How carbon rationing works
- An authority independent of government sets a total carbon emissions budget (the "cap") for the country each year, which is decreased each year in a series of downward steps.
- A proportion of the carbon budget is shared free of charge as an equal "carbon credit" (or ration) for each citizen on an electronic swipe "carbon card" which would be use to debit from your individual carbon credit balance each time you paid for household gas and electricity, petrol and air tickets. If people do not use all their credits, they can sell them to people whose lifestyle is more carbon dependent. For individuals, carbon rationing would operate as a parallel currency: when purchasing high-carbon goods (energy and private travel) a proportion of carbon currency would be surrendered at the point of sale. For minor amounts of energy embedded in commodities purchased such as food and personal services, the carbon ration will already have been paid for by the company, and its cost built into the end price for the consumer.
- If a person lacks the carbon credits to cover a purchase or is an overseas visitor without a carbon credit, he or she could buy on the "spot" market at the point of sale, just as pay-as-you-go mobile-phone users top up their credit in order to make a call.
- The balance not made available to households for energy and transport emissions would be auctioned to business and government in a market where the price would rise and falls such that the business and government demand for carbon emissions would not exceed the budget target for business carbon emissions.
- The change would be rapid and effective: when one's money and carbon budget are added together, suddenly renewable electricity would be cheaper than coal-fired power, everyone would want solar hot water and better insulated houses, the madness of excessive use of private cars would be rationalised, stores and offices would be lit by natural light and skylights rather than floods of lights. We might even slow down a little and reduce our madly stressed lives, planning our movements for the day before we leave home. We would be more likely to consume what we need, rather than what we want.
- Because both individuals and businesses can trade their carbon credit within the overall national carbon emission target, there is a financial incentive to switch rapidly to low-cardon technologies and for for low-carbon innovation. If a new invention needs less of your ration, it will become more attractive. If having household solar hot water or panels allows you to cash in your unused ration, they become not just affordable, but desirable. Business has an incentive to make long-term, low-cardon investment decisions. And it is driven by the market.