World currency system

The 2007-9 global financial crisis, the post-2009 Eurozone debt crisis, and growing inequality are reasons to critique the world financial system. More disconcerting are scientific findings that civilisation’s impacts on the environment are approaching ‘planetary boundaries’ (Steffen et al., 2015) such as catastrophic climate change and ocean acidification. This paper presents a proposal for Complementary Currencies for Climate Change (4C) and it’s associated mitigation policy, called Global 4C Mitigation (G4CM), with the specific aim of achieving strong mitigation of climate change and improved economic conditions (Chen & Cloud, 2014).

4C is a market-and-monetary instrument that will complement the international financial architecture to help correct the existing market failure in environmental externalities associated with greenhouse gases (Stern, 2007). The unit of account of 4C is 100 kg CO2-e verifiably mitigated, and this unit of account is unique in terms of official money because it is based on services rather than commodities or fiat banking. 4C issuance will be administratively coupled to mitigation services, and 4C issuance will be delivered globally as proportional subsidies for the de-carbonisation of industrial and power installations, and as proportional rewards for carbon sequestration. We call this incentive mechanism Globalised Payments for Ecosystem Services (GPES) and it will be implemented under the Beneficiary Pays Principle (BPP).

The G4CM policy prescribes multi-decade 4C floor price schedules. To establish these floor prices, an international monetary protocol will be used to transfer purchasing power from a comprehensive basket of fiat currencies into 4C. This monetary approach will create a concomitant rate of inflation in the fiat basket, and it is hypothesised that this cost spreading will minimise political delay over the long run. Co-benefits will include new currencies for international trade, price signals that complement carbon taxes, stimulus for sustainable projects and employment, ecosystem protection, and improved social cohesion.

The proposed 4C world currency is a new type of official money that creates a price benchmark for climate stability. We give 4C a new monetary classification: the World Service Currency (WSC). The 4C world service currency is advocated on the basis that it can mitigate greenhouse gas emissions to the maximum amount using market forces and a new political pathway. Nations are invited to participate in a 4C system for mutual protection by ceding some fiscal sovereignty and monetary autonomy to the G4CM protocol. The political pathway to an agreement may begin with field trials using digital currencies, followed by contingency planning and negotiations.

An energetic debate on the danger of a global currency war has flared up in recent months, stoked by a renewed move to “quantitative easing” in the United States, resurgent capital flows to developing countries and strong upward pressure on emerging market currencies ...