Money, Renewable Energy and Climate Change

Abstract

Climate change has been identified as "The biggest market failure the World has ever seen", (Stern 2006). This paper identifies the cost of finance as an influential element of this market failure to allocate resources to renewable energy. One approach to mitigate market failure is the selective introduction of Islamic Banking to remove the bias against renewable energy created by interest costs. Another approach is the introduction a complementary currency redeemable into units of renewable energy. This could improve the efficiency, stability and resilience of the financial system. Renewable "Energy Dollars" create a unit of value independent of any increases in the costs of coal, oil, gas, or taxes on their consumption.

Keywords: Climate change, Demurrage currency, Energy dollars, Islamic Banking, Monetary policy

JEL Classification: D49, E50, G28, N50, Q42