A monetary policy solution to to the climate crisis : The Indicator from Planet Money What if we could engineer a path towards solving the climate crisis...with monetary policy? Kim Stanley Robinson's novel The Ministry for the Future considers this question, and the idea is catching on in real life too.

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The carbon coin: A novel idea

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

ADRIAN MA, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Adrian Ma.

WAILIN WONG, HOST:

And I'm Wailin Wong. All this week on THE INDICATOR, we've been looking at how economics can address the climate crisis. And when we started working on this series, I knew right away who I wanted to talk to.

MA: And maybe you're thinking we wanted to call up a Nobel economist or maybe a climate activist, like a Greta Thunberg type.

WONG: Nope. I wanted to talk to the science fiction author Kim Stanley Robinson. And I know this is kind of a departure for us but hear me out. About a year ago, my husband handed me this novel called "The Ministry For The Future" by Kim Stanley Robinson. And he said, you have to read this book. It's all about central banks and quantitative easing.

MA: Right. And just to be clear, this is a novel, not a econ textbook or, like, Ben Bernanke's memoir.

WONG: Exactly. It is a science fiction novel published in 2020, and it's about a newly formed group at the United Nations that's tasked with, you know, saving the planet. And the boldest idea this group comes up with, their Hail Mary plan for the biosphere, it involves monetary policy.

MA: Today on the show, Kim Stanley Robinson helps us imagine a plausible future where central banks could actually hold the key to averting climate disaster.

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WONG: Kim Stanley Robinson goes by Stan. He's written over 20 science fiction novels as well as short stories. And he says a lot of his work is tracing out future histories.

KIM STANLEY ROBINSON: Sometimes they're five years out, sometimes 200 years out. For a science fiction writer, I'm relatively conservative in that sense, close to the present. I don't do space opera. I'm not out in the galaxy millions of years from now.

MA: Take Stan's novel "Red Mars." It's about colonizing Mars in the 21st century. And when the book came out in the '90s, Stan says the response was pretty good, except...

ROBINSON: One reviewer said, gee, it's really a shame that Robinson doesn't know anything about economics. I was irritated at that.

WONG: Oh, no.

ROBINSON: But it was kind of true. So I self-educated in economics with the guidance of some friends that I ran into along the way. And that's gotten very intense.

WONG: Then a few years ago, Stan published a novel that featured a subplot about the banking system, and he found himself thinking about central banks.

MA: Central banks, of course, wield enormous economic power. They keep the banking system stable. They move interest rates up and down. And remember, in response to the financial crisis in 2007 and -8, they bought trillions of dollars in government bonds to keep interest rates down and try and give the economy a boost. This is a process known as quantitative easing.

WONG: And so Stan thought, maybe central banks could use this same policy tool, creating trillions of dollars in new money not to buy government bonds but to pay for the removal of carbon.

ROBINSON: So the central banks were key to the story. Certainly, fiscal policy, where governments simply legislate the spending of funds, is crucial - but monetary policy, where the central banks, in order to stabilize the value of money, began to spend it on green projects to save the biosphere because money doesn't do well when the biosphere is crashing. In a mass extinction event, the value of money is going to go squishy.

MA: Stan's novel starts in the year 2025. And in the book, the Ministry for the Future comes up with something called the carbon coin. It's a new kind of money paid to governments and fossil fuel companies as a reward for decarbonizing. And so they get one carbon coin for every ton of carbon that stays in the ground for 100 years.

WONG: These carbon coins would trade in financial markets like other currencies, and the central banks of the world would guarantee a minimum price for the coin.

ROBINSON: Now, if civilization collapses, then of course that guarantee won't be worth very much. But this is going long on civilization, in effect, rather than shorting civilization.

MA: In financial markets, short selling means making a bet that an asset will fall in value. So the carbon coin would incentivize governments and companies to make the opposite bet, to believe that the asset, in this case civilization, will rise in value. It will persist.

WONG: Now, this plan for carbon quantitative easing is really ambitious and requires unprecedented cooperation from central banks. The head of the Ministry for the Future, a woman named Mary Murphy, encounters a lot of opposition. Here's an excerpt from the audio book. Mary is pitching the Bank of England on the carbon coin, and they're all like, no, thank you; this will lead to inflation and expose us to speculative currency trading.

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JENNIFER FITZGERALD: (Reading) When Mary reminded them that they had quantitatively eased trillions of pounds into existence when needed to save the banks, they nodded. Their job was to save the banks. To quantitatively ease trillions of pounds into existence to save the world - not their job.

MA: But Mary Murphy prevails. She gets the Federal Reserve, the European Central Bank, the People's Bank of China and the Bank of England all to sign on. And together, these banks start issuing carbon coins to fossil fuel companies and Indigenous groups in the Amazon, even individual farmers.

WONG: Meanwhile, on the legislative side, those fossil fuel companies are legally bound to spend the money they get from their carbon coins on even more carbon reduction. And after decades of hard work and lots of meetings - so many meetings - the Ministry for the Future pulls it off. The carbon coin works.

ROBINSON: If you think of the things that the central banks can do and the things that governments can do as control knobs on a gigantic machine that is lumbering towards a cliff, and everybody's, like, twisting a steering wheel that only can move you one degree per 10 years, then you're kind of desperate for control knobs. And that's why in my novel, we're discussing things as wonky as monetary policy of central banks. But what else do we have? - because it is an economy that's creating the damage.

MA: In the novel, repairing that damage from industrial capitalism comes with a heavy cost. There's violent regime change, a refugee crisis, a financial market crash, even something called a super depression with unimaginably high rates of unemployment.

WONG: But "The Ministry For The Future" is not a dystopia because in the novel, carbon quantitative easing is successful and so are other large-scale scientific projects like refreezing the polar ice caps. Stan says he doesn't do dystopian fiction.

ROBINSON: I was always interested from the very beginning in utopian alternatives going forward. Couldn't it be better than we have it now?

MA: And it's worth mentioning here, the carbon coin is actually getting attention in the real world. One group pushing a version of this idea is the Global Carbon Reward Initiative. It was founded by an Australian civil engineer named Delton Chen, and he co-authored an academic paper about carbon quantitative easing that is cited as inspiration in Stan's novel. And just recently, Delton and Stan met for the first time in person.

WONG: Stan was also invited to COP26 in Scotland last year, where he gave a lot of talks and met with U.N. officials who'd read his novel. And he says he's spoken with some central bankers, but he can't share too much about those chats.

ROBINSON: The central bankers are thinking, if the markets were to understand that we are consulting with a science fiction writer, it might be bad for the market.

MA: It's been a couple of years since "The Ministry For The Future" came out. Stan says he was in a darker place when he wrote the novel than he is now, though optimism is not quite the right word for what he's feeling. Instead, he says, it's more like he's trying to hold two thoughts in his head at once. On the one hand, the world is falling apart. On the other, we are saving the world.

ROBINSON: Maybe that's what dread is, a combination of fear and hope in that you think it could be going better, but it's not. Well, that's a dreadful feeling that we're going to be stuck in the rest of our lives. And yet it needs to fuel the right actions. Hope has to stay alive, and it's a willed project. You hope as a political project not as a biochemical, you know, accident.

WONG: We have to go long on civilization.

MA: All right. I will take that bet.

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WONG: This episode was produced by Corey Bridges with engineering from James Willetts. Dylan Sloan checked the facts. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.

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