One of the most critical ecosystem services today is carbon sequestration and storage, which involves the protection, management, and support of ecosystems capable of capturing atmospheric carbon dioxide (CO₂) and storing it in a stable form. This service plays a direct role in climate change mitigation by reducing the concentration of greenhouse gases in the atmosphere.
Controlling greenhouse gas emissions — particularly carbon dioxide, often referred to simply as “carbon” — has become a key concern for the international community, which has increasingly turned to market-based mechanisms and economic instruments as strategies to limit pollution and foster the transition to low-carbon economies.
In the early 2000’s the most promising approach appeared to be a cap and trade model, aiming both to restrict carbon emissions and to generate income for climate solutions. Cap and share is a variant on this model wherein revenue from permits, required of fossil fuel suppliers, is socially distributed. Unfortunately, due to market instability, inadequate political will, and the intrinsic challenge of addressing the global commons without a truly global administration, the cap-and-trade and cap-and-share models have so far failed to scale.
In addition to such practical limitations, carbon trading has also been criticized for perpetuating a “business as usual” approach that fails to achieve meaningful emissions reductions. Complex trading systems often contain loopholes that allow emitters to avoid reducing emissions, especially when oversight is weak.
A nation-state level carbon tax has also been proposed, with strong support from economists, but has failed so far to catch on politically, partly due to the complexities of managing unequal taxes between different countries. A global carbon tax has also been proposed.
A common thread in these past attempts has been reliance on limits and added costs, which function economically as a penalty, leading to resistance from the private sector. Thus, although mechanisms such as cap and trade, cap and share, and carbon taxation form the core of carbon pricing policies, these structures share a significant limitation: they overlook the compensatory dimension of the ecosystem service of carbon sequestration and storage. In other words, they fail to adequately recognize and reward the actors — often Indigenous peoples and traditional communities — who ensure the continued provision of this service, which is vital to maintaining global climate stability.
An emerging alternative proposal seeks to break this dynamic by emphasizing carrots rather than sticks. The Global Carbon Reward is an innovative financial mechanism, conceived by Dr. Delton Chen, that would generate financial rewards for voluntary greenhouse gas (GHG) reductions and avoidance and atmospheric carbon removal. The carbon reward would be linked to long-term contracts between mitigators and an authority for the policy, called a Carbon Exchange Authority. Recipient projects would be rigorously vetted based on milestones achieved and the mass of GHGs that are mitigated. The rewards would be issued as a carbon-linked financial asset that would then be traded in the foreign exchange markets and would be assigned a price guarantee by a consortium of the world’s central banks. This guarantee would be implemented through international monetary policy called Carbon Quantitative Easing.
It is important to note that the carbon reward is not a carbon credit, and it is not a medium of exchange (i.e. it is not a currency). It is a new type of carbon-linked sovereign-backed asset that can be issued at speed and scale to span the multi-trillion dollar climate finance gap, and without imposing direct costs on stakeholders or governments.
The Global Carbon Reward concept is highly developed, yet requires stakeholder consultations, feasibility studies and piloting by a club of nations. After piloting, the policy may then be implemented under the auspices of the UN with support from sponsoring countries and their central banks.
In light of the structural challenges posed by the climate crisis and the limitations of current carbon pricing instruments, it is urgent to acknowledge that the provision of ecosystem services essential to climate regulation — such as carbon sequestration and storage — transcends political borders and depends on coordinated collective action at the global level.
In this context, proposals such as the Global Carbon Reward offer a new paradigm for climate governance by establishing a results-based, transnational reward architecture capable of aligning the interests of multiple actors around a common good: the stability of the Earth’s climate system.
However, for such a proposal to become scalable and practically applicable, innovative financial mechanisms are essential. The creation of a Global Commons Fund, for instance, could provide the international financing for the piloting of the Global Carbon Reward and to support an emerging conservation economy.
This discussion highlights the urgent need to build a global governance framework for the commons, capable of integrating financial, legal, and political instruments that recognize, value, and safeguard the ecological systems that sustain life on the planet.
| While there is no donor affinity group specifically focused on Payments for Ecosystem Services, a 2023 report from the Netherlands Enterprise Agency and a 2024 report from the UNDP makes recommendations for how to scale such programs. While some grantmakers have retreated from carbon markets due to problems with the sector, a 2023 statement from a consortium of climate funders working through ClimateWorks recognized the significance of high integrity carbon markets and offered recommendations to donors. |