PCAs: ’Feasible and Fair’

Examining the concept of personal carbon allowances

Project duration: August 2006 to March 2008

The concept of personal carbon allowances — or individual carbon trading — has been judged by the Government to be "an interesting concept...ahead of its time" in a report published on May 8 2008, but has committed only to keep a ‘watching brief' on research into the idea.

Drawing on four newly published research studies, two of which involved CSE, Defra concluded that a system of personal carbon allowances (PCAs) is feasible and relatively fair.

But, it also considers that the anticipated costs of developing and operating the scheme may outweigh the added benefits of each individual having his or her own carbon allowance. Defra compared PCAs with a simpler scheme of limiting the supply of services which cause carbon emission by capping the emissions of energy suppliers, petrol retailers and airlines.
These thoughts were echoed by MPs on the Environmental Audit Committee who called on the Government to "seize the reins on this, lead the debate and co-ordinate research". In a new report, published at the end of May, they described PCAs a "radical" idea with "potential to engage the population in the fight against climate change".

Under a PCA scheme, individuals would get an equal allowance to cause carbon emissions which would be surrendered when paying for fuel and flights. Those who emit more than average would have to buy allowances from those who emit less — or cut their own emissions

CSE explored the concept in detail for Defra at the end of 2006, with a report laying out a research programme required to answer many of the unanswered questions about the concept. These latest studies for Defra addressed a number of these questions.
A major examination of the social distribution of carbon emissions across the UK population was undertaken by CSE. Working with the University of Bristol, this enabled an assessment of the types of household which might ‘win' (i.e. have more allowances than they need) and which might ‘lose' under a PCA scheme.

The study concluded that most low income households would be ‘winners' but that about 2 million would start with fewer allowances than they needed. These ‘losers' were particularly concentrated in rural areas without access to the gas network and in one person households in larger-than-average homes. CSE's research team identify a number of further steps required to produce a full picture of how carbon emissions — and the opportunities to reduce them — are distributed across the population.

CSE also made a significant contribution to the pre-feasibility and costing study undertaken for Defra by the multinational management consultants, Accenture. This found that it would be relatively straightforward to set up the system and create carbon accounts within the banking system alongside current accounts and to link the surrendering of carbon allowances to payments like chip and pin and direct debit.

However, the scale of the operation — perhaps 50 million individual carbon accounts — would create significant annual running costs (potentially in excess of £1 billion per year). These operating costs would be significantly higher than for a scheme which capped the supply of carbon ‘upstream' from a much smaller number of energy suppliers and retailers. The suppliers would then pass on in their prices the costs of reducing carbon emissions.

Photo: eandrew howe |  istockphoto.com

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