Brief description of DTQs
The DTQs scheme is premised on the assumption that stabilising greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous anthropogenic interference with the climate system will require very large reductions in global greenhouse gas emissions. Furthermore it is assumed that these reductions will be achieved through some form of international agreement establishing binding national emissions reduction targets. The Domestic Tradable Quotas (DTQs) Scheme is a new instrument designed to enable nations to meet the component of their emissions reduction targets that is related to energy use.
A nation implementing a DTQs scheme establishes the maximum quantity of greenhouse gases that it can emit from energy use during any given year. This carbon budget is reduced year on year up to and including the year by which a nation must have achieved its emission reduction target.
Each carbon budget is divided into carbon units, with, for example, 1 carbon unit representing 1 kg of carbon dioxide.4 A proportion of these units is allocated by government, free and on an equal per capita basis, to all adult citizens.5 This free allocation is known as the Entitlement. The remaining carbon units are allocated to firms and other organizations through a government regulated auction.
All fuels and electricity are assigned a carbon rating based on the quantity of greenhouse gases (measured in carbon units) emitted by the combustion of a unit of each fuel and by the generation of a unit of electricity.6 When citizens and other end users purchase fuel or electricity, they surrender the number of carbon units corresponding to their purchase to the retailer. For accounting purposes, these units are passed up the supply chain and on reaching the primary energy producer are surrendered back to government. There is a national market in carbon units in which individuals and organizations with surplus units may offer them for sale to those wishing to purchase additional units.
Such a system would be expensive and hard to implement at first, but do we really have a choice? Is any decision we take now (including not to do anything) going to be cheap? Insurance companies want governments to tackle global warming. Maybe in a few years they will be the 800lbs-gorilla backers of domestic carbon trading?
Read the Grist article for more.