Carbon Rationing

This year is Climate Change year. There will be much hand-wringing and good intentions – but despite the covering of much of the most beautiful parts of Britain with wind farms and a general acceptance the atmospheric carbon in is a ‘bad thing', the world is still running on carbon based fuels – and looks like doing so for a good deal longer. Coal, the dirtiest emitter of them all, is still king despite the clear evidence in every Chinese lung that it is not an ideal power source. How is this possible? Simple really: because coal is cheap and every other method of creating electricity can’t compete. And also because the approach to fighting climate change has been using methods that were discredited and abandoned in the 20^th century in the communist command economy experiment. Until either of these change we are not likely to see a different result.

The cost of coal and other fossil fuels is key. If the only way of costing them is the cash cost of digging, transporting and shovelling it will always be cheaper. If you add into the mix the cost to public health, miners’ lives and runaway carbon pollution  – and these are real costs - then coal becomes a lot more expensive and a solar panel a lot cheaper. Government’s role,  as the framer of the rules by which commerce is conducted, should be directed at leveling the playing field by applying a ‘carbon cost/tax’ to these dirty fuel sources so that their true cost is accounted for when making cost comparisons. This is the first stage.

The second is for government to abandon attempts to control how energy is generated or saved with subsidies or tax breaks. They are not good at this any more than they were good at running airlines or trains. The capitalist idea – and it’s not really a system, that’s its beauty – is to let the human ant heap sort it out. Government’s role should be, once the cost of carbon is agreed, to impose carbon rationing for everyone and then let the market do its magic.

How would this work? Everyone would be issued with an annual carbon ‘ration’ of, plucking a figure out of air, say one ton. With it would come a ration card and with every purchase would include a  carbon cost that would be debited from the card depending on the cost of the carbon. For example, this would apply every time you filled up your car at a petrol station. If, on the other hand you had an electric car that you charged at home off your solar panel, your carbon ration would not be effected. Every good would have its carbon cost labeled and individuals would make their choices and prioritise their carbon 'spend". At the same time there would be a market in carbon rations. The little old lady with the tiny carbon footprint would be able to sell her ration to Roman Abromavich in order for him to be able to fill up his yacht.

The real beauty of this system is that the market, in billions of small choices every day, would seek out the most effective solution. It would be agnostic on how that would be achieved. One person might decide that he can do best by insulating his house to Canadian standards and another may feel that a wind generator on the roof does a better job for the money. The cost of holiday in Britain becomes a lot cheaper compared to the Japanese option. Electricity generated from wind farm in Scotland may not be a clean alternative once the cost of manufacturing and installing it is taken into account. Nuclear becomes a cheaper option. The whole system would be transparent and fair and deliver the desired result by using the grain of the market.

All government has to do is cost carbon, set the ration and provide the infrastructure. It then gets out of the way.  The trouble is that they don’t like doing that.