This is the submission we made to the UK Dept of BEIS in response to their call for proposals to be considered by their parliamentary inquiry.
Please outline the issue that you would like the Committee to look into (200 words)
Carbon rationing is a policy that can be implemented both locally in communities and nationally.
Locally it could allow citizens to reduce their carbon footprints by bringing together carbon emissions information from local transport, energy providers, business groups and similar. There are technical tools that could be implemented quite cheaply following various prototypes.
On a national scale, if the BoE deployed a CBDC based on carbon, citizens could be allocated a per capita carbon ration. Oil, coal and gas producers could collect and pay back the rations against all fossil fuels extracted. As a second currency, carbon rations would flow through the supply chain from citizen to fossil fuel producer, enabling the real-time calculation of carbon emissions by every business: their carbon emissions would be visible as the total of the carbon rations each business requires. Those required rations would be obtained by each business from their normal customers.
Government oversight would only be required for the smooth functioning of the carbon ration market and payments system, and for auditing the oil, coal and gas producers as they offer up carbon rations obtained when selling their products.
Net zero goals could be targetted by regular reduction of allocated rations.
Why does this issue deserve attention? (200 words)
Carbon rationing has had very little attention since it was dropped by the Labour government in 2008 after its unpopularity in the press. The plan was to introduce rationing only for citizens. Research results show rationing would have definite benefits, which could already be realised in local community schemes.
However changing one simple but major facet of the rationing mechanism could leverage those benefits ten-fold across the economy. In simple rationing as during the war, rations are surrendered to the government by retailers who collect them from retail customers. Changing this so that all of business and the economy becomes subject to the rationing would occur if the oil, gas and coal producers were made the ultimate collectors of the rations at the end of every supply chain. They would surrender the collected rations under audit weight-for-weight against the quantity of fossil fuels extracted.
This rationing mechanism would be a more direct stimulus to the decarbonisation of UK business and industry than any other carbon policy. Similarly it is the only policy allowing direct control of emissions quanitities. And along with several other key benefits, it would radically simplify the emissions data monitoring process.
How could Government policy in this area be improved? (This might include the creation of new policy or changes to existing policy) (200 words)
The implementation of rationing would require central bank oversight and imposition of controls via the HMRC at trade borders. The impact on the UK population and its businesses would be extensive but readily determinable, and it is increasingly apparent that the public possesses the appetite for such a move, especially since the policy is fundamentally fair, being based on an equal per capita ration allocation.
Rationing has multiple benefits compared to carbon taxes or other pricing schemes, firstly in its effectiveness in creating the desired emissions reductions across the economy, but also because its management would not necessarily have to fall under control of the Treasury which tends to treat climate targets as secondary concerns to economic goals. The management of carbon ration supply should fall to an independent body which would increase or decrease rationing to balance CO2 emissions reduction against the economic impacts that it causes, to find the optimal path to decarbonise the economy.