IMF report

The recent IMF Report predicts China’s growth will be 6.5% in 2009 while the advanced economies will drop by -3.8%. This is a huge difference.

China’s growth is holding up because the Chinese government control the money supply. The rest of the world is in a mess because the banks have created too many loans for non productive purposes. The banking system adjusts itself by reducing lending until the bad loans are removed from the system. This slows economic activity. The IMF suggests stimulus packages to put money into the system. Unfortunately governments – except the Chinese – still use the same mechanism to increase the money supply that got us into the mess. That is, governments increase the money supply by allowing the banks to lend money, they do not have, back to the government who now spend it on stimulus packages. 

There is a better way. We can increase the money supply by the Reserve Bank giving money to the general population but requiring the money be invested on productive assets. We have two obvious candidates where we need to invest massive amounts of money. One is investment to reduce ghg emissions and the other is the National Broadband Network. The government can tell the Reserve Bank to increase the money supply by issuing money, giving it (not loaning it) to the population and requiring the money be invested in ways to reduce ghg emissions and in the Broadbank Network. 

A way for the government to fund the broad band network

The government can fund the broadband network and give the economy an immediate stimulus without going into debt.

To do this the government issues every citizen in Australia with shares in the new Company with a face value of $2500. Anyone who wants the shares registers to obtain them. Many people will keep them and many people will sell them for whatever the market will pay them. Probably most will sell. This will create an immediate stimulus to the economy. The company will have a large amount of shares and when it needs some funds it will convert some of the shares to cash by asking the Reserve Bank to issue it with zero interest new money. This increases the money supply but only as assets are created to back the money. Because the money in the company will be spent on producing an earning asset this will not be inflationary. Thus the government can at one stroke solve the ownership problem of the new company, not go into debt, stimulate the economy, and solve the broadband infrastructure.

This is a variation on increasing the money supply as explained in http://stableproductivemoney.wordpress.com/2009/04/03/increasing-the-money-supply-without-loans/

The whole idea of the broadband network is to provide infrastructure at a reasonable price for all Australians and if you remove the capital cost of the broadbank infrastructure then the last mile becomes very cheap. This means we can have broadband at very low prices which will increase productivity (and taxes) because the price of communications will drop.

If the last mile is already in place, such as in Canberra with Transact, then those assets can be purchased from TransACT with shares in the new broadband company. Similarly Telstra in those places where ducting to the home is available can be given shares of equivalent value. This would accelerate the introduction of broadband through existing Telstra as they will make the ducts available otherwise the NBN will do it in parallel.

As long as the broadband company ONLY owns and builds infrastructure and does not get into selling what is sent along the wires then this will give us the worlds cheapest communications infrastructure with all the economic benefits that will come from low priced communications. Giving shares to both the general population and to those whose assets can be used as part of the network is the fairest way of dividing up the ownership of the new asset created by through increasing the money supply.

Where is the downside? Well the company initially will NOT make 10% or whatever rate is deemed necessary for people to invest existing money to build the network. Perhaps the profit can be set to be at the percentage productivity improvement for the country as a whole and prices set accordingly? So as productivity goes up so the return goes up and prices go up. As productivity goes down so prices go down. If we believe (as I do) that a NBN will increase the productivity of the nation this would seem to be a sensible regulatory mechanism to contain the monopoly that will ultimately evolve. What this means is that the nominal value of shares of $2,500 will be lower. That is the share price will be perhaps $1500 but this does not matter because people were given the shares for nothing.

Online Opinion Article

Governments around the world are faced with the problem of stimulating their economies. The most popular approach is to borrow money or use reserves of cash, give people the money and hope that they spend it. The British have decided to print more money and for the government to buy assets.

There is another way. The government can take advantage of the crisis to reform the money market and at the same time, reduce the deficit, reduce the cost of energy, and reduce the levels of greenhouse gases in the atmosphere. All this can be achieved by changing the way we increase the money supply. While this article suggests a way of spending the increase in money, its main purpose is to describe a better way to expand the money supply by investing money rather than just spending it.

First some background to how we currently expand the money supply and an alternative to the existing method. You can read another description on ABC Perspective http://www.abc.net.au/rn/perspective/stories/2008/2448111.htm.

Money is a government promise to pay the bearer an amount shown on the currency. A loan is a promise by an entity to repay money that is given to the receiver of the money. The people who loan us money want us to repay it and before they give it to us they seek assurance that it will be repaid. Therefore loans are secured against assets such as gold, money, buildings, future wages or other loans. In a growing economy we need to increase the amount of money available, so we create some loans with the promise that the issuer of the currency will repay the loan. This is the way we increase the money supply. The issuer of the currency allows some institutions to issue loans without there being any tangible asset against which to back the loan.

Money is not the same as a loan yet the way we have built our financial system money and loans have become the same because we allow some loans to be created without there being an asset backing the loan – only a promise by the government to honour the money. When we allow loans to be created that are only backed by the promise of the controller of the currency, it is almost inevitable we will spiral into a system where too many loans, and with it too much money, is created.

When this happens the system adjusts itself by decreasing the value of money – inflation – or by loans defaulting. When loans start to default on a large scale, both money and loans are removed from the system and we end up with fewer assets against which to loan. The inevitable result of this is a recession or depression, further accelerating the rate at which loans default.

The way we currently expand the money supply involves internal positive feedback mechanisms and it is these which cause our money market to be structurally unstable. In other words, when money supply increases it tends to keep increasing and when money supply decreases it tends to keep decreasing and the price of money has little effect on the rate of increase or decrease.

What is needed is to change the way that the money supply is expanded so that we can stabilise the system and remove the positive feedback mechanisms. What is proposed is that we build productive assets first, then create the money backed by these new assets. This contrasts with the current system under which we produce the money first, followed by the asset.

Is this reversal feasible? Yes, if we create special purpose money that can only be invested in creating productive assets and which can only become interest-bearing regular money after the asset has been produced. The creation of this special purpose money does not require the issuing of loans, and because it results in the establishment of a productive asset the inflationary pressures are controlled.

Getting started 

The first step is to select a class of productive assets to create. The next is to issue the special purpose money to those who agree to invest it in that class. The class of assets needs to be something society wants and that is guaranteed to return more money than is invested. For example, assets that reduce greenhouse gas levels in the atmosphere are something that society wants. Furthermore, if we remove finance charges such as interest and repayments, greenhouse gas reducing technologies will return good profits or more money than we invest.

Here is how it can be implemented.

We create a supply of special purpose money that has zero interest and that must be spent on ways to reduce greenhouse gas levels in the atmosphere. Let us call this money Energy Rewards. Energy Rewards money pays no interest.

We create a market place where suppliers are invited to offer goods and services that reduce the level of greenhouse gas emissions in the atmosphere. This market place will have goods such as house insulation, solar hot water heaters, solar panels, smart metering systems, investments in renewable energy plants, investments in ways to fix carbon, and so on. Any supplier can offer their goods and services provided they can show how the sale of their products will reduce greenhouse gas emissions. Buyers in this market place can use regular money or they can use Energy Rewards. When they pay with Energy Rewards the supplier receiving Rewards converts it to unrestricted money when the product purchased is delivered to the buyer.

Because we invest Energy Rewards in a market place it is likely that Rewards holders will seek ways to invest for the greatest profit. That is, the allocation will be efficient. Who is issued with Energy Rewards is a political decision as it is a wealth allocation issue not an economic issue. If too many Energy Rewards are issued, the Rewards themselves will reduce in value but because their expenditure still produces a productive asset they isolate the regular currency from inflation.

To summarise we can change the way we expand the money supply by creating assets first, then money. This removes the present, unhealthy positive feedback mechanisms from the money market thus helping to prevent over-expansion and over-contraction of the money supply.

The government can stimulate the economy by spending money through special purpose markets. The idea of using special purpose, internally regulated markets to implement particular policy objectives is one that I have promoted for several years through On Line Opinion.

“Contingent loans to reduce taxation and reduce greenhouse gas emissions” http://www.onlineopinion.com.au/view.asp?article=8477 shows how to give extra resources to the less well off without increasing taxation.

“The credit crunch and how to solve it” http://www.onlineopinion.com.au/view.asp?article=7973 has another description of creating assets then creating money.

“A new way to fund health” http://www.onlineopinion.com.au/view.asp?article=6741 describes how to distribute money for health through a market.

“Reward the frugal and charge the profligate” http://www.onlineopinion.com.au/view.asp?article=7085 describes a way to encourage people to consume less and to turn our society from one based on consumption to one based on sustainability.

“A different approach to funding transport” infrastructure http://www.onlineopinion.com.au/view.asp?article=3625 has some early ideas on funding public transport

All these articles are variations on the same idea; using internally regulated market places as a way to spend community money. In devising these schemes a central issue was always one of obtaining the money to fund the buyers in the market places. It turns out that the funding can be provided by using these market places as a way to expand the money supply without the government going into debt.

While it seems counter-intuitive that we can get something for nothing, that is the magic of investment. When we invest we expect to get back more than we put in. This approach can be used by the community as well as individuals. If the government starts to think like an investor and uses the appropriate tools, they can stimulate the economy, so that as a community we all become investors and increase our collective wealth. It’s a much healthier approach than becoming borrowers and mortgaging our future.

The global financial crisis gives Australia an opportunity to change the way we spend public monies at the same time as delivering the Australian government the political capital to change the system to achieve their election promises of fiscal responsibility and reduction in greenhouse gas emissions. My advice to the Federal Government is to decide to do something about climate change and to issue $30 billion in Energy Rewards to the population each year for the next 10 years. The result will be zero emissions, no government debt, a booming economy based on low cost clean energy, with zero inflation and a stable money market.

Submission to ghg enquiry

http://www.legassembly.act.gov.au/downloads/terms-of-reference/TORgreenhouse.pdf

http://www.legassembly.act.gov.au/committees/index1.asp?committee=112&inquiry=753&category=13

Submission to the ACT Government Standing Committee on Climate Change, Environment and Water

Inquiry into ACT Greenhouse Gas Reduction Targets

From : Kevin Cox

Zero net emissions by 2020.

It is recommended that the ACT Legislative Assembly set a target of zero net emissions by ACT residents by 2020. It is recommended that the funding required to achieve these targets be obtained by asking to Federal Government to increase the money supply required by the Territory to fund its anticipated regular growth though the system called Energy Rewards outlined in this submission. 

The problem of green house gas emissions can be resolved by investing enough money.  If we invest enough in ways to reduce green house gases we can bring emissions down to whatever level we wish and we can start to remove green house gases from the atmosphere. The maximum investment needed to make Australia Carbon Neutral is $30 billion invested each year in electricity generation for 10 years. This scenario is if all energy used in Australia was achieved through generating electricity. Investing this amount of money in existing renewable methods of electricity generation such as geothermal and solar thermal will give Australia zero net emissions within ten years. This means Canberra needs to invest a maximum of $600M each year for ten years to achieve zero emissions.

This submission outlines a process that will achieve the goal of zero net emissions. The investments will be paid for from the profits from the production of energy and from savings on energy reductions. There will be NO increase in the debt of the ACT government or the Federal government. There is NO reliance on overseas capital. The price of energy is likely to drop significantly and the system will bring stability to Australian money markets.

How do we get money into investments in greenhouse gas reducing technologies?

We could encourage investment by putting a price on carbon. That increases the price of pollution which should ultimately make investing in renewables more attractive. This may or it may not work. The evidence so far is that it is difficult to implement and that, at best, it may achieve its objectives slowly. So called market based solutions where we put a price on carbon are problematic because markets will not stabilise if any of price, supply or demand are fixed. In the case emissions permits trading supply is predetermined because of the cap. The internal dynamics of markets will fail to bring price stability and so prices will become unpredictable and are not reliable enough to be used for investment decisions. To encourage an investment of $30 billion a year through price increases in polluting energy would require a very large increase in the price of energy.

A simpler way to achieve the level of investment required is to give zero-interest loans to people who will invest in ways of reducing ghg emissions.  The money will be paid back over time from the profits on the investments. That is the loans are only loans from the point of view of government bookkeeping. For the individual recipient of the loans they are like grants. This means that we reduce the cost of finance to zero, thus removing one of the major stumbling blocks for any kind of infrastructure investment.  It’s also a move that immediately makes almost all renewable energy projects and ghg emission reduction projects financially viable. For bookkeeping purposes the loans will be paid back from taxes collected on the investments.

Investing does not cost money in the long term if you get back more money than you put in. In fact the whole idea of investing is to make us wealthier than before. The issue is not whether we can do it and afford it but what is the most efficient way to do it so that we reduce ghg emissions for the least amount of money.

 

We need to address the following issues:

• From where do we get the money?
• Who gets the money?
• How do we ensure it is spent on ways to reduce emissions?
• How do we get the best value for money?

It turns out that it matters little where the money comes from. It could come from selling permits, putting a tax on carbon, putting a surcharge on all energy or it could come from printing special purpose money. 

Printing special purpose money is the method recommended because it can supply the required large amounts of money without distorting the economy. Rather it will help stabilise the financial system by creating money without creating debt.  If we print the money for zero-interest loans secure in the knowledge that the the funds can only be used to invest in infrastructure and tangible goods, we will finally have found a way to equate the creation of money with productive assets and we’ll be one step closer to solving the current financial crisis. We can prove it does not matter how much special purpose money is created because if we print too much the special purpose money it becomes inflated not the general currency. This means we can adjust the amount of special purpose money printed to achieve our zero emission target in the required time frame.

Who gets the money also does not matter with respect to the objective of reducing ghg, so long as we know that it will be invested in ways to reduce ghg emissions. A politically acceptable solution would be to compensate the people who are disadvantaged by the introduction of the scheme or by the existing distribution of wealth in the community. The first of these would be the owners of power stations and the owners of coal mines. Other groups are those with few assets and those who use the least energy now and hence are contributing less to the problem. Any or all could be eligible to receive the special purpose money.

The last two points – ensuring that the money is spent on ways to reduce emissions and getting the best value for money – are covered by the one mechanism. We create a highly internally regulated and controlled electronic market place where people can only buy goods and services that are investments in ways to reduce greenhouse gas emissions. Think of an online service not too dissimilar to Amazon online stores.  If this is the only place where people can spend their zero interest loans this will ensure that the money is spent on appropriate goods and services. Because it is a competitive market place and given the availability of modern tools such as buyer feedback forums and ratings, we can expect vendors to compete to deliver the best value for money.  And because the funds are being invested, buyers can anticipate a return on the money.

Unregulated market places have proven less than satisfactory in delivering social objectives. Regulation has proven difficult to implement and is often counter productive in terms of social goals it is meant to address. The reason is that “external regulation” is difficult but if we build social objectives and regulation into the fabric of the market then we know we can achieve our objectives. The reason is that if anyone uses the system they automatically obey the regulations. That is enforcement is automatic. If people abuse the system we simply do not let them participate rather than try to invent new regulations.

 

One important attribute of such a system is that it is open to making adjustments to the value of the market place money. For example, we could decide that the special purpose money is converted at a different rate depending on how much reduction is achieved per dollar spent.  This will create a positive feedback system whereby the more ghg emissions we save, the more we invest and the more we save. 

The ACT government can put a proposal to the Federal Government for a zero interest grant of $600 million per year for ten years to be distributed as special money called Energy Rewards to ACT residents. Energy Rewards are guaranteed to be used to create infrastructure assets that will reduce greenhouse emissions. $600 million for the ACT is the equivalent of $30 billion for Australia. The money would be notionally repaid from taxes on the profits generated by the investments. An electronic market place will be built to regulate the market and to keep track of the expenditure money and of the taxes paid on the investments so that both governments can be assured that the money has been spent wisely. The approach is disciplined and cost effective, and it does not require the Federal Government to borrow any money to fund the project. Thus there is no increase in budget deficit. Arrangements will be made for the ACT Government loan to be notionally repaid from a percentage of the taxes collected on the infrastructure assets built from the loans.

30 billion per year for ten years is an approximate figure for the amount of money needed to reduce Australia’s emissions to zero. It is based on the capital cost of generating electricity. We know that there are more cost effective ways of reducing ghg emissions than generating zero carbon electricity so this is the maximum investment needed. The figure is arrived at by working out how much money is needed to get to an installed capacity of 186GW of electricity generation. 186GW of installed capacity will produce the total amount of all energy needed by Australia in the year 2020. The exact amount of money and energy needed will be adjusted in the light of experience and the measured net emissions but it is recommended that the scheme starts with the maximum required.

$30 billion introduced into the Australian community as Energy Rewards will not cause inflation of unrestricted currency. The reason is that the money only becomes unrestricted – that is it can earn interest – after it has been converted into a productive asset. Inflation occurs when there is too much money chasing too few assets. If money comes into existence and there is a productive asset backing it then the money will not cause inflation because there are assets that can be purchased with the money. Energy Rewards money can become inflated. That is, if there are not enough opportunities to invest Energy Rewards then the value of Energy Rewards will drop. This will encourage more suppliers to come into the market in investments in ways to reduce ghg emissions which is the objective of the exercise.

In the year 2008 the M3 money supply increased by $170 billion dollars. Introducing $30 billion for reducing emissions is not going to be enough new money and if the government decides to adopt this approach to creating new money other worthwhile community projects could be funded through this approach.

Letter to Editor on super fund investments

Mike Gilligan (CT mon 9th Super interests neglected) should not be too hard on super fund managers as they operate in unpredictable markets. No one can predict the future price of money, shares, and houses. You can predict that once a market starts to go up it will tend to continue to go up and when it starts to go down it will tend to continue to go down. How far up we cannot predict and how far down we cannot predict. Share prices are random in the short term and long term. The only reason we bother with share markets instead of “investing” at a casino is that over time the size of the total pool goes up while in the casino the house takes its cut and the total pool goes down.

The problem is caused by the internal operations of asset markets. Many (most) asset markets do not obey the laws of supply and demand with price acting as the control mechanism. Currently the government is injecting money into the market because banks are not lending and hence are not creating any money. The banks are not lending because they have too much debt. The problem is that to create money the mechanism we use is to create more debt (the government goes into deficit). Clearly this is not going to work because the more debt that is created the less money the banks are willing to create.

There is a way of creating money that does not create debt and it is called investing. The government is doing the right thing when it invests in infrastructure but it is doing the wrong thing when it goes into debt to fund the investment. One way of creating investment without creating debt is to give zero interest loans to people who will invest in productive enterprises where they agree to repay the money from the taxes on the profits of the investment. 

Save the planet and the financial system

Save the planet and the financial system

Kevin Cox and Heather Caulfield

Most would agree that we want to continue to enjoy a high standard of living and that we need to reduce greenhouse gas emissions. To achieve this we first need to invest in renewable energy systems and in ways to save energy. The problem is that right now we are being told that the financial system is failing to provide enough money to keep our economies going, let alone the huge sums required to invest in energy infrastructure. It’s a situation in which global warming concerns are at risk of being pushed aside while the economists and politicians battle to keep the economy afloat.

However, it doesn’t have to be an “either/or” situation. We can combine the two issues and address the financial crisis and rising greenhouse gas emissions with one solution. It’s a market-based approach that should please economic rationalists. It will also make social democrats happy as it results in wider distribution of wealth. It gives environmentalists a boost by offering zero net emissions within a reasonable time frame and delivers lower energy prices along with an enhanced standard of living to the person in the street. Bankers benefit through reduced risk and it provides the Reserve Bank with a method of fine tuning the economy for continuous stable growth while eliminating inflation. What’s more, it is an approach that will please the most fiscally-conservative government because it can be adopted without incurring a deficit.

The solution is to stop banks lending money they don’t have and for the government to lend energy-frugal people zero interest loans that must be invested in infrastructure to reduce greenhouse gases. Right now banks create much of this country’s money from thin air: They agree to a loan with a customer and suddenly the funds appear in the customer’s account.  Most of the money didn’t exist prior to the establishment of the loan and there is only a small amount of existing money actually backing this newly created deposit in the customer’s account. If banks stopped lending money they do not have we could break the link between debt and money. This immediately stops the debt spiral whereby the more money we create, the more debt we create and the more money we have to create to service that debt.

It is this spiral that has caused the financial crisis because much of the debt was to pay for non productive loans or overpriced assets. As various bubbles burst, we are getting rid of the excess debt but we are also getting rid of money and this is where the problem lies. By breaking the link between money and debt we can increase the supply of money without increasing debt. Last year in Australia the total supply of money increased by $170 billion dollars.

However, if we stop the banks from creating extra money it is necessary to find another way to increase the total money supply. One option is for the government to issue zero interest restricted loans. The restriction is that the loans must be invested in ways to reduce greenhouse gas emissions. Think of them as a kind of shopping voucher that can only be redeemed at certain outlets only in this instance those outlets involve greenhouse-friendly goods or services. Once the loans are invested they become regular money and increase the supply of money. It is similar to the way that banks currently create money but we are guaranteed to that the new money will be backed by an asset. Repayment of these zero interest loans can occur over time, taken as taxes on the profits of the investments. 

If we distribute the loans to those people in society who consume relatively less energy – for example those who use less mains electricity – the investment potential of the loans will encourage people to use less energy. They will also look for ways to obtain the best financial return, leading to a system bias for the greatest reduction in greenhouse gas emissions for the least cost. As many frugal people are poor, the distribution of loans will be socially equitable.

Wholesale electricity from renewable energy plants under such a system would cost one cent per kilowatt hour. As the average wholesale cost is now six cents a kilowatt hour renewable energy systems will be very profitable and it is likely that energy prices will drop, not increase.

All this can be done without any world wide agreement and without the economy plunging into recession and without causing a government deficit. 

Letter to editor and submission to Senate Committee

To – Committee Secretary 

Senate Finance and Public Administration Committee
Department of the Senate

From Kevin Cox

22 Yirawala St

Ngunnawal

ACT 2913

The government intends to provide insulation to millions of houses.

There is a more efficient way for the government to achieve the same objective of spending money on ways for households to save energy. 

Let the government set up a scheme where people can register to receive electronic vouchers that can only be spent on ways to reduce energy consumption in households. Let sellers who have products or services that reduce energy consumption voluntarily register to accept vouchers for products or services that reduce energy consumption. Registered sellers are the only ones who can redeem the vouchers for cash. Registered buyers are the only ones who get vouchers. 

If any buyer or seller breaks the rules associated with the vouchers they are banned from this or any other similar scheme. Distribute vouchers to people not to houses so it does not disadvantage the homeless or renters or large families.

Let the vouchers be transferrable so that if people have no way of reducing energy consumption in a house they can sell their vouchers at a discount to someone who can. 

Because the vouchers are electronic, implementation and operation of the system is inexpensive and will be paid by the sellers in the market place. The voucher scheme can be extended to include financing renewable energy plants. The government can spend as much money as it needs to get the economy going through this approach while at the same time reducing greenhouse gas emissions.

Mitigation of GHG Emissions

Mitigation of GHG Emissions.

“Unless we change the direction we are heading, we might end up where we are going.“ – Chinese Proverb.

Whereas Emissions Trading Schemes  have assumed prominence in the public eye as evidence of our determination to confront the causes of climate change, the notion that there are many other available strategies for mitigating Green House Gas emissions tends to be overshadowed, and talk of adapting to an inevitable global warming is often considered to be nothing short of heresy. However, any rational consideration of the situation must take into account multiple mitigating strategies and should even face up to the possibility that mitigation may already be too late, or too difficult – even Ross Garnaut entertains only “a chance, just a chance, that humanity will act in time and in ways that reduce the risks of climate change to acceptable levels” (Time to Aim High on Climate Change  - Ross Gittins / Sydney Morning Herald: September 10, 2008 ). In this context, the development of both mitigation and adaptation strategies certainly makes good sense.

This edition OF WWWTools for Education offers a range of resources selected to present a broad view of the issues involved and available courses of action, with special reference to the distinctions between mitigation and adaptation, but with an emphasis on strategies for mitigation. A fuller coverage of adaptation to global warming will follow in a subsequent edition of this newsletter.

Terminology.

From the Intergovernmental Panel on Climate Change:

•     
  In Climate Change 2007   (Working Group II, Martin Parry et al / CUP 2008 ), the IPCC defines mitigation as: “An anthropogenic intervention to reduce the sources or enhance the sinks of greenhouse gases.”
•      It defines adaptation as the “adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities.” Appendix I of the report offers a comprehensive Glossary .
•      The Summary for Policymakers  includes a set of Endboxes clarifying definitions and language usage. 

Useful treatments distinguishing mitigation from adaptation include:

     Climate Mitigation and Adaptation   (Global Warming)

    Glossary of Environmental Terms – Mitigation of Global Warming   (woopidoo)

 Aimee Barnes’ report from the recent Poznan Climate Change Conference  highlights the polarisation developing around the two terms – see Adaptation vs. Mitigation and the Perception Battle  (climatebiz: December 05, 2008 )

Updates on Emissions and Climate Change.

UN Reports Rise in Greenhouse Gas Emission   (Dawn: November 19, 2008 ) – emissions of 40 industrialised countries rose by 2.3 per cent between 2000 and 2006.

Going Green Fails to Stem Rise in Global Carbon Emissions  (Ursula Heger / Courier Mail: September 26, 2008 )

Japan’s Emissions Hit Record High   (Agence France-Presse: November 12, 2008 ) – 1.37 billion tonnes in the year to March 2008.

Tomgram: Michael Klare, The Energy Challenge of Our Lifetime  (Michael T. Klare / Tomdispatch.com: November 09, 2008 ) – the excessive reliance on oil, and the problem with coal. Along similar lines, see also ‘Protecting’ the Queensland Economy?  (Mike Pope / ON LINE opinion, October 29, 2008 )

Call for Urgent Action on Climate Change  (European Commission, Environment DG / Science for Environment: November 12, 2008 )- a new report responds to critics of the Stern Review, calling for consideration of mitigation and adaptation strategies, risk and ethical issues in economic climate change models, and political agreement on GHG targets. These were addressed to some degree at the United Nations Climate Change Conference  in Poznan  (December 01 – 12)

Climate Change: Prepare for Global Temperature Rise of 4C, Warns Top Scientist  (James Randerson / The Guardian: August 07, 2008 )

Global Climate Change: Resilience through Mitigation and Adaptation  (Joanne Stone Wyman / Logistics Spectrum: Jan-Mar 2008 ) – overview of climate change issues, with examples of mitigation and adaptation measures. According to John Holdren, there are 3 possible responses to climate change – mitigate, adapt or suffer; or maybe all 3 at once? 

Recent Responses.

It’s a common complaint that mitigation efforts are pointless without stronger Chinese, Indian and American commitment to abatement programs – see for example John Garnaut’s Light in the Fog  (Sydney Morning Herald: July 19, 2008 ). Here are examples of positions around the world.

CHINA: Chinese responses demand a degree of perspective:

    Is it Fair to Treat China As a Christmas Tree to Hang Everybody’s Complaints?  (ZhongXiang Zhang / October 10, 2008 ) – outlines efforts towards reduced energy consumption and use of cleaner technologies.

     China Says Developed Countries Should Take Lead in Cutting Carbon Emissions  (Thomson Financial News: October 29, 2008 )

     China’s Policies and Actions for Addressing Climate Change   (Government of China / egovmonitor.com:  October 30, 2008 )

INDIA: 

Indian against Altering UN Convention on Climate Change  (Akshaya Mukul / Times of India: December 13, 2008 )

USA:

An American white paper from the Pew Center on Global Climate Change on State-level Economic Impacts of a National Climate Change Policy  (Martin Ross et al / April 2008 ) analyses Economic Implications of the Climate-Change Mitigation Policy, concluding “that economic impacts of a policy that reduces GHG emissions to around the levels seen in the year 2000 are relatively small…”

American reluctance to act is about to change – see President-elect Obama Promises “new chapter” on Climate Change

 (change.gov: November 18, 2008 ) – link to a video of the address. See also The Obama-Biden Plan: Agenda – Energy and Environment

UK:

The Climate Change and Energy  site covers new responses, including the Climate Change Act 2008, the Committee on Climate Change, and the establishment of the Department of Energy and Climate Change.

EU:

EU Leaders Drastically Weaken Their Emission Ambition  (James Kanter and Stephen Castle / IHT: December 12, 2008 ) – European leaders aim to reduce GHG emissions by 20 percent by 2020.

AUSTRALIA:

Chapter 15: Adaptation and Mitigation Measures for Australia   (The Garnaut Climate Change Review) – key points:

•     Australians will need to adapt
•     good policy will be based on good information
•     the Australian Climate Change Science Program needs adequate financial resources
•     we need a new Australian climate change policy research institute.

– for additional resources, see also the Notes and References

The Department of Climate Change  website should keep us up-to-date with developments. It also carries a useful set of links to International Activities

Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future  (Department of Climate Change, Australia / White Paper: December 15, 2008 ) – the final design of the Carbon Pollution Reduction Scheme and decisions on climate change programs. See in particular Chapter 4: National Emissions Trajectory and Target, which commits to a long-term goal of reducing emissions to 60 per cent below 2000 levels by 2050; the medium-term aim is emission reductions of 5 – 15 percent below 2000 levels by 2020, the higher figure being contingent on a comprehensive global agreement. Though these figures are in line with the Garnaut recommendations, any policy decisions on this had to be controversial:

•     Big Emission Cuts Ruled Out  (Sydney Morning Herald: December 15, 2008 ) 
•     Climate Change Experts Critical of Goals for Emissions Cuts (Paul Colgan / Courier Mail: December 15, 2008 )

GLOBAL: 

The United Nations Climate Change Conference, Poznan, Poland – COP 14, 1-12 December 2008   (UNFCCC) – note decisions adopted by COP 14 and CMP 4. 

Mood Mixed As Climate Summit Ends  (Richard Black / BBC News: December 13, 2008 ) – widely varying views on the degree of progress. On a positive note, Adaptation Fund money will become available in 2009.

The latest Copenhagen Consensus   delivered a ranked list of solutions to ten pressing challenges. See in particular its conclusions on Global Warming   (Copenhagen Consensus 2008 ). 

The  Global Warming Challenge Paper   (Gary Yohea et al / April 03, 2008 ) proposes a mixture of adaptation and mitigation approaches, and further research.

Readings in Emissions Reduction / Mitigation of Global Warming / Abatement.

Mitigation of Global Warming (Wikipedia)  “involves taking actions to reduce greenhouse gas emissions and to enhance sinks aimed at reducing the extent of global warming.”

Understanding Climate Science: 2.4 The Task of Global Mitigation   (The Garnaut Climate Change Review) – “stabilising at low levels of CO2-e (around or below 450 ppm) requires ‘overshooting’ the concentration target” 

Climate Change 2007: Mitigation – Working Group III Report (Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change)

No matter what term is used, it remains true that there’s Strong Support for Emissions Reductions  (Ben Block / Worldwatch Institute, December 01, 2008 )

Strategies for Mitigation.

Canada’s Mitigation of Global Warming   lists strategies for mitigation and relates A Canadian Success Story.

TECHNOLOGICAL ADVANCES:

    Low-Carbon Energy: A Roadmap   (Chris Flavin / Worldwatch Institute, 2008 ) – “technologies that are available today, or are projected to become available over the next two decades, will allow a rapid shift in the mix of energy sources.” Good introduction to alternative energy technologies. Note Sidebar 1. What About Nuclear Power?

Report available for free download 

    Role of Technology Policies in an International Climate Agreement (Joseph Aldy, Robert Stavins / Climate Dialogue, Denmark, September 2–3 2008 ) – innovation and deployment of energy-efficient and low-carbon technologies will require substantial investment.

    Green Cement May Set CO2 Fate in Concrete  (Carrie Sturrock / The San Francisco Chronicle: September 02, 2008 ) – cement that can be manufactured without carbon dioxide emissions. See also Geopolymer Cement for Mitigation of Global Warming   (Geopolymer Institute)

    Group Developing Waste-Powered Fuel Cell for Africa  (Cate Doty / IHT: November 11, 2008 ) – bacteria will produce sufficient power for a small device.

    Scientists Would Turn Greenhouse Gas Into Gasoline (Kenneth Chang / New York Times Science: February 19, 2008 ) – works in progress.

 

    The End of Oil? Breakthrough Turns Coal into Clean Diesel  (Sean Markey / National Geographic News: April 18, 2006). 

See also Coal Put Forward As Alternative Source of Diesel  (ABC News: Jun 03, 2008 )

SEQUESTRATION / CARBON CAPTURE AND STORAGE / CCS:

Carbon Dioxide Capture and Storage  (Paul Freund et al / IPCC Special Report) – a core document.

Carbon Capture and Storage  (Wikipedia) – this overview is supplemented by Carbon Capture and Storage in Australia  - a fairly pessimistic prognosis.

However, the Australian Government is determined to pursue the technology as a central plank of its mitigation policy:

    Carbon Storage Gets the Green Light  (Sydney Morning Herald:  August 15, 2008 )- draft laws to allow companies to capture carbon dioxide emissions and bury them under the seabed.

    Rudd Unveils Carbon Research Institute   (Siobhain Ryan / Australian IT: September 19, 2008 ) – to act as a clearing house for research, technology and investment.

    Clean Coal ‘Has 10 Years to Be in Black’ (Sydney Morning Herald: September 29, 2008 ) – feasible technology, but taking too long.

Is Coal with Carbon Capture and Storage a Core Climate Solution?  (Climate Progress) – an attractive idea with 4 fundamental problems.

Coal-is-dirty.com   - dedicated opposition.

Long-Term Risks and Short-Term Regulations Modeling the Transition from Enhanced Oil Recovery to Geologic Carbon Sequestration  (Alexander Bandza and Shalini Vajjhala / Resources for the Future: September 2008 ) – engineering–economic models of four strategies. Concludes that regulatory design needs to anticipate the use of the potentially leakiest or “worst” sites first.

Economic Modeling of Carbon Capture and Sequestration Technologies (Jim McFarland et al) – explores the economics of carbon capture and sequestration technologies as applied to electric generating plants; could such modeling be skewed by factors such as the global financial crisis?

German Plant Could Point to ‘Clean Coal’ Future  (Tim Colebatch / The Age: October 04, 2008 ) – world’s first pilot plant to capture and store the carbon dioxide from burning coal.

Innovative solutions:

   Common Rock Could Store Carbon Emissions  (Timothy Gardner / Reuters: November 08, 2008 ) – peridotite + CO2 = calcite? 

See also In Situ Carbonation of Peridotite for CO2 Storage   (Peter B. Kelemen1 and Jürg Matter / Proceedings of the National Academy of Sciences of the USA: November 2008 )

    Innovation In Carbon Capture   (CO2 Solution Inc)  - a bio-technological platform for capturing carbon dioxide from power plants and other large stationary sources. 

    Proposal: Suck Carbon Dioxide Out of the Air   (Charles Q. Choi / LiveScience: November 20,  2007)

FOREST CONSERVATION:

Garnaut Climate Change Review: Chapter 2.4.1, Understanding Climate Science  (Ross Garnaut, 2008 ) –  ”The simplest way to remove carbon dioxide from the air is to use the natural process of photosynthesis in plants and algae.”

See also:

Garnaut Has the Answer to Climate Change  (Sydney Morning Herald: September 03, 2008 ) – trees.

Climate Change, Carbon Sequestration and Tasmania (Fred Gale / ON LINE opinion: August 28, 2008 ) – with special reference to Gunns’ Tamar Valley pulp mill.

Avoiding Deforestation to Limit Climate Change ‘Cheap and Practical’  (ENS: July 23, 2008 ) 

Study Says Old Growth Forests Bank Carbon Dioxide  (Jeff Barnard / Associated Press: September 10, 2008 ) – contrary to popular belief.

It Pays to Leave the Trees Standing   (Andy Ivens / The Province: September 05, 2008 )

Promotion of Carbon-Sink Measures to Mitigate Global Warming  (Forestry Agency, Ministry of Agriculture, Forestry and Fisheries of Japan / Annual Report on Trends in Forests and Forestry, Chapter II: 2006)

NUCLEAR POWER:

Australia has an abundant supply of uranium ore – see for example Uranium Leaps to the Rescue (Peter van Onselen / The Australian: November 22, 2008 ). Given the absence of GHG emissions in nuclear power plant operations, it’s no surprise that the option has been considered. Ziggy Switkowski puts the case in Australia ‘Must Consider’ Nuclear Power  (Sydney Morning Herald: November 13, 2008 )

However, according to Daniel Botkin in The Limits of Nuclear Power  (IHT: October 20, 2008 ) there’s a problem that takes the shine off the option.

RENEWABLE ENERGY – refers to sources of energy that are naturally replenished, i.e., using them does not decrease the amount available for future use; sources include sunlight, wind, waves, tides and currents, geothermal resources, and biofuels. Renewables will become more attractive as petroleum reserves dwindle – see for example, ‘Peak Oil’ Drives Urgent Energy Alternatives   (Ian Dunlop / ON LINE opinion: September 01, 2008 )

Broad coverage:

•     Alternative Energy Renewables   (Global Warming) – a fascinating site. Well worth following the links.
•     Renewable Energy Sources and Climate Change Mitigation (Proceedings of IPCC Scoping Meeting on Renewable Energy Sources / April 2008 ) – structured outline of issues.
•     Renewable Energy: The Good, the Bad, and the So-So   (Regulatory Compliance Consulting : August 03, 2008 )

In practice: The Island with No Carbon Footprint  (Robin McKie / Dawn: September 23, 2008 ) – Samso (Denmark) replaces fossil-fuel plants with alternative power generators.

WIND:

     Wind Power   (Wikipedia) – comprehensive coverage.

    
Learning resources for children:

•         Wind Energy – Energy from Moving Air   (Energy Kid’s Page / Energy Information Administration: July 2008 )
•        Wind Energy  (Energy Quest, Canada)

Examples from around the world:

    New York: Wind Energy Bumps into Power Grid’s Limits   (ENN: August 29, 2008 )

    San Francisco: For Wind Turbine Advocates, a Rooftop Is the Place to Be   (Kate Galbraith / IHT: September 04, 2008 )

    Scotland: Coal Back-up for Wind Power ‘Will Cost £100bn’  (Jenny Haworth / Scotsman: August 30, 2008 )

    Pakistan: 50MW Wind Farm Planned in Sindh   (Dawn: September 13, 2008 ) 

    Australia: Wind Farms Shake Up Electricity Market    (Sydney Morning Herald: November 19, 2008 )

Kevin Cox presents interesting ideas on financing wind farms in his Blog  (September 24, 2008 ). He recently expanded on these ideas in a Perspective broadcast entitled Old Money, New Money, No Money  - listen to the audio, or read the Transcript  

HYDROKINETIC ENERGY: energy resources based on water movements. See detail in How Hydrokinetic Energy Works

 (Union of Concerned Scientists)

The Idaho National Laboratory   is the lead laboratory for engineering and program management support for the DOE’s Hydropower Program – explore the site for links to Hydropower Facts, Research and Development, Workshop Proceedings and Presentations  , and much more.

Ocean Energy   (Energy Kid’s Page / Energy Information Administration) – K-12 learning resource on Tidal Energy, Wave Energy, Ocean Thermal Energy Conversion.

Examples from around the world:

    Scotland: The Race Begins for Tide Power Bonanza (Jenny Haworth / The Scotsman: November 15, 2008 )

    Hawaii:Buoy Turns Waves into Electricity  (Gregg Kakesako / Star Bulletin: November 16, 2008 )

    Australia: Tidal Power in Western Australia   (Sue Graham Taylor, Peter Wood / ABC Radio: August 26, 2000) – environmental issues.

SOLAR:

Solar Energy   (Wikipedia) - covers a large range of applications.

Solar Power   (Alliant Energy Kids) – learning resources for students, parents, teachers.

Research and Development:

   Solar Power Reaches a Magical Milestone  - 25% Efficiency  (Jason Mick / Daily Tech: October 24, 2008 ) – good news from UNSW’s ARC Photovoltaic Centre of Excellence. 

    Aussie Panel Could Halve Solar Cost  (Cathy Alexander / AAP: September 23, 2008 ) – a solar panel at the Australian National University generates electricity and hot water simultaneously.

Australian Projects:

    Polluters Back $1b Solar Power Plan   (Ben Cubby / Sydney Morning Herald: August 12, 2008 )- site not yet confirmed. 

    NT Govt Backs Solar Farm Federal Subsidy   (ABC: November 27, 2008 ) – new solar farm planned for Alice Springs.

BIOFUEL:

Biogas  (Wikipedia) – covers main types and associated processes, uses and issues

The Beginners Guide to Biogas   (Paul Harris / University of Adelaide) – a very useful introductory learning resource. 

Ongoing Developments:

    Methane Capture Technology Offers Double Benefit for Transport and Environment  (Tara Mulholland / IHT: November 13, 2007) – use as a transport fuel.

    Animal Farts to Help Kyoto Targets  (Steve Gray / AAP: September 16, 2008 ) – using methane emissions from piggeries.

    Cow Power: the Energy and Emissions Benefits of Converting Manure to Biogas  (Amanda Cu´ellar and Michael Webber / Environmental Research Letters: July 24, 2008 ) – 95 million American animals could produce biogas equivalent to about 1% of annual US energy consumption.

    Sweden Turning Sewage into a Gasoline Substitute  (James Kanter / IHT: May 27, 2008 )

    The Commodore That Runs on Lawn Clippings  (Richard Blackburn / Drive: December 05, 2008 ) – ethanol from waste vegetation.

    Game-changing Day for Jet Biofuels (From Shit to Sweetie: September 27, 2008 ) – blog about alternative fuels, energy, biofuel. 

    Make Your Own Biodiesel   (Keith Addison / Journey to Forever)

    Fungus Could Be the Future of Fuel   (Richard Ingham / Agence France-Presse: November 04, 2008 ) – discoverers have coined the term “myco-diesel”

    What We Don’t Know about Biofuels   (Chris Somerville, Energy Biosciences Institute / UC Berkeley News: September 15, 2008 ) – research directions.

GEOTHERMAL:

Geothermal Power  (Wikipedia) – “energy generated by heat stored in the earth, or the collection of absorbed heat derived from underground, in the atmosphere and oceans.” – one of the most promising but most underexploited energy resources available.

In Australia:

•    Hot Rock Power Set to Take Off in SA ( The Sydney Morning Herald: June 04, 2007) – South Australia may be first off the rank, with commercial geothermal power from the end of 2009.
•    Hot Rocks Rock! (Kevin Cox / ON LINE opinion: July 23, 2008 ) -“Australia can have zero net greenhouse emissions within ten years. The technology is available, the renewable energy resources are available and the conversion to a low carbon emissions regime will bring an increase in wealth for the whole country.”
•     Geothermal Energy May Supply 5% of Australia’s Power (Update1) (Angela Macdonald-Smith / Bloomberg: August 20, 2008 )- the government’s $50 million geothermal fund is launched.

EERE’s Geothermal Technologies Program   – works to establish geothermal energy as an economically competitive contributor to the U.S. energy supply.

Geothermal Heating and Cooling   (Geothermal Education Office) – an extensive suite of educational resources.

HYDROGEN: We have access to vast pools of water, a simple combination of hydrogen and oxygen, most easily separated be electrolysis. When burned together, these gases complete the loop by yielding energy and water – there’s something poetic about the simplicity and the closure involved here, yet we are only just beginning to grasp the possibilities. However, on reading through Wikipedia’s Hydrogen Economy  , maybe it’s not as simple as might appear at first blush.

Fuel Cell   (Wikipedia) – an electrochemical device which produces electricity from fuel (on the anode side) and an oxidant (on the cathode side), which react in the presence of an electrolyte.

Current Applications: 

    Hydrogen Fuel   - news and information about hydrogen fuel cell technology.

    Hydrogen Vehicle  (Wikipedia) 

    Warm Welcome for House Powered by Hydrogen Fuel Cell  (Alok Jha / The Guardian: October 10, 2008 ) – the first permanent hydrogen-powered home connected to the national grid.

    Air Products to Supply Hydrogen and Infrastructure to Fuel Fleet of Fuel Cell Lift Trucks at New Illinois Grocery Distribution Center

 (Market Watch: December 11, 2008 ) – over 200 fuel cell powered lift trucks will operate at Central Grocers’ distribution center in Joliet, Illinois.

GEO-ENGINEERING:

Ross Garnaut’s Report (Chapter 2: Understanding Climate Science : 2.4.2 Geo-engineering ) cites the IPCC definition: “technological efforts to stabilize the climate system by direct intervention in the energy balance of the earth”, and outlines proposed strategies: 

• release sulphate aerosols into the stratosphere to scatter incoming sunlight 
• cloud seeding
• fertilise the ocean with iron and nitrogen to increase carbon sequestration 
• change land use to increase the reflectivity of the earth’s surface

Among the disadvantages is the risk of unexpected and irreversible consequences of global interventions.

See also:

    Geo-Engineering: the Ultimate Sun-block  (Thomas Homer-Dixon, David Keith / IHT: October 06, 2008 )

    Is Iron Fertilization Good for the Sea?   (LeLeng To, Goucher College) – the Geritol effect; a learning resource.

    Can Smoke and Mirrors Ease Global Warming?  (Alister Doyle / Dawn: October 28, 2008 )

    Science In the Policy Process: Rational Decision-Making or Faustian Bargain?  (Paul Higgins / American Meteorological Society: May 2008 ) –  avoid geoengineering with all due diligence.

    Experts Ponder the Hazards of Using Technology to Save the Planet  (Cornelia Dean / IHT: August 12, 2008 )

    Sea Carbon Dumps ‘no silver bullet’  (The Age: December 16, 2008 ) points of view from Australian scientists.

 News.

Obama Meets with Gore for Talks on Environment  (Brian Knowlton / IHT: December 09, 2008 )

Obama Announces Energy and Environment Team (Liz Sidoti / San Francisco Chronicle: December 15, 2008 ) – this team will aim to revive the US economy by boosting renewable energy use and creating lots of jobs. 

• Steven Chu   - Energy Department.
• Carol Browner  - a new post to co-ordinate policy on energy and climate change.
•  Lisa Jackson   - Environmental Protection Agency.
• Nancy Sutley   - White House Council on Environmental Quality.
• Ken Salazar    – Secretary of the Interior.

Obama Picks Tom Vilsack, Former Iowa Governor, As Agriculture Secretary  (Jeff Zeleny and David M. Herszenhorn / IHT: December 17, 2008 ) –  a strong proponent of renewable energy.

 

Prince Charles Presents Forest Plan  (Agence France-Presse: November 03, 2008 ) – a scheme to determine how much funding rainforest countries need to reorientate economies toward preservation and reforestation.

California Adopts Sweeping Global Warming Plan   (Associated Press: December 11, 2008 ) – utilities, refineries and large factories must cut GHG emissions.

BOOKS:

Preparing For Climate Change: A Guidebook for Local, Regional, and State Governments  (The Climate Impacts Group, King County, Washington, and ICLEI – Local Governments for Sustainability / 2007) – a free download.

Down-to-Earth Guide To Global Warming    (Laurie David and Cambria Gordon / Orchard Books, 2007)

Reading level: Ages 9-12

Paperback: $15.99

ISBN-10: 0439024943

ISBN-13: 978-0439024945

Global Climatology and Ecodynamics: Anthropogenic Changes to Planet Earth  (Arthur J. Cracknell et al / Springer: 2008 )

Hardcover: $259.00

ISBN-10: 3540782087

ISBN-13: 978-3540782087

Letter to the Editor CT 31st Jan – solving credit crisis

There are four general solutions to the financial crisis caused by the world wide issue of excessive debt. The first solution is the depression route that destroys the excess debt by letting businesses and individuals go bankrupt. The second is to “double” our bet and increase the amount of debt through fiscal stimulus. The third is let inflation lose and get rid of the debt by deflating the value of money and hence debt. The fourth solution is to remove the link between debt and money and create new money by creating new productive assets. The fourth solution is simple, easy to do, and in the long term brings zero inflation, financial stability and greater wealth to the whole community.

Contingent Loans to reduce taxation and greenhouse gas emissions

A submission to the Australian Taxation Review

Contingent Loans to reduce taxation and greenhouse gas emissions

One of the functions of the tax system is to redistribute wealth within the community. At the moment this is normally achieved by taxing profits of individuals and organisations and then distributing some of the taxes to other individuals or organisations according to different policy objectives.

There is another parallel approach that is already in use. This is the idea of contingent loans such as HECS where zero interest loans are given to individuals for them to spend on education and then for them to pay the money back through the taxation system. That is the money is given first and then collected. This is reverse of collecting tax and then distributing it. Although over the long term the amount of taxes collected is the same, it removes the need to collect taxes first to pay for projects that increase community productivity. It will significantly reduce the amount of taxes collected.

In particular the idea can solve the current financial crisis, reduce greenhouse gas emissions and distribute new wealth to the needy as well as the already wealthy.

Major policy issues

At the moment the government is faced with the problems of how to provide fiscal stimuli (spend money) to keep the economy operating in the face of a world wide contraction of credit and at the same time finding ways to reduce greenhouse gas emissions. These two problems have a single solution.

A scenario

The government issues zero interest loans to individuals and requires the individuals to invest the loans in ways to reduce greenhouse gas emissions. The loans are distributed by non government organisations like banks or community groups. The loans are paid back from the tax on the profits from the investments. Loans are given to anyone who volunteers. The size of a loan is in inverse proportion to the person’s previous consumption of mains electricity. The loans must be spent in a licensed market place in infrastructure to reduce greenhouse gas emissions. The market place requires both buyers and sellers to provide ongoing information for the market place to calculate the effect of sales on emissions.

Outcomes of the scenario

The cost of renewable energy will become less than the cost of fossil fuel energy. This happens because the finance costs of interest on capital and repayments are removed from renewable energy infrastructure costs. One of the investments in the market place will be direct investment in companies that produce renewable energy. As finance costs are the major costs of renewable energy plants this immediately makes renewable energy profitable and people will be encouraged to invest their loans in renewable energy companies as they will get a good return on their investment. The profits will produce taxes, part of which can be used to repay the zero interest loans. This will reduce greenhouse gas emissions but without increasing the price of energy. It will remove the need to issue emissions permits as a way of increasing the cost of fossil fuel burning energy plants which in turn encourages investment in renewable energy plants. It is likely that the cost of energy will drop with the consequent economic benefits flowing to the economy.

The zero interest loans feed into the regular economy after the money has created an asset. This means the government has a guaranteed way of increasing the money supply and at the same time knowing that the money is backed by a productive asset. This reduces the need for banks to create money through lending money they do not have. This breaks the connection between debt and money for the Australian economy and so frees the money system from destabilising positive feedback of debt . This may lead to a much more stable Australian financial market that may decouple Australian money from the excesses of foreign debt markets.

It is estimated that $20 billion dollars of investment in renewables per year will reduce Australia’s net greenhouse gas emissions to zero within ten years. 

The loans will be invested efficiently as they will be invested through a stable market place of investment opportunities.

The size of the of loans criteria could also include an income criteria so that the poorer the person the higher the loan. This reduces the need to increase social security payments. As a person receiving a loan can sell the loan for unrestricted cash it allows recipients to choose between immediate cash and long term income from their investment.

Implementation and Running Costs

The cost of implementation and running the system would be covered by a transaction fee paid by merchants in the market place. For large amounts of money this would be as low as 1%. The system could be introduced and run for no cost to the government. The government, including the Treasury, could be paid for the cost of ensuring compliance from the merchant transaction fees.

How effective will it be in reducing greenhouse gas emissions?

Buyers and sellers as part of their terms and conditions agree to provide ongoing information with respect to the effectiveness of the investments. The system can be tuned to favour those products and services that give greater emissions for the same amount of money. It is likely that the system will reduce greenhouse gas emissions for the lowest cost.

Other infrastructure systems

The same model – with variations – can be used to finance and develop any community infrastructure including Water Systems, Urban Transportation Systems, Broadband infrastructure, Medical Facilities, Child Care, and Education. This would remove the need for many transfer payments made by government and would reduce the need for taxes and enable the government to give ongoing tax cuts.

Effect on the Government Budget

As the money is new money it does not have to be supplied from existing taxes so it will make no demands on the government budget.

How quickly can it be implemented?

It can be implemented, in a small way within three months and can cover the entire country within two years.

Won’t it cause inflation?

It need not cause inflation because the money has to be invested in productive assets. If too many loans are issued for a particular purpose then the money for that purpose will inflate but that will only affect those people holding those loans. If all new money is created through this system the outcome can be zero inflation for the whole economy if the government adjusts the amount it takes from taxes it collects to pay off the zero interest loans.

Won’t it be hard to enforce compliance?

All markets in the system are voluntary. That is both buyers and sellers agree to participate in the markets and agree to the terms and conditions of the market place. If they break the rules of the market then they are banned from the particular market place and they do not receive any new loans or are allowed to sell through the market place. The cost of compliance including government compliance costs can be covered by the merchant fees.

Summary

The system proposed is a generalisation of the idea of contingent loans with their known benefits. It can be introduced quickly and different market places can be set up for different policy issues. Policy can be implemented by building a targetted system to achieve policy outcomes rather than by trying to regulate the large complex overall economy to achieve a specific policy goal. The approach will reduce the demands on the taxation system to supply money for community wealth creating infrastructure.