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Tina Fawcett

What if carbon trading – where companies must bid for limited permits to emit pollutants, and so pay a price in order to do so – could be applied on an individual level?

Personal carbon trading is a policy idea that aims to reduce a nation’s overall carbon emissions by handing to individuals rights and responsibilities for their own emissions. With the IPCC this week preparing their latest report on the threat of climate change, with greenhouse gas emissions still rising perhaps it’s time to put more tools on the table.

In a scheme designed to manage household energy use and personal travel, each adult would be allocated an equal annual carbon allowance. Units of this carbon allowance would have to be paid out when paying household energy bills or filling up the car. Those using less than their annual allowance could sell their surplus units, while those needing more would have to buy them. This way, the polluter would pay – a key environmental maxim. Could such a radical policy work, and could it be socially and politically acceptable?

The UK government has set itself a target of reducing carbon emissions by 80% by 2050. This would require considerably more rapid reductions in carbon emissions that have been managed so far. Some scientists argue that deeper and more rapid reductions in carbon emissions are required if the UK is to make a just contribution to global efforts.

A low carbon society will require major improvements in energy efficiency, a shift towards low- and zero-carbon fuels, and ways of living and doing business which are much less energy-intensive. It’s unlikely that this can be achieved without actively involving citizens – who are after all directly responsible for more than 40% of UK emissions.

So a personal carbon trading scheme would make people more directly aware of their energy-related carbon greenhouse gas emissions, and give them direct control of managing them. By contrast, most policy on personal energy use operates at a distance from individuals, for example requirements for energy suppliers to fund insulation schemes, or for manufacturers to meet minimum efficiency standards for appliances. And it fails to communicate the significance of different decisions on personal carbon emissions.

How would it work?

Personal carbon trading would need be practical to use, and to persuade people to reduce their emissions. Research has shown that introducing an electronic card system and “bank” of carbon units would be easily possible with current technology (which already works for gas- and electric-payment cards, Oyster travelcards, secure entry building passes, and many other systems).

The policy could use various ways try and change individuals’ behaviour. For example, economic (by generating an extra cost for profligate energy use), psychological (by setting goals and budgets and providing timely feedback), and social (strongly signalling what constitutes a socially acceptable level of personal emissions).

But would this policy be fair? It embodies a specific view of equity, proposing that an equal carbon allowance is fair. This is rights-based interpretation of fairness, but some would argue that a more just system would be based on an individuals’ ability to reduce emissions, or their ability to pay, or even to focus on most efficient reductions (most carbon savings at least cost). However, in terms of consequences, models have suggested that personal carbon trading in the UK would be a progressive policy. Poorer individuals would be mostly winners, because their levels of direct emissions are generally lower.

Nipped in the bud

Under the previous Labour government a few years ago, personal carbon trading attracted positive political interest. The government commissioned research which reported in 2008). But after considering that research, the government decided not to pursue the policy, largely due to concerns about public acceptability and costs.

This decision was not universally welcomed, with an environmental committee of MPs advising the government to support more research into the subject, given its importance. My further research into public perception of the scheme has revealed a more positive attitude toward the idea than many alternatives, such as carbon taxation. There has been speculation that the government’s main objection to a system of personal carbon trading was that the policy would reveal the carbon gap between the rich and poor. Either way, there was very little research available at the time, so the official assessment of the policy was taken largely in ignorance.

Which is not to say that carbon trading is dead in the water. In fact it’s currently being trialled in Norfolk Island, an island of around 1,800 people 1,500km off the coast of Australia. While still in its early stages, the scheme has registered 350 people, and set up systems for electronic carbon accounting, feedback on carbon emissions, and rewards for participation.

Personal carbon trading is a radical approach that directly engages citizens in taking steps to mitigate climate change. It encourages discussion about who the winners and losers would be in a lower-carbon society. Research shows it could be progressive and publicly acceptable, and in the absence of other big ideas to bring about emissions reductions, it’s surely time to re-evaluate the idea’s potential to bring about positive changes.

This article was originally published at The Conversation. Read the original article.

Tina Fawcett is a researcher at University of Oxford. Tina receives funding from the UK Energy Research Centre (UKERC).

Jim Watson

The big energy policy headline in the budget was well trailed. As expected, the level of the UK’s carbon tax on electricity generation will be frozen from 2016/17 until the end of this decade. Conceived in response to lobbying by energy intensive industries and Labour’s price freeze policy, this change is part of a package that the government claims will save energy consumers up to £7bn.

The tax, known as the Carbon Price Floor, was implemented to compensate for the persistently low price of carbon in the European emissions trading scheme. Rather than increasing as planned, it will be capped at £18 per tonne of CO2. This will cost the government £1.8bn in lost revenue between 2016/17 and 2018/19.

Because this measure will make electricity cheaper than it would have been, electricity demand is expect to increase by 3-4%. Emissions may also rise too as a result. The compensation package for energy intensive industries that are liable to pay this tax will be extended to the end of the decade, and additional compensation will be available for these industries to offset the costs of renewable energy support policies.

Economics over environment

This freeze is unwelcome. It weakens the basic incentive for power generators to switch away from the use of carbon intensive fuels (particularly coal) towards lower carbon options such as gas, renewables and nuclear power. The only exception is a new exemption for electricity from efficient combined heat and power plants.

Coal-fired electricity has experienced a revival in the last couple of years at the expense of gas due to low coal prices. This has led to an increase in power sector carbon emissions after many years of decline. From a climate change perspective, it is very important that policies counteract this economic advantage to reduce the risk that coal generation will be locked in for longer than necessary.

But it is also important to remember that the Carbon Price Floor received mixed reactions when it was introduced. Many investors were sceptical, and foresaw the political risks associated with a measure that could be adjusted by the chancellor each year. They seem to have been vindicated. Its usefulness as a signal for new investment in low carbon technologies was already questionable – and now it is significantly weaker.

Keeping emissions reductions on track

To ensure emissions reductions remain on track, other measures may be necessary. The long term contracts for new sources of low carbon generation introduced by the Energy Act 2013 will be even more important. The budget does include positive statements about the government’s commitment to renewable energy through these contracts.

In addition to this, further details of the “capacity mechanism”were published on budget day. This is a complex mechanism designed to support new flexible generation to help balance supply and demand for electricity. The duration of capacity mechanism contracts for new gas-fired plants has been increased to 15 years.

This may help to improve confidence among investors who have put plans on hold because of poor economics. But the mechanism can also support existing coal plants, some of which could be awarded three-year contracts to pay for refurbishment. This adds to concerns that coal generation (and wider power sector emissions) will not be reduced quickly enough.

The demand side of energy policy was notable by its absence from the budget. A more comprehensive response to high energy bills would have included a greater emphasis on energy efficiency. This is especially the case for households and smaller companies that have limited resources to invest. While the government has an ambitious energy efficiency strategy that aims to avoid the need for 22 power stations by 2020, progress has been mixed.

The Secretary of State for energy Ed Davey MP recently admitted that the uptake of the flagship Green Deal policy had been “disappointing”. Some of the £1.8bn the government will forego as a result of the Carbon Price Floor freeze could have been used to strengthen energy efficiency programmes.

While the pressure to relieve the impact of high energy prices is understandable, this budget increased the risks that the UK’s carbon targets will not be met. It also missed an opportunity to improve energy efficiency, and to insulate energy consumers against high prices in future.

This article was originally published at The Conversation. Read the original article.

Jim Watson, is Research Director at the UK Energy Research Centre.