Thursday, August 10, 2006

Tradable emissions quotas

To Manchester? That’ll be 10 pounds for the ticket, and 15 kilos of carbon credits.

As I mentioned in passing last week, the British environment secretary David Miliband floated the idea of implementing a personal carbon trading system. The idea is that each person gets an annual carbon allowance. Whenever you buy gas, pay an electrical bill, etc., you would hand over some carbon credits. If you run out of credits, you would have to buy more from the government. The price of the credits would be determined by trading on the government-run market.

The concept itself is not new. Tradable energy quotas (TEQs), also known as domestic trading quotas, were first proposed several years ago by academics in the UK; a bill aimed at raising awareness for the idea was even proposed in the House of Commons.

Most people assume TEQs would work like a progressive carbon tax. The wealthy who consume more energy could buy credits, from a government-run market, in turn, essentially subsidizing people with less-carbon intensive lifestyles. From Miliband’s speech in the House:

“Imagine your neighbourhood. Each neighbour receives the same free entitlement to a certain number of carbon points. The family next door has an SUV and realise they are going to have to buy more carbon points. So instead they decide to trade in the SUV for a hybrid car. They save 2.2 tonnes of carbon each year. They then sell their carbon points back to the bank and share the dividends of environmental growth.

The granny next door doesn’t drive and doesn’t do much air travel. So she has spare carbon points that she can sell. But she doesn’t want to be handling two currencies so she cashes in all her carbon permits as soon as she receives them. When she pays her electricity bill, her energy company builds in the price of carbon to her total bill. She simply pays carbon as she uses it. At the end of the year she finds herself better off.”

For the moment, it is only a proposal. I don’t envision the UK actually enacting a TEQ system in the near future. And I can’t imagine the US or Canada agreeing to issue necessary ID / carbon credit cards to every citizen, let alone agree to further tax personal energy use.

Nevertheless, I’m surprised more people aren’t talking about the idea, even here in Hummer-land. Almost all the N. American environmental organizations promote the importance of both individual action and the market-based mechanisms change, like carbon trading between businesses, states or countries. So where are the environmental organizations on TEQs?

I’m surprised that, at least as a publicity stunt, no group has set up a pilot individual carbon trading program. Issue credits to volunteers, and get them to keep track of their energy bills, fuel use, maybe food purchases, etc. Maybe Chicago Climate Exchange, the home game?


Anonymous said...

This system will hit the hardest the poor in North America if ever implemented. Poor drive older cars. Those cars consume more gas. They also tend to use car to do the work. Say, delivering mail or papers. Or pizza. Yes they would like to get a less gas sucking hybrid, but it is out of their price range. One solution is going on social assistance, do nothing, and sell your green gas credits.
This will create a new class of society that does not contribute anything to the society. Read some history. Things like that happened in Roman Empire. Then it was Roman citizenship that became a commodity. Human life must never become a commodity. We already had example last year of the dead peasant insurance scam that made some people wealthier after Katrina.

Good Idea, runs into reality and shatters.

Unknown said...

Back here the 21st century... a personal carbon allowance system, like any tax system, could include a progressive scale, exemptions for employment expenses, exemptions for rural dwellers, etc. I suggest reading the Tyndall Centre's report, which formed the basis of Miliband's speech:

Anonymous said...

Yes, in 21st century this scheme will make me a very rich man. I live in upper middle class neighborhood. How do you think Russian Oligarchs were made. During privatization of industry all workers in the factories received shares. They end up concentrated in the hands of few. I will not give the methodology.

As per your argument on grading the allowances of the rural, remote and employment. Right away you make a system unequal.

My main argument is how would you control emissions? Do you control every step a person does? If a large rural family has 2 SUVs but drives 5 people at the time in each of them. They emit less than a single guy who drives his hybrid everyday.

About all your main points report talks about more research needed.

This policy I put up there with the Marxism. May be a good idea but short of violent compulsions you will never get everyone to do it.

Simon what you have to realize is how much distrust in the general population toward science. And it is growing. I am just stating the fact here. As a scientist. The science, specifically climate change became extremely political. The myth of ivory tower and independent scientist have evaporated. Majority of people do not care about global warming or climate change. This is postmodernist reality of the western societies. Politicians know this. The talk about things but no one will think about putting 200% consumption tax on fossil fuel.

Unknown said...

Oh yes, it would be much better concede a supposed public mistrust of science, and squash discussion of new or different ideas. That'd be very open and egalitarian.

Of course, what do I know, I'm stuck in the Ivory Tower.

Besides... five people in the car on every trip? Isn't that exactly what the cut-your-personal-emissions crowd is aiming for?