personal carbon trading: an overview
DESCRIPTION
Personal Carbon Trading: An Overview. Richard Starkey Tyndall Centre for Climate Change Research The University of Manchester 16 May 2008. Outline. Define personal carbon trading (PCT) Summarize place within policy debate Outline PCT Assess PCT. Outline. - PowerPoint PPT PresentationTRANSCRIPT
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Personal Carbon Trading:An Overview
Richard Starkey
Tyndall Centre for Climate Change Research The University of Manchester
16 May 2008
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1. Define personal carbon trading (PCT)
2. Summarize place within policy debate
3. Outline PCT
4. Assess PCT
Outline
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1. Define personal carbon trading (PCT)
2. Summarize place within policy debate
3. Outline PCT
4. Assess PCT
Outline
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Definition
Personal carbon trading (PCT) schemes are…
proposed greenhouse gas emissions trading schemes
under which
individuals are allocated some/all available emissions rights
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1. Define personal carbon trading (PCT)
2. Summarize place within policy debate
3. Outline PCT
4. Assess PCT
Outline
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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
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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
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1. Define personal carbon trading (PCT)
2. Summarize place within policy debate
3. Outline PCT
4. Assess PCT
Outline
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A particular form of PCT…
• …Domestic Tradable Quotas (DTQs)
• Proposed by David Fleming in 1996
• Since July 2003 assessed by Tyndall for
– feasibility– appropriateness
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What are DTQs?
• PCT scheme covering emissions from energy use
• Rights allocated to end purchasers of fuel and electricity
‒ individuals‒ firms‒ other organizations
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3 elements
1. Setting the carbon budget
2. Allocating carbon units
3. Surrendering carbon units
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3 elements
CAP
TRADE
+
1. Setting the carbon budget
2. Allocating carbon units
3. Surrendering carbon units
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3 elements
1. Setting the carbon budget
2. Allocating carbon units
3. Surrendering carbon units
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Carbon budgetannual emissions from energy use
175
MtC
2010 2050Year
Reduction of >60%
Budgets set several years ahead
Long-term signal to society
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3 elements
1. Setting the carbon budget
2. Allocating carbon units
3. Surrendering carbon units
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3 elements
1. Setting the carbon budget
2. Allocating carbon units #1
3. Surrendering carbon units
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Carbon units
• Carbon units are emissions rights
• 1 carbon unit = right to emit 1kg CO2 (equivalent)
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How are carbon units allocated?
Carbon units equal to carbon budget divided between
ADULT INDIVIDUALS
and
ORGANIZATIONS
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Individuals
% carbon units to individuals
equal to
% energy emissions from their fuel + electricity use
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60%40%Individuals Organizations
Energy emissions
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40%Individualsemissions
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40%units
Individuals
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Free
Equal per capita
and on an
basis
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Carbon account
• Units deposited in an electronic carbon account
• Carbon account similar to bank account
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Individual carbon unit allocation
5
tCO
2
2010 2050Year
Reduction of >60%
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40%units
Individuals
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40%units
IndividualsAuctioned by government
on the…60%
units
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…National carbon market
All organizations must purchase units on market
…more on the carbon market later
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3 elements
1. Setting the carbon budget
2. Allocating carbon units #1
3. Surrendering carbon units
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3 elements
1. Setting the carbon budget
2. Allocating carbon units
3. Surrendering carbon units
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Surrendering
• Units surrendered whenever fuel/electricity purchased
• N.B. No surrender when purchasing e.g. train ticket
• Quantity surrendered covers carbon content of purchase
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Surrender must be easy and convenient
When paying
– gas and electricity bills
surrender by direct debit from carbon account
– for petrol/dieselsurrender by…
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…carbon card
Carbon CardCarbon Card
Bjorn LombergBjorn Lomberg
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Government Primary Suppliers/ Importers
OrganizationsIndividuals
Energy Retailers
En
erg
y S
up
ply
Ch
ain
Units surrenderedUnits surrendered
Units Surrendered
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3 elements
1. Setting the carbon budget
2. Allocating carbon units
3. Surrendering carbon units
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3 elements
1. Setting the carbon budget
2. Allocating carbon units #2
3. Surrendering carbon units
…More on the national carbon market
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National carbon market
SellersGovernment (60% at auction)
Below-allocation individuals
Buyers
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Below-allocation individuals
• Emit at level below that permitted by their allocation
• Have surplus units
• Surplus can be saved...
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Individual carbon unit allocation
5
tCO
2
2010 2050Year
Reduction of >60%
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Below-allocation individuals
• Emit at level below that permitted by their allocation
• Have surplus units
• Surplus can be saved...
• …gifted, retired or sold
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National carbon market
SellersGovernment (60% at auction)
Below-allocation individuals
BuyersOrganizations
Above-allocation individuals
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Below-allocation individuals
emit at level below that permitted by their allocation
Above-allocation individuals
emit at level above that permitted by their allocation
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National carbon market
SellersGovernment (60% at auction)
Below-allocation individuals
Trading made easy – online, by phone or over-the-counter
Market makersE.g. banks, post office
Profit on “bid and offer” spread
BuyersOrganizations
Above-allocation individuals
Buy Sell
Buy at auction
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Government Primary Suppliers/ Importers
OrganizationsIndividuals
Energy Retailers
En
erg
y S
up
ply
Ch
ain
Units surrendered
Units Surrendered
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Free/equal per capita
Carbon Budget 40% 60%
Primary Suppliers/ Importers
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
En
erg
y S
up
ply
Ch
ain
Units surrendered
Auction
Market Makers
Units Surrendered
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QuestionWhat if customer has no units at point of sale?(e.g. forgotten carbon card, overseas visitor, run out of units)
AnswerThey buy units at the point of sale
(1) Retailer buys units required by customer on market (2) Cost added to customer’s bill
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AuctionFree/equal per capita
Carbon Budget 40% 60%
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
Primary Suppliers/ Importers
En
erg
y S
up
ply
Ch
ain
Units surrendered
Market Makers
Units Surrendered
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AuctionFree/equal per capita
Carbon Budget 40% 60%
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
Market Makers
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Auction
Units purchased
at point of sale
Free/equal per capita
Carbon Budget 40% 60%
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
Market Makers
£ £
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AuctionFree/equal per capita
Carbon Budget 40% 60%
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
Primary Suppliers/ Importers
En
erg
y S
up
ply
Ch
ain
Units surrendered
Market Makers
£ £
Units purchased
at point of sale
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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
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AuctionFree/equal per capita
Carbon Budget 40% 60%
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
Primary Suppliers/ Importers
En
erg
y S
up
ply
Ch
ain
Units surrendered
Market Makers
£ £
Units purchased
at point of sale
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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
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1. Define personal carbon trading (PCT)
2. Summarize place within policy debate
3. Outline PCT
4. Assess PCT
Outline
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DTQs
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Why do some people love DTQs?
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Two reasons
• A fair allocation
• A tangible stake
− Adults made stakeholders in the atmosphere
− Carbon units are ones actual stake
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Should we all (learn to) love DTQs?
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Tyndall assessment of PCT
• Feasibility
• Appropriateness
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Tyndall assessment of PCT
• Feasibility
• Appropriateness
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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)
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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)
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Tyndall assessment of PCT
• Feasibility
• Appropriateness
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Appropriateness
• Fairness
• Efficiency
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Appropriateness
• Fairness
• Efficiency
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Seven Seas
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Seven Seas Cs
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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)
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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
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Appropriateness
• Fairness
• Efficiency
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Appropriateness
• Fairness
• Efficiency
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Objection
Can implement equal per capita more cheaply
– Upstream trading
– Carbon tax with lump-sum recycling
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AuctionFree/equal per capita
Carbon Budget 40% 60%
Primary Suppliers/ Importers
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
En
erg
y S
up
ply
Ch
ain
Units surrendered
Auction
Market Makers
Units Surrendered
DTQs
Units paid for
at point of sale
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Costs
Set up costs
Annual running costs
£0.7-2 billion
£1-2 billion
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AuctionFree/equal per capita
Carbon Budget 40% 60%
Primary Suppliers/ Importers
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
En
erg
y S
up
ply
Ch
ain
Units surrendered
Auction
Market Makers
Units Surrendered
DTQs
Units paid for
at point of sale
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Carbon Budget 40% 60%
Primary Suppliers/ Importers
Individuals
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Carbon Budget 40% 60%
Primary Suppliers/ Importers
Individuals
Upstream auction
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Carbon Budget 100%
Primary Suppliers/ Importers
Individuals
Auction
Equal per capita
£
£
Upstream auction
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Carbon Budget 100%
Primary Suppliers/ Importers
Individuals
Auction
Equal per capita
£
£
Sky Trust
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Equivalent but CHEAPER!
Not
emissions rights
being allocated on
equal per capita basis
but
REVENUE FROM SALE OF EMISSION RIGHTS
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Costs
Set up costs
Annual running costs
£50-100 million
£50 million
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£Carbon Budget 100%
Primary Suppliers/ Importers
Individuals
Auction
Equal per capita
£
Sky Trust
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£Carbon Budget 100%
Primary Suppliers/ Importers
Individuals
Auction
Equal per capita
£
Carbon tax
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£
Primary Suppliers/ Importers
Individuals
GovernmentTax
Equal per capita
£
Carbon tax
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Cap and Share
Individuals being allocated rights is important
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AuctionFree/equal per capita
Carbon Budget 40% 60%
Primary Suppliers/ Importers
OrganizationsIndividuals
Below allocation
Above allocation
Energy Retailers
Auction
En
erg
y S
up
ply
Ch
ain
Units surrendered
Auction
Market Makers
Units Surrendered
DTQs
Units paid for
at point of sale
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Carbon Budget 40% 60%
Primary Suppliers/ Importers
IndividualsMarket Makers
Cap and Share
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Free/equal per capita
Carbon Budget 100%
Primary Suppliers/ Importers
Individuals
£
Sell Market Makers
Cap and Share
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Increasing costs
Increasing benefits
C&S
Sky Trust
DTQs
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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
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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
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D
S
QFF/E
P
FF Price
Quantity
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D
Budget
Permit price
S
QFF/E
P
Quantity
FF Price
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D
Budget
Permit price
S
P
QFF/E
FF Price
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DD*
Budget
S
P
Permit price
QFF/E
FF Price
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DD*
Budget
S
P
QFF/E
Permit price
FF Price
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DD*
Budget
S
P
QFF/E
D**
Permit price
FF Price
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DD*
Budget
S
P
QFF/E
D**
Permit price
FF Price
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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
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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