Paper short abstract:

Building on Keynes' idea for an "International Clearing Union", we propose the creation of a special purpose global money form which allows financial elasticity towards green projects, alleviating finance constraints under today's predominant principle of neoliberal discipline.

Paper long abstract:

While at least in theory high-income countries have sufficient financial leeway to promote sustainable transformation, other countries, e.g. in Latin America and Africa, do not. But even the former are trapped in a neoliberal corset that restricts their financial options. Our approach offers a way out of this dilemma based on the assumption that financial resources for green transformation are not limited per se but rather by the prevailing (global) politico-economic framework. The current international monetary system, in particular the need for U.S. dollar reserves or (expensive) access to dollar-denominated credit to finance imports necessary for sustainable investments, constitutes a major constraint on the path to green transition.

We propose a Green World (Central) Bank that would be allowed to create its own unit of account: the ecor - a supranational special purpose currency similar to the one Keynes called 'bancor'. The amount of ecors would adjust endogenously to the real demands for sustainable transformation and would not be limited by gold, the U.S. dollar, or any other reserves. Exporting countries would incur debt in ecors which they would only be able to spend within the system, obviating any risk of a run on ecors and systematically countering trade imbalances. As the system would allow countries, especially in the Global South, to finance sustainable investments, we believe, that it will be fruitful to discuss our proposition in the context of a conversation on the potential role of financial centers in Latin America and Africa in sustainable and just development.