Climate Solutions from Ministry for the Future: The Market
Real-world ideas stitched into story
This article is part of a series:
So far, we have introduced The Ministry for the Future’s fundamental theses regarding climate resilience, as well as the role of the public sector. In this article, we will shift towards the role of the market in the following themes:
- A market manipulated by governments to incentivize the reduction of greenhouse gases and preservation of natural resources…
- …resulting in the proliferation of technologies for reducing greenhouse gases.
Within each theme, I will outline the specific ideas proposed and how they manifest both in the book and in the real world today.
Manipulating the Market
Kim Stanley Robinson leverages the efficiency of the market in proliferating climate solutions, with manipulation from governments to internalize greenhouse gas emissions. Central to his approach is extending the “stick”-based approaches popular today (e.g., carbon taxes, cap-and-trade) to include rewards as well.
Modern Monetary Theory
What’s the idea? Since the market incentivizes companies to reduce labor costs, governments must also create jobs to achieve full employment in a society. One approach, Modern Monetary Theory (MMT), seeks to guarantee jobs and print money (i.e., quantitative easing) to pay for them. Critics claim this will cause inflation, but proponents say this is only the case at full employment and point to the US’ response to the 2008 financial crisis as a successful example of quantitative easing.
What’s The Ministry’s take? The book uses MMT to carry the US through its COVID response and Green New Deal. As Robinson explains:
“Economics was a tool for optimizing actions to reach goals; the goals could be adjusted, and should be. So the MMT crowd admitted they were proposing a move to a new political economy, rather than merely adjusting capitalism. It was not just Keynes Plus, nor just the ad hoc theory or rather praxis that had gotten them through the 2020 crash, nor just the theory or praxis that had bolstered and ultimately paid for the Green New Deal, that early shot in the War for the Earth. It was more than that: it was trying to think through how to do the needful in the biosphere’s time of crisis, while orthodox economics failed to rise to the occasion…”
What’s happening in the real world? MMT is being pushed by the American left to pay for increased government spending on programs like the Green New Deal and a universal jobs guarantee. While it has its critics, quantitative easing has been used in the US again in response to the COVID pandemic. Whether it will pay for increasingly large social welfare programs — and the effects that might have on the economy — remain to be seen. For now, President Biden’s American Jobs Plan aims to be covered by more traditional corporate tax increases through the Made in America Tax Plan.
Blockchain Fiat Currency
What’s the idea? Making national currencies digital using blockchain would increase transparency, making transaction history visible to all. This could allow governments to crack down on tax havens, increasing their tax revenue to pay for social and environmental programs.
What’s The Ministry’s take? In the book, the major nations have converted their fiat currencies to blockchain, enabling governments to eliminate tax havens. This helps the ministry cap the wealth of wealthy individuals and better negotiate with them on climate activities:
“Now [money] can be traced, in fact it has to be to stay real. So there’s no place to hide, there are no tax havens. We blockaded the last ones, got the WTO to declare them a disqualifier, all that. No. For individuals, if you want to stay rich in the current moneyscape, it’s best to take the haircut and accept your fifty million and walk.”
With a complementary increase in property taxes, wealthy individuals also avoid shifting their money into property, with an additional side effect of more property entering the commons as public land.
Robinson is not shy about his distaste for non-fiat cryptocurrencies. In a recent talk, he contrasted the two, singling out Bitcoin, which uses about half the energy of the global banking system and about 50 times more energy per transaction than proof-of-stake cryptocurrencies.
“It’s not a cryptocurrency — particularly not the horrible cryptocurrency of Bitcoin, which burns carbon into the atmosphere to make its value, which is a scam and presumably a bubble that I hope will pop soon.”
What’s happening in the real world? Non-fiat cryptocurrencies dominate the blockchain landscape, criticized for energy use and speculation. Several national governments are exploring central bank digital currencies (CBDC), though not necessarily with blockchain technology. Depending on how these currencies are designed, they may still give governments a similar level of transparency into transaction activity or otherwise prioritize privacy, keeping transactions anonymous except in the case of a warrant. More than 60 countries are now exploring CBDCs, most notably China testing its digital yuan and the US in a research phase. Some countries like France and New Zealand have expressed a more positive attitude towards blockchain in general.
Carbon Quantitative Easing
What’s the idea? Combining MMT and blockchain fiat currency, carbon quantitative easing would issue money in exchange for drawdown of greenhouse gases or avoidance of emissions. Its new currency would be issued with a guaranteed price floor, underwritten by a consortium of central banks, and tradable for other fiat currencies.
What’s The Ministry’s take? The book’s manifestation is “carbon coin,” which becomes a major driver of change. Recognizing that people respond to rewards and penalties differently, the ministry intends to pair carbon taxes with carbon coins. Central banks are initially resistant but later backed into a corner in the face of financial crisis. Carbon coin ultimately funds projects like regenerative agriculture, carbon capture, and leaving oil in the ground. Coins are issued by a large bureaucracy known as the Climate Coalition of Central Banks (CCCB), which evaluates claims.
What’s happening in the real world? The “Chen paper” referenced in the book is real. In the paper, Delton Chen and his co-authors proposed a policy called Global Complementary Currencies for Climate Change (Global 4C). The team continues to advocate for carbon quantitative easing among academics and policymakers through the recently rebranded Global Carbon Reward initiative.
What’s the idea? Putting a price on greenhouse gases seeks to internalize emissions within the scope of the market. One method is to tax it, incentivizing companies to reduce emissions.
What’s The Ministry’s take? If carbon quantitative easing is the carbon carrot, carbon taxes are the stick. Robinson’s view is that the most effective climate policy includes both. The book explores ways to ensure carbon taxes do not unfairly impact low-income communities, including a progressive carbon tax, increasing at higher emissions levels, as well as feebates, pairing taxes on the high-emission products with discounts on low-emission ones.
What’s happening in the real world? Many countries have implemented a carbon tax, including several EU members, Canada, India, and Japan. Carbon tax proposals in the US have repeatedly failed (for example with the 2018 MARKET CHOICE Act), though they have been implemented locally in cities like Boulder. Debates continue as to whether the US should pursue a carbon tax or a cap and trade system, which would set a limit on pollution for each industry and allow under-polluters to sell emissions credits to over-polluters. The EU, California, and others have already implemented cap and trade, and China is set to implement its own system. One risk of any carbon pricing scheme is that it gives an advantage to under-regulated competitors overseas, which is why the EU is evaluating a tax on imports from high-emitting countries, known as a Carbon Border Adjustment Mechanism (CBAM).
What’s the idea? Temporal discounting assesses the relative value of investing resources in future vs. current generations. It is used in budgeting to adjust the value of a social investment with a return sometime in the future. Understanding relative temporal weighting can help evaluate the economics of climate change mitigation.
What’s The Ministry’s take? Given the ministry’s mission to advocate for future generations, understanding their relative value is a natural focus. The book suggests that future people tend to be highly discounted, but morally they should not be discounted at all. However, if you weight all current and future people equally, future generations will always infinitely outweigh the current generation. India sets an example by setting a very low discount rate for the next seven generations, after which the rate increases dramatically.
What’s happening in the real world? Temporal discount rates are hotly debated in climate economics since they greatly impact the outcome of climate change cost analyses. They range from 3% in Germany to 15% in the Philippines. In the United States, the rate changes by government agency and over time. The UK and France have adopted a declining discount rate, with the future discounted less over time given the future’s relative uncertainty.
What’s the idea? Since the 1950s international creditors have engaged in debt-trap diplomacy: intentionally extending excessive credit to debtor countries, which cannot be repaid, so that debtors need to make concessions to the creditors. The International Monetary Fund (IMF), World Bank, and, more recently, China have been accused of this practice. Developing countries have been forced to extract natural resources and privatize government services for the benefit of creditors, exacerbating climate change. Debt relief forgives some or all of their debts.
What’s The Ministry’s take? Debt relief is demanded by an initiative called Africa for Africans (possibly inspired by a poem by Marcus Garvey), seeking to restore power from foreign institutions back to African nations. It starts with the rise of national-level political parties and culminates in the African Union’s declaration of all debts to the World Bank and Chinese government illegitimate and backing complete debt forgiveness.
What’s happening in the real world? In 1996, the IMF and World Bank created the heavily indebted poor countries (HIPC) initiative to assist 39 countries with high poverty and debt overhang, mostly in Africa. However, assistance was tied to additional required reforms, including privatization of government programs and reduced government spending, which have been criticized as sacrificing social welfare for economic extraction. So far 36 of the 39 countries have completed their commitments, and the program has issued USD 76 billion in debt relief. Yet debt from African countries to international creditors (increasingly China) continues to increase.
Technology for Reducing Greenhouse Gases
With the right incentives in place, The Ministry almost magically sees a proliferation of technologies and practices for reducing global greenhouse gas concentrations. Many of these technologies exist today, some see boosts in efficiency, and others are envisioned reclamations of the past.
What’s the idea? Reducing atmospheric greenhouse gas concentrations requires stemming anthropogenic emissions. Switching electricity production from fossil fuels to carbon-free sources and electrifying other systems will reduce these emissions.
What’s The Ministry’s take? The book passively mentions wind and hydropower, but it gives huge real estate to solar. Solar photovoltaics power swaths of India, geoengineering efforts in Antarctica, futuristic sailboats and aircraft, and experimental microwave-beaming satellites. In a recent interview, Robinson shared his outlook on solar:
“Solar power has already become cheaper. If you didn’t subsidize the carbon industry massively by taxpayer money, you already have the crossover power where clean energy could be quickly put in by government supported projects and it would be full employment, it would be a thing to do and you could have clean energy so much faster than we thought even 10 years ago.”
What’s happening in the real world? As of 2018, only 15% of energy came from renewable sources (including carbon-free sources and biofuels). The current trajectory projects an increase to 23% by 2050, but to keep global temperature increases below 1.5 °C, renewables may need to reach 74%. The Drawdown framework suggests that solar (including photovoltaics and solar thermal) will lead the way, reducing carbon emissions by up to 212 gigatons by 2050, with wind in second at up to 160 gigatons. According to the 2020 Annual Energy Outlook from the US Energy Information Administration, the levelized cost of energy (LCOE) is already lowest for solar, followed by oil and onshore wind. President Biden has pledged to reduce the cost of solar power by an additional 60% in 10 years through research on emerging technologies like efficient perovskite solar cells.
What’s the idea? A quarter of anthropogenic greenhouse gas emissions comes from agriculture and land use. Traditional industrial agriculture focuses on maximizing yield of monocultures through tilling and application of fertilizers and pesticides, which degrade soils and cause them to release carbon. Regenerative agriculture seeks to nurture soil health and biodiversity, converting land from a carbon source to a carbon sink.
What’s The Ministry’s take? In the book, significant swaths of agriculture are converted from traditional to regenerative practices. The leader is India, who rushes to decarbonize their economy in the aftermath of their heat wave. They view this effort as a reversal of the Green Revolution, which benefitted American agrochemical companies and degraded soils around the world.
“Sikkim and Bengal have been developing an organic regenerative agriculture that, at the same time it provides more food than before, also sequesters more carbon in the soil, and this too has been taken up across the country. Indian agriculture moving into its post–green revolution is also a giant step toward independent subtropical knowledge production, achieved in collaboration with Indonesian and African and South American permaculturists…”
What’s happening in the real world? A UN Food and Agriculture Organization (FAO) official estimated that with current practices, the world’s topsoil would be lost by 2074. Today, of the 1.4 billion hectares cultivated with crops, only 12 million hectares use regenerative practices. In India, Sikkim has become the first state to use 100% organic farming by law. The Drawdown framework estimates that by 2050, up to 322 million hectares could be converted to regenerative, and another 400 million could be converted to a less-intensive conservation state. Key drivers of adoption include major corporations like General Mills and PepsiCo recently committing to converting a total of 3 million hectares of cropland, as well as a proposed US Agriculture Resilience Act, which would fund improvements.
Direct Air Capture
What’s the idea? Direct air capture seeks to extract CO₂ from the atmosphere. The extracted carbon may be stored in bedrock or sold to third-party organizations as a manufacturing input.
What’s The Ministry’s take? Direct air capture plays an important role in the book’s drawdown efforts, complementing biosequestration methods. Adoption picks up when the ministry pressures fossil fuel companies to repurpose oil wells for storage of CO₂ as dry ice and when the concrete industry adopts captured CO₂ as an input.
What’s happening in the real world? According to the European Academies Science Advisory Council, direct air capture will be needed to keep global temperature increase below 1.5 °C due to its rapid and reliable uptake of CO₂. Biosequestration methods, while providing additional ecosystem benefits, have been criticized recently for underperforming relative to carbon capture claims. Though direct air capture is still nascent, carbon capture from point sources like power plants and factories is already mature. Currently, recovering CO₂ from ethanol, cement, and natural gas range from $46–107 per tonne, while direct air capture still costs more than $200. A key factor in adoption is carbon pricing. In California, cap and trade credits have reached $200, whereas in the EU, credits recently passed $50. Another factor is how the CO₂ is stored or reused. For example, reusing CO₂ in agriculture or beverage carbonation, while making capture more profitable, does not store carbon permanently.
What’s the idea? Aviation accounts for 2–5% of anthropogenic carbon emissions, but it could increase to 25% by 2050 as air travel increases and other sectors decarbonize more easily. Carbon-free aviation would reduce the impact of a sector that is responsible for significant emissions in high-income countries and difficult to decarbonize.
What’s The Ministry’s take? Air travel is treated as a symbol of excess among wealthy elite, and jets become targets of ecoterrorism. This spurs rapid change in the aviation industry to alternatives like battery-powered, biofuel-powered, and most notably, airships (blimps, dirigibles, and hot-air balloons). Robinson’s focus on airships appears an aesthetic choice in line with solarpunk (he also included airships in his Mars trilogy), for he emphasizes the opportunity to take things at a slower pace and enjoy the view:
“He met her on a pad on the side of Mount Tamalpais where his craft was tied to a mast, and ushered her up the jetway and along to the craft’s viewing chamber, which was located at the bow of the airship’s living quarters, a long gallery that extended under much of the length of the airship’s body, like a big keel. The gondola, they called it. A little group of passengers were already in this clear-walled and clear-floored room, eating appetizers and chatting. Nature cruise.”
What’s happening in the real world? Though many climate plans ignore air travel for its decarbonization challenges, the aviation industry is seeing pressure to take action. Norway has set a target of 30% of aviation fuel being sustainable by 2030 and 100% of short-haul flights being electric by 2040. Carbon taxes are also making fuel more expensive. A survey of flyers found that a third were considering reducing air travel due to climate concerns. But trajectories aren’t currently pointing towards an airship future. Rather, the focus is on carbon offsets and technologies like biofuels, batteries, and hydrogen.