Saturday July 23, 2005

The Peak Oil Crisis: Rationing

fromthewilderness.com -> fcnp.com :

It has to come sooner or later. As oil becomes scarcer and scarcer and price rises higher and higher, pressures will grow for a formal allocation system. Rationing will come, if only to calm the havoc at the gas lines and the social upheavals that are bound to occur as long as rationing is only by price.

A couple of weeks ago, the British press reported that Her Majesty's cabinet is considering a plan to ration energy consumption. The immediate reason for implementing such a system is to reduce the UK 's emission of greenhouse gases as required by the Kyoto Treaty. The plans authors, however, claim that if the proposal works, it will deal equally well with equitably allocating dwindling energy supplies caused by peak oil.

The major feature of the allocation system is that it covers all fossil fuels, not just gasoline; and it makes a real effort to be fair to all, by giving consideration to the needs of the poorer folks. Under the plan, every adult in the country would be given (for free) an annual "Personal Carbon Allowance" (PCA). This allowance would be measured in "carbon units." One carbon unit would be equal to one kilogram of carbon dioxide emitted into the atmosphere when the fuel is burned. Carbon units can be equated easily to gallons of gasoline, heating oil, diesel, or jet fuel, or to pounds of coal, BTUs of natural gas, or KWh of electricity. For example, one gallon of gas would be the equivalent of about nine carbon units. Thus, for every gallon of gas purchased, nine carbon units would be subtracted from your account.

The next most interesting feature of the plan is the government would also establish an electronic free market to buy and sell carbon units. Thus, those who have no need for their complete annual carbon allowance would be free to sell their excess units for cash at the market price. Those individuals who want and can afford more than their allocated share can buy as much as they want at the going price.

The object of all this, of course, is to force people to cut back on their energy use in a systematic way. With full knowledge of the projected costs and allocations of energy, people could make choices between SUVs or bicycles, McMansions or efficiencies, and train or plane rides.

The plan's developers claim that declining amounts of energy will be allocated equitably and with minimum government interference. For, aside from setting up the system and determining the annual carbon ration, the free market would be left to work out the details of oil depletion.

- Implementation nit-picking aside, this does sound like a reasonable plan. So it won't be only "companies with polluting factories" trading "carbon credits", it extends to individuals as well. Just a few questions on my mind - are people going to be allowed to "roll-over" their unused credits to the next year, like most employee annual leave systems do? If an individual passes away, can the unused credits become part of the deceased's estate that can be inherited by family members? How many credits do newborn babies get? Will this credit system become a kind of currency by itself, and get quoted on sites like xe.net in terms of PCA per USD, JPY per PCA, etc? Are traders going to be allowed to short the market? What's going to prevent unscrupulous practices like getting some hapless folks to sign away their PCA for the next five years in return for a big plasma TV or some other happy-consumer-thingy (or does that, well, go under "free market practices")?

(2005-07-23 23:40:58 SGT) [Energy] Permalink

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