A truly global solution would be to give each citizen on earth equal quotas of two things (to start with): oil and carbon emissions. These would be tradeable.
To politically attribute and impose a value to something inherently valueless is the proposition which underpins emissions trading. No surprise therefore to find the principal proponents were those who attribute value to IOU's created by "credit institutions" based upon negligible amounts of value.
As the guy said:
"If you want to keep a donkey healthy, you don't regulate what comes out of it, you regulate what goes in".
It is the energy in carbon that actually has inherent value, and IMHO our starting point in creating a viable system must therefore be to capture carbon-based energy transactions.
This is the concept that I have been advocating for some seven years now, and which I referred to when giving evidence to the UK Parliament's Treasury Committee recently.
It was picked up by the Glasgow Herald
here
and in my view could give an energy agency (if one is necessary) both access to market data and a meaningful power of sanction (by suspending or terminating the ability to "clear" transactions) when upholding agreed market standards.
It could - if coupled with a guarantee/ default fund arrangement - form the basis of the "International Clearing Union" proposed by Keynes at Bretton Woods, but with an energy-based "Carbon Dollar" rather than a "Bancor"
In other words, I am proposing that we monetise energy, rather than continue with the inherently unsustainable (and indeed currently moribund) monetisation of bank-created credit on the one hand, or the monetisation of equally worthless CO2 emissions on the other.
With such an energy accounting system in place it is then possible to apply a levy on carbon non-renewables at the clearing level; to invest the resulting "Energy Pools" of funds in future production of renewable energy ("MegaWatts") and energy savings ("NegaWatts") - thereby funding both; and to distribute equitably the "Units" in the "Energy Pools".
These Units would be redeemable against renewable energy consumed or as repayment of "energy loans" made (say) to retrofit CHP etc etc. and would therefore have a value in exchange.
ie we would have monetised energy and "reversed the polarity" of our deficit-based global monetary system.
Since energy is only a relatively small proportion of value in circulation today - but constitutes a large proportion of cross- border trading - we would also have to address another principal source of value - ie land rentals - but that, as they say, is another - domestic - story. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The case for regulating carbon emissions is to a large extent unrelated to the case for a different paradigm for energy use (indeed, some argue that you can have one problem but not the other, given that one is "not enough of" and the other is"too much of" carbon-based stuff).
We need to make people pay the price for creating a negative externality in the form of additional carbon in the atmosphere. There is value there, and a simple case to be made to put a price on it in order to get people to "increase value", ie to reduce carbon emissions.
I fail to see how this is different from your scheme, altogether. In the long run, we're all dead. John Maynard Keynes
CO2 emissions have no value in exchange other than that imposed by fiat - exactly as with conventional "money as debt".
The energy value of carbon on the other hand is exchanged millions of times a day for money, and all such transactions are currently captured, albeit in a fragmented way.
Value in exchange is what markets are about and I believe I'm proposing a workable one, whereas TBG pithily pointed out the problems implicit in taking emissions trading to a "retail" level.
I see no evidence that the existing and proposed market architecture could ever achieve its professed aim of cutting emissions, but I do see it as achieving the aim of those who developed and promoted it to enrich themselves.
Jerome a Paris:
We need to make people pay the price for creating a negative externality in the form of additional carbon in the atmosphere. There is value there, and a simple case to be made to put a price on it in order to get people to "increase value", ie to reduce carbon emissions. I fail to see how this is different from your scheme, altogether.
I fail to see how this is different from your scheme, altogether.
The mechanism I advocate gets a handle on value (by essentially monetising energy value) in a way which emissions trading can never do.
You advocate "putting a price" on emissions - a purely political act.
I advocate a compulsory carbon levy, collected at the clearing level, and therefore inescapable. The funds collected go into a "Pool" which is then "unitised" into "Units" which are redeemable either against renewable energy actually consumed, or in payment of "energy investments" advanced to pay for energy efficiency projects.
This Pool is invested in suitably appraised projects for both MegaWatts (eg off shore wind) and Negawatts eg retrofitted CHP - which as William Orchard points out on Claverton is far and away the most cost effective mechanism there is.
Either way, the skills of experts like you would be needed to decide which projects stack up and deploy the necessary investment form the Pool.
The "Units" in the Pool would essentially be "Carbon Dollars" redeemable against something of value ie energy - instead of against something with only a "fiat" value and subject to manipulation, cheating and political whim.
Moreover, if the redeemable Units are distributed equally as an "energy dividend" there will be a net transfer from those with above average use of carbon energy to those with below average use of carbon energy. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Why do we even bother then? In the long run, we're all dead. John Maynard Keynes
So don't start at that end of the donkey.
Why do we even bother then?
I believe in attempting solutions that I think, based on my own experience, have a good chance of working.
Emissions trading is not one of them IMHO, not in a million years.
I lost a good livelihood, and everything I had, on a matter of principle when I blew the whistle on the exact same manipulation that the CFTC have just disciplined Optiver over.
Only now, seven years on, am I being vindicated.
Why did I bother? Because I believed it was the right thing to do...
If you can think of a way to make emissions trading viable, then I will regard you as not just a top rate banker, but a miracle worker. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
