Implementing a “climate bailout”: How to convert fossil fuel stranded assets into renewable energy investments


To comply with the 1.5°C limit agreed in Paris, a significant fraction of fossil resources cannot be used for energy production. The loss of value of fossil fuels such as oil, gas and coal will cause considerable uncertainty and instability on the financial markets. Also, the unavoidable transformation of energy companies towards renewable energy generation will be even harder when they are weakened by the accelerated depreciation of their fossil fuel assets.

Therefore, a new financial instrument is required to enable energy companies to convert their de facto “stranded” fossil fuel reserves into renewable energy (RE) assets. Since assets already threatened by “stranding” can only be sold in the private financial markets at a minimum residual value, private actors can be excluded as feasible buyers.

Passing on the losses to taxpayers would be neither politically nor financially realistic. The only institutions that have the economic potential to implement a “climate bailout” are Central Banks, just as they have done in the banking crisis since 2008.

Unlocking the trillions to finance the 1.5°C limit


In order to meet the +1.5 ° C limit specified in the Paris Agreement, a shift of the global energy supply to 100% renewable energy is necessary at the latest by 2050. Such a process requires annual investments in the order of $1.5 to $2 trillion. Although the costs of renewable energies (RE) have recently declined sharply and further downturns can be expected, current investments are stagnating at approximately $250 billion. Therefore, additional monetary support must be provided, in order to bring the global expansion of RE to the necessary scale.

This report outlines how it can be established through cooperation between the non-industrialized countries, the Multilateral Development Banks (MDBs), the Green Climate Fund (GCF), or other financial institutions, and the Central Banks of the industrialized countries.

‘Degrowth’ alone is not enough


Can our production systems become sustainable and balanced within our existing political and economic order? This is, in principle, possible. The expected problems in financing such a transition can be overcome once the analysis is based on actual economic processes.

This paper aims to move beyond the current purely GDP-oriented debate on growth by highlighting the differences between real finiteness and the apparent finiteness of GDP.

Growth and finiteness have to be reconciled if we want peace and sufficiency for possibly over 10 billion people in the future.


Debt and Asset: From a Macroeconomic Perspective


The model of a thrifty housewife as the prototype of sustainable domestic bookkeeping is a familiar one. Indeed, the thrifty housewife does everything correctly when she takes care not to spend more than she earns, thus ensuring she does not live above her means. The situation, however, becomes more difficult when many households follow the same rule. In the national economy as a whole, the thrifty housewife can only succeed in her model of living if at least some other households spend more than they earn and become indebted, i.e. live above their means.

Each household can only earn interest on its savings if another economic sector borrows money and becomes indebted but at the same time makes enough profit with the borrowed credit to service the interest and repayment costs. If this is not the case no interest can be generated. The amount of financial assets of one side is always exactly the same as the debt of the other side.

Looking at this from a global perspective, a country can only reach an export surplus if at least one other country has a matching deficit. The attempt of all countries to achieve a surplus simultaneously will fail because the trade balance sheet of the global economy is always zero.

Financial Market Reform: Strengthening Public Interest


Financial institutions and governments are keen to stress that regulation should not unnecessarily burden the financial sector. However, the key question must be: how can the public interest be effectively protected and strengthened? — This new WFC-brochure shows the urgent need for financial market reform to catch up and highlights new risks as well as methods and routes towards sustainable financial markets. It demonstrates how trade agreements such as CETA, TTIP and TiSA put enormous brakes on reform and contradict the UN Sustainable Development Goals.

The meaning of the endogeneity of money for ‘conventional QE’ and the different kinds of ‘helicopter money’



Financing large scale climate investments and other SDG duties needs new tools. One tool could be a new kind of monetary finance by the central banks. The future finance department of the WFC developed a theoretical background paper which demonstrated how the new tool works and why it precisely fits with recent findings of economic science.

The monetary system in crisis



This paper provides a summary of the current challenges our monetary system is facing and offers an overview of the different ideas for reform, discussing their practical feasibility. It will also demonstrate how a simpler monetary policy tool could facilitate the implementation of many of the ideas that reformers advocate, without a complex restructuring of the banking system. The implementation of this monetary policy tool will enable central banks to regain their ability to act effectively.

Costs of Austerity – Squandering our Productive Resources



Austerity policies are not only practiced since the 2008 global financial crisis, but have been implemented for over 30 years. Many countries are living below their potential because they do not use their existing production capacities, creating idle real capital and large-scale unemployment. Methodologically, neoclassical economic theory can neither explain mass unemployment nor unused production capacities. In this study a heterodox approach has been selected to explain the under-utilisation of productive capacities in a real world market model. It indicates that additional demand frequently results in additional production rather than increased prices. Absurdly, while living below our economic potential we are living above the means of our finite raw materials and produce excessive CO2 emissions. The win-win response is to reduce our CO2 emissions and our over-consumption of finite raw materials by utilising our free productive capacities to expand renewable energies and redesign our production, as far as possible, according to the “Cradle to Cradle” principle of closed loops.1 In this study we calculate the global costs of under-using our productive resources, i.e. the economic losses caused by austerity policies, to be at least US $2.3 trillion a year. In the Eurozone the annual costs of austerity are estimated at 580 billion Euros. These amounts show the extent to which we live below our potential by not using available productive resources. A gradual closing of this production gap would neither overtax the existing production potential nor cause dangerous inflation.

The Monetary Cost of the Non-Use of Renewable Energies



It is often claimed that renewables are still too costly and not yet competitive with conventional energy sources. But what costs are incurred when renewable energies are not used? Every day during which potential renewable energy sources are not utilised but exhaustible fossil fuels burnt instead speeds up the depletion of these non-renewable fuels. Using burnt fossil fuels for nonenergy related purposes (e.g. in the petro-chemical industry) in the future is obviously impossible. Thus, their burning – whenever they could have been replaced by renewables – is costly capital destruction. This study concludes that, estimated conservatively, the future usage loss resulting from our current oil, gas and coal consumption is between 3.2 and 3.4 trillion US Dollars per year.

Breaking the climate finance funding deadlock



The centerpiece of the WFC proposal is the innovative use of a financing tool that utilises the ability of the IMF to create new money in the shape of its own reserve currency: Special Drawing Rights (SDRs). Such new funding will not be inflationary if issued only against performance, i.e. to produce new goods and services with (mostly) unused productive capacities and unemployed labour. The use and control of this new money could be coordinated by the Global Environment Facility, UNEP, UNDP or the new Green Climate Fund of the UNFCCC.