Opportunities for the Environmental Entrepreneur
I had the honor to chair a panel and speak at the 10th ICREI conference in France on environmental issues last week. This year’s conference was about environmental entrepreneurship in particular, and the challenges it faces.
In my speech, I looked at the role of technology in reducing transaction costs, and outlined three areas of potential benefit for the environmental entrepreneur as a result. Here’s the text of the part of my speech on those potential developments:
The first is the way in which Blockchain technology could provide a guaranteed ledger of property rights, whose importance to the environment we heard about earlier. Take the example of land titling in Honduras. There the government has historically been entrusted with maintain a central ledger of property titles and their transactions. It has failed horribly at this task. Property owners have found transactions not properly registered, conflicting claims over the same property, and in some cases outright theft of the title by bureaucrats and officials. My friend Guillermo Pena, of the Eléutera think tank in Honduras, is working to overcome this problem by introducing a new system of land titling registered on the Blockchain. The Blockchain is designed so that transactions are only registered when every holder of the ledger recognizes it, so the opportunities for theft, confusion, or failure to process a legitimate transaction are minimized. The Blockchain could be used to provide a guaranteed ledger of all sorts of environmental assets, particularly those related to unfixed assets that cross national borders such as wildlife or fisheries. There is significant potential there, I think.
Let us turn to Crowd funding – probably best known to you by portals such as Indiegogo. Crowdfunding allows for people to raise money for a project from huge numbers of individuals who are willing to show trust in the project, rather than having to go to a bank or venture capitalist to raise the money. The transaction cost of financing a business or project is probably the first one the entrepreneur faces. By lowering this cost, crowdfunding is already allowing many startups to get going. I believe there is particular potential for crowdfunding in environmental entrepreneurship because environmental quality is a good that people in the west are prepared to pay for, but until now the only way they could explicitly do so was to give money to nonprofit environmental groups. Yet as we have heard, the environmental movement has a very rigid, anti-entrepreneurial stance that may lead to perverse results. By providing the potential for investment in environmental startups, people will not only have a choice of how to demonstrate their willingness to pay for environmental quality, but they may even, if equity crowdfunding is liberalized, earn a return from their investment.
One final source of potential is represented by 3D Printing. I am reliably informed that it is now possible to 3D print a rhino horn that is completely indistinguishable from the real thing. As the costs of 3D printing falls it is only too easy to see that the market for rhino horns will become dominated by the printed horns rather than the real thing. Why bother going through the risk of poaching to get your supply when you can just print it instead, and no-one will be able to tell the difference? 3D printing on the grand scale also offers the potential for the holy grail of environmental quality – production without waste. We have barely scratched the surface of what we can do with 3D printing, but I believe it offers the most potential of any of the advances I have mentioned so far.
The fly in this ointment is the presence of many environmental laws that are intended to mitigate the problems these developments have the potential to solve. We can expect the environmental movement to fight the removal of these restrictions tooth and nail. For instance, the mentality that wants to ban the possession of ivory chess sets created over a hundred years ago is also likely to oppose any trade in 3D printed ivory artifacts, on the basis that one cannot tell whether they were obtained illegally or not.
You can learn more about the rhino horn project here. And, as I suspected, there is already a movement to ban it. The full text of my remarks is here.
Many thanks to Max Falque, leader of the free market environmentalist movement in France, for putting together this conference.