UK Commons Committee recommends personal carbon trading

There is a certain elegance and appeal of personal carbon quotas. Like democracy they are inherently equalizing. A challenge for carbon taxes is that they may allow the wealthy to buy their way our of change, when it is the most affluent who have the largest carbon footprints (a CCPA study is coming out next week on this topic). And as Lars Osberg pointed out at the recent PEF session on carbon pricing, the expansion of consumption by the richest is largely responsible for Canada’s horrible emissions record (the bottom 80%, in Lars’ estimation, have met their Kyoto commitments due to stagnant incomes and improvements in energy efficiency).

I first heard about carbon quotas or rationing in George Monbiot’s book Heat, where he advocates a version of the system. Beyond a few articles here and there, however, the concept has not received much attention. In part because it will take some time and expense to implement, I have been thinking about the idea as the next stage of development of carbon pricing, a medium-term measure that will get us beyond the low-hanging fruit.

But the fact that a major UK House of Commons committee, the Environmental Audit Committee, has endorsed the idea, perhaps it will start to get some traction. It is really just cap-and-trade for households but expect fierce resistance from people who have oversized carbon shoes. Here is an excerpt from the summary:

If the Government is to stand the slightest chance of meeting its 2050 carbon emissions target it cannot afford to neglect the domestic and personal sector. Reductions in carbon emissions from business and industry will be meaningless unless accompanied by significant and equal reductions from households and individuals.

Existing initiatives are unlikely to bring about behavioural change on the scale required, with many individuals choosing to disregard the connection between their own emissions and the larger challenge. Personal carbon trading might be the kind of radical measure needed to bring about behavioural change.

We believe that personal carbon trading has the potential to drive greater emissions reductions than green taxation. Personal carbon trading could guarantee a reduction in emissions because it places a ceiling on the carbon available for consumption, rather than seeking to reduce demand. Equally important, a carbon allowance could be more effective at incentivising behavioural change and engaging individuals in reducing their emissions than the price signals resulting from green taxation. There is also potential for a well explained personal carbon trading system to be better received and accepted than green taxation, because instead of all households being penalised, many would actually stand to benefit.