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December 12, 2006

Green energy: consumer pull or policy push?

Following a feasibility study, the UK government is considering introducing carbon 'credit cards' as part of a carbon rationing scheme. While it is claimed that such a scheme would encourage carbon thrift through rewarding consumers, it is unlike that the cards would help to reduce carbon emissions regardless of the whether the EU ETS is a success or not.

By CBR Staff Writer

The UK government is contemplating introducing carbon ‘credit cards’ as part of a rationing scheme.

UK environment minister David Miliband told the Guardian newspaper that rationing carbon among UK consumers using an electronic card system has a simplicity and beauty that would reward carbon thrift. Under the scheme, consumers would be given an individual carbon allocation which would then be debited when they bought energy, fuel, travel tickets, food and other items. Consumers could sell extra credits as a reward for choosing low-carbon alternatives under a mini-trading scheme, and carbon-intensive individuals would be punished by having to buy more.

This is an attempt – like taxation – to manage the demand for carbon by making it more expensive. To date, the EU has focused on reducing the supply of carbon – initially in the power generation sector – through its EU ETS scheme.

While environmentalists may support the government’s intentions, the proposed scheme is rather redundant if it operates within the EU ETS. The EU ETS is an attempt to make the output of carbon-intensive industries (such as fossil-fueled power generation) more expensive so that industry is spurred to invest in alternative, low-carbon technologies.

Therefore, if the EU ETS makes the supply of carbon-intensive products expensive compared to low-carbon products, why is a demand-led scheme required? If the EU ETS fails – and this is a real possibility – the proposed demand-side carbon scheme would not provide alternative low-carbon technologies for the consumer to choose.

Furthermore, there are also concerns as to how long it would take for the government to implement such a card-based scheme, not least because the cards would be underscored by a new government IT project. Given the UK government’s history of project failures and deadline struggles, major national new projects must be viewed with some concern. As a Friends of the Earth campaigner commented, the new system could take a long time to implement, and we do not have that long to tackle the problem of climate change.

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