Carbon Debit Cards - Domestic Tradable Quotas

We've have some discussions lately about what it would take to make people change their habits to less destructive ones. A certain segment of people thought that government policies and regulations would be necessary, and another segment thought that economic incentives were what would really make people change. Maybe we will have a mix of the two: Grist Magazine has a very interesting piece on the idea of "Domestic Tradable Quotas" (pdf) in the UK (basically, carbon rationing). The concept is explained in more detail below, but in short, it would be a way to precisely allocate a country's "carbon budget" among its citizens and monitor how it is spent via central carbon banking, thus ensuring that carbon emission reductions are not left to corporate, political and individual goodwill and hard to enforce regulations (we're seeing how hard it is for countries to reach their modest Kyoto goals). A gradual reduction of the yearly carbon budget would encourage conservation, but mostly spur research and development and create a very lucrative market for efficient technologies and products. People who spent less than their carbon allowance could sell it to those who spend more on carbon markets.Here is an excerpt from the paper (pdf):

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.

::Domestic Tradable Quotas: A policy instrument for the reduction of greenhouse gas emissions, via ::Grist