Climate Change Policy Memo Short Form

How Climate Finance Can Support International Carbon Pricing Systems

A version of this memo was published in the SAIS Perspectives here.

Executive Summary

Developing countries and cities account for more than 60% of global GHG emissions[1] but represent less than 25% of carbon pricing systems globally[2],[3]. The Green Climate Fund (GCF) can strategically leverage climate finance to incentivize carbon pricing in developing countries by conditioning mitigation and adaptation aid on instituting a minimum price for emissions.

The GCF should provide more aid and compensation for developing countries with higher carbon prices. There are two benefits to this approach. First, it provides an incentive for countries to pursue increasingly ambitious carbon prices – thus increasing trust and coordination in the global climate regime as developed countries know their donations are driving higher emission reductions. Second, the domestic revenues from carbon pricing schemes will help developing countries finance investments associated with the costs of mitigation and enable a just transition to a low-carbon economy.

By establishing carbon pricing systems in developing countries, GCF can help establish international carbon markets that open additional revenue streams. Getting involved in carbon pricing efforts gives GCF an opportunity to shape Article 6 negotiations for global carbon markets where a portion of the sale of carbon credits and emission reductions are required to go to developing countries, thus channeling additional revenue for global mitigation and adaptation efforts.

Why Focus on Carbon Pricing?

Carbon pricing is a uniquely powerful mitigation solution due to its ability to influence energy use and investment decisions across all sectors of the economy as well as being tied to emission targets which guarantee that they are met. A well-designed carbon tax or cap-and-trade system will create incentives for cost effective emission reductions in the short run and cost reducing innovation in the long run[4]. One analysis found that on its own carbon pricing could deliver almost a third of the emission reductions necessary to avoid a rise of 2°C[5]. Unfortunately, GCF has no official policy or involvement in driving this vital policy mechanism while the developing countries it supports are on pace to account for ~70% of global energy demand in the next 20 years[6].

Carbon pricing has several advantages for developing nations:

  • Economy-wide Impacts: It’s a technology neutral way to incentivize economy-wide decarbonization by making it more expensive to pollute than to find lower carbon alternatives.
  • Revenue Generation: It generates revenue through tax collection or permit auctions that can be used by governments to support an equitable clean energy transition through R&D, job re-training, and investment in the poorest, most polluted areas. The revenue could also be used to support U.N. Sustainable Development Goals (SDGs) or directly compensate populations affected by the shuttering of energy intensive industries.
  • International Cooperation: It can serve as a focal point for international carbon pricing coordination resulting in additional revenues through the sale of carbon credits and emissions reduction that can go towards adaptation and mitigation costs.

How Climate Finance Can Spur Carbon Pricing In Developing Countries

International climate cooperation requires mutual commitments and stable incentive structures – coordinating national carbon prices is an efficient solution to achieve this. A major gap in the current Paris regime is that nations are only held to voluntary commitments which are not legally binding. If one country perceives that their decarbonization efforts are not being complemented by similar efforts in other countries, then the ambition and political will to ratchet up mitigation efforts will weaken. This dynamic has the potential to play out between developed and developing countries as the global share of emissions from developed nations continues to decrease[7]. National carbon prices are transparent and easily comparable, thus setting a floor for international cooperation and negotiations.

Conditioning climate finance aid to developing countries based on establishing a carbon price would incentivize adoption of carbon pricing systems globally. Developing countries lack the capacity and expertise to introduce carbon pricing systems and are disincentivized due to the high costs of mitigation. Indeed, even small changes to the prices of basic commodities because of a carbon price can have a significant impact on underprivileged groups. However, if they are compensated by richer countries then developing nations would be more willing to set carbon prices. The GCF should leverage its transfer payments for adaptation and mitigation on the condition that countries set a minimum carbon price. GCF can use existing funds to help establish tax collection or permit auctioning and allocation infrastructure.

Climate aid should be allocated to go more to countries who increase their carbon price over time, thus increasing ambition and trust in the climate regime. As countries start with different minimum carbon prices the hope is that they will rise and converge over time. However, GCF can accelerate this process by allocating increasing amounts of aid to those countries who increase their carbon price. In this way, developing nations continually pursue more ambitious carbon prices and developed nations will have increased trust and confidence that their transfer payments are achieving higher emission reductions.

Supporting Global Carbon Markets Offers New Revenue Streams for Mitigation and Adaptation

Establishing carbon pricing systems globally can facilitate the rules for international carbon markets under Article 6 of the Paris Agreement. Nearly half of the initial Nationally Determined Contributions (NDCS) include the use of international cooperation through carbon markets[8]. Enabling countries to effectively trade emission reductions and carbon credits across borders will be critical to the overall effort of global decarbonization. By helping establish carbon pricing systems, GCF will earn a seat at the table to ensure that carbon market rules are structured appropriately to benefit developing countries and to mitigate against the risks of double counting.

Successful international carbon markets will catalyze additional revenue streams for GCF to funnel to global mitigation and adaptation efforts. Under the Kyoto protocol a fee was levied on international emission trading and carbon credit purchases through the Clean Development Mechanism which funded nearly 30% of the U.N. Adaptation Fund[9]. Article 6.4 of the Paris Agreement would effectively replace the Kyoto Standard by ensuring that this “share of the proceeds” shall “assist developing country parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation” in addition to “covering administration expenses”[10]. By involving itself in Article 6 negotiations, GCF has an opportunity to open a large pool of public and private climate finance contributions to further scale its mission.

[1] Center for Global Development, “Developing Countries Are Responsible for 63 Percent of Current Carbon Emissions,” August 18th, 2015,

[2] United Nations Development Programme, “Human Development Reports – Developing Regions,” 2020,

[3] World Bank Group, “State and Trends of Carbon Pricing 2021,” May 2021,

[4] James Boyce, “Carbon Pricing: Effectiveness and Equity,” 2018,

[5] Harvey, et. al, “Designing Climate Solutions,” 2018, pg. 253,

[6] Stephen Eule, “A Look at IEA’s New Global Energy Forecast,” Global Energy Institute, November 29th, 2018,

[7] UNFCC, “Most Developed Countries on Track to Meet their 2020 Emission Reduction Targets, but More Ambition Needed by Some,” November 23rd, 2020,

[8] Kelley Kizzier, Kelly Levin and Mandy Rambharos, “What You Need to Know About Article 6 of the Paris Agreement,” December 2nd, 2019,

[9] Carbon Brief, “In-depth Q&A: How ‘Article 6’ carbon markets could ‘make or break’ the Paris Agreement,” November 29th, 2019,

[10] Carbon Brief, “In-depth Q&A: How ‘Article 6’ carbon markets could ‘make or break’ the Paris Agreement,” November 29th, 2019,

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

Climate Short Form

Is Nuclear Our Only Hope or a Waste of Time?

Side #1: Investing In More Nuclear Is A Waste of Time

Building more nuclear power plants doesn’t make sense: they’re too expensive, take too long to build, and are fundamentally unsafe with the safety risks only increasing as the environment deteriorates.

The Cost and Time To Build Nuclear Plants Is Astronomical

Nuclear energy cannot economically compete with wind and solar. The cost of generating solar power ranges from $36 to $44 per megawatt hour (MWh), while onshore wind power comes in at $29–$56 per MWh. Nuclear energy costs between $112 and $189 – more than three times as much.

The Vogtle nuclear plant in Georgia, only the second reactor built in the US since 1996, is estimated to cost $27 billion and has been under construction for almost 10 years. Once fully built, Vogtle will generate about 2,200 MW of power. In comparison, the fully operational Bhadla Solar Park in India took 4 years to build, generates 2,245 MW of power, and cost $1.3 billion. If you had reinvested the remaining $25 billion set aside for the Vogtle plant into solar you would generate nearly 20 times the power and saved 6+ years.

Some may argue that learning by doing with nuclear plants will lead to standardization and cost savings. The evidence for that is limited. In France, the country with the most successful and expansive nuclear program covering 70-80% of the country’s electricity, construction costs have actually risen over time rather than fallen . This is due to rising labor costs, more complex reactors, and new regulations imposed after the Chernobyl and Fukushima accidents.

One study has shown that we can get 90% of the way to zero carbon electricity with no new nuclear by 2035 if we double the amount of wind and solar in this decade and triple it in the next decade. Accomplishing this will require substantial investments in battery storage technology, high-voltage transmission lines, and more efficient production methods. Unfortunately, we’ve invested more government R&D support into nuclear than any other type of renewable. If this changes now we could resolve many of the issues preventing real clean energy from being scaled at the level necessary.

There’s No Solution to the Nuclear’s Safety Problems

Radioactive waste remains active for up to 250,000 years. As of today, there is no permanent solution as to where waste can be stored. Right now nuclear plants are employing a temporary solution to store waste on-site in dry casks. The Nuclear Regulatory Commission has said this method is only safe for 60 years.

A permanent disposal site in Yucca Mountain, Nevada, has been surveyed, studied, and debated since 1987 but continually faces political hurdles and may never become a nuclear storage site (or it does and could become a nuclear volcano).

Some argue that the elegant solution to the nuclear waste problem is reprocessing. This is where the fission products and unused uranium in spent fuel can be continually re-used to generate additional nuclear fuel rather than being sealed and discarded.

President Jimmy Carter banned reprocessing in 1977 due to fears of the process creating plutonium, which could be used to make nuclear
weapons. But President Reagan lifted the ban in 1981. The problem is that the cost of reprocessing exceeds using the cost of using new fuel as long as the price of uranium remains low. At current prices of uranium, reprocessing increases the cost of generating electricity making it even less competitive against renewables.

The problem with maintaining and cleaning up nuclear waste is not just that it’s incredibly expensive and poses proliferation risks – it will get more dangerous because of climate change.

Nuclear has to be close to a body of water or coast because of the need to access large amounts of water to cool the nuclear fuel rods before they overheat. These are the same areas that will experience increasing flooding, hurricanes, and sea level rise as the climate crisis worsens. This will increase the risk of meltdowns and release of nuclear waste – like the release of radioactive waste water into the Pacific Ocean following the meltdown of the Fukushima reactor in Japan.

Side #2: Nuclear Power is Our Only Chance To Get To Net-Zero

While nuclear may be expensive right now with potential environmental vulnerabilities, there is simply no other carbon-free electricity source available today that can meet the size and scale of today’s energy demand and what’s needed in the future.

Nuclear Supports An Equitable Transition, Unlike Renewables

Yes, building new reactors is expensive. But this is mostly just true in the U.S. It’s because there is not enough repetition and standardization to get cost savings. China, Japan, India and South Korea have gotten there. South Korea had an average decline in the costs of nuclear of 2%. Small modular reactors promise to transform the speed and cost of bringing new plants online by taking 1/2 to 1/3 as much time with at least 15-17% cost reduction.

The more important point is to look at comparative costs if we didn’t have nuclear at all. Every year 442 global nuclear reactors reduce 1.2 billion tons of emissions. Just keeping existing plants open would be far less expensive than developing and bringing online new renewable technologies to remove the same amount of emissions.

Lastly, the cost of nuclear has multiple layers. Detractors of nuclear focus on one dimension of cost which is the cost per MWh. But there are significant social costs in cities where coal plants are being shut down and entire communities are losing their livelihoods and identity. Nuclear power provides better economic prospects for job-retraining paying 37% more than wind and solar as well as providing long-term jobs not just temporary jobs to install solar panels or wind turbines (which require very little long term operational support).

Wind and Solar Cannot Match the Reliability of Nuclear

Nuclear is largest source of carbon free baseload power. Period. It’s the only energy source that can supply electricity throughout the day and night in a zero carbon way. That alone will make it a necessary part of a net-zero economy.

Right now nuclear comprises of nearly 20% of the U.S. electricity supply – more than 10x the amount currently coming from solar. Because of the vast variability in amount sunshine and strength of wind, renewables suffer from a severe amount of unpredictability when it comes to grid management. As a result, on their own they are incapable of meeting current U.S. energy demand necessitating fossil fuels to fill the gap.

But renewables are not only unreliable from an intermittency standpoint – they’re also very vulnerable from a supply chain standpoint. For example, technologies for battery storage and solar panels carry large mineral and mining costs. Nearly half of the minerals and raw materials used for solar cells come from the Xinjiang region of China where there are allegations of forced labor camps being used for production. By contrast, the United States has an abundant domestic uranium supply estimated to last 100-years.

Lastly, is is the issue global renewable adoption. Other countries don’t have the option of solar and wind because of geographical constraints in terms of how windy or sunny their countries are. For them, nuclear may be the only way to go carbon free. The U.S. only represents about 11% of all carbon emissions in the world, so for the remaining 89% nuclear may be their only way to substantially decarbonize. 

Nuclear’s Safety Issues Are A Solvable Problem

The safety discussion around nuclear is happening on an uneven playing field. In the real world, the safety of nuclear should not be compared to renewables, but to coal. The reality is that solar and wind cannot replace coal as a continuous source of energy supply. If the 20% of the electricity mix from nuclear goes down, it will at least in part be filled by coal and natural gas.

However, the health effects of coal and natural gas plants have been normalized compared to the fear of radiation exposure. The deaths from air pollution and cancer as a result of sulfur dioxide, arsenic, nitrous oxide, and particulate matter exposure coming from coal plants dwarfs the number of people who have died from nuclear power by orders of magnitude. Suffice it to say, nuclear is not causing 800,000 pre-mature deaths every year like coal. Similarly, fracking for natural gas has known links to asthma symptoms, childhood leukemia, cardiac problems, and birth defects in surrounding communities.

Coal also releases more radiation than nuclear waste. Burning coal gasifies its organic materials into fly ash which contain radioactive elements like uranium and thorium. Chinese fly ash on its own has .4 pounds of triuranium octoxide/MT.

In fact, the entire amount of nuclear waste created in the U.S. would fill one football field, 10 yards deep. By comparison, a single coal plant generates as much waste by volume in one hour as all nuclear power plants have in their entire history. If we want to comprehensive get rid of coal, nuclear is our best bet.

Aside from the issue of fossil fuel substitution, nuclear plants do not necessarily need to be subject to climate disasters. Following Fukushima, nuclear engineers have created concrete solutions to avoid rising sea levels and hurricane floods. These include relocating the plants 6 miles inland, building 50-foot tsunami walls, using a lead acid battery backup system, and relocating the diesel generators to a higher site.

Lastly, the obvious answer to the waste problem is reprocessing. Nuclear facilities can and should reprocess nuclear fuel and use it to generate additional fuel. Plutonium can be blended with uranium to create mixed-oxide fuel (MOX) that could burn in ordinary reactors and also render plutonium no longer usable for weapons. UK, France, several other EU countries, and Japan have been using MOX for years.

Frankly, the threat of nuclear proliferation with nuclear plants has had 70 years of data to be proven true. Since the 1950s, 132 commercial reactors in 35 U.S. states have been licensed for operation. Today, 104 remain in operation at 65 sites in 31 states. Globally, 442 reactors are in operation in 30 countries. Where’s the dirty bomb? It hasn’t happened. Terrorists cannot simply just pick up some uranium and make a bomb. This worst case scenario should not be driving our energy policy when the planet is facing more immediate threats.


While nuclear may seem dangerous and expensive, it does provide a major pathway to large-scale decarbonization. However, given the cost and time needed for new nuclear plants to come online and significantly reduce global emissions, putting that money into wind and solar infrastructure and battery storage would likely achieve the same results faster and without the potential environmental draw backs.

Ultimately, even if we starting build more nuclear reactors now they will take an average of 10 years to build, by which time the green energy transition will have to be mostly complete. There’s no guarantee that new types of reactor designs, like small modular reactors, will be quicker to build or financially competitive and there is no time or money to waste.

Rather than investing any more time or money into building new nuclear plants, the existing ones should be kept online with the remainder of R&D investment going towards new solar and wind.

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

China Foreign Policy Short Form

Understanding Modern China Through Mao

Mao Zedong, the father of the Chinese Communist Party, casts a long shadow on modern day China despite his death nearly a half century ago. Like any shadow, China and its current president Xi Jinping trail alongside the towering figure in both form and substance.

Understanding politics in modern China requires reckoning with two of the most significant legacies of the Mao era – the Anti-Rightist campaign of the late 1950s and the cult-of-personality developed around Mao himself through mass media and propaganda during the Cultural Revolution in the 1960s. One could draw a straight line from these foundational events to Xi Jinping’s current attack on intellectualism, his brutal suppression of dissenting voices, and attempt to exert singular control over Chinese society through ideological indoctrination.

The Anti-Rightist campaign began in 1957, less than ten years after Mao and the CCP founded the People’s Republic of China. It was in response to the Hundred Flowers Movement launched the year before when the CCP encouraged Chinese citizens and intellectuals to openly express their opinions and criticize the government to help the party correct its mistakes.

This brief liberalization of political expression in China proved to be a bridge too far. Mao found the overwhelming criticism from the masses to represent a threat to the party’s control of Chinese society and responded by ordering a brutal purge of so-called “rightists”.

Anyone who favored capitalism over collectivization or had criticized the CCP was accused of plotting to overthrow the government. An estimated 550,000 people were rounded up and either publicly criticized through “struggle meetings”, sent to prison camps for re-education, or even executed[1]. The actual number of victims may be between 1-2 million or more[2].

The Anti-Rightist campaign was a game-changer not only because of how arbitrary the persecutions were – indeed nearly 98% of all who were labeled “rightists” may have been wrongly applied[3] – but that it was aimed at the mainstream, intellectual class not the fringes of Chinese society[4]. It effectively shuttered intellectual dissent and turned China into a de-facto one party state.

Today, Xi Jinping is echoing the legacy of the Anti-Rightist campaign through a similarly repressive crackdown on intellectual discourse. In 2013, Xi’s comprehensive reform plan effectively banned any discussion of constitutional democracy and universal values – it was the biggest ideological campaign to restrict speech since Mao’s death[5].  

As a result, hundreds of professors, lawyers, and activists have been targeted for promoting so-called Western concepts like a free press, civil society, and rule-of-law – acts that have resulted in their harassment, jailing, exiling, and disappearance for “subversion of state power”[6],[7]. Access to China itself has shriveled with scholarly researchers facing surveillance, intimidation, and restrictions on entering the country or accessing archival research materials[8].

Xi is merely borrowing Mao’s suspicion of the intellectual class – if left free to protest or critique the party then they would risk unraveling the hegemonic control of the CCP over the Chinese people.

How were both leaders able to pull off this repressive form of governance? One of Mao’s enduring legacies is the extent to which he was seen a veritable demi-god in the eyes of the public – an infallible, heroic leader who rescued China from the imperialist West[9].

The deification of Mao saw its fever pitch during the Cultural Revolution when he urged young people to purge China of the capitalist and revisionist elements in society and impose “Mao Zedong Thought” as the dominant ideology of the country[10].

The People’s Liberation Army deployed expansive propaganda and mass media to build a cult-of-personality around Mao. Songs glorifying him were sang in schools and played in loudspeakers in public, the “Little Red Book” of Mao’s quotations was almost mandatory to be held by everyone and quoted extensively, even a loyalty dance was created for people to express their love and devotion to Mao[11].

Xi is now in the process of leveraging the party’s vast propaganda apparatus to create his own god-like image as a way to engender support from the public in the face of totalitarian control.

In 2019, the CCP launched a mobile app some have dubbed as the “Little Red App” to promote Xi’s ideology where party members and civil servants must log points in every day[12]. Starting in August 2021, “Xi Jinping Thought” has been integrated into the Chinese school curriculum from primary school through college with Xi’s ideology being taught to “cultivate love for the country, the Communist Party of China, and socialism.[13]” At the most recent Central Committee meeting of the CCP, Xi’s ideology was declared the “essence of Chinese culture.[14]

After having eliminated term limits for himself, Xi now stands as ruler-for-life of China[15]. Equipped with the lessons from Mao, he stands ready to quash political dissent, expand the party’s control on every facet of Chinese society, and cement his legacy in the same strain of revolutionary immortality that Mao Zedong imprinted into generations of Chinese citizens.

[1] Roderick MacFarquhar, “The Politics of China: Sixty Years of The People’s Republic of China”, pg. 82, Cambridge University Press, 2011,

[2] Christine Vidal, “The 1957-1958 Anti-Rightist Campaign in China: History and Memory (1978-2014)”, HAL Archives, April 25th, 2016,

[3] Roderick MacFarquhar, “The Politics of China: Sixty Years of The People’s Republic of China”, pg. 83, Cambridge University Press, 2011,

[4] Andrew Mertha, “Lecture – The Anti-Rightest Movement and the Great Leap Forward”, Module 3 – Maoism and Its Legacy.

[5] Cai Xia, “The Party That Failed: An Insider Breaks With Beijing”, Foreign Affairs, January/February 2021,

[6] Tom Phillips and Ed Pilkington, “No country for academics: Chinese crackdown forces intellectuals abroad,” The Guardian, May 24th, 2016,

[7] Human Rights Watch, “China: On “709” Anniversary, Legal Crackdown Continues,” July 7th, 2017,

[8] Sheena Chestnut Greitens and Rory Truex, “Repressive Experiences among China Scholars: New Evidence from Survey Data,” The China Quarterly, 242, June 2020, pp. 349–375,

[9] Ian Buruma, “Cult of the chairman,” The Guardian, March 7th, 2001,

[10] Ronald McLeod, “The Great Proletarian Cultural Revolution: Mao Zedong’s Quest for Revolutionary Immortality”, Dissertations, Theses, and Masters Projects, 1990,

[11] South China Morning Post, “How Mao Zedong built up his cult of personality – from new Frank Dikötter book How to be a Dictator,” October 13th, 2019,

[12] Iza Ding and Jeffrey Javed, “Why Maoism still resonates in China today,” The Washington Post, May 29th, 2019,

[13] BBC, “China schools: ‘Xi Jinping Thought’ introduced into curriculum,” August 25th, 2021,

[14] NPR, “China’s Communist Party, with eye on history, gives Xi Jinping the same status as Mao,” November 11th, 2021,

[15] James Doubek, “China Removes Presidential Term Limits, Enabling Xi Jinping To Rule Indefinitely,” NPR,  March 11th, 2018,

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

Short Form Technology

It’s Time To Regulate Cryptocurrencies

Cryptocurrencies are the digital zeitgeist. They represent a cultural moment where technological innovation meets financial intrigue – and everyone wants a piece. While the societal buzz tends to focus on those becoming wealthy from crypto, behind the scenes there are thousands of crypto victims. Countless hacks, extortion schemes, and market manipulation tactics should have shed the perception that crypto is a harmless game to make money, yet its popularity and adoption has only grown over the years.

Unregulated market forces have made crypto into the Wild West where anything goes and, ostensibly, anyone can become rich. But if it sounds too good to be true, it probably is. Without sensible regulation, regular consumers will continue to be defrauded and have their funds hacked, not only risking personal financial ruin but triggering downstream instability to wider financial markets. 

Last month the crypto platform PolyNetwork temporarily lost $600 million of its customers assets to hackers. This was only a hack of moderate severity as far as infamous thefts go. In 2019 alone, hackers stole more than $4 billion by breaching crypto exchanges and digital wallets. In the crypto world, there are no specific rules to ensure protection of customer assets. Unlike banks, crypto exchanges don’t have any specific cyber security requirements, making hacks common and relatively easy for sophisticated cyber criminals utilizing techniques like SIM card swapping, phishing, and URL hijacking.

In addition, crypto exchanges are not required to have systems to prevent fraud and manipulation, nor are there rules to prevent or minimize conflicts of interest. One analysis identified 175 “pump and dump” schemes where crypto traders drastically inflated and then suddenly crashed the prices of 121 cryptocurrencies in 2018, generating millions in losses for unknowing consumers.

Another analysis found widespread use of automated trading programs or “bots” to manipulate prices. The bots used strategies similar to a practice outlawed in stock and future markets called “spoofing” where traders create fake orders only to cancel them – an attempt to trick consumers into buying or selling crypto based on false market signals.

Popular cryptocurrencies like Bitcoin, Ethereum, Litecoin, Ripple, and Dogecoin have suffered from numerous hacks and price manipulation schemes, losing more than $5 billion in consumer funds. Photo by Worldspectrum on

As of September 2021, the total market value of all the crypto assets surpassed $2 trillion. While it’s a small part of the $400+ trillion financial system, it is not an isolated one. There are growing linkages to the wider financial system through banks, brokers, and technology vendors that interface with crypto exchanges – including large players like Fidelity, Goldman Sachs and Wells Fargo.

This will only grow as the consumer demand for crypto shows no sign of abating. If left unaddressed, the cybersecurity and market manipulation vulnerabilities in the cryptocurrency market could cause collateral damage in the global financial system.

Proponents of cryptocurrency will argue that cryptocurrency regulations would slow down the advancement of the technology or could raise barriers for investor access and capital formation. While this may be true initially, addressing the vulnerabilities present in the cryptocurrency market would boost investor confidence and technology investment in the long term.

The fact that crypto exchanges lack basic cybersecurity protections or are victims of market manipulation from practices outlawed in the traditional financial market underscores how badly these entities lack strong operational, governance, and risk practices. These barriers will do more to prevent global adoption of cryptocurrencies than attempts to develop guardrails around them.

Ultimately, interest in cryptocurrency will only grow. And with it, theft and defrauding will also grow. The federal government has an imperative to create regulatory oversight of crypto-assets and the intermediaries that operate in that space given the risk to consumers and the larger financial market. If the U.S. continues to just let the invisible hand guide the crypto market, soon the trillions that consumers, banks, and trading firms have held in this market will also become invisible.

Read More:

China Economics and Trade Short Form

The Legacy of China’s Economic Transformation

Through the lens of government revenues and expenditures, China is the most decentralized country in the world[1]. With 31 provinces, 334 prefecture units, 2,851 county-level administrative units, and more than 41,000 township level units[2], these subnational governments have significant autonomy in governing the world’s largest population. In fact, local government accounts for almost 70-80% of all government spending in China, double that of other OECD countries[3].While China might appear to have a top-down, hierarchical command-and-control government, fragmentation of authority is actually at the heart of China’s political system[4].

It has not always been this way. Decades of political reform that began in the 1970s have led to waves of centralization and de-centralization of government control. Understanding this dynamic is crucial to make sense of China’s future – in particular, its ability to carry out the economic reforms it promised to make when it joined the World Trade Organization (WTO) in 2001. China’s economy is the lynchpin on which social stability hinges, and Xi Jinping plans to drive future growth not through the free-market reforms which made it into the economic juggernaut it is today, but through re-imposing central control on key parts of the economy.

The fragmentation of China’s contemporary political and economic system began in 1978, when Deng Xiaoping inaugurated a period of “reform and opening up”. Agriculture was de-collectivized, large state-owned enterprises (SOEs) were privatized, and government interference in economic forces like employment and inflation were relaxed[5]. The result was double-digit growth and the lifting of roughly 800 million people out of poverty[6]. As China pushed to join the WTO, the central government began to slash tariffs, strengthen intellectual property rights, and welcome in foreign companies. However, regional governments, who retained substantial control over their local economies, did not always share Beijing’s enthusiasm for this paradigm shift.

China’s decision to join the WTO and the ensuing threat of foreign competition produced a range of regional reactions, some in lockstep in Beijing while others resisted, fearing that competition would slow their efforts to maintain ambitious growth. For example, the prefecture of Yanbian in northeast China began to consolidate its cement industry in 2003. Rather than allowing market forces decide which firms should stay in business, the local government handpicked the winners and took away business licenses and machinery from firms they felt were inefficient[7]. This type of regional subversion against the market liberalization that China had promised the world reflected a wider divergence between the interests of Beijing and its ability to influence the sprawling network of subnational entities to follow their lead.

This regional subversion, however, was also responsible for China’s infrastructure boom. In 1994, the central government centralized tax collection and effectively starved regional governments of their revenue. In order to meet their growth targets, local governments turned to a new source of revenue – land. They began leasing millions of acres of land to real estate developers which was turned into highways, subways, high-rise apartments, and associated urban infrastructure[8]. The result was a doubling of the length of China’s highways between 2007 to 2017 – enough to go around the world three times – as well as ha ving 8 of the world’s 12 longest metro-rail systems.

The global economic crisis of 2008 turned the tide in Beijing’s interest to fulfill the hopes of its accession to the WTO. To China’s leaders, the crisis exposed America’s model of free-market capitalism to be fundamentally weak[9]. The solution, they argued, was a re-centralization of economic power and an anti-corruption drive to rid the nation of crony capitalism. Since Xi Jinping came to power, SOEs have become significantly stronger and larger, taking on leading roles in China’s Belt and Road Initiative to build infrastructure around the world and ultimately export their form of state capitalism[10]. This has corresponded with a retreat of the private sector through a crackdown on financial technology firms like Alibaba and Tencent as well as a recalibration of center-local revenue sharing to reduce debt accumulation[11].

Xi’s anti-corruption drive, the longest and widest in the CCP’s history, can also be understood through the lens of reigning in the autonomy of subnational governments. One of the primary mechanisms of central influence through the fragmented system is by the CCP and the state appointing a nested hierarchy of cadre leaders. These are bureaucrats placed at all levels and are supposed to be trained in the party’s ideology and carry out the will of the central government[12]. So far, Xi’s campaign has ensnared 1.5 million officials, both high level and low level, who will ultimately be replaced with those who will more closely hew the line of the central government, and Xi himself[13].

Under Xi’s reign, China is returning to an era that it is most familiar with – command and control. To deliver economic reforms and continued growth, China will grapple with its structure of fragmented authoritarianism through centralized crackdowns in an attempt to execute a uniform agenda and vision. Will it work? History has shown that decentralization has led to China’s most explosive growth, but perhaps Xi will continue to defy all odds.

[1] Michael Davidson, “Creating Subnational Climate Institutions in China,” Harvard Project on Climate Agreements, December 2019,

[2] Andrew Mertha, “Lecture – Disaggregating the State”, Module 8 – Center-Local Relations. Johns Hopkins University, Blackboard.  

[3] Michael Davidson, “Creating Subnational Climate Institutions in China,” Harvard Project on Climate Agreements, December 2019,

[4] Kenneth Lieberthal and Michael Oksenberg, “Policy Making in China: Leaders, Structures, and Processes. Princeton University Press”, pg. 137, Princeton University Press, 1988.

[5] Jacques Delisle and Avery Goldstein, “China’s Economic Reform and Opening at Forty: Past Accomplishments and Emerging Challenges,” The Brookings Institution, April 2019,

[6] Maria Ana Lugo, Martin Raiser, and Ruslan Yemtsov, “What’s next for poverty reduction policies in China?”, The Brookings Institution, September 24th, 2021,

[7] Yeling Tan, “How the WTO Changed China: The Mixed Legacy of Economic Engagement,” Foreign Affairs, March/April 2021,

[8] Yuen Yuen Ang, “The Robber Barons of Beijing: Can China Survive Its Gilded Age?” Foreign Affairs, July/August, 2021,

[9] Rana Mitter and Elsbeth Johnson, “What the West Gets Wrong About China,” Harvard Business Review, May-June 2021,

[10] Yeling Tan, “How the WTO Changed China: The Mixed Legacy of Economic Engagement,” Foreign Affairs, March/April 2021,

[11] The Economist, “Xi Jinping’s crackdown on Chinese tech firms will continue,” November 8th, 2021,

[12] Maria Edin, “State Capacity and Local Agent Control in China: CCP Cadre Management from a Township Perspective,” The China Quarterly, March 2003, No. 173 (Mar., 2003), pp. 35-52.

[13] Yuen Yuen Ang, “The Robber Barons of Beijing: Can China Survive Its Gilded Age?” Foreign Affairs, July/August, 2021,

Climate Change Economics and Trade Short Form

Carbon Taxes vs. Cap and Trade: Economic Theory and Outcomes

What is Carbon Pricing and Why Do We Need It?

Time is running out to prevent a 2°C rise in global temperature. The world has 29 years to make annual carbon emissions 40 – 70 percent lower than they are today[1]; otherwise, 190 million people will be exposed to extreme droughts, and more than 70 percent of Earth’s coastlines will be flooded[2]. While there are several avenues to reduce emissions, carbon pricing is a uniquely powerful mitigation solution. One analysis found that on its own, carbon pricing could deliver almost a third of the emission reductions necessary to avoid a rise of 2°C – more than any other mitigation option available.[3]

Carbon pricing is an economic tool that discourages pollution by imposing monetary costs on CO2 emissions. When faced with a price tag on carbon, industries will pursue emission reduction opportunities that are cheaper rather than paying the price. The price of carbon can be set through two vehicles: a carbon tax or a carbon cap.

A carbon tax directly prices carbon through a fixed, per-unit charge for each ton of CO2 emitted. While the level of emissions may fluctuate, the tax is set according to a projected amount of emissions at that price.[4]

A carbon cap indirectly prices carbon through a quantity-based approach. It sets a quota of carbon allowances, or permits, for emitters which represents their emission target. A carbon cap is often called “cap-and-trade” or an “emissions trading system” because the cap limits the number of allowances that businesses can have, but there is a market which enables the emitters to buy and sell their permits, effectively setting a price for emitting CO2

The primary advantages of carbon pricing are that its effects radiate across all sectors of the economy, it’s technology neutral, it provides a transparent price/quantity, and it generates revenue that can be used by governments to support an equitable clean energy transition.

Here, we argue that carbon taxes are preferable to cap-and-trade schemes due to offering price certainty, a simpler implementation and administrative cost, and a comparatively lower chance of corruption and rent-seeking behavior.

What are the Economic Assumptions Behind Carbon Pricing?

At its core, carbon pricing seeks to address the market failure of pollution control. In a market economy, firms have no incentive to restrict the negative externalities from greenhouse gas emissions like sulfur dioxide and particulate matter or dumping toxic waste.

The burning of coal is responsible for 800,000 premature deaths in the U.S. every year [5] while the byproducts of fracking have known links to asthma, childhood leukemia, cardiac problems, and birth defects in surrounding communities[6]. Yet companies rarely pay for these harmful impacts unless through successful litigation or penalties imposed by government authorities like the EPA. Carbon pricing attempts to impose a cost on these firms for their polluting activities by determining a socially efficient level of pollution.

The socially efficient level of pollution is determined through a cost-benefit analysis that balances the marginal social benefits (MSB) from pollution control with the marginal social costs (MSC). While striving for zero pollution would be ideal in the context of combatting climate change, the costs of achieving this would be astronomical and may not even be possible. At the same time, cleaning up the last few units of pollution would likely not provide that much additional marginal benefit.

As indicated in Figure 14-3[7], where the MSB and MSC curves intersect at Point E is considered the socially efficient level of pollution because the emissions rate maximizes the net social value of production.[8] The marginal private benefit (MPB) curve represents the benefits to the firm of cleaning up its pollution. As is evident from the graph, the firm does not achieve that much benefit compared to what the community receives and if left to its own devices would abate emissions at point I, far below Point E. Thus, to abate emissions at a socially efficient level an external intervention is needed.

Carbon pricing analyzes this market dynamic and attempts to compel firms to abate emissions at a socially efficient level. At Point E, the carbon tax would be set at the price on the Y axis, while cap-and-trade would set the emission cap based on the quantity on the X axis. Both schemes rely on foundational ceteris paribus, or all-else-unchanged, economic assumptions about the MSC and MSB of abatement. If these assumptions change, then the economic rationale for these policies also changes.

The first assumption is that the marginal social benefits curve is downward sloping. This implies that the first few units of abatement provide a lot of social benefit, but this benefit decreases over time as more emissions are cut. The logic is that as more emissions are cut the end products those emissions are created for – be it electricity, consumer goods, or transportation – get further reduced which diminishes your quality of life. But what if the MSB curve was upward sloping? In this case as more emissions are reduced, then the positive environmental externalities of cleaner air and water and preserved forests improve your quality of life more than carbon-intensive goods becoming more expensive. In that scenario, the tax price would be a lot higher, and the emissions cap a lot lower since the marginal social benefits are increasing the more pollution is reduced and everyone is better off if emissions can be abated more aggressively.

The second assumption is that the marginal social costs curve is upward sloping. This implies that the more emissions are abated, the more expensive it gets for the firm and society to do so.  While some emission reductions could be easier and cheap to achieve early on, after the low hanging fruit are addressed then more expensive technology and product substitutes are needed to achieve additional reductions.

A carbon cap uses a quantity based approach by allocating a fixed amount of carbon allowances tied to an emissions target. A carbon cap is often called “cap-and-trade” or an “emissions trading system” because while the cap limits the number of pollution allowances that businesses can have, there is a market where emitters can buy and sell their allowances, effectively setting a price for emitting CO2.

However, this relationship is likely not linear. As firms begin reducing emissions, there will be improvements in energy efficiency and technology along the way which will decrease the cost of abatement over time. As a result, the marginal social cost curve can be thought of as an initially upward sloping curved line that then begins to flatten and move downward. Consequently, the price of a carbon tax would likely be lower and the emission cap higher. This is because as the abatement cost decreases, then the socially efficient pollution point is further down the marginal social benefits curve so a higher amount of emissions can be curtailed (cap) at a lower price (tax).

The third assumption is that the carbon price or emission quantity at the socially efficient pollution level is sufficient to avoid the impacts of climate change. There is no guarantee that the point where the MSC and MSB curves intersect is the exact quantity which prevents a rise of 2°C. Indeed, there is still considerable uncertainty as to the exact amount of emission reductions that are needed to avoid this fate. If a tax or a cap is placed at the socially efficient pollution level and the planet continues to warm beyond the target 2°C benchmark, then carbon pricing schemes can no longer be set at socially efficient pollution levels and instead need to be set at a higher amount, economically inefficient level in the hopes of achieving the reductions necessary.

Which Carbon Pricing Scheme is Preferable?

There are several advantages and disadvantages when choosing between a carbon tax or cap-and-trade system, but in theory both will create incentives for cost effective emission reductions in the short run and cost reducing innovation in the long run.[9]

Based on years of real-world results, a carbon tax is preferable to cap-and-trade for three reasons[10]: more effective revenue collection, lower risk of corruption, and carbon price stability.  

First, carbon taxes can capture revenues more easily than cap-and-trade with lower administrative cost. Cap-and-trade systems are more complicated to implement due to the need to determine the pricing of permit allocations as well as developing trading infrastructure so firms who reduce more emissions than required can sell their additional reductions to firms that are behind. This complexity is compounded by the need for some degree of free permits needed to be given to energy-intensive industries where fossil fuel substitutes don’t exist, like in the creation of cement or steel. Carbon taxes are a comparatively easier and more straightforward way to collect revenue since they are evenly applied across all industries and at a flat rate based on the quantity of emissions released.

The ease of revenue collection under a carbon tax connects to our first assumption – what if the marginal social benefits curve is actually upward sloping, not downward? In that scenario every unit of emissions reductions gets converted into revenue that the government can use to accelerate mitigation and adaptation efforts. This improves your quality of life more than the negative effect of certain products being more difficult or expensive to consume, especially if you’re living in a coastal community affected by sea-level rise, or in the American West that’s been ravaged by wildfires. Thus, choosing a carbon tax which can more effectively collect revenue is preferrable to increase the marginal social benefits of abatement.

Second, carbon taxes provide less opportunity for corruption which can occur through rent-seeking behavior with cap-and-trade permits. Cap-and-trade systems create a new valuable asset in the form of pollution permits. It also creates a scarcity where one previously did not exist. As a result, scarce permits can be exploited by politicians and corrupt administrators who can sell off permits to certain favored industries and pocket the fees. A carbon tax provides less opportunity for corruption because it doesn’t create artificial scarcities, monopolies, or rents.[11] The tax cannot be sold to other entities and there are no new rent-seeking opportunities.

This benefit of carbon taxes connects to our second assumption – that the marginal social costs of abatement is assumed to increase over time but may actually be decreasing. Carbon taxes help drive a decrease in social costs because the fees are not being diverted by corrupt economic agents like could potentially happen in a cap-and-trade system. Rather these funds can be re-invested to bring down the cost of expensive technology that’s needed to achieve additional reductions after easy decarbonization steps are taken.

Third, a carbon tax offers price certainty as opposed to quantity certainty which limits volatility in the market price for carbon. Under a cap-and-trade system only the quantity of emissions is fixed, thus allowing the price to fluctuate as economic agents shoulder their own individual costs in order to meet that emission limit. For example, in 2006 the carbon prices the European cap-and-trade system ranged from $44.47 to $143.06 per ton of CO2.[12]  While cap-and-trade provides greater emission reduction certainty and is more environmentally effective, the price uncertainty of this approach may make the gains short lived. Uncertainty in the price of carbon will slow investments in clean energy, disrupt energy markets, and may become extremely unpopular with the public if the price fluctuates frequently causing instability in the price of everyday consumer goods.

This drawback of cap-and-trade connects to our third assumption – even if we have quantity certainty about the emissions we’ll reduce, how do we know that’s sufficient? If the assumption changes that the quantity of emissions at the socially efficient pollution point is not enough to mitigate against climate change, then carbon taxes provide a preferrable alternative since they drive market behavior through prices not quantity and can achieve progressively higher emission reductions through higher prices.

The Way Forward

Ultimately, carbon pricing is a crucial tool for reducing CO2 emissions as the environment continues to deteriorate. Currently, four-fifths of global emissions are unpriced, and the global average emissions price is only $3 per ton[13] – far too low to induce substantial emission cuts. As policymakers continue to explore avenues to decarbonize their economies, pricing carbon at the socially efficient pollution level presents a market-driven opportunity to act on this existential crisis.

Introducing carbon taxes as part of international climate negotiations at COP26 is one viable path forward to increase their uptake. For example, negotiations are continuing on how much money developed countries will donate to developing countries to help with adaptation and mitigation costs. These transfer payments could be conditioned on developing countries instituting carbon taxes with more aid going to countries with higher carbon taxes. This approach would incentivize more ambitious carbon pricing globally and increase trust in the system that climate aid is tangibly going towards higher amounts of abatement.

Works Cited

[1] Hal Harvey, Robbie Orvis, and Jeffery Rissman, “Designing Climate Solutions: A Policy Guide for Low-Carbon Energy,” pg.2, November 2018,

[2] Alan Buis, “A Degree of Concern: Why Global Temperatures Matter”, NASA, June 19th, 2019,

[3] Hal Harvey, Robbie Orvis, and Jeffery Rissman, “Designing Climate Solutions: A Policy Guide for Low-Carbon Energy,” pg. 253, November 2018,

[4] Sanjay Patnaik and Kelly Kennedy, “Why the US should establish a carbon price either through reconciliation or other legislation,” The Brookings Institution, October 7th, 2021,

[5] EndCoal, “Health,”

[6] NRDC, “Reduce Fracking Health Hazards,”

[7] Paul Samuelson and William Nordhaus, “Economics: 19th Edition,” pg 275,

[8] Paul Samuelson and William Nordhaus, “Economics: 19th Edition,” pg 273,

[9]James Boyce, “Carbon Pricing: Effectiveness and Equity,” 2018, Ecological Economics,

[10] William Nordhaus, “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming,” Review of Environmental Economics and Policy, Volume 1, Number 1, Winter 2007,

[11] William Nordhaus, “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming,” Review of Environmental Economics and Policy, Volume 1, Number 1, Winter 2007,

[12] William Nordhaus, “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming,” Review of Environmental Economics and Policy, Volume 1, Number 1, Winter 2007,

[13] Kristalina Georgieva, “Launch of IMF Staff Climate Note: A Proposal for an International Carbon Price Floor Among Large Emitters,” The International Monetary Fund, June 18th, 2021,

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

Climate Change Short Form

Heavy Industries Must Do The Heavy Lifting To Slow Climate Change

The industry sector produces the building blocks of modern life – like cement, steel, iron, and chemicals – but also accounts for nearly 40% of global CO2 emissions every year.

Because of the extremely high temperatures and chemical processes required to create heavy industry products, fossil fuels are an integral, and often unavoidable, part of their creation. Demand is only expected to increase for these goods as emerging economies launch ambitious infrastructure projects. In fact, cement is already the most used substance in the world after water. 

Much of the conversation around climate solutions has focused on renewable energy and electric vehicles. The attention there is warranted –  the power and transportation sectors account for more than 50% of the nation’s CO2 emissions.

Paradoxically, the scaling up of the green economy compounds the issue of emissions from heavy industry. Wind turbines, electric vehicle parts, and carbon capture equipment will require a substantial amount of steel and cement, among other industrial products. As a result, industry-related emissions are on pace to become the largest source of emissions from the U.S. within the next 10 years.

This makes achieving a net-zero economy by 2050 virtually impossible unless the U.S. urgently invests in innovative solutions now to reduce emissions from heavy industries.

Steel mills are energy intensive facilities which are dependent on fossil fuels because of the high temperature and chemical processes required.

To get ahead of this, policymakers in the U.S. should take a three-track approach.

First, the U.S. should implement a national Buy Clean program. Buy Clean policies mandate carbon disclosures and emission standard requirements in order to build publicly funded construction projects. Nearly half of all cement and a fifth of steel in the U.S. are purchased with tax dollars, giving federal, state, and local governments immense leverage to incentivize contractors to use lower carbon construction materials.

California was the first state to pass a Buy Clean policy in 2017 and serves as a model for the federal government to create an environment where adoption of greener technologies like alternative cements and electric arc furnace (EAF) “minimills” to make steel can and must be adopted more quickly.

Second, the U.S. should incentivize installation of carbon capture and storage (CCS) technology at industrial plants by expanding existing tax credits. CCS technology prevents CO2 from being emitted into the atmosphere by capturing emissions in the smokestack and injecting them deep into a rock formation underground for permanent storage. The Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA) found that CCS was the only technology capable of bringing industry emissions towards net-zero. The major barrier is cost.

Enacted in 2008, Section 45Q of the IRS tax code provides a tax credit based on the metric tons of carbon dioxide captured and stored using CCS. To further drive down the cost for industry to install CCS equipment, the U.S. should increase the monetary amount of the tax credit beyond $50 per metric ton of CO2  as well as expand the definition of CCS to include Direct Air Capture (DAC) technology which extracts CO2  directly from the atmosphere. In addition, the U.S. should provide an option to receive cash payment in lieu of a tax credit which will more effectively enable industry developers to finance decarbonization projects without the added complexity of tax liability management

CCS captures CO2 from industrial plants and stores them underground where they will be absorbed by the soil and water rather than become a greenhouse gas in the atmosphere.

Lastly, the U.S. should engage with multilateral institutions like the World Bank and World Trade Organization to establish carbon border adjustments, like a carbon tax. Much of the demand for heavy products over the next few decades will come from developing nations who are rapidly industrializing and planning new highways, bridges, and homes. For example, between 2011 to 2013, China used more cement than the U.S. did in the entire 20th century At the same time, China is the world’s largest producer of steel, followed by India. A carbon tax at the border will make it more expensive for developing countries to import and export industrial goods in a dirty way and incentivize global adoption of CCS and cleaner alternatives.

Industry is at the core of a green economy. Not only is it responsible for producing the building blocks of the clean energy transition, it represents arguably the most important sector to decarbonize in the world. If the U.S. does not take action to curb emissions from heavy industries it will simply not be possible to keep the planet from warming above 2°C no matter what else we do.

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

Investigative Report Politics and Government Short Form

How Does American Policing Compare to the World?

Explanatory investigation into American policing, formatted for Instagram.

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

China Economics and Trade Short Form

Chinese Digital Currency and the Future of the Dollar

There are billions of financial transactions happening right now between consumers, businesses, and governments around the world. The vast majority of these transactions are denominated in U.S. dollars. As the world’s reserve currency, the dollar serves as the unit of account for most global trade and foreign exchange transactions. Simply put, there is no currency more important to the functioning of the world economy than the dollar.

As a result, the U.S. has spent the last 75 years in the driver’s seat of the global financial system incurring a range of economic and geopolitical advantages. U.S. consumers have enjoyed low interest rates and cheap imports for decades, spawning one of the world’s highest standards of living. In turn, the U.S. government has been able to sustain large trade deficits without inflation and successfully advance its national security interests through economic sanctions which prevent nations from accessing the dollar for cross-border transactions. For years, adversaries have sought to bypass the Western financial system with little success.

However, the reign of dollar supremacy is not guaranteed. China is now preparing to take the most ambitious step yet to internationalize an alternative currency to the dollar. In April, China’s central bank became the first to pilot a national digital currency for the renminbi, known as the e-RMB. The renminbi represents the most viable currency to dethrone the dollar due to the size of China’s economy and its integral role in the global supply chain. If successful in its vision to create an alternative to the dollar, China could shift the paradigm of the global economy into a new era – one with a duopoly of reserve currencies that would have a significant impact on international competition.

In this new era, imagine that the U.S. comes to learn that North Korea is trying to acquire uranium from Iran for its nuclear weapons program. The U.S. would issue new sanctions, but North Korea and Iran would have shifted much of their global trade into using the new Chinese digital currency thus allowing them to circumvent the dollar payments system. Now the sanctions are ineffective at damaging North Korea or Iran’s economy in order to change their calculus, and the U.S. no longer has the visibility to track and shut down illicit financial flows going to purchase nuclear materials.

The U.S. is currently unprepared for a scenario like this. As COVID-19 accelerates the digitalization of the world economy, the U.S. cannot afford to fall behind China in the sphere of digital currency. China’s brand of techno-authoritarianism, if successfully applied to money, would pose a fundamental threat to the rules-based world order that the dollar underpins. The U.S. must act now by developing a “digital dollar” – a new national, central bank digital currency issued by the Federal Reserve.

Rather than letting other nations dictate the terms of a digital world economy, the U.S. would lead the way by modernizing the dollar’s underlying technological infrastructure. Advancements that enable the programmability of money could unleash innovative new functions like customized privacy and data ownership (e.g. preventing the selling of payment data), consumer wallets for the unbanked (e.g. direct government assistance payments), or frictionless peer-to-peer cross-border payments and currency conversions (e.g. remittances).

Amidst the global economic turmoil caused by the pandemic, the dollar’s role as an anchor of economic stability is more important than ever. A digital dollar presents an opportunity to future-proof the dollar’s role as the world’s reserve currency by spurring new innovations and operational efficiencies while also reinforcing U.S. values of transparency, rule of law, and privacy in a world soon to be dominated by competing digital currencies.

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

Politics and Government Short Form

Ecosystem Integrators And The Future of Work In Government

The rise of the digital age has brought a new mindset that requires leaders who are committed to being agile and taking intelligent risks. As government agencies look to develop high potential individuals that can lead in this environment, a critical role to prepare for is one of an Ecosystem Integrator.

Today, the “ecosystem” of government is a dynamic, interconnected network that connects our public institutions, private corporations, and everyday communities.  An Ecosystem Integrator’s primary role is to build connections and create the space for aligned action by others. In this role connecting the people and technology platforms in this ecosystem and giving room for decisionmakers to work in an integrated fashion will ultimately transform how government interacts with its stakeholders and improve business outcomes.

From a technology stand point, the way people and organizations interact with information has changed drastically, and likely permanently. The government has an imperative to respond accordingly by creating a “smarter” government that can harness the power of emerging technology to collect and integrate disparate sources of data to reinvent and overhaul core government services.

From a people stand point, innovative thinking will be required to navigate the divide between career officials and political appointees in today’s highly charged political environment. Bridging the gaps in trust and breaking down siloes in decision-making will be a necessary cornerstone to produce a well-functioning government.

To tackle these problems, Ecosystem Integrators will need to develop these core competencies:

  • Aligning for a Common Purpose: Establish early on what strategic goals are important to all stakeholders and build the organization around that core vision. This includes ensuring technology modernization or enhancement efforts are aligned to a common goal as well as dialoguing, and sometimes negotiating, with political appointees without a career government background as to what are appropriate risks to take for the organization.
  • Interpersonal Relationship Building: Cultivate and facilitate relationships internally and between public and private sector entities. Create a positive culture by encouraging and empowering others to form meaningful connections, and train career government officials ahead of a transition of how to communicate with new political appointees. Establishing these bonds will allow for greater trust, transparency, and consensus around roles and responsibilities across the organization. 
  • Systems Thinking:  Lead or advise others in understanding the full scope of the organization’s work, including governing laws, policies and regulations as well as understanding the patterns, dependencies, and governance structure of multiple, interrelated complex IT systems. These insights should be used to articulate to leadership what areas of the organization are working well and which have gaps that need to be closed.

As an example of successful ecosystem integration, tackling prescription opioid abuse presented an opportunity for public sector officials to step up and facilitate the type of collaboration needed to combat this public health epidemic.

Case Study: Ecosystem Integrators in the Opioid Response

State governors and their administrations are increasingly serving as Ecosystem Integrators in the anti-opioid ecosystem. State commissions, such as the Commonwealth of Virginia Governor’s Task Force on Prescription Drug and Heroin Abuse, the Commonwealth of Massachusetts Governor’s Opioid Working Group, and New York’s Heroin and Opioid Task Force, are helping to drive real action.

They achieve this through improved coordination and alignment of strategies focused on opioid abuse and heroin use prevention, intervention, treatment, recovery, and enforcement. Given the attention these commissions have received, and the resources their work has attracted, state leaders are orienting their bodies to drive ongoing implementation and innovation after they deliver their final reports. Through working sessions, implementation groups, and coordinated action plans at the governor’s level, various state governments are integrating the activities of executive agencies, community organizations, and health care providers, thus making the overall effort more effective.

This case study demonstrates the importance of Ecosystem Integrators in connecting the public and private sectors to improve the lives of everyday citizens. Given the wide-scale impact of the opioid crisis, Ecosystem Integrators must be able to bring private sector organizations like foundations or companies that focus on public health, economic development, or the welfare of children and families to the table. Once government brings these parties together it can more easily provide resources and create the space for these local organizations to better tailor efforts to the unique needs of a community or region.

Ultimately, government cannot address today’s complex challenges with outdated systems or legacy organizational roles. The way government operates through its work, its workforce, and its workplace is changing, and we need fresh thinking to address the issue of how the public sector delivers value. Ecosystem Integrators stand at the front line of this fresh thinking by aligning people and technology to common goals, bridging trust within the workforce and with private industry, and utilizing systems thinking to create a holistic understanding of how the organization’s infrastructure ties together. Ecosystem Integrators will play a critical role in creating a more unified and smarter government of the future. 

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More: