Examination of Witnesses (Questions 200-211)
MR RICHARD
STARKEY AND
MR MATT
PRESCOTT
1 NOVEMBER 2006
Q200 David Taylor: Presently Britain
has excess deaths due to hypothermia each year. So in a future
Richard Starkey winter, if they were then presented as excess
deaths due to inadequate domestic tradable quotas that would sound
rather better, would it, for elderly people who did not want to
play?
Mr Starkey: Again, I do not think
that is a criticism that is specific to a personal carbon trading
scheme. If you are trying to cap emissions, be it with an upstream
tax, an upstream trading scheme or a downstream trading scheme,
you are nevertheless capping emissions. There is a limit to the
amount of fossil fuels out there so the deaths could come under
any instrument. I suppose the important point to emphasise is
that personal carbon trading is not proposed as a stand-alone
scheme that solves all problems. It has to be implemented as part
of a portfolio of measures, including tackling fuel poverty, making
sure that elderly people have a proper fuel allowance and so on
and so forth. It is valid point but I do not think it is one that
is necessarily specific to this scheme.
Mr Prescott: It is one of the
reasons why we are particularly interested in looking at the community
angle and working with local authorities because one issue of
concern in terms of climate change adaptation is that people in
social housing in the block that you have described quite often
pay communal energy bills and do not actually own their property
so they cannot insert solar panels on the roof and so on, and
so they are quite limited in the way they can act, which is why
if we can bring a community-focused angle into this debate, we
can not only enable the far more efficient group efforts such
as, for example, communal CHP and so on and so forth but also
support those individuals who are particularly vulnerable as part
of a community.
Chairman: Can I ask you to do something
because you may think we sound rather cynical in the questions
that we are asking, but we are traders in reality because all
of us are anticipating what we think we might have to deal with
in our constituencies if such a mechanism was there. I think the
words "if", "might", "hope", "would"
and "could" have percolated what you have said. I think
it would be helpful, because we are also trying to understand
something which is totally novel and unfamiliar to us and you
have the advantage of working with it. If you could reformulate
your paper for the Committee taking into account some of the practical
questions that we have asked, and present us with what I will
not call an "idiots' guide" because that would be insulting
to my colleagues but a simple guide as to what a workable scheme
would actually look like, taking into account what I might call
things that we can be reasonably certain of now and a column for
the work in progress, I think that might be quite useful. You
have made it very clear that there are a lot of areas where, in
fairness to you, you are formulating a new way of doing business.
What are the areas of uncertainty which would have to be resolved
in order to try and make a scheme that was practically launchable?
You have heard colleagues around the table express some concerns
about identity of data. Perhaps you could reflect upon those in
terms of some further material that you may wish to send to us.
Lynne, I think you have some further points.
Q201 Lynne Jones: I am attracted
in the hybrid scheme by the concept of having the lump sum distribution
from the auctioning of carbon permits to the energy suppliers
because it could be redistributed in a way that it benefited people
who are poor financially or people who have poorly insulated homes
to help them insulate their homes, that sort of thing. Is there
any mechanism in your proposal that would allow redistribution
in that way?
Mr Starkey: Under a personal carbon
trading scheme emissions rights themselves are allocated on a
lump sum or equal per capita basis. In Steve's proposed scheme
the emissions rights are auctioned upstream and the revenue from
the sale of emissions rights is allocated on a lump sum basis,
and what Steve argues in his paper is that those are roughly equivalent.
Q202 Lynne Jones: But you could redistribute
that money in different ways. You would either do it equally or
there would be a mechanism of actually giving some people more
than others.
Mr Starkey: Yes, Steve talks about
the lump sum route but one could go down other routes as well.
What we have argued is that allocating emissions rights on an
equal per capita basis or allocating the revenue from the sale
of emissions rights on a per capita basis is broadly progressive
and that those on low incomes would, broadly speaking, be better
off because the emissions from their energy use are lower than
the number of emissions rights that they would receive in allocation
so they would have surplus units.
Q203 Lynne Jones: They would not
be jetting off and having high carbon emissions in that way but
they might actually use a lot of energy in heating their poorly
insulated homes.
Mr Starkey: Yes, this was a piece
of research done by the Policy Studies Institute which found that
20 to 30% of households in the lowest income deciles are actually
above average emitters because they live in such energy inefficient
housing and they have to use so much energy to heat their houses
so they are having to use a huge amount of energy and fossil fuel
to keep their house warm which means that their emissions are
very high. What the Policy Studies Institute found was that they
thought they could tax household energy and then redistribute
the income to make sure that those in fuel poverty were no worse
off, but they found that because the range of energy use within
the lowest income deciles was so broad you could not adequately
compensate those on low incomes to make sure that they were not
worse off. I think what this tells us is whether you use Steve's
upstream scheme, you use a carbon tax or you use a personal carbon
trading scheme you cannot implement the instrument in isolation.
You also have to deal—very quickly I would argue—with
issues of fuel poverty because otherwise you end up disadvantaging
some people on low incomes.
Chairman: You have said on a number of
occasions that each individual would receive their own personal
allowance under the scheme. If I look at the energy usage in our
house, there are two adults who live there and in terms of the
heating we can enjoy the heating simultaneously. Are you not in
that context over-allocating multi-owner households because from
the point of view of the differential, it is the individual actions
say in the use of hot water where there may be a difference but
in the context of absorbing the heat there is no difference.
Lynne Jones: Unless you share a bath!
Q204 Chairman: That is an innovative
solution.
Mr Prescott: In a way it is the
same as car sharing; you buy a tank of petrol and if your car
is full then it is more efficient, but there is a dose of realism
here which is that multi-occupancy households are more efficient.
Q205 Chairman: Does that not go back
to my next-door neighbour who is a single person in her home.
She gets one allowance; she has still got the same space to heat
up. The only saving she has over a two-person household is the
hot water in a domestic situation. It could well be that you use
the same amount of gas in both properties. It just seems to me
that equality ends up by disadvantaging the single person.
Mr Starkey: In a sense, this was
the issue that I addressed in my memorandum to the Committee.
There is in some sectors of the environmental movement a feeling
that if you allocate emissions rights on an equal per capita basis
that is straightforwardly and obviously fair, but the example
that I think you are giving shows things are perhaps a little
more complicated than that: single occupancy households versus
multiple occupancy households; people who live in the countryside
who have to do a lot travelling simply to live their lives who
do not have a regular bus service versus people who live in an
urban setting where all the conveniences are very nearby and where
public transport is plentiful; people who live in much warmer
parts of the country versus people who live in much colder parts
of the country. There are very many ways in which you can say
this particular allocation of cash, if it is lump sum recycling
or emissions rights, is not entirely fair. I think those are very
valid arguments. The point that I was getting at in my memorandum,
I suppose, is perhaps the argument that one makes is you cannot
adjust the lump sum recycling and the emissions rights to take
into account every single factor so this is about as fair as it
can get practically. So for those people who live in the countryside,
okay, we have to implement other measures in addition to this
scheme to make sure that they are not unnecessarily disadvantaged.
Q206 Chairman: Can I give an example.
All of us as MPs have people in our constituencies who have a
disability who feel, for example, that they ought to qualify for
a benefit like Disability Living Allowance, but because their
disability and circumstances do not chime in with that scheme's
definition of disablement they do not get state money. Let us
say for argument's sake, in the world of PCAs that people with
a disability that is recognised by Disability Living Allowance
may get some extra credits in terms of the scheme, but another
person with a disability who might argue, "My personal condition
requires me to sit at home with the fire on because I get cold
very easily but I am not officially recognised as being disabled"
is in a very disadvantaged position because of the measures that
might be used to determine who could get an additional allowance
because of their circumstances. If you are saying to me that is
about as fair as you can get, the question you have to address
is how are you going to deal with the hard luck cases which we,
I can guarantee you, will have in our constituency surgeries every
week with people complaining, "But they do not understand
my energy needs."
Mr Starkey: Perhaps I will clarify
what I said. That may be as fair as it gets in terms of allocation
of emissions rights, but it may be that through the benefits system
you could, for instance, increase disability allowances so that
that particular constituent was in a position to buy more emissions
rights on the market.
Q207 Chairman: That is the practical
problem through the benefits system and the point I was making—forgive
me, I would not expect you to be an expert in Disability Living
Allowance, there are very few people who are—what I am saying
is there are categories of people with difficult personal circumstances
who do not qualify for a benefit but who may need additional help.
Officialdom has a nasty habit of saying, "Okay, we recognise
that some groups need some special help so if you qualify for
the following forms of assistance you are in but if you do not,
notwithstanding the fact that you might need assistance, you are
out." Somebody, for example, who was very ill but who did
not qualify for a social benefit might need more heat and you
are going to have to build in a mechanism to deal with that set
of circumstances.
Mr Starkey: All I would say is
if there is a need to build in that sort of mechanism it does
not simply apply to personal carbon trading; it applies to whichever
instrument you allocate, so the carbon tax would be the same.
Q208 Chairman: Let me ask you one
factual question and one interesting one. I understand at the
moment that the price of carbon is about £11 a tonne on the
market. If you want to go and buy some carbon credits it will
cost you £11 a tonne but from what I have read the average
household in this country pushes out about eight tonnes of carbon
a year. Would it not be a lot simpler if you just said everybody
has got to have eight carbon credits and go on the market and
spend £88 and buy sufficient carbon credits to offset your
carbon emissions?
Mr Prescott: But that would involve
basically purchasing credits from anywhere in the European Union
under the £11.
Chairman: It could be that in a world
system you might do it on a world basis.
Q209 Lynne Jones: It would push the
price up quite a bit if all these people were after them?
Mr Prescott: It is true to say
that the price would rise according to the scarcity of the credits
and if everybody was buying then clearly the price would go up,
but then there are some serious global equity questions that get
raised when the offset is thrown into the ring.
Chairman: So my simple system is not
workable?
David Taylor: It would suit your much-quoted
neighbour who would be better off than you and your wife.
Q210 Chairman: Let us move on to
the easy question then, who is involved in CarbonLimited
and how is this project being funded?
Mr Prescott: CarbonLimited
is funded upfront by the RSA. There are a number of funders that
have supported the total budget of the work and I can make that
available.
Q211 Chairman: That would be helpful,
thank you.
Mr Prescott: No problem. The project
has an advisory group and I shall also send through a list of
those names, as it is rather a long list, drawn from experts in
the field of personal carbon trading and also the relevant experts
across economic issues, social issues and technological issues
so that we can cover many of the key questions that are being
raised. It is a three-year programme with a small core team at
the RSA. The work programme that I believe we sent through with
our evidence is looking to cover many of these larger questions
that are being asked. Because the RSA has very good links with
many different sectors of society, including industry, we are
looking very closely at what the commercial precursors could look
like and some of the steps that we would take in the direction
of a personal carbon trading scheme and, as we know, the goalposts
may well shift so there is a lot of learning to be done on that
process. We are working with a number of partners, the likes of
the Green Alliance and local authorities that I mentioned, developers,
other regional schemes, so it is a multi-faceted project.
Chairman: Can I on behalf of the Committee
thank you most sincerely for interacting with us because you have
been very kind in stopping your flow of thoughts when we wanted
to pose another question. I think you will have seen that you
have certainly stimulated our thinking as we have groped towards
understanding this new potentially very interesting area to involve
individuals in making a contribution to reducing emissions and
dealing with climate change. I hope perhaps you might think that
there is some value in eventually bouncing your final product
off a group of cynics like us because we as a class, if I can
put it this way, do have to deal with all shapes, sizes, forms
and conditions of man and womankind in the work that we do so
I think we have some expertise in what works and what does not,
so maybe you would like to reflect on that. Can I thank you in
advance for the further work you are kindly going to do to help
us to get a better understanding of these matters, and we very
much look forward to hearing from you, and thank you very much
for the written evidence.
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