Norway has a sovereign wealth fund—the largest in the world at this point. It's built up with over $1 Trillion from decades of oil money and is being invested outside of Norway. I propose the United States should have some similar directed investment fund—the United States Ecological Conservation Investment Fund (USECIF)—to stimulate market activity and move the rest of the world away from the planet-killing fossil fuel industry and more toward sustainable energy. To really move toward more sustainable industries, we must also invest in ourselves, which means the investments of the USECIF should be split between the US and the rest of the world.
Norway's wealth funding comes from revenues from oil extraction, primarily in the sea area that Norway controls. I propose we expand upon this revenue model and include revenues from more types of fossil fuels than just extracted oil, namely imported oil, extracted natural gas, and extracted coal.
This could be the centerpiece of a Green New Deal. With both domestic and international influence, this sovereign wealth fund can fundamentally reshape the world's economy and steer us away from the planet-killing pollution-intensive industries that are infecting our global economy.
Through careful management and long-term planning, this sovereign wealth fund can generate high rates of return for the US. This large amount of investment being injected dorectly into domestic and international markets will supercharge growth by investing in new entrepreneurship, guaranteeing the US (by undertaking this investment) stays at the forefront of a flexible and dynamic world economy.
Oil extraction could be taxed. Revenues are expected to be $30 Billion over the next decade for each dollar of an extraction excise placed on each barrel extracted. A $10/barrel tax could provide roughly $300 Billion over the next decade.
The US imported (on average over 2019) 9.1 Million barrels of oil each day. That totals 3.3215 Billion barrels of oil over the 2019 year. Extrapolating this figure over a decade, we will import over 33 Billion barrels of oil into the United States in the 2020s. By placing a $10/barrel tariff on all oil that enters the US, we could generate $332.15 Billion over the next decade.
NOTE: A $10/barrel tax on oil may increase the cost of gasoline and diesel by $0.50/gallon and $0.83/gallon respectively, as 20 gallons of gas and 12 gallons of diesel can be made from one barrel of oil.
In 2018, 756.2 tons of coal was extracted from US mines. If a $10/ton extraction excise is applied on all coal mined from the ground (and we ignore the fact that coal use has been decreasing), we could raise $75.62 Billion over the next decade.
Roughly 40.7 Trillion cubic feet of natural gas were extracted in 2019 . A tax of $10 per 1000 cubic feet could pull in roughly $407 Billion over the next decade.
All told, these revenues total $1,114.77 over the next decade. Considering the current pandemic is lowering consumption of oil and coal is on a natural decline, I'll consider only 90% of revenues, $1003.293 Billion. This is near what Norway has grown its investment fund to, so this will be the benchmark for our implementation.
The primary purpose of the USECIF is to invest in projects that will conserve natural ecology and develop new low- or non-polluting solutions to our current and future problems. As a wealth fund, we should also be making money through forms of fixed income (corporate, municipal, and other bonds; treasuries and other securities; investments into consistently high dividend stocks with low market reactivity; etc.). To achieve these goals, I am proposing a 2:1 ratio of investments into equity (stakes in private companies, direct support of entrepreneurs, buying shares of public companies, etc. things like that) to investments into fixed income (treasuries, bonds, real estate investments, other suchlike things).
The larger portion being in equity will allow for larger returns on successes (incentivizing smart investing and not wild throwing about of money), while the smaller portion being in fixed income sources allows the fund to weather market downturns.
Having the same 2:1 ratio of international to domestic investment allows for less political favoritism by investing so heavily in politically favored companies in the US while still being able to stimulate the economy during this time of economic uncertainty. Focusing more on international markets will allow for greater international US influence and USECIF investments can be used as a reward for positive diplomatic developments.
To ensure the fund has enough liquidity to stay agile and able to flexibly invest, I propose it keep 10% of its value in cash; 6% in foreign exchange (any more and we'd be called currency manipulators) and 4% in USD (having around $40 Billion on hand is quite a bit of coin to have laying around). The breakdown looks like this:
- 40/20 equity/fixed income
- 20/10 equity/fixed income
- 6/4 forex/USD
As a final note, the returns would be funneled into the "general funding" of the US government, or perhaps redistributed as a national dividend or a credit of some form. Perhaps paying down the US debt (or, at least, some amount of interest thereof).
What do you think? Lemme know down below :)