Time for IMF Climate Dogs (2/3)

This is the second article in a series of three.

What happened to the Special Drawing Rights (SDRs)?

Since 1972, the global silver design framework has abandoned the idea of ​​the status of gold. Gold as alignment became too expensive for the Federal Reserve Bank to support its currency against the requirement of non-stop money printing to fund the war in Vietnam. The idea for fiat money, which came from Latin, means “let him do it”. Overnight the USD assumed its position as a global reserve currency, backed by its position as a major international military and economic power.

In 1969, attempts were made to mark the level of gold. The International Monetary Fund (IMF) introduced Special Design Rights (SDRs) as an international investment fund made up of US dollars, Euro, British Pound, Japanese Yen, and the Renminbi (since 2016) .

SDRs are a unit of account and cannot be used by governments or individuals. Governments and international organizations have SDRs. The reserved assets can be lent to countries suffering from the loss of sovereign bonds, balance of payments deficits, and disruption of the foreign exchange markets in exchange for structural reform. A country can trade its SDR loan allocation for global fiat currency, mainly USD, with the IMF and support their home currency.

The IMF has distributed SDR 204.2 billion to date (equivalent to approximately US $ 281 billion) to members, bringing in SDR 182.6 billion after the 2008-09 global financial crisis. On the IMF’s balance sheet, every October 2020, SDRs will be worth $ 30 billion along with more than $ 400 billion worth of usable currencies.

The design of a new currency concept could reverse the purpose of SDR.

New money status

With the world’s prospects for climate change, a pandemic health crisis and a financial market situation, the world is poised for a multi-faceted, stable institutional foundation, contributing to sovereign fiat currencies. existing, local currency, crypto-Arian and central bank issued. digital currencies (CBDC).

The crypto-currency stable base, rooted on a blockchain, is backed by a collateral base and designed to represent low price volatility.

The IMF has the right remit, a landmark role as a provider of technical support for global macroeconomic issues, to monitor global exchange rate stability, and a steward of sustainable economic growth, and a “where to get” base climate stable. ”

The crypto-currency would remain scalable, licensed (with only IMF member countries participating), a private distributed ledger, maintaining the integrity of the encryption protocol and the accessible holding chain , certified, and trade records.

The new silver standard would be a cornerstone of the 2015 Paris Agreement.

The Climate Dogs would be offered to exchange countries substantial progress on their nationally proven voluntary contributions (NDCs). The award would be in addition to the country’s achievements through its voluntary carbon markets and / or mandatory Emissions Trading Scheme (ETS) initiatives, also known as cap-and-trade systems. The Climate Dogs would be particularly attractive for managing threatened ecosystems announced by the Stockholm Sustainability Center in their Planning Boundaries dashboard.

The frontier currency would have a threefold goal: acting as a unit of account, a source of value, and incentive reward. It would not work as a medium of exchange. A collateral (partial) pool would support the currency, initially consisting of $ 30 billion worth of Special Image Rights (SDRs) and $ 170 billion worth of usable funds (it can be expected other changes per revision on the IMF balance sheet). The IMF gradually turned the pool together into a bulk reserve of sustainable assets, eventually reaching 55% of land and forests, 25% in renewable energy ventures, 15% in the top 500 ESG compliant companies, and 5% in biotechnology research ventures.

The total supply of coins would be used over a 30-year period.

Provision

An IMF climate monetary link with the 2015 Paris agreement would be a basic requirement. However, it would strongly encourage contract signatories to commit, increase and deliver faster on their nationally proven (voluntary) donations.

The supply of stablecoin would be limited and expressed as a fraction of the remaining carbon budget of 1,042 Gigatons of CO2, necessary to stay well below the 2 ° Celcius rise.

At normal GHG consumption levels, the reserve would be reduced in just under 20 years.

In practice, the IMF could export 100 billion units in Climate Coins, or about 10% of the remaining budget of 1,042 Gigatons of CO2. At the same time the IMF could introduce a global carbon price of $ 100 per tonne of CO2 with each coin representing one tonne of CO2 equivalent.

In the first installment, the IMF was able to release 10 billion coins. At $ 100 per tonne of CO2 (per coin), the total value would be up to one trillion USD. The initial collateral base would be worth 200 billion USD of IMF funds, ensuring a target ratio of 1/5.

The IMF was able to award 1 million coins to high school children worldwide, showcasing trailblazing climate change solutions to raise awareness of climate Dogs. The awards, along with the rest of the nominated Climate Medals, could be funded in the year 2050.

Request

Demand for medals would initially be driven by the amount of individually certified voluntary contributions of individual countries (NDCs) to provide zero-carbon disclosure by 2050, in line with the Paris Agreement resolution.

In 2020, the world emitted about 55 gigatons in CO2-equivalent emissions. A signatory country could select high-priority initiatives and pledge for a specific commitment by 2050 (or earlier) to reduce Greenhouse Gas (GHG) emissions. In exchange for tight delivery on the pledge, with evidence from satellite imagery and third-party Verification Services (NOVS) notifications, the IMF would release the Climate Coins.

Through the use of the Global Positioning System, the IMF register guarantees that the GHG reduction efforts of countries are unparalleled and have not been reproduced on any of the existing records. In the U.S. case, the IMF record would scan Climate Action Reserve, Determined Carbon Level, American Carbon Record, California Air Resources Board, Emit Alberta Antifreeze System Index, and Climate Conservation Biodiversity Status for Inconsistencies any.

Referring to the picture above, the IMF Climate Dogs campaign would focus on both the gray area and the green space, again to the extent that it is not yet covered by Regional or Country Voluntary Distribution Trading Schemes. The green space would be targeted by using the collateral base to encourage capital redistribution and investment in carbon removal methods. The gray zone would be marked by the offer of Climate Medals for mitigation efforts made under the 2015 Paris contract. The main goal of the coin is to ensure that the global carbon price mark is provided as an action of both carbon budget and frequency of physical climate impacts. In addition, the Climate Dogs would receive capital flow incentives and progressive efforts towards a sustainable asset ecosystem.

This is the end of the second article. A third article will follow shortly.

The author would like to thank Delton Chen and Darius Nassiry for their extensive review and comments. Any other errors are the responsibility of the author.