Memorandum submitted by Richard Starkey,
The Tyndall Centre for Climate Change Research, University of
Manchester
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).[3]
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[4]
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 organizations). 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-politicize budget setting
in same the way that the Bank of England's Monetary Policy Committee
is intended to depoliticize 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 organizations
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 organizations. 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 organizations
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.[5]
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, p401).
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, pp43-4) argues that there is:
no foreseeable prospect of being able to privatize
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:[6]
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, p77-8).
18. Most egalitarian liberals also reject
the notion that "equality of condition" is achieved
by equalizing 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, p83-4).
19. In place of equalizing welfare, Arneson
therefore suggests that what should be equalized is, in fact,
"opportunity for welfare".[7]
(In his example in the previous paragraph, the two persons are
provided with resources that give them equal opportunity for welfare.
However, instead of realizing this opportunity by consuming these
resources, they decide to gamble with them.)
20. Arneson argues that equalizing 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, p656-7) 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:[8]
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?[9]
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.[10]
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 recognize
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.[11]
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, pp77-93.
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 pp393-408,
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,
pp655-658.
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, pp31-51.
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
July 2007
3 Available at www.tyndall.ac.uk/research/theme2/final_reports/t3_22.pdf Back
4
www.teqs.org Back
5
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
6
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
7
Other egalitarian liberal philosophers have suggested alternative
formulations of what should be equalized but this does not affect
the basic argument set out below. Back
8
This response (21 July) can be viewed on the webpage referenced
in Miliband (2006). Back
9
Of course, it may be that a person with a disability is not able
to travel much and so has low transport emissions. Back
10
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
11
See the Tyndall DTQs report, Section 3.4. Back
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