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Chris Taylor

May 31, 2014
03:45

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I just had a look at your CRCS website. Some great work you guys are doing there, keep it up. I was thinking about the feasibility of your proposal. Do you really think those in congress will be able to get their heads around what a crypto currency is? Overall, I support your idea, but I'm not sure about it's ethics. You intend to reward those companies which cut their emissions, but what if their emissions are already low. It seems to me you would end up rewarding the big emitters more than those who emit less. The modernity of crypto currencies is very appealing. However, wouldn't the issuing of crypto currencies devalue fiat money - if there is more money to go around, then prices rise. This would mean that it would be the public who pick up the bill for cleaning up companies emissions. Further, companies would have to report their base emissions before they could claim that they had made a reduction. This was a disaster in the EU ETS scheme. Companies claimed that their bases (starting points) were much bigger than they were, which led to an over issuance of allowances. How would you ensure that that wouldn't happen in your proposal. Do you intend to audit every company's emissions. Seems like an administrative nightmare. Hopefully you could address these points, which would make your proposal stronger. Finally, would you be so kind to have a look at my proposal and leave some constructive criticism: https://www.climatecolab.org/web/guest/plans/-/plans/contestId/1300404/planId/1305907

Chris Taylor

Jun 5, 2014
03:51

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Hi Delton - Thanks for your detailed reply. If it’s OK with you, could we keep our discussion on the comments board rather than messaging. I enjoy reading the comments of others, and I’d like to imagine that others could find our discussions informative too. In a way, 4C is quite a straightforward simple solution. Your description makes it appear more complicated than it really is. However! Many companies struggle, just breaking even from month to month. Later in the century, when the price on carbon is above $50/ton, wouldn't these companies be tempted to cut production as a way of raising 4C revenue? It’s standard practice for factories to reduce their workforce when business is slow. Wouldn’t 4C exacerbate that? Perhaps the 4C revenue raised should be carbon intensity related instead.

Gary Horvitz

Jun 8, 2014
12:33

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Just looked at your proposal. Very interesting. I'm not an economist, so perhaps you could educate me about a question I have. You are not entirely clear about what determines the price of your currency. You determine its intrinsic value in terms of carbon emission saved and the object of the whole enterprise is to create more currency. Intuitively I would guess that the more there is of something, the less its value. But since the marginal cost of emission reduction rises, then the value of marginal credits would become greater, yes? Then the accumulation of credits becomes more difficult. Who determines the value of a credit? Similarly, if I am understanding you properly, someone who wishes to accumulate credits might undertake reforestation, calculating the corresponding carbon sequestration added and thereby qualifying to "buy" credits. So the higher the value of credits, the greater the incentive to perform this option. But on the flip side, how is the profit motive of someone engaged in DE-forestation overridden? (Indonesia, Brazil) What if they don't care about credits at all? They are not putting carbon into the atmosphere--unless they're burning the forest. Where's the penalty?

Ross Collins

Jun 27, 2014
04:58

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Hi Delton, I'd like to echo christayor's request that you post your responses to the discussion questions directly in the discussion thread. For one thing, it's in line with the openness of the Climate CoLab community, but it does also facilitate learning for current and prospective proposal authors. Would you mind posting your response to christaylor below? Looks like ghorvitz has some interesting questions in need of answering as well...

Delton Chen

Jul 16, 2014
12:00

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Hello, I am writing here to respond to the old question (June 9). I apologise for shifting around with private messages and missing the thread here. It is actually a bit confusing how the MIT system works. With three websites in development (Global Plan) I have just not quite understood the messaging protocol. I will answer the questions here to be clear: WHAT DETERMINES THE CURRENCY PRICE: The short answer is the governments of G20 nations will determine the price because they want to avoid dangerous climate change. They will buy "4C" in the Forex markets. They can do this because they have control over the money supply (at least with central bank cooperation they do). There are other details around this topic. So far, it appears that the theory we have developed is feasible and meets fundamentals of economic management and good governance. INTRINSIC VALUE: This is very specific. The unit of account is 100 kg CO2-e mitigated or safely stored per 100 years. Intrinsic value is the climate, or more precisely, avoiding dangerous climate change. VALUE AND MARGINAL COST: You are exactly right, the marginal cost of mitigation will rise with time. The 4C price will therefore need to rise with time. The carbon tax, also rises with time. As mitigation rates increase, the supply of 4C increases, and the market price will tend to fall. But this won't happen, because the G20 governments will be buying more for the very exact reason you mention, to keep the price rising. There is no free lunch. Also, avoiding 4C warming is not an option. Avoiding 2-3 C warming may be as dangerous as 4C. The risks are extraordinary. SEQUESTRATION VERSUS DEFORESTATION: People in the Amazon and elsewhere deforest (burn, cut, slash) for a reason. As you know, to make money or to survive. They can make more money by clearing than by leaving land forested. So the economics is simple. If there is money in reforestation or averted deforestation, then these options will be compared with deforestation based (in a big way) on profitability. By rewarding reforestation or averted deforestation with money (ie 4C) they become more profitable. Based on prices, it is very much possible to reduce deforestation. The economics is no different just because its in the Amazon. DEFORESTATION: It would be much better if there were a tax, penalty or legislation to prevent deforestation, but often these are weak or don;t exist in many rural areas of SE Asia, Africa and S America. If we could magically enforce penalties, that would be great, but obviously the governments are not 100% functional. Hence, by applying global rewards, it is possible to offer these with very little cooperation from the national government, especially if the rewards are provided digitally through the internet or mobile phone. The technology is there.

Delton Chen

Jul 16, 2014
01:44

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Hello again, I am replying to ChrisTaylor's question of 31 May. I think I have already answered these questions elsewhere, but I need to complete the thread here. The rewarding big polluters versus clean industry, Firstly, this question is very typical. It is the first question that I receive from from environmentalists that are determined to make big polluters pay their social costs. The Global 4C has four Classes 1,2,3 and 4. The question only applies to Class 1 (Heavy Industry), because the other three are generally OK and don't relate to the question. The rewards to heavy industry need to be assessed for cost-benfit and this includes the social cost of past pollution, and the risk of future damages caused by dangerous climate change. Given that the future damages of 4C warming is more or less a total collapse of civilization, the social cost of not mitigating is extremely high (also for future generations). So the analysis of rewards is currently incomplete if only the Polluter Pays Principle (PPP) is considered. The analysis must also include the future. It also includes social preferences. Unfortunately, the carbon tax is 30 years too late because of the imperfect political system. In standard economics, policy choices do not include the risk of policy vulnerability and political delay. The risk analysis for political delay has been done by climate scientists (see references) and it is very significant. The assumption of environmentalists is that there is no other option other than taxation, but this is a mistake. The reward system we propose is now very relevant because the Earth system is nearing a critical stage whereby the PPP is not going to deliver a safe outcome. Moreover, I would assume, that 99% of the people on ClimateCoLab have not read the work of Garret. Basically, even with a perfect taxation systems, Garret provides reasonable theory to suggest that collapse will occur anyway. Hence, there is no way out of what Garret calls the 'double bind'. Certainly, Guy McPherson has no time for silly ideas like the carbon tax, when arctic clathrates (methane) is de-stablized. And so what might appear to make sense (here on the CoLab) is not necessarily universally correct. With Global 4C, at least we have created a coupling between economic growth and mitigation. No other policy can make that claim. read Garrett's papers. Understand what he says, then come back to me with some serious questions.

Delton Chen

Jul 16, 2014
11:39

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My apologies for the previous comment. It was late at night and I was tired. I would not call the carbon tax 'silly'. It is vital and absolutely necessary. So I apologise profusely for that very poor choice of words. I think that my frustration is that it is quite a challenging to work through so many inter-related topics, all of which are complex in their own right. So I would like to publicly retract the last two paragraphs of my previous statement and make a public apology in case I offended anybody. Faithfully, Delton Chen

Climate Colab

Aug 5, 2014
08:21

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I don't think the creation of a new legal, global currency (digital or otherwise) is realistic. Not sure this is responsive to the topic re a US carbon price, although I appreciate the recognition that a US carbon price, alone, is unlikely to make a meaningful difference. Creating new currencies to reward carbon mitigation seems a bit of a Rube Goldberg answer to the problem - too complicated to understand easily and quite likely to go wrong in some unexpected ways. Nor is it clear how it leads to a conventional system of carbon pricing, which was the question being asked. Either a price is put on carbon or a cap on emissions - either one will create tangible value for mitigation, which can be expressed in available currencies.

Delton Chen

Aug 8, 2014
03:48

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Judges, thank you for this opportunity to comment. I agree that legislating a global digital currency through the U.S. Congress (or other national parliaments) could be very challenging. The political force needed to achieve Global 4C legislation is unlikely to be found in the current political situation in the U.S., especially since major political groups are rivals and relatively conservative. If this proposal were realised quickly, it would more likely to be driven from higher in the political-financial complex. History indicates that national monetary systems and innovations, including the existing debt-based fiat system, were designed and introduced top-down and much less by democratic vote. The British banking system was introduced to promote industrial efficiency, military power, 'options' for national finance, and to serve the hierarchy. An excellent overview is provided in "Money & Sustainability: The Missing Link". I have provided links to the ebook and summary (see below). http://www.triarchypress.net/money-and-sustainability.html http://www.clubofrome.org/cms/wp-content/uploads/2012/05/Money-and-Sustainability-the-missing-link-Executive-Summary.pdf If I were to explain the core limitation of the current fiat monetary system in one sentence, it is simply this: The fiat system has the effect of forcing people to monetize all natural resources and social capital in an effort to remain profitable, pay back debts, and in some cases just to survive. Whilst the above statement may reflect a popular view, what is not intuitive is that new currencies can (and should) be designed to address climate change and other serious problems. Put simply: a currency that is minted by mitigating and sequestering GHGs will allow civilisation to grow wealthier and limit climate change at the same time. A problem for civilisation is that leaders of the political-financial complex have so far failed to evolve the monetary system in response to the existential threat of climate change. As Jarod Diamond and others point out, the collapse of civilisations typically follow a period when leaders fail to make structural adaptations and when the elites are distracted by their wealth and power. Global 4C could resolve the socio-economic problem because it allows resource preservation and delivers genuine 'control' of the mitigation effort to the leaders of the political-financial complex. In todays world (7.3 billion people) the 'control' of climate change will also require new networks of information and cooperation to build new infrastructure and bio-sequester carbon. The ideas being served by traditional economists are, by design, constrained to carbon taxes because this is 'allowable' under the existing fiat system that is a root cause of the problem. Whilst carbon taxes are necessary and useful, if we rely only on carbon taxes, then we will likely commit to 2C, 3C, 4C and finally to the collapse of civilisation before 2100. We are already committing to exceed 2C based on IPCC reports. World Needs 'Plan B' on Climate - IPCC Report http://www.bbc.com/news/science-environment-26922661 Judges wrote: "reward carbon mitigation seems a bit of a Rube Goldberg answer to the problem - too complicated to understand easily and quite likely to go wrong in some unexpected ways." What Global 4C proposes is a digital information network to monitor and reward mitigation and sequestration on a per kg CO2-e basis. This is also part and parcel of the currency minting process. To put this in another perspective, consider that the abatement cost of climate change could be >3% of global world product (GWP). This is marginally greater than what is currently spent on global military. If we were planning to oversee the global military, would we consider an information network and monitoring to be appropriate? Rewards and penalties synergy with each other both at the inter-personal level and at the collaborative level. Traditional economists view rewards as inefficient. The truth is that rewards and taxes are complementary opposites, and the price signal of the two incentive approaches should not be directly compared, but should be used together. A metaphor is the yin and yang, or man and woman. They work in synergy (such as a dance between a man and a woman) and the result is greater than the sum of its parts. The complex behaviour of the real world, such as the dance, is beyond linear modelling and beyond traditional economics. Psychology is also at play here, because economics is divided by political and moral preferences (e.g. classical, neo-liberal, Austrian etc.) and so economists are biased by personal preferences and also by the system that pays their salary in fiat. The traditional economic model is somewhat 'closed' because it does not consider these key issues: (i) efficiency is calculated in fiat and efficiency calculated in other types of money would give a different result; (ii) comparing the price efficiency of taxes with those of rewards ignores the truth that these are complementary opposites and should be considered synergistically and not individually; and (iii) the traditional models do not account for complex real world interactions, events and risks, for example: a natural bias for economic growth, positive feedbacks in the climate system, moral psychology, information bias, social cooperation, religion, herd behaviour, geopolitics etc. An exponential transition to global economic decarbonisation is needed. Carbon taxes are already 25+ years late, and this is because of political delay and not because of a lack of science. A basic assumption is that we can survive dangerous global warming between 2C and 4C by 2100. Hence we can categorically say that traditional economics has 'failed', civilisation is unsafe, and the entire political-economic system needs an urgent review. Under short-term cost-benefit analysis, influential groups will continue to resist carbon taxes regardless of climate change impacts, and this is because the cost of delay, deadlock and political lobbying is much less than the cost of the carbon tax. Global 4C is priced in mitigation of emissions, and so 4C would help reverse this situation. A long-term strategy is not provided by the traditional economic model because it excludes political dynamics related to wars, rising costs, unemployment, recessions, sovereign debt crises, monetary crises, disease, famine, extreme weather, corruption etc. Combine these stresses with poor international co-ordination on pricing, and carbon taxes could sink like a rock in water. The overarching problem for carbon taxes is that the market becomes the enemy of the government when the government tries to de-carbonise the economy (i.e. energy is the fundamental driver of all economic activity and more is needed every year to maintain growth at ~2%). If the government uses Global 4C rewards in combination with carbon taxes, then this dynamic can fundamentally change. A monetary policy is also needed to fund the Global 4C currency so that de-carbonisation can occur without directly penalising influential groups. If influential groups are unhappy, they may destabilise or remove political leaders. No doubt leaders of the current political-financial complex have already asked this question: how do we decarbonise the global economy in an exponential fashion? The political-financial complex is limited by a hegemonic view that fiat currencies are the most precious tool for geo-political advantage. However this view is only valid to a point, because currencies are tools, and like any tool it is only useful when it does a job properly. None of the existing national fiat currencies is fully appropriate for the job of mitigating climate change (i.e. they encourage competitive economic growth and energy consumption). Hence the untested proposal of Global 4C is to introduce this new currency system (minted as rewards) so that both carbon taxes and the new rewards for mitigation can be introduced together. This will 'balance' the costs and allow enterprises to manage their finances in the market place. A critical issue is time. Time is now our most scarce resource. REFERENCES http://www.triarchypress.net/money-and-sustainability.html http://www.clubofrome.org/cms/wp-content/uploads/2012/05/Money-and-Sustainability-the-missing-link-Executive-Summary.pdf http://www.bbc.com/news/science-environment-26922661
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