Impact bonds are contingent contracts, paying private entities a set amount if they deliver a certain public good (i.e., they pay private actors for solving a public problem). However, the price of traditional impact bonds appear to be a product of political will, based on what the government had previously paid for the services at issue.

 

The idea behind the "open" impact bond is that governments should identify an uncertain public good that would save taxpayers billions of dollars if produced and then offer a substantial, but lesser, amount to whichever private entity first produces that good.

 

For example, climate change costs U.S. taxpayers tens of billions of dollars each year according to NOAA. If the federal government were to offer a $10B to $100B open impact bond for efficient carbon capture technology, it would create net savings for taxpayers by incentivizing investors to build a carbon capture industry.

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To find out about how open impact bonds could bring trillions in investment to R&D for the public good, email nate@outsideinnovation.org.