The implications of introducing a carbon currency and new central bank mandates/policies for funding climate mitigation raises many questions. Before these questions can be answered, it is necessary to establish a sound conceptual model for (a) how the monetary system works (i.e. how and why money is created), (b) the possible reasons for increasing the money supply (e.g. to increase productivity), and (c) the possible reasons for reducing debt levels (e.g. to improve equity and social cohesion). But how can growth be responsibly managed when the available carbon budget is placing boundaries on total energy use, consumption, and GDP? What could/should we do about planetary boundaries?

The Open Letter proposes that a carbon currency and new mandates for central banks can/should be used to provide a “pubic finance guarantee”. The guarantee is designed to ensure that the value of the carbon currency is high enough to fund a sufficient amount of greenhouse gas removal and reductions (i.e. mitigation) over the very long-term. A carbon currency with such a guarantee will attract private investment demand to fund much of the needed mitigation. The guarantee will ultimately — over the long-term — create more debt-free fiat and will increase the proportion of debt-free fiat in circulation. This new debt-free fiat may be needed to stabilise the economy when economic growth can no longer be sustained at post-WWII rates of about 4% per annum.

At the bottom of this webpage are four videos that offer a primer on the money supply and debt restructuring — but with the conventional assumptions of perpetual growth and the business cycle.