Sunday, February 20, 2011

Household cap and trade

A couple of Eastern European countries are piloting a household level cap and trade system. Each household gets a certain quota of carbon emission credits. If you want to use more, you have to buy credits from someone who will use less. There is a big, central, market for the credits, so it’s not like you have to go out and find the person to buy from/sell to. Would that change your behavior? The pilot studies are finding that people are using less electricity, driving less, etc. But since it’s their choice, it is more “free market philosophy” than government mandates.

An extra benefit is that since lower income households tend to use less energy than high income, it also reduces the need for social safety net spending without raising taxes or government spending. Rich households are buying emissions from low income households. But again, rather than forcing this on people, it is free market based. If a low income household wants to use more energy, they can. And if the high income household wants to reduce emissions and save money, they can do that too.

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