To implement certificates of impact we need to decide how we want projects to be evaluated. The following is a consideration that seems to me potentially important (and I haven’t seen it mentioned yet) [EDIT (2022-06-28): the fundamental problem here was pointed out by Ryan Carey, and perhaps I’ve seen that thread and started thinking about the topic as a result.]:
If the evaluation of a project ignores substantial downside risks that the project once had but no longer has (because fortunately things turned out well), the certificate market might incentivize people to carry out risky net-negative projects: If things turn out great, the project’s certificates will be worth a lot; and thus when the project is just started the future value of its certificates is large in expectation. (Impact certificates can never have a negative market price, even if the project’s impact turns out to be horrible).
[Certificates of Impact]
To implement certificates of impact we need to decide how we want projects to be evaluated. The following is a consideration that seems to me potentially important
(and I haven’t seen it mentioned yet)[EDIT (2022-06-28): the fundamental problem here was pointed out by Ryan Carey, and perhaps I’ve seen that thread and started thinking about the topic as a result.]:If the evaluation of a project ignores substantial downside risks that the project once had but no longer has (because fortunately things turned out well), the certificate market might incentivize people to carry out risky net-negative projects: If things turn out great, the project’s certificates will be worth a lot; and thus when the project is just started the future value of its certificates is large in expectation. (Impact certificates can never have a negative market price, even if the project’s impact turns out to be horrible).