Sunday 4 June 2006

Personal Carbon Quota

So far, a personal carbon quota system is the best idea I've heard for managing carbon dioxide emissions. It's also refered to as Domestic Tradable Quotas (DTQs) or Tradeable Energy Quotas (TEQs) or Personal Carbon Allowance (PCA). Think of it as a personal pollution allowance/quota/ration.

The idea is you get a fixed number of units per year recorded on a plastic card. Units get debited when you buy goods or services. You can argue about the details but assume everything has a money price and a carbon price. The carbon units are a currency in their own right that can be bought, sold, earned and traded. Of course it won't be perfect and there will be a huge black market but it's the best mechanism I've heard of for creating a CO2 bound economy that leaves consumers with the greatest choice.

There are better descriptions of this on the net like Feasta Review, BBC News or TEQs.

I think it would be a more dynamic approach than carbon taxes which are a more blunt way of suppressing polluting activities. A personal quota provides a direct way of encouraging and rewarding green actions. You could even make money selling surplus carbon units. But it also allows you limited indulgence in polluting luxuries without raising the cost of them in "old" money.

Some will argue that such a scheme is too complex to run. Maybe. Maybe not. It depends on the details. I think it's worth pursuing further.


  1. As you say, the carbon units would be a currency in their own right that could be traded. That means they would have an exchange rate with traditional currency.

    In which case why not just use traditional currency as the carbon credits? Charge for licenses for carbon releasing activities, such as importing/mining fuel, and give the same total amount of money out equally to each member of the population. Over the years decrease the total amount of carben quota given out to a sustainable level, while holding the total price constant.

    It seems to me that this method would be effectively the same, but with a lot less potential for adminsitrative hassle and incidental surveilance. There'd be little chance of a black market, as each kilo of carbon only needs to be charged once, and you'd do it at the most convienient point, such as the coal mine, oil platform or port.

    This would also effectively be a revenue-neutral way for a government to introduce a citizens' income. At first carbon-intensive goods would become more expensive, but the extra income would exactly cover the cost (on average). As the amount of carbon credits available was decreased, the prices of carbon-intensive goods would increase.

  2. >why not just use traditional currency as the carbon credits?

    My gut feel is that you need to keep carbon credits seperate so you can have seperate credit policies and currency policies and allow a more dynamic exchange rate. For example, currency inflation would be decoupled from credit inflation. But I'm no economist.

    I would also be nervous about your how your proposal is effectively a huge new tax and a massive redistribution of wealth. What I liked about carbon credits is that it didn't make carbon belching activities instantly unaffordable for those on low income but did allow them to be capped. Should rich people be able buy up as many carbon credits as they want? Or should it be more egalitarian?

    But these are just the thoughts off the top of my head. Your scheme might be better overall because of it's simplicity. Thanks for the thoughtful comment.