January 19, 2009

President Obama urged to use carbon tax, not carbon trading, to address climate change

As the era of President Obama dawns, the top climate change scientist in the US has warned he has to take decisive action in his first term.

As I have suggested here before, the 'carbon trading' approach pushed by Europe is having little effect. For example, it is far cheaper to pay the Congo not to cut down trees than to invest in carbon capture development for power stations. The net result being that carbon dioxide in the atmosphere continues to rise. See:

Here's what caught my eye in the Guardian report of the comments from Jim Hansen, described as "Nasa scientist and leading climate expert":

Only the US now had the political muscle to lead the world and halt the rise, Hansen said. Having refused to recognise that global warming posed any risk at all over the past eight years, the US now had to take a lead as the world's greatest carbon emitter and the planet's largest economy. Cap-and-trade schemes, in which emission permits are bought and sold, have failed, he said, and must now be replaced by a carbon tax that will imposed on all producers of fossil fuels.

The advantage of a carbon tax is that it enables policy makers to set a price for producing greenhouse gases that will make reducing emissions economically viable. With market-derived prices for licences for the right to pollute, it is proving to be more economic to buy the licences rather than reduce emissions. Though it seems to me it would be better to levy this on carbon emitters, rather than the producers of fossil fuels. That will drive efficiencies in use of fossil fuels as well as switching to other sources of energy. It may, however, be harder and more controversial to measure.

Another advantage of a tax on fossil fuels or the greenhouse gases they produce is tax income can be used directly for investing in sustainable energy, carbon capture and ameliorating the effects of climate change.

A third advantage is that carbon taxes, to a greater or lesser degree, could be used to offset other taxes. For example, green goods could be zero rated for sales tax, providing an added incentive for consumers to select them - and, incidentally, helping the economy out of recession as society is restructured to be low carbon.

These are the type of practical, national policy steps that could be taken within the framework of global commitments to contract total emissions, while converging the right each person on the planet has to produce greenhouse cases to be equitable. This 'contraction and convergence' approach is the best-supported proposal for inclusion in the Simultaneous Policy's annual voting yet again. See:

January 9, 2009

Quantitative easing, monetary reform and green credit

In the current financial crisis it has been proposed that the Bank of England print money to lubricate the economy. This is referred to as 'quantitative easing'. This proposal has received a lot of criticism, dubbed in the press as 'helicopter money' with pictures of bankers throwing money for people to spend to avoid recession. The allegation is such action would devalue the pound, with Zimbabwe's currency collapse and hyperinflation cited as a cautionary tale.

But, as I have raised here, monetary reformers propose something very much like this. They point out that new money, required as the economy expands, is currently created by commercial banks at a profit as interest-bearing loans. They propose that central banks take over the role and provide the money to governments to spend into circulation through investment in capital projects or by funding tax cuts.

Monetary reform proposals didn't do well enough in the last annual vote to stay in the process - I think due to the apparent contradiction between the claim that commercial banks create money out of nothing and credit drying up. See:

I've been looking for those who know more about this subject than I do to explain more about quantitative easing and how it links with monetary reform proposals. So I was very pleased to receive the following email from Barbara Panvel and links from Sabine McNeill of the Green Credit campaign, which I am off to explore.

I hope that the monetary reform proposals come back stronger and clearer. Anyone interested in working up a proposal can do so in the 'work in progress' of Simpol's online forum. See:

---Email from Barbara

Will the opportunity offered by the current dialogue about ‘quantitative easing’ - a term first noticed by me a couple of months ago - be taken by people working on the Green New Deal?

The definition of quantitative easing given by those with a vested interest in opposing such measures is ‘printing money’ and warnings are given citing the example of Zimbabwe.

Philip Stephens, associate editor of the Financial Times, does not agree, describing printing money as ‘the new prudence’ now that the Washington consensus has been fractured.

However, printing and distributing banknotes – once suggested by Milton Friedman and the Fed's chairman, Ben Bernanke - is not on the agenda of most monetary reformers.

MP Austin Mitchell has for years consistently and constructively proposed to spend fiat money, issued electronically, into circulation in a focussed way, meeting unfulfilled public needs such as improving transport, education and health provision – and the range of measures advocated in the Green New Deal.

In November 07, his EDM 265 called for a policy of using publicly-created money to finance carbon neutral measures and conversions which could be adopted to create additional economic growth and recommended the Treasury to use its powers to create non-interest bearing money to fund activities to combat climate change.

The real issue is not one of bank-notes versus virtual money but of the uses to additional ‘liquidity’ could be put: as Andrew Lydon once pointed out, money issued in this way could be used for good or ill.

To date, Alistair Darling has not ruled out quantitative easing, so I hope that readers will press for the funds released to be used in the interests of the ‘real’ economy and the environment - and not to give further subsidies to the arms trade or to build incinerators and nuclear power stations.

---email ends

---Links provided by Sabine McNeill

Money Supply or Public Credit Petition
Parliamentary Scrutiny via the Treasury Select Committee.

Money as Debt also known as Credit

Green Credit for Green Purposes
our submission to the Committee’s Inquiry into the Stern Report

Green Credit campaign

In the Spirit of the Forum for Stable Currencies

Forum for Stable Currencies

Expanding Dr. Yunus' Sphere of Influence