Should petrol supplies be limited?

By Will Smale
Business reporter, BBC News

The study says drivers wouldn't have any individual limits

Imagine a time when petrol supplies are strictly rationed to help combat global warming.

In such a world, a country's annual quota could mean prices sky-rocketing towards the end of the year as supplies dwindle, before crashing back down again in January.

It would certainly reduce Christmas trips to visit relatives, while roads would likely be gridlocked at the start of each year.

Such a system might seem unworkable - or at least unpalatable - but it is being seriously proposed by Dublin-based think tank, the Foundation for the Economics of Sustainability (Feasta).

And to help get the public on board, under their plans every adult citizen would be able to make some money from the scheme - at least before they are stung by soaring prices at the pumps.

Trading certificates

Under Feasta's proposals, the European Union or member states would determine the maximum allowed levels of annual C02 emissions from the road transport sector.

It would be a political decision whether to sweeten the pill Feasta's Richard Douthwaite

They would then divide this figure by the number of adult citizens to come up with a theoretical personal allowance.

Each and every adult would then be given an annual paper certificate at the start of the year, allowing them to produce a certain amount of carbon dioxide (CO2), for example three tonnes per person, from their cars or other motor vehicles.

These certificates would also have a cash value, such as 90 euros ($122; £61), and be designed to be redeemed at a bank.

The way the system would control C02 emissions, is that the petrol retailers would have to buy the certificates from the banks to cover how much fuel they are allowed to sell, be it petrol or diesel.

As such, simple supply and demand would then determine how much money people got when they cashed in their certificates, and how much the petrol firms have to pay for them - with the price determining the fluctuating cost of fuel at petrol stations.

So, if near the end of a given calendar year a country is coming to the end of its capped limit on the sale of petrol and other motor fuels for that annum, the price would rise accordingly on the forecourt to reduce demand.

Likewise, if motor fuel consumption is low, then the price of petrol and diesel - and the value of the certificates - would fall.

Market forces

Feasta's Richard Douthwaite says such a "cap and share" system would be successful, because all the hard work is left to the market forces of supply and demand.

He says individuals would be pleased to cash in their certificates, and not have to put up with any actual personal limits on how much fuel they could consume.

Alternatively, Mr Douthwaite says more environmentally-minded individuals could instead choose to rip up their certificate, thereby reducing the amount of motor fuels that can be sold.

"The problem is that the transport sector is seeing the biggest rise in emissions within the European Union, and within that, road transport the most," he says.

"The cap and share system we propose is both fair and easy to implement, and avoids the need for any additional taxes."

Yet Mr Douthwaite recognises that the scheme would no doubt gain some objections, such as from the road haulage industry.

He adds that it would be up to governments to determine whether some exceptions are allowed when petrol prices are high.

"It would be a political decision whether to sweeten the pill," he says.

And while other critics say the scheme could see petrol prices soar to unacceptable highs at the end of any given year, Mr Douthwaite adds that petrol inflation will already be inevitable in the future as global oil supplies start to decline.

The petrol companies themselves seem either unwilling, or unable to comment on Feasta's proposal.

A spokeswoman for Shell said it "was aware of many capping proposals, but had no specific comment to make on any of them".

Road pricing alternative

But will Feasta's proposals receive serious political consideration?

The UK government has yet to determine whether to look at capping road transport emissions, but it is keen for the European Commission to consider adding road transport to the next phases of the wider EU Emission Trading Scheme.

This currently covers sectors of the economy such as power generation and heavy industry, but does not include transport.

The UK government is also continuing with the Climate Change Bill, which it aims to make law early next year.

While it does not specifically mention what action to take in the transport sector, the bill aims to create powers to introduce new trading schemes through secondary legislation.

Others, such as Conservative MP Tim Yeo, chair of the Environment Audit Committee, have put forward road pricing and reduced taxation for smaller engined vehicles as a more viable alternative to a capping system.

"Road pricing, if introduced in a specifically bold way, should deliver," he says.

Yet he stressed that it should be tax neutral overall.

"You just need to assure people that if you drove a low powered car at a non-peak time, you can drive more cheaply," he says.

Or else under Feasta's proposals - never buy your petrol in December.