I was speaking to a friend Tim Harford, ‘The Undercover Economist’ writer, columnist and presenter, the other day. He said most economists had been taken by surprise by the repeating financial crisis. Watching the events of the last six months unfold has been very revealing. It is not just the economists that seem to have been wrongfooted, it is the politicians, policy makers, regulators and supra-national institutions like the EC.
All of them seem to be flailing around desperately looking for ways to prop up the endless growth-based system that everyone takes for granted as being the only way. You can see the discomfort in their faces, it really is desperate. And the striking thing: no real solutions. The only thing on offer seems to be pumping ever more ‘money’, or liquidity, back into the system through the very channels which caused a great deal of the mess in the first place – the banks and financial institutions. This is like catching a band of robbers and then giving them even more bounty and asking them to redistribute it again to their victims!
I don’t want to get started on the banks, nor even the fundamental difficulties with the principle of endless growth based on finite resources. What I do want to offer is not a fully rounded solution, which would take some serious global coordination on a scale which has never been achieved so far, but moreover an option which could be developed into something workable if the political will was there.
What is needed is a more accurate way of accounting for the flows of resources and assets that contribute to adding value to the societies that live on our planet. We need some kind of mechanism that can be related to something real, like the old gold standard but perhaps something more critical to the ability of the planet to sustain us. We need something that can be quantified, converted to financial value and can be quite accurately measured. We also need something that links to consumption so that resource flows can be tracked. Finally, but most importantly, it needs to be equitable so that there are incentives built into the system that reflect absolute use of resources, rewarding those who use less and fairly charging others for higher usage.
Whilst I am not proposing that this is the answer to the world’s ills, I think that carbon accounting could take a more central role in future ways of transacting and valuation. Could carbon footprint data be used as something that currencies can be fixed against and that economic activities could be valued by?
Currently, the key footings for our economies seem to be confidence and the mood of the ‘market’- whatever that is! If the market cannot see a way of making something out of it, then – oh dear – it mobilises to put companies and even national economies on their knees. This is no solution for a more resilient future – why not consider some alternatives.
CO2 and equivalent emissions measurement and valuation is not a panacea. For a starter, the carbon cycle is only one of a number of critical systems (some say there are nine of them) that sustain our planet. Herbert Girardet and others have however suggested that carbon is a good enough proxy for environmental impact and I think it is a really useful way of thinking about economic activity. As Jean-Marc Jankovic, from Carbone 4 in France, explained to a group interested in digital media impacts in London the other day, input data to a carbon footprint can be sourced from generally available audited data e.g. national consumption data. This data can be broken down by sectors and activities across the economy. All data can be on a cradle-to-gate basis to avoid double counting.
As we move into a big data era, and thinking back to ideas of personal carbon allowances, in theory all transactions could have an amount of emissions associated to them. We are quickly developing ways to hold and utilise enormous amounts of data – why not create a new accounting system based on something that at least is real?
This idea of carbon as a currency is not a new concept, and one not without its difficulties. Carbon trading has been subject to significant fraud. Data protection and handling are real issues. How do we fairly value the effort people put in each day and the value they bring? There would be many questions to answer if people were serious about changing our economies.
Perhaps in the light of the current political befuddlement, now is the right time to be having some deep conversations and working out new ways to enable economies to be vibrant and to work in the new world order. And perhaps one idea is looking to account for transactions and value created through carbon emissions. What do you think?