Green finance will shape the economy’s future

(Interview with DAO IPCI co-founder Anton Galenovich for «Sputnik» radio station)

Reporter (R): - From the 5th to the 7th of September the 10th AFI Global Policy Forum is held is Sochi, and «Sputnik» radio station keeps its work at this forum.Here we have a portable studio, and Maria Merkulova is here to have a guest – Anton Galenovich, the chairman of «Russian Carbon Fund». Mr. Galenovich, we are glad to have you here.

Anton Galenovich (G): – Hello.

R: - Mr. Galenovich, we know that you are the founder of the first and only functioning platform for market programs on the public blockchain. This is very interesting but very complicated as well. Tell us, please, what this platform is for, who it is for and how it helps – to develop financial inclusion as well.

G: - Of course, financial inclusion as well. This is a platform for inclusion of climatic initiatives, created by us together with Russian developers on public blockchain – their team is very strong – and its main difference is that it is not a plan, a concept or a white paper, but a functioning product that has been working for 2 years now, and over 1,600 000 so-called carbon credits (green assets) – registered amounts of emissions of greenhouse gases - have been produced on this platform. They have been verified by a serious accounting firm – KPMG company, produced in blockchain and verified there. The platform is a set of smart contracts, intended to verify, register and issue such results of environmental protection as the reduction of emissions of greenhouse gases, water pollution and other types of emissions and pollution – that is, any results that can be measured and verified by a serious independent auditor. They are issued in public blockchain, and one more difference of our solution, our platform is that the contracts are open and the platform can be used by anyone. Just some technical support is needed to do it, but anyone can use it. And we work with programs in Chile, in Canada, with an investment fund in Europe, and they all are planning to use this platform, launching their own, independent representative bodies. They will be managed by themselves, will use the same set of smart contracts, and they will decide themselves whether they should unite or connect with other programs.

R: - So, if I understand if right – with the help of this platform any company or corporation willing to minimize their own harmful emissions will be able to make their business more environmentally-friendly, greener, and they can contact other people who can help them to do it using this platform, and create contracts based on co-operation?

G: - Yes, you are right. We don’t rule these programs. «Russian Carbon Fund» has launched the first genesis program, it is called «Blockchain Climate Standard», but we don’t rule others, don’t run them, they are run by themselves, and we provide technical support – in creating additional applications for using this set of smart contracts, but how to use them is decided by the user. And if a company or a community or a corporation or a country wants to have the results of their activity – measured, registered and put into the public blockchain - so this is a solution for them.

R: - Welcome, so to say… Both the developing markets and the Alliance for Financial Inclusion which unites about 100 countries. And nowadays they talk more not only about uniting and connecting companies and corporations but also about making the economy and business more environmentally-friendly, this is becoming a trend. Not like in the past – profit was in the focus, and ecology was not so important. Now sustainability has become an essential part of running a business.

G: - Yes, this is an economic model which includes ‘social expenses’ – that is, any harmful effects produced by any business, for example, one of the most harmful is coal mining – they harm the countryside, cut down forests, pollute the water and air, put at risk people’s health. And the economy suggests including these expenses into the cost of the product…

R: - …and the final product will increase in price.

G: - Yes, the final product will increase in price, and green technologies will become more commercially viable. On the other hand, if these expenses are included – who should get this money? Probably, those who reduce the damage.

R: - Indeed.

G: - If the money goes straight to those who reduce this harmful effect or fight the consequences, for example, it goes to some ecological insurance payments in order to prevent negative consequences, it is a really viable model based on a different economic paradigm.

R: - I have a question on environmental friendliness of some technologies and projects: for example, «Nord Stream-2» is believed to be ecologically harmful – water pollution and so on, but I hope in Russia they pay attention to such an important issue as ecology…

G: As I have already said, any business has a downside – «collateral damage», so to say, potential or real, and another question is – how to measure it, that’s why there is a system of ecological audit and verifying the results. Such large projects, of course, should have an appropriate insurance fund in case of some catastrophic consequences for the environment. We have mainly economical approach to such things. It can sound cynically - Mother Nature shouldn’t be traded, but we say – we should and must measure, trade and include these environmental costs into the mere economical process. Then the logic of economic co-operation will lead to our movement towards the good for the future generations. Otherwise we harm our children and grandchildren as a result.

R: - It seems that you are right. Anton Yurievich, are there any initiatives, suggestions or projects that you found interesting here at the forum? In this paradigm – climate, financial inclusion, economic development, innovations… This is a really large field.

G: - Yes, I agree, this field is quite large. I have participated in the section that concerns climate changes, and my colleagues from Bangladesh, Sierra Leone and China discussed the same things. There are so-called «transaction expenses» of including all the potential participants, all the stakeholders - and everybody is interested in climate change mitigation. And to get it to everybody costs a lot. And to overcome the barrier of high transaction costs and to get the instruments of financing to each consumer – and it is practically any person on the Earth – this is our goal. Besides, the sources of financing, banks should have an accurate and detailed accountability – where their money went and what happened in the end. So, these issues were concerned in the discussion – everybody is worried about that, and developing world in the first place.

R: - Yes, of course, because they want to adopt the experience, practices and technologies that have already proved to be efficient, but are there any universal solutions? Probably not, because everybody is an individual.

G: - I can surely say that our platform is universal for everybody (laughs). Well, there are some universal principles - for example, the chain of agents should be shortened. It is peering, one-level co-operation where agents work with each other directly. The farther we move towards this model, the more efficient it will be – the ecologically responsible economy.

R: - Blockchain is becoming one of those «whales» on which the future of economic development is based – not only for years but decades…

G: - Of course, there are certain «illnesses of growth» - plenty of projects, presentations and declarations, but these are natural and they can be overcome. Maybe in the end, just 5 or 10 percent of them will survive, but this is really not only move towards a new technology but towards a new economic paradigm. It is a direct co-operation of people and communities with each other, without middlemen and barriers, and this is way more efficient.

R: - What can you say about this forum? Is it possible not only to create a certain dialogue but also work out any solutions? Anton Yurievich, what is your personal opinion about the forum – what you have seen, what you have participated in?

G: - Unfortunately, I haven’t taken part in working out solutions, as I am not a member of the association, but what I can see is a very good alliance with a well-defined target. But, as any international forum – I can say from my experience at UN FCCC – it makes it quite difficult because the participants are so different, they are from different countries and nations, with different interests. And such forums are essential to unite them. It makes it similar to blockchain – decentralized protocols for the reconciliation of the interests are necessary - when everybody keeps their independence and interests but come to a general protocol of co-operation and agreement.

R: - Anton Yurievich, thank you very much for coming and your time. I remind you that it was «Sputnik» radio station at AFI Global Policy Forum and our guest was Anton Galenovich, the chairman of «Russian Carbon Fund».