Pitch

The economy is set to inflate climate chaos. Let's switch it to pump up a climate rescue!

Description

Summary

The economy is like a big pump, currently set to shift an increasing mass of carbon into the atmosphere. This economy has a future only if quickly switched to deflate the problem by pumping less carbon in and pumping accumulated carbon out.

Two novel methods of pricing carbon are proposed, to overcome both the full scale of the climate crisis and to the obstacles that obstruct other methods.

Pump less. Carbon is priced as one element in switching the whole economy from linear to circular flows of all resources. The externality of waste is accounted for without distorting markets for other elements.  All products including fuels are subject to an insurance-like premium in proportion to the risk that their materials will become future waste in air, land and water.  All premiums are immediately spent on activities that cut this waste-risk. For example, premiums on fossil fuels will be spent reducing dependence on fossil fuels by energy efficiency and renewables.

Pump out. Accumulated atmospheric carbon is priced by a supply of new money into local economies in all areas which is spent on activities that transfer carbon from the air to ground level. The new money is local or regional currency that continues to circulate around the area providing the means for a combined regeneration of jobs, shared prosperity, food security and climate. As national policy this would be a bottom-up form of quantitative easing.

Category of the action

Mitigation - Helping U.S. enact carbon price legislation

What actions do you propose?

Action 1: Pump Less

The national economy runs like a pump, shifting more resources of all kinds to become wastes in ecosystems. Climate instability is a symptom of this pumping action, as fossil and ecological carbon adds to atmospheric carbon concentrations. The historical neglect of waste-related externalities from product prices means that the economic pump is set to shift increasing masses of resources into wastes in ecosystems. This damages climate, resource stocks, ecosystem services and the potential for future economic growth.

The first proposed action is to switch the economic pump from increasing to quickly decreasing the transfer of resources into wastes, including greenhouse gas wastes in the air. This task is deliberately larger than just attempting to decrease emissions, but more effective in  ecological, political and economic terms (see 'other key benefits section' below). The switch is to be made by pricing carbon as one element in switching the whole economy from linear to circular flows of all resources. Resource-related externalities are accounted for without distorting markets for other elements.  All products including fuels are subject to an non-tax insurance-like premium calculated in proportion to the risk that their materials will become future waste in air, land and water. This might be called 'future insurance'. Premiums are immediately spent on activities that cut this waste-risk. For example, premiums on fossil fuel products will be spent reducing dependence on fossil fuels by energy efficiency and renewables.

This form of insurance works preventively, since today's huge systemic problems cannot be managed by paying for future unaffordable damage costs but only by paying the smaller present cost of preventing worsening problems. These premiums are market-based, being collected and spent by non-government organisations. The role of government is not to handle the funds (as with taxes) but to implement the regulation and oversee its efficient and fair operation. Accountability is provided by full public transparency and the separation between the finance and the oversight. After Future Insurance is enacted in law, markets would take on the responsibility for what becomes of products after use and the profit motive would work to incentivise the meeting of human needs with steadily reducing use and waste of resources. Fossil energy sources have a high risk of becoming wastes in ecosystems so this incentive would make them more expensive while providing support for the household, community and infrastructure changes needed to reduce fossil energy dependence. As a whole economy, whole market action, the incentives would also reduce consumption and waste of all resources at risk of being dumped to ecosystems. Rapidly increasing resource efficiency, with all kinds of products not needing to be recreated from raw ecosystem-derived materials, is far more energy efficient and ecosystem preserving so contributes more to quickly regaining climate stability.

This 'circular economy' goal is being actively advanced as a national strategic priority in China. The proposed insurance-related mechanism is now being considered by the European Commission and EU member state representatives as a key economic tool for implementing circular economy and preserving potential for future climate stability and economic growth.

Action 2: Pump Out

Existing climate impacts and loss of climate stability buffers such as ocean alkalinity and Arctic ice volumes indicate that atmospheric carbon concentrations are already too high. Future climate stability requires a climate response that includes action to cut carbon concentrations in the air. This means action to switch the economic pump to quickly reduce emissions (as above) and also action to remove historical accumulations of atmospheric carbon. The proposed action would price this atmospheric carbon by providing an innovative source of funds for activities that sequester carbon. A nationally-agreed supply of new money into local economies in all areas will be spent on activities that transfer carbon from the air to ground level. The new money is local or regional currency that continues to circulate around each area providing the means for a large-scale regeneration of jobs, shared prosperity, food security and climate. As a national policy this is a bottom-up form of quantitative easing. Local (complementary) currencies are used to enable the funds to be used for small scale sustainable carbon-storage activities such as ecosystem expansion, composting, algae farming, shellfish cultivation and making biochar (charcoal that isn't burnt). This avoids the tendency for carbon sequestration and storage to be dominated by large-scale high-tech expensive activity by large (often fossil-based) industry.

National government would provide enabling law for local communities to use either new or existing local currency systems that create new local money supply by spending it into circulation by paying for carbon-negative activities. The local currency would be nationally registered and locally administered by non-profit local groups with transparent decision-making and finances. All local people would be eligible to apply for payments to support activities that remove carbon from air. A typical example would be paying the local money to local people to build, distribute and teach the use of simple cookers that make biochar as byproduct of cooking with dried biomass fuels. This establishes a regenerative cycle with carbon absorbed by plants, transformed into non-biodegradable charcoal then used to filter grey water, accelerate composting and build soil fertility so more plants, trees and food can be grown. The local money is repeatedly spent as it circulates locally, supporting local services, businesses and jobs, as well as adding to national economic growth accounts. It would be taxable in the same way as national money, with tax payable on business-type earnings (then spendable by local authorities). This local money supply would work like a bottom-up form of quantitative easing, though with greater effect on both economic and climate revival .

Who will take these actions?

Action 1: Pump Less

Government enacts regulation to oblige producers (including importers) to obtain 'future insurance' according to risk of their product becoming future wastes in air, land or water. Government oversees fairness and transparency.

Non-governmental organisations (eg insurers or producer-responsibility bodies) assess, collect and spend premiums according to regulated calculations, using information provided by producers and verified by public transparency and oversight by government regulators.

Producers consider what will happen to their products after use and what could be done to reduce the risk of becoming wastes in ecosystems. Led by the incentive to reduce the waste-risk premiums, they will adapt their products, shift patterns of investment and pursue new collaborations throughout society.

Other decision-makers will adapt their lifestyles, purchasing choices, policy initiatives and even world-views in response to the new paradigm where markets will now work to solve so many problems that they have previously caused.

 

Action 2: Pump out

Government enacts regulation to enable creation and supply of new local/regional currencies used to pay for carbon-negative activities.

Local non-profit bodies run local currency systems where new money is supplied into the area by spending on carbon-negative activities.

Local carbon-storage entrepreneurs will have a source of support for a range of sustainable local climate-rescue activities that would not otherwise happen.

Local communities and businesses will benefit from access to flows of money that can overcome poverty, unemployment, food insecurity, and depleted ecosystems.

Where will these actions be taken?

USA

Every other country

 

How much will emissions be reduced or sequestered vs. business as usual levels?

This requires modelling. I don't think this modelling has so far been attempted anywhere. I'd like to work with those who can do it.

Action 1: The desired rate of reduction in emissions can be set by the level of premiums. Higher premiums introduced earlier will cut the pumping of resources-to-wastes including emissions.

Action 2: The desired rate of pumping of carbon from air to ground level can be set by the level of carbon-negative local currency made available. More funds will extract more carbon.

What are other key benefits?

Action 1: Pump less

Ecological benefits: The circular economy addresses most resource-related problems at source, for example depletion of ecosystems and scarce elements, pollution, consumerism and waste. Greater resource-efficiency means that energy is not lost re-extracting materials and remaking items that previously became wastes.

Economic benefits: The proposal solves the wider problem of market externalities. This provides a non-arbitrary way to set carbon prices and avoids creating unintentional market distortions, for example by under-pricing resources.

Political benefits: The proposal retains responsibility for the market failure of carbon-waste within markets, rather than attempting to transfer this into government and into government fiscal budgets. This avoids political roadblocks and offers a future for economic growth.

Action 2: Pump Out

The key other benefit is to enable carbon-negative activity to be cost-negative.

What are the proposal’s costs?

Both actions incentivise a new scale of response to the climate crisis. These responses involve costs but both proposed actions provide sources of funds to pay for them.

Economic growth is preserved by both actions. The waste-risk insurance  enables the gain in new (increasingly sustainable) economic activity to exceed the loss of old (climate damaging) economic activity. The local money supply would all tally up into national GDP.

Time line

Both actions should be enacted asap. They may be phased in by starting with low levels of premiums and low carbon-negative local money supplies. This enables the mechanisms to develop ready for handling larger financial flows.

Action 1 should be phased in across all resource flows rather than for selected flows such as carbon, in order to make a level playing field without new market distortions.

Action 2 could be phased in with selected local areas as a pilot.

The levels of premiums may be set in later terms, according to the balance between reduced waste risk from more circular resource flows and the need for more response to climate and other ecological problems.

Related proposals

References

An economic instrument for zero waste, economic growth and sustainability. Journal of Cleaner Production (Publisher’s link, paper on precaution.org)

This proposal is entered for judging but any prize may be passed onto another team.

Proposal summary
The economy is a carbon pump; let's switch it to reverse!
Team proposal: Only members listed on the proposal's Contributors tab will be able to edit this proposal. Members can request to join the proposal team on the Contributors tab. The proposal owner can open this proposal for anyone to edit using the Admin tab.
Contest: U.S. Carbon Price 2014
How could a national price on carbon be implemented in the United States?