Energy-Denominated Currencies as a Viable Pathway for Sustainable Societal Transitions
24 Pages Posted: 11 Jul 2012
Date Written: July 11, 2012
An energy-based system of exchange that combines the commodity and credit-clearing characteristics of currency can be adopted in parallel to or in place of fiat currencies in order to facilitate a sustainable societal transition. The universal adoption of fiat currencies and of the fractional reserve banking system coincided with access and ability to utilize energy-dense fossil fuels. Their combined effect allowed for unprecedented rates of economic expansion but the synergy of this combination switched from positive to negative due to the depletion of economically recoverable fossil fuels thus setting the stage for persistent systemic crises. An energy credit system concept that realigns the economic system to the thermodynamic limits of the physical world is described and a transition to an energy currency is postulated. The ability of energy currency to support sustainability objectives is shown to be more comprehensive than existing policy options based on a framework of sustainability principles including a debt as future consumption commitment constraint. An energy currency generally reflects the economic value-added of current activities but also addresses instances of undervalued energy services like the merit order effect for renewables.
Keywords: energy currency, sustainable transition, energy economics, renewable energy, merit order effect, money supply
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