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.

European debt crisis and oil affordability

Well it looks as though it wouldn't be much fun being the next Prime Minister of either Greece or Italy right now. It is a poisoned chalice. Who wants to introduce austerity measures and remain electable? Any concerned citizen can see what is coming for New Zealand when our trading partners are in this sort of trouble. Richard Douthwaite, the green economist from Ireland, has written the most amazing chapter in FEASTA's book Fleeing Vesuvius. He explains the connection between declining oil supplies and the trend of rich countries to run deficits. Taking Ireland as an example, he lists the cost of mineral fuel imports, the value of exports and then works out the fuel cost as a percentage of export earnings. It rose from 2.4% in 2001 to 7.6% in 2008. Exports are the only means by which the country can earn the money it needs to pay the interest on its overseas borrowings. He explains that a country that runs a deficit on its trade in goods and services for several years will find that its firms and people get heavily in debt because a dense web of debt has to be created within that country to get the purchasing power, lost as a result of the deficit, back into everyone's hands. After a careful explanation, one of his conclusions is that it is dangerous and destabilising for any country, firm or individual to borrow overseas and net capital movements between countries should be prohibited. This is rather startling, but when you think about it foreign capital creates problems when it enters a country and when it leaves the country. When it comes in it boosts the exchange rate, thus hurting firms producing for the home market by making imports cheaper. It also hurts the exporters, reducing their overseas earnings when they convert them into national currency. As a result, when the loan has to be repaid, the country is in a weaker position to do so than it was when it took the loan on.  And managing borders obeys one of the laws of Nature. The late Rod Donald, former co-leader of the Greens, used to go on and on about the balance of payments in New Zealand and I can see why. Both the National Party and the Labour Party seem to be taking our country into more and more debt. We have borrowed around $40 billion in the last three years. Someone should work out our trend over the last few years. We need to find a list of the fuel cost as a percentage of export earnings and the ratio of total external debt to exports.