Can the World’s Bankers Really Save the Climate?

by Jessica Green on May 6, 2021

The Ministry for the Future (TMFTF) should be lauded for reimagining global climate governance. It recognizes what many climate scholars do not: climate change is in large measure, a problem of extreme wealth and wealth inequality. Thus, addressing the climate crisis requires discussing “potential alternatives to the global neoliberal order” (155). Moreover, the Ministry is keenly aware of the shrinking window for action. Addressing climate change is a race against time, rather than a “tragedy of the commons.” Thus, we should be less worried about getting everyone to participate in international agreements, and more worried about acting quickly, since delay will make climate problems harder to solve, and could result in irreversible changes. What follows from these two premises is nothing less than a wholesale reimagining of the global economy, as enacted through coordinated efforts by the world’s biggest central banks. However, the Ministry’s proposed technocratic solutions overlook the messiness of domestic politics, and the huge challenge of constraining powerful anti-climate interests.

In essence, TMFTF trades one technocratic solution for another – bankers instead of climate wonks, converting tons of carbon dioxide into “carbon coins.” Robinson acknowledges this, noting that “all central banks [are] undemocratic technocracies” (291). Indeed, the appeal of the Ministry’s proposal to the central bankers is precisely the extent to which it bypasses the politics of democratic decision-making.

There are three reforms that follow. First, banks will create a new “carbon coin” – essentially a form of green quantitative easing. Carbon coins will be backed by central banks and convertible to other currencies. Thus, not emitting carbon becomes a moneymaking endeavor. The coins will be securitized by long-term bonds with a guaranteed payout, to incentivize capital to “go long” on climate.

Second, blockchain technology will assign digital identification to each carbon coin. Everyone will know how many coins are in circulation and where. Combined with strict regulations, this would prevent currency speculation.

Third, as a result of fully trackable currencies, the use of tax havens to avoid taxes would no longer be possible. As the Ministry’s legal expert notes, “That’s maybe the best thing about blockchain for fiat money—we know where it is. There aren’t any hiding places left. If you do manage to hide it, it isn’t really money anymore. Only money on the books has any real value now” (403). This means that the world’s wealthy would actually pay their fair share of taxes, making tax regimes more progressive. Thus, “if you want to stay rich in the current moneyscape, it’s best to take the haircut and accept your fifty million and walk” (404). Compared to the trillions now estimated to be parked in tax havens, this would be a marked improvement. TMFTF further posits the possibility that a fully digital, trackable currency “could quickly stimulate rapid change in behavior and wealth distribution” (333), though it’s not entirely clear why.

Why would central bankers consent to such an approach? The linchpin of the TMFTF strategy is a threat of greater control over central banks. An International Credit Union, where individuals can trade carbon credits, would be an alternative to private banks. When private banks crash, as TMFTF predicts, they would be absorbed by central banks, but only on condition of more stringent oversight by legislatures. The Ministry thus plots a “double action” which reorganizes control over carbon capital. If plan A doesn’t work, then plan B would also create a credible threat to central banks: The Ministry could simply call upon allies in key governments to expand legislative control over central banks, curtailing their independence and enhancing their accountability.

This strategy stands in stark contrast with the current policy approaches in the Paris Agreement to the UN Framework Convention on Climate Change (UNFCCC): countries pledge to reduce emissions and ratchet up the ambition of those pledges every five years. These “Nationally Determined Contributions” aim to get every country to address climate change, no matter their carbon footprint. Every pledge is viewed as an important contribution to continued international cooperation. However, it is abundantly clear that this approach is failing in our race against the climate clock. Currently, countries’ collective pledges set us on a pathway to between 2 and 4 degrees of warming.

In addition, non-state actors are also invited to take voluntary actions to address climate change through the UNFCCC. The Marrakech Partnership was created to involve non-state actors more directly in the UNFCCC process, promoting cooperation between governments, cities, regions, businesses and investors. Along with 5 countries with net zero legislation, a growing number of corporations are increasingly pledging to go net-zero by 2050, in accordance with the goals set forth in the Paris Agreement.

But net-zero pledges and domestic regulations are constantly butting up against the structural power of those actors who stand to lose the most from decarbonization. These “climate-forcing asset holders” include fossil fuel and mining companies, electric utilities and heavy manufacturers among others. A recent study finds that of the 61% of global emissions and more than half the world’s population are now covered by a net zero pledge. Yet only 20% of these meet basic robustness criteria, such as outlining clear interim targets, publishing a clear plan and using a reporting mechanism.

And for these climate-forcing asset holders, climate policy has become existential – a profound threat to the value, and perhaps even the existence, of their assets. Decarbonization cannot be successful without addressing their obstructionism. The Ministry understands that real progress on decarbonization requires the power of the purse combined with the power of the state. TMFTF should be lauded for emphasizing the critical role of the state as the route to decarbonization.

Though we should not expect cli-fi to provide realistic roadmaps for policy reform, the book falls short in its political imagination of mobilization. Beyond the Children of Kali – the climate vigilantes who target the ultra-wealthy – there is no mass mobilization, no political demand for change from the citizenry. Indeed, any possibility of such mobilization is quickly dismissed: “Demonstrations are parties. People party and go home. Nothing changes” (156).

While the imaginary of the MOF actually gets much closer to the true sources of the climate crisis, it wishes away the obstructionism of the powerful through the magic of a new international banking system. Setting aside the real problems with creating a carbon coin (see current critiques and concerns about the performance of carbon pricing policies), there is little in the way of politics here. In the end, domestic interests will be the central component of any real efforts to meet the goal of the Paris Agreement of limiting warming to 1.5 degrees, and while TMFTF points us in the right direction, it doesn’t dig into the conflicts that continue to slow our race against the climate clock.

{ 8 comments }

1

Tim Worstall 05.06.21 at 3:00 pm

There’s a certain amusement here. In this specific instance:

“It recognizes what many climate scholars do not: climate change is in large measure, a problem of extreme wealth and wealth inequality. Thus, addressing the climate crisis requires discussing “potential alternatives to the global neoliberal order” ”

Well, OK. Another of these contributions insists that we’ve got to kill off ad supported social media in order to beat climate change. I think I got that right.

The amusement being that the actual economist here, JQ, has long been pointing out that a carbon tax at $50 a tonne does the job. Agreed, that’s not a very exciting basis for a novel and that’s fine. But it does seem worthy of mention when discussing what must be done to beat climate change.

2

Brett 05.06.21 at 3:08 pm

This means that the world’s wealthy would actually pay their fair share of taxes, making tax regimes more progressive. Thus, “if you want to stay rich in the current moneyscape, it’s best to take the haircut and accept your fifty million and walk” (404).

I’m not sure it would make tax regimes more progressive in terms of revenue, if you made steep progressive taxation unavoidable. You’d likely see the wealthy take their “compensation” in the form of non-monetary perks – heightened control over their firms, creative use of expensing goods and services, etc (the “company car” and so forth). A lot fewer paper billionaires, but definitely still a business elite – and not much revenue from them for taxation purposes if you’re trying to fund a progressive, expansive state apparatus.

The obvious comparison here would be with the Postwar Era of the 20th century, but that era had numerous loopholes on taxation (the average tax rate paid by the ultra-wealthy was 40-50%) plus often far more generous tax rates on the capital gains they stood most positioned to benefit from.

3

Matt 05.06.21 at 5:00 pm

But net-zero pledges and domestic regulations are constantly butting up against the structural power of those actors who stand to lose the most from decarbonization. These “climate-forcing asset holders” include fossil fuel and mining companies, electric utilities and heavy manufacturers among others. A recent study finds that of the 61% of global emissions and more than half the world’s population are now covered by a net zero pledge. Yet only 20% of these meet basic robustness criteria, such as outlining clear interim targets, publishing a clear plan and using a reporting mechanism.

One depressing thing I have noticed in the past few years is that a lot of effective political opposition to decarbonization has been grass-roots rather than driven by the sorts of big companies noted above. Germany hasn’t shut down its coal plants as fast as technically feasible, nor in the technically optimum order, because shutting down the least efficient plants first would mean shutting those in the eastern region where AfD is already riding a wave of anger among workers/communities who feel like they’re left behind.

The biggest obstacle in Poland to getting a coal phase-out agreement has been placating the unionized coal miners.

Trump campaigned on grass roots yearning for a lost way of life when he pledged (without any real progress, thank goodness) that American coal mining would come roaring back under his administration. That wasn’t America’s big coal companies buying campaign favors from him. Big Coal’s most notable pattern of the last decade or so has been repeated downsizing and bankruptcies.

The big industrial players like Siemens, Mitsubishi, ThyssenKrupp, General Electric, Samsung, etc. are going to do fine in a transition away from fossil fuels. They’re going to be selling the replacement technologies. They’re not really trying to drive it faster than they think the market demand will move, but they’re not obstructionist either.

Mexico’s president Andrés Manuel López Obrador is critical of renewable energy projects and promoting new domestic coal mining. To my eyes it looks like a pro-labor politician from 1984 was revived from cryogenic hibernation and pledged to fight solar power like it was Margaret Thatcher. I don’t speak Spanish and don’t understand Mexican domestic politics well enough to understand where he is coming from, but it again looks like a revolt where big money actually supports decarbonization and populist forces are trying to bring back dirtier energy.

10 years ago I thought that renewable energy just had to get prices competitive with conventional sources and then the banks, manufacturers, power companies, etc. would naturally drive things forward. I did not envision how much political opposition would come from communities who don’t want fossil fuels to be replaced via markets or any other mechanism.

4

Bob 05.06.21 at 6:46 pm

I haven’t read TMFTF. All I know about it is the blurb on Amazon and what I have gleaned from the posts and comments in the Seminar. But I am finding the discussion increasingly surreal.

This is a novel, right? Why are we discussing and debating the merits of various solutions to climate change–solutions that involve a wide range of expertise and sciences, both hard and soft–that appear in a novel?

We don’t challenge the literary merit of a novel by saying, “But people would  never do that, or that’s scientifically impossible.” It would be wrong to dismiss Orwell’s “1984,” because you don’t believe that some of the technology could work the way Orwell said it would, or “One Hundred Years of Solitude,” because it is a work of magic realism. Conversely, it makes no sense to say “People did X in novel Y, even though you would never expect X to happen, so what’s wrong with us, in the real world, why can’t we do Z, which is no more probable than X? But OLÚFẸ́MI TÁÍWÒ seems to be saying exactly that when he asks: “what prevents us from learning from Kerala and Sikkim, in the very same way that the incomprehensibly diverse and massive country of India manages to do in Robinson’s telling? What prevents us from giving the mines to the workers, as the Namibian government and the African Union manages to do in this same novel?”

On this specific question of this OP, concerning the carbon coin and central bankers, it strikes me that there is no shortage of experts in economics, from across the political spectrum, who might have thought of something like this, if it made any sense. But apparently not. Why are we hearing about it for the first time from a novelist? If the author is really on to something, then isn’t it something of a scandal that no social scientist, inside or outside the economic main stream, right or radical left, has ever proposed it?

Am I alone in this feeling of the surreal? Why not a seminar that involves OPs by experts in the various solutions to climate change expressing their ideas and the relative merits of different approaches? Why are we beating around the bush seeking answers in a novel?

5

Gareth Wilson 05.06.21 at 8:58 pm

“climate change is in large measure, a problem of extreme wealth and wealth inequality.”

If all five billion adults on the planet had $71,000 in savings, how would that affect climate change?

6

J-D 05.07.21 at 3:45 am

We don’t challenge the literary merit of a novel by saying, “But people would never do that, or that’s scientifically impossible.” It would be wrong to dismiss Orwell’s “1984,” because you don’t believe that some of the technology could work the way Orwell said it would, or “One Hundred Years of Solitude,” because it is a work of magic realism. Conversely, it makes no sense to say “People did X in novel Y, even though you would never expect X to happen, so what’s wrong with us, in the real world, why can’t we do Z, which is no more probable than X? But OLÚFẸ́MI TÁÍWÒ seems to be saying exactly that when he asks: “what prevents us from learning from Kerala and Sikkim, in the very same way that the incomprehensibly diverse and massive country of India manages to do in Robinson’s telling? What prevents us from giving the mines to the workers, as the Namibian government and the African Union manages to do in this same novel?”

On the specific issue of why we don’t learn from the novel’s imagined version of events in India, I made a similar comment on the specific post in which that question was raised (but I expect my comment had not yet cleared moderation when Bob composed this one).

On a more general issue, I think it is a valid form of literary criticism to argue that a fictional character, at one point in the narrative, behaves in a way which the reader cannot regard as credible given the way the character is otherwise presented in the narrative (an illustrative example of this is George Orwell’s argument in his essay ‘Charles Dickens’ that it is a flaw in Great Expectations that the character of Magwitch, at his first appearance, behaves in a way which doesn’t fit with the role he later plays in the novel, making it harder for the reader to swallow). If I agree with a critic that ‘I don’t believe the character would do that’, then I agree that it’s a fault in the literary work. However, I’m not sure to what extent that’s a relevant issue here.

7

Alex SL 05.07.21 at 11:26 pm

What Gareth Wilson said.

I find the claim that inequality is the cause of environmental problems (often along with the denial of overpopulation, meaning really the denial that, all else being equal, a hundred humans have a larger footprint than twenty) to be utterly befuddling.

Don’t get me wrong – I despise social inequality, and I fully recognise the problem of an economic system incentivising short-term profiteering over long-term sustainability. But the question of inequality, specifically? There seem to be several unstated arguments or assumptions:

The rich consume resources in proportion to their wealth. This just doesn’t seem right to me. Yes, obviously somebody who has ten billion dollars will consume more than somebody who has 100k dollars, they may have a yacht, a personal jet, several houses, etc. But are they going to use up 100,000 times more electricity, water, and food than the second person? Seems quite unlikely. So, problems of water overuse, pollution, ecosystem decline, and soil erosion will not rise proportionally with wealth, but rather follow some kind of saturation curve style relationship.
Some 20 top companies or CEOs are solely responsible for climate change, and all the rest of us aren’t. That kind of ignores the fact that those companies produce petrol, electronics, food, whatever, because you and I are happily buying those things, and they produce them unsustainably because you and I usually aren’t ready to pay twice as much if we can help it.

(That number of twenty is mentioned repeatedly in this context; I wonder where that meme originated but haven’t yet been able to find out.)

Inequality should be solved by raising the poorest’s prosperity and living standards. Obviously, if that is the solution, then environmental consequences will be worse, much worse.
Alternatively, inequality should be solved by impoverishing everybody. It is no surprise that this is not made explicit. I, personally, am rather frugal in nature and would be able to live with a general leveling down (hopefully while keeping most medical advances). But let’s be honest, that approach would not be politically viable. It would be rejected also by most of those who are currently the poorest, because they too want comforts.

Perhaps a compromise would be to meet in the middle. Consequence: no benefit for the environment. Probably even a slight worsening, if my suspicion about the consumption ~ wealth saturation curve is correct.

Again, I would be ecstatic if inequality could be much reduced, ideally abolished. I do not understand why the CEO of a global consortium should earn significantly more than the cleaner coming in to dust off their office or the nurse who vaccinates them. But it wouldn’t solve climate change or our environmental footprint more generally. That problem is largely orthogonal to inequality, and it is no good having illusions.

8

Seekonk 05.11.21 at 5:11 am

While we struggle to move to a non-toxic, renewable energy supply, we could address the demand for energy by paying a stipend to women for each year that they defer having their first child.

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