Creating Wealth

by Gwendolyn Hallsmith

  A New Approach: The Vision of a Carbon Currency

  Both cap and trade and the carbon tax are tools we should have in our green toolbox. But that doesn’t mean we should simply sit back and wait for the results. What other tools might we design? What if your carbon-producing and carbon-reducing activities were automatically counted and banked? What if you could see your net carbon effects simply by swiping a card or clicking your mouse? Would that active awareness of your place in the biosphere, of your role in restoring balance to our world, not change your actions? And what, if as an added bonus, a new carbon currency also created new economic opportunities?

  A Carbon Currency System

  Carbon currency4 would be a voluntary carbon reduction program whereby consumers receive electronic credits for purchases or investments that contribute to measurable carbon emissions reductions. It could mobilize people who are already engaged in reducing their carbon footprint (for example, they may currently own a fuel efficient car or solar power generator) and also the much larger group of consumers who have adopted a wait and see attitude. Furthermore, a carbon currency could provide individuals and communities with a reliable way to track and compare their carbon emission reductions, as all transactions can be recorded and verified.

  Businesses providing goods and services that reduce carbon emissions or those that have formally engaged in sustainability activities (green businesses) could accept carbon currency units (CCUs) as a loyalty currency in partial payment for additional carbon-reducing goods and services. Each business would decide what percentage of an invoice or bill they are willing to accept in CCUs (which in turn could be tied to its value on the carbon market). An electric or hybrid car dealer, for example, could decide to accept 10% of the purchase of a new car in CCUs, whereas a shop selling energy efficient light bulbs or solar panels might accept 20% of their payment in this currency.

  The participating businesses that sell the carbon-reducing goods or services to the customer provide the data relevant to the transaction — the amount of carbon reduction achieved with the purchase. For example, a consumer could earn a CCU when they take a bus to work in the morning instead of driving their car. They would pay for the trip in dollars, and would swipe their CCU debit card for the carbon currency credit. The transit company would have a standard carbon value for bus riders.

  Later, the same consumer might go shopping for solar panels to replace electric generation using fossil fuels. If the consumer had a number of the carbon currency units on their card and the solar panel store accepted up to 10% of the purchase price in the units, they could partially pay for their panel with CCUs.

  In turn, participating businesses like a car dealership, hardware store or solar panel distributor would have two options for the use of the CCUs they receive. They could make purchases with other businesses participating in the program (B2B transactions) or sell the CCUs through the program’s administrator to the carbon market.

  Final redemption of CCUs would be at a fixed price previously agreed upon between the carbon market administrator and the businesses. The administrator could be any organization willing to pay for carbon emissions. Given additional sales tax generated by this program, it would be ideal if the tax authority of the particular municipality, county, state or local government that has a mandatory reduction in carbon emissions would play this role.

  For homes, professional raters could make an evaluation of the carbon credit consumption of different types of dwellings. (In the US, many have already been trained and certified by the trade association called Build it Green.5) Residential homes could then be rated on performance beyond their city/county’s energy code minimum standards. If a house scored 25% better than code, then that fact could be logged and certified and corresponding carbon savings are computed. Adding better insulation or double-paned windows, for example, are ways to reduce heating bills and carbon consumption.

  For transportation, the type of car used and any reduction in mileage driven compared to some benchmark like the state or city’s average vehicle miles traveled, could similarly provide CCUs to the consumer. These would be credited to his or her CCU account following a smog test or a comparison of the driver’s previous annual mileage.

  Keeping the System Honest

  The burgeoning regulated international market for carbon credits is expected to more than double in size to about $68.2 billion by 2010, with the unregulated voluntary sector rising to $4 billion over the same period.6 Yet, companies and individuals rushing to go green have been spending millions on carbon credit projects that, on deeper inspection, yield few if any environmental benefits.

  A Financial Times investigation has uncovered widespread failings in the new markets for greenhouse gases, suggesting some organizations are paying for emissions reductions that do not take place.7 Others are meanwhile making big profits from carbon trading for very small expenditure and, in some cases, for cleanups that would have been made anyway.

  In contrast, the CCU approach provides carbon savings that are locally certified, can be tracked within the vicinity in real time and whose use can be electronically audited back to their origin. Each CCU has its own electronic certificate, through which one can follow where and by whom it was created, for what specific purchase and at what time. This gives a much higher degree of verifiability than is typically available with the carbon credits traded under the Kyoto agreement. Finally, as the CCU system is electronically integrated in real time, it enables each community to announce the carbon savings it has generated, providing on the spot feedback on how well it is doing compared to other communities. That way, everybody participates through their own daily decisions.

  Advantages Compared to Other Approaches

  Besides the advantage of providing an instantaneous tracking system for carbon-reducing activities and leaving an auditable trail of these carbon reductions, the CCU leverages the efficiency of tax dollars to multiply carbon reductions. In most existing schemes, a consumer or business receives a tax credit or subsidy for a carbon-reducing investment, but these tax dollars only have a one-time effect.

  In contrast, CCU are used at least twice, and possibly more, before they are cashed in. The sales taxes on these multiple transactions compensate for the cost of their redemption. As already noted above, the cumulative sales taxes can even be larger than the redemption costs, changing the carbon reduction program from a cost item to an income-producing one for the tax authority.

  Other Ecologically-Positive Currencies:

  the Biwa Kippu System in Japan

  Japan has hundreds of complementary currencies designed to benefit local communities and their needs. In the case of the Shiga Prefecture (a Japanese Prefecture is roughly equivalent to a County in the US) near Kyoto, protecting Lake Biwa is of critical importance to the community. The lake, which is one of the oldest and most diverse lakes in the world, is inextricably linked with the culture and industry of the area. Poor upstream watershed management, pollution from industry, agriculture and households and the arrival of invasive species now threaten the lake and its once healthy ecosystem. Enter the Biwa Kippu — a complementary currency designed specifically to rehabilitate the lake. Although it is currently in evaluation stage and not yet implemented, this is how the Biwa would work once in place.

  The Biwa system will promote environmental activities by residents and nonprofit organizations in Shiga Prefecture without creating any additional budgetary deficits. Job creation and community building, while not direct objectives, are expected as positive side effects. Focusing on residents and nonprofit organizations, and only indirectly on businesses, the system is designed to be able to expand in both scope and range over time.

  To begin, the prefectural government would enact an ordinance requiring residents to contribute a certain amount of environmental Biwa Kippu each year, for example 10 Biwas per family, with appropriate exceptions for special circumstances (e.g., people with disabilities or other valid grounds for exception).
One Biwa might correspond roughly to one hour of environmental service. The Biwa would be issued by the Prefecture itself (or by an appropriate entity such as the Lake Biwa Environmental Research Institute) only for specific measurable environmental activities as determined each year by the Prefecture. Residents or nonprofit organizations that engage in such work would be rewarded with Biwa Kippu. Biwa obligations could not be paid in Yen, nor would the government set a fixed exchange rate between Biwa Kippu and Yen. Participants, however, would be free to exchange Biwa Kippu should they choose, including for Yen, on free market principles through an electronic e-Bay type market.

  Biwa would be issued via mobile telephone and collected using the online prefectural taxation system. In addition, real-time progress could be tracked and feedback given using the electronic Biwa system.

  Aside from the obvious advantages of creating a supplementary eco-currency like the Biwa Kippu, the system has several additional benefits. The sale of Biwas to those who haven’t earned enough Biwas through their own environmental activities would provide an income source for environmental non-governmental organizations and activists. Research has shown that more people volunteer and that the turnover of volunteers in nonprofit organizations is significantly reduced when a complementary currency is used to reward volunteers.8 Because of these two effects, more nonprofit organizations that focus on environmental needs will tend to emerge spontaneously in Shiga Prefecture.

  By balancing the quantity of contributions and the opportunities for earning Biwas, an ecological economy can be activated at whatever scale is deemed appropriate for the Prefecture.

  Conclusion

  In addition to the specific examples of how currencies can be used to address the environmental issues described here, it’s important to note that local currencies issued without interest help reduce the environmental impact of the monetary system. They do this by striking at the heart of the growth imperative described in Chapter 2. This growth imperative drives the practices that require the environment to be used up without adequately pricing the services it provides.

  CHAPTER 9

  Minding

  the Community’s Business

  Do businesses ever look out for anything besides the bottom line? The answer is yes. In fact, both corporate social responsibility and corporate sustainability are growing movements in the business world, with a history that goes back centuries.

  In the 21st century, businesses — corporations, partnerships, sole proprietors — are omnipresent. We don’t think twice about being able to find familiar national chain stores thousands of miles from where we live, even in other countries. Small businesses get a lot of our attention, too, and a lot of our cash. Let’s face it, without businesses, most of us wouldn’t be able to feed or clothe ourselves, or even live under a roof. We rely on businesses, big and small, to make the necessities of life available to us. But this wasn’t always the case. Business of today’s scope and scale is a relatively new phenomenon, and it has changed our most basic relationships — with food, land, housing, clothing, transportation, work and even ourselves.

  Before the Industrial Revolution, industry was usually small scale, and much was done at home. The big trading corporations, like the East India Company and the Hudson’s Bay Company, were notable exceptions.

  One of the earliest corporations in the United States, the Massachusetts Bay Corporation, began as a group of religious refugees, pooling their money and resources to begin a new venture in a new land. Led by John Winthrop, who famously preached social responsibility and called upon the wealthy to help the poor, these Puritans founded a new colony which eventually became the Commonwealth of Massachusetts. (Of course, social responsibility in the early colony included mandates and practices that we would consider inappropriately invasive today.)

  Since the days of the Puritans, our sense of community and many of the institutions that form it, like our spiritual traditions and the need to help our neighbors bring in the harvest, have changed in our modern industrial world. But our core sense of social responsibility has not changed. Many of us are now beginning to expand the notion of responsibility to community so that it goes beyond the responsibility to our fellow human beings to the whole ecological community of life. We expect the businesses we buy from to share these values and reflect them in their supply chains, the products they offer and the energy they use.

  From Social Responsibility to Sustainability

  Green sells. Turn on the television, and chances are good that you will see a commercial proclaiming the ways in which some company or other is helping the environment. And many are. In some cases that ad reflects a deeply held corporate value. In other cases, that 30-second spot serves both the bottom line and consumers’ calls for corporate environmental responsibility.

  The notion that businesses have a responsibility to society isn’t new, but the extent and shape of that responsibility, as well as the rationale behind it have changed. Some robber barons of the late 19th century were also great philanthropists, founding universities, museums and public libraries. Meanwhile, working conditions in steel mills and mines, shoe factories and sardine canneries were abominable. The labor movement was born from inhuman working conditions: organized workers demanded fair wages and better workplaces, asking management to be socially responsible to at least their employees. The road from child labor to the corporate sustainability report took just over a hundred years to travel (the first child labor laws were introduced in the 1830s).

  Our modern idea of corporate social responsibility (CSR) is only about 60 years old and owes much to the time and place of its birth. In the early post-war years, as the Cold War (a battle between two economic systems, capitalism and state socialism), began to take shape, the call for corporate social responsibility was championed by the most prestigious business schools in the US. The idea that business and business managers had the aptitude and means to positively influence society, and a responsibility to the public, became ingrained in several generations of influential businesspeople.

  With the advent of the modern environmental movement in the 1960s and subsequent regulations, particularly of toxic substances, the expectation that businesses had some responsibility not to pollute grew. Corporate responsibility was gaining a new face.

  In the 1980s the public, and particularly investors, began to pay more attention to where their money was going. The idea of socially responsible investing (although again, not new) took off, spurred largely by the call to end apartheid in South Africa. Wall Street heeded the call, and soon investors could choose socially responsible stocks and funds. By 1999, the Dow Jones Sustainability Indices had been created, and the idea of selling “green” was catching on.

  Just as business was beginning to embrace the idea of corporate environmental responsibility at the end of the 20th century, a shift took place within corporate culture. Managers began to manage funds to increase their own profits, and those who were most successful rose to the top where their salaries and bonuses quickly set them apart. Shareholders, employees and certainly the public good took a back seat. The excesses of Enron, whose traders mocked the idea that old ladies were going to lose their pensions, became the icons of corporate irresponsibility.

  Strangely, while many businesses were losing ground when it came to actual indicators of social responsibility, more and more were taking on the challenge of sustainability, whether by ordering recycled paper or supporting green causes in their local communities. And of course, some were doing both at the same time. But could you do good AND make a buck? While many of us wondered, others got to doing just that — building successful, sustainable businesses.

  Progressive Profitability

  In 1983, a small, organic farming and homesteading school in New Hampshire needed a way to stay afloat. They decided to make and sell organic yogurt. The venture was so successful that they closed the school and devoted themselves full-time to yogurt-making. Today, Stonyfield Farms is a fixture in g
rocery stores across the US, with enviable profits, a firm track record of environmentally and socially responsible actions and a plethora of awards to show for it. Although their rise to success wasn’t always smooth, the company persisted through everything from runny yogurt and market flops (prunewhip yogurt) to a serious economic crisis brought on by an insolvent supplier.

  As Stonyfield grew, becoming economically more and more secure, they increased their commitment to the environment, tackling everything from global warming to cow emissions. (Yes, their cows now burp less, emit less and produce milk higher in Omega-3s!) In 1997, long before most people had heard of carbon offsets, Stonyfield began offsetting their carbon footprint and teaching others how to do the same. It turns out that producing a good product, making good money and doing good with that money isn’t as hard as we might have thought. It just takes a little imagination, a lot of hard work and a healthy dose of persistence.

  Businesses that Change the World

  Like Stonyfield, Seventh Generation also models what a company can and should be. From a first glance at their website, it’s clear this is no ordinary company, no business as usual. “Protecting Planet Home,” is front and center, along with their mission, “help[ing] you protect your world with our naturally safe and effective household products.” You can participate in “Ask Scienceman,” a Q&A, or purchase a copy of “The Responsibility Revolution.” Seventh Generation isn’t just selling eco-friendly products, they are teaching people how to steward Earth. Recently, the company began a crowd-source project to produce an online book featuring best practices in corporate social responsibility and sustainability. Contrast this with a large, conventional competitor whose website proclaims “Everyone is an innovator” and lists “Investor Relations” as the first tab.