Energy-based local currencies and community building - research log
The idea of issuing local, energy-based currencies is based on two intuitions from my part. Firstly, I have observed a correlation between the supply of money on the one hand, and energy use per capita on the other hand. The more money supplied, in relation to the GDP, the greater the energy-intensity of an economic aggregate. Secondly, I think that the shift to renewable sources of energy has to be financially sustainable, not just fiscally sustained. Of course, it is a great thing when governments create incentives for the development of renewable energies. Governments are supposed to leverage social change. Still, I have that idea, probably referable to the Austrian school in economic sciences that social change works much better, and is much more sustainable when people just want to do those things because it pays off. 

In general, both as an economist and a citizen, I am strongly attached to the idea of sustainability, rather than optimization. We usually do things that we think are functional, but usually someone can come up with something more efficient. Action is based on imperfect information. On the other hand, any action that brings reasonably functional results can do wonders when repeated consistently over a long period of time. I think this is the best definition of sustainability in its most practical, day-to-day perspective: sustainable action is the kind of action we can carry out systematically, consistently, and see our outcomes accumulate along an exponential curve. As I studied the Russian legislation on renewable sources of energy, I noticed some kind of institutional loop. When the state undertakes to support financially the investment in renewable energies, the natural course of things involves selection of projects. There are plenty of people out there, with brilliant ideas, just some of those people and some of those ideas seem more reliable than others. Thus, governments are hardly able to support all the projects and ideas connected to renewable energies. Just some projects will obtain public assistance. In the next step of the process, if the government supports selected projects, they are expected to give some payback to the society. They pay back by complying with rules established by the government, as for the technologies applied, domestic components used, prices of energy etc. As new projects compete for government’s funding, the best odds are with those, which comply the best with the established rules. Those rules are being established through the observation of the already running projects, which are running now, because they have been selected in the past due to their compliance with the rules etc. The loop closes.

Of course, public support for renewable energies is a great thing, and I am a strong advocate of spending money on new solar or wind farms, instead of spending them on another motorway. Still, there is so much human activity going on beyond the scope of active attention from the part of governments. All those local or network initiatives frequently just need being allowed to exist, nothing more. I want to explore the conditions they need to thrive, outside the issue of public subsidies. 

On the other hand, I have that feeling under my skin that the civilizational shift to renewable energies can and should be connected to the emergence of sustainable, resilient social structures. In that sense, my idea of local currencies pegged on local sources of renewable energies is essentially a concept for building communities. Local currencies can, under some conditions, serve to attract people and businesses to local communities. At the end of the day, we can imagine communities competing (peacefully) against each other as for the efficiency of local power generation from renewable sources. Local currencies, embodying claims on locally generated energy, could smooth out the process of such competition. If I want to settle my home and my business in Amplepuis, France (this is the case I discussed in my previous update), I have to sign a contract with the local branch of EDF (Electricité de France), the national on-grid provider of electricity. If I am in kind of two minds and settle somewhere in the countryside between Amplepuis and the neighbouring community of Tarare, I will have to choose one specific, local branch of EDF, and accept some kind of not very reliable connection to the grid, with electric wires suspended on posts, exposed to strong winds and that heavy wet snow that just loves breaking them under its weight. Besides being very exposed to physical contingencies, such connection is usually costly, and it takes time to build it. 

Still, a different type of arrangement can be imagined. It local communities develop local networks for distributing surpluses of locally generated energy, the geographical spread of those local networks will be based on the capacity of local energy sources. A town with more capacity in its water turbines and its solar farms can expand its local network of surplus-distribution on a relatively wider area, as compared with a town endowed with less powerful an energy-base. The more renewable power we install in our town, the bigger a network of surplus-distribution we can create. Such networks would expand slowly, as local investment capacity is usually limited. Networks expand as more people join the fun. There is that difficult phase of transition, when it is hard to say if new people should join first, and the network should expand subsequently, or maybe the other way round. Money, as social contrivance serving to transfer value in space and time, can help to smooth out both the development, and the rational calibration of those local networks. When being in two minds whether to move to Ampleuis or to Tarare, I can start choosing by buying (and possibly trading) the locally issued, energy-pegged currencies; those local wasuns, as I baptised than money in my previous updates. As many people – me and a few hundreds of others who entertain the same choice - progressively build up a portfolio of those local currencies, we become a financial community, which, in turn, can progressively move our assets to some of those local communities, and their sources of energy, rather than to others. As a wide market of those local wasuns emerges, that would create a capitalistic mechanism of smooth movement of assets in space and time, between the opportunities of settling in a precise place at a specific time. 

If` we imagine many local communities, with their respective, off-grid power installations, and their local energy-pegged currencies, one logical development is the creation of a wider market for exchanging those currencies. Logically, a market for trading locally generated energy should emerge.  A delicate phase comes. That market can evolve in two directions: network or hierarchy. The network component is based on exchange. The market grows where the most intense exchange takes place. I am thinking about a few towns, with exceptionally efficient patterns of creating new power-generation facilities, based on renewable sources, and they have a splendid bunch of energy surpluses to trade, mirrored by the issuance of their local currencies. They attract the attention, and the capital of new people, and so efficient development of renewable energies is rewarded. Yet, the history of mankind shows that efficient, powerful networks quickly give rise to hierarchies, i.e. social structures oriented on appropriating, frequently by coercion, the surplus value created in the network. Governments are an excellent example of such hierarchies. I can imagine the emergence, in the market made of local energy-pegged currencies, of investment funds accumulating large monetary balances in order to build political power. Still, the fact that we deal with local currencies, pegged on the local sources of energy, puts a limit to the rational investment in such a fund. Balancing my investment portfolio with local, energy-based currencies has any point if they are close to the physical place where I live or where I envisage to move to. If I live in Poland, there would be hardly any point for me to invest in local, energy-based currencies issued by local communities in New Zealand. 

Here, an interesting dilemma appears. In my previous update, I assumed that those local currencies, unlike the Bitcoin, should be backed with some real assets held by the local communities. In such case, we can imagine that, in a well-developed market of such currencies, some ill-intentioned people could build up large monetary balances in order to acquire control over local assets, vital for the production of energy. The concept of Bitcoin, i.e. pegging the value of the currency in the past chain of ledgers (Blockchain technology), rather than in real assets, could solve the problem. If I have a large balance in Bitcoin, I simply have a large balance of public trust, expressed in immutable, past ledgers of transactions. This is the dream of the Austrian school in economic sciences: a currency that embodies trust, and does not give rise to political power.

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