Portable & field testing
Why economists think monitored carbon could underpin global currency
Feb 02 2025
If the health of the global economy will depend on avoiding as much climate change as possible, some unconventional economists have argued that this means ditching fiat currency and resurrecting a material underpinning for money - but this time, instead of weighing gold, we'll be monitoring sequestered carbon.
Recent proposals in environmental economics suggest that the traditional monetary system could be restructured to reflect the ecological foundation of our global economy.
In particular, a growing school of thought argues for the issuance of a “carbon currency”—or “carbon coins”—by central banks for each verified unit of carbon sequestered or greenhouse gas emissions avoided.
Proponents of this model contend that just as gold once provided a tangible basis for monetary value, a carbon-backed currency would derive its worth from the real and quantifiable benefit of reducing atmospheric carbon. This approach redefines value by directly linking financial stability to the abundance and reliability of natural capital.
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A new gold standard
At the heart of this proposal is the idea that effective carbon monitoring, using advanced technologies like satellite imagery, ground-based sensors, and blockchain for data integrity, can create a new system of incentives. In this framework, economic agents—from farmers practicing silviculture to aquaculturists cultivating seaweed for ocean carbon sequestration—would earn carbon coins proportional to the measurable increase in natural carbon stocks or the avoidance of carbon emissions.
Each carbon coin becomes a unit of account that directly corresponds to a specified mass of carbon dioxide equivalent mitigated over a designated duration (for instance, one tonne of CO₂e sequestered for 100 years). In this way, the currency’s value is secured by ecological performance rather than by abstract economic variables.
The concept is presented as the 'global carbon reward' or 'carbon quantitative easing', a market-based climate policy that emerged in response to the urgent need for new climate finance. The policy was first introduced against the backdrop of a steadily rising concentration of CO₂ since the early 1990s, despite multiple international agreements.
The shortfall in investments needed for a rapid clean energy transition—as estimated by agencies like the International Energy Agency—and the possibility of residual fossil fuel emissions reaching dangerously high cumulative levels have both contributed to the call for innovative policies. Delton Chen, a civil engineer, was inspired by these challenges and in 2014 launched a climate policy initiative that sought to merge a market mechanism with monetary policy.
His work, later refined in collaboration with Joël van der Beek and Jonathan Cloud, presents a detailed theoretical model in which central banks would coordinate with a supranational “carbon exchange authority” to maintain a rising floor price for the carbon currency via a mechanism referred to as carbon quantitative easing (CQE).
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A significant element of Chen et al’s work is their proposal to use the carbon coin as a mechanism for internalizing what they term the “risk cost of carbon” (RCC). This concept supplements the traditional social cost of carbon (SCC) by taking into account the systemic risks associated with climate change. Their analysis argues that by rewarding carbon mitigation through the issuance of coins, the monetary system would convert long‐term climate risk into immediate, quantifiable financial gains. In essence, the model suggests that each carbon coin is not merely an abstract token but a verifiable claim on natural capital, much like a modern-day gold standard for environmental sustainability.
But don't we already have incentive schemes for decarbonisation?
The context of the Chen et al paper is rooted in an era when the shortcomings of existing carbon pricing mechanisms—such as carbon taxes and cap-and-trade schemes—were becoming increasingly apparent. Traditional models often fail to adequately price in the externalities of greenhouse gas emissions, and critics argue that they leave systemic risks unaddressed.
Chen and his colleagues offered an alternative that treats the mitigation of atmospheric carbon as a positive externality, one that should be financially rewarded rather than merely penalized when ignored.
Their work has stimulated lively debate among both academics and policymakers. Supporters see it as a creative way to channel private investment into large-scale carbon dioxide removal (CDR) projects while ensuring that the natural capital base remains robust and secure.
Critics, however, have raised practical concerns—such as the current technological limitations in accurately measuring carbon sequestration and the challenges of establishing internationally accepted standards—that must be overcome before the policy can be implemented on a global scale.
A robust carbon currency system depends on a layered approach to data acquisition, verification, and coin distribution.
Measurement technologies such as satellite imaging and remote sensing provide large-scale, continuous monitoring of land-use changes and deforestation, while ground-based sensors and soil sampling offer localized, accurate measurements of carbon sequestration across diverse ecosystems. To ensure that the data remains accurate and tamper-proof, blockchain and distributed ledger technologies are employed, guaranteeing data integrity and providing real-time tracking of carbon transactions.
Equally important is the need for standardization and verification. Global acceptance of this system requires the establishment of internationally recognized standards and regulatory frameworks. Independent audits and regulatory oversight are essential to ensure that every carbon coin issued corresponds to a verifiable increase in natural capital.
These measures help maintain confidence in the currency’s value, reinforcing the idea that the abundance and stability of natural capital—secured through effective carbon drawdown—serve as the true guarantor of economic value in the 21st century.
Ultimately, by embedding carbon monitoring into the monetary system, proponents argue that we can create a new socioeconomic pathway toward net-zero emissions.
In this envisioned system, every act of environmental stewardship—from reforesting degraded lands (practiced by silviculturists) to cultivating seaweed in the oceans (by aquaculturists)—directly contributes to the value of the currency. The global carbon reward policy, therefore, not only incentivizes emissions reductions and carbon sequestration but also redefines our conception of economic value to reflect the true cost of climate change.
What would the issuing of carbon coins actually look like?
The crop farmer
A farmer employing sustainable agricultural practices—such as no-till farming, cover cropping, and organic amendments—enhances carbon storage in subsoil and humus.
• Measurement: Soil samples, paired with remote sensing data, quantify increases in carbon content.
• Verification: Third-party audits and sensor networks confirm the sequestration metrics.
• Coin Distribution: Officials allocate carbon coins based on the measured increase in soil carbon (e.g., tons of CO₂ sequestered per hectare annually), directly rewarding practices that build natural capital.
The oil and gas company
A fossil fuel company that opts to leave its oil and coal fields untapped contributes to the preservation of existing carbon stocks.
• Measurement: Satellite and geospatial analyses monitor that extraction activities have ceased.
• Verification: Blockchain records and regulatory audits ensure that no fossil fuels are exploited, safeguarding the inherent carbon reserves.
• Coin Distribution: Carbon coins are awarded based on the potential emissions avoided, quantifying the environmental benefit of non-exploitation and contributing to the natural capital base.
The forester
Reforestation projects enhance terrestrial carbon sequestration by restoring native vegetation and expanding forest cover.
• Measurement: Satellite imagery tracks changes in forest cover, while ground-based sensors record biomass increases.
• Verification: Independent audits and ecological surveys validate the carbon uptake.
• Coin Distribution: Based on the verified increase in carbon stored in new forests, carbon coins are distributed proportionally. This rewards efforts that significantly bolster the terrestrial natural capital and contribute to long-term ecological stability.
The seaweed farmer
Ocean-based initiatives, such as large-scale seaweed cultivation, represent a distinct strategy for enhancing carbon sequestration.
• Measurement: Buoy-based sensors and marine surveys monitor the biomass growth and carbon uptake of cultivated seaweed beds.
• Verification: Remote sensing data, combined with in-situ measurements, confirm the increase in carbon captured in the ocean.
• Coin Distribution: Officials issue carbon coins corresponding to the verified increase in oceanic carbon sequestration, treating each coin as a unit of ecological value that strengthens the overall natural capital.
While the carbon-backed currency model is promising, several challenges must be addressed:
• Standardization: Establishing and enforcing global measurement and verification standards requires international cooperation.
• Technological Reliability: The accuracy and integration of various monitoring systems are crucial for preventing errors or fraudulent claims.
• Economic Transition: Shifting to a system where currency value is tied to carbon metrics may initially introduce market volatility.
• Political and Institutional Resistance: Transitioning from established financial and fossil-fuel-based frameworks will likely encounter resistance from entrenched interests.
The proposal to underpin global currency with carbon monitoring reimagines value itself. By anchoring currency in natural capital, central banks issuing carbon coins for each verified unit of carbon sequestered effectively establish the 21st century’s new gold standard. Each carbon coin is a direct representation of ecological stability and abundance, serving as a universal medium of trade that reflects our commitment to sustainable development.
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