JoNova

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A global Carbon Currency would be a wonder-tool for Bankers, Bureaucrats and Crooks

Carbon markets, carbon trading, climate money, burning carbon credit image. Jo Nova.The idea that we could make “a carbon credit” work as an international currency and fix our weather at the same time, is the stuff of  Econo-alchemy.

It’s where a scientific quagmire marries an economic fairy.  Instead of salvation we get the swamp to end all swamps.  It doesn’t give power to the people or produce an honest mode of exchange or stop the storms either. A carbon currency just feeds corruption and centralized unaccountable unelected committees who play power-brokers and Kingmakers, deciding what is and what isn’t a real “right” and who or what should pay. It serves global bankers who broker the transactions. It is the paper currency from hell.

Where do we start? A bar of carbon “rights” is not a bar of gold

How do we weigh a “carbon right”? Every nation on Earth knows what a gram of gold is, and with 2,500 years of trading history, everyone knows that come the apocalypse, they can still swap gold for goods.

What sort of security is backed by the right to emit one unit of carbon dioxide,  a right that all life on Earth and most of the rocks and water already has? The largest consumer of carbon rights is the Pacific Ocean on a warm day. Should we set up an account for it in Geneva? Do the territorial seas around a nation produce or consume carbon rights? What about the coral reefs, the trees, the bark, the bacteria? Says who? We cannot measure it, so it’s all modeling. May the biggest cheats win and UN Gatekeepers rule the world.

The problem with using a ubiquitous molecule as an exchange of value is manifold — either every molecule is in the market or the new Global Emperor decides what is and what isn’t and everyone bows, grovels or bribes Zir or Zat Ruler to get what they want. There’s no intrinsic way to know if the molecules being counted are “in” the market or out; the biggest players in the market can’t play, and perverse incentives are everywhere like spaghetti.

A global carbon currency would be instantly prone to massive rorting, corruption, and political whimsy.

Are all carbon rights equal, and if not, who decides?

Does a freezing Inuit have the same right to emit carbon as someone living in the tropics? Do countries with high population growth earn more rights to emit? Would that incentivize baby-production in a world where some argue that more people means more pollution? Or do we go the other route, where humans don’t count per se, but it’s the right of a nation compared to past emissions, which disincentivizes and punishes nations that grow their population or allow mass immigration. Should we rate the “right” based on distance from global population centers, population density, latitude, rating for “development” proclaimed by some quasimodo UN Index, rorted up the kazoo by nations that earn votes via Belt-N-Road bribes or leverage, or should we just auction the rights to the biggest bribers? What could possibly go wrong? And whose is this magical “we” who decides?

Gold, on the other hand, is the ultimate anti-cheating device

Governments can’t print it, fake it, change the definition of it, or argue over whether it exists. Logically, without gold backing, our paper currencies are simply legalized counterfeiting. Any global fiat carbon market would be only as secure as its weakest link — think Zimbabwe. At least some paper currencies are backed by the tax-raising power of democracies, which slows the descent of paper currencies to their true long-term value — zero. (Look up MMT).

Make no mistake — the Carbon market is a fiat currency, not a commodity

Despite the name sounding exactly like an element of the periodic table, the carbon market isn’t counting carbon, or even carbon dioxide. It’s merely some fractional subpart, a few percent thereof, as defined by a committee of bureaucrats who would control billions of dollars on a whim — and be bought for mere millions or promises of a glorious golden ambassadorships to New York or Beijing. The carbon market wouldn’t just invite loopholes, it would be one. Real CO2 makes the world go round, produced or consumed by every living thing on Earth. It’s only a small player in the global climate controller — vastly outdone by the Sun, by clouds, ocean cycles and who knows what. Carbon (as CO2) is the only “commodity” on Earth that no human can tell whether the container ship is full or empty. Is that certificate real? Will that CO2 stayed stored in the trees or under the sea? Sure, if you say so, but I need a cut of what you’re getting or I will go public…

There are major obstacles to enter the market

In an efficient market, there should be no obstacle to entry or exit. Yet the largest players in a global carbon market can’t play because they have no brain. Which of these sources or sinks do nations own with sovereign control, and which do they not? The UN power-games over the definition of the parts of nature that could be included will be the International Monetary Bunfight of the Century, and it will never end. We are carbon life forms. Shall we charge fat people more for their right to breathe? Well, obviously.

Is that a market managed by God I see?

What happens when a fire wipes out a forest? Was that an Act of God, or arson, or just an investment? Was it warfare? Foreign actors might find all kinds of ways to destroy a national account. Currency management might be a cigarette butt thrown out a window on a summer’s day. In another country — that sounds like a job for the CIA.

The efficient market hypothesis suggests buyers and sellers act on all available information. But when humans make only 4% of total global emissions, and 96% of this market is controlled by the Sun, or phytoplankton, or cosmic rays, who the heck knows?

Perverse incentives are everywhere

In Australia the Kyoto agreement probably led to the theft of farmland from farmers. Coincidentally, all Australian states brought in legislation to protect native regrowth (often also known as weeds). Suddenly farmers that didn’t clear every year couldn’t clear at all. The new “carbon” was credited towards our national Kyoto commitment, as measured by satellite cameras with no compensation for farmers. Thus the perverse incentive was to stop farmers from allowing regrowth, or to steal the farm accidentally off them if they made the mistake of allowing trees to fill paddocks. (Read the sorry saga of Peter Spencer, who lost his life’s work through no fault of his own).

Most past carbon markets ended up including credits for atmospheric nullities that may or may not have been real, and are always unknowable. Was the forest saved from being razed? Would you have built that hydro dam anyway? Does that carbon credit really exist — was that factory closed, purely to claim the credits, or did it create more pollution in the first place so it could earn more from being closed than it did while running? These environmental frauds have already happened — see HFC-23 and ask President Xi.

And then there is the awful state of carbon accounting. In 2015 the world found 2.6 trillion undiscovered trees. Despite satellites, 83% of the Earth’s trees were not counted nor known. Suddenly, the whole world owed carbon credits to the rest of the world. It’s a bad joke. Every year new carbon account “oopsies” turn up. Lakes one year, microbes the next. As soon as there is money in carbon accounting, the grants to discover carbon will bloom and flow. The market will shake every year and for decades to come as the dollar gets furiously revalued with a thousand new peer-reviewed papers.

Let’s have a free market in science before we mandate an un-Free market in carbon

We need to understand the science before we can even start thinking about the market. The abject endless climate model failure, and the scientific sickness underlying the core value of “a unit of emissions” neutralizes the entire economic argument. We can’t predict what  CO2 will do to the climate a year from now, but we do know that carbon emissions increase crop growth, help arid zone plants grow, and green the world. Is that not beneficial? Who should pay who? Cold countries benefit from warming. Twenty times as many people die in the cold than die in the heat. Nothing kills as many people as moderate cold. Global warming saves 166,000 lives a year. Based on the only scientific facts we are sure of, carbon feeds the masses, helps the poor, and saves lives. Reducing carbon will kill people. Who will pay for that?

A theory of carbon currency

Abstract

We propose a new international monetary system based on carbon currency (the carbon standard) to tackle two pressing externalities in today’s global economic and political context: the dangerous and irreversible effects caused by unconstrained green-house gas emissions and the cost to the rest of the world as a result of the U.S. dollar being the dominated global currency and the U.S. Federal Reserve increasingly implementing monetary policies not aligned with the global common interest. We define carbon currency as standardized carbon-related securities backed up by the right of one unit of carbon emissions. It can be used as a new global reserve currency and functions as an international unit of account. Through the trading of carbon currency, efficient carbon prices are established. By incorporating the cost of carbon emissions into decision making, carbon pricing provides incentives for countries to pursue low-carbon growth, which helps achieve the net zero emissions global goal set under the 2015 Paris Agreement. Under the carbon standard, the external shocks to the international financial system would come from variations of carbon emissions rather than the U.S. monetary policies. As such, monetary authorities’ commitment to maintaining stable exchange rates comes together with monetary policies aiming at pursuing low-carbon growth. The new system potentially poses a plausible solution to the classical Mundellian Trilemma because the objectives of maintaining fixed exchange rate and implementing monetary policy become one. Although several hurdles are constraining the launch of carbon currency immediately, the carbon standard poses a feasible international monetary system as the world-wide campaign to achieve carbon neutrality progresses.

 

Table, Carbon Currency, base monetary systems.

….

 

Let’s use a medium of exchange which is not meant to be a medium of exchange, it’s “meant” to control the weather?

3.4. Other benefits: carbon currency as a medium of exchange and a store of value

As discussed earlier, we do not emphasize much the function of carbon currency as a medium of exchange because it is not the main motivation of introducing carbon currency into the international monetary system. As invoicing currency have been shown to be important, we argue that carbon currency could also be used in international trade. The current trade system has U.S. dollar as the dominant invoicing currency, and both theoretical and empirical studies [2] have shown that an appreciation of U.S. dollar would lead the trade volume of the rest of the world to decline. 

And by definition the appreciation of the carbon credit “dollar” would lead to a trade volume decline in every nation on Earth. Carbon dioxide emissions are linked to GDP. The more nations emit, the richer they are.

 

Nothing about a carbon currency makes sense except to global bankers and bureaucrats. Certain parties are going to grow rich and powerful by using a carbon currency, but they don’t include us.

h/t Willie Soon and Joe Bast at Heartland

REFERENCE

Liu et al (2022) A theory of carbon currency, https://doi.org/10.1016/j.fmre.2022.02.007

https://www.sciencedirect.com/science/article/pii/S2667325822001182

10 out of 10 based on 52 ratings

19 comments to A global Carbon Currency would be a wonder-tool for Bankers, Bureaucrats and Crooks

  • #
    Zane

    What’s wrong with just using diamonds? They’re made of pure carbon after all.

    120

  • #
    Kalm Keith

    The graph of carbon consumption per person, aka CO2 emissions per person shows India and China well below the USA.

    What that calculation doesn’t show is the use by those two countries of significant “other fuels”.

    In all non western countries the use of cow dung, wood and coal as fuel is enormous. Coal is often converted to charcoal and sold to the village. All in all it’s much dirtier than even the old coal fired power plants of 50 years ago.

    We are being dudded.

    120

    • #
      Lawrie

      I don’t claim to be bright but it does seem that more emissions equals more wealth. More wealth equals more services for the average family and we know that the more secure families feel the less children they have. The better education and health systems available the better the standard of living. Are world leaders concerned that when people are happy and secure they do not need un-elected bureaucrats to tell them what to do?

      110

  • #
    Old Goat

    There are so many “fiat currencies” out there : cryptocurrencies, carbon credits and most national currencies . All are being created at increasing rates and hoovered up by greedy corrupt groups and individuals . At the same time the same individuals are choking production of what everyone needs to survive . When this reaches its ultimate conclusion , all of these currencies will be virtually worthless .

    130

  • #
    tonyb

    Are all carbon rights equal you ask?

    they will be if we get the credit card being promoted by the WEF

    https://freewestmedia.com/2022/07/04/world-economic-forum-plans-to-freeze-bank-accounts-of-polluters/

    These are intended for the ordinary person. I can’t see people willingly signing up for this so presumably it would be a govt imposed thing perhaps in conjunction with a digital health document that shows your covid vaccination status

    80

  • #
    bobby b

    ” . . . as a result of the U.S. dollar being the dominated global currency . . . .”

    Denominated?

    40

  • #
    Saighdear

    Oh mann, after commenting on https://material-properties.org/sand-density-heat-capacity-thermal-conductivity/ as per articles in past 24 hrs, and at Tallbloke’s, are these “Leaders” been taking the Weed whilst snorkeling in the Swamp ( could call it sh.. ens in a T ) . What does it take for Learned Ppl of our society ( all of us according to all those Uni students we’ve been “teaching” ( ha ha ha ) ) to go and chuck out all those Clowns and reclaim some sense ? If you’re wanting food on the table, I’m afraid I can’t oblige there, BUT maybe I’ll try and block sales to the CLowns ( Hoch but they’re vegans etc anyway – don’t want our ‘li’l red tractor’ FA & SQB, etc. …)

    41

  • #
    Kevin Kilty

    About the time of Bush’s second election to the Presidency there was a large contingent of my extended family who were very excited about joining carbon markets via selling credits. What they had in mind was being able to run their current businesses unchanged, while augmenting incomes selling credits — grazing land, forests, potential oil/gas deposits (unproven of course). That is, they imagined something for nothing. At the same time others in the group, who didn’t own any of these magic carbon-sequestering assets, imagined gathering the “rights” to them from family members and then reselling these at a profit to people in need of carbon indulgences.

    Right here you see all the features of a foamy market.

    I might point out that open trading in carbon credits, to the extent there are any making an efficient market free of government interference has resulted in credits over time becoming worth almost zero — peoples’ imaginations can conjure up a huge oversupply of assets.

    60

    • #
      Ted1

      Have you been talking to the National Farmers’ Federation? They’re on the Kool ade.

      40

      • #
        Sceptical+Sam

        Not the Kool Aid.

        The public drip feed; the public teat.

        If governments are silly enough to buy them, the farmers are smart enough to grow and sell them.

        No NPK needed.

        00

  • #
    John Hultquist

    Here’s my offering.
    You send me $2,500 (USD) and I will send you 4 kg of dried wood chips — but only after you sign a carbon-securing-certificate (CSC).
    The CSC is a promise, by you, that you will tuck the package of wood under your bed (or a similarly safe place) until 2042, or when the cows come home.
    If you like, deduct $100 (the cost of shipping and handling) from the purchase price, send me $2,400, and I will safely store your stash of carbon. Each year, on your date of purchase, I will send you a digital image of your sequestered carbon.
    Respectively yours,
    The Carbon Meister

    150

  • #
    Penguinite

    Lunacy writ large but the crooks and maleficent governments intent on making mischief and doing evil or harm to the global family are already rubbing their grubby little fingers in readiness to poke into this pie! Carbon credits are about as useless as all the other NFT and crypto.

    70

  • #
    R.B.

    Maybe it’s time for those who dreamt this up to make nuclear look good to fess up.

    60

  • #
    Graeme No.3

    Two solutions come to mind:
    1. Since the southern hemisphere has the same atmospheric CO2 level as the northern hemisphere which produces 90% of human emissions, we and a few countries like Peru, Chile, South Africa, Malawi, Tanzania, and Kenya** should issue carbon sequestration certificates (based on shore lines to the Pacific and Indian oceans). I am sure that those other countries would be ammenable to a flow of “carbon credits” from those polluters up north. Apart from those polluters like China, Sth. Korea, Japan, The Philippines, India, Indonesia etc. who wouldn’t want to send money?

    2. The other solution that I’ve dreampt up is to pay all Public Servants and Politicians Pensions and Superannuation in carbon currency.

    ** and a lot of Pacific islands like Fiji, Tonga, Vanuatu etc. but excluding New Zealand.

    10

  • #

    How will they negotiate with a volcano?

    30

  • #
    David Cooke

    I think this paper is an exercise in kite-flying, hardly a serious proposal.

    BTW, the authors are at the Guanghua School of Management, Peking University, Beijing, and the journal Fundamental Research is avowedly “supervised by the National Natural Science Foundation of China.”

    30

  • #

    OK.

    So who will issue and regulate this one unit of ‘carbon emission’? What Exchange or Exchanges will these units trade on. Will Off-Market transactions in these units be legally made available? How will the number of units be managed with purchases and sales and cancelled units. What will be the US dollar price of the one unit? How will the increase and decrease in the US dollar value of the unit be managed. And what about all other Currencies?

    The mind boggles.

    00