My last post, covering a recent discussion of carbon credits, prompted my friend Walter Ross to remind me of Kim Stanley Robinson’s “climate fiction” novel The Ministry for the Future, which among much else sets out a concept for a worldwide “carbon coin.”

As it’s the holiday season, let’s spend a little time in a world other than our own, although the two may end up largely converging, we’ll see. Here’s the notion:

• (Central bankers) would issue together a single new currency…one coin per ton of carbon-dioxide-equivalent sequestered from the atmosphere, either by not burning what would have been burned in the ordinary course of things, or by pulling it out of the air. They promised to establish a floor in the value of this carbon coin, which exposed them to great danger from speculators trying to scare money out of the plan: and they foretold a rise in the value of the currency over the coming decades. By doing these things they made this investment a sure thing, assuming civilization itself survived…

Not an entirely safe assumption by any means, but toward the end of the book, the coin seems to have been a substantial success (Robinson is a bit vague about dates and timelines, but the following assessment seems to be made around 2050):

• For a while, in its earliest days, it had looked like the creation of carbon coins would simply make the rich richer, as some of the largest fossil carbon companies declared their intention to sequester the carbon they owned, and took the corresponding pay-out in carbon coins, and then traded most of those coins for US dollars and other currencies, and then made investments in other capital assets, in particular property, thus becoming richer than ever – as if all their future profits were going to be paid to them at once, at a hundred cents on the dollar, even though their assets were now stranded as toxic to the biosphere and thus to human beings.
• But the central banks had worked out a scheme to deal with this. The fossil fuel companies were being paid, yes, and even at par, if that meant one carbon coin per ton of carbon sequestered…(but) pay-outs above a certain amount were being amortized over time, and would be paid out, when the time came, at zero interest…and with guarantees, thus becoming a kind of bond. And then the companies were required by law and international treaty to do carbon-negative work with the initial use of the carbon coins they were given, in order to keep qualifying for their pay-outs…The upshot of these policy implementation decisions was that the oil companies and petro-states were being paid in proportion to their stranded assets, but over time, and only for doing carbon-negative work…

Robinson has obviously mused over this enough that it’s almost surprising he doesn’t address how the accountants of the future deal with the carbon coins. We can perhaps assume some analogy to the discussions over cryptocurrencies: whether the items are intangible assets or financial instruments; if the former, the applicability of fair value measurement, and so on. In common with the discussion covered last time, the applicability of accounting for government grants might come into play, raising the possibility of non-monetary measurement on initial recognition; there’s also the question of whether and when asset recognition might be appropriate for those future entitlements. But whereas the IASB of the recent past declined to carry out any major new standard-setting on crypto issues, we might hope that the social importance and prevalence of the carbon coin would push the IASB of the future into a more comprehensive response (I mean, why not, since all other accounting issues will have been completely solved by then…!)

Would the scheme work as well as the book envisages? Robinson’s concept includes certification by teams overseen by the titular Ministry for the Future – the book’s examples of qualifying efforts include “landscape restoration, regenerative ag, reforestation, biochar and kelp beds, direct air capture and storage.” Still, it seems likely that a portion of these efforts would amount to less than advertised, and that it would be near-impossible for the certification effort to keep up (maybe not though, as the book envisages a “new bureaucracy of verification…so vast that no single bank could afford it…almost a full employment plan all by itself”). The zero interest/time value of money aspects might complicate things considerably, blurring the assessment of the value of the coins relative to that of remaining carbon reserves; the volume of trading in derivatives indexed to all of that would probably eventually eclipse the value of the primary market, perhaps creating new kinds of systemic risks. But maybe that’ll all be covered in the sequel.

And I should emphasize that the carbon coin probably doesn’t even amount to 1% of Robinson’s intricately imagined book – it’s quite the feat of research, organization and evocation. Not particularly Christmassy though, if you were wondering about that. But Happy Holidays all the same!

The opinions expressed are solely those of the author.