Tradeable Ration Coupons to Address Climate Change and Alleviate Poverty

On Sunday at 4pm I was lucky enough to hear a wonderful talk on sustainability and economic growth by economist Gareth Morgan on Radio New Zealand, followed by an interview with Kim Hill.

Gareth listed some horrifying facts about how badly New Zealand was doing in reducing its carbon emissions. He referred more than once to the importance of having tradeable rights for emissions. That reminded me of something I have been reading from an excellent little 1999 book called The Ecology of Money by the late Richard Douthwaite. Chapter 4, which is on the web, outlines his proposal for an international currency, the EBCU (environmentally backed currency unit) designed to reduce carbon emissions.

He says “We want to link our monetary unit to something that discourages fossil fuel use even when there is pressure for an expansion of the amount of money in circulation.”

He says set the global limits and share them out among the nations of the world on the basis of their population in a certain base year. Ration out the rights to all human beings on earth. “Some nations would find themselves consuming less than their allocation, and others more, so it is proposed that the under consumers should have the right to sell their surplus to more energy intensive lands.”

Like Gareth Morgan, Richard says make the rights tradeable, but in a suitably designed international currency. (if we use the existing currencies the poor countries will still be cheated by the rich ones and will end up no better off. He explains that most countries keep their US dollars and Euros for reserves so that wouldn't end up with the right effect) Then after they have all been traded in for emissions and cancelled, issue less the next year in the same way.

And the ration coupons are something called Special Emission Rights SER assigned by the IMF. It all gets a bit confusing and I struggle to understand it.

If you read Douthwaite’s chapter 4 it is clear that he has based it on the Contraction and Convergence model of the Global Commons Institute (GCI). He also talks about the work of an independent economist David Fleming. Fleming envisaged that perhaps 45% of each country's allocation would be shared out equally among its population in the form of 'domestic tradable quotas' (DTQs). These would have to be surrendered in addition to cash whenever people purchased electricity or fuel.  And if you want to find more a search will lead you to a paper by Molly Scott Cato and Tony Cooper of the GCI. This gives some figures.

In my efforts to understand it better, I emailed Molly but she hadn’t done any more work on it since she wrote it. It seems David Fleming died in 2010 and Richard died last year. So I am trying to track down Tony Cooper of the Global Commons Institute. Maybe someone else can help me understand it better?

So I was thinking about this in relation to our country’s carbon emissions. We could issue ration coupons to all New Zealanders, enough to allow for the current carbon emissions. Then we should allow people to sell their rights, but not in New Zealand dollars. They can be bought and sold only in our proposed domestic-only currency, the Zeal.

The effect would be that there would be a transfer of wealth from the high carbon emitters to the low carbon emitters.

We had ration coupons during the Second World War. I remember my mother taking her ration book to the shop to buy sugar, meat and clothing. You needed them as well as money. You couldn't trade them then. And of course petrol was rationed.

5 thoughts on “Tradeable Ration Coupons to Address Climate Change and Alleviate Poverty

  1. I’m wondering if you could expand on your claim that allowing trading in emissions rights, but only in the domestic-only currency, will lead to “a transfer of wealth from the high carbon emitters to the low carbon emitters.” From what you’ve written, it seems obvious that the only thing transferred is the currency, not wealth per se. What is the mechanism by which low emitters increase their wealth?

    • Goodness, let me see if I understand what Richard Douthwaite and after him Molly Scott-Cato and Tony Cooper have written. You can find the original chapter at http://www.feasta.org/documents/moneyecology/pdfs/chapter_four.pdf and then the article by Molly and Tony at http://www.gaianeconomics.org/pdf/ebcu.pdf. Richard also talks about the use of SERs – Special Emission Rights to be used alongside ebcu’s. I would be delighted to speak to someone who has read Richard’s original chapter and has really digested what he has to say. You will be able to help me come to terms with it.

      I now realise that the TEQs I got so excited about last week actually don’t adhere to Richard’s wisdom in recommending the only way it would work would be to have a truly international currency to use for trading these emission rights. This is possibly because the people who are working on TEQs (Tradeable emission quotas) are primarily climate change activists and didn’t quite grasp the whole significance of having to invent a new international currency rather than trading in reserve currencies. So they dropped it.

      Like all ration coupons, you need them as well as money to buy your rights. And of course those who don’t use much in the way of emission rights will be able to sell their quota to the high energy users. So this approach will appeal to two groups, those who are acutely aware of the need to get a real and progressing reduction in emissions, and those who want social justice between nations. What more could you want from a currency than the alleviation of poverty and the steady reduction of carbon emissions? This chapter is so worth studying. Just because Richard died it doesn’t mean we should neglect his idea. When you look at his contributions to online discussions you will find he favoured a genuine rationing per capita on the planet. People sell their ration coupons to businesses and carbon emitting industries like power companies burning oil or coal. The TEQ people have watered down Richard’s suggestion and I don’t favour it.

      And if we have a true international currency at last, then all trade between nations should be done in it. It was 1944 when John Maynard Keynes took his proposal for an international currency which he called the bancor, to the Bretton Woods conference. Heavens that is 68 years ago! He would be horrified to think we have been using the US dollar for so long and the UK pound and the euro and the yen. Ridiculous. Why should countries trade using one individual country’s currency?

    • Thanks Fractal. I understand Richard Douthwaite was also involved in the Convergence and Contraction idea proposed in the website you quote for the Global Commons Institute. That is no coincidence!

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