Isn’t this going to be really complicated to manage?

Yes and no to give a maybe unhelpful answer.

On a basic level, we just say this – the market determines all the pricing. It is up to market participants to ensure that the appropriate amount of red hydrocarbon is made available (ie the carbon capture is acheived and paid for) and every price is negotiated. The end user will pay more in the end, of course.

In practise it could work like this.

A coal mining company can sell coal to a power station operator. The coal company is obliged to make 20% of its coal black. This means that 20% of the coal needs to go through a carbon capture plant.

To begin with, perhaps another company could offer services to do carbon capture by trading. So you can buy carbon capture for 100 tons of coal.

The carbon capture plant is more likely to be operated by the power station operator – so the ‘red hydrocarbon’ would be sold (by the coal mining company to the power station operator) at a discount to black hydrocarbon to compensate for the cost of doing this.

Or if the red hydrocarbon requirement is being forced by a buyer (someone wants to buy red hydorcarbon), then a market operator (like Ecotricity, in the UK wind sector) can pay for carbon capture services from a carbon capture operator, and in return sell the red electricity to buyers – so in this case, the red electricity is more expensive.

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