Abstract
The universal adoption of fiat currencies and of the fractional reserve banking system coincided with access to and ability to utilize energy-dense fossil fuels leading to unprecedented rates of economic expansion. The depletion of economically recoverable fossil fuels though sets the stage for systemic crises as it is not adequately priced in the current market system. An energy-based system of exchange can be adopted in parallel to or in place of fiat currencies in order to facilitate a sustainable energy transition (SET) and mitigate the impacts of such crises. Energy-backed and energy-referenced currencies are discussed as two possible variants for their ability to realign the economic system to the thermodynamic limits of the physical world. The primary advantage of an energy-referenced currency over the current mechanisms for SET (like feed-in tariffs or carbon taxes) is realized with the decoupling of the monetary and credit functions, especially when debt is tied to future energy availability. While energy-backed (credit) systems can be easier to adopt on a regional scale, the full transition to an energy-reference currency system requires significant reform of the financial and monetary system although it would not radically disrupt the current economic valuations given the high degree of correlation between value and embodied energy.
Highlights
An energy-denominated currency can be defined as a system of exchange that uses a unit of energy to measure the value of transactions in part or in whole
Energy-backed and energy-referenced currencies are discussed as two possible variants for their ability to realign the economic system to the thermodynamic limits of the physical world.The primary advantage of an energy-referenced currency over the current mechanisms for sustainable energy transition (SET) is realized with the decoupling of the monetary and credit functions, especially when debt is tied to future energy availability.While energy-backed systems can be easier to adopt on a regional scale, the full transition to an energy-reference currency system requires significant reform of the financial and monetary system it would not radically disrupt the current economic valuations given the high degree of correlation between value and embodied energy
In order to illustrate the dynamics of the energy transition, we present an indicative Etech curve for an energy system that transitions from a fossil fuel base to a ER base at a constant value of the ER investment ratio ε showing both the unconstrained depletion trajectory of a composite Hubbert curve and one constrained by climate-driven limits in the use of the fossil resource
Summary
Reviewed by: Subbu Kumarappan, Ohio State University Agricultural Technical Institute, USA Sebastian Mayr, Sciences Po, France. An energy-based system of exchange can be adopted in parallel to or in place of fiat currencies in order to facilitate a sustainable energy transition (SET) and mitigate the impacts of such crises. Energy-backed and energy-referenced currencies are discussed as two possible variants for their ability to realign the economic system to the thermodynamic limits of the physical world.The primary advantage of an energy-referenced currency over the current mechanisms for SET (like feed-in-tariffs or carbon taxes) is realized with the decoupling of the monetary and credit functions, especially when debt is tied to future energy availability.While energy-backed (credit) systems can be easier to adopt on a regional scale, the full transition to an energy-reference currency system requires significant reform of the financial and monetary system it would not radically disrupt the current economic valuations given the high degree of correlation between value and embodied energy
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
