Memorandum submitted by Richard Starkey
(CIT 38)
INTRODUCTION
1. Since July 2003, Dr Kevin Anderson and
I (both of the Tyndall Centre, University of Manchester) have
been assessing the feasibility and appropriateness of implementing
a Domestic Tradable Quotas (DTQs) scheme.
2. In December 2005, Dr Anderson and I published
a detailed report on DTQs (Starkey and Anderson, 2005). [5]This
report (henceforth "the Tyndall DTQs report") has been
submitted to the Committee in evidence.
3. This memorandum briefly describes the
DTQs scheme and then discusses issues of equity not fully addressed
in the Tyndall DTQs report but relevant to the public acceptability
and therefore the viability of a DTQs scheme. It is submitted
in a personal capacity.
BRIEF DESCRIPTION
OF DTQS
4. DTQs were formulated by Dr David Fleming
who first published the idea in 1996 (Fleming, 1996). Dr Fleming
maintains a website[6]
and his most recent publication is Fleming (2005).
5. DTQs are a "cap and trade"
scheme for the reduction of greenhouse gas emissions from energy
use under which emissions rights are allocated to and surrendered
by all end-purchasers of fuel and electricity (both individuals
and organisations). The DTQs scheme can be divided into three
elements: (1) setting the carbon budget (2) the surrender of carbon
units and (3) acquiring carbon units for surrender.
Setting the carbon budget
6. The carbon budget is the maximum
quantity of greenhouse gases that may be emitted from energy use
in a given year. Under DTQs, the carbon budget is reduced year
on year in line with national and international emissions reduction
targets. Fleming has proposed that, in any given year of the scheme,
carbon budgets should be set 20 years ahead, so as to provide
a long-term emissions reduction signal to society. He further
proposes that carbon budgets are set by an expert independent
Carbon Policy Committee, a proposal designed to de-politicise
budget setting in same the way that the Bank of England's Monetary
Policy Committee is intended to depoliticise the setting of interest
rates.
Surrendering carbon units
7. A carbon unit is an emissions
right, specifically the right to emit 1 kg of carbon dioxide equivalent.
All fuels and electricity are assigned a carbon rating
based on the quantity of greenhouse gases (measured in carbon
units) emitted by the combustion of a unit of each fuel and by
the generation of a unit of electricity. Whenever individuals
and organisations purchase fuel or electricity, they are required
to surrender to the retailer carbon units to cover the quantity
of fuel or electricity purchased. For accounting purposes, these
units are surrendered up the supply chain and, on reaching the
primary energy producer or the energy importer, are passed back
to government.
Acquiring units for surrender
8. Each year a quantity of carbon units
equivalent to that year's carbon budget are allocated by government
to individuals and organisations. The proportion of total carbon
units allocated to individuals is equal to the proportion of total
energy emissions arising from individuals' purchase of fuel and
electricity over a given period prior to the introduction of the
DTQs scheme. (In the UK, the proportion is currently around 40%.)
Carbon units are allocated to adult individuals free and on an
equal per capita basis.
9. Whilst individuals receive their units
for free, organizations must purchase the units they require on
a national carbon market. Units enter onto the market from
two sources. First, government auctions onto the market those
units not allocated to individuals. Second, individuals who emit
at a level below that permitted by their allocation, and who have,
thus, not surrendered all their units, can sell their surplus
units onto the market. Conversely individuals who wish to emit
at a level above that permitted by their initial allocation ("above-allocation
individuals") must buy additional units on the market. Visitors
to the UK are not allocated units and so along with organisations
and above-allocation individuals, must purchase them on the market.
ASSESSING DTQS
10. In the course of our research we have
encountered three main objections to DTQs.
(i) Allocating emissions rights on an equal
per capita basis is not equitable.
(ii) Allocating emissions rights on an equal
per capita basis is equitable and therefore 100% of emissions
rights, rather than the approximately 40% under DTQs, should be
allocated to individuals on an equal per capita basis.
(iii) Allocating emissions rights on an equal
per capita basis is equitable, but other instruments can
achieve this allocation more cost-effectively than DTQs.
11. Objections (ii) and (iii) and responses
to them are discussed at length in the Tyndall DTQs report and
hence this memorandum focuses on objection (i).
FAIRNESS OF
AN EQUAL
PER CAPITA
ALLOCATION
12. In exploring the equity (or fairness)
of an equal per capita allocation of emissions rights (henceforth
"EPCA"), I put forward an argument for fairness that
finds some support within the philosophical literature on distributive
justice. I contrast this with the main argument for the fairness
of EPCA found within what might be termed the "non philosophical"
literature (ie writings that do not explicitly draw on the distributive
justice literature). Though somewhat academic in parts, the discussion
is relevant to the public acceptability and, thus, the viability
of a DTQs scheme. [7]
13. Within the non-philosophical literature
The central argument for equal per capita rights
is that the atmosphere is a global commons, whose use and preservation
are essential to human well being (Baer, 2002, p 401).
14. Used in this sense, the term "commons"
refers to something that has, since the beginning of humanity,
been owned jointly and equally by humanity. And if the atmosphere
is jointly and equally owned, it follows that all of humanity
should have the right to emit equally into it.
15. However, within the philosophical literature,
it is disputed that the atmosphere is a commons in this sense.
It is held by a number of philosophers, both on the left and the
right politically, that, in fact, nature was, in the beginning,
unowned and that, over time, various parts of nature have
been taken into ownership by individuals acting upon them in an
appropriate manner. It is further held by some philosophers that
the part of nature which is the atmosphere is incapable of being
taken into ownership in the way that, for example, fossil fuel
can be, and that the atmosphere is therefore not only unowned
by unownable. For instance, Schmidtz (1997, pp 43-4) argues that
there is
no foreseeable prospect of being able to privatise
the air ... [as] it is difficult to parcel out ...
16. Given that fossil fuel is something
that can, uncontroversially, be owned, is it the case that, in
a fair society, individuals would be entitled to equal quantities
of fossil fuel, and thus emissions rights? If so, then we would
have an argument for EPCA that did not require an endorsement
of the (philosophically contested) claim that that the atmosphere
is a commons.
17. Such an equal sharing out of fossil
fuel would be an example of the norm of "equality of resources".
However, this is not a norm that has been endorsed by most egalitarian
liberal philosophers. [8]
The norm of equality of resources stipulates
that to achieve equality . . . everybody [should receive] a share
of goods that is exactly identical to everyone else's and that
exhausts all available resources to be distributed. A straightforward
objection to equality of resources so understood is that if Smith
and Jones have similar tastes and abilities except that Smith
has a severe handicap remediable with the help of expensive crutches,
then if the two are accorded equal resources, Smith must spend
the bulk of his resources on crutches whereas Jones can use his
resource share to fulfil his aims to a far greater extent. It
seems forced to claim that any notion of equality of condition
that is worth caring about prevails between Smith and Jones (Arneson,
1989, p 77-8)
18. Most egalitarian liberals also reject
the notion that "equality of condition" is achieved
by equalising welfare.
Equality of welfare is a poor ideal. Individuals
can arrive at different welfare levels due to choices they make
for which they alone should be held responsible. A simple example
would be to imagine two persons of identical tastes and abilities
who are assigned equal resources by an agency charged to maintain
distributive equality. The two then engage in high-stakes gambling,
from which one emerges rich (with high expectation of welfare)
and the other poor (with low welfare expectation). In [this] example
... it would be inappropriate to insist on equality of welfare
when welfare inequality arises through voluntary choice of the
person who gets less welfare (Arneson, 1989, p 83-4).
19. In place of equalising welfare, Arneson
therefore suggests that what should be equalised is, in fact,
"opportunity for welfare".[9]
(In his example in the previous paragraph, the two persons are
provided with resources that give them equal opportunity for welfare.
However, instead of realising this opportunity by consuming these
resources, they decide to gamble with them.)
20. Arneson argues that equalising resources
can lead to inequality in opportunity for welfare. Conversely,
providing individuals with equal opportunity for welfare is likely
to entail providing them with entitlements to unequal amounts
of resources. For instance, people who live in colder regions
may require more energy for heating. Or, as life in the countryside
requires more travelling, people living there may require more
energy for transport. (Indeed, one might even argue that people
who feel the cold may require more energy for heating than people
who generate lots of body heat!) And, if fossil fuel energy comprises
the same proportion of each individual's energy use, then an entitlement
to differing quantities of energy translates into an entitlement
to differing quantities of fossil fuel and, thus, emissions rights.
21. This sort of argument was been made
in relation to the allocation of emissions rights between
nations. For example, Raymond (2006, p 656-7) takes the view that
the more one considers the equal per capita argument,
the harder it is to shake certain reservations about the idea
... Does a poor writer living in a garret in St. Petersburg, for
example, have the same entitlement to the atmosphere as one living
in San Diego, or do the cold Russian winters (heating being a
major source of GHG emissions) merit additional consideration?
What about the rancher living in eastern Montana, 40 miles from
the nearest school or hospital, versus the resident of Tokyo?
The problem is that once one begins unpacking the apparent equality
of the per capita right, it becomes clear that it creates significant
inequalities based on criteria—warm versus cold climate,
rural versus urban dwelling—that look morally arbitrary.
Tailoring the allocation principle to adjust for these various
mitigating factors, however, again threatens to undermine its
initial advantages of clarity and simplicity as a basic human
right.
22. This sort of argument has also been
made with regard to DTQs (a proposal for the allocation of emissions
rights within nations). For example, commenting on a recent
blog posted by the Secretary of State for Environment, Food and
Rural Affairs on DTQs (Miliband, 2006), one respondent (Harry
Manuel) argued (echoing Arneson) that those with a disability
may require additional emissions rights. [10]
Will everyone get the same fixed amount, if so
this is unfair on those with disability etc, who have a greater
reliance on mechanical/electrical aids? [11]
23. Mrs Thatcher's former Press Secretary,
Bernard Ingham (2006), also responded to the Secretary of State
in an article in his local paper, describing DTQs as
A perfect wheeze for champagne socialists, but
egalitarian, my foot. Nor is there anything fair about a single
carbon allowance, bearing in mind the differing needs of the elderly,
families with young children, the disabled and those who live
in the country who simply have to have a vehicle.
24. Faced with the charge that equality
of opportunity for welfare requires something other than the EPCA
of DTQs, what defence can the supporter of DTQs mount? Of course,
the supporter can reject egalitarian liberal arguments in favour
of the commons argument. However, I think that the supporter of
DTQs can, in fact, mount a defence that accords with the egalitarian
liberal approach. And that defence is that an equal per capita
allocation is fair if it is the closest affordable approximation
to the allocation of emissions rights that would pertain under
equal opportunity for welfare.
25. Imagine a society implementing equal
opportunity for welfare with regard to energy use. Prior to implementation,
everyone starts with an equal allocation of energy. It is then
calculated what adjustments would need to be made to take account
of the various factors affecting opportunity for welfare such
as the temperature, whether people live in the town or in the
country, the energy efficiency of dwellings, the extent to which
people feel the cold and so forth. These adjustments result in
individuals being allocated differing quantities of energy. And,
as fossil fuel energy comprises the same proportion of each individual's
energy use, individuals are therefore entitled to differing quantities
of fossil fuel and, thus, emissions rights.
26. In this example, a fair allocation of
emissions rights arises from the fair allocation of energy. By
contrast, climate change policy, when considering issues of fairness,
is concerned not to allocate energy fairly, but only emissions
rights. [12]But,
in a situation (like today) where energy is not allocated fairly,
the fair allocation of emissions rights can be established only
by determining the allocation that would arise if energy were
to be allocated fairly.
27. This fair allocation of emissions rights
can in theory be established by everyone starting with
an equal allocation. The same adjustments (for temperature, town/country
etc) would then made to this allocation as would be made to the
equal allocation of energy if one were setting out (as
in the example in paragraph 25) to allocate energy so as to bring
about equal opportunity for welfare.
28. However, in practice it may simply
be too administratively burdensome and expensive to collect the
information on individuals necessary to make such adjustments
(see following examples). If so, the closest affordable approximation
to a fair allocation of emissions rights (ie that which would
pertain under equal opportunity for welfare) is to stick with
the pre-adjusted, equal per capita allocation.
29. The following are two examples of the
expense involved in collecting "adjustment information".
(1) There would be a significant administrative burden and expense
to classifying each dwelling according to average temperature
and tracking individuals' moves between dwellings so as to accurately
adjust their allocation of emissions rights. (2) Whilst it is
probably feasible to assess how rural/urban each of a nation's
dwellings is, this would not accurately reveal how much travel
a person required to live their life. For whilst rural life might
on average require more travel than urban living, some urban dwellers
may have to travel significant distances (eg to work) putting
them above the rural average. Hence, obtaining accurate data on
the amount of travel required by each individual to live their
lives would be extremely expensive.
30. In making the closest affordable approximation
argument, the supporter of DTQs would be arguing not that EPCA
is the fairest allocation in theory, but simply that it
is the fairest allocation in practice. And making this
argument may be significant if government is minded to implement
a DTQs scheme. For to argue that EPCA is absolutely fair may well
invite a cacophony of objections such as those described above
and diminish the public acceptability of the scheme. However,
if it was argued that the equal per capita allocation was simply
the fairest in practice, then the government would create a space
in which to recognise the concerns of specific groups and could
leave open the possibility of taking actions to accommodate their
concerns. For instance, government could ensure that DTQs was
implemented as part of a portfolio of measure to make certain
that those on low incomes were not disadvantaged by the scheme.
[13]The
adoption by government of this "fairest-in-practice"
approach, may therefore promote a greater acceptability of DTQs
amongst the public.
REFERENCES
Arneson, R (1989) Equality and Equal Opportunity
for Welfare, Philosophical Studies, 56, pp 77-93.
Baer, P (2002) Equity, Greenhouse Gas Emissions,
and Global Common Resources. In Schneider, S, Rosencranz, A and
Niles, J (eds) Climate Change Policy: A Survey pp 393-408,
Washington DC: Island Press.
Fleming, D (1996) Stopping the Traffic, Country
Life, vol 140, 19; 9 May, pp 62-65.
Fleming, D (2005) Energy and the Common Purpose:
Descending the Energy Staircase with Tradable Energy Quotas (TEQs),
London: The Lean Economy Connection.
Ingham, B (2006) Bring Me Sunshine, Hebden Bridge
Times, 3 August.
Miliband, D (2006) Carbon Allowances.
www.davidmiliband.defra.gov.uk/blogs/ministerial—blog/archive/2006/07/19/1557.aspx
Raymond, L (2006) Cutting the "Gordian knot"
in Climate Change Policy, Energy Policy 34, pp 655-658.
Schmidtz, D (1997) The Institution of Property. In
Ladeur, K (ed) Liberal Institutions, Economic Constitutional
Rights, and the Role of Organizations, Baden Baden: Nomos
Verlagsgesellschaft, pp 31-51.
Starkey, R and Anderson, K (2005) Domestic Tradable
Quotas: A Policy Instrument for Reducing Greenhouse Gas Emissions
from Energy Use, Tyndall Technical Paper 39
www.tyndall.ac.uk/research/theme2/final—reports/t3—22.pdf
Richard Starkey
Tyndall Centre for Climate Change Research, University
of Manchester
September 2006
5 Available at www.tyndall.ac.uk/research/theme2/final-reports/t3-22.pdf Back
6
www.teqs.org Back
7
This work is ongoing and is presented here in provisional form
to provide the Committee with an illustration of the research
conducted at Tyndall Manchester since the publication of the Tyndall
DTQs report. Back
8
The views of egalitarian liberals are important as they take
a much more egalitarian approach to the distribution of resources
than, for example, libertarian philosophers. Back
9
Other egalitarian liberal philosophers have suggested alternative
formulations of what should be equalised but this does not affect
the basic argument set out below. Back
10
This response (21 July) can be viewed on the webpage referenced
in Miliband (2006). Back
11
Of course, it may be that a person with a disability is not able
to travel much and so has low transport emissions. Back
12
It might be argued that the aim of policy is to graft a fair
allocation of emissions rights onto today's less-than-fair allocation
of energy! Back
13
See the Tyndall DTQs report, Section 3.4. Back
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