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A proposal for a monetary policy to address climate change and strengthen international cooperation.


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Summary

>Global & Land

Climate science is telling us that our actions today could have potentially devastating consequences. Nature will not wait as we struggle with our economic and political issues and differences of perspective. A key challenge for the U.S. government and constituency is to craft effective legislation to deal fairly with the country's greenhouse emissions, but this task is challenging because taxes and regulations attract opposition from groups concerned with economic growth. 

Our proposal has clear objectives and potential for fundamental change. The objective is to create a price on carbon as a reward for reducing greenhouse emissions or sequestering. The idea is to complement future carbon taxes or fee & dividend with positive financial rewards as this is anticipated to significantly improve opportunities and better synchronize financial objectives in the economy.

The proposed delivery system for the rewards is a new currency. This may be a digital (crypto) currency over the Internet, but a key requirement is that the currency be integrated with the national and international banking system. We believe that this approach will be economically efficient by providing financial incentives and creating information networks for mitigation. Moreover, Congress need not assign a price to the new currency, because the price could be managed with monetary policy of successive governments. Hence the second objective is this: to create a strong macro-economic tool for governments to manage mitigation and supply a new global currency for trade. 

We call this plan Global 4C. It is a proposal to build a new pathway for international cooperation around a currency and invite other governments to help raise its value for the next 50 to 100 years. This is to ensure that the world undertakes adequate greenhouse mitigation and sequestration. This proposal could make all the difference by balancing taxes with rewards and so allowing markets to undertake deep decarbonization.

 


Category of the action

Mitigation - Helping U.S. enact carbon price legislation


What actions do you propose?

Below we give an introduction to the new currency, propose short-term actions, and then discuss the long-term actions that will be needed to mitigate GHG emissions and stabilize the global economy under the Global 4C plan.

The price signals of carbon taxes and our (proposed) mitigation rewards are additive. In other words, every dollar in carbon taxes and every dollar in rewards will influence business decisions. This point is highly important because business decisions are usually based on profitability. The proposed rewards will help finance de-carbonization and reduce the cost burden for families and enterprises. 

  • Rewards are advocated to cut through political conflict and create a price signal. 
  • Digital money has the advantage of traceable data and contracts to prevent free-riding and fraud.
  • Verification of mitigation (kg CO2-e per 100 years) is strengthened by decentralized authority

 

The rewards will be delivered as new currency that we call Complementary Currencies for Climate Change (4C). This essay is a sub-proposal of Global 4C: an integrated action plan for the world as a whole that is officially titled the Global 4C Mitigation Policy (g4cm.org). Global 4C is effectively a tool for governments to mitigate climate change with monetary policy. A concern of some environmentalists over Global 4C is that big polluters might make a lot of money for mitigation after making a lot of money whilst polluting. The 4C reward rules have been designed to avoid this situation. Referring to our main proposal, we show that the rules for cleaner energy in power markets will reward suppliers without unfairly benefiting big polluters. Also, we provide reward rules for reducing emissions by families, light industry, agriculture, etc., and rewards for sequestration and better land management. Rewards for heavy polluting industries will depend on the importance of the price signal in the market, social equity, and cost-vs.-benefit of options. One option is to divert rewards for major polluters into a Public Trust (investment) but this depends on social preferences. Socio-economic principles are covered in our main proposal.

The 4C is a currency and price that can be called the "reward for carbon". The 4C price (i.e. exchange rate) can initially 'float' in the market and so Congress is not burdened by the costs of mitigation. The 4C will be incorporated into the long-term monetary policy of government, and in this way the 4C price can be managed over many decades in an adaptive response to climate change.

To legally establish 4C in the United States, a political decision will be needed in Washington to introduce a bill for the proposed 4C currency. We recommend that the bill be written to ensure that it can be used in a future internationally coordinated mitigation policy. The following bill title and four key technical items are suggested:

Bill to Introduce Legal Digital Currency in the United States for Rewarding the Mitigation of Greenhouse Gases and for General Trade: 

(Item 1) The U.S. government legislate a national crypto-currency for the Internet that is legal tender in the U.S. and recognized as such by the IRS

(Item 2) The unit of account for the currency should be 100 kg CO2-e (mitigated) so that it can be pegged to GHGs that are mitigated by enterprises, and should only be minted and issued to enterprises as a proportional reward for mitigation. 

(Item 3) The authority to issue 4C as rewards should be given to service providers that have sufficient technical capability and public trust, but not requiring a traditional banking license.

(Item 4) The currency should have a floating exchange rate, should be fully convertible with U.S. dollars, and should be traded in one global market so that other 4C currencies of other nations can equilibrate prices (under the Law of One Price).

Legislation of this nature (and in combination with carbon taxes) will send a clear message to the world that the United States intends to use market solutions to strongly mitigate greenhouse emissions. Some relevant words from Nelson Mandela (July 18, 1918 – December 5, 2013) "Money won't create success, the freedom to make it will." While Mandela was talking about a different situation, there is a common point about the importance of 'opportunity'. Global 4C is offering enterprises more opportunity to do the 'right thing', which is to reduce carbon emissions and sequester carbon.

Using the analogy of a 'ship and anchor': government is the ship, and the 4C currency is the anchor. It is necessary to tie the anchor to the monetary policy of government with a strong chain: verification. With strong verification of mitigation, the ship is firmly anchored. 

ACTIONS: There are both direct and indirect ways of presenting Global 4C to the U.S. Congress. The direct approach is to identify those members of Congress most likely to be receptive and reach out to their offices. The goal is to identify the legislative and political aides most able to (a) absorb the concept, and (b) to pass it to legislators in a form that can be acted on. There is a growing number of high ranking officials in Washington who are working on climate change policy and have the background to assess this proposal.

The indirect approach is to engage independent organizations that already do advocacy work in Washington. The challenge and opportunity is to communicate that, because of the climate crisis, a new strategic national and international policy is needed to avoid triggering a tipping point and imposing unfair costs on future generations. The message is that Global 4C overcomes the weaknesses of other proposals, by providing i) options for fair international cost sharing, ii) congressional involvement in planning, iii) keeping living costs low, iv) establishing a direct cause-and-effect between prices and mitigation, v) not encouraging jobs to go to overseas, and vi) ability to scale-up to meet the challenge.

Our current actions include the writing of a collaborative paper with economists, engineers, and scientists from around the world. We are creating a web site for the Global 4C manifesto. Lobbying in Washington requires financial resources that we do not have. To get this in front of policymakers in both the United States and around the world we will need help from the private and public sectors and from other NGOs.

VISION: There is a long-term vision and economic rationale for Global 4C as explained below and in Table 1. The centerpiece of this vision is an international system of five currencies for world trade and for rewarding enterprises that mitigate GHG emissions or sequester GHGs.

The five currency architecture was chosen as a trade-off between flexibility and practicality for international negotiations. The five 4C currencies will each be managed by one council, of which there are four regional councils (i.e. North, South, East and West) and one World council. Each council represents a geographic region and its portion of the global economy. The total GDP of the North, East and West regions are of the same magnitude, however there is no need for these to be equal. The World 4C Council acts as the mediator for World institutions and banking, and may have the added responsibility of using commodities to leverage the World 4C price. Nations not wanting to join their regional council may chose to join the World 4C Council. Membership is voluntary.

All member nations are committed to sponsor their regional 4C currency, and in return their enterprises are entitled to participate in 4C rewards. A special case will be made for nations with forests and ecosystems at risk of degradation, logging, clearing and fire, and these nations may participate in 4C rewards without providing sponsorship (under the global rules). The 100 kg CO2-e (mitigated) is the unit of account for all of the 4C currencies, and this condition must be maintained globally. Each of the five regional councils will negotiate the trade conditions and convertibility of their 4C currency with their member nations. The same councils will then convene to negotiate their long-term commitments to raising the exchange rate of their particular 4C currency (Fig 3). The idea is to  coordinate the monetary effort of each region to equitably achieve the desired de-carbonization of the global economy.

National commitments can be managed with Quantitative Easing (QE) or other approaches, however QE may be the most efficient method. The Global 4C Mitigation proposal has a long-term goal of raising the value of all 4C currencies so that greenhouse emissions can be strongly mitigated and sequestered (Fig 3). The system is designed so that all five currencies are traded in a single global market with an interface with the international financial system. By a 'single global market' it is implied that enterprises in any participating nation will be able to chose any combination of 4C currencies as their due reward for mitigation or sequestration. This single market will equilibrate 4C currency prices by the 'Law of One Price'. 

GLOBAL DISCUSSION: The following quotes show that Global 4C addresses a common thread in the contemporary narrative on climate change, economics and politics.

RISKY BUSINESS PROJECT

“…Taking a cautious business as usual approach [on climate change] is in fact radical risk taking”. - Henry M. Paulson, Jr. (Co-Chair) & 74th U.S. Secretary of the Treasury (2006-9)

BILL GATES ON (1) FOX (2) REDDIT

“Digital money has low transaction costs which is great for the poor because they need to do financial transactions with small amounts of money. Over the next 5 years I think digital money will catch on in India and parts of Africa and help the poorest a lot.” -  Bill Gates

U.S. CONGRESSMAN

“…Until the American people are free to choose the money they want to use, and not what the government forces them to use, the economy never will be truly stable and any recovery will be illusory.”  – Ron Paul (July 31, 2012).

REUTERS ON CHINA U.S. TALKS

"This is a classic example of an area of a global challenge [Climate Change] for which U.S. China cooperation is an essential ingredient of any long term solution." - official commenting on high level talks over exchange rate reform and climate change.

FRENCH FINANCE MINISTER

“We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don’t think so. I think a rebalancing is possible and necessary, not just regarding the euro, but also for the big currencies of the emerging countries, which account for more and more of global trade,”  - Michel Sapin (July 07, 2014)

PRINCETON PROFESSOR

“…And at the rate we are emitting, the world would exceed the 2 degrees Celsius (3.6 degrees Fahrenheit) temperature change limit … Marginal cuts by the U.S. don't have a long-term overall big effect on the climate. …What has to happen to have a big effect on the global climate is for all the big emitters to get together and decide that they are all going to cut some substantial fraction [of emissions]." - Michael Oppenheimer, Princeton University

U.S. VICE PRESIDENT

“… We have to put a price on carbon in our markets, and we need to eliminate the massive subsidies that fuel the profligate emissions of global warming pollution.” “ExxonMobil, Shell and many other holders of carbon intensive assets have argued, in essence, that they simply do not believe that elected national leaders around the world will ever reach an agreement to put a price on carbon pollution.” - Al Gore, 45th U.S. Vice President, Nobel Peace Prize

HOUSE JOINT RESOLUTION NO. 557

“Establishing a joint subcommittee to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.”  – Report  (January 12, 2011)


Who will take these actions?

CURRENT: We are a team of volunteers operating from the Center of Regenerative Community Solutions, NJ, United States. We are working on a policy proposal and seeking sponsorship for undertaking an economic modeling study and policy assessment.

Currently we have a team of 8 PhD economists, 1 PhD civil engineer and 3 student interns working on the seminal papers to explain the macro-economic theory and social equity issues as they relate to the use of complementary currencies for correcting market failures in public goods and services. A 100+ page technical report defining the Global 4C Mitigation rules is available to sponsors and partners.

Our team for dealing with sponsors and partners is listed here: www.g4cm.org, and includes:

Jonathan Cloud (Executive Director) jcloud@crcsolution.org

Center for Regenerative Community Solutions and New Jersey PACE 501c3 non-profit Organization, NJ, United States

Theresa Carbonneau (Strategic Business Consultant) tcarbonneau@mac.com

Delton Chen (Lead Author & Coordinator) g4cm@email.com

Joel van der Beek (Community Sponsor) info@econovision.nl

EconoVision, Economic Research & Advice, The Netherlands

We will grow the team after securing sponsorship and partners for the Global 4C study.

FUTURE: The team will expand in the future to undertake advocacy and political networking focusing on Washington, other capital cities in the U.S. and international connections in Europe, China and India.

VOLUNTEER VACANCIES: Global 4C would welcome volunteers to help with:

  • Press Releases, Bookings and Engagements
  • Sponsorship Introductions and Applications
  • Graphic art for website design
  • Contact: g4cm@email.com

 

OTHER STUDY TEAM MEMBERS:

Dr  Hailong Jin (Canada); Dr  Sreekanth Venkataraman (India); Dr  Radmilo Pesic (Serbia); Dr  Phu Viet Le (USA); Dr  Tong Wang USA); Dr  Armonia Borrego (Mexico); Dr  Jan Kunnas (Finland); Mrs  Griva Shah (UK/India); Mrs Veronica Caraman     (UK); Mr  Harmanpreet Kaur Bhullar  (UK/India)


Where will these actions be taken?

CURRENT: Our team is currently working from various locations North America,  Europe, Asia-Pacific and India. We are seeking sponsorship for a detailed study and a policy white paper that will define the terms of reference for Global 4C Mitigation and officially present it to think tanks and policy makers. Sponsorship and partnering is being sought from both public institutions and private enterprise.

FUTURE: The study needs to be international and collaborative because the objective is a new international currency system for global GHG mitigation. The current policy host iswww.crcsolutions.orglocated in NJ, United States. During and after the policy study, we will seek support from climate scientists, economists and policy makers from various nations. Advocacy will then focus on the United States administration and Congress, and on the Chinese administration (these being two of the most important groups for policy on mitigation and currencies). 

For governments to begin Global 4C negotiations, a framework of five 4C host countries and one host institution is suggested (see Table 1). These will most likely be the United States, China, European Union, India, Switzerland, and the United Nations. A starting point for negotiations could be a five-currency system to be managed and delivered by the country hosts (note: a multiple currency system can be designed to equilibrate under the Law of One Price).


How much will emissions be reduced or sequestered vs. business as usual levels?

The objective is deep de-carbonization and a CO2-e peak of 450 ppm and then to sequester to <400 ppm by 2100. We propose that Global 4C will facilitate this by coordinating international monetary flow into the 4C market. The 4C price will rise adaptively, whereas carbon taxes will be pre-determined in various legislations.

Business-as-usual might yield 1,800 Gt CO2 by 2100. In this plan the carbon budget will be limited to <2°C warming (about 950 Gt CO2 between 2011-2100). This can be achieved because 4C rewards are globalized and can be used to finance improved land use and bio-sequestration to counteract previous emissions. 4C will also finance other sequestration technologies, cleaner energy sources and emissions reductions in all sectors of the economy. The 4C rewards complement the fee-and-dividend and carbon taxes (of each nation). Monetary expansion into 4C will also help national/global economies to manage aggregate demand and recover from recessions or financial crises.

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What are other key benefits?

PHYSICAL: The unit of account for 4C currency is 100 kg CO2-e that is verified as mitigated for 100 years. Digital currencies enable this conditionality to be redressed by contract (micro) or addressed by demurrage (macro).

SOCIAL: Global 4C will create a sense of global unity given the information sharing (social networking) and financial benefits. Social cohesion is expected to improve with better environmental management. A strategic benefit is the ability for the 4C to transcend environmental disasters, civil unrest and political upheavals. 4C, with its strong price, will offer an alternative currency in economies that might suffer inflation.

POLITICAL: Global 4C rewards will be funded by monetary policy that avoids direct taxation. Global 4C will therefore synergy better with the politics of economic growth.

ECONOMIC: Global 4C will reward those who contribute to society’s wellbeing. It will also create an international reserve currency and so provide liquidity for globalized trade. 

 


What are the proposal’s costs?

FEASIBILITY: Economic study is $0.75 -1.0 million USD with private and public partnering.Please contact g4cm.org.

ADVOCACY: In kind with partners and sponsors.Please contact g4cm.org.

OPERATION: The marginal cost for data collection & verification will fall rapidly with the emergence of the ‘internet of things’.

ABATEMENT: The global abatement cost for de-carbonization to 450 ppm CO2 (<400 ppm by 2100) is roughly 3.1% of GWP (Tyndall Centre, 2006). The cost to markets will include a $20 trillion fossil asset write down. Investment of about $48 trillion will be needed for new energy by 2035.

CONCLUSION: Carbon can be globally deleveraged with rising government purchases of 4C over 100 years. This will diversify reserve currencies (fiat and gold) and will reward mitigation and sequestration (M&S). A caveat is that the 4C must be supply-pegged to CO2-e mass of M&S to ensure it is physically coupled to the climate. 4C rewards for M&S can bypass banks and improve currency liquidity for global trade (i.e. a new 'carbon-Keynesian' policy).

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Time line

Presented is a slow-track timeline for policy development. A fast track might involve parallel projects to develop 4C pilots in various situations. 

TIME LINE FOR GLOBAL 4C MITIGATION:

(A) July 2014-Dec 2014: Find sponsors and partners for Global 4C, Launch Website (g4cm.org), Publish Journal Papers defining the 4C Economic Instrument

(B) Jan 2015-Dec 2015: Global 4C Study Commences, Set-up Collaborative Website (g4cm-policy.org), Undertake 4C Macro-Economic Modeling, Undertake 4C Policy Analysis, Undertake 4C Legal and Constitutional Review, Undertake 4C Ethics Review, Direct outreach for political and policy allies in Washington

(C) Jan 2016-Dec 2016: Global 4C Study Continues, Develop Multi-Media Presentations, Publish a 4C Policy White Paper, Present Key Findings (Conferences), Direct outreach for political and policy allies in Washington 

(D) Jan 2017: Find Financial & Political Sponsors for Advocacy, Find Policy Custodians, Build Strategic Alliances, Strategy for a bill to Congress


Related proposals

Integrated action plan for the world as a whole:

Global 4C: Empowering Humanity for Carbon Transition with Smart Money

Global 4C is the international currency reward system and enterprise network for climate change mitigation and integrated land management.

Land use:

Global 4C: Managing Land for Carbon Sequestration with Smart Money

Global 4C advocates a new source of global finance that will reward carbon bio-sequestration and the protection of biodiversity.

 


References

[1] World Bank (2012). Turn Down the Heat: Why a 4°C Warmer World Must be Avoided.

[2] Chen, D.B. (unpublished). Global ‘4C’ Mitigation Policy: Complementary Currencies for Climate Change. Working Paper 1 – Theory and Concepts.

[3] IPCC, 2013: Summary for Policymakers. September, 2013.

[4] PwC (2012). Too late for two degrees? Low carbon economy index 2012. Pricewaterhouse Coopers.

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

[6] Garrett, T.J. (2014), Long-run evolution of the global economy: 1. Physical basis, Earth’s Future, 2, 127–151, T. J. Garrett.

[7] Garrett, T. J. (2012), No way out? The double-bind in seeking global prosperity alongside mitigated climate change, Earth's Future, Volume 2, Issue 3, pages 127–151, March 2014

[8] McKibben, B. (2014). A Call to Arms: An Invitation to Demand Action on Climate Change. Political News, Rolling Stone. May 21, 2014.

[9] Payton, L (June 9, 2014). Tony Abbott, Stephen Harper take hard line against carbon tax: 'Job-killing carbon tax' criticized by Australian, Canadian prime ministers meeting in Ottawa. CBCNEWS Politics.

[10]  Anderson, K. (2012). Climate change going beyond dangerous – Brutal numbers and tenuous hope. Development Dialogue September 2012. What Next Volume III. Climate, Development and Equity.

[11] Socrates (470-399 BC). Socratic paradoxes: “No one desires evil”

[12] Stern (2013). The Structure of Economic Modeling of the Potential Impacts of Climate Change: Grafting Gross Underestimation of Risk onto Already Narrow Science Models. Nicholas Stern, Journal of Economic Literature 2013, 51(3), 838–859.

[13] van Vuuren et al. (2011). RCP2.6: exploring the possibility to keep global mean temperature increase below 2°C. Climatic Change (2011) 109:95–116.

[14] Randers (2012). 2052: A Global Forecast for the Next Forty Years. Report to the Club of Rome commemorating the 40th anniversary of The Limits to Growth.

[15] The Economist (2012). Man and Machine: Ray Dalio. The economic ideas of the world’s most successful hedge-fund boss. The Economist, March 10, 2012.

[16] Dalio (2014). How the Economic Machine Works – Leveragings and Deleveragings. Economic Principles, Draft Version. Ray Dalio. Copyright 2014, Bridgewater Associates, LP, (210 pp.).

[17] Rogelj, J. et al. (2013). Probabilistic cost estimates for climate change mitigation. Joeri Rogelj, David L. McCollum, Andy Reisinger, Malte Meinshausen, & Keywan Riahi. NATURE, 80, Vol. 493, 3 January 2013.

[18] IPCC, 2014a: Impacts, Adaptation and Vulnerability. Contribution of WG II to the Fifth Assessment Report (AR5). March, 2014.

[19] IPCC, 2014b: Mitigation of Climate Change. Contribution of WG III to the Fifth Assessment Report (AR5). April, 2014.

[20] Weyant et al. (2014). The EMF27 Study on Global Technology and Climate Policy Strategies. Climatic Change, April 2014,

[21] IEA (2014). World Energy Investment Outlook 2014.