- Investigates the causes of economic imbalances.
- Investigates the effect of the global financial system and/or the monetary system in fostering a sustainable economy.
- Investigates causes tending to destroy or impair the free-market system.
- Explores and develops market-based solutions.
This Fossil Fuel Risk Bonds (formerly known as "Climate Risk Bonds") project is focused on tackling the hidden subsidies we all pay in the externalized costs of fossil fuel extraction, transport, storage and combustion. In line with the internationally recognized “polluter pays" principal, our work on fossil fuel risk bonds is an effort to get these costs borne by the polluter.
Center for Sustainable Economy experts spent a good amount of 2016 first writing up the latest iteration of the “fossil fuel risk bonds” concept and then sharing it with elected officials.
Funding permitting, we plan to do a study in 2017, perhaps for Portland and other cities eager to stop the expansion of fossil fuel infrastructure, looking at the economic benefits of the risk bonding approach in their jurisdictions.
The fossil fuel industry is exacting a growing cost on the lives of all people, and the planet overall. The costs of climate change alone is as Lord Richard Stern noted in his "Stern Review of Climate Change" in 2006, the "greatest and widest-ranging market failure ever seen, presenting a unique challenge for economics." This market failure means that the market for oil, gas and coal is distorted in favor of these polluting energy resources over carbon-free and low carbon energy solutions.
Elected officials in the city of Portland, OR, have put in place a "green bonds" program in order to enhance the City's investments in sustainable infrastructure. CSE has developed a proposal for a “Fossil Fuel Risk Bond” program to supplement this program, to provide an economic disincentive for the fossil fuel industry to expand their export activity in the city while also generating revenues needed to both dismantle and/or make safer existing fossil fuel infrastructure.
While CSE has developed the concept of "fossil fuel risk bonds" (FFRB), we are hoping that Portland, OR, will be our first city to try it out. With both an existing Green Bond program and a recent resolution by the City Council to oppose all new fossil fuel infrastructure, Portland, OR--a resolution that is now being made legally binding--we think Portland may be the perfect city in which to test and incubate this idea.
In the absence of a national and international price on carbon, we envision the FFRB program as one vehicle for correcting the market distortions that favor fossil fuels, while providing the resources required to transition away from dependence on fossil fuels.
We see the FFRB program as a vehicle for dramatically scaling up investments in restoration of contaminated sites, green architecture, green infrastructure, and renewable energy technologies. We also see it playing a role in providing the financial resources to “harden” –or make safer and/or dismantle--various existing fossil fuel infrastructure given the high likelihood of a 9.0 earthquake in the Portland area.
CSE is meeting with local officials in the Pacific Northwest to lay the groundwork for fossil fuel risk bond programs. In a series of presentations and one-on-one meetings CSE is working through the mechanics of jumpstarting these programs in four phases: risk assessment, inventory of missing financial assurance mechanisms, cost assessments for adaptation and mitigation, and calculation of the requisite surcharge for funding adaptation and mitigation projects.
(Check sent: 2/3/2016)