The Green Fee is a mechanism first introduced by KlimaDAO. Its purpose is to apply a fee to every transaction made on a cryptocurrency exchange in order to compensate for the carbon emissions caused by said transactions. The first real world implementation occured on the cryptocurrency exchange Sushi.
The Green Fee adds a modest sum (on Sushi it’s currently 0.02 of Polygon’s MATIC token per transaction I believe) to every transaction. This fee will be used to purchase and retire (in crypto-lingo: burn) carbon credits, enabling carbon removal/reduction projects to continue and hopefully scale up their work. Whatever CO2 emissions are caused by your transaction will therefore be compensated for elsewhere in the world (let’s not turn this into a discussion about the validity of carbon credits; maybe a future article will address this).
While this is a great first step, Sushi’s transaction volume alone only causes the tiniest of tiny dents in the global emissions gap.
Implementing a concept like the Green Fee not only in one (d)app, but across most popular applications would have a much stronger effect, I thought. So I whipped out the calculator and looked at a bunch of popular applications.
Applying the Green Fee to social media
As a thought experiment (and this article is really just that), I looked at the most popular apps/services in use today and tried to apply reasonable fees to their functionalities. I chose Twitter, Snapchat, Instagram, and WhatsApp. They are some of the most dominant social media services and offer very distinct functionalities which can be tied to a fee.
Twitter’s Green Fee
In 2022, users (and bots) sent roughly 200 billion tweets. Individual users tweet about 2.6 times a day. I decided to settle for a fee of $0.001 per tweet.
This would cost the average user about $0.95 per year. If the number of tweets remains constant, this would create about $200m worth of Green Fee — so $200m which would get funneled to carbon projects around the world via purchase of their carbon credits. At the same time, the cost per individual user would be so low that it’s hardly noticeable (even in weaker economies).
Snapchat’s Green Fee
About 5 billion snaps are created per day, spread across 375m daily active users. That’s about 13.3 snaps daily per active user. Let’s keep the Green Fee at $0.001 per snap. Snaps would cost the average user about $4.85 per year, while the core messaging functionality would be free.
Spread across all the snaps sent, this equates to $1.825b per year.
Instagram’s Green Fee
95 million pictures get uploaded to Instagram per day. Let’s stick to the tried and tested $0.001 and charge this sum per picture. That’s $95,000 daily or $34.6m per year. In 2021, the platform had 1.21 billion monthly active users. The average user posts 2.35 pictures per day, which is a cost of $0.86 per year — manageable.
WhatsApp’s Green Fee
The messenger transmits about 100 billion messages per day, divided across 2 billion monthly active users. If we apply a $0.0001 fee, that’s $10m per day or $3.65b anually. Each user sends about 18,000 messages per year, which would cost $1.83.
What’s the damage?
If we use the power of math, we arrive at a staggering sum of $5,709,600,000 being transferred to carbon projects anually. Assuming a cost of $5 per credit, this would compensate for 1.14 gigatons of carbon.
Currently, we emit 37.12 gigatons, so our experimental Green Fee would compensate for about 3% of those emissions — not bad for a system which costs the individual user $8.49 or basically a few cheeseburgers per year.
If we aim for higher reductions, we could simply tweak the numbers. Doubling the cost for Instagram would mean that this platform would still cost less than $2 annually — still very reasonable, but we would unlock an additional $35m in funding for carbon projects.
But…
I know what you’re saying. “But tapioka, you handsome devil, your math is full of flaws, because…!”
Of course it’s very simplistic. The calculations assume the number of users stays static, everyone uses the Green Fee, the number of pictures/tweets/messages stays constant, and so on. Very unlikely. In the calculations about the gigatons compensated, it assumes the price for carbon credits stays constant, which is very unlikely because of the surge in demand caused by this system.
There are also technical issues: no blockchain could handle billions of transactions per day without massive spikes in gas fees, making the whole operation unfeasible. Even with batch transactions, this is probably(?) not quite doable yet at the scale mentioned (but I’m no expert on this — so if it is possible already, even better!). I’m confident smart engineers will fix these problems eventually anyway.
The Green Fee’s incentives
Once those issues are solved and we not only apply a Green Fee to the four examples I looked at but also to all kinds of other apps, there is potential for massive funds being funneled to carbon credits for much less than 1% of your individual income in most developed countries.
“But why would anyone agree to this if it’s voluntary?” It’s easy to get people to do something if the incentives are strong. It’s also easy to come up with great incentives to make people not only grudgingly agree, but happily pay the Green Fee in exchange for goodies.
Think of a Discord Nitro subscription: It’s $9.99 monthly, and the core functionality of the application doesn’t change, but the added incentives (most just fall into the category of Lighthearted Fun or That Extra Dash of Polish instead of Must-Have Features) make people subscribe to it anyway, helping Discord to generate considerable, nine-digits income.
Technically, I imagine this would not be too difficult to accomplish. If those apps could be linked to a Web3 wallet, all you’d have to do is load some funds into it (in my example, 10 USDC would be enough to enable all your social activities across those four apps). Then you approve some smart contract that allows Instagram, Snapchat, and others to access your USDC whenever required by the Green Fee (maybe once a month to save gas fees?) — done. Everything else happens in the background and the user wouldn’t be bothered by technical details.
Conclusion
Carbon credits, carbon emissions reductions, sustainability: those topics are usually talked about from the perspective of organizations, companies, institutions.
If done right (a future article will discuss what right means), I think there’s plenty of opportunity to engage the individual user in our combined effort to reduce carbon emissions as well. This would unlock billions of dollars to flow into carbon projects (and thereby the industry as a whole, which would lead to more robust methods to boost the overall integrity of carbon credits). Getting the incentives right is one piece of the puzzle; the other piece is the implementation. Both will be discussed in upcoming articles.
Images created with MidJourney.
Disclaimer: I contribute to the workload at KlimaDAO. This organization seeks — among other things — to improve existing carbon markets. However, this is my personal account and I do not speak for the DAO or any of its members. This article has not been proof-read by any member of the DAO. Flaws, mistakes, assumptions, extrapolations, wishful thinkings: those are all my own. Do not confuse anything mentioned in this article with the opinion of KlimaDAO as a whole or any of the organizations’ members.
