Why personal carbon trading works

photo credit: alicepopkorn

With climate change now an increasingly important concern for policy-makers, can personal carbon trading make a difference? I think so and here’s why.

Personal carbon trading is an idea whose time has come. You can’t expect it to solve problems of inequity which already exist in the world - the rich will always be able to buy themselves a way out, and survive catastrophes better than the poor. That’s the nature of the capitalist society in which we live. But properly run, the scheme would protect the fuel poor, and allow low carbon consumers to make money from the rich.

In fact, the great thing about personal carbon trading is that government sets the outcome - a reduction in carbon - and the ‘price’ rises and falls depending on whether consumers change their behaviour. So the more people simply stick to their lifestyle and buy their way out, the price rises until people think it is better to reduce their carbon use.

1. It helps increase ‘carbon literacy’, thereby allowing individuals to make a fair contribution to reducing carbon dioxide emissions. Sociologist Stan Cohen analysed in his book ‘States of Denial’, that most of us rely on a capacity to turn our faces away from difficult truths. This is why that we can live affluent Western lifestyles while a few thousand miles away African children starve. This wouldn’t be possible, if we were faced with personal responsibility and accountability towards the carbon that we generate.
2. It allows the burden of reducing emissions to be shared evenly throughout the economy, rather than focusing all the attention on business and governments, and should encourage more localised economies.
3. There is minimal reliable data on the perceived complexity and supposed have high transaction costs.
4. The rich could only buy additional rations from the poor, thus achieving wealth redistribution, while in no way reducing the effectiveness of the scheme in reducing carbon emissions. So in effect, you would be rewarding some people for the environmental benefits of things they already do (or rather, don’t do): not driving such fuel inefficient cars, using less energy, and not flying. And you’d be making people that do use more carbon pay the full social cost of doing so. What’s unfair about that? In fact, if a set level of allowance is given out free, then a scheme is likely to be progressive not regressive.
5. It presents the true cost of activities to individuals and companies and having the market react accordingly - how would companies internalise costs that they currently don’t pay (because some other sector of society deals with it).
6. It is fairer then any proposed carbon tax which are often set at a rate that is too low to change behaviour, but high enough to raise money for the treasury. It is hard to raise taxes to a high enough level to change behaviour as taxes are simply associated with raising revenue for the treasury. The other technical issue is how do you know what price rise is needed to change behaviour - it relies on economists and central planners understanding of price elasticities.

10 typical criticisms which don’t work

1. “The government should be doing things such as building up a viable public transport infrastructure outside of London.”

True. But we have to take all these measures in parallel. We don’t have the time to implement them serially.

1. “Rather than make firms internalise their external costs, they will force consumers to try to incorporate this into their decision making”.

Again true, but that’s exactly what I want consumers to do.

1. “How is this proposal any different than adding a tax to high carbon emitters - the outcome is exactly the same - I end up paying more money in order to ‘do things’ that burn more carbon”.

The crucial difference is that the government sets the carbon emissions for say the following year and the market ensures that those emissions are not exceeded. It isn’t taxation, it’s rationing.

1. “I have no choice but use the carbon emissions I use”.

So presumably you have already fitted a condensing boiler, brought your house insulation up at least to the current standards and fitted a wind turbine, P.V. panels and solar water heating. I envy people living in the country because options like wind are so much more practical.

1. “What about those who commute and/or have to travel long distances, would individual situations such as these be taken into consideration all would we all be measured by the same average standard? Would this scheme not discourage the ordinary citizen from travelling to other countries and possibly inhibit cultural knowledge etc?”

The answer is hopefully and regretfully yes. People that want to travel a lot can choose not to drive during the rest of the year or move into a smaller energy efficient home.

1. “Surely finding ways of improving machinery/vehicles/housing resulting in heightened carbon efficiency would be both more practical and desirable in that some people’s lifestyles would not be so strongly affected.”

People’s lifestyles are going to be strongly influenced that’s the key objective and it is the only way of hitting the emission targets already set by the UK government.

1. “How does your personal carbon quota scheme improve on a scheme where those same fixed tradeable carbon permits are instead sold to the producers of petrol, heating fuel and electricity?”

It may well be that petrol is or could be sold with the cost of the carbon credits combined. However, in monetary terms, the bulk of the cost will be the carbon credits not the petrol itself. It would make more sense to pay for petrol entirely in carbon credits, as you would be less exposed to the volatility of price of carbon credits that day.

1. “You would then need to markup the carbon cost of every imported good to the UK to not make it meaningless.”

Even if carbon credits were used to cover just air travel, petrol, heating and electricity, this would be an enormous and worthwhile step forward and it could potentially transform our understanding and use of carbon based fuels.

1. “Why don’t the government acknowledge, legislate for or give commercial grants to innovative green technology?”

Investors are pouring money into any UK technology e.g. fuel cells that might be part of the solution. But you are running away from the basic problem: we all have use less energy.

1. “All we have to do is to ensure every strategy has a carbon-reducing target built in: Local Transport Plans, Local Development Frameworks, etc. And ensure the process is done properly by insisting on the assessment to be done by an independent agency.”

The problem with all these suggestions is that they are very prescriptive and have an indirect and slow impact on emissions.

Parking, for example, is one of the best tools councils have for controlling commuter traffic but residents vote out councillors that introduce anything that is inconvenient for them. The public sector cannot alone deliver the necessary cuts, residents have to be directly involved, they need to demand radical changes from their local authorities not to just have mild changes imposed upon them which is what is happening at the moment.

What’s next?

Head on over to Carbon limited, a project looking into the practicalities of personal carbon trading.

Carbon Ltd’s set up a personal trading practice scheme on its website and you can use the website to calculate your carbon emissions and compare it to other site users. The more people that register, the quicker Carbon limited can find out what kind of Carbon Trading system would work for us.

Do you agree with me? If not why? Leave a comment below: