SOLVE PRESENTATIONWORLD MONETARY UNIONWINNING PLANNEW ECONOMIC SYSTEMPRESENTATION 2015

SOLVE PRESENTATION

Carbon Price

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WORLD MONETARY UNION

Institutions for Sustainability

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WINNING PLAN

MIT Climate CoLab 2015

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NEW ECONOMIC SYSTEM

Global Rewards for Climate Mitigation

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PRESENTATION 2015

Paper and Interview

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Economics


Copyright ©2014-2016 Center for Regenerative Community Solutions. All Rights Reserved
Please cite this page as:
Chen D. B, J. Cloud, and J. van der Beek (2016). Global 4C – Monetary and Market Policy for Climate Change Mitigation. www.global4c.org

“All religions, arts and sciences are branches of the same tree.”

Albert Einstein
Out of My Later Years: The Scientist, Philosopher, and Man Portrayed Through His Own Words (1950)

Introduction

A world currency system for climate mitigation is not discussed in the mainstream narrative on climate change and economics. This project presents a new narrative, and inspiration derives from the idea that it will be possible to divert wealth (and embodied energy) from the global economy directly into effective mitigation through a digital currency and decentralized knowledge network.

The laws of thermodynamics apply to all systems, including civilization, and they help to explain the purchasing power of currencies and the rates of greenhouse gases emitted. Based on the peer reviewed literature it appears plausible, if not likely, that some economic degrowth is needed to stabilize the climate. The following interview with Tim Garrett is worth considering in this context. The modelling work of Garrett supports the idea of a global inflation tax (via monetary policy) for financing greenhouse mitigation, because such an approach can automatically manage global growth. An important (but easily overlooked) dimension to this problem is the synergy of combining ‘carbon rewards’ with ‘carbon taxes’. In economics, synergy is usually called a ‘dynamic feedback’, and this synergy may also be called the ‘carrots and sticks’ approach. Rewards and penalties are actually complementary pairs in market pricing, and both are essential to all types of human socialization. It is argued that a social transformation and global mobilization towards mitigation can be achieved with an improved balance of rewards and penalties.

Project Objective: Global 4C aims to publish in the peer reviewed literature, and then undertake feasibility and pilot studies (refer Partnering) of protocols that can internalize the cost of mitigation into the global economy and with the least political delay. Supporting this approach is the finding of Roglej et al. (2013) that political delay poses the greatest uncertainty for climate mitigation [1]. Feasibility studies will design and assess Complementary Currencies for Climate Change (4C) and will propose a World Monetary Union for Climate Change Mitigation. We use the terms 4C and Solar Dollar interchangeably when referring to the proposed world currency system.

Policy Objective: Global 4C objective is to decarbonize the world economy and address Article 2 of the 2015 Paris Agreement (COP21). Global 4C policy involves new international monetary policies under a new world monetary union. The monetary policies will internalize the cost of mitigation into the global economy by raising the purchasing power of Solar Dollars against a basket of G20+ currencies. The Solar Dollar will be issued as a global reward for mitigation. The anticipated result will be a managed rise in global mitigation rates, and other benefits, including a social transformation and economic renewal through large-scale divestment and long-term wealth preservation.

Policy Narrative: Global 4C will bring into focus a new political roadmap for a global market price. The new narrative will explain how and why a parallel world currency with rising exchange rate can be used to finance mitigation, and also encourage markets to divest wealth into cleaner energy projects, carbon sequestration, and emissions reductions. We hope to improve significantly on the future scenarios published by Shell Energy (for example). Shell has undertaken an analysis for future global primary energy and grouped their results into scenarios called Mountains and Oceans. Mountains represent a future with institutional decisions, market-pricing, planned cities, abundant gas, and CCS. Oceans represents a less orderly future with market pricing, less predictable events, and more competing interests. Both scenarios show that future emissions are likely to far exceed those levels that could keep the climate system below 2ºC of global warming (see graph). We therefore claim that there is a compelling reason to consider a radical new policy to break away from the existing economic paradigm. We hope that economists will take the time to consider Global 4C, and in particular to consider the importance of a decentralized network for more localized decision-making. Shell’s Mountain scenario emphasizes centralized decision making. Global 4C argues the case for combining the best of both worlds.

Linked to an article in solarlove.org  “Shell Bullish On Solar Despite Dropping Solar (But Much More In Its New Scenarios Than That)”

Contents

1. Currency Details

1.1 Generic Name & Type of Money
1.2 Unit of Account
1.3 Currency Issuance
1.4 Store of Value
1.5 Medium of Exchange

2. Climate Mitigation & Economic Management

2.1 Reward-Quantity Relationship
2.2 Gross Domestic Product (GDP)
2.3 Institutional Requirements
2.4 Feasibility & Pilot Studies
2.5 Banking & Interest Rates
2.6 Price Fixing with Hard Currencies & Quantitative Easing
2.7 International Monetary System
2.8 Administration
2.9 Cost-Benefit Analysis

3. Socio-Economic Feedbacks

3.1 Profit Motive and Environmental Ethics
3.2 Bull Market Sentiment
3.3 Social Network and Knowledge Sharing
3.4 Social Network and Investment
3.5 Social Network and Social Transformation
3.6 Geo-Social Network and Land Management
3.7 Coasian Bargaining

4. New Economic Approach  

4.1 Unit of Account for Mitigation – Missing Link
4.2 Gross Domestic Product (GDP) for Sustainability
4.3 Tinbergen Rule for Climate Change
4.4 Jevons Paradox for Energy
4.5 Triffin Dilemma for Climate Change
4.6 Complementary Penalties and Rewards
4.7 Limits of Standard Economics

1. Currency Details

 

1.1 Technical Name & Trading Name

The technical name of the proposed currencies is Complementary Currencies for Climate Change (4C). The proposed trading name of 4C is the Solar Dollar. The Solar Dollar will be a service currency, and will be a supply-pegged currency, and a service currency because the unit of account is a quantum of service. The Solar Dollar will also be a supranational currency, a complementary currency, and a parallel currency.

Footnote: Historical types of official currency include (i) commodity currency, (ii) representative currency, and (iii) fiat currency. The service currency is a new term that is defined as part of the Global 4C project [5] [6].

 

1.2 Unit of Account

The Unit of Account of the Solar Dollar is 100 kg of CO2-e verifiably mitigated. This is fundamentally different to any currency previously issued by governments because the unit of account is defined by a fixed quantity of environmental service. The amounts of greenhouse gases mitigated (kg CO2-e) will be assessed and quantified using set of rules that will have statistical and deterministic elements.

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1.3 Currency Issuance

The Solar Dollar mechanism will issue Solar Dollars directly to enterprises that (voluntarily) provide verifiable mitigation services. Preliminary reward rules are presented in this report. There are five classes of issuance that cover all (lawful) mitigation possibilities:

Class 1. Heavy Industry Decarbonisation

Class 2. Light Industry Decarbonisation

Class 3. Cleaner Energy

Class 4. Net Sequestration

Class 5. Education

Commercial banking provides money in a borrower-lender relationship. Global 4C will be based on a mitigator-assessor relationship for money issuance. Hence Solar Dollars will be issued directly to enterprises that provide verifiable mitigation services. Global 4C has some similarity to Payments for Ecosystem Services (PES) as defined by the UNEP [2]. With PES, a transaction occurs when a well-defined ecosystem service is ‘bought’ by at least one buyer. With Global 4C, the the global economy (under international agreements) is the financial sponsor of the mitigation service. The socio-economic rationale is the Beneficiary Pays Principle (BPP).

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1.4 Store of Value

The Solar Dollar exchange rate (i.e. price) defines its store of value. The exchange rate simultaneously advertises the current global subsidy and global rewards on offer for climate mitigation services.

The Solar Dollar exchange rate will be programmed to rise under monetary protocols that transfer value into Solar Dollars from a basket of hard currencies. The aim of the monetary protocols is to peg theSolar Dollar price to a schedule. This schedule will create a globalised price signal for incentivizing climate mitigation services worldwide. The price schedule should be based on the results of integrated assessment models for the global economy and Earth climate system.

By raising the value of Solar Dollars, the global economy will internalize the cost of mitigation. This cost internalization process will create inflation for the basket of hard currencies relative to Solar Dollars, but the relative inflation between the various hard currencies will be minimised (or possibly reduced to zero).

Footnote: Some alternative community currencies (i.e. complementary currencies) have their value backed by a promise of goods and services, but this is not the case for Solar Dollars. Solar Dollars are not tradable carbon credits. Carbon credits are backed by laws that require firms to limit their GHG emissions or acquire carbon credits in the marketplace. Carbon credits attain their value from environmental laws based on the Polluter Pays Principle (PPP). Global 4C is based on the Beneficiary Pays Principle (BPP). The PPP and BPP are complementary opposites and mutually inclusive. A key assertion of the Global 4C Mitigation proposal, is that a combination of PPP policies and BPP policies will achieve a significantly stronger mitigation result.

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1.5 Medium of Exchange

The medium of exchange will be digital-electronic and will connect to the Internet and mobile phones, and then banking systems. Banknotes and coins are not feasible unless they contain a digital record that is traceable. The Global 4C digital social network is intentionally a knowledge-sharing network that will collect mitigation data and share this data with the marketplace and public. This will provide the market with instantaneous knowledge for improved mitigation efficiency.

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2. Climate Mitigation & Economic Management

 

2.1 Reward-Quantity Relationship

Global 4C is a proposal for rewarding climate mitigation worldwide and diffusing the cost across the global economy as inflation. The 4C supply rate will correlate to the total rate of GHG emissions voluntarily avoided or sequestered (for nations that are party to Global 4C agreements and protocols).

The 4C exchange rate represents the global subsidy and reward value, hence the 4C exchange rate and supply rate will define the reward-quantity relationship for worldwide mitigation services.

The Global 4C system is ambitious because it will create macro-economic controls over national currencies and mitigation. Given that there is a climate emergency and that mitigation costs could approach 4% of world GDP, it is argued that the approach is commensurate with the problem.

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2.2 Gross Domestic Product (GDP)

International GDP statistics can be sub-divided based on money type (i.e. fiat vs. 4C) to index and evaluate physical-economic coupling in the global economy during the transition to a de-carbonized economy.

 

2.3 Institutional Requirements

Global 4C will require a World Monetary Union for Climate Change Mitigation. Trading of 4C will need to be managed within a single globalised market. This market  may be called the Global 4C Clearing Gateway. This gateway can accommodate multiple currencies, however a single market will be needed to allow prices to equilibrate under the Law of One Price (LOP).

Note: Academics and historians have warned that an adequate response to climate change (and other planetary limits) will require major institutional innovations. A world monetary union would create a powerful financial institution for leveraging mitigation markets around the world.

 

2.4 Feasibility & Pilot Studies

A feasibility study and a white paper are needed to document Global 4C Mitigation and define the key terms of reference (refer partnering).

Global 4C pilot studies may be initiated by diplomats of small nations by inviting G7 members to request the International Monetary Fund (IMF), World Bank or other peak institution to carry out specific 4C pilot studies. A peak institution could then review Global 4C as a supranational currency for the world community.

A Global 4C supranational currency may also inspire creative reforms to improve economic management and the prevention of future financial crises (in addition to the central aim of mitigating climate change).

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2.5 Banking & Interest Rates

This proposal recommends that the 4C subsidies and rewards be offered at low cost or debt-free to enterprises.

Contractual relationships will need to be studied to determine the optimal conditions for preventing free-riding, handling defaults, preventing corruption, and recovering administration costs.

Global 4C does not follow the traditional banking model for issuing money. 4C issuance will be a scientific process to quantify mitigation amounts.

The debt-free nature of the 4C is unorthodox, and implies that traditional financial risk assessments may not be necessary. However studies will be needed to examine whether 4C should be provided with contracts (like a loan) at low interest or zero interest. The contractual requirements for 4C may require the assistance of banks when both mitigation performance and financial performance are important. This may be a reason for banks to support 4C in the marketplace.

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2.6 Price Fixing with Hard Currencies and Quantitative Easing

The 4C financing mechanism will require a monetary protocol that transfers purchasing power of existing hard currencies into 4C. The total cost of mitigation will be  about  4% of world GDP. Hence this may be the maximum value that needs to be transferred to 4C to avoid dangerous climate change.

Studies should investigate mechanisms that could give 4C a rising store of value. Examples include currency trading, currency purchases with quantitative easing, legal tender status, new trade rules, and backing with commodities.

  • Could 4C be backed with laws that require transactions around the world to be undertaken in 4C?
  • Could 4C be implemented as an extension of the IMF’s special drawing rights (a currency basket comprising dollars, euros, yen, and sterling)?
  • Could 4C be backed with commodities, such as oil reserves?

The fundamental approach of Global 4C is that it should not penalize enterprises or nation states, and so it is not intended to replace the US dollar as a reserve currency. Studies should propose measures to establish international equity for G20 nations and other nations that support the 4C supranational currency with their national economies.

The non-reserve (or reserve) status of Global 4C needs to be assessed, and national preferences may be satisfied with conditions on convertibility between 4C and national currencies. The effect of Global 4C on the US dollar and other currencies needs to be reviewed by economists.

Studies should take into account the trade imbalances of nations that earn a disproportionate amount of 4C subsidies and rewards. Ideally, Global 4C should contribute to global stability, economic strength and global equity.

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2.7 International Monetary System

Studies should propose measures to reduce the volatility of exchange rates of 4C and other currencies, and to avoid unhelpful policy interference by individual countries. It should also examine the effect it will have on international reserves, exchange rates, currency payments and capital flows [3].

 

2.8 Administration

Important considerations are:

  • Should Global 4C be administered by a global central bank?
  • Should Global 4C be issued only as a crypto-currency or as a combination of technologies and systems?
  • Should Global 4C be designed as multiple global currencies that exchange in a single market?
  • Does Global 4C undermine national sovereignty of nations states?

 

2.9 Cost-Benefit Analysis

Important considerations are:

  • How much will Global 4C cost and what are the benefits?
  • Could 4C be used to make international business more efficient?
  • Could 4C be used to encourage foreign direct investment (FDI)?
  • Can all nations work together closely enough to support Global 4C?

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3. Socio-Economic Feedbacks

 

3.1 Profit Motive and Environmental Ethics

The profit motive is often associated with greed and failures in the ‘capitalist’ system. Whilst the capitalist system is currently unsustainable, the profit motive is fundamental to human nature and cannot be removed with economic policies. The profit motive may be explained by rational choice theory, but basically it just means that people naturally pursue what’s in their best interest.

Global 4C aims to provide global subsidies and rewards for GHG mitigation to synergy with the profit motive. This synergy is extremely important for creating positive social feedbacks. The approach has some similarity with “Payments for Ecosystem Services” (PES) that is based on the Beneficiary Pays Principle (BPP). With climate mitigation services, it is argued that the global economy (and all people) will be the beneficiary of those services. It is important to note that Global 4C is to be used in conjunction with pollution limits and taxes based on the Polluter Pays Principle (PPP).

What sets Global 4C apart from other policies, is that long-term finance is provided by a transfer of purchasing power from a basket of hard currencies (i.e. G20 currencies) into the 4C. This will be a system of globalised wealth transfer that avoids new taxes. By avoiding new taxes, Global 4C can avoid political delay.

The profit motive will be satisfied with Global 4C and will also align with the ‘environmental ethics’ of climate mitigation to give the policy its social potency. The rules of Global 4C are designed so that payments are only given for effective climate mitigation.

It is conceivable that some people may prefer that financial rewards not be given to enterprises for climate mitigation services, perhaps because (a) mitigation should only be dealt with as a regulatory or ethical issue, or (b) polluters should only be penalised and not rewarded. Global 4C cannot satisfy (a) or (b) because all people and all enterprises are responsible for some GHG emissions. Global 4C is a ‘no penalty’ approach and its central philosophy is that all enterprises, including multi-national corporations with a history of emissions, will be subject to the same rules for calculating subsidies and rewards for mitigation. Social preferences for historical culpability need to be addressed with separate policies that use penalties or regulations. The three types of policy (i.e regulatory, penalty based, and reward based) are ultimately required to strongly mitigate greenhouse emissions.

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3.2 Bull Market Sentiment

The term ‘irrational exuberance‘ was coined by Alan Greenspan when he commented on the dot-com bubble. Under Global 4C policies, the 4C exchange rate (i.e. price) will be scheduled to rise over many decades. The rising 4C price will have a profound psychological effect on the market, and this will be the ‘rational exuberance‘ of Global 4C. This deserves the attention of policy makers, because it is argued that a 4C bull market will attract enormous private investment. Private demand for 4C will transfer mitigation costs out of the basket of hard currencies (i.e. out of public budgets of the G20) and into the private sector. As more people trade and invest in 4C, the 4C price schedule will gain political support. Eventually the 4C price may stabilise or fall if and when mitigation is successful.

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3.3 Social Network and Knowledge Sharing

A decentralised digital social network (and digital currencies) will allow the market to undertake most of the Global 4C administration. This includes mitigation assessments and verification. The social network will be geo-social (e.g. Google Earth) because it will geographically locate projects and mitigation activities. All applicants who seek 4C payments will need to submit their mitigation data to the Global 4C network. This data will be made public and will provide the world with instantaneous technical and financial knowledge about mitigation methods.

 

3.4 Social Network and Investment

4C will be a tradable currency, and people everywhere will be encouraged to use 4C in their daily lives. The Global 4C digital social network (e.g. Facebook) will also allow people everywhere to invest in mitigation projects. Small investors will be able to access the global market and make investment decisions quickly and efficiently.

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3.5 Social Network and Social Transformation

Global 4C will trigger a social transformation because it will empower people everywhere to establish collaboratives for mitigation. Collaboratives allow individuals to aggregate their mitigation data to achieve a statistically significant mitigation result (a requirement of the Global 4C rules). For example, a collective of 10,000 people may combine their domestic GHG emission reductions to earn 4C subsidies (paid as group dividends). This social aspect of Global 4C will be a major part of the social transformation.

 

3.6 Geo-Social Network and Land Management

Refer this MIT article.

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3.7 Coasian Bargaining

The Coase Theorem says that the economic efficiency of an economic allocation in the presence of externalities can be improved with private trading. The Coase Theorem says that this is possible if trade in the externality has sufficiently low transaction costs. With low transactions costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.

The worldwide use of a Solar Dollar world currency for climate mitigation may not precisely meet the requirement of ownership of the pollution externality, however Global 4C offers the public and enterprises an opportunity to express some ownership of the climate mitigation services that can preserve the atmosphere, climate and bio-sphere (i.e. common pool resources). By using the Solar Dollar currency, in preference to other currencies, actors may express their social preference for climate mitigation. This social preference will create additional economic demand for the Solar Dollar and will improve its effectiveness. It may also have flow-on effects in the political domain.

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4. New Economic Approach

 

4.1 Unit of Account for Mitigation – The Missing Link

The economy has a ‘unit of account’ for defining greenhouse pollution, as follows:

Unit of Account of Carbon Tax = 1000 kg of CO2-e Pollution.

The above unit of account is for ‘pollution’ and so the monetization must be a penalty. Hence a ‘carbon tax’ is the obvious policy match for the above unit of account. Carbon taxes tend to be negotiated at the national, state and local level. A global carbon tax is not currently feasible.

There is an opportunity to create a global ‘unit of account’ for greenhouse mitigation. In this project we define the new ‘unit of account’ for mitigation as follows:

Unit of Account of Carbon Reward = 100 kg of CO2-e Mitigation.

The above unit of account may be termed the ‘missing link’ in the contemporary narrative on climate change. When the missing link is analysed, the economic instrument that matches the new unit of account is a carbon reward (or subsidy). It is further argued here that a new world currency is the appropriate economic instrument to deliver the rewards and subsidies.

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4.2 Gross Domestic Product (GDP) for Sustainability

For economists who deal with national issues, GDP is an important metric for macro-economic management. Governments typically plan and hope for GDP growth to meet the voters desire for financial prosperity and opportunity. Economic growth, as a paradigm of the modern economy, has been criticised because the resulting growth (as described by GDP) has so far failed to satisfy our long-term need to become ecologically sustainable. By introducing 4C into the economy (refer above) it is now possible to index economic decarbonisation with GDP metrics. To clarify this point, consider the following equations:

GDPtotal = GDPfiat + X.GDP4C

 

where,
GDPtotal = Total GDP of the world (expressed in USD)
GDPfiat = Subtotal of GDP for fiat currencies (expressed in USD)
GDP4C  = Subtotal of GDP for 4C currencies (expressed in 4C)
X = Exchange rate for 4C (expressed in USD)

 

As the 4C price rises, the incentive to mitigate increases, and the result is more 4C currency in circulation. Therefore, as more mitigation is carried out, the GDP denominated in 4C will increase. To characterise the macro-economic transition and decarbonisation process, the economist may thus consider how two key parameters vary with time: (i) Total GDP; and (ii) the ratio of GDP denominated in 4C to the Total GDP.

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4.3 Tinbergen Rule for Climate Change

The current policy mix in UNFCCC climate change negotiations has not addressed the global problem with a single price signal that is globally enforced. This suggests that the current policy mix does not satisfy the Tinbergen Rule.

It is proposed that Global 4C is an appropriate policy because the 4C instrument will create a global price signal that can be rolled out through foreign exchange markets (Forex). To its advantage, the dependent variable of climate change mitigation is explicitly defined by the unit of account of 4C (refer Section 4.1).  Hence Global 4C satisfies one half of the climate mitigation problem: incentivising mitigation with rewards. Global 4C does not prevent or limit emissions. Stronger carbon taxes and regulations are also needed to incentivise mitigation as part of a global policy portfolio.

 

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4.4 Jevons Paradox for Energy

Jevons paradox (as it applies to energy) is the proposition that an increase in energy efficiency tends to increase (rather than decrease) the rate of consumption of energy in the economy. This may also be called the ‘rebound effect’. This comes about because improved efficiency lowers the relative cost of energy. Garret (2012) argues that increased energy efficiency will accelerate economic growth and greenhouse emissions in the long-term.

Global 4C will help overcome Jevons paradox because the unit of account of 4C is defined as a mass of greenhouse gases mitigated (i.e. 100 kg of CO2-e verifiably mitigated). Hence the ‘objective function’ of the Global 4C policy is to maximise the issuance of 4C currency, and this will synergy with the self-interest of actors who can profit from mitigation. The Global 4C subsidy rules do not reward energy efficiency per se, because the rules focus on decarbonising the economy by: (a) providing subsidies for reductions in the greenhouse emissions intensity of cash flow; (b) providing subsidies for cleaner energy; and (c) providing rewards for net sequestration.

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4.5 Triffin Dilemma for Climate Change

By trading the 4C currencies in a single global market, a single global 4C price may be established. The Triffin dilemma (or paradox) refers to the conflict of interest between national and international objectives when the reserve currency is also a national currency.

The Triffin dilemma may be expanded to include climate change as the key objective (i.e. replacing the reserve currency objective). A problem with national and international agendas is that not all nations are committed to strong climate change mitigation. For example, certain governments may prefer to strengthen their economies with carbon intensive industries rather than tackle the climate change problem.

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4.6. Complementary Penalties and Rewards

Civilisation as a social system is composed of ‘complementary opposites’ that require balance. An example are the skills of logic (e.g. science) and imagination (e.g. art). The climate change issue concerns the complementary opposites of penalties and rewards. There is scientific evidence [4] to show that a combination of penalties and rewards will yield the most cooperation from individuals. Also, a simple balancesheet analysis can show that a combination of penalties and rewards will create a stronger incentive but will leave the business in a better financial situation.

The global policy mix is overly dependent on carbon taxes (Polluter Pays Principle) at the sacrifice of mitigation rewards (Beneficiary Pays Principle), and so the system has become rigid and vulnerable. The critical challenge is political delay associated with carbon taxation. Whilst this delay can be traced to the ‘profit motive’, in a more general sense the delay is the result of a global policy mix that is out of balance in terms of penalties (under the PPP) and rewards (under the BPP). A unified economic approach (that combines PPP and BPP) will create new emergent properties as suggested in Table 1.

Table 1. Consequences of Rewards and Penalties in the Economy

NOT BALANCED BALANCED
Vulnerability Resilience
Corruption Cooperation
Financial Imbalance Financial Balance
Inaction Action
Rigidity Adaptability
Conflict Synergy

 

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4.7 Limits of Standard Economics

Why does mainstream economics acknowledge that carbon taxes as ‘a good idea’ but mostly ignore subsidies and rewards for climate mitigation? Most likely there is the problem of long-term finance (for the subsidies and rewards) and the added costs of administration needed for assessments. These costs and challenges are seen as ‘inefficient’ when compared with carbon taxes that can be applied to the fossil fuels at the mine or port. However there are structural limitations with this perspective. These limitations are summarised as follows:

1) Insufficient priority given to the unit of account for greenhouse mitigation (i.e. it is opposite to the unit of account for carbon taxation which is the primary focus of policy makers).

2) Based on (1) there is a failure to consider monetary policy that can avoid unpopular taxes. Monetary policy can transfer purchasing power from a basket of currencies into a single currency for paying mitigation rewards. This approach will create some inflation in the currency basket however this inflation is ultimately necessary to make the transition possible.

3) Comparing penalties (under PPP) with rewards (under BPP) using a common yard stick of ‘efficiency’, where in fact penalties and rewards are complements and have inherently different psychological and social effects that deserve individual assessment. For example, we do not consider males to be superior to females (or vice versa) because they are different.

4) A common assumption is that the administration of subsidies and rewards is difficult and expensive. A decentralised digital social network (using digital currencies) will allow the market to undertake most of the administration. Administrative costs can be paid with commissions. Digital currencies have low transaction costs and can be digitally programmed to enforce rules (e.g. with escrow contracts). This will help avoid corruption and reduce reliance on financial intermediaries.

5) Ignoring the importance of a social transformation to break-down political and cultural resistance to carbon taxes (under the PPP). What is overlooked by standard economics is the idea that rewards (under the BPP) will be the catalyst for a social transformation.

6) Failure to accept that civilisation is an integrated physical-economic-social-political system. More specifically, a failure to acknowledge that political delay will be an integral feature of any economic plan for climate change mitigation.

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References

[1]

[2]

[3]

[4]
Andreoni, J. et al. (2003). The Carrot or the Stick: Rewards, Punishments, and Cooperation. The American Economic Review, Vol. 93 No.3.

[5]

Chen D., J. Cloud and J. van der Beek (2015). ‘Global 4C: World Monetary Union for Climate Change Mitigation’. 2015 Canberra Conference on Earth System Governance: ’Democracy and Resilience in the Anthropocene’. Delton B. Chen, Jonathan Cloud, Joel van der Beek (November 20, 2015).

[6]

Chen, van der Beek, Cloud, Jin, Borrego, (2015), World Currencies for Sustainability, World Economics Association (WEA) Conferences, No. 1 2015, Ideas towards a new international financial architecture?, 15th May – 20th July, 2015.

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