Budgeting Carbon Like We Budget Money

How would our consumption patterns change if they were constrained not just by finances but by carbon, too?

Photo credit: Jake Setlak, CC BY 2.0.

People talk a lot about the wealth gap, and whether we need to bring minimum wages up or, as Danielle Corcione recently suggested, bring maximum wages down.

What About Maximum Wage?

What we don’t talk about is the fact that there’s also a “carbon gap”—and we don’t ask whether we need to monitor carbon in the same way that we monitor money.

In 2012, Adam Corner (currently the Research Director for the Climate Outreach and Information Network) wrote an article for The Guardian explaining that “a truly equal division of carbon would reveal the carbon gap between the rich and the poor.” Last December, Oxfam published a study titled “Extreme Carbon Inequality” which put this carbon gap in clear terms: “The poorest half of the global population are responsible for only around 10% of global emissions yet live overwhelmingly in the countries most vulnerable to climate change — while the richest 10% of people in the world are responsible for around 50% of global emissions.”

Personal carbon allowances – a ‘big idea that never took off’

One idea for reducing emissions fairly is by creating “personal carbon budgets” that would give each person a certain number of carbon credits that they could use, sell, buy, or “retire” (give up so that carbon would not be emitted). Over time, the total number of carbon credits available for the entire population would decrease along with the amount of emissions produced.

Corner included the personal carbon budget idea in his 2012 Guardian article, and this type of proposal has been discussed for years. A 2005 report by Richard Starkey and Kevin Anderson, scientists at the Tyndall Center for Climate Change Research, suggested that carbon credits could realistically be designed around existing systems of credit cards or personal IDs; people could swipe whenever they purchase electricity or gas, with the option of buying or selling carbon units in “convenient and familiar” ways: at the post office, on the internet, or on the phone. (Venmo wasn’t around when that was written…)

In fact, Starkey and Anderson wrote their own Guardian article explaining how carbon credits could work:

That’ll be £17 and 10 carbon points

Say, for example, you need to drive to work, but have no carbon units left. No problem, the garage simply goes into the national market and buys the number of units needed. The cost is added to your bill.

Or perhaps you don’t own a car? Then you can sell your surplus units into the market for hard cash. And because the size of the cake is fixed, these trades will not affect the overall emissions produced.

The interesting thing about this is that it’s pretty flexible in terms of money management styles. After all, not everyone likes to follow a traditional budget. For instance, if you’re a fan of the “anti-budget”—as described by Paula Pant of the personal finance site Afford Anything—and prefer to just transfer a certain percentage to savings and spend what’s left, you could follow the same principle by selling or retiring a certain amount of carbon credits first and living on the rest.

If you prefer not following a budget and just spending as little as possible à la The Frugalwoods, you could do that too and just trade or retire excess credits.

And if you’re short on cash at the moment — or just don’t want to deal with carbon credits at all — you can just sell them all at once and then pay for the credits with each purchase, similar to a carbon tax.

So how is this different from a carbon tax? To quote Starkey and Anderson’s 2005 Tyndall report, a personal carbon budget “makes individuals equal environmental stakeholders by awarding them an equal stake or share of the atmospheric sink” and “promote(s) greater public buy-in to the task of substantially reducing emissions.” As described by the editors of Bloomberg, one of the arguments against carbon taxes is “that they hit poor households hardest.” While applying the carbon tax to reducing other expenses (like income taxes) is one solution, a personal budget could also be a way for lower income households to benefit from lower energy use with cash (the Tyndall report goes into detail about issues with personal ID cards and exceptions where low-income households have higher emissions).

Although this idea appears to be favored compared to its alternatives among the public, it can be politically controversial. To quote Adam Corner again:

The rich would literally have to buy carbon from less wealthy people (with less environmentally damaging lifestyles), or change their behaviour in a dramatic way.

So what if we budgeted carbon along with money? How would our consumption patterns change if they were constrained not just by finances but by carbon, too? For instance, maybe accounting for the carbon cost would ultimately make it “cheaper” to choose trains over cars for certain trips.

While there are parallels with financial budgeting, carbon budgets would be a bit different in that we’d have fewer and fewer credits available from one year to the next. Would the fact that the allowable credits decrease over time affect decision-making, and would we think more about carbon use over the long-term? For example, maybe we’d be more likely to spread trips out, rolling over credits each year by selling one year’s surplus to fund a year of high carbon use.

Unfortunately, we don’t seem to have a whole lot left in our global carbon budget. I’ll cite the 2014 Carbon Brief:

It will take just six years of current emissions to exhaust a carbon budget that would give a good chance of keeping global warming below 1.5 degrees Celsius, based on figures from the Intergovernmental Panel on Climate Change (IPCC).

While so much of the news seems pretty dire, maybe we can borrow ideas from or integrate solutions with fields like personal finance to speed things up a bit. Whether we’d prefer to think of it as a “budget,” an environmental version of universal basic income, or, as suggested by climate change researcher Dave Robbins, a “carbon treasury,” this could be one possibility for reducing emissions while potentially putting money in the pockets of those who consume less.

Bhavya Reddy is currently working on a master’s degree in environmental engineering in New York and thinking about the ties between sustainability and money, feminism, and more. Read more on her blog and follow her on Twitter @bhavyaenreddy.

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