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Consumer carbon rationing plan floated in Britain. Riots and looting fail to ensue.

swipecard.gifThe British goverment has drawn up a proposal to introduce a swipe card (British for “card”) that would require every British citizen to adhere to a strict carbon diet when purchasing goods and services such as plane tickets and petrol (British for “gas”).

The system is a personal trading scheme of refreshing simplicity:

Under the scheme, all UK citizens from the Queen down would be allocated an identical annual carbon allowance, stored as points on an electronic card similar to Air Miles or supermarket loyalty cards. Points would be deducted at point of sale for every purchase of non-renewable energy. People who did not use their full allocation, such as families who do not own a car, would be able to sell their surplus carbon points into a central bank.

High energy users could then buy them — motorists who had used their allocation would still be able to buy petrol, with the carbon points drawn from the bank and the cost added to their fuel bills. To reduce total UK emissions, the overall number of points would shrink each year.

The man behind the plan is David Miliband, England’s Environment Secretary, who — wonder of wonders — has a blog. It’s actually a pretty good blog too: wonky, earnest, unafraid to address real issues, free of beauracratese, and written by Miliband himself. It has an active comments section, and Miliband himself frequently chimes in on the threads.

In a speech to the Audit Commission, Miliband discussed the implications of the proposal:

Imagine your neighbourhood. Each neighbour receives the same free entitlement to a certain number of carbon points. The family next door has an SUV and realise they are going to have to buy more carbon points. So instead they decide to trade in the SUV for a hybrid car. They save 2.2 tons of carbon each year. They then sell their carbon points back to the bank and share the dividends of environmental growth.

The proposal has come in for the predictable confused attacks from all quarters. The head of Greenpeace’s UK climate team argues that the scheme is unfair, because consumers today don’t have real choices to make regarding carbon consumption. No real choices? How about taking a train? How about ditching the Land Rover?

He goes on to suggest that the government first has to create those choices by, for example, mandating higher fuel economy standards. I’m all for higher fuel economy standards, but elementary economics also suggests that carmakers will respond to demand for more fuel-efficient vehicles when consumers start asking for them. Which they’re more likely to do if, say, they have an incentive in the form of a carbon allowance.

In comments on Miliband’s blog, some have raised the objection that this scheme will favor the rich, who, after all, will be able to purchase additional allowances and continue their profligate lifestyles. This criticism entirely misses the point: the rich have always been able to buy more stuff then the less rich. This scheme would simply force them to pay for the external consequences of their consumption. In fact, the more the rich seek excess carbon allowances, the more dear those allowances will become, creating a great income opportunity for those who conserve. Because the rich do typically consume more than their share, there’s a good chance this program will end up creating a net transfer of wealth to the poor.

Reaction from the other side of the political spectrum has been even more tortured — and deeply weird. The Telegraph seems eager to throw anything against the wall to see what might stick, including the charge that carbon allowances might be used to fund terrorist networks. “They appear not to have thought of that yet,” the Telegraph snarks, “but we have.” Phew! Thank goodness someone has their eye on the ball.

The Telegraph goes on to offer up an analysis of the proposal so convoluted — and sarcastic — that it becomes clear they have no idea what the scheme even entails. The article variously refers to Miliband as a bat-hugger and a squirrel-hugger before finally concluding that the carbon trading scheme is just a backdoor for sneaking the Euro into the UK.

What do the squirrel-huggers at TerraPass think about the idea? I’m surprisingly ambivalent. Of course, I love the idea of setting up a scheme like this, which would use market forces brilliantly to put a price on carbon consumption. And under such a scheme consumer awareness of the environmental consequences of their choices would go through the roof. In fact, I suspect this awareness alone might spark a massive popular drive for conservation, even in the absence of any financial incentives. Finally, by applying pressure at the point of demand, the scheme would likely ripple through the entire economy with remarkable speed. For example, imagine what would happen to demand for green power under this proposal.

But the idea also seems politically explosive, so much so that a strong backlash against environmental regulation seems a real possibility. I can’t help wondering if it makes more sense to continue to apply pressure at the level of corporations and energy providers, who can then affect consumer demand indirectly by pricing carbon into their products.

Color me unconvinced for now, but eager to be sold.

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