A recent recipient of a Masters in Economics from the Humboldt University of Berlin, Andrew McConnell, has been awarded €1000 and will present to the Policy Advisory Board of the Oxford Martin Programme on the Post-Carbon Transition after his idea was chosen as the most promising ‘sensitive intervention point’ (SIP) that could tip the balance on climate change.
From an excellent field of ideas which included climate impact labels for consumer products, low-cost graphene nanotubes and carbon-free careers support for students McConnell’s concept was chosen as the one most embodying all the SIP characteristics that ensure out-sized results.
His proposal is for central banks (and the European Central Bank in particular) to reduce their valuation of the worth of carbon-intensive assets posted as collateral for credit. This would both reflect the risk of these assets devaluing as the world transitions to a low-carbon economy and would increase the relative value of “green” assets within the global financial system.
Even if only one central bank did this, the impacts would cascade down across the financial system as commercial banks and markets adjusted to the lower value of these assets with their ‘lenders of last resort’. This would then create a strong incentive for other central banks to follow suit - a perfect example of the positive feedback system that typifies a SIP.
McConnell’s proposal also makes a strong case for the timeliness of the intervention as the world works to ‘build back better’ from the economic crisis caused by the COVID-19 pandemic; “As we have seen with COVID-19, effective crises responses require strong policy initiatives from both governments and central banks. Given that the effects of climate change on both human life and economics will be considerably larger than those of COVID-19 we will require central bank intervention in the mitigation process. A ‘green’ reformulation of central bank collateral frameworks is a good place to start.”
“Andrew’s ‘central banks’ proposal was a great idea for a SIP,” said Dr Matthew Ives, Senior Research Officer on the Oxford Martin Programme on the Post Carbon Transition. “It was unique, well thought out, concise, and practical. We are keen to help him pursue it further and are looking forward to him presenting his concept to our eminent Policy Advisory Board in November.”
“We want to thank all our competition entrants,” he continued. “They provided a great starting point for us to get a critical mass of ideas for SIPs to help us accelerate the transition to a post-carbon society. Particular thanks should go to our other six finalists, all of which provided great entries that we will also be sharing with our Advisory Board.”
Although the competition has concluded, anyone can still upload their own ideas to the SIPs pages at www.postcarbontransition.wiki and collaborate by helping people improve their ideas.