Memorandum submitted by Public Interest
Research Centre (PIRC), Centre for Alternative Technology (CAT)
and The Lean Economy Connection
1. Is a scheme of personal carbon allowances
desirable, and could such a scheme be practical?
DESIRABLE
1.1 A scheme of personal carbon allowances
is desirable, for many reasons. Here are two:
1.2 (a) Citizens are ultimately (either
directly or indirectly) responsible for the entire flow of carbon
emissions into the atmosphere. There will be no possibility of
reducing that flow on the scale required unless individuals are
themselves involved in the scheme. Equally, there will be no possibility
of reducing individuals' contribution to that flow unless they
are able to work in real practical partnership with all other
energy users—companies, public services and local and the
government itself.
1.3 (b) The nation needs to have an
efficient electronic system in place in order to support an energy
rationing scheme in the increasingly probable event of shortages
in the supply of oil and gas. At the very least, this is a necessary
precaution; a rationing facility needs to be in place. In fact,
the case is stronger than that, because oil and gas outages are
to be expected from the early years of the decade beginning 2010.
1.4 A key criterion for the design of a
personal allowance system is that it should be equally applicable
both in the context of rationing to reduction of carbon emissions
and in the context of rationing to reducing the consumption of
particular fuels, (at short notice). Tradable Energy Quotas (TEQs)
have this facility.
PRACTICAL
1.5 The system is entirely practical if
it is "hands-free"—that is, it must not require
participants, especially households, to be distracted by calculations
of carbon emission and administration of their unit (credit) accounts.
The way to achieve the needed simplicity is to base the scheme,
not on carbon emission themselves, but on fuel. The fuel is rated
for the carbon emissions associated with it, and consumers will
simply surrender their units when they buy fuel, in exactly the
same way is done for their monetary payments. Virtually the whole
scheme can in this way be handled by credit card and direct debit
arrangements, enabling participants to focus attention on the
real problem—the practical task of achieving a steep, demanding
reduction in their fossil energy use/carbon emissions, and sustaining
this effort over at least a 20-year time-scale.
1.6 "Practical" also means (amongst
other things) "effective". Tradable Energy Quotas (TEQs)
are highly effective in that (a) they guarantee that the reductions
set by the Carbon Budget will actually be achieved, and (b) they
focus attention on ways to sustain steep reductions in fuel-dependency.
By directly involving citizens, they recruit the intelligence
of the whole population to the task of achieving the energy descent.
Without the full involvement of citizens, it cannot be done.
2.0 The likely impact of a personal carbon
trading scheme. The Committee would like to investigate the likely
impact of a scheme of this nature, not only on carbon emissions,
but also on the economy, different markets, existing "green"
policies, and the public themselves.
The Committee would also welcome opinions on
whether favourable conditions currently exist for the introduction
of such a scheme and, if not, what conditions would be required
for such a scheme to be feasible, desirable, and palatable to
the public and business community. In particular the Committee
would be interested to identify any areas where further research
and consideration would be required in order to fully assess the
impact and feasibility of a personal carbon trading scheme.
2.1 In compiling the report ZeroCarbonBrtiain,
we explored the concept from first principles as well as evaluating
various existing proposals for Personal Carbon Allowances. We
found that the most robust and comprehensively thought-through
policy was that of Tradable Energy Quotas or TEQs which explicitly
includes personal carbon allowances and crucially, does so within
a single carbon market used by business, industry, government
and individuals.
3. Operational feasibility. The Committee
would also like to investigate the operational feasibility of
a personal carbon trading scheme, notably whether the institutional
and operational systems to implement the scheme currently exist
and, if not, what degree of system and institutional development
would be required for the programme to operate effectively.
3.1 We found that TEQs are feasible, the
components that have been drawn together in the design of the
scheme are all tried and tested. The innovation is simply the
linking of the various components in its application to carbon.
— Ration schemes have been relied upon
in the past.
— Today's "Oyster Cards"
demonstrates that the technology to underpin the system is feasible.
— The financial industry in which Britain
excels in will provide the backbone for the delivery of such a
system.
3.2 By integrating personal and business
choices, TEQs provides a system that genuinely harnesses the power
of the free market within a climate safe[7]
and energy secure framework.
4. The Committee also welcomes opinions
on how the administration of a scheme should operate, and who
should have responsibility for managing the scheme, setting the
emissions caps and deciding the allocation of credits. The Committee
is also interested in the likely cost of implementing and operating
the system, and the feasibility of running an effective pilot
scheme.
4.1 It will be essential to maintain independence
between the elected government of the day and the administrative
body that manages the carbon budget. It will also be highly desirable
for Government, business and civil society to work in cooperation
under the same constraints set by an independent external body.
4.2 Our most effective model in Britain
is that of the Monetary Policy Committee. A a Carbon Policy Committee
should be established with at least as much independence and integrity
of structure. The economy has been recognised as a subset of the
Environment, so economic considerations should be framed by the
considerations of the Carbon Policy Committee.
The existence of the Carbon Policy Committee is also
critical to the effectiveness of the scheme because of its value
in freeing the Government to concentrate on enabling and encouraging
the nation as a whole to achieve the demanding energy descent
set by the Carbon Budget. The practical difficulties of achieving
this descent tend to be underestimated (owing perhaps to the interest
aroused by the scheme itself). It will require changes in transport
patterns, in land use, and in work patterns, as well as the more
straightforward tasks of energy conservation and renewables. The
zero carbon Britain report demonstrates that this transition
is technologically achievable.
4.3 However there is no possibility of achieving
a transformation on this scale unless the Government is deeply
committed to supporting it and helping all energy-users to achieve
it. The government's ability to do this will in the end depend
on it being in the same situation—in the "same boat"—as
everybody else. If the Government can say, "We too, are bound
by the requirements of the Carbon Policy Committee, we deal in
the same market, and are subject to the same challenges as everyone
else", it will earn the trust and credibility it needs. That
sense of working together will require the Budget to be set by
an independent body, not by the Government.
5. Variations between different proposed
models. The Committee is interested in the various different proposals
for personal carbon training schemes, and would like to investigate
the distinctions between these ideas, such as:
Who should participate in such a scheme?
5.1 All energy users: Individuals, Business
and Industry, the Government.
How should permits be allocated?
5.2 Issued by entitlement to individuals,
auctioned (by weekly Tender) to business and industry on the model
of the existing system of Tender for government debt (Treasury
Bills).
Which carbon emissions should be included under
the scheme?
5.3 All greenhouse gases associated with
the provision and use of energy, including the extremely climate-potent
solvents used in the nuclear industry, such as the halogenated
compounds whose impact ranges up to 10,000 times that of carbon
dioxide.
6. The Committee would also welcome any
opinions on alternatives to a compulsory system of personal carbon
trading, such as a household-based system, a voluntary scheme,
or a rewards-based system for saving carbon credits.
6.1 It is helpful to be aware of key criteria
to be fulfilled in the choice and design of a scheme to reduce
carbon emissions quickly and/or to sustain an energy rationing
scheme. Here are nine criteria for a successful scheme:
1. Is there a guarantee that the budgeted
energy descent will be achieved?
2. Is there an assured ration of energy for
individuals at a time of scarcity?
3. Is there a long term budget, which gives
time to plan ahead.
4. Is the scheme specified in terms of energy
(not money), so that it involves everyone in energy-planning,
not in calculating financial opportunities?
5. Is the scheme equally suited and designed
as a response both to climate change and to energy depletion.
6. Is the scheme hands-free?
7. Is the scheme denominated in units other
than money, making it resilient to the deep economic changes and
possible recession which could emerge over the period of the scheme?
8. Is the system based on "pull"?
That is, does it avoid paternalistic intervention and, instead.
recruit individuals and localities to the task—inviting
them to apply their intelligence and talent to the invention and
development of solutions?
9. Does it inspire a "common purpose"
between all participants—individuals, industry, the Government?
The Committee may wish to consider whether the
alternative schemes indicated under this heading fulfil these
criteria.
10. Public acceptability and involvement.
Given that a personal carbon trading scheme requires the cooperation
and engagement of the public, the Committee would welcome views
on the likely response of the public to such a scheme, not only
on the extent to which such a scheme would be acceptable, but
also on the capacity of the public to adopt and benefit from the
scheme, and the likely trading habits that would develop.
10.1 Once a sufficient portion of society
are aware of both our necessary cuts in carbon for climate change
and the imminent constraints in global oil and gas supply it will
become incumbent on Government to act. When presented with the
available options, TEQs will be the preferred option of the public
as they are transparent and provide fair access to energy for
all. Business will champion the system as the preferred option
as TEQs provide a level playing field, rewards carbon-free innovations
and provides long term certainty with which to plan.
10.2 Introducing such a system will change
all of lives more profoundly than any single policy ever has.
10.3 The system will necessarily demand
clear and strong leadership. The introduction of such a scheme
will be greatly aided by widespread public understanding and deep
concern of the seriousness and urgency of climate change —specifically
runaway feedbacks. We should recognise that we have now entered
the slow unfolding of a climate emergency.
11. The Committee would also like to examine
the extent to which such a scheme would be just and equitable,
and what possible measures would be required to ensure no groups
were unfairly disadvantaged.
11.1 There is clear and direct equity in
the equal per capita adult entitlement. There would be flexibility
(eg by child allowances and local social services) to provide
households in particular difficulties with financial support.
However there is a danger in building too much flexibility into
the scheme. The reality is that the energy available to us all,
and the carbon emission permissible from us all, will fall rapidly,
and without regard to equity. The big impacts are beyond our control,
however committed we may be to equity. It is fundamental that
we learn to adjust to the imposed rate of decline. It would be
profoundly inequitable if the scheme were so moderated by adjustments
in the interests of equity that it failed to achieve the reductions
that are needed. Evidence of special cases with very high energy
dependency should not be signals for compensation, but clear challenges
for energy reform achieved with all speed.
11.2 Nonetheless, measures to sustain high
levels of equity, consistent with also sustaining the effectiveness
of the scheme, will need to be included among the available policy
instruments. The TEQs system is flexible, allowing arrangements
to be made to meet circumstances and needs, according to the best
judgment of circumstance and time. Two key constraints exist for
many of the poorest households under a personal carbon allowance
scheme.
— Firstly, poor households will not
have the disposable income to cover the capital expenses of energy
saving measures such as insulation, low energy appliances and
efficient cars. In the absence of secondary legislative support,
a steadily reducing personal allowance will cause energy poverty
for these households.
— Very poor households may find themselves
compelled to sell their personal carbon allowance for short term
financial gain at the expense of their longer term or mid term
energy needs.
11.3 Both of these problems are real and
need to be carefully addressed in any carbon permit scheme. Under
the TEQs scheme, a portion of the revenue from sale of TEQs to
Industry and business must be hypothecated to support these low
income households.
11.4 These issues do not undermine the central
reason for choosing a personal carbon scheme; that it provides
the core driver for a race out of carbon.
July 2007
7 The level of climate safety is contingent on the
size of the global carbon budget. Furthermore it must be recognised
carbon emissions management is only part of a comprehensive global
strategy towards a safe climate. Back
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