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Climate finance: A Transformational Way

Post By gaia1 in Climate crisis


CLIMATE FINANCE: A Transformational Way


Submitted to the New York Times

14 December 2009


Frans C. Verhagen


During this second and last week of the Copenhagen conference on climate change the funding of mitigation and adaptation measures in developing nations is a central concern. While the EU has been leading industrialized nations with its promise of some $10 billion over the next three years, the need for some $200 billion by 2020 is still from being satisfied during these hard economic times in the industrialized world. The market approach of raising large amounts of funds via the cap-and-trade system will be illusory given that large amounts of carbon emissions permits are grandfathered rather than auctioned.


A transformational way of financing climate measures with the needed billions or even trillions by 2050 is the monopoly-like infusion of monetized carbon emissions permits. After setting the cap based upon the best science—the IPCC is still the best organization notwithstanding those 1000plus leaked email messages of the East Anglia Climate Research Unit—the permits would be allocated on an equal basis to all adults in the world. (Strictly speaking, nations in the South should be indemnified for the ‘atmospheric occupation’ of nations in the North for the last couple of centuries. However, Southern nations would agree to this fair allocation.) This sharing is like the distribution of equal amount of money at the start of the monopoly game.


The next step is to monetize this permits and make them part of the carbon account of a nation’s balance of payments, resulting in ecological debit accounts for the industrialized North and ecological credit accounts for the agricultural and industrializing South. This can be done by the introduction of a carbon-based international reserve currency that would replace the present reserve currencies of the US dollar and others. It is the existence of the major reserve currency country’s monetary policies and its Triffin dilemma that is one of the main reasons for the present economic imbalances anyway. It was also for this reason that the UN Stiglitz commission of June 2009 recommended shift to a non-national or even regional currency like the euro. By monetizing the allocated carbon emissions permits as a nation’s reserve currency in a transformed international monetary system, liquidity is introduced into climate finance. The volume of liquidity can be determined by the value that nations want to give to that carbon-based reserve currency which I have called the Tierra, Spanish for Earth.


By introducing this monopoly-like infusion of liquidity into the international monetary system funds for climate finance would become available as soon as the nations can agree on the monetary architecture of these Cap & Share Tierras that would administer the new monetary system. They could decide to establish an UN Commission on Monetary Transformation, leading to a Bretton Woods II Final Act in which Keynes’ International Clearing Union with its non-national reserve currency of Bancor would be updated for the needs of the monetary, financial, economic and commercial systems of the 21st century.


A major advantage of this infusion of liquidity by the Tierra Cap & Share (TCS) method—one of the 7 "Whole World" view approaches that are being considered to be peer-reviewed by a proposed UNEP Technical Panel—consists of avoiding the racket of a world-wide carbon market for which the large consolidated financial companies are lining up with their shadow economy of derivatives. By changing from a cap-and-trade to a carbon tax system the main beneficiaries are not banks, but the public. Another advantage of the TCS system is the reassertion of public control of the monetary system away from privately-owned banking systems which are competing in the public domain function of money creation that is not theirs to compete in. Even ignoring the financial collapse of 08-09 it is not advisable to have large private companies set the direction of the economy, both in a nation or in the international arena. Reformist bodies such as the Financial Stability Forum are more part of the problem than of the solution, because they maintain an unfair, unsustainable, and, therefore, unstable monetary system.


Infusion of these monetized carbon emissions permits need not cause inflation, given that these extra funds would be used for economically worthwhile programs without becoming part of a shadow economy that has caused such disruption.


 I agree with the Klima-Forum09 in Copenhagen who in statement 4 expresses “strong opposition to purely market-oriented and technology-centred false and dangerous solutions put forward by many corporations, governments, and international financial institutions. These include nuclear energy, agro-fuels, carbon capture and storage, Clean Development Mechanisms, biochar, genetically “climate-readied” crops, geoengineering, and reducing emissions from deforestation and forest degradation (REDD) as currently defined by the UNFCCC. These only produce new environmental threats, without really solving the climate crisis. Carbon trading and offsetting are also false and unjust instruments, because they treat a common planetary resource – the atmosphere – as a

commodity that can be owned and traded. So far, the system has not proven its merits, and by allowing rich countries to offset their reduction obligations, it has maintained this unjust and unsustainable system.”


Thousands of civil society organizations (CSOs) have signed its declaration entitled “System change – not climate change”. This proposed TCS approach proposes a system change in the international monetary system which, being the glue of the other international systems, would transform the present international system that still enriches the few, impoverishes the many and imperils the planet.


Frans C. Verhagen, M.Div., M.I.A., Ph.D. is a sustainability sociologist and founding president of International Institute of Monetary Transformation His forthcoming book is entitled THE TIERRA CAP AND SHARE: A Transformative Monetary Approach to Deal with the Climate Crisis.