How Do Personal Carbon Allowances Work?

Money makes the world go round but a new currency is emerging: Carbon.  Almost every activity releases carbon dioxide: every product, human and country has a carbon footprint.  We need to reduce our global footprint and the easiest way is through making carbon expensive or rather making products reflect their true cost. Products need to internalise the currently externalised environmental costs of carbon caused by their production and consumption. In the first post of this three part series we will look at how carbon allowances would work on a global scale.

Step One: World Sets a Target

This challenge was reached at the climate talks in Copenhagen in 2009.  The world agreed than we should prevent the average temperature from rising by 2.5 degrees celcius.  Although basically a death sentence to many island nations, at least a target exists to stabilise the temperature rise. With this target we turn to science and come out with a year when we need to stabilise CO2 emissions and a rate at which we need to reduce pumping the greenhouse gases into the atmosphere.

Step Two: World Creates a Roadmap

After accepting the science the politics comes into play.  The world divides the cuts that are needed to individual countries.  Rich countries should cut their CO2 emissions first and developing countries a bit later to account for historical carbon emissions, current per capita emissions and the ability of rich nations to adapt quicker.

Step Three: Countries Set-up Carbon Central Banks

With its agreed cuts each country creates its own carbon central bank which then divides the countries allowance between it individual adult citizens.  Each citizen now has a right to pollute which means the environmental costs are born directly by the polluter.

Step Four: Citizens Choose to Pollute or Make Money

Citizens then are forced to internalise the environmental cost of their actions. At last those who bike and don’t fly will be rewarded as they will see their carbon allowances build up in their personal carbon accounts. The frequent flyers and gas guzzler drivers can carry on; they just need to pay the cyclists and non flyers for their unused carbon credits.

Carbon becomes more and more expensive as the Carbon Central Bank reduces personal allowances. Carbon pollution becomes a scarcity and the price rises every year. To be competitive industries need to become more efficient. However when a particular activity, for example flying, cannot improve its efficiency enough to become a carbon light activity then the citizens will be forced to pay ever more for the allowances or they will need to fly less.

Under such a system the world can stabilise its CO2 and we have “only” lost a few nations and thousands of species. We are currently stuck at step 2 and without a world agreement such a system will only ever have limited success.  In the second part of this series I will deepen the discussion into why we need this particular system and the obstacles to introducing such allowances.

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4 Responses to “How Do Personal Carbon Allowances Work?”

  1. [...] eco label is crucial if we are going to implement carbon allowances. Without carbon labels the consumer cannot make informed decisions and the state cannot tax him for [...]

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