tool that are a source of finance for getting what is supposed to be pro-environmental activity off the ground because of the failure to internalize externalities. With true cost accounting, new sports, can, and must, proliferate.
  4. Demand an interplanetary system that transcends standards and black boxes. The majority of voluntary carbon credits only live in a registry and are transacted on a sale. Most LCAs are proprietary to companies. They don’t actually track with the reality on the ground, or what a jurisdiction can do to improve the way it manages carbon stocks and flows. They could. We, as various audience members — could demand that the data that enables the creation of MBI’s to look more like Elanor Ostram’s “common pool resources” thereby feeding into something that transcends beyond one limited and rather incomplete purpose. The Open Climate initiative at Yale bats in this direction.

Who should be creating the rules of the game?

However, with emerging technologies and awareness of the past, future games can be written to provide a more holistic and healing approach.

Ultimately, this means that to achieve planetary restoration we should create space for the rules to be written from the ground up. That means it includes everyone. From the audience, to players, to coaches, and referees. Most importantly, it must be written by those who can translate how it’s best played so that more people want to play the game. When we write the rules too early, we may lock ourselves in pathways that serve special interests, but not the planet. The audience sits on the sidelines, never wanting to play or sign their kids for the sport. Instead, we should be looking at what is possible in a way that empowers the players as the heroes who restore the health of our planet and the games so abundant that coaches show up to help people play the sport better.

Rather than trying to over optimize the rules before we’ve played, or building something that satisfies referees so it can appear fair (but in reality is anything but), we should be asking ourselves, what’s the end goal? If it’s just to create liquidity in a market for a tradable instrument that allows companies and countries to more or less continue business as usual and feel safe from being audited because of purchase of seemingly “high integrity credits”, that’s one thing. If it’s to actually transition as a society that is more equitable, resilient, and treating our earth like one we plan to live on for generations to come, that’s quite another. We’ve known that there is a choice for some time, and the window to choose is closing. But there’s still time.

Climate change entrepreneur and consultant. Recovering from carbon exuberance. I like to stir the pot.