APPENDIX 5
Memorandum submitted by Feasta
I attach a policy paper, "The three Crises:
Oil Prices, Climate Change and International Debt", produced
by Feasta, the Dublin-based foundation for the economics of sustainability
with a request that it is passed on to the House of Commons Environmental
Audit Committee for their consideration. [Not printed, available
online at http://www.feasta.org/documents/energy/three—crises.htm].
To briefly introduce our paper—the Feasta
approach links together the long term strategic aim of addressing
the threat of global climate disruption, through Contraction and
Convergence (C&C), with more immediate practical steps that
the British Government could take to address current issues, in
particular impending oil depletion and, soon, natural gas depletion.
Most economic commentators now acknowledge that
rising oil prices could have powerfully recessionary effects on
the international economy—hitting developing countries ability
to import and pay their debts, as well as exacerbating the twin
deficit crises, and the need for adjustment of the USA economy—which
is heavily dependent on imported oil and gas. A dangerous recession
is threatened on the demand side of the world economy. On the
supply side depleting oil and gas threatens in the long term to
encourage the substitution of an even worse greenhouse polluter,
coal—not to mention a resurgence of nuclear power.
The Feasta strategy suggests a package of policy
measures to resolve this crisis in the only way in which they
can be resolved, namely at the systemic level. The aim is to reconfigure
the global economic system so that it is designed for stability
and sustainability. To this end the basic Feasta proposals are
to form an international oil buyers cartel to fix an upper limit
on the aggregate demand for oil and gas by international agreement.
The aim is that demand does not overshoot what can be supplied.
This will stabilise prices. The fixed quantity of oil and gas
purchased would be allocated to countries on a per capita rationing
system basis. It is proposed to use C&C principles for this
and Feasta thinks there is a need to include coal in the energy
demand rationing system, using tradeable energy quotas, in order
to prevent a coal boom as substitute for oil and gas—with
all the carbon and other pollution that would entail. This would
stabilise energy prices and stabilise carbon emissions.
At the same time Feasta is proposing that the
world's political powers intervene to reform the international
money and financial system and create liquidity in the form of
a new international currency unit called the ebcu—which
stands for Emissions Backed Currency Unit. (There is a precedent
for creating an international currency when the IMF created special
drawing rights based on a basket of currencies).
As you know before the late 1960s the chief
reserve currency (the dollar) could be exchanged for gold at a
fixed price. In this case the ebcu would be exchangeable for tradeable
energy (emission) quotas at a fixed price—so that the ultimate
numaire of the international monetary system would be environmental
and energy based. Different national currencies would, in turn,
float against the ebcu. This way the international money system
would be forced to align with the environmental system—using
emission quotas as (limited and contained) broad measures of environmental
damage. Feasta shares the view of many policy analysts and institutes
that fundamental reform of the international monetary system is,
in any case, overdue because of the massive dollar overhang and
the threat that that poses to world economic stability—and
because there are huge tensions opening up between China, the
USA and the chief energy suppliers. These tensions and problems
need to be managed through negotiated adjustment through the sorts
of comprehensive policy agenda that Feasta proposes. (Much of
the future policy work will be with China and the USA. China is
now a major exporter to the US market, as well as lender to the
US finance markets. It is also a major competitor for Middle East
and Russian gas and oil and, like the USA, a major coal producer).
To repeat—there are several tangled knots
of tensions in the world economy which are dangerously unstable.
Although there are powerful vested interests for the status quo
in the global economy the forces for change are also unstoppable
and require the adjustments in the direction comprehensively proposed
by Feasta. There are:
(a) energy/emissions rationing with tradeable
quotas setting an upper limit on the production systems of individual
countries and global economy; and
(b) an energy backed currency system for
demand management, so that contraction does not occur too quickly.
In conclusion, perhaps it is worth advising
busy members of the committee that this six page document has
a one page summary at the end—though we hope EAC members
will have time to consider all the complex issues in full. If
there are later versions of the paper these will also be forwarded
to the Committee with advice in regard to changes made. (This
is work in progress for Feasta and, as you will appreciate, aimed
at a trans-national audience).
3 December 2004
| 
