Energizing Money - Monetizing Energy

nef (the new economics foundation)

Energizing Money - Monetizing Energy

1st ISTC, Split 12/07/12Josh Ryan-Collins and

Ludwig Schusternew economics foundation


Introduction

• Energy money/currencies/accounting:– Multiple objectives– Multiple scales– High level of complexity

• Communication and comprehension challenge• Moving beyond the niche


Report detail

• Nature and the economy• Nature and role of money• Taxonomy• Case studies:

– Basket of commodities– Single commodity– Emergy, WAT– ‘Debit-based models’– ‘Credit-based models’– Global complex models

• Conclusions & next steps• Appendix: 36 selected energy currency & accounting projects

with links


Money & economy: conventional, anthropocentric production process


Real world: non-substitutability of resources & wastes


Flaws of the monetary system

· ‘Virtual’ wealth – the problem of compound interest allowing monetary ‘wealth’ to diverge from the productive capacity of the economy

· Un-economic growth – structural drivers of monetary growth beyond ecological limits

· Dysfunction – conflict between store of value and means of exchange functions

· Discounting the future – undervaluing future wealth in economic decision-making

· Mis-allocation – lack of incentives for money to be created for investments that create ecological and social value

· Financial instability – the problem of money creation for speculative rather than productive use


Key findings

• Different objectives will require diff models: energy money can improve classical functions of money and drive the energy transition

• Need a new reference (unit of account) money linked to natural world - price in nature & make clear non-substitutability – Difficult, top-down reform.

• Stimulating local and regional energy transition: – Debit-energy currencies for stable store of value & encourage

sustainable consumption– Future redeemable credit-energy currencies to fund investment in

renewable energy– Sustainable energy banks to issue non-redeemable credit linked to

energy unit of account


Going forward: a research and action agenda• Encourage further innovation, local experimentation• Knowledge sharing & scaling up of successful models across

national boundaries and institutions


Going forward: Engagement with natural partners


Research legal & regulatory constraints


Richard Douthwaite “Without equitable, locally- and regionally-controllable monetary alternatives to provide flexibility, the inevitable transition to a lower-energy economy will be extraordinary painful for thousands of ordinary communities, and millions of ordinary people. Indeed, their transitions will almost certainly come about as a result of a chaotic collapse rather than a managed descent and the levels of energy use that they are are able to sustain afterwards will be greatly reduced. Their output will therefore be low and may be insufficient to allow everyone to survive. A total reconstruction of our money-issuing and financing systems is therefore a sine qua non if we are to escape a human, social and economic disaster.”

Douthwaite, R., (2011) ”Degrowth and the supply of money in an energy-scarce world”, Ecological Economics


When is energy money energy money at all?

• Three criteria qualify an energy unit to be money: („A-T-R“):– Accountable? (distinct units of account

= indispensable monetary function)– Transferable? (means of exchange =

crucial function to act as a currency)– Redeemable? (store of value = optional

function)


Energy monies – a taxonomyEnergy-related Money

Mon

eyEn

ergy



Mon

eyEn

ergy

unit of account function

accounting / measuring means of exchange function store of value function

as a commodity

as an accounting value

primary energy

final/use energy

non-ren. renewable

consumed saved



Mon

eyEn

ergy



as a commodity


physically backed by

with reference to

redeemable for

primary energy

final/use energy

non-ren. renewable

consumed saved


Energy monies – a taxonomy

as part of a basket of commodities



primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved

Energy-related Money

measured

traded


with reference to

redeemable for

Mon

eyEn

ergy

non-redeemable unitsused for accounting in form of

redeemable promissory notesfor future redemption against






primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy


measuring value(comparison)

transferring value(allocation)







primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy





ACCOUNTABLE

TRANSFERABLE

REDEEMABLE






primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy





stored/harvested production

(hoarding/stock-keeping)

projected /future production

(investment)

available today available in the future

REDEEMABLE






primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)


REDEEMABLE

HOARDING

INVESTMENT

FIAT CREDIT



• Comparing (measuring) vs. allocating (transfering) – Pegged (referenced) vs. backed

• irredeemable vs. redeemable– energy debit (hoaring) vs. energy credit (investment)

» pre-saving vs. fiat credit creation (self-financing)


Examples





primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)


Examples

HOARDING





primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)


Examples




primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)


INVESTMENT





primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)


Examples

INVESTMENT





primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)


Examples


Boarderline Examples

• Borderline Examples: – Wörgler Sonnenscheine

(redeemable but not transferable)– Emergy

(to date, only accountable)

Table 5 . Emergy intensities for some common products (after Odum, 1996) Item Transformity Specific Emergy

(Sej/J) (Sej/g) Corn stalks 6.6 E4 Rice, high energy 1 7.4 E4 1.4 E9 Cotton 1.4 E5 Sugar (sugar cane) 2 1.5 E5 Corn 1.6 E5 2.4 E9 Butter 2.2 E6 Ammonia fertilizer 3.1 E6 Mutton 5.7 E6 Silk 6.7 E6 Wool 7.4 E6 Phosphate fertilizer 1.7 E7 Shrimp (aquaculture) 2.2 E7 Steel 2 8.7 E7 7.8 E9 1. After Brown and McKlanahan, (1996) 2. After Odum and Odum (1983)





primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)



INVESTMENT





primary energy

final/use energy

non-ren.

as a commodity


renewable

consumed saved


measured

traded


with reference to

redeemable for

Mon

eyEn

ergy








(investment)



Table 5 . Emergy intensities for some common products (after Odum, 1996) Item Transformity Specific Emergy

(Sej/J) (Sej/g) Corn stalks 6.6 E4 Rice, high energy 1 7.4 E4 1.4 E9 Cotton 1.4 E5 Sugar (sugar cane) 2 1.5 E5 Corn 1.6 E5 2.4 E9 Butter 2.2 E6 Ammonia fertilizer 3.1 E6 Mutton 5.7 E6 Silk 6.7 E6 Wool 7.4 E6 Phosphate fertilizer 1.7 E7 Shrimp (aquaculture) 2.2 E7 Steel 2 8.7 E7 7.8 E9 1. After Brown and McKlanahan, (1996) 2. After Odum and Odum (1983)


Examples


Questions for further research

• Theory vs. praxis: scale implications in setup and management (implementation gap)

• ecological accounting – how to coin those units into a currency?

• Credit easing energy currencies – appropriate design & implementation?

• how to scale up and merge existing models into a new sustainable monetary framework?


Further information

• www.neweconomics.org• www.neweconomics.org/proj

ects/monetary-reform• www.moneta.org

http://www.neweconomics.org/

http://www.neweconomics.org/projects/monetary-reform

http://www.neweconomics.org/projects/monetary-reform

http://www.moneta.org/


Thanks for listening!

Josh Ryan-Collins and Ludwig Schuster

for nef (the new economics foundation)and The 40 Foundation

Documents

Energizing Money - Monetizing Energy