Global 4C: A Monetary Policy Response to the Risks of Catastrophic Climate Change
Background and context
Since early 2014, we have collaborated with Dr. Delton Chen—an Australian Civil Engineer with a Ph.D. in Geo-Hydrology for work on the Great Barrier Reef—in the development of the “Global 4C Risk Mitigation Policy”, where 4C stands for “Complementary Currencies for Climate Change.” The essence of the Global 4C proposal is to use the monetary-policy role of global financial institutions and national central banks to incentivize verified carbon-reduction and sequestration projects through a kind of “green quantitative easing” strategy, which pumps more money into carbon drawdown projects in a currency that can be readily exchanged with the national currency wherever the projects are being done.
Note: A number of newly-elected U.S. representatives, have recently proposed a program of central bank Quantitative Easing to finance a zero carbon economy. This development confirms that the approach of Carbon Quantitative Easing (CQE), under the Global 4C, is politically feasible.
The Risk Management Plan
At the heart of the Global 4C policy is a new economic theory that redefines the standard economic model for pricing carbon emissions. The standard model is to assess the social cost of carbon emissions, but the new model is to include a risk-cost of carbon emissions, which is comparable to the cost of a global insurance policy that can prevent catastrophic climate change. The Global 4C proposal is to mandate national central banks with a new monetary-policy that can incentivize verified carbon-reduction and sequestration projects through a kind of “green quantitative easing” strategy, which pumps more money into successful carbon drawdown projects as part of a risk management plan. If implemented, the 4C currency will be readily exchanged with the national currency wherever the projects are being done.
This risk management plan should support the 2015 Paris Agreement (COP21). A study published in Nature (July 24, 2017), indicates that we may have less time to address the climate crisis than previously thought, because of some uncertainty as to how quickly greenhouse gases have accumulated in the atmosphere since the pre-industrial era. A related story in Scientific American (July 25, 2017) states “A new global temperature baseline casts doubt on humanity’s ability to meet the Paris target.”
Our role has been that of a US-based nonprofit “policy host” for the proposal. In that capacity we’ve worked with Dr. Chen and EconoVision (Netherlands)to reach out to a global network of scientists, engineers, economists, and entrepreneurs. Our main efforts include the drafting and submission of several grant proposals, most notably the MacArthur Foundation’s 100 & Change; accepting two awards for the proposal from the MIT Climate Collab; co-authoring conference papers and a peer-reviewed academic paper in the Journal of Sustainable Finance and Investment. We also host the Global4C.org web site; and we will continue to present the concept at conferences, such as the MIT SOLVE, and also through the website, video presentations, and public engagements. During the course of this work we’ve had the opportunity to meet and collaborate with a number of globally-prominent figures, all of whom have given us valuable feedback and contacts with others who may be helpful.
It’s important to understand what a long shot this kind of proposal is in its initial formulation. It seems immediately obvious at one level, but complex and profoundly challenging in a number of ways. Dr. Chen came up with the idea at one of Al Gore’s famous Climate Reality briefings (in Istanbul), and has basically suspended his career for several years in order to work out (a) the details of how it might work, (b) the theoretical underpinnings in physics, economics, and biomimicry that support the idea that it will work, (c) the unique features of the policy, and (d) the widespread recognition and understanding of key players in global climate policy negotiations of how this could provide a significant approach to what is now recognized as the challenge of moving trillions of dollars into addressing the problem.