Brad, I think you partly misunderstood the motive for banning air-conditioners. As someone probably mentioned already, the main problem is with peak use, where relatively little use on a few sweltering days requires a massive additional expenditure on infrastructure (and, perhaps, a lot of associated inefficiency and pollution).

However, I share your dismay at the "Green" solution, and support a market based approach. One good idea is the peak load pricing scheme which I believe is already being used in some places in Sydney - and which looks like at least a partial solution.

I would also suggest some non-market based solutions, such as requiring that all potential home buyers are given a pamplet explaining such things as what to look for in terms of passive solar design, and how to spot a house which will be suffer unpleasant temperature extremes and high heating & cooling costs. This would work in a similar way to the current handing out of booklets to new tenants. Although it's additional to the market, it's low cost, doesn't interfere with the market, and in fact improves the function of the market though drawing closer to the ideal of fully informed market participants.

It's worth mentioning that there are two streams of thought among Green people - those like myself, and those like Mayor Moira Main. I think it's extremely unfortunate that her "command and control" philosophy appears to be more widely held - or at least more visible and vigourously argued.