The ecor as global special purpose money: towards a green international monetary system to finance sustainable and just transformation

Abstract

Countries from the Global South face significant challenges to finance sustainable and just transformation. These challenges primarily stem from the hierarchical character of the current international monetary system, which requires Global South countries to obtain US dollars to finance imports of green goods, services, and technologies that they cannot (yet) produce, but require for the sustainable transformation. To overcome this hurdle, we propose the foundation of a green international monetary system with a Green World Central Bank (GWCB) at its centre. The GWCB would be allowed to create its own unit of account, which in our model we refer to as the “ecor”. The ecor would be a global special purpose money similar to Keynes’ ‘bancor’. Ecors would be created by the GWCB in the act of lending, and credited to the GWCB accounts of countries to finance imports needed to combat the climate crisis and advance the process of sustainable and just transformation in their societies and economies. Ecors transferred by deficit countries to surplus countries would only be able to be used within the system, leading to an expansionary adjustment of international imbalances. In this way, the amount of ecors would adjust elastically to the real demands for sustainable change and would not be limited by reserves or by funding conditions from private finance. This would create an international monetary system capable of responding appropriately and flexibly to ease the financing needs of countries around the world, thus enabling them, to effectively address the climate crisis on a globally just basis.