Yves here. Proper climate change accounting is long overdue. Just think if corporations had been made to record the cost of pollution or climate change remediation as a contingent liability…
By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK
The FT has an article in it this morning from Natasha Landell-Mills, who is head of stewardship at Sarasin & Partners. In it she argues that:
What gets measured gets managed. The climate impact of business and consumer decisions is not being fully measured and thus not being properly managed.
I wholeheartedly agree. And I also agree that a carbon tax is not the solution to this issue – because a tax at $75 a tonne has consequences that are unmanageable in the rest of the economy. In that case I also agree that alternative actions are need. Natasha Landell Mills identifies five. As she notes:
First, we need to incorporate climate effects into the rules that govern how companies calculate their profit and capital. In more than 140 countries, the International Accounting Standards Board sets these standards. Until recently, companies could report accounting numbers with little regard for either the climate consequences of their activities or the probable impact of efforts to reduce carbon emissions.
This matters because financial statements underpin capital allocation decisions. If you ignore decarbonisation promises, a coal-fired power station looks like a good investment choice because it appears to offer high returns. Factor in policies to phase out coal power, and the station looks like a much riskier, less attractive choice. In November, the IASB reminded companies that they should be including anticipated material climate-related impacts in their accounts. We need to go a step further. Companies need to make visible what their profit and capital would be, given a sustainable climate. Paris-aligned accounting would be catalytic.
This is where we really agree. I rather hope that Landell-Mills is referring to sustainable cost accounting. I am well aware that she is familiar with it: she chaired a session when I presented the idea to the Local Authority Pension Fund Forum in December. And she is right: Paris-aligned accounting would be catalytic.
Of course it is not all that matters: the other recommendations Landell-Mills makes are also important. She calls on auditors to address climate change issues (but that has to be linked to proper accounting); for shareholders to take on companies; for asset managers to do the same and for credit rating agencies to embrace the issue.
But when it comes down to it all need climate change accounting. And right now sustainable cost accounting is the only proposal there is for putting climate change on the balance sheet. And COP 26 needs to take note.
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Short version of the comment that disappeared: Thank You, I agree, we need mechanisms of de escalation asap.
The author is spot on – and the quote – what gets measured gets managed is so true. But here is a very simple thing the next President and new congress can do – phase out ALL subsidies to fossil fuel companies over a 2-3 year period. This is a crisis that needs to be addressed as a crisis and this would do it and also more than pay for the rapid transition to renewables. Worldwide these numbers are over 80 Billion per year in just the US and Europe. Then let’s see how willing the oil companies are willing to bet THEIR money, not the peoples. It will also cause a huge drop in all fossil fuel-related public companies – harsh but necessary.
I don’t understand this comment, and I am somebody that is
a) freaked out by climate change
b) thinks “economic” incentives are bs, if you need to do something do it!
>because a tax at $75 a tonne has consequences
Everything has consequences. Taxing X/ton, or whatever it’s going to take some serious re-configurations.
There’s other weird stuff – “a coal-fired power station looks like a good investment choice”… not anymore it doesn’t.
So although I agree with the headline, I want better advocates than these people appear to be.
ADC-gotta run but I share your concerns–simple: nobody wants to invest without knowing all the risks compared to the rewards. ‘Accounting’ is already mandated to do this through their International Agreements(sic).
Recognizing Climate Impact from business operations and relaying it to investors is what I see this initiative trying to address.
Oh–then there is that thing that Bloomberg established to pursue this concept–TCDF
gottago
You need to follow Richard Murphy. Very clear thinker. A few months ago he proposed a new class of bankruptcy for accounting purposes: carbon bankruptcies. He anticipates that the destruction to the climate by carbon use will force us, very soon now, to quit using it or pay an extremely high price to do so – so much that the company(s) in question can no longer make a profit or compete and will go bankrupt. He’s at the forefront of accounting for a sustainable world. And bankruptcy is a way to smooth the way – ease the debt – create new methods of industry. Etc. Nice to see his arrows hitting their mark with people like Natasha L-Mills. Remember when Gandalf said “release the water”? – that’s our moment. I kinda love Richard Murphy.
Actually it was “release the river!” – a much more organic image.
thank you–I believe there is a strategy behind why insurgencies ask for lots of small arms instead of a big cannon–
a link to his thinking–keep an open mind here–
https://www.taxresearch.org.uk/Blog/2019/08/23/the-green-new-deal-has-to-take-business-with-it-and-not-drag-it-along-behind-it/
so big is the issue to be faced that there is no way that it can be achieved whilst also alienating large numbers of people in the population. The moment for lobbing grenades in support of the radical agenda that the Green New Deal represents has long passed: this is now the mainstream and it has to behave as such. And that means the majority of the economy, which is the private sector in the US as well as the UK, has to be brought into the Green New Deal.
I stress that this will not be easy. My own proposed radical accounting reform will not be popular with all in this sector, but it is designed to address the issue they claim to be most concerned with, which is the efficient allocation of capital to those businesses best able to use it given we now know we have a climate constraint. I try to reach across a divide to create a solution.
Huh?
a [carbon] tax at $75 a tonne has consequences that are unmanageable in the rest of the economy
If you ignore decarbonisation promises, a coal-fired power station looks like a good investment
Exactly. Consequences of retooling the accounting system are probably very similar to the consequences of installing a $75/ton carbon tax. Indeed having a tax is probably a great incentive for firms to adopt their own carbon counting.
I also agree that the right form of “carbon tax” brought in the right way would be useful. And that every approach has some kind of consequences.
What is the “right” tax the “right” way? A Full Metal Hansen Fee-Tax Dividend against fossil carbon at the point of very first sale. Write the law so it escalates slowly enough for society to adjust but inexorably enough towards an exterminist final endpoint that “society” knows very well that the endpoint we are adjusting to is a Hansen FeeTax against thermal coal, gas and oil so high as to exterminate these industries from existence within the borders of the U.S.
The only way that can work is if we ban economic and interpersonal contact, travel, etc. with every single country which does not adopt the same exact thing the same exact way. This is the only way we could protect ourself from fossil carbon dumping by our Trading Enemies who will keep themselves unbound by any Hansen FeeTax in order to preserve their race-to-the-carbon-bottom mercantilist advantage against us.
Climate change is only one of many, many externalities that are not properly accounted for. Pollution is another big one – Chinese river ecosystems come to mind – it’s easy to keep “apparent” manufacturing costs down by dumping all the toxic byproducts into the streams. But that’s only because the river and the rest of society downstream are paying the hidden price. Then you have the social costs of sweatshop work environments, the “military cost” of global oil production which isn’t in the oil price, the cost of resuscitating failed banks at the expense of savers and taxpayers, the broader cost of cost-of-business fines in lieu of proper deterrent punishment for corporate crimes… There are many other examples known to readers here.
Of course, those benefiting from the hidden externalized costs are unwilling to change the system. So the real question isn’t one of describing a more-Utopian accounting system, but one of building the political will to make any improvement whatsoever.
Yes sustainable accounting. And this should include not only direct or indirect emissions BUT, importantly for manufacturers, Life Cycle Analysis of goods sold. We calculate value added instantly using prices without proper discounting accordingly to the duration of the stuff, environmental costs of materials (water print, CO2 print, other contaminants), and the cost of disposal/recycling of residues generated. The latter are typically paid by consumers at a flat rate not having agency on decisions taken in Corporateland that may result in increasing environmental costs. It is both possible and plausible to do this.
The “right to pollute, loot and degrade.” That’s where all the current systemic fails come from, I think — that initial assignment of the “right” to corporate interests, rather than to people and plants and Protozoa and stuff. And the realist recognition that polluters own the economic system.
I took an environmental law class in law school, in 1975. The professor was very proud of his “environmentalist” credentials, having argued for the public interest in US v. SCRAP, a seminal case on standing (long since eroded by subsequent “conservative” rulings. https://en.wikipedia.org/wiki/United_States_v._SCRAP But he was infected by some background in classical economics as informed by nascent neoliberalism. So he preached the economic analysis of environmental issues.
Which led to a question on the final exam, to wit: “It is a beautiful summer day on a lovely ocean beach. Dozens of people are quietly enjoying the sun, sea and fresh salt air. But Mr. Black arrives, sets up his blanket and chair in the midst of these people, lights up a big smelly cigar, and turns on his boom box with the volume up high. Discuss: how much should the other people pay him to stop smoking his cigar and turn off his boom box?”
See, it all turns on the initial assignment of rights. The prof presumed that the right to be free of annoyance and pollution was trumped by the right to pollute the environment. Essentially tossing any consideration of the precautionary principle into the dustbin. So in his universe, we mopes have to pay the Monsantos and US Steels and Ford Motor Company and the rest some money if we don’t want toxic intrusions into the environment. Of course, that initial assignment of the right to pollute was carried out “undemocratically,” the growth and development industries having the power to just go ahead and dump. Bearing in mind the dictum that the only “rights” that exist are the ones that can be enforced. And “the environment” may have eventual and maybe terminal enforcement powers, like climate collapse, but not at the point where the direction of human presence and impact could have been changed. Not to mention that in the legal system in the US, and in places like the gold mining Mordors of the Amazon area, individuals wanting to stand up for “the environment” have no legal standing any more, Or are just summarily killed by business interests, following the principle of Baron Vladimir Harokonnen: “A certain amount of killing has always been an arm of business.”
This piece and the underlying article seem limited in scope to just the carbon effects and “markets.” Not so much thought given to toxic air emissions and discharges into surface- and groundwaters, soil depletion, the effects of “paving Paradise,” feedlot feeding practices, and the like.
And I’ve only read al little about “sustainable accounting practices,” though there is a large literature on trying to use accounting (“market forces,” actually) to get corporations steeped in the looting mindset to redirect into healthier channels. It’s a nice idea, but what chance is there, really, that Big Coal and Big Gas and Big Oil and Big Chem and Big Steel, wielding the power they collectively have over the political economy, would ever allow anything other than “greenwashing” amendments to the “generally accepted accounting practices?” The EU, I believe, has taken some small steps toward trying to push accounting for public costs, the “externalities” that are killing us humans and a lot of other species, into the corporate mind set. How well has that fared?
I really don’t like the apparent focus on “remediation costs.” The federal Superfund program’s failures make it clear that “remediation” does not work, and that barring the practices that result in the “Release of hazardous substances into the environment” is the only effective approach, long haul.
As to shareholders “taking on companies,” how well has that fared? Corporate interests have successfully changed the rules on class and derivative actions, and gotten many favorable rulings from “business-friendly” judges that further limit “standing—“ and as my Civil Procedure professor hammered into us, standing is the first question: don’t got that, Then you can go home.
I see more and more of a meme to the effect that “hey, it’s a big universe, no species lasts forever, it’s just the natural development of humankind, and besides, IBG-YBG so let’s dance while the sun shines.” What’s the possible path around the vested interests to even a significant slowing of the processes at work in our biosphere?
The world is not a spreadsheet or balance sheet. Once the precautionary principle was discarded, it was just “Katy bar the door.“
First an answer to the test question you posed. The other people on the beach should nicely ask the lout to put out his cigar and shut off his boombox. If he refuses they should pay the lout 10 or 20 strikes of a club and some fist strikes, the forfeit of his cigar to the waves, and his boombox smashed on his head. When he tries to leave they should follow and get information on where he lives and key one of his car doors. Then they should make sure he knows they know where he lives and make sure he knows they do not forget or forgive.
“Proper climate change accounting is long overdue.” — indeed! Proper climate change accounting is necessary to identify who the villains are and what they are up to. But how will costs be estimated? If we had some effective way to remove CO2 from the atmosphere that would allow an estimate of costs. If it costs ‘X’ dollars to remove ‘Y’ CO2 from the atmosphere then a company dumping ‘Y’ amount of CO2 into the atmosphere should be charged ‘X’ dollars — plus a substantial penalty for leaving a mess for someone else to deal with — and the money collected should them be applied to removing ‘Y’ CO2 from the atmosphere. Otherwise where does the cost figure come from and what purpose does it serve? Why worry about “putting climate change on the balance sheet”? Instead — why are matters of climate change on any balance sheet and why are critical resources and energy utilities on balance sheets? In times of crisis — and we are in such times though not immediately evident because of the time lags of effects — the production of energy, fossil fuels, and other resources like aquifer water or phosphorous should be nationalized and managed for the common good … assuming we still have a government that might be able to accomplish such husbanding of our nation and our impacts on the world. I do not trust economics to solve problems like climate change. Climate change is not unlike a potentially fatal illness. What does treatment cost in the Market? What is a patient willing to pay?
From what I see, “putting climate change on the balance sheet” only means finding ways to profit from the destruction (buying soon-to-be-arable farm land or “water rights” a la Nestle , peddling “carbon capture” or sea wall construction, e.g.) or costing out the lobbying needed to evade or block any resurrection of the Precautionary. Principle — if you can’t prove it will cause no harm, you don’t get to do it.
On that law school test, I kind of provided the answer you offered — a little gentler, but the same idea. Who has the ‘right’? And how does the populace of the Commons enforce it?
I think everyone is willing. Maybe also afraid. I set my house up to recycle diligently. (just an example) And I’m now inundated with the stuff. Recycling is an example of missing the mark. It’s impossible to do this without a government subsidized industry behind it. Because “recycling” implies that my recycled trash will be used for new manufacturing in a manner that pollutes far less. I’m not sure about any of that right now. Because it comes to a screeching halt when we can no longer export our trash to Asia. We need to be responsible and do the recycling in a complete circle right here in the USA. That requires the federal government to subsidize it. Which in turn subsidizes the production of this trash in the first place. So the solution is a little of both. Prohibit the use of certain packaging; promote others…. and improve our tactics as we go along. If we give up on recycling we’ll bury ourselves in it. But this is just one example of externalized costs being turned into a viable industry.
>“recycling” implies that my recycled trash will be used for new manufacturing
Yes, and moroso recycling, at the very first level of meaning, says that you have purchased something that you don’t actually have a permanent use for.
Which is rather messed up, if you think about it. How did we get here?
My “favorite” (sarcasm intended) “march of progess” example has been finding that my bananas, of all things, are getting more and more packaging. Now before I ate the insides, and the outside went into the compost bin and eventually assisted my gardening. And the little Chiquita sticker could be ignored.
But now I have this extra crap to throw out.
Omigosh, I’ve never even seen packaged bananas. I do shop at a small local grocery store, but still…
All sound suggestions, but doesn’t it ultimately come to naught – i.e., we choke and burn – unless the economic model of perpetual growth is abandoned? The types of actions you list have to be transitional ones on the way to a full steady state economy. The Second Law of Thermodynamics bats last.
And who is going to enlist all the “less fortunate people” in the Philippines and the favelas of the world to stop demanding or acceding to the megabloat of single use and even “recyclable but not recycled, just dumped” plastic crap? Us conscientious Northern Hemisphere types can’t even clean up our own preferences and behaviors, and just shipped the conscience-salving “recycled” crap to China and Vietnam and various African ports, or just dumped it off the ships in mid-ocean…
I don’t think that a $75 a ton carbon tax is unreasonable. Ya, it has consequences, that’s the point of it. Payroll taxes also have consequences, without the potentially huge benefits. Unless you view suppressing wages as a benefit (cough).
The huge benefit of payroll taxes is that everyone who pays them ( and the payroll tax payers certainly do lose the work-per-unit-time expressed as monetized value-equivalent in the “money” paid as payroll tax) . . . feels they did so in order to pre-buy and pre-pay-for the right to get Social Security retirement benefits when they reach retirement age.
So many people feel this so strongly that they form a powerful and hard-to-remove barrier against each new Catfood Conspiracy that has been attempted against Social Security.
That’s why FDR, political genius, designed SS to run on payroll taxes. Or to appear to do so. Because he didn’t want ” any damn politician” messing with Social Security.
And that’s the potentially huge benefit. And it has been an actual kinetic benefit several times so far, defeating several Catfood Attacks on SS so far.
I’ll say okay to that, SS is popular for sure. I hate payroll taxes because I think that they are regressive and economically destructive, but SS did do wonders for poverty among old people, in large part moving them from the poorest segment to the richest.
You say $75 per ton carbon tax is not unreasonable. Is $75 per ton carbon tax enough? or is it too much? How does anyone answer these questions? And without answering these questions — what is the social value of a carbon tax? What does it accomplish? Does it stem pollution or just pass additional costs to consumers? Who should pay a ‘fair’ carbon tax — producers or consumers? [I think producers — but how can I be sure the burden falls on them?] What does economics accomplish when the price of a good is increased with a tax but there is no substitute good and the good in question is vital?
If you pass enough costs on to consumers, you can reduce or even repress consumption. What right do consumers have to escape and evade the costs caused by their consumption? They have no such right.
That’s why Hansen suggested a FeeTax specifically against fossil carbon . . . to repress its use. And why he designed it in such a way that of COURSE every second-stage-and-beyond re-buyer and re-re-buyer and etc. of the fossil carbon would of COURSE pass the cost and the pain on down. Things made with less or no fossil carbon would include less or no of the punitive price torture in their price. That would make them more price-attractive compared to the Hansen FeeTaxed fossil carbon derived items.
And the dividend is to give people who HAVE to buy fossil carbon to survive . . . enough money to buy some lo-fossil-carbon or no-fossil-carbon items with their dividend money.
I think rationing might work better.
Well, in a nation with a hundred million wannabe global de-warmers, it should be possible to get at least several million people to support rationing and try moving it through the political system . . . and another at least several million people to support Full Metal Hansen and try moving it through the political process.
Each TAG ( Theory Action Group) can pursue its own TOC ( Theory Of Change) and see which goes where.
If you are talking practicalities — I think the most practical thing to do is move inland to an elevation above 1000 feet, learn to grow food, collect and purify water, and learn as many skills as possible, while collecting and preserving books. Practically speaking I seriously doubt anything meaningful will be done. I only hope nothing truly stupid — like some geoengineering project ever gets past the collection of investment money.
Carbon taxes, carbon pricing, climate budgets and other Market gobbledygook is not solve anything. It’s like dickering over the right price for the rope you sell to a mob that wants to hang you.
Whether $75 is the right amount is not IMO knowable, it depends on how big the costs prevented are and how sensitive carbon emissions are to taxes, both of which are opaque, at least to me. I’d lean more towards rapidly raising it to $500 a ton, which I think would get us carbon neutral pretty fast. Producers should pay it, because they are big and easy to find, but they will pass it on to consumers. Taxes that don’t get dodged either raise money for the government, or cause disinflation allowing for more spending without inflation(depending on how you look at it). A UBI would be a good thing to do with the money IMO also. $500 a ton is about $2 a gallon, which is real money, but shouldn’t be crushing, especially if balanced by a grand a month or so direct deposited.
Among the intellectual problems I see with neoliberalism is what I’d call the valuation fungibility fallacy (VFF). VFF is the idea that there is a quantitative relationship between the values of all the goods, services, and activities which have value. This quantitative relationship is usually expressed in terms of a currency.
A simple example of VFF relates to the idea of *gambler’s ruin*. Gambler’s ruin explains that even in a simple game of betting that theoretically gives equal odds of winning to the gambler vs. the house, if the gambler keeps on playing long enough, he or she will go broke. The theoretically expected outcome of playing forever is that the gambler breaks even because on average, the same amounts of money are being gained and lost. However in practice, the gambler has a zero lower bound. If the gambler plays forever, he/she will eventually lose enough money that he/she has to stop playing.
A common erroneousness economics assumption is that for individuals, dollars lost equals negative dollars gained. However, this is not strictly true for the same reasons as Gambler’s Ruin. So for example I saw an economics study of Facebook usage intended to measure the monetary value of the service that its users pay for not with money but with their attention span and loss of privacy. They did this by bribing people to *not use Facebook*, and reasoned that however much they had to pay users to not use it is what the service was worth to users. However, I would argue they committed VFF by assuming that its users would be *willing to pay* this same amount to keep from losing access. Clearly for someone on a fixed budget, a bribe is not the same as a ransom. Both numbers may be in “dollars” and both may “cancel out” in accounting, but in a practical context they are not the same because of the zero lower bound
The idea that we can put a price on carbon emission would seem to be another type of VFF, this one involving our planet’s finite capacity rather than the finite capacities of our bank accounts. No matter how much we price the carbon, the notion that we can always pay if we want to pollute more doesn’t jive with reality. We can try to make the carbon tax float based on demand, but then we have to worry about prices rising above what most people can afford in order to live. If this problem is compensated for using rebates or UBI, then you are back to the original problem of trying to limit demand for CO2 emission.
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In order to optimally manage our decline and slow transition away from fossil fuels and other unsustainable practices to renewable energy and materials, we are going to have to think outside of framing of a single currency-denominated balance sheet. One possible solution would be to conduct trade using multiple simultaneous currencies.
For climate change, a carbon credit currency (CCC) can be issued by a central Central Carbon Bank (CCB). Payment of CCC back to the CCB would be required for any activity that directly emits CO2 (or other greenhouse gas) emission. In other words, CCC is scarce, and the CCB is its sole creator. The CCC can be issued directly to citizens using a (hopefully) simple and equitable method of distribution. Because CCC is a currency, it can be bought and sold with money as well as exchanged between individuals and corporations. As such, it’s very similar to cap-and-trade credits. However, in the cap-and-trade system, credits are originally issued to corporations (e.g. power companies) in exchange for money they pay (i.e. the cost of the permit). Instead the CCC is issued directly to each citizen as a benefit rather than to corporations.
I expect one would tend to pay CCC inin addition for any transaction that involves receiving a good or service that emitted or will emit CO2 as part of its lifecycle. Obviously, having to pay with multiple currencies could be cumbersome, especially if we choose to use many different currencies to achieve different environmental objectives. A digital implementation could help with that, even though this site has given ample reasons to be skeptical of digital payment systems and digital currencies. I’d certainly worry a lot about problems like theft of digital CCC, which could ruin someone’s life. However, the fundamental attraction of CCC is that the policy for CCC can directly affect the trade off between carbon emissions reduction and minimum standard of living.
For corporations, balance sheets would be drawn up for both money and CCC (and other environmental currencies), each tracked separately. The ability to borrow CCC would probably be necessary for both individuals (e.g. building a new house that involves emitting a lot of carbon) and corporations (for startup overhead and “working capital”). It’d probably make most sense to only allow the CCB to lend CCC which it would do only under very strict terms. This is probably necessary because long-run savings rates would be zero or negative anyway. Because CCC is inherently scarce (with strict limits on borrowing), the viability of a business would likely be at risk if the business was not CCC neutral in addition to being financially whole. Most businesses would pass on their CCC cost to customers in order to avoid the risk of being unable to afford to buy CCC to maintain operations.
Anyway, I’m sure there are a lot of problems with what I proposed, but maybe it’s a start of something to think about. Would additional simultaneous currencies cause more “friction” in commerce and trade? Of course they would, but that’s kind of the point. We’re just going to have to get used to balancing more priorities than the “bottom line”, and multiple simultaneous currencies provide a mechanism to do that.
I don’t think that your idea is that bad. It would be an improvement on what we have now. You are basically setting up a UBI/Carbon Tax currency. That doesn’t break anything that I see, but I think it is an unnecessary nuisance. I see no reason to believe that the pollution goals we need to achieve aren’t achievable with dollars(assuming we don’t cross some tipping point), but I’m not terribly enamored of Dollars anyway. Sticky zero and potentially unaffordable living expenses are real things, and to my mind they argue strongly to minimize our climate risks. You can’t always fiscal yourself out of a famine, sadly. Courting global catastrophe for a few bucks a gallon would be madness even if the few bucks a gallon was destroyed rather than used as tax income(or whatever MMTers call it).
Hmmm…
Ration tickets — with the advantage of not triggering people who go into fits seeing the word “ration”.
With the difference that AFAIK ration tickets in the past were kind of ad hoc, and weren’t integrated into the formal accounting system. (From what I’ve read, wartime rationing (e.g.) applied to individuals, and industrial allocation was done separately.)
CCC would have to be a scarce currency (like gold used to be.) CCC would have to be created according to the annual supply of survivable carbon, not fiat. CCC would be withdrawn/destroyed when the carbon allocated was used.
All as you say.
Under those conditions, lending of CCC would be limited by Lendable Funds principles. Fiat money is lent privately on the basis that any aggregate amount of lending is OK, as long as the interbank flows net out to small enough imbalances. That will be totally deadly for carbon allocations..
Interesting.
It is interesting, ya. And are they exchangeable for dollars? Ration cards were a nightmare, people forget. Cut people to a gallon of gas a week these days and see how fast our economy grows when we stop that. And I’ve seen estimates that half the ration cards spent in Chicago were counterfeit. And important people were just on their honor.
I don’t see that CCC could possibly be convertible to the fiat currency. That would be the whole point of issuing special currency backed by survivable carbon. If CCC were convertible they’d instantly get tangled up in the fiat lending system; we could use credit to blow 1000 years of survivable carbon in a single year, and we’d steam ourselves like dim sum.
CCC would be tradable — I don’t see that there would be any way to prevent that, but the rules for creation and destruction of CCC would make for genuine control of carbon emissions. That’s related to the Lendable Funds limits to borrowing CCC. The only CCC that anyone could borrow, would have to be CCC that someone else didn’t want to use.
What is unique to this CCC proposal lies in treating CCC seriously as separate currency — taking serious care in accounting for CCC, and suppressing counterfeiting.
Maybe. I don’t exactly know how Fiat could be kept away from a tradable asset. Maybe it could be done but it sounds like a devil of a chore. I don’t really see the point of creating a dual currency system where the currencies can’t convert, it feels perverse and difficult. Maybe I am missing something, but I think just a point of extraction tax is so much simpler that it is less likely to go wrong.
The trouble with an extraction tax (if it’s simply a tax,) is that it doesn’t set a limit on the use of carbon. All it says is that anyone who pays this amount of money can use that amount of carbon, and anyone who pays more can use more. There’s no set limit on the M2 money supply, so there’s no set limit on the amount of money that might be paid to use carbon.
If we’re serious about achieving set limits to emissions on schedule, I think we should be talking about solid, recognizable, enforced, limits to carbon use. The nature of The Tech Critic’s CCCs sets up a plan to do that.
Well, I don’t exactly know how M2 works these days. People clearly shouldn’t be able to whip up unlimited money and just ignore the Carbon Tax. But stopping that seems possible to me, no one is paying unlimited income tax for example. If you can get a real sequestration method proven and let them benefit from the tax as a subsidy payment, then at some tax price sequestration will equal emissions (or even run it backwards for a while).
My mind is perhaps too simple to get all the intricacies of this proposal. Somehow, a straight up Full Metal Hansen seems simpler and more do-able to me. Then again, so does straight up Rationing, if you could get a hugely commanding majority of gunned-up-and-ammo’d Americans to accept it.
This item:
https://www.bloomberg.com/news/features/2020-02-03/climate-models-are-running-red-hot-and-scientists-don-t-know-why
has some relevant implications. It appears that the newer models, which have more physically plausible ways of dealing with clouds and aerosols, are predicting faster future warming trends than earlier generations of models which employed simpler ways of incorporating these effects.
It appears that the models are highly sensitive to the specifics of the cloud and aerosol modeling, which might mean that the physical climate system is also highly sensitive to feedback loops involving these aspects of the atmosphere and their interactions with other aspects of the climate system.
If that’s right, the implications for balance sheet accounting of climate risks would appear to be that the range of possible negative consequences is larger but also more uncertain than previously thought.
Balance sheet stress tests of specific enterprises or industries under such circumstances might not be able to distinguish between “solvent” and “insolvent”.
Interesting times.
natural capital valuation
eartheconomics.org