1. Personal Carbon Trading: An Overview Richard Starkey Tyndall Centre for Climate Change Research The University of Manchester 16 May 2008

2. 1.Define personal carbon trading (PCT) 2.Summarize place within policy debate 3.Outline PCT 4.Assess PCT Outline

3. 1.Define personal carbon trading (PCT) 2.Summarize place within policy debate 3.Outline PCT 4.Assess PCT Outline

4. Definition Personal carbon trading (PCT) schemes are… proposed greenhouse gas emissions trading schemes under which individuals are allocated some/all available emissions rights

5. 1.Define personal carbon trading (PCT) 2.Summarize place within policy debate 3.Outline PCT 4.Assess PCT Outline

6. PCT and policy #1 Research Royal Society of Arts £0.5m research programme Research at Environmental Change Institute + ippr Government PCT has “a simplicity and beauty” - David Miliband Defra completed pre-feasibility study Parliament Call for evidence by EFRACOM and Env Audit Ctte

7. PCT and policy #2 Political parties Adopted as Green Party policy Awareness/discussion of PCT within 3 main parties Even discussed by British National Party!?! Other Formation of carbon rationing action groups (CRAGs) PCT now well known within the policy community

8. 1.Define personal carbon trading (PCT) 2.Summarize place within policy debate 3.Outline PCT 4.Assess PCT Outline

9. A particular form of PCT… …Domestic Tradable Quotas (DTQs) Proposed by David Fleming in 1996 Since July 2003 assessed by Tyndall for – feasibility – appropriateness

10. What are DTQs? PCT scheme covering emissions from energy use Rights allocated to end purchasers of fuel and electricity ‒ individuals ‒ firms ‒ other organizations

11. 3 elements 1.Setting the carbon budget 2.Allocating carbon units 3.Surrendering carbon units

12. 3 elements CAP TRADE + 1.Setting the carbon budget 2.Allocating carbon units 3.Surrendering carbon units

13. 3 elements 1.Setting the carbon budget 2.Allocating carbon units 3.Surrendering carbon units

14. Carbon budget annual emissions from energy use 175 MtC 2010 2050 Year Reduction of >60% Budgets set several years ahead Long-term signal to society

15. 3 elements 1.Setting the carbon budget 2.Allocating carbon units 3.Surrendering carbon units

16. 3 elements 1.Setting the carbon budget 2.Allocating carbon units #1 3.Surrendering carbon units

17. Carbon units Carbon units are emissions rights 1 carbon unit = right to emit 1kg CO 2 (equivalent)

18. How are carbon units allocated? Carbon units equal to carbon budget divided between ADULT INDIVIDUALS and ORGANIZATIONS

19. Individuals % carbon units to individuals equal to % energy emissions from their fuel + electricity use

20. 60%40% Individuals Organizations Energy emissions

21. 40% Individuals emissions

22. 40% units Individuals

23. Free Equal per capita and on an basis

24. Carbon account Units deposited in an electronic carbon account Carbon account similar to bank account

25. Individual carbon unit allocation 5 tCO 2 2010 2050 Year Reduction of >60%

26. 40% units Individuals

27. 40% units Individuals Auctioned by government on the… 60% units

28. …National carbon market All organizations must purchase units on market …more on the carbon market later

29. 3 elements 1.Setting the carbon budget 2.Allocating carbon units #1 3.Surrendering carbon units

30. 3 elements 1.Setting the carbon budget 2.Allocating carbon units 3.Surrendering carbon units

31. Surrendering Units surrendered whenever fuel/electricity purchased N.B. No surrender when purchasing e.g. train ticket Quantity surrendered covers carbon content of purchase

32. Surrender must be easy and convenient When paying – gas and electricity bills surrender by direct debit from carbon account – for petrol/diesel surrender by…

33. …carbon card Carbon Card Bjorn Lomberg

34. Government Primary Suppliers/ Importers OrganizationsIndividuals Energy Retailers Energy Supply Chain Units surrendered UnitsSurrendered

35. 3 elements 1.Setting the carbon budget 2.Allocating carbon units 3.Surrendering carbon units

36. 3 elements 1.Setting the carbon budget 2.Allocating carbon units #2 3.Surrendering carbon units …More on the national carbon market

37. National carbon market Sellers Government (60% at auction) Below-allocation individuals Buyers

38. Below-allocation individuals Emit at level below that permitted by their allocation Have surplus units Surplus can be saved...

39. Individual carbon unit allocation 5 tCO 2 2010 2050 Year Reduction of >60%

40. Below-allocation individuals Emit at level below that permitted by their allocation Have surplus units Surplus can be saved... …gifted, retired or sold

41. National carbon market Sellers Government (60% at auction) Below-allocation individuals Buyers Organizations Above-allocation individuals

42. Below-allocation individuals emit at level below that permitted by their allocation Above-allocation individuals emit at level above that permitted by their allocation

43. National carbon market Sellers Government (60% at auction) Below-allocation individuals Trading made easy – online, by phone or over-the-counter Market makers E.g. banks, post office Profit on “bid and offer” spread Buyers Organizations Above-allocation individuals Buy Sell Buy at auction

44. Government Primary Suppliers/ Importers OrganizationsIndividuals Energy Retailers Energy Supply Chain Units surrendered UnitsSurrendered

45. Free/equal per capita Carbon Budget 40%60% Primary Suppliers/ Importers OrganizationsIndividuals Below allocation Above allocation Energy Retailers Auction Energy Supply Chain Units surrendered Auction Market Makers UnitsSurrendered

46. Question What if customer has no units at point of sale? (e.g. forgotten carbon card, overseas visitor, run out of units) Answer They buy units at the point of sale (1) Retailer buys units required by customer on market (2) Cost added to customer’s bill

47. Auction Free/equal per capita Carbon Budget 40%60% Organizations Individuals Below allocation Above allocation Energy Retailers Auction Primary Suppliers/ Importers Energy Supply Chain Units surrendered Market Makers Units Surrendered

48. Auction Free/equal per capita Carbon Budget 40%60% Organizations Individuals Below allocation Above allocation Energy Retailers Auction Market Makers

49. Auction Units purchased at point of sale Free/equal per capita Carbon Budget 40%60% Organizations Individuals Below allocation Above allocation Energy Retailers Auction Market Makers ££

50. Auction Free/equal per capita Carbon Budget 40%60% Organizations Individuals Below allocation Above allocation Energy Retailers Auction Primary Suppliers/ Importers Energy Supply Chain Units surrendered Market Makers ££ Units purchased at point of sale

51. For those who don’t understand… …or who don’t want to transact in carbon units 1.Sell ALL units immediately they enter carbon account 2.Buy ALL units required at point of sale

52. Auction Free/equal per capita Carbon Budget 40%60% Organizations Individuals Below allocation Above allocation Energy Retailers Auction Primary Suppliers/ Importers Energy Supply Chain Units surrendered Market Makers ££ Units purchased at point of sale

53. For those who don’t understand… …or who don’t want to transact in carbon units 1.Sell ALL units immediately they enter carbon account 2.Buy ALL units required at point of sale 3.Deal only in money…like a carbon tax

54. 1.Define personal carbon trading (PCT) 2.Summarize place within policy debate 3.Outline PCT 4.Assess PCT Outline

55. DTQs

56. Why do some people love DTQs?

57. Two reasons A fair allocation A tangible stake − Adults made stakeholders in the atmosphere − Carbon units are ones actual stake

58. Should we all (learn to) love DTQs?

59. Tyndall assessment of PCT Feasibility Appropriateness

60. Tyndall assessment of PCT Feasibility Appropriateness

61. Technical elements Enrol 50m people into the scheme Verify identity Open account and issue card Replace lost and stolen cards Provide and operate trading channels Issue statements Close accounts (on death or emigration)

62. Defra pre-feasibility report “We have not identified an insurmountable technical obstacle for the implementation of this type of Personal Carbon Trading scheme from this initial analysis. It appears that the majority of functions could be fulfilled by modifying and / or adding capacity to existing systems.” Accenture (2008)

63. Tyndall assessment of PCT Feasibility Appropriateness

64. Fairness Efficiency

65. Appropriateness Fairness Efficiency

66. Seven Seas

67. Seven Seas Cs

68. Seven Cs Individuals who Live in the countryside Live in a cold region of a country Live in a chilly house Have children Feel the cold Are single rather than in a couple Are crook (and require e.g. home dialysis)

69. Under equality of welfare All require more energy to achieve same welfare More energy = more emissions ∴ They should get more emissions rights ∴ A fair allocation is an unequal allocation

70. Appropriateness Fairness Efficiency

71. Appropriateness Fairness Efficiency

72. Objection Can implement equal per capita more cheaply – Upstream trading – Carbon tax with lump-sum recycling

73. Auction Free/equal per capita Carbon Budget 40%60% Primary Suppliers/ Importers OrganizationsIndividuals Below allocation Above allocation Energy Retailers Auction Energy Supply Chain Units surrendered Auction Market Makers UnitsSurrendered DTQs Units paid for at point of sale

74. Costs Set up costs Annual running costs £0.7-2 billion £1-2 billion

75. Auction Free/equal per capita Carbon Budget 40%60% Primary Suppliers/ Importers OrganizationsIndividuals Below allocation Above allocation Energy Retailers Auction Energy Supply Chain Units surrendered Auction Market Makers UnitsSurrendered DTQs Units paid for at point of sale

76. Carbon Budget 40%60% Primary Suppliers/ Importers Individuals

77. Carbon Budget 40%60% Primary Suppliers/ Importers Individuals Upstream auction

78. Carbon Budget 100% Primary Suppliers/ Importers Individuals Auction Equal per capita £ £ Upstream auction

79. Carbon Budget 100% Primary Suppliers/ Importers Individuals Auction Equal per capita £ £ Sky Trust

80. Equivalent but CHEAPER! Not emissions rights being allocated on equal per capita basis but REVENUE FROM SALE OF EMISSION RIGHTS

81. Costs Set up costs Annual running costs £50-100 million £50 million

82. £ Carbon Budget 100% Primary Suppliers/ Importers Individuals Auction Equal per capita £ Sky Trust

83. £ Carbon Budget 100% Primary Suppliers/ Importers Individuals Auction Equal per capita £ Carbon tax

84. £ Primary Suppliers/ Importers Individuals Government Tax Equal per capita £ Carbon tax

85. Cap and Share Individuals being allocated rights is important

86. Auction Free/equal per capita Carbon Budget 40%60% Primary Suppliers/ Importers OrganizationsIndividuals Below allocation Above allocation Energy Retailers Auction Energy Supply Chain Units surrendered Auction Market Makers UnitsSurrendered DTQs Units paid for at point of sale

87. Carbon Budget 40%60% Primary Suppliers/ Importers Individuals Market Makers Cap and Share

88. Free/equal per capita Carbon Budget 100% Primary Suppliers/ Importers Individuals £ Sell Market Makers Cap and Share

89. Increasing costs Increasing benefits C&S Sky Trust DTQs

90. Suggested additional benefits Makes individuals stakeholders Engenders sense of common purpose Gives sense of responsibility Increases carbon visibility Increases carbon consciousness Increases carbon literacy Gives sense of agency Empowers individuals

91. Not just feel-good factor… Increased carbon consciousness leads to greater search for and picking of “low hanging fruit” leads to cheaper reduction of emissions

92. D S Q FF/E P FF Price Quantity

93. D Budget Permit price S Q FF/E P Quantity FF Price

94. D Budget Permit price S P Q FF/E FF Price

95. DD*D* Budget S P Permit price Q FF/E FF Price

96. DD*D* Budget S P Q FF/E Permit price FF Price

97. DD*D* Budget S P Q FF/E D ** Permit price FF Price

98. DD*D* Budget S P Q FF/E D ** Permit price FF Price

99. Defra’s findings Insufficient additional benefits to justify additional costs Much low-hanging fruit “picked” by existing/planned instruments – Efficiency standards for appliances – Banning of incandescent bulbs – Building regs – Emissions standards for vehicles Visibility of residential carbon increased by smart meters

100. Conclusions Important to consider fair allocation of emissions rights EPCA not straightforwardly fair To argue against Defra’s position proponent of DTQs – Benefits greater than suggests – Costs less than suggested – Two birds with one stone – climate change and peak oil