The market price would of course be set by the invisible hand (supply and demand) but with an upper carbon cap. The higher the price, the more incentive there is to cut your own carbon use.
Of course in reality such a scheme is utterly doomed - a result clearly evident from the demonstration. However, it is worth reading what happened at the Manchester experiment and to see "economic experiments" like this being attempted.
Fair trade takes on a whole new meaning in Manchester [Guardian]
A progressive climate change solution, or a pain in the arse personal intrusion?
Personal carbon trading is an idea that could result in a division of opinion of fuel tax proportions, if managed poorly. It is currently still only a kernel of an idea being developed by the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA).
Understandably, everyone has a different carbon footprint. The absence of a local train station may make you a heavy car user, for example, or you may need to visit your distant family for an important event. On the other hand, does that stag party really need to be in Tallinn?
With a personal carbon trading scheme, everyone would have a carbon allowance. If you needed more credit, you could buy more, but the application of an allowance would make people consider which high carbon behaviours they could chop. The market price would be determined by supply and demand, with the total amount of carbon capped. So the more people that buy, the higher the price and the greater the incentive to reduce.
Last night, RSA CarbonLimited was in Manchester with 60 members of the public to explore the idea of personal carbon trading in a public demonstration.
The group, drawn from people pledging through Manchester Is My Planet (Mimp) to cut their emissions by 20%, could be characterised as keen greens.
Participants registered their personal carbon emissions at rsacarbonlimitedcities.com and were placed in a league table. At the town hall, they received their personal carbon allowance - their carbon credits, ready for trading.
In line with existing proposals, all participants received the same carbon allowance. In an initial demonstration, Peter Fell, of Manchester City Council, chose to 'green' his lifestyle rather than buy surplus credits from Mike Reardon, of Manchester University, but the council's environmental expert, Sarah Davies, attempted to trade with Mimp's Keith Boxer. He reluctantly traded while musing about the possible future value of the credit he handed over.
The group of Mancunians then had a go themselves. Through a mixture of pledges to change their behaviour and a number of trades, they managed to simulate a 23% reduction in their average allowance.
This suggests that this community could live within a tightened carbon emissions allowance, with the trading market enabling some people to maintain a larger carbon footprint for now.
The major hiccup with the idea proved to be that the Manchester group blocked the trading market - many of them didn't want to sell, at least not to that SUV-driving bloke opposite.
Perhaps the other pilot groups will react in the same way - but in the real world, sellers wouldn't know the identity of buyers, so surely our simulated price of £100 per tonne would provide an adequate incentive.
· CarbonLimited will be coming to a city near you to further develop the idea of a personal carbon trading scheme. To get involved, visit rsacarbonlimited.org