Personal Carbon Trading
A radical concept?
In 2005, the Sustainable Development Commission (SDC) recommended that Government should fund research into the concept of personal carbon trading (sometimes referred to as ‘personal carbon allowances’), as a radical but exciting proposition that could be a major part of an economy-wide ‘cap and trade scheme’ for carbon emissions.
This would enable us to achieve guaranteed, annual cuts in our national carbon budget, and could become a key element of complying with legally-binding cuts in emissions.
Personal carbon trading (PCT) is the term used to describe a number of different proposals that involve some element of direct individual participation in a cap and trade (or ‘emissions trading’) scheme designed to reduce carbon emissions. A cap and trade scheme for carbon is one of three ways in which a price for carbon can be introduced into the economy, which was a key recommendation from the Stern Review (the others are a carbon tax and regulation)."
Some of the more developed proposals for personal carbon trading schemes assume a free allocation of carbon credits to individuals, on a per capita basis, which we would use to pay for purchases of electricity, heating and transport fuel, and possibly air travel. Individuals that are low carbon consumers would be able to sell their surplus credits on the carbon market, whilst those with a high consumption would have to buy.
Possible benefits
A personal carbon trading scheme would allow the cost of carbon emissions to be included in everyday decision-making and purchasing, which would promote energy efficiency and behavioural change. This would also incentivise the development and uptake of new low carbon technologies.
If personal carbon trading was part of a wider cap and trade scheme covering the whole economy, then individuals could be trading carbon allowances directly with businesses and other large organisations. From an economic perspective, this could help to identify the lowest cost emissions savings across the whole economy.
Finally, the evidence suggests that personal carbon trading would be inherently fairer than a carbon tax. This is because those individuals that have the lowest incomes are, on average, those with the lowest ‘carbon footprint’, and so would have carbon credits to sell under such a scheme.
Outstanding issues
Personal carbon trading is not a well-developed concept, and there are a number of outstanding issues that need to be resolved before it could be considered as a viable policy option. These include:
- How would it fit with other climate change policies, such as the EU Emissions Trading Scheme?
- What would be the impact on the fuel poor?
- How would carbon credits be allocated?
- How would the scheme be introduced, and how would the Government ensure compliance?
- What would the scheme cost and how does this compare to other similarly-effective policies?
- What are the technical challenges?
- What concerns would people have over such a scheme and how could these be dealt with?
Publications
• SDC submission to the House of Commons Environmental Audit Committee inquiry into personal carbon trading (2007)
• SDC submission to the review of the UK Climate Change Programme (2005)
Further information
• A Rough Guide to Personal Carbon Trading – report by the Centre for Sustainable Energy for Defra
• Cap and Share – an hybrid PCT proposal
• House of Commons Environmental Audit Committee inquiry into personal carbon trading
• Tradable Energy Quotas - website by David Fleming
• Domestic Tradable Quotas – paper by the Tyndall Centre (2005)
• Wikipedia article on personal carbon trading – with further links and information
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