The human economy distinguishes itself from what we could call the “natural economy” by producing useless waste — excessive amounts of it, in fact. Since the dawn of the industrial revolution we have cast gaseous carbon outside of our monetary accounting, labeling it an “externality.” Instead of being valued, it pollutes. Contrariwise, nature itself finds a vital use for all the seeming waste products that it produces. As such, nature knows no waste, seeing everything as not only a useful and productive resource, but an essential one.
Today, we are existentially threatened by our own waste production: atmospheric carbon. But what if we took a cue both from nature and endless generations of farmers, and re-labeled our carbon waste as central, as fertile; as the font of all value in the system? For eons, farmers have known how to put waste to work. They knew that discarding waste or ignoring its power could, in fact, harm the total productivity of the system they sought to build. This led not only farmers but many rural societies to elevate waste to something precious, even associating it with the fertile power of the gods.
We believe that recent developments on two seemingly-unrelated fronts could help the global economy finally recognize the central value of waste to its functioning. Our proposed revaluation of waste is made possible, firstly, by the advent of digital money that can be governed by entities outside of nation-states. Secondly, much as in the past gold was pulled from mountains, secured in banks, and then converted into productive capital, today widely available natural “technologies” can pull carbon from the sky via photosynthesis and secure it in the earth’s “vault” where it can be converted into productive soils.
We know that we need to actively remove carbon from our atmosphere; mitigation alone (i.e., reducing carbon footprints) will not be enough. The creation of a digital currency (a so-called “stablecoin”), which would be backed by solidified and safely-sequestered carbon that has been “mined” by a global army of prospectors, could serve as a vital step in this removal process. Based on the arguments we make below we believe that such a currency is possible and that providing it would activate a broad swath of hopeful people who are already motivated to fight climate change but have felt largely powerless to do so. Instead of feeling hopeless as they watch governments and industries continually fail to solve our looming crisis, the introduction of a new currency and new technology would, we argue, be able to meaningfully contribute to a global solution.
***
Throughout time, humankind has grounded the value of its currencies in an extraordinary variety of objects: everything from shells to tobacco leaves to gold to Treasury bills have served as our economic cornerstones. While human beings are aware of this, we have often failed to learn the lesson it teaches: that we can make active choices about how to back the value of our currencies. In some ways, a currency represents a sort of “baptismal name” that allows a given society to label that which it values most highly. Consequently, the material form of this value becomes immobilized in secure vaults as “reserves” while abstract representations of it circulate in our everyday speech, in our accounting books, and in our trading systems. Thus, with a carbon-backed currency, we could align our economy with the cycles of regeneration found in nature by finally recognizing that carbon, which we know serves as the foundation of all biological life on our planet, is of central economic value as well.
Unbeknownst to many, when the gold standard reigned, it caused the vast, globally-distributed, sequestration of gold. In a pattern explained by “Gresham’s Law,” one of economics’ earliest insights, prospectors all over the world hunted down gold in a million crevices, brought it to banks for purification and sequestration, and received chits and deposit accounts in exchange. Beyond this trade between prospectors and banks, each time individuals sought out gold-backed currencies to complete their everyday trades, they were also doing their own little part to move gold from mountains into banks. Additionally, banks (the sound ones at least) could only increase their lending capacity if they themselves acquired more gold. In other words, the simple decision to back national currencies with gold correlated with an explosion in both the supply of and demand for purified gold.[1] As a result, today the vast majority of the world’s gold is safely sequestered and immobilized, either as jewelry or as bars in banks. Human beings have long been aware of currency’s power to satisfy the needs and desires of its users. But its power to catalyze the kind worldwide, collective action seen in the global sequestration of gold has been far less recognized.
Simultaneously, advances in the practices, technologies, and verification of bio-sequestration have made mining carbon from the skies affordable and accessible to individual citizens around the world. Methods such as biochar production, afforestation, and regenerative agriculture all leverage nature’s own ability to store carbon safely and securely in the ground through practices that can be implemented on a vast scale by millions of people. If these practices were to be more widely adopted, we would not need to rely exclusively on high-tech and expensive (and in many cases potentially dangerous) tactics such as point-source geo-engineering.[2] With a carbon-backed currency that relies on multiple modes of bio-sequestration to build and sustain its reserve assets, enthusiastic “miners” could exchange their verified sequestration at local banks for chits (and even as down payments on loans) that could then be used on the open market to purchase regular goods and services.
The cryptocurrency market already has at least one carbon-backed currency. Like most cryptocurrencies, it seeks to tokenize carbon in order to unite an already extant global field of carbon buyers and sellers. Instead of following crypto’s tokenization model, however, we take inspiration from the less radical history of what is known as “fractional reserve banking.”
While typical cryptocurrencies are often seen as undermining banks (particularly central banks), this digital currency project acknowledges that banks are the engines of demand-side growth for the asset that underwrites their currency-issuance. For example, this proposed digital currency could be pegged to an index of “global habitability” or “pre-industrial atmospheric CO2 levels.” This would then inform – and even potentially circumscribe – total net issuance by banks rather than allowing issuance to be limited by the common practice of releasing a specific and inviolable total number of tokens. By catalyzing a new and potentially explosive demand for solidified carbon, such currency-issuing banks could then spark an army of individuals who seek to “mine” carbon out of the sky – just as 19th century banks incentivized countless miners to seek their fortunes in the hills of California, Australia, and South Africa.
Implementing such a currency would, of course, entail transcending an array of legitimately complicated hurdles. Nevertheless, we take inspiration from small-scale “currency activism” projects which provide portraits of how a carbon-backed currency could begin with dedicated volunteer enthusiasts rather than salaried central bankers. We think, for example, of Wikipedia, which has proven that crowd-based volunteer labor can rapidly move projects from an initial small scale to a global one. Thus while not trying to solve all the potential hurdles such a project faces in advance, we do seek to address some of them here in order to suggest some potential lineaments of such a currency’s future.
***
At the outset of the project, the primary reserve[3] of solidified carbon should be comprised of so-called biochar.[4] And this for the following reasons:
- It already has a price on the international marketplace, not only because of its value as a material form of sequestered carbon, but because of its many applications in agriculture and industry;
- Its production is based on a simple and scalable technology;
- It can be made for a variety of specific local market applications, so it can cater to the particular needs of each region in which it is produced (thus obviating transport); and
- It happily mimics four of the central qualities that are often mentioned as securing gold’s popularity as a reserve asset: it is portable, non-decaying, easily divisible, and quantifiable. (Scarcity, the fifth central quality, is addressed below.)
Once a more robust market in carbon sequestration is established, securitization could add many other types of assets to the reserves, many of which will represent carbon outside of sterile bank vaults and deposited instead in soils where they can activate new ecological life — and thus additional sequestration. All of these assets, including biochar, are similar in that they are based on processes that utilize carbon “waste” as the structural home for new biological life.
At this point, surely every reader is wondering about carbon’s notorious abundance, as opposed to gold’s legendary scarcity. To this obvious critique, we have several responses. Firstly, the gold standard tagged currency and its underlying asset by the ounce, but there is no reason whatsoever that the currency cannot be tagged to tons. Secondly, the gold standard itself was critiqued – and gradually abandoned — precisely because humankind feared attaching the growth of its economy to a resource that it had no control over; sometimes it was too scarce, sometimes it was too abundant. The world moved to a “fiat system,” wherein governments issued money based on demand, rather than how much gold existed on planet earth. From this perspective, a carbon-backed currency could achieve an exciting dovetailing of needs — on the one hand, a return to grounding our economy upon the limits that nature imposes upon it, while on the other not straitjacketing it too much. Thirdly, as with every standard national currency today, the lion’s share of currency units will be issued by more localized private banks rather than a central bank; these banks could then be carefully monitored and controlled by licensing agreements, reserve requirements, open market operations, and a central bank interest rate, all of which would outline how much currency can be issued (just as in today’s standard monetary system).
In all these ways, a fractional reserve system, relying on a hierarchical but competitive interplay between the central and local banks, could battle against overissuance. It is worth recalling that the recent explosion of the US Federal Reserve’s “balance sheet” during the 2008 financial crisis did not cause massive hyperinflation, even though the reserves skyrocketed.[5] For our purposes, the story is quite telling because, at the time, the Fed not only took on oodles of new reserve assets, but oodles of (at the time) almost worthless reserve assets. If the Fed can decide to sequester collateralized debt obligations in order to avert a financial crisis, surely a central bank can safely decide to sequester carbon in order to avert a climate crisis.
An additional benefit of a dispersed fractional reserve system lies in the fact that the local banks would simultaneously work to ensure that no bad actors would destroy existing sequestration only to acquire new chits. Bankers (and the depositors who keep an eye on the soundness of their chosen bank) would serve precisely as assayers of gold did in the past. To wit, bio-char — along with other carbon fixed in living soils or suspended in material production — would have to first be “assayed”[6] for both origin and quality, and then stamped, before entering the economy as chits.
These local banks would be built and sustained by an enthusiastic network of founders and depositors who are all dedicated to the project of net carbon sequestration. The passion[7] that these people would bring to the project has two fringe benefits. First, as mentioned above, they would be vigilant verifiers, ensuring both that the currency remains sound and that it remains true to its original principles. Second, the process of biosequestration itself requires attentive and iterative stewardship of complex local biological systems. A currency based on local banks embedded in a local ecosystem would be best equipped to oversee the success of local projects. As a result, a carbon-backed currency would be resilient in much the same way as the complex biological systems that will serve as the foundation of its value. Interdependence, in both the planetary and economic sense, grounds the overall monitoring system that guarantees the value of all chits.
***
This brings us to our closing argument, which highlights how a sound currency creates the conditions of its own, ongoing, monitoring. Once a trusted currency is circulating, a community of like-minded interest grows up around it, all dedicating some time and effort to ensuring its smooth functioning and retention of value. Depositors can flee a bank; consumers can stop buying a product; investors can stop buying sovereign debt; banks can refuse a loan; a central bank can decommission a bank.
All these practices — and others like them — conjoin to protect the stability of a currency. Unlike many of the other proposals to bring down C02 levels, a carbon-backed currency creates what we call a self-governing “field of internal tension” that holds together not unlike a spider’s web. Because a carbon-backed currency could aid in averting a massive climate crisis, we believe that this field of internal tension will be more closely guarded and carefully attended to than many other currencies have been in the past.
As stated in our introduction, nature knows no waste, only an endless cycle of growth, decay, and regeneration. One entity’s waste product is another entity’s food. In our current economic system, gaseous carbon is a cumbersome — and we now know, dangerous — waste product. A carbon-backed currency inverts this formula, reassigning gaseous carbon as a vast “vein” that can be mined to stimulate new cycles of both economic and ecological growth.
Our dependence on one another through the means of production and exchange need not be incompatible with the natural systems that sustain us. Releasing gaseous carbon into the skies as waste was an expression of our old fateful hubris – which was the industrial revolution’s grounding ethos – that we could seize from nature’s vault’s without returning a payment. Internalizing the externality of carbon via the catalytic power of currency would help us gradually transform our extractive economy to one more in line with the planet’s own regenerative cycles of investment and growth.
Gustav Peebles is an associate professor of Anthropology at The New School in New York City. His research has long focused on the history and debates over monetary policy. Currently, he is delving into the Swedish Central Bank’s potential interest in introducing a national digital currency, the e-krona.
Ben Luzzatto is an interdisciplinary artist and professor at The Maryland Institute College Of Art in Baltimore. His work draws from a variety of fields, including; ecology, architecture, and object design. He is currently in the production phase of a sequestration instrument designed for household waste streams.
[1] Other go-to sources on the history of the gold standard include chapter 2 of Eichengreen’s Globalizing Capital and his book Golden Fetters. Beyond that there is an almost-endless trove of research covering a century of interest in the matter. Gustav Cassel’s extensive work provides a good sense of these efforts.
[2] How net sequestration tactics are deployed in practice matters tremendously. Blunt “point source” interventions have the potential to dangerously disrupt the balance of both global and local ecosystems, reminding us that sometimes the cure can be worse than the disease.
[3] To ensure liquidity in an entirely new market, a basket of standard national currencies should be held in reserve at the outset.
[4] Biochar is produced when organic biomass is heated at high temperatures in the absence of oxygen. Under these conditions the biomass rids itself of volatile gases without combusting. What is left behind is an emptied-out matrix composed primarily of carbon. The result of this process, which is called pyrolysis, is a stable form of sequestered carbon. When inoculated later and integrated properly into soils, biochar can serve as a resilient habitat for new growth. Biochar is also a versatile additive in manufacturing; used in everything from building materials (such as plasters, bricks, and asphalt) to carbon fiber composites and 3D printer filament.
[5] Recent outcomes from “quantitative easing” lends additional support to this, so much so that some monetary theorists have moved away from their past fixation on the scarcity of money as the linchpin of its economic value.
[6] Currently there are two internationally recognized certifying bodies for biochar, one in the U.S. and one in Europe.
[7] “Passion” and banking are words that one does not typically see together. But it is essential to recall that the original 19th century bank revolution was led by passionate proselytizers. They built the system that now stretches throughout the world not because of their love of profit but their dedication to a project of national self-improvement.
