Why Stranded Coal Money Can’t end World Poverty

RenewEconomy Australia runs a piece called “$US1 trillion: money wasted on stranded coal assets could end world energy poverty”. It’s an excellent example of how the economy, money is still fundamentally misunderstood. It reads :

“$US981 billion to be exact. According to a report released today by the Sierra Club, CoalSwarm, and Greenpeace, Boom and Bust 2016: Tracking the Global Coal Plant Pipeline, that is the estimated amount that could be spent on the global coal plant pipeline…But instead of solving a global crisis, those trillion dollars may go down the drain, supporting potentially stranded assets in the dying coal industry.”

So it is claimed that the money that would have been brought into circulation in the form of credit, used to mine and buy the coal that would come on the market from mining, could be used to other things. This is not true, at least not with the same effectiveness. This is because coal is not a normal asset, it is part of the production cycle. Just like oil the money we use to buy it is created exactly and only for that purpose, to buy coal, and to allow it to be distributed to where it optimally plays its role in our economy.

Credit is created to mine coal, to buy the fuel to do it, then credit is created so people can buy the coal.

The coal has to find it’s way to power plants, furnaces and other machines that still use it around the world. This means banks have to create credit, loan it out to people, and those people will spend it on products and invest it in companies that need the energy made by coal. This is a very effective way to both make sure only those that actually do something usefull with the energy get it, and to minimize the amount of coal used, because companies that need less coal energy to make their products make cheaper products.

No fossil fuel company can spend its profits back into the market. That is because money’s purpose is to end up with a fossil fuel company. It is  carboncredit.

Without the coal being mined though, there is no reason to create the credit. In fact, if one created it this would destabilize prices. The credit would be spend on products made with other forms of energy and would raise prices as now more credit (money) competed for the same number of products. This is why we have banks, to make sure that we have exactly the right amount of money to spend, as much as there are products and services being produced, which in turn is a function of the output of fossil and renewable energy flowing into the production chain.

To make it simpler : If you compare coal with food for workers. If you have a ton of food for 100 workers, they can create a community, make products and trade those, and you’d have to introduce credit for food (and give every member some credit), and all could trade their credit for stuff they wanted, or food, or work for credit from others etc. But if there was no food. If someone locked the food warehouse and threw away the key, there would be no need or use for credit. The 100 workers would have 100 units of credit, but nobody would make anything to buy, no food could be bought, it would be a desperate situation. Money or Credit has no real value on its own.

If there are means of production, there are products and there is a need for a means of trade : Money

This is the carbon credit view of money, which is the only correct view still, because renewable resources like solar and wind do not lend themselves to central credit creation. In fact, a lot of what is happening in the energy market (smart grid, big remote projects) is done to solve this problem with renewables. At the same time banks know their best bet for survival is to hang on to oil, coal and gas, but losing coal is not such a big problem.

The $981 Billion credit that was supposed to be created to distribute coal (‘invested’ in it), could not be used elsewhere, if it where then it would consume fossil fuel resources now used by other consumers, companies, it would add nothing. The money could not be spend on the poor, because they would also by fossil fuel dependent products, only creating more demand for fossil fuels. The truth about coal is that not using it is a loss. A healthy and wise loss.

Coal is a dangerous fuel, and not using it does not leave us with more than we had before

A middle road we would perhaps see a sane is to use coal in specific instances where it powers solar panel and wind turbine factories and creation of other specifically coal and fossil fuel replacing products. This should be under tight supervision as we proposed in an earlier post. The situation is dire enough, fossil fuels are killing our oceans and soils, life on Earth is not resillient against change this fast. We need radical intervention to have a chance, and one of the biggest challenges is how to save ourselves without making the problem worse.




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