Can a ‘Carbon Coin’ Save the World?
As the novel opens in the near future, a heatwave extinguishes millions of lives in a matter of weeks, but it’s a utopian story. Its happy ending features humanity rapidly decarbonizing a multitude of systems, maintaining a livable planet.
In the genre of cli-fi, or climate fiction, “Ministry for the Future” has attracted an avid following — and not mainly for its visions of a post-fossil-fuel future through which airships and solar-powered ocean transport ships glide.
Instead, the book’s wonky solution of a “carbon coin” is what’s offering room for optimism in certain crowds of futurists, economists and hopeful innovators.
“I believe very strongly that this is one of the reasons why my novel has been taken up with such enthusiasm over the last couple of years,” said author Kim Stanley Robinson during the GreenBiz VERGE 22 event in San Jose, California, in October. “It seems to suggest that there’s a viable plan, that it could be done, that it could be paid for and that we can squeak by, and people want that story.”
The idea of a digital currency tied to CO2 mitigation efforts is building into a movement, and a timeline is moving forward to build a demonstration project exploring if and how it might work in real life.
In the book, protagonist Mary Murphy, a former Irish foreign minister with shades of Christiana Figueres and Mary Robinson, runs the fictional Ministry for the Future, an agency with the climate crisis as its top foe. She brings central bankers together at a table, literally, and demands that they adopt a carbon-based global currency, which ultimately accelerates climate solutions at enviable speed and scale, effectively saving the planet from further catastrophic warming.
Robinson got the plot idea when he stumbled across a little-known 2018 paper, “Hypothesis for a Risk Cost of Carbon: Revising the Externalities and Ethics of Climate Change,” co-authored by Australian civil engineer Delton Chen. The sci-fi writer then reached out to Chen, whose organization Global Carbon Reward is advancing the concept.
“It was a bit of a surprise to be dealing with a science fiction novel,” Chen said of reviewing the novel with Robinson ahead of publication. “But in reality, when you develop a policy, it’s storytelling. It’s economic storytelling, it’s political storytelling.”
What’s a Carbon Coin?
Robinson described Chen’s concept as creating a carbon standard the way there used to be a gold standard, with units of CO2 serving as the infrastructural underpinning of the economy. One unit would be equivalent to, say, a metric ton of mitigated carbon dioxide (equivalent) for a century. The global currency would be a standard and national currencies’ exchange rates with it would vary. It’s not a “coin” that individuals would bank and shop with.
The idea flips a tax or price on carbon on its head, standardizing carbon as a reward or “carrot” rather than a “stick.”
In theory, a carbon coin would enable businesses and policymakers to place a price on carbon removal efforts that are otherwise hard to quantify. In addition, there’s no need for carbon offsets because direct CO2 removals are happening left and right.
A carbon currency is an untapped mechanism that economists aren’t thinking about much, yet it could fund climate mitigation rapidly at the scale of trillions of dollars through monetary policy, attacking the “free rider” problem and not creating debt, Chen said. “And by avoiding debt, by avoiding directly charging citizens, businesses and governments, I think it will solicit much more cooperation.” The carbon currency connects with other ideas too, such as decentralization, the ability to use blockchains and sharing information from markets, he added.
We’re in a capitalist world and it needs to be a public-private partnership. The actual work will be done by a lot of private corporations, but the payment for them may need to be directed by and even paid for in the first place by government.
Robinson described Chen’s main concept as “a targeted kind of Keynesian stimulus,” which he regards as “the most effective, the most socially just method that we can deploy right now,” as opposed to ideas stemming from a neoliberal, trickle-down economic framework.
The novelist referred to the British Treasury taking over the Bank of England during World War II to keep the nation afloat. “Well, now the whole world has a pressing existential problem, which is climate change and a mass extinction event,” Robinson said. “We’re in a capitalist world and it needs to be a public-private partnership. The actual work will be done by a lot of private corporations, but the payment for them may need to be directed by and even paid for in the first place by government.”
Real World Tests?
A tagline on the Global Carbon Reward (GCR) website touts a shift “from climate gridlock to a regenerative financial system.” The organization’s three-part vision to resolve the climate crisis is to stimulate climate mitigation; to coordinate people, markets and governments to participate; and to “rebalance the economy.” GCR details the beneficiaries of a “carrot-stick” carbon pricing and reward system as being cleaner energy, cleaner business and carbon removal efforts.
After operating in stealth mode for at least eight years, GCR is moving forward with a strategic plan. Chen met in person in California in October for the first time with seven members of the interdisciplinary team, whose experience includes renewable energy, banking and climate policy. They seek to raise $6.5 million to launch a policy demonstration of a carbon currency that will take roughly three years, he said. (A concept paper is available for potential supporters.)
That demonstration is designed to engage with “the decision-makers in business who will be asked to mitigate quickly for the reward,” Chen said. “This is social science; we’re not going to build a currency straightaway, but the idea is to map the views and opinions to get that feedback so we can understand that this policy can trigger an exponential response that we need,” he said.
GCR, a project of the nonprofit Inquiring Systems Inc., will not conduct the demonstration itself. How a demonstration takes shape remains to be determined, but the possibilities include a mix of economic modeling or even the use of a software platform.
The Origin Story
Robinson is a self-described “old hippie leftist,” and neither he nor Chen is an economist by training. Chen described the carbon currency concept emerging from his habit as an engineer of looking for solutions to complex problems. He said he was suspicious that concepts were missing from the standard economic model.
“For example, carbon markets are somewhat dysfunctional,” Chen said. “We don’t have the scale of funding for carbon removal. Economists are still debating time discounting. These are unsolved riddles and puzzles, and so something’s not quite right there.” He warned against “false” dichotomies, such as between socialism vs. capitalism or green growth vs. degrowth.
“There is a double lattice, OK?” Chen said, describing his carbon currency model enabling a parallel and complementary “mitigation economy.”
“And so what we end up with is two systems working together in a kind of symbiosis, where resources are transferred from this consumptive mainstream economy with the fiat money and the debt into a debt-free economy,” he said. “And this approach, which is macroeconomic, can rebalance our unsustainability with a new economy that would fund all of the work that people here are trying to progress in advance.”
‘It’s All There’
Chen believes his idea can be achieved because so many elements to enable it already exist.
“When I look at the situation — I see central banks, I see the network for greening the financial system, I see all this marvelous new technology, the internet, centralized digital currency — it’s all there,” Chen said. “What we’re missing is the story for how it all fits together, to provide the finance to resolve these economic problems we have with funding, carbon removal and conventional mitigation at speed and scale. I think it can be done. We just need to have clarity in the economics and the concepts to support it and advance it at the right time.”
As Adam Aston noted in a GreenBiz story one year ago, trends in central banking and the rise of verification technologies, such as satellite imagery and AI for precise measurement of atmospheric CO2, would seem to lay the conditions for such a vision to take hold. In addition, momentum is gathering in the financial system to support decarbonization in line with the Paris Agreement.
As for central banking, the “carbon quantitative easing” (CQE) concept Chen has set forth follows in the path of quantitative easing (QE), which emerged from the U.S. Federal Reserve out of the financial crisis of 2007 and 2008. With QE, a central bank buys bonds or other securities, triggering a virtuous economic cycle that reduces economic risk, encourages economic activity and helps regular investors. QE, for example, has poured $11 trillion into the world’s economy since the COVID-19 pandemic kicked off in 2020. With CQE, central banks would directly support climate mitigation projects.
“If GCR is successful in raising money for the GCR demonstration, then I am confident that the GCR policy will become well-known — especially when a few governments (and central banks) review the policy and discuss it,” Chen wrote me. “When the policy reaches a certain level of support, I presume that it will be talked about by environmentalists and economists worldwide.”
Those are all hypothetical future developments. Nevertheless, Robinson expressed optimism as well, an emotion generally lacking when his 576-page novel was published in October 2020, two seasons ahead of the release of COVID-19 vaccines.
“But it’s also because I portrayed the next 30 years going well — despite chaos, defeats, disorder, things going wrong, people working hard to oppose decarbonization and the saving of the biosphere, making it their life’s project to wreck that project of saving the biosphere — all that’s going to happen,” he said. “People definitely want to hear that story, believe in this story — which is, of course, a kicker, because it’s a utopian story that you can dismiss or that won’t happen, but people want it to be true.”
A version of this article originally appeared in GreenBiz.com.