Monday, 4 December 2006

You the Actor

Carbon Limited project ( comments on Domestic Tradable Quotas (for UK):

At the present time, 44% of emissions in the UK are attributable
directly to individuals, but the individual is not currently a player
in the carbon market. In a globalised carbon market, the initiative to
reduce emissions may not stay with governments. Companies and
communities who recognise the scale of the threat of climate change to
their own futures and the future of their families could themselves
become the drivers.

As a concerned citizen, one could buy verified carbon reductions and not
sell them - hence removing carbon from the market and therefore forcing
the price up, but the RSA does not believe this is enough. We are
looking at an entirely new approach to individual carbon trading which
we hope could hold the key to balancing the development of the economy
with the need to control carbon emissions in a fast, effective and
equitable manner. It is the new show in town.

At present, there are few actors in the EU ETS - 12,000 installations,
representing approximately 45% of EU CO2 emissions. The RSA conceives of
every individual in the UK becoming an actor and, if the scheme
succeeds, every individual in the EU - nearly 500 million people.

It would work like this: The government of the UK would allocate to each
adult in the UK an equal per capita share of the 44% of the country's
emissions that are attributable directly to individuals (through fuel
and electricity purchases). The remaining 56% of the UK's carbon
emissions would be auctioned to government and business.

That 56% operates in much the same way as the EU ETS. However
individuals are now actors in the same market. If they emit less than
their personal allocation, they can sell their emissions rights to those
emitting more than their share.

Decoupling emissions from growth

So what would happen if each person was financially responsible for his
or her own emissions? Firstly we would find out where our allowance was
going: do we drive a big car? Do we leave the lights on? Do we have the
heating turned up too high? Do we take many flights? If there was a
strong financial incentive and individual access to the market, we think
we would see a rapid move away from wasteful to low-carbon lifestyles.
People would look for low-carbon products and services to save on their
emissions allocations. If there was demand for low-carbon products,
entrepreneurs, in turn, would develop and produce them for the market.

Each year, to fight climate change, the carbon budget will have to
shrink. As the budget is shrunk, the goods and services required to
meet the lowered targets will become available and affordable and a new
low-carbon culture will continue to propel this change.

It would be good in other ways, too. It would enhance public health and
energy security and, indeed, the Contraction and Convergence model
could also be delivered through this mechanism. So what starts out
looking like an idea with a strong core of market economics, on closer
inspection turns into something which speaks to the heart of a strong
and just society.

Matt Prescott is the director of CarbonLimited. The Royal Society for
the encouragement of Arts, Manufactures and Commerce (RSA) is at the
heart of work to further the debate on personal carbon trading through
the CarbonLimited project. CarbonLimited runs until December 2008 and is
delivering a programme of research, public debate and piloting.

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