Alternative solution to greenhouse gas abatement

Most agree that the cost of green house gases should be built into the price we pay for energy. The solutions suggested are carbon credits (letting people pay to be able to pollute) and green house gas taxes (giving the government money to distribute). Both these mechanisms have problems. An alternative is to increase the price of energy that produces green house gases but to leave the control of the surcharge in the hands of the purchaser. It is something like frequent flyer points but we will call it carbon abatement funds. These funds can be sold but they can only be used on infrastructure that will reduce green house gases. The approach is not a tax because you can sell your carbon abatement funds to others who can use them or you can decide to invest your funds in some way to reduce carbon – perhaps growing trees, or solar water heater or a nuclear power plant or carbon sequestration. This approach should appeal to economists because it creates a market that distributes the carbon surcharge which is missing from a carbon tax. My back of the envelop calculations indicate that a 30% carbon abatement funds will give enough investment funds to turn Australia into a 100% carbon gas free economy within 10 years. The approach will work for any country and does not need international agreements to implement – just a country with vision enough to show the way.

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