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Please cite this page as:
Chen, D. B, J. Cloud, J. van der Beek (2016). Global 4C – Monetary and Market Policy for Climate Change Mitigation. www.global4c.org
The Solar Dollar will create major new opportunities for mitigating greenhouse emissions both locally and internationally. The Solar Dollar will be a parallel world currency to be issued as a “reward for carbon” that is mitigated. Carbon taxes, on the other hand, are known as a “price on carbon” and are a penalty for pollution. The Solar Dollar will create new political pathways to achieve central bank coordination, a social transformation, and the deep decarbonisation of the world economy.
Show Transcript. Table of Technical Details for the Solar Dollar.
|Trading Name (Tickers):||Solar Dollar (SOL, SUN, SAM, SON, YAN) is the recommended trading name. Other currencies can be included in the policy.|
|Monetary Standard:||A new monetary standard for ecosystem services is proposed, called the Carbon Monetary Standard.|
|Currency System:||A system of parallel world currencies is proposed, called Complementary Currencies for Climate Change (4C).|
|Policy Name:||The public policy is called Global 4C Mitigation.|
|Unit of Account:||100 kg of CO2-e verifiably mitigated is set as the reference unit of account for coupling the currency supply to greenhouse mitigation.|
|Medium of Exchange:||The medium of exchange will comprise digital networks over the internet, mobile phones, and banking systems, and it will use new technologies for digital currencies and programable digital contracts.|
|Store of Value:||The store of value of the Solar Dollar (i.e. the exchange rate) will be scheduled to rise, and this for rising mitigation stringency and a simultaneous transfer of wealth into the mitigation economy. Future price targets will be guaranteed and managed under an international monetary protocol for coordinating central bank currency trading. The protocol will instruct central banks to use Green Quantitative Easing (GQE) to create fiat and buy the Solar Dollar in open markets. This will spread the mitigation cost as a globalised inflation tax, and it represents a systemic step-change to the world economy. It will ensure that the world economy becomes the ‘engine’ for change and guarantor of the climate system. It will also engender trust in the currency for global trade, and for the forward planning and financing of small-to-large businesses and other multi-decade projects.|
|Social Agreement:||The social agreement will be ratified under a World Monetary Union for Climate Change Mitigation. This will provide the mandate to issue Solar Dollars as debt-free rewards for greenhouse gas mitigation, and it will ratify international rules for assessing all mitigation. The assessment rules will evolve with technologies, and they will be used to audit mitigation work to calculate Solar Dollar issuance. This approach is based on matching auditors with mitigators in contractual relationships, and these relationships will differ to traditional lender-borrower relationships that are common in commercial banking. The financial costs of Solar Dollar rewards will be spread evenly across the global economy with internationally coordinated Green Quantitative Easing (GQE), and the approach will be justified under the Beneficiary Pays Principle. The policy will avoid new taxes and budget cuts. Market actors may trade and invest in the Solar Dollar to maximise their welfare. Solar Dollar prices will be managed under the mandated monetary protocols to continuously and adaptively achieve carbon budgets and mitigation objectives specified under U.N. agreements.|
Clarification: This Solar Dollar proposal differs significantly to a currency proposal with the same name, by Thomas Greco (author, community economist). Greco’s Solar Dollar proposal is for a new credit instrument for local electric utility companies. For more information on Greco’s Solar Dollar concept, please see Beyond Money and this discussion paper. The information provided below relates to the Global 4C Mitigation Policy, which is a monetary-and-market based climate mitigation policy.
“Even the darkest night will end and the sun will rise.”
Vitcor Hugo (1801–1885) – Les Miserables
The Global 4C Mitigation policy for the Solar Dollar is explained here, and also in our winning proposal in the 2015 MIT Climate CoLab for a global plan to mitigate climate change. The Solar Dollar will have many benefits for society, including the ability to avoid political delay because it can be introduced by private enterprise under a profitable business model. The currency will be digital for trading over the Internet and mobile phones, and will probably use technologies based on the Bitcoin blockchain, Etheruem, or similar. The Solar Dollar:
- will be an official world currency, and will not be a carbon credit or a carbon offset;
- will create a price signal that aggregates with the price signals created in carbon markets; and
- will not be associated with carbon that is previously rewarded with carbon offsets.
The sun is the metaphor for the Solar Dollar. Our sun emits radiant energy through the process of hydrogen fusion. The sun’s radiation powers life on Earth. Our most useful sources of energy tend to be highly concentrated, and the sun is symbolic of this concentrated energy. The purchasing power of all of the world’s currencies is coupled to primary energy usage. Most of our primary energy originates from the sun, including the fossilised solar energy in coal, oil and gas; and present-day solar energy in solar PV, solar thermal, wind, hydropower and biofuels. Geothermal, tidal, and nuclear energy are the exception.
Solar Dollar Blueprint
Unit of Account (The Key)
The Solar Dollar will have a unit of account of 100 kg of CO2-e verifiably mitigated. This is defined under a Carbon Monetary Standard. The Solar Dollar will be an official currency and will not be issued as a tradable pollution offset, credit, or a tax. The unit of account is ‘The Key’ because it seeds the logical framework for the entire policy. The choice of unit of account is critically important, because it defines what society is ‘counting’. By adopting ‘100 kg of CO2-e verifiably mitigated’ as the unit of account of an official currency, the currency can be used as a measure of greenhouse gas mitigation. An official currency based on this unit of account will also represent a major departure from the traditional monetary standards of commodity currencies (e.g. the gold standard) and fiat currencies (e.g. the floating exchange rate system).
Administrative System (The World Tree)
The Solar Dollar will be managed and delivered through a digital administrative system that will be implemented over the Internet, banking systems, and mobile phone communications. Technologies that enable decentralised currencies, programable digital currencies, and digital contracts may be used, and are likely to enable critical administrative tasks. We call the administrative system the World Tree. The purpose of the World Tree is to apply the monetary blueprint of the Solar Dollar, and that blueprint is represented by the Triadic Logos of Money shown in Figure 1. By some coincidence or special relationship, the three struts of the Logos are correlated with three well-known religious motifs, called the Tree of Life, the Tree of Knowledge, and the Kabbalah Tree of Life. This correlation of the World Tree blueprint with the story of Genesis is explained below with ontological reasoning (see below).
Figure 1. The Triadic Logos for the Solar Dollar, and the blueprint of the World Tree.
Medium of Exchange (Digital Tree of Knowledge)
Since the late 20th century, national currencies have been traded as digital records over computerised networks. These days only a relatively small percentage of national currencies actually exist as physical banknotes and coins. Modern currencies are therefore bits-and-bytes sent over networks and stored on computer systems. This has massively increased our capacity to associate currencies with other types of information and communications. The medium of exchange for the Solar Dollar is therefore an information and communications network. In this situation, we have not changed the definition of money, but we have realised that money can be integrated into the Internet, banking, and tele-communications networks.
Global 4C will utilise global digital networks to ensure that the Solar Dollar is available from the Internet and mobile communications. What this means philosophically, is that we will combine the concept of money and with the concept of decentralised intelligence. Given that a ‘tree topology’ is an effective architecture for network decentralisation, we may claim that the media of exchange for the Solar Dollar is in fact a ‘tree of knowledge’. This reference to a tree of knowledge correlates with the Tree of Knowledge as described in the book of Genesis.
Store of Value (Biological Tree of Life)
Fiat currencies, which are created mostly by fractional reserve banking, are ideal for rapid economic growth and financial speculation because the fiat supply is readily increased as new loans or by Quantitative Easing (QE). Plutocrats may have privileges provided by the banking model and currency markets, and this may contribute to wealth inequity. In any case, a currency’s value is always contextual, especially given that currencies are created for multiple purposes and stakeholders. Most national currencies are designed for the following common values:
• To provide citizens with a convenient tool for trade and investing (a personal benefit).
• To resolve the double coincidence of wants in markets (a social benefit).
• To build a nation state with economic vitality, stability, and geopolitical influence (a national benefit).
The above three common values do not specifically include the global context of the climate system, ecosystems, and human rights. Our existing currency systems are simply not designed to protect the climate, ecosystems, or agriculture, and nor are they designed to maintain peace and security. Global 4C introduces a new currency system, the Solar Dollar, that could create a fourth common value in a global context:
• To stabilise the climate system and protect the planetary ecosystem (a global benefit).
If the Solar Dollar is used to help protect the planetary ecosystem, then the store of value (i.e. its value in a global context) will include the biological tree of life. This reference to the tree of life correlates with the Tree of Life as described in the book of Genesis.
Social Agreement (Institutional Tree of Life)
To define the complete social agreement for the Solar Dollar, it is necessary to define the major new institutions to manage operational tasks (see Figure 2). The primary institution will be (1) an international agreement which may be called a World Monetary Union for Climate Change Mitigation. The other new institutions can be grouped into institutions for currency markets and mitigation markets.
The first group, for currency markets, includes (2) a monetary protocol for central banks to conduct Green Quantitative Easing (GQE) and to trade Solar Dollars with fiat currencies, and (3) a team of experts who will estimate the multi-decade floor price schedule for the Solar Dollar. These floor prices will be fed into the monetary protocol. The central banks will interact with (6) the Solar Dollar, and the world currency market (shown as a dotted circle in Figure 2).
The second group of institutions are those required to manage global mitigation markets. These may be grouped into (4) an institution to manage assessment rules for all types of greenhouse abatement; and (5) an institution to manage assessment rules for all types of greenhouse sequestration including bio-sequestration with land management. The other major institutions for mitigation include those for (7) verification to reduce free-riding; (8) mitigation assessments and auditing; (9) managing software, data, and physical networks; and (10) the global mitigation market. The entire ensemble of ten major new institutions and twenty-one major relationships has correlation with the Kabbalah Tree of Life.
Figure 2. The social agreement for Global 4C will require at least ten major new institutions for operational purposes (Chen at al. 2015 ).
The Solar Dollar will be a vehicle for a worldwide social-and-environmental movement that can circumvent unproductive rhetoric of politics by launching without inter-governmental agreements. In a sense, we can use the Solar Dollar to lead a new monetary narrative, rather than following the same old political narratives. It is argued that a balance of Solar Dollar rewards, conventional carbon taxes, and fair regulations is necessary for society and businesses to experience a social transformation towards a sustainable economy. The Solar Dollar will provide the trigger for social transformation because it speaks a common language – value. The Solar Dollar will be issued directly to enterprises, firms, citizens, as a reward for greenhouse mitigation, assuming that the applicants can pass a reliable auditing and assessment process. This will help avoid the corruption and inefficiencies of intermediaries. The Solar Dollar will be used to create a worldwide public database for sharing knowledge about all types of abatement and sequestration. This will lead to greater market efficiency and social inter-connectedness. The policy for the Solar Dollar is very clear – it will request a guarantee from all of the world’s major central banks to create a multi-decade bull market in the Solar Dollar currency. The Solar Dollar price will be scheduled to rise over the coming decades, to ensure that greenhouse emissions are mitigated, and to significantly improve our chances of staying below 1.5-2°C of global warming as defined under Article 2 of the 2015 Paris Agreement. The Solar Dollar bull market will also allow citizens and firms to protect wealth during a period of tumultuous change.
Social and Environmental Movement
The implementation of the Solar Dollar will be done in two major stages. During the first stage, the Solar Dollar price will rise by social demand. When citizens buy the currency (ideally in small amounts) they will be asked to sign a global digital petition for official recognition of the policy by the United Nations. They will also be asked to invite their friends to join the movement. The movement will attract massive public support and a massive petition, requesting that a new international agreement be negotiated under the United Nations to establish the Solar Dollar as an official (parallel) world currency. The Solar Dollar will then be backed by a World Monetary Union for Climate Change Mitigation. This World Monetary Union will coordinate the world’s central banks to undertake currency trading so that the Solar Dollar price will rise as high as is needed to achieve the climate mitigation ambitions of the 2015 Paris Agreement. The outcome of this approach will likely be a paradigm shift in economics and social consciousness.
The first stage involves completing theoretical papers and establishing a consortium to build the World Tree administrative system for the Solar Dollar. Administration will be decentralised over the Internet to enable the assessment (by licensed auditors) of carbon mitigation and sequestration that occurs anywhere in the world. The digital currency will be issued (as a proportional reward) to enterprises after they submit their mitigation data to prove that mitigation has occurred. Verification will have four levels (i) standard audits; (ii) transparency and reputation; (iii) public oversight with social networking; and (iv) random and targeted audits.
It will be necessary to attract millions of people to support the Solar Dollar policy by trading the currency over the Internet and mobile phones. After a critical mass of people, firms, and institutions are involved in the Solar Dollar, diplomats of various nations (esp. ‘at risk’ nations) may deliver the petition to the United Nations for registration as an official world currency. The aim will be to bring the policy into international negotiations, so that political leaders and central bankers can consider and negotiate the policy.
The second stage is to establish the World Monetary Union for Climate Change Mitigation. Central bankers will be requested to negotiate a monetary protocol that will provide the required financial support for the Solar Dollar, and this will likely involve Green Quantitative Easing (GQE). The Solar Dollar price will be programmed to rise over decades to incentivise and financially reward all types of mitigation and sequestration, and in all sectors of the economy. The Solar Dollar will complement carbon taxes, cap-and-trade, and regulations, and will put upward pressure on carbon prices over time because any carbon that is rewarded with Solar Dollars will be removed from carbon markets.
Figure 3. Politico-economic analysis suggests that (Top) the Solar Dollar and World Tree can be implemented quickly with a design-and-build approach because it invites decentralised authority, and (Bottom) the carbon price is challenging to introduce because it relies on centralised authority.