A Currency for the Wealth, and Environmental Debt, of Nations

(Climate Wise by Daniel Kammen) - In order to survive and thrive in the face of climate change, we need to establish and then put into practice – as quickly as possible – markets that utilize the value of carbon.

The development of human civilization has followed a series of scientific and technological innovations – starting with harnessing fire and domesticating plants and animals, the evolution of increasingly convenient energy sources, powerful personal communications and computing devices – that have made our relatively quick progress possible. Looming advances include distributed energy systems, nanotechnology, and the pervasive use of genetic technologies for plants, and potentially for humans as well.

But as a physicist who is focused on energy science, technology and policy related to climate change and the fates of rich and poor nations, when I look at the next fifty years, I believe financial and economic change are essential if we want to safeguard the future of Mother Earth.

Over and over again, it is a financial revolution that I see as needed to change our mindset about the value of the environment – and of our relationship to the planet and the world we leave the generations to come. That is not to say that we don’t need scientific and technological advances – arguably we need these at rates never before achieved in the energy sector – but that our inability to value nature stands today as a fundamental obstacle in our appreciation of both nature and ourselves.

There have arguably been three fundamental stages in our economic “meta-history.” First, the development of a monetary system, and hence, and perhaps tautologically, a value of money. Second, we evolved a sense and a sensibility of the value of time. Each of these added sophistication – and complication – to human transactions. While money provides the means evolve beyond barter, the value of time provides a measure of the pace of change, and the opportunities that we both face and create.

Now, we are poised on the edge of third financial revolution, the value, and cost, of carbon. Unlike the first two, the value of carbon brings our financial assessments back in touch with nature in rather remarkable ways.

The capacity of the biosphere – the ocean, air, and terrestrial systems – to absorb carbon emissions, and the extent to which that carbon subsequently transforms nature, is at the heart of the value of carbon. In many respects, of course, it is not the value, but the cost of carbon that I am discussing.

We do not yet know in what range the cost of carbon will float. Some say $20 – 30 per ton of carbon, some argue $100, some say even higher. What we do know, however, is that like all currencies, it is a monetary proxy for a wide range of resources and processes. In this case, the cost of carbon reflects something never before quantified, the health of the planet.

The pre-industrial concentration of atmospheric carbon was about 270 parts per million by volume. We recently passed 370 parts per mission of carbon – an event that was marked by environmentalists with a “party” on the Millennium Bridge in London – and the rate of increase remains steady. Current forecasts of the ‘business as usual’ scenario are for us triple, or worse, the pre-industrial atmospheric carbon concentration during the coming century, and to eclipse a doubling within the next 50 years.

By all scientific accounts this will fundamentally alter the planet. Many of the effects of this environmental transformation will come as “surprises” as nature does things we had anticipated, and most of these surprises will be bad for our society and our economy.

Our ability to develop a meaningful value of carbon over the next fifty years will be fundamental in our ability to manage environmental change to not only minimize the damage from global warming, but to find ways to address many of the other looming issues we must at some point face. These “next” crises include water shortages, ecological health and resilience, and even arguably the most important social poison we face today – the incredible poverty in which much of the world lives today and the crippling inequity between the global rich and poor.

We will, indeed we must, find ways to value carbon withinwithin the decade. The question is how soon, and how honestly. If this realization comes late the amount of what is too mildly termed “global warming” will induce severe changes in our society, but if this realization comes sooner, even if halting and geographically patchy initially, the wealth of under-utilized and under-researched technological innovations provides us ample tools to address global environmental change.

That is not to say that today we know how to reduce global greenhouse gas emissions by the 80 percent or more needed to avert a climate crisis, but by starting seriously on that path now, we will – hopefully – both have time and interest to learn as we go, and find the suite of technologies, policies, and social transformations needed to protect the planet.

Ironically, a snapshot of a city in 50 years will reflect the technological change, not the economic change in the value of carbon. This future could involve significant amounts of solar, wind, biofuel, nuclear, tidal, geothermal, or other forms of low-carbon energy. It also has a very uncertain role for personal automobiles – cars will need to become low-carbon modes of transport, but simply building low-emission cars does not begin to address the consumption footprint that cars today represent.

That said, it is the appreciation and valuation of carbon that is needed to facilitate the technological change to a low-carbon society that we know is required.

GreenBiz Editor-at-Large Daniel M. Kammen is the Class of 1935 Distinguished Professor of Energy at the University of California, Berkeley. He co-directs the Berkeley Institute of the Environment and is founding director of the Renewable and Appropriate Energy Laboratory. He has appointments in the Energy and Resources Group and the Goldman School of Public Policy.

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