emission trading through a complementary currency system

We have found that an individual climate gas quota is needed for each of us and that this can be traded. Now a currency is needed for this newly created market. In the medium term, of course at global level, but for the time being also at European level, we should start by introducing a complementary monetary system for greenhouse gas emission - the "ECO" Earth Carbon Obligation).

How does this work in detail?

1. Introduction of the ECO as CO2-equivalent

First of all an Agreement is needed as multinational as possible, to introduce this complementary resource currency, called the parallel currency "ECO", which represents the CO2-equivalent of our consumption. This is needed because our normal money is not able to reflect our actual carbon footprint.  Because everything has two prices, one economic and one ecological. These two values do not necessarily have to correlate. An item can be produced economically for a very low price, but it can be very damaging to the environment.

2. Establishment of private climate accounts

Since all world citizens have an equal right to use the resource "atmosphere" by emitting greenhouse gases through their personal consumption, every citizen of full age receives a personal climate account at the climate bank to record and account for his consumption. This account is topped up monthly in the form of an agreed ECO amount equal to each person.  Just as with our conventional account, we also have to ensure that it does not run out through unreasonable consumption.

3. Establishment of ECO clearing accounts for industry

The commercial enterprises receive an ECO clearing account to be able to pay for fossil energies with the corresponding amount of the parallel currency in addition to their price in normal money:

• the raw material producing industry pays to the climate bank
• fossil energy-consuming companies pay to the raw materials industry
• all entities involved in production, transport and other sub-processes along the entire value chain, calculate the amount of ECO consumed for their sub-process and invoice this amount to the next entity.

4. Establishment of a climate bank

Personal climate accounts or commercial Clearing accounts are managed by the climate bank. This bank transfers exclusively to natural persons a monthly equal amount of the parallel currency ECO. This climate-compatible budget can:

• be consumed free of charge itself
• sold proportionately to someone who wants to or has to consume more than the quota of greenhouse gas to which he is entitled
• if necessary, topped up by purchasing from someone who does not (or does not need to) use his or her entire quota.

5. Establishment of a climate exchange

Since citizens are entitled to trade their ECO, a climate exchange will be established for this purpose. Even ECO that are not used can be sold for money or additionally required ECO can be purchased. Companies are not allowed to trade on the climate exchange in order to prevent distortions through incorrect pricing for the purpose of enrichment. The resource currency ECO should not degenerate into an investment or speculative object, but should reflect the real ecological value of our consumption. This removes the incentive for industry to charge higher ECO amounts than those actually spent. On the contrary: this ban gives companies an incentive to buy raw materials and products from preliminary stages for as little ECO as possible and to optimize the energy efficiency of their own processes in order to pass on as little ECO as possible and thus be able to place their own products on the market more attractively. The operator of the climate bank and climate exchange could be the United Nations (UN), for example.

6. certification of fossil primary energy sources

The fossil fuels coal, oil and gas do not contribute to the greenhouse effect to the same extent. In order to be able to compare them nevertheless, the term CO2-equivalent (CO2e) was defined. It describes a unit of measurement for standardizing the climate impact of the various greenhouse gases in relation to CO2. The different CO2-equivalents also result in different ECO costs. From now on, the ECO amount of the subsidized amount of fossil energy sources must be transferred to the supranational climate bank. The amount of fossil fuels extracted is subject to a market economy limitation due to the closed loop system of the resource currency, in which no more may be spent (extracted) than can be paid with the limited currency. Within this cycle, the costs for the extraction of fossil fuels must ultimately be covered by the payment of the consumers. The resource currency circulates in a closed system, between the climate bank, the climate accounts of the consumers, across all instances of value creation, up to the extraction of the fossil primary energy sources. A limitation of emissions, from now on, results automatically, through the reduction of climate-damaging consumption, due to the rationed parallel currency ECO. 

What are the advantages?

• The ECO price of the products or services is determined automatically and simply by market economy mechanisms.
• For this reason, the concept manages with a minimum of administrative measures by the state, because it very effectively tackles the bottleneck of the entire value chain, namely the promotion of fossil fuels.
• The parallel currency creates a desirable transparency, which means that people can now also assign a price to the CO₂-equivalent of their consumption. In this way, they value what they have in a language they understand.
• The speed of the regulatory mechanism, results from the immediate impact of changes in demand, on the production processes of the industry and consequently on emissions.
• The alternative climate concept is very detailed, because really all instances of value creation, down to the smallest screw, are included.
• It is exemplary fair, because every citizen is allocated the same emissions budget, in the form of the parallel currency. There is also a social justice aspect in the fact that it can be traded. There is a balance between poorer and richer people, which helps to narrow the prosperity gap.
• And it allows a maximum of personal freedom of choice, but within clearly defined limits for everyone. After all, every citizen decides for himself for which consumption his personal budget will be used.

Each process stage within the value chain calculates the ECO price of its product by dividing the sum of all upstream stages by the number of units produced.

There cannot be any CO2 components hidden in a product that are not included in the final ECO price, other than those charged via the numerous upstream stages of the value chain. Even the CO2 content, of the smallest screw, is integrated in the ECO final price and therefore visible to the consumer. Due to the very high smallness of the calculation, ALL sub-stages of the value chain are included. This ensures a high-quality information about the contained CO2 values. Much better and more precise than any CO2 calculator app could do.

Any extraction of fossil primary energy sources must be quantitatively transferred to the Climate Bank with its ECO equivalent (according to the following table). The ECO price is based on the assumption of a scientifically determined maximum of currently approx. 2 tons of CO2-emissions/person/year to stop global warming. The only necessary governmental monitoring takes place for the produced amounts of coal, oil and gas.

Scientific values (exemplary):

Basic assumptions:

• To stop global warming, a maximum of about 2 tons of CO2-emissions per person/year is available.
• This corresponds to 166 kg CO2-emissions per person/month
• 1 kg CO2-emissions costs 10 ECO
• Monthly transfer of the climate bank 1.660 ECO per person/month

All sub-instances involved in the extraction of raw materials, production, transport and other activities within the entire value chain calculate the ECO expended (analogous to money) on a pro rata basis for their sub-process and invoice these to the subsequent instance(s) in each case. This is because the final ECO price of each product or service includes all CO2-emissions that have occurred along the entire value chain.

Example production of 10,000 ballpoint pens (highly simplified)

The following section describes in detail the costs incurred during the entire value creation process, from the production of ballpoint pens to their final sale via the retail trade. The ECO pricing from the extraction of the fossil fuels, the material extraction to the finished product and finally the distribution through the retail trade is presented. The use of the various CO2-emission sources (coal, oil and gas) for electricity generation, production of fuels, heating oil and materials is broken down and clarified separately.

ELECTRICITY GENERATION

Coal mine extracts 100kg of lignite:

• Mining company pays 3.250 ECO for 100kg of lignite to climate bank. (see table: 3.25 kg CO2/kg lignite corresponds to 32.5 ECO/kg)
• Sale of these 100 kg lignite to electricity producer RWE at the price of 3.250 ECO
• RWE converts these 100 kg lignite into 417 kWh electricity. (see table: 4.17 kWh/kg lignite)
• RWE sells 310 kWh of electricity to Pentastic at a price of 2.416 ECO. (see table for lignite: 0.779 kg CO2/kWh. This results in a price of 7.79 ECO/kWh).
• Pentastic produces ballpoint pens. It uses the purchased electricity to operate machines for the production of barrels, refills, nibs and packaging, as well as its infrastructure.
• RWE sells a pro rata 107 kWh of electricity to the retailer Schmitt at a price of 834 ECO. (see table: for lignite: 0.779 kg CO2/kWh. This results in a price of 7.79 ECO/kWh).
• Schmitt uses the electricity to operate its infrastructure, consisting of lighting, IT, air-conditioning units, etc., at the same time.

PRODUCTION OF FUEL AND PLASTICS

Oil production company produces 100kg of crude oil:

• The extraction company pays 2.300 ECO for 100kg of crude oil to the climate bank. (see table: 2.30 kg CO2/kg petroleum equals 23.0 ECO/kg).
• Sale of these 100kg of crude oil to the refinery at the price of 2.300 ECO.
• The refinery sells 50 l of oil proportionally to BASF at a price of 1.150 ECO. (Assumption for simplification: 1 kg of crude oil equals 1 l of oil).
• BASF produces plastics from it
• BASF sells plastic to the company Pentastic at the price of 1.150 ECO
• The refinery also converts crude oil into gasoline and sells a proportionate amount (assumption for simplification: 1 kg crude oil equals 1 l gasoline)

- 30 l to Pentastic for 690 ECO, which uses it to operate its vehicle fleet.

- 20 l to the retailer Schmitt for 460 ECO, which is used to operate its vehicle fleet.

PRODUCTION OF HEATING GAS

Gas production company produces 100 kg of gas:

• The production company pays 1.500 ECO for 100 kg of natural gas to the climate bank. (see table: 1.50 kg CO2/kg natural gas equals 15.0 ECO/kg)
• Sale of these 100 kg of gas to the energy company EON at the price of 1.500 ECO.
• EON processes these 100 kg of natural gas to heating gas and sells proportionally

- 70 kg to Pentastic for 1.050 ECO, which uses it to heat its production facility and administrative buildings.

- 30 kg to the retailer Schmitt for 450 ECO, which is used to heat its sales and administration premises.

 SUMMARY:

1. pentastic ballpoint pen company (ECO costs of various preliminary instances):

• Refinery – gasoline                            690 ECO
• BASF – plastic                                  1.150 ECO
• RWE – electricity                             2.416 ECO
• EON - heating gas                            1.050 ECO

     Total:                                                      5.306 ECO

5.306 ECO goes into the production of the 10.000 pens and is passed on to retailers.

2. retail company Schmitt (ECO costs of various previous instances):

• Pentastic - ballpoint pen (goods)      5.306 ECO
• Refinery – gasoline                               460 ECO
• RWE – electricity                                   834 ECO
• EON - heating gas                                  450 ECO

     Total:                                                         7.050 ECO

Thus, the complete value chain of manufacturing, transporting and selling the 10,000 pens, accounts for a total of 7.050 ECO. Each individual ballpoint pen accounts for 0.71 ECO, in addition to the sales price in euros.

The example is presented in a highly simplified form for better understanding. The figures are merely intended to provide a quantitative explanation of the various ECO prices for individual process stages in a simplified manufacturing process and make no claim to qualitative accuracy. Also, for simplification purposes, no own infrastructural expenses were applied for the various extraction companies, the refinery, BASF, RWE and EON.

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