In early 2012, the Nigerian government drastically cut diesel and petroleum subsidies causing local fuel prices to more than double overnight. Violent public protests broke out in response, leading the Nigerian government to quickly reinstate national fossil fuel subsidies. While the Nigerian case is extreme, it illustrates a common challenge facing many countries: Despite the recognized benefits of fossil fuel subsidy reform, the reality of subsidy removal can be a political nightmare. Past reforms focused on the politically unpalatable policy of making fossil fuels more expensive, ignoring the possibility that reform can also be tackled by making fossil fuels more obsolete. Phasing out fossil fuel subsidies is crucial to avoid dangerous levels of climate change. Estimates of global fossil fuel subsidies range from the $400—500 billion per year that the International Energy Agency cites for consumption subsidies, to the $5.3 trillion IMF estimate that includes both production and consumption subsidies as well as external effects. While such numbers certainly grab headlines—especially when juxtaposed with estimates for support for low-carbon technologies (about $120 billion) or Green Climate Fund pledges ($100 billion)—they also risk masking the complexity of fossil fuel subsidy reform. While the IMF figure attempts to capture some of the environmental or health impacts of fossil fuel subsidies, it still cannot reveal the effect these subsidies have on distorting public investments and creating political and social vulnerabilities as state budgets drain. Indeed, many cases of national subsidy reform occur in times of major fiscal imbalance, when international organizations, such as the IMF, step in with substantial loans and make their lending conditional on fossil fuel subsidy phase-out. However, in times of crisis, a government’s capacity to manage the distributional impact of subsidy removal is often limited. While low international fuel prices temporarily suppress these negative consequences, subsidies may simply return as soon as international fuel prices rise. Reducing fossil fuel subsidies to a single number may also give the idea that fossil fuel subsidy reform means simply reducing this sum. To date, subsidy reform has been synonymous with subsidy removal—or taking away a negative distortion. As a result, much work on fossil fuel subsidy reform has analyzed the political power balances involved in subsidy removal, and concludes that subsidy phase-out should be coupled with an appeasement strategy to win buy-in from affected stakeholders. One common strategy therefore proposes a partial redistribution of the fiscal savings from the subsidy reductions to compensate stakeholder groups perceived as particularly powerful in opposing reform. Such approaches to subsidy reform are not only fiscally unsustainable, but also can only be a superficial solution to a much deeper socio-technical problem. While the ultimate goal should be to reduce fossil fuel subsidies, strategies for achieving this goal need to better target the underlying energy systems that create the demand for cheap fossil fuels. Ultimately, it is this system that generates the economic and political rents that make fossil fuel subsidy reform difficult and short-lived. Combining reform with policies that incentivize technological change can thus help make subsidy reform more sustainable. In parts of Indonesia, for example, technology-oriented policies enabled the elimination of kerosene subsidies for cooking: As in Nigeria, public opposition thwarted earlier attempts to phase out kerosene subsidies. What enabled successful and permanent kerosene subsidy removal were policies that incentivized a significant number of consumers to switch to alternative cookers running on cleaner liquefied petroleum gas. These technology-oriented policies weakened politically powerful kerosene stakeholders and provided a cost-effective alternative for users, thereby reducing their dependence on—and thus their opposition to the removal of—kerosene subsidies. Such an approach could also work for other sectors such as transport, industry and electricity generation. Hybridizing fossil fuel subsidy reform with technology-oriented policies also critically reframes the political economy of reform. Rather than a one-sided focus on removing a financial flow in an often already investment-starved economy, these hybrid approaches seek to build advocacy for subsidy reform by creating real economic activity. In the electricity sector, for example, policies that support emerging fossil-free technologies open the typically monopolistic sector to new independent power producers. Renewable energy technologies also can create local jobs in construction, maintenance and manufacturing. The emergence of these low-carbon actors entrenches new “green” interests in the sector, thus altering the political balance of power in subsidy debates. Directing finances into low-carbon investments, rather than into the pockets of opposition stakeholders, also helps provide a natural sunset clause for public intervention – both by weening the energy system off of fossil fuels and by setting in motion processes of technological learning that drive down the cost of fossil-free alternatives. In many cases, low-carbon technologies are already cost-competitive; and diversifying the technology mix decreases the vulnerability of a country and its consumers to future fuel-price shocks. Finally, it should be in the interest of international organizations to advocate for and, where necessary, financially support hybrid policies. These approaches provide an opportunity for international organizations to move from being the scapegoat for driving up energy prices, to enablers of new, job creating alternatives. The G20, comprised of leaders as well as laggards regarding fossil fuel subsidy reform and clean technology-oriented policies, could play an important role. The G20 could act as driver of ambitious targets for both fossil fuel subsidy reform and technological change and promote the exchange of experiences and best practices between the international community. Editor’s Note: This opinion piece is informed by the research performed by both authors. Relevant publications include: Matsuo, T. and Schmidt, T.S., 2017. Environmental Research Letters, 12(1); and Schmidt, T.S., Born, R. and Schneider, M. (2012). Nature Climate Change, 2(7) About the authors: Tobias Schmidt is an Energy Politics Professor at ETH Zurich where he earned his PhD in Management, Technology, and Economics. He was a post-doctoral visiting scholar at Stanford University, and consulted for the UN Development Programme. In recent years, he gave talks at T20 meetings in Turkey, Germany and China. Tyeler Matsuo is a doctoral researcher in ETH Zurich’s Energy Politics Group. She has also worked as a consultant in climate and energy policy with organizations such as the World Bank.  

But it’s difficult to think about value when we have no buoy for understanding it outside our traditional lenses: for example, our time, our job, and what others tell us they are worth in cash. This, largely, is the world’s paradigm for value so far. But understanding what value really means changes everything—and will be at the center of the decentralized revolution in global coordination that will unfold over the next decade. So, where do we begin?

Let’s start with gold.

Gold is an inherent value. When backing a market, gold allows us to grow a balanced economy well into the trillions. But why does it allow for massive stable markets to form around it? It is gold's permanence that creates stability. We understand that gold will always have value, because it is inherent in all of us, not just in one part of the world, but everywhere, not just today, but tomorrow and for the long haul.

In the 1930s when the gold standard was removed, we learned that the U.S. dollar didn’t need gold to back its economy to flourish. We learned that it was just a symbol for U.S. citizens to decentralize their coordination around the United States economy.

It turns out, common agreement is a philosophy for building shared economy.

And so it seems inherent value is a marker for us to begin exploring what the future could look like—a future beyond gold and the existing realm of credit. And so what else has inherent value? Is education as valuable as gold? What about healthcare? What about a vote that can’t be tampered with? What about an ID that can’t be stolen or erased? What about access to nutrition or clean water? You will find value everywhere you look.

It turns out, we’ve already done the legwork necessary to uncover the most elemental inherent values: The Sustainable Development Goals are commitments grown out of the drive to bring to life basic tenets of the Universal Declaration of Human Rights—the closest possible social contract we have to a global, common agreement.

We’ve already agreed, as a global community, to ensure inclusive and equitable access to quality education. We’ve already agreed to empower all women and girls, to ensure pure and clean water access for all, to promote health at all stages of life, and to end hunger.

We’ve already agreed.

Our agreements are grounded in deep value centers that are globally shared, but undervalued and unfulfilled. The reason for this is our inability to quantify intangible value. All of these rich, inherent values are still nebulous and fragmented in implementation—largely existing as ideals and blueprints for deep, globally shared common agreement. That is, we all agree education, health, and equality have value, but we lack common units for understanding who and who is not contributing value—leaving us to fumble in our own, uncoordinated siloes as we chase the phantoms of impact. In essence, we lack common currencies for our common agreements.

Now we find ourselves at the nexus of the real paradigm of Blockchain, allowing us to fuse economics with inherent value by proving the participation of some great human effort, then quantifying the impact of that effort in unforgeable and decentralized ledgers. It allows us to build economic models for tomorrow, that create wholly new markets and economies for and around each of the richest of human endeavors.

In late 2017 at the height of the Bitcoin bubble, without individual coordination, planning, or the help of institutions, almost $1 trillion was infused into blockchain markets. This is remarkable, and the revolution has only just begun. When you realize that Blockchain is in a similar stage of development as the internet pre-AOL, you will see a glimpse of the global transformation to come.

Only twice in the information age have we had such a paradigm shift in global infrastructure reform—the computer and the internet. While the computer taught us how to store and process data, the Internet built off that ability and furthered the conversation by teaching us how to transfer that information. Blockchain takes another massive step forward—it builds off the internet, adding to the story of information storage and transfer—but, it teaches us a new, priceless and not yet understood skill: how to transfer value.

This third wave kicked off with a rough start—as happens with the birth of new technologies and their corresponding liberties. Blockchain has, thus far, been totally unregulated. Many, doubtless, have taken advantage. A young child, stretching their arms for the first couple times might knock over a cookie jar or two. Eventually, however, they learn to use their faculties—for evil or for good. As such, while it’s wise to be skeptical at this phase in blockchain’s evolution, it’s important not to be blind to its remarkable implications in a post-regulated world, so that we may wield its faculties like a surgeon’s scalpel—not for evil or snake-oil sales, but for the creation of more good, for the flourishing of commonwealth.

But what of the volatility in blockchain markets? People agree Bitcoin has value, but they don’t understand why they are in agreement, and so cryptomarkets fluctuate violently.  Stable blockchain economies will require new symbolic gold standards that clearly articulate why someone would agree to support each market, to anchor common agreement with stability. The more globally shared these new value standards, the better.

Is education more valuable than gold? What about healthcare or nutrition or clean water?

We set out in 2018 to prove a hypothesis—we believe that if you back a cryptocurrency economy with a globally agreed upon inherent value like education, you can solve for volatility and stabilize a mature long lasting cryptomarket that awards everyone who adds value to that market in a decentralized way without the friction of individual partnerships.

What if education was a new gold standard?

And what if this new Learning Economy had protocols to award everyone who is helping to steward the growth of global education?

Education is a mountain. Everyone takes a different path to the top. Blockchain allows us to measure all of those unique learning pathways, online and in classrooms, into immutable blockchain Learning Ledgers.

By quantifying the true value of education, a whole economy can be built around it to pay students to learn, educators to create substantive courses, and stewards to help the Learning Economy grow. It was designed to provide a decentralized way for everyone adding value to global education to coordinate around the commonwealth without the friction of individual partnerships. Imagine the same for healthcare, nutrition, and our environment?

Imagine a world where we can pay refugees to learn languages as they find themselves in foreign lands, a world where we can pay those laid off by the tide of automation to retrain themselves for the new economy, a world where we can pay the next generation to prepare themselves for the unsolved problems of tomorrow.

Imagine new commonwealth economies that alleviate the global burdens of poverty, disease, hunger, inequality, ignorance, toxic water, and joblessness. Commonwealths that orbit inherent values, upheld by immutable blockchain protocols that reward anyone in the ecosystem stewarding the economy—whether that means feeding the hungry, providing aid for the global poor, delivering mosquito nets in malaria-ridden areas, or developing transformative technologies that can provide a Harvard-class education to anyone in the world willing to learn.

These worlds are not out of reach—we are only now opening our eyes to the horizons of blockchain, decentralized coordination, and new gold standards. Even though coordination is the last of the seventeen sustainable development goals, when solved, its tide will lift for the rest—a much-needed rocket fuel for global prosperity.

“Let us raise a standard to which the wise and the honest can repair.”  —George Washington
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.