Select Committee on Environmental Audit Fifth Report

2  Background

5. In a personal carbon trading scheme, individuals are allocated an allowance of carbon from within an overall national cap on the quantity of carbon emissions produced by individuals within the jurisdiction. People surrender their credits as they make certain purchases that result in emissions, such as electricity and fuel. Those who need or want to emit more than their allowance have to buy allowances from those who can emit less than their allowance. The market effect encourages people to pursue energy efficiency in the home and to reduce their carbon emissions in other areas, such as transport. Over time, the overall emissions cap (and therefore individual allocations) can be reduced in line with international or national agreements.

6. Most of the work conducted so far on the feasibility of personal carbon trading has taken place in the academic domain. There are three key models (although all are variations on the basic concept described above): Tradeable Energy Quotas (TEQs) proposed by David Fleming; Domestic Tradable Quotas (DTQs) proposed by Richard Starkey and Kevin Anderson at the Tyndall Centre (a development of Fleming's work); and Personal Carbon Allowances (PCAs) proposed by Mayer Hillman, Tina Fawcett and Brenda Boardman's team at Oxford's Environmental Change Institute.

7. Broadly, there are three issues that differentiate these approaches:

  • Participation: Generally, this concerns whether the scheme is limited to individuals, or also allocates a proportion of the overall carbon allowance to companies.
  • Allocation: The main areas of contention here are whether children should receive an allocation and how disadvantaged groups should be accounted for.
  • Scope: This concerns which carbon emissions are included. For example, whether or not personal air travel and / or public transport are included in the scheme.

8. The Centre for Sustainable Energy summarised the differences between the schemes as follows:
Participation Individuals (40% free) and organisations (60% tendered, principally to market makers from whom organisations then buy as required) As TEQsIndividuals only (assumes organisations covered by another, unspecified scheme). At least 40% of UK emissions (i.e. all domestic plus aviation)
Allocation Adults only equal per capita (plus organisations as above) on weekly rolling basis As TEQsAdults full equal per capita allowance; children under 18 half an allowance
Scope Gas, electricity, coal, oil, road fuels As TEQs plus personal aviation Gas, electricity, coal, oil, road fuels, personal aviation, (not public transport)

Source: Simon Roberts and Joshua Thumim, Centre for Sustainable Energy, Report to Defra, 'A Rough Guide to Individual Carbon Trading: The Ideas, the Issues and the Next Steps', November 2006, p3

Alternative schemes involving individuals

9. Personal carbon trading is not the only mechanism that aims to encourage behavioural change in individuals through monetary penalties and rewards. A number of other options, some more developed than others, have identified the prospect of financial loss or gain as the most effective lever for persuading individuals to take responsibility for their own emissions. Although the most obvious of these is a systematic programme of 'green taxation', others take more direct inspiration from carbon trading. The two main alternative proposals to personal carbon trading, other than green taxation, are outlined below.


10. Cap and Share was originally developed by the Irish NGO Feasta (the Foundation for the Economics of Sustainability). Cap and Share aims to achieve the same results as personal carbon trading (i.e. a guaranteed reduction in emissions), but in a form that claims to be simpler, faster and cheaper to implement. Under a Cap and Share scheme, a cap would be set for all UK carbon dioxide emissions. All adults would then receive a certificate entitling them to an equal share of the emissions under that cap. These certificates would be issued monthly, and could then be sold at banks or post offices. The certificates would then be bought by primary fossil fuel suppliers, who would be required to buy and surrender certificates equal to the emissions from burning the fossil fuels they introduced into the economy. The price of the certificates would be built into the cost of fossil fuels, which would then cascade down through the economy. Consumers would therefore have to pay more for carbon intensive products and services, but would be compensated to an extent by the money from selling their certificates.


11. The Hybrid Scheme has been developed by Steve Sorrell of the Sussex Energy Group at the University of Sussex. The scheme aims to achieve environmental and economic benefits that are comparable with personal carbon trading, but claims to be a simpler and more practical alternative, both for the short- and long-term. Under the scheme, the EU ETS would operate alongside a second upstream scheme covering all other carbon emissions from fossil fuels, including emissions from households, other buildings and transport. The fossil fuel producers or suppliers would be responsible for the carbon content of fuel sold to downstream consumers not participating in the EU ETS, surrendering an allowance for each tonne of carbon. The cost of the allowance would be passed on to consumers, and would act like a tax on carbon-intensive goods and services.

Government Interest

12. David Miliband, when he was Secretary of State for the Environment, supported the idea of personal carbon allowances as a promising policy option:

It is easy to dismiss the idea as too complex administratively, too utopian or too much of a burden for citizens. Do we really want another Government IT programme? Are there not simpler ways of achieving the same objective by focusing on business to change their behaviour not citizens? And will it ever be politically acceptable?

But, as the Tyndall Centre's work shows, in the long term, there may be potential to make a system work, and in a way that is arguably more equitable, more empowering and more effective than the traditional tools of information, tax, and regulation.[2]

13. On 4 June 2007 Mr Miliband appeared before us, and was again asked about personal carbon allowances.[3] He noted that the process was being carried forward through further research (for example, a pilot scheme was being undertaken by the RSA[4]) and the increased public debate on the matter. Mr Miliband also said he believed personal carbon trading was an idea that 'all the main parties will think about' when preparing their next manifestos.[5]

My approach to this is that as a party of Government that has been in ten years it is right that we are looking for bold solutions. We have got to test them out, we have got to make sure they are sensible, we have to make sure that they are in tune with our values and the considerations of equity are paramount in that for my party, but it is right that we look at it. I do not think we should make any excuses about saying we have not decided but we think it is worth working through.[6]

14. In August 2006, Defra commissioned the Centre for Sustainable Energy to produce an initial analysis of some of the ideas and issues involved in the concept of personal carbon trading. The resulting paper, entitled A Rough Guide to Individual Carbon Trading—The ideas, the issues and the next steps,[7] examined the advantages and disadvantages of different approaches and concluded that a personal carbon allowance and trading system had the potential, with further research, to achieve emissions savings in a fairer way than carbon taxes.

15. Defra told us:

The concept of a personal carbon allowance is one of a number of potential long term ideas being explored by the Government that could help to make individuals better informed about, and involved in, tackling climate change. […] The Government remains committed to exploring the potential of personal carbon trading.

[…] The Government believes that the current system of taxation strikes the right balance between protecting the environment, protecting the most vulnerable in society and maintaining sound public finances. There remain many high-level questions about whether a personal carbon allowance scheme could be a proportionate, effective, socially equitable and financially viable policy option, particularly when compared or combined with existing policies and other options for controlling carbon emissions; whether it could be a practical and feasible option; how such a scheme might work in practice; and whether it would involve placing undue burdens on individuals.[8]

2   'The Great Stink: Towards an Environmental Contract'-Speech by David Miliband, Secretary of State for Environment, Food and Rural Affairs, at the Audit Commission Annual Lecture, 19/07/06  Back

3   Qq 39-55 Back

4   The RSA (Royal Society for the Arts, Manufactures and Commerce) operates a pilot and research project called CarbonLimited  Back

5   Q 48 Back

6   Q 50 Back

7   Simon Roberts and Joshua Thumim, Centre for Sustainable Energy, A Rough Guide to Individual Carbon Trading: The idea-the issues and the next steps, November 2006  Back

8   Ev 113 Back

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