A theory of carbon currency
We propose a new international monetary system based on carbon currency (the carbon standard) to tackle two pressing externalities in today's global economic and political context: the dangerous and irreversible effects caused by unconstrained green-house gas emissions and the cost to the rest...
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| Format: | Article |
| Language: | English |
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KeAi Communications Co. Ltd.
2022-05-01
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| Series: | Fundamental Research |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2667325822001182 |
| _version_ | 1797976293845762048 |
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| author | Qiao Liu Zefeng Chen Sylvia Xiaolin Xiao |
| author_facet | Qiao Liu Zefeng Chen Sylvia Xiaolin Xiao |
| author_sort | Qiao Liu |
| collection | DOAJ |
| description | We propose a new international monetary system based on carbon currency (the carbon standard) to tackle two pressing externalities in today's global economic and political context: the dangerous and irreversible effects caused by unconstrained green-house gas emissions and the cost to the rest of the world as a result of the U.S. dollar being the dominated global currency and the U.S. Federal Reserve increasingly implementing monetary policies not aligned with the global common interest. We define carbon currency as standardized carbon-related securities backed up by the right of one unit of carbon emissions. It can be used as a new global reserve currency and functions as an international unit of account. Through the trading of carbon currency, efficient carbon prices are established. By incorporating the cost of carbon emissions into decision making, carbon pricing provides incentives for countries to pursue low-carbon growth, which helps achieve the net zero emissions global goal set under the 2015 Paris Agreement. Under the carbon standard, the external shocks to the international financial system would come from variations of carbon emissions rather than the U.S. monetary policies. As such, monetary authorities’ commitment to maintaining stable exchange rates comes together with monetary policies aiming at pursuing low-carbon growth. The new system potentially poses a plausible solution to the classical Mundellian Trilemma because the objectives of maintaining fixed exchange rate and implementing monetary policy become one. Although several hurdles are constraining the launch of carbon currency immediately, the carbon standard poses a feasible international monetary system as the world-wide campaign to achieve carbon neutrality progresses. |
| first_indexed | 2024-04-11T04:48:42Z |
| format | Article |
| id | doaj.art-493187666fca4a79897c1a294fc18dab |
| institution | Directory Open Access Journal |
| issn | 2667-3258 |
| language | English |
| last_indexed | 2024-04-11T04:48:42Z |
| publishDate | 2022-05-01 |
| publisher | KeAi Communications Co. Ltd. |
| record_format | Article |
| series | Fundamental Research |
| spelling | doaj.art-493187666fca4a79897c1a294fc18dab2022-12-27T04:43:19ZengKeAi Communications Co. Ltd.Fundamental Research2667-32582022-05-0123375383A theory of carbon currencyQiao Liu0Zefeng Chen1Sylvia Xiaolin Xiao2Corresponding author.; Guanghua School of Management, Peking University, Beijing, 100871, ChinaGuanghua School of Management, Peking University, Beijing, 100871, ChinaGuanghua School of Management, Peking University, Beijing, 100871, ChinaWe propose a new international monetary system based on carbon currency (the carbon standard) to tackle two pressing externalities in today's global economic and political context: the dangerous and irreversible effects caused by unconstrained green-house gas emissions and the cost to the rest of the world as a result of the U.S. dollar being the dominated global currency and the U.S. Federal Reserve increasingly implementing monetary policies not aligned with the global common interest. We define carbon currency as standardized carbon-related securities backed up by the right of one unit of carbon emissions. It can be used as a new global reserve currency and functions as an international unit of account. Through the trading of carbon currency, efficient carbon prices are established. By incorporating the cost of carbon emissions into decision making, carbon pricing provides incentives for countries to pursue low-carbon growth, which helps achieve the net zero emissions global goal set under the 2015 Paris Agreement. Under the carbon standard, the external shocks to the international financial system would come from variations of carbon emissions rather than the U.S. monetary policies. As such, monetary authorities’ commitment to maintaining stable exchange rates comes together with monetary policies aiming at pursuing low-carbon growth. The new system potentially poses a plausible solution to the classical Mundellian Trilemma because the objectives of maintaining fixed exchange rate and implementing monetary policy become one. Although several hurdles are constraining the launch of carbon currency immediately, the carbon standard poses a feasible international monetary system as the world-wide campaign to achieve carbon neutrality progresses.http://www.sciencedirect.com/science/article/pii/S2667325822001182Two externalitiesNet zero carbon emissionsCarbon currencyGlobal reserve currencyMundellian Trilemma |
| spellingShingle | Qiao Liu Zefeng Chen Sylvia Xiaolin Xiao A theory of carbon currency Fundamental Research Two externalities Net zero carbon emissions Carbon currency Global reserve currency Mundellian Trilemma |
| title | A theory of carbon currency |
| title_full | A theory of carbon currency |
| title_fullStr | A theory of carbon currency |
| title_full_unstemmed | A theory of carbon currency |
| title_short | A theory of carbon currency |
| title_sort | theory of carbon currency |
| topic | Two externalities Net zero carbon emissions Carbon currency Global reserve currency Mundellian Trilemma |
| url | http://www.sciencedirect.com/science/article/pii/S2667325822001182 |
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