Lord Smith of Finsbury believes that implementing individual carbon allowances for every person will be the most effective way of meeting the targets for cutting greenhouse gas emissions.
It would involve people being issued with a unique number which they would hand over when purchasing products that contribute to their carbon footprint, such as fuel, airline tickets and electricity.
Like with a bank account, a statement would be sent out each month to help people keep track of what they are using.If their "carbon account" hits zero, they would have to pay to get more credits.
Those who are frugal with their carbon usage will be able to sell their unused credits and make a profit.
Lord Smith will call for the scheme to be part of a "Green New Deal" to be introduced within 20 years when he addresses the agency's annual conference on Monday.
An Environment Agency spokesman said only those with "extravagant lifestyles" would be affected by the carbon allowances.
He said: "A lot of people who cycle will get money back. It will probably only be bankers and those with extravagant lifestyles who would lose out."
However, some have criticised the move as "Orwellian" and say it will have a detrimental impact on business.
Ruth Lea, an economist from Arbuthnot Banking Group, told the Daily Mail: "This is all about control of the individual and you begin to wonder whether this is what the green agenda has always been about. It's Orwellian. This will be an enormous tax on business."
Under the Climate Change Act, Britain is obliged to cut its emissions by 80
per cent on 1990 levels by 2050. This means annual CO2 emissions per person
will have to fall from about 9 tonnes to only 2 tonnes.
