Making the Fed’s Money Printer Go Brrrr for the Planet
(Bloomberg) -- Capital has a tendency to get invested at the perceived highest rate of return, and so we have a tendency towards doom.
Getting human civilization into a healthy and sustainable balance with the biosphere is going to be expensive. It will never be the most profitable investment out there, being a matter of mitigations, infrastructure replacements, decarbonization, and the creation of new and cleaner technologies. The market misprices things such that none of these activities will turn the largest short-term profit, so they are insufficiently attractive to private investment, and we are therefore headed for a mass extinction event.
Oops! Just the way it is! Nothing to be done but proceed!
But not really. An adjustment is needed, and more people are becoming aware of that necessity. It has to be big, and yet something that the currently existing legal and economic order can execute. And now, months into the Covid-19 pandemic, we’re seeing both the scope of the need and that the world can turn on a dime when there’s a perceived need this serious. Government fiscal policy can get very creative when things are overwhelming. That may be the story of this century.
We have to save the biosphere from catastrophic heating. We also have a market that won’t invest enough in this project. So governments need to do it, by way of creating new money specifically targeted to pay for rapid decarbonization.
You can think of this proposal as “carbon quantitative easing,” in tribute to the quantitative easing undertaken by central banks in the teeth of the 2008 recession. All told, central bankers in the U.S. and Europe spent over $5 trillion dollars buying up bonds. That QE was mostly given to the banks without restrictions, and many used it simply to save their asses. The program did maintain liquidity and, by saving the banks, saved the economy. But because of the lack of targeting for this new money, inequality was increased and investment in fossil fuels by big banks continued.
This time, QE would have to be specifically directed to save the biosphere itself.
Delton Chen, a civil engineer and geo-hydrologist who co-founded the Global 4C project, has elaborated on a carbon QE system with Joel van der Beek and Jonathan Cloud. Put briefly, carbon quantitative easing suggests that big central banks work together to create new money for decarbonization projects. This injection of new money would also redirect the ordinary economy toward biosphere health.
What might this look like in practice? All around the world, anyone from individuals to nations would be paid to sequester carbon in the ground for an agreed-upon time. A century is often proposed, which is possibly not long enough, but it would be a decent beginning.
The sequestration of carbon would have to be certified, possibly by a public-private bureaucracy like bond rating agencies. It could even be administered, perhaps, by a body created under the 2015 Paris Agreement.
Once certified, a carbon coin would be paid out. These coins would trade on currency-exchange markets, and the central banks would set a floor value, perhaps by issuing long-term bonds for investors. With the proper arrangement, the value of the carbon coin could be defended, and everyone on Earth could then be paid for doing good work for the biosphere and the generations to come.
At the national level, it might work like this: A petro-state such as Venezuela or Saudi Arabia or Russia or the U.S. could declare it was going to sequester its fossil fuels, leaving proven reserves in the ground and getting paid in carbon coins instead. These payments could be made on a timetable matched to how quickly the countries would have extracted and sold the fuels. (Now there could be a weird precedent for this: The Trump administration is considering paying U.S. oil drillers to leave it in the ground, as way to protect oil prices, not the planet.)
Cities could change infrastructures and get paid. Mass-transit projects, electric car recharging stations, infill construction, city agriculture, de-suburbanization efforts, clean power generation—anything that kept carbon in the ground would earn carbon coins.
Individuals could do what individuals do: some could start kelp beds, if they live by the right kinds of coasts; some change their farms to no-till agriculture, and compensate for the smaller yields by getting paid for growing soil itself; others can winnow down cattle herds; or create a peat bog; or swap out any carbon-burning machine for a cleaner one.
Many kinds of activities will sequester carbon, and more would be found. Growing forests would count under carbon QE, so would caring for biomes like swamps. Engineers and designers who figure out how to pull carbon dioxide directly out of the atmosphere and then turn it into carbon nanofiber materials, thus replacing cement and steel, would be earning carbon credits in multiple ways. One could imagine windmills that create clean power devoting some of that power to a CO₂ drawdown device coupled to it, with the captured CO₂ then transformed cleanly into a substance that could be used for car bodies or house foundations. It would be a trifecta.
The opportunities would be endless. People could devote their working lives to decarbonization and make a living at that, and the biosphere that is our only home would be better for it.
Of course, any single rubric of economic success will create distortions as people try to game the system for an advantage. Balances would emerge as we got used to paying ourselves for making the biosphere healthier. It would be complicated and messy, sure, but not as complicated and messy as a mass extinction event.
In many ways this idea is a return to John Maynard Keynes’s idea of a government stimulus in times of economic trouble, an idea that has been used successfully many times before. Now it’s our ecology that’s in trouble, and the method is being revived again for this larger purpose. Whether its carbon coin, or the suggested funding methods for Green Deal, or the European Union’s new “Green Recovery” plan for a post-Covid-19 reboot, these are attempts at stimulus that adapt Keynesian concepts to our particular crisis.
This is the work that is facing us. We have to change, because the direction we’re headed now leads to disaster. And that change will have to involve figuring out ways to pay ourselves to do good work. Carbon quantitative easing is one big step on that path.
Kim Stanley Robinson writes science fiction in Davis, California. His next novel will be called The Ministry for the Future, out in October from Orbit Books. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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