The environmental challenges we face today compel us to reconsider the conventional economic concept of growth and recognize that it cannot be easily reconciled with the dangerous implications of runaway consumption and unlimited development.
The obvious solution to the environmental crisis is to devise a mechanism that will link the health of the global ecosystem directly to the economic rules that undergird all aspects of global finance, trade and investment in the post Cold-War era. That is to say, the environment must be embedded deeply into the heart of the global financial system and its roots must extend into the concepts by which we assess growth and imagine the economy.
We would like to propose here that the most appropriate starting point for such a reform of our concept of the environment and its economic significance is with currency itself. The international community should establish an eco-currency that will serve either as a universal currency or as a factor that significantly impacts all the global currencies linked to the IMF . How much of that currency a nation possesses will be a reflection of its environmental policies. Such a mechanism stands the best chance of encouraging significant progress on the environmental front.
If the eco-currency serves as one of several factors impacting all global currencies, it might serve as something akin to the SDR (special drawing rights) system currently employed by the International Monetary Fund. According to the IMF website, member [nations] with sufficiently strong external positions are designated by the Fund to buy SDR s with freely usable currencies up to certain amounts from members with weak external positions. That strong external position could be redefined so as to consist primarily, or entirely, of environmental criterion.
The eco currency could also serve as a gold standard for all nations of the world, permitting each nation to increase its money supply in direct proportion to the environmental credits that it has accumulated through wise and effective policies by reducing emissions and preserving water and soil. After all, in that the gold standard was based on a mineral that was exceptionally rare and valuable, it is a logical extension of that concept to argue that a healthy ecosystem is the most valuable commodity available. In fact, the ecosystem is far more valuable than gold because it is so critical to human life. Each nation would continue to have sovereignty with regards to its own currency, but the calculation of that currency will take into account the environmental status of each country and its share of a calculated total of environmental credits for the entire world.
Whether it served as a universal currency, or as a factor impacting all hard currencies, the eco-currency available to the world would be calculated as equal to a total global sum of environmental credits. Those credits would be assigned to a country based on an evaluation of how good a job that nation does reducing harmful emissions, preserving undeveloped lands, caring for its water supplies and otherwise implementing policies that have a positive effect on the environment. Although the calculation of what the total number of environmental credits for the world should be and the division of that total number between the nations of the world would be difficult, and at times political, it would by no means be an impossible task.
Such an international currency program based on environmental credits would make the abstractions of carbon trading far more palpable and more visible in the financial world. The policy would require all makers of fiscal and developmental policy at the local level to engage in a serious debate on the implications of their policies for climate change as part of their economic policies. No longer would it be possible to think separately about monetary policy and environmental policy; the two would be effectively yoked together. By reflecting the consequences of good environmental policy at the core of our future economic system, we can ensure that environmental issues cannot be put on the back burner.
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