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Personal carbon trading: a review of research evidence and real-world experience of a radical idea

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  • Reichman University (IDC) Herzliya

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Personal carbon trading (PCT) is a radical and innovative mitigation approach for the residential and personal transport sectors. PCT is an umbrella term for various downstream cap-and-trade policies, all of which aim to limit carbon emissions within a society by engag-ing individuals in the process, and could cover more than 40% of national carbon emissions. This policy idea is unique because it provides an overarching approach to personal emissions from energy use and because it combines a number of mechanisms to drive behavior change: economic, psychological, and social. This paper presents a review of research evidence and real-world experience of PCT. Most of the political interest, research, and experimentation with PCT has taken place in the UK. During 2006–2008, the UK government commissioned a number of studies on PCT, following high-level political interest. It concluded that public acceptability and the cost of the scheme were serious barriers to its introduction. However, a variety of other research work has subsequently demonstrated that public acceptability may not be such a barrier as feared. Nevertheless, there are a number of other barriers, including costs and technical challenges, some adverse distributional effects, and the low carbon capa-bilities of citizens. Probably the main barrier is the lack of political will currently to consider PCT as a real option. However, opportunities for PCT adoption could open up, particularly if governments fail to meet their carbon reduction targets. PCT is still an idea rather than an implementable policy – more research is needed to develop detailed scheme designs, which can be tested with regards to equity, effectiveness, cost, and efficiency. Other research requirements include understanding public conceptions of fairness in relation to climate change mitigation. Some interesting experimental research on PCT is currently taking place in Norfolk Island, Australia, but many research gaps remain.
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Energy and Emission Control Technologies 2014:2 23–32
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http://dx.doi.org/10.2147/EECT.S56173
Personal carbon trading: a review of research
evidence and real-world experience
of a radical idea
Yael Parag1
Tina Fawcett2
1School of Sustainability, The
Interdisciplinary Center, Herzliya,
Israel; 2Environmental Change
Institute, Oxford University Centre
for the Environment, Oxford, UK
Correspondence: Yael Parag
School of Sustainability,
The Interdisciplinary Center,
Kanfei Nesharim St, PO Box 167,
Herzliya 46150, Israel
Tel +972 9 9602443
Email yparag@idc.ac.il
Abstract: Personal carbon trading (PCT) is a radical and innovative mitigation approach for
the residential and personal transport sectors. PCT is an umbrella term for various downstream
cap-and-trade policies, all of which aim to limit carbon emissions within a society by engag-
ing individuals in the process, and could cover more than 40% of national carbon emissions.
This policy idea is unique because it provides an overarching approach to personal emissions
from energy use and because it combines a number of mechanisms to drive behavior change:
economic, psychological, and social. This paper presents a review of research evidence and
real-world experience of PCT. Most of the political interest, research, and experimentation
with PCT has taken place in the UK. During 2006–2008, the UK government commissioned
a number of studies on PCT, following high-level political interest. It concluded that public
acceptability and the cost of the scheme were serious barriers to its introduction. However,
a variety of other research work has subsequently demonstrated that public acceptability may
not be such a barrier as feared. Nevertheless, there are a number of other barriers, including
costs and technical challenges, some adverse distributional effects, and the low carbon capa-
bilities of citizens. Probably the main barrier is the lack of political will currently to consider
PCT as a real option. However, opportunities for PCT adoption could open up, particularly
if governments fail to meet their carbon reduction targets. PCT is still an idea rather than an
implementable policy – more research is needed to develop detailed scheme designs, which can
be tested with regards to equity, effectiveness, cost, and efficiency. Other research requirements
include understanding public conceptions of fairness in relation to climate change mitigation.
Some interesting experimental research on PCT is currently taking place in Norfolk Island,
Australia, but many research gaps remain.
Keywords: emission reduction policy, residential energy
Introduction – the need for a more radical
approach for emission reduction
The most recent evidence from the world’s scientists reinforces the message that
climate change is occurring and that “it is extremely likely that human influence has
been the dominant cause of observed warming since the mid-20th century”.1 At the
same time, carbon emissions from energy use, the greatest source of anthropogenic
greenhouse gases, have continued to increase at an average of 2% per year since 1971.2
As a consequence, the atmospheric concentration of carbon dioxide has surpassed
400 parts per million for the first time in human history.3
National and international efforts to date have failed to reduce carbon emissions to a
level likely to ensure the threshold for “dangerous climate change” is not exceeded. The
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Parag and Fawcett
International Energy Agency4 suggested that a “far-reaching
transformation of the global energy system” would be nec-
essary for global emissions cuts sufficient to remain within
the 2°C temperature target. The agency warned that without
a bold change of policy direction, the world will lock itself
into an insecure, inefficient, and high-carbon energy system.
New approaches to reducing carbon emissions from energy
use are clearly needed.
In Europe, the most prominent European Union (EU)-wide
policy to reduce emissions is the EU Emission Trading Scheme
(EUETS). The EUETS, governed by Directive 2003/87/EC,
caps emissions from the EU power and heavy industry sectors.
Although criticized (eg, by Spencer and Guérin5), the EUETS
has been successful in terms of high compliance rates with the
caps and the acknowledgment of the majority of the managers
in the capped sector that the scheme has caused them to reduce
emissions.6 Yet, the EUETS caps only a limited percentage
of the EU total emissions and does not cover emissions from
agriculture, waste, residential sector (except for electricity),
and transport (other than aviation). As a result, emissions from
all energy sources, other than electricity, in the residential
sector are not covered by a cap and trade scheme.
Personal carbon trading (PCT) is a radical approach to
reducing emissions from energy use in the residential sector.
Unlike most current policy, it focuses on individual energy
users and locates rights and responsibilities with individuals
for their carbon emissions from household energy use and/
or personal travel. PCT is an umbrella term which describes
various downstream cap-and-trade policies, which have dif-
ferent detailed rules and system boundaries, but all of which
aim to limit carbon emissions within a society by engaging
individuals in the process. This concept has been explored in
the context of developed countries, particularly the UK where
this idea originates and where much of the research, as well
as the real-world examination, has been carried out so far.
This review paper summarizes existing research on PCT.
It begins with a short introduction to personal emissions, the
concept of PCT, the variants of PCT, and the mechanisms
through which a PCT scheme could deliver emissions
reduction. It continues with a review of the history of PCT
in the UK policy arena and discusses public and political
acceptability issues as well as the various barriers facing a
PCT scheme. The paper concludes with a reflection on what
further research is needed to take the idea forward.
What are personal carbon
emissions?
The concept of personal carbon emissions refers to the
carbon emissions arising from direct use of energy in the
household and for transport/transport services. The reason
for bringing together emissions from the residential and trans-
port sectors, which are normally discussed separately, is the
focus on the individuals – in their roles as householders and
transport users, and as decision-makers. Carbon emissions
from energy and fuel use in homes and cars are straightfor-
ward to calculate. Calculating carbon emissions from travel
by public transport and by air or sea is more complex, but
well-researched methodologies exist.7 Indirect emissions
embodied in the goods and services which individuals buy are
not included in this definition of personal carbon emissions,
primarily because they are difficult to calculate and account
for. So far, very few products have carbon labels showing
their embodied emissions, and creating these is complex.8
Giving people responsibility for managing their indirect
carbon emissions is currently impossible and indeed might
never be a practical option. Thus, the boundaries of “personal
carbon emissions” are different from popular measures of
personal “carbon footprints,”9 which usually try to take some
account of embodied emissions.
While the proportion of national emissions which arise
from each sector varies between countries, personal carbon
emissions and energy use is generally a significant proportion
of the total in developed countries. In the UK, for example,
personal carbon emissions make up around 42% of the national
total. From these, 30% arise from space heating, 10% from
water heating, 9% from appliances, 4% from lighting, 3%
from cooking, 29% from personal travel, 12% from holiday
air travel, and 2% from other travelling.10 Preliminary analysis
shows personal emissions make up a similar proportion of the
national total in Ireland and Denmark.11 In the USA, energy use
in the residential sector and for personal transport accounts for
38% of national delivered energy (authors’ analysis based on
figures in a US Energy Information Administration report12).
Although personal carbon emissions are individually
insignificant, collectively they are very large. Delivering emis-
sion reductions by altering millions of individuals’ energy-use
choices and behavior remains an unmet policy challenge.
Why PCT?
In order to reduce emissions from the residential and transport
sectors, most governments use a range of policy instruments,
including minimum efficiency standards, industry voluntary
agreements, energy efficiency obligations on energy suppli-
ers, energy labels, financial incentives, research and devel-
opment support for efficient and renewable technologies, as
well as information and advice programs.
Notwithstanding the wide range of policies, programs,
and schemes, there seems to be no overarching approach to
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Personal carbon trading
reducing personal energy consumption which could link them
together. An integrated approach would create a perceptual
and cognitive framework, enabling individuals to integrate
understanding across emissions from different activities, and
in the context of energy use as it occurs.13
Taxing energy or carbon could be considered as an over-
arching option for delivering carbon mitigation via energy
demand reduction across all energy end-uses. Ultimately,
taxation is visible to the final energy user as a price rise which
consequently leads to demand reduction. However, people
do not necessarily react to price signals imposed by taxes
in the manner predicted by neoclassical economics. Energy
demand has been shown to be inelastic to price rises,14,15 thus
weakening the effectiveness of taxation schemes in delivering
demand reduction.
PCT is an alternative, innovative, and radical overarching
policy with a potential to tackle some of the challenges above.
As mentioned earlier, PCT is a general term which describes
various downstream cap-and-trade policies. Unlike upstream
policies which place much of the responsibility for emission
reduction on the energy sector, operate at a distance from
individuals, and do not require their direct involvement (eg,
minimum efficiency standards for products), PCT focuses
on energy users themselves. Accordingly, it assigns rights
and responsibilities for the carbon emissions from household
energy use and/or personal travel to individuals.
Different PCT schemes have been proposed in the last
two decades, but none of these is a fully developed policy
instrument. Some of the proposed schemes are outline ideas
(eg, a proposal for a scheme covering household energy
only16), while others have been developed and investigated
in more detail (eg, tradable energy quotas17 and personal
carbon allowances18). The PCT schemes also vary in their
inclusiveness, the scope of emissions they cover, the rules and
procedures for allocating, surrendering, and trading carbon
units, and the level of individual engagement. Table 1 pro-
vides a summary of proposed PCT schemes.
Despite variation, the objective of all PCT schemes is to
limit the overall carbon emissions within a society by engag-
ing individuals in the process. All the schemes proposed so
far share common features: the scheme is mandatory, with
no opt-outs; individuals periodically receive a carbon quota
for free; for every activity that involves carbon use within
the scope of the scheme, allowances are surrendered; the
allowances are tradable in a new personal carbon market;
and allowances are reduced over time in line with national
carbon-reduction commitments.
To be effective, a PCT scheme must be mandatory.
However, there have been a few small-scale voluntary
PCT-like schemes, which people joined in order to reduce
their personal carbon emissions. Table 2 provides a summary
of voluntary PCT-like schemes. Howell,19 who examined
such voluntary schemes, argues that while people who tend
to join such schemes are usually environmentally aware and
do not represent the general population, there are insights
from this experience that would be relevant for a mandatory
PCT scheme. Insights include, for example, controversies
which might arise around issues such as what allowance –
if any – should be given to children, the boundaries of the
scheme, the conversion factors used, and the allowances
allocation on an equal-per-capita basis. At the same time,
Howell’s study highlights the benefits to participants of act-
ing within the schemes, including improved carbon visibility
and literacy, and social support for behavior change.19 It also
suggests that further research is needed to better understand
trading behavior, which does not necessarily align with the
economically rational, and could have implications for carbon
market structure and operations.
How could PCT bring about
emissions reduction?
PCT provides an overarching approach to personal
emissions. It is unique because it accesses and combines a
number of mechanisms to drive behavior change: economic,
psychological, and social.13,20 The mechanisms of PCT are
presented in Figure 1.
The price of carbon provides an economic incentive for
reducing emissions. This price would be determined by the
market of traded allowances and will be influenced by various
factors, including the extent of the “shortage” of allowances,
the value of the services carbon-based energy can deliver,
and the extent to which there is a well-behaved market.
This mechanism penalizes high-emitters while rewarding
low-emitters.
The intrinsic psychological mechanism is driven through
a combination of the carbon price, the scale of the indi-
vidual allowance, and the awareness to and the visibility
of the carbon emissions related to the individuals’ actions.
The distribution of allowances between individuals, as well
as the personal cap, could influence behavior in different
ways than the allowance’s total value. Experimental work
has provided some indication for a carbon awareness effect
on willingness to change behavior20 and that people may be
inclined to respond to PCT partly based on the absolute size
of the allowance and whether they are in credit or debit, rather
than responding with pure economic rationality.21
The social mechanism relies on the notion that decisions,
even about individually allocated resources, are subject to
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Parag and Fawcett
Table 1 A short summary of the variation in proposed personal carbon trading (PCT) schemes
Scheme Summary
Tradable energy quotas (TEQs)17 Previously known as ‘DTQs’ (domestic tradable quotas). TEQs is one of the more detailed and developed
proposals. It was proposed and developed in the UK for the UK economy. It aims to tackle climate change
and peak oil. The scope of scheme covers the whole economy.
How it works: a TEQ budget sets a limit on annual carbon emissions over the next 20 years,
which then rolls forward week by week. 40% of the allowances are distributed free to individuals
on an equal per capita basis. Personal emissions allocations cover household energy use and personal travel,
but not air travel. The remaining 60% are sold by tender to all other energy users. All fuels
have a carbon rating and purchasers must surrender carbon units to cover related emissions.
Transactions are carried out electronically and all carbon units are tradable.
TEQs scheme has been examined by the UK government in a ‘pre-feasibility’ study.
Cap and Share (C&S)69 C&S is one of the more detailed and developed proposals. It was proposed and developed in Ireland
for the Irish economy. The scope of the scheme covers the whole economy.
How it works: an independent committee sets a national carbon cap. All adults periodically receive
certicates entitling them to an equal share of national emissions. Certicates are sold by individuals
via banks or post ofces to companies that import or extract fossil fuels. These suppliers require
surrendering certicates equal to emissions from the use of the fossil fuels that they introduce
into the economy. The price of emissions ows through the economy.
C&S has been examined by the Irish government.
Tradable consumption quota70 The details of this scheme are not particularly well developed. The scope of the scheme covers the whole
economy.
How it works: a national cap is set on carbon emissions. All national emissions are allocated for free
to individuals on equal per capita basis. All products would be carbon labelled. Quotas are surrendered
by individuals to cover the emissions related to the non-manufacturing-related carbon content of purchased
goods and their own direct use of energy. Manufacturing organizations buy emissions quotas from individuals
in a carbon market to cover their carbon emissions related to the process of manufacturing.
Personal carbon allowances (PCA)18 PCA was proposed and developed in the UK. It is one of the more detailed and developed proposals.
The scope of the scheme covers household energy and personal travel.
How it works: a national cap is set for emissions from household energy use, including air travel.
Allowances and personal are allocated periodically on an equal per capita basis to individuals for free
to cover these emissions. For every transport purchase of electricity, gas, transport fuels and services,
allowances are surrendered. Transactions (PCA) are carried out electronically and allowances are tradable
in the personal carbon market.
PCA has been examined by the UK government in a ‘pre-feasibility’ study.
Household carbon trading16 Household carbon trading was proposed in California and examined against its emission targets.
The details of this scheme are not particularly well developed.
The scope of the scheme covers household energy.
How it works: a yearly carbon emissions cap is set for residential energy use based on emissions reduction
targets. Allowances are allocated to each household on an equal per household allocation basis via utility
service providers who place the allowances in each user’s account. These are deducted periodically
by the utility according to energy use, and additional allowances must be purchased if the account
is in decit. The carbon allowances are fully tradable. At the end of a compliance period, the state collects
the permits from the utilities and determines compliance with the cap.
Tradable transport carbon permits71 Tradable transport carbon permits were originally suggested in France and the scheme was examined
for emissions generated by French private transport. It has also been applied to the UK.38
The scope of the scheme covers private road transport.
How it works: a cap is set for emissions from private transport. Allowances are allocated to all individuals
for free (not necessarily on an equal basis). For every purchase of fuel, allowances are transferred
to the regulating authority to cover the CO2 equivalent of a liter of fuel and cancelled. Transactions
and trading are carried out electronically.
Participants buy and sell permits through intermediates like banks or buy them at the petrol pump.
Note: Copyright ©2010. Adapted from Fawcett T, Parag Y. An introduction to personal carbon trading. Clim Policy. 2010;10(4):329–338, with permission from Taylor &
Francis Ltd, www.tandfonline.com.68
social forces22 and that energy conservation arising from
normative concern as opposed to hedonistic or cost
reasons – is more robust against changes and therefore more
durable.23 The carbon “budget” allocated to individuals
suggests, to some extent, an acceptable and fair personal
carbon footprint. As such, it provides an indication and
guidelines for the level of personal emissions that would
not harm the atmosphere.
The interaction between these mechanisms and the
overall impact of the policy will be contingent upon a range
Energy and Emission Control Technologies 2014:2
Table 2 Voluntary personal carbon trading (PCT)-like schemes
Scheme Summary
Grassroots
PCT-like schemes
In the UK the grassroots movement Carbon Rationing Action Groups (CRAGs) operated a PCT-like scheme. CRAGs
were community-based groups (8–12 members on average) that voluntarily agreed to ration personal carbon emissions
and act to reduce them against the pre-set carbon targets. The different CRAGs schemes varied: some were more
ambitious than other, some covered aviation while other did not, some included a nancial penalty for not meeting
the target, and some did not. On 2009 there were 24 groups listed on the UK CRAG website as ‘active’. Since then,
however, most of the CRAGs have ceased to exist.19
Work place
PCT-like scheme
In 2008, WSP, an international engineering and environmental consultancy company, launched ‘PACT’ a personal carbon
allowance tracking scheme for its employees around the UK. This PCT-like program set staff an annual carbon allowance
and tracked their performance against it. The program included a bonus for those who came under their targets and
a penalty (maximum £100) for those who exceeded it. Today WSP sells the PACT as a service to other organizations.
According to the WSP website, the voluntary carbon allowance scheme has helped around 4,000 employees to cut their
carbon footprints by an average of 10 per cent.72,73
Policy tool
PCT
Impact
Impact
Intrinsic
motivation
External
Social
support
constraints
Energy
demand
reduction
Emissions reduction
Impact
Carbon perception
Social norm
Economic behavior
via
price signal,
incentive to maximise benefits
via
allocation, visibility,
awareness, budgeting
via
new perception of fair emissions,
what is acceptable and what is not
Mechanism Policy goal
Figure 1 PCT mechanisms.
Note: Copyright ©2009. Environmental Change Institute, University of Oxford. Adapted from Parag Y, Strickland D. Personal Carbon Budgeting: What people need to know,
learn and have in order to manage and live within a carbon budget, and the policies that could support them. UKERC Research Report, Demand Reduction Theme. 2009.13
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Personal carbon trading
of other factors related to the design of the scheme and its
public support. The same broad assessment might be made
of carbon taxes as a policy instrument. However, while
carbon taxes are designed primarily to target economic
behavior, through changing prices within existing markets
and social frameworks, PCT is more likely to impact via the
other mechanisms too because of the use of a new carbon
market, budgets, and the potential for social and institutional
change.20
It is important to note that PCT is not envisaged as
replacing most current policies. Rather, it could be seen
as an enabling policy which is likely to push individuals
to make the most of existing schemes, such as prod-
uct and building standards, energy labels, taxation and
financial incentives,24,25 as well as low carbon transport
modes.26
Public and political
acceptability of PCT
From the start of research into PCT, there has been con-
cern about whether this type of policy could be publicly or
politically acceptable. This is not surprising given its radical
nature.
PCT has attracted political interest in the UK, particu-
larly during 2006–2008. Serious interest was kick-started
in 2006 by the Secretary of State for the Environment,
promoting it as a possible policy option in the context
of all parts of society needing to make a contribution to
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Parag and Fawcett
reducing carbon emissions.27 Although PCT had gained
some previous political attention, this had not led to much
public discussion, whereas in 2006–2007, there was con-
siderable reporting of the ideas in the press, and discussion
about its pros and cons.28
The Secretary of State’s interest led to a program of
research work being commissioned by the Department for
Environment, Food and Rural Affairs (Defra). In 2008,
Defra published four reports regarding PCT, which covered
its technical feasibility and potential cost, effectiveness and
strategic fit, public acceptability, and distributional impacts.
In its synthesis report, based on the research it had commis-
sioned, Defra concluded that PCT was ahead of its time.29 The
key concerns were public acceptability and costs, with doubts
of whether these issues could be resolved satisfactorily. Defra
concluded that the government should remain engaged in the
debate around PCT, but that further work should be taken
forward by academics and research organizations and not
the government itself.
However, the House of Commons Environmental Audit
Committee, an influential committee of members of parlia-
ment, which published its report a month later, was more
supportive of PCT, and “regretted” Defra’s decision to
wind down further research work on PCT.30 Their inquiry
concluded that PCT could be “essential” in helping to
reduce national carbon emissions, and that further research
was urgently required. However, the government did not
take the committee’s advice, and there has been no further
government-sponsored research on PCT.
In general, there has been little political interest in other
countries. In Ireland, “Cap and Share” (see Table 1) has
been investigated by the Sustainable Development Council,31
but this has not led to wider government interest in the
scheme.
A number of studies have explored public response to
PCT. These have used a wide range of methodologies, includ-
ing focus-group discussions,32,33 presenting participants with
personalized information about the impact of different poli-
cies based on their actual carbon footprints,34 semi-structured
interviews,35 questionnaire surveys,36 and an opinion poll.37
Other studies have used mixed methods.38 Questions about
PCT have been asked in the context of all personal energy
use, for transport emissions only, and in comparison with
other policies, or as a stand-alone policy.
The range of methods, and the fact that they have been
used with different scheme designs, adds weight to the col-
lective conclusion that when PCT is compared with carbon
taxation (or other policies) it is usually preferred. For those
who prefer PCT, its key benefits are seen as fairness and
effectiveness, where fairness is understood in terms of the dis-
tributional effects of the policy (who loses and who gains) as
well as the “equal rights” principle PCT embodies. For those
against, their main concerns are about implementation and
unfairness. There is concern about different sorts of unfairness.
Some people object to the idea, embodied in PCT, that high
polluters can pay to continue their high carbon lifestyles.
Others worry that there would be vulnerable losers, without
the resources to adopt a low carbon lifestyle (eg, investing in
energy efficiency). Another source of unfairness is that the
existing infrastructure does not always permit low carbon
choices (eg, lack of public transport in rural areas).
Seeking views on a hypothetical policy, whose details
have not yet been fully worked out, is somewhat problematic,
and care needs to be taken in interpretation of results. The
criteria that people raise as guiding their decisions on PCT
and other policies (fairness, effectiveness, and implementa-
tion) are important in understanding their views. Fairness
is a key issue, and in practice, the fairness of PCT would
depend on detailed policy design, implementation, and
enforcement, as well as the principles on which it is based.
Therefore, while the evidence points to public acceptability
not being an overwhelming barrier to the uptake of PCT,
scheme design would need to deliver the benefits expected
by those in favor, and allay the fears of those against, to
achieve public support.
Barriers and opportunities for PCT
Barriers and obstacles to PCT can be divided into two
categories: 1) barriers related to technical and economic
feasibility of the scheme, and 2) barriers related to ideology,
values, and beliefs about fairness and about the role, respon-
sibility, and capability of individuals versus government and
industry in climate-mitigation efforts.
PCT not only presents a different approach to pricing
carbon, it also runs contrary to the conventional wisdom in
the policy community about the extent to which governments
can and should challenge personal consumption.39 As such,
PCT is perceived by policymakers as a political risk.40 Adding
to this political risk is the fact that PCT is innovative and
radical, and while promising, its feasibility and effectiveness
have never been demonstrated or tested. And even if a PCT
simulation was trialed, only limited aspects could actually
be tested before launching it.41
Examination of the technical and operational feasibility of
PCT suggests that the know-how to establish a database sys-
tem to securely hold and manage personal carbon “accounts”
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Personal carbon trading
exists: the existing infrastructure for credit and debit card
transactions could be used for carbon credit transactions.42
Likewise, fraud prevention and enforcement are possible.43
Both fraud prevention and enforcement details would depend
on the level of enforcement: upstream, at the energy utility
level, or downstream, at the individual level.44 A trial using
loyalty cards to track fuel purchases at petrol stations and
generate carbon emissions figures, showed that this was
feasible and that it cost less than had been thought.45 Most
feasibility studies were done nearly a decade ago. In the last
decade, however, information technology and information
security have improved dramatically. Today, electronic
transactions of money and information are widely used on
a daily basis. It would be reasonable to assume that there
should not be a significant technical barrier to implementing
a PCT scheme.
The cost of introducing, running, and enforcing PCT could
be a significant barrier. Costs would depend very much on the
scheme structure and the implementation details.42,43,46 A study
commissioned by Defra47 suggested that PCT annual run-
ning costs could be £20–£40 per adult, in addition to one-off
startup costs of £14–£40 per person. Lockwood48 and the Lean
Economy Connection49 questioned some of the underlying
assumptions about the cost of the scheme and suggested that
the costs might only be half those suggested by Defra.
Moving from technical and economic barriers to those
based more on values or ideology, the fairness of PCT is
a key concern. PCT embodies a specific view of equity: it
suggests that an equal allowance is fair. This is based on a
“rights” interpretation of fairness, but some would argue that
a “capability” basis (eg, ability to reduce emissions, or abil-
ity to pay), or even efficiency (most carbon savings at least
cost) would be more just. For a philosophical interrogation
of these issues, see Starkey50,51 and Hyams.52 Practically and
technically, allocation of equal allowances has clear benefits
over a system based on individual capability. However, PCT
scheme design is likely to be strongly influenced by (compet-
ing) interpretations of fairness.
In the UK, there has been modeling work looking at the
distributional consequences of PCT for different sections
of the population and how this varies with the design of
PCT policy. The most detailed early work on this was car-
ried out by Ekins and Dresner.53 This analysis was updated
by Thumim and White,54 who looked at the distribution
of high and low carbon emitters by income, geographical
location, and household composition. They found that 71%
of households in the lowest three income deciles would be
“winnersunder PCT, while 55% of households in the highest
three income deciles would either have to buy allowances or
reduce their emissions (making them “losers”). The authors
identified 2.1 million low-income “loser” households (from a
total of 24.6 million UK households), many of whom live in
rural areas and many also live in larger-than-average homes.
Further work looked at the potential for moderating the
negative social effects of PCT and showed the positive dis-
tributional effect of giving children a proportion of the adult
allowance.55,56 The overall finding is that PCT is generally
progressive but that there will be some low-income losers.
Their numbers can be reduced by careful policy design, but
these might pose administrative and feasibility challenges.
PCT places responsibility to reduce emissions on indi-
viduals and suggests that carbon “budgeting” and trading
may cause people to become more aware of their personal
emissions, more engaged with emissions reductions, and
more inclined to make an effort to reduce them.42 There is,
however, concern about whether individuals are carbon
capable” (ie, whether they would be able to make informed
judgments and take effective decisions regarding the use and
management of their own carbon emission budget).25,43,57
PCT can be framed and presented in a number of ways –
and this is reflected in the variety of names used in different
versions of the idea: carbon rations, allowances, quotas,
tradable permits, and cap and share. The “carbon ration”
framing was used by some early proponents58 and taken
up by the network of voluntary Carbon Rationing Action
Groups (Table 2). While some people find this framing
attractive, drawing on values of social solidarity and col-
lective responses to external threats, other find it negative,
with connotations of austerity and government control. Most
advocates tend not to use the language of rationing, for fear of
evoking a negative response.59 There is also the wider issue
about the effect of using a war metaphor in relation to climate
change.60 Other framings such as PCT – can also garner
a negative response, with concern about the legitimacy of
treating carbon as a tradable commodity.61 Framing and use
of language is clearly important in terms of communication
and persuasion, and the wrong framing could damage public
and political perception of PCT.
A further criticism of PCT is that it will discourage people
from spending money and hence will slow economic growth
and reduce the UK competitive advantage compared with
places where no such constraint exists.39
But maybe the most significant barrier for PCT in the
policy arena is the lack of political will to consider it as a
real option. In fact, despite the risk of the UK government
not delivering its own long-term carbon-reduction targets,
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Parag and Fawcett
currently there is no actor within or outside the government
who actively advocates PCT or any other mitigation policy
that places some of the responsibility to act on individuals.
Non-governmental organizations, too, do not advocate it,
and this might be because they fear that proposing solutions
that rely on civil society action risks “letting Government
off the hook”.39,62
While there are many barriers to the adoption to PCT,
there are also opportunities. PCT is more likely to be consid-
ered seriously if other policies were seen to be failing at a time
when there exists a political pressure to act more radically
on climate change.39,40 Political pressure for PCT could arise
from the public (bottom up) or from the international arena
(top down), or both. Once in a while, there are calls for the
government to consider PCT as a policy option. For example,
in 2008, the UK House of Commons’ Environmental Audit
Committee urged the government to introduce a PCT scheme,
arguing that “personal carbon trading might be the kind of
radical measure needed to bring about behavioral change.”30
Likewise, following the failure of Copenhagen, there were
calls (eg, in Doran63) for policymakers to seriously consider
a PCT scheme for the UK in order to bring about a step
change in sustainable consumption policy. So far, none of
the calls have been accompanied by any significant public
or international pressure.
Agreeing with Defra,29 Bird and Lockwood40 say this
might not be the time for a PCT scheme. However, they
suggest that policymakers should keep PCT on the shelf as
“plan B.” They advise the government to prepare the ground
for the introduction for PCT by improving the public’s car-
bon literacy and better understand how the public perceives
fairness and climate change.
Ongoing research and interest
in PCT, and research gaps
While research on PCT continues to be published (eg,
Zanni et al64 and McNamara and Caulfield65), there are no
large-scale research programs about PCT within the EU, to
the authors’ knowledge. However, there is interesting research
currently happening on an island 1,500 km off the coast of
Australia. Norfolk Island is undertaking “the first real test of
personal carbon trading in the world” for the Norfolk Island
Carbon/Health Evaluation Study (NICHE). The trial is in
its early stages, but already, 350 people are registered for it,
there is an electronic carbon accounting system, feedback
on carbon emissions, and rewards for participation.66 The
research goals are 1) to test attitudes (and hence acceptability)
of an incentive scheme for saving energy and reducing a
community’s carbon footprint, and 2) to test the hypothesis
that increasing people’s environmental consciousness will
have a positive impact on their health through better health
behaviors (ie, more exercise and healthy diet).
There has been some interest in PCT ideas from the com-
mercial sector. For example, Coca-Cola in collaboration with
the UK’s Carbon Trust have published research on PCT. They
expanded the boundaries of personal carbon to include the
embodied carbon in food and drink and in leisure activities
(as well as household and travel energy use), and trialed the
concept of a “personal daily carbon allowance” with a sample
of households.67 For another example of commercial sector
interest, see Table 2.
As this paper has emphasized, considerable political and
societal change would be needed for PCT to make the tran-
sition from an idea to an adopted policy. However, further
research is also required to fully explore the case for PCT.
There is a need for further development of detailed PCT
policies whose likely effects in terms of equity, efficiency,
cost, and acceptability can be tested. Many design options
need to be considered, including allocation rules (do chil-
dren get an allowance, and if so, how much?), banking and
accounting, boundaries of the scheme, and compensation
to vulnerable “losers” under the scheme. A wide range of
research approaches should be involved to test policy designs,
including researching voluntary PCT and similar schemes,
laboratory experiments, research trials, modeling and qualita-
tive, deliberative methods. A better understanding of people’s
current carbon capability is needed, as is understanding
of how to best inform and motivate people to make lower
carbon choices (with or without a PCT scheme). Methods
of improving carbon capability should also be researched.
How people would actually manage a carbon allowance or
trade within a market is currently not understood, and this
too needs to be explored. Finally, understanding public inter-
pretations of fairness in energy and climate change policy is
vital. Without new and detailed multidisciplinary research,
it seems unlikely that PCT will attract significant public or
political interest.
Summary and conclusion
The urgent need for increased action to reduce carbon emis-
sions from developed countries is unarguable. PCT has the
potential to tackle a significant proportion of emissions in
these countries. It can provide an overarching approach to
carbon emissions reduction in the residential and transport
sectors and accesses psychological, social, and economic
mechanisms to engage individuals. It explicitly involves
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31
Personal carbon trading
citizens in meeting the carbon reduction targets their
governments have signed up to.
The UK government said “no” to PCT after a pre-feasibility
study and essentially took it off the list of optional mitigation
policies. There is no doubt, however, that for developed
nations with ambitious carbon reduction goals, innovative
and radical policies, including PCT, need to be developed.
PCT is a powerful idea, but at present there is neither
a detailed policy design nor sufficient research to indicate
that PCT is likely to be an effective, efficient, and equitable
policy. More detailed research is needed into a variety of
PCT policy designs. Such research would also answer many
questions about options for significantly reducing emissions
from the residential energy use and personal-travel sectors.
Disclosure
The authors report no conflicts of interest in this work.
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... Several variations of mandatory PCAs or personal carbon-trading schemes have been proposed in the literature under different names 8 . For instance, centrally allocated and tradable PCAs have been examined by the UK government, looking at a design covering household energy and personal travel 9 . ...
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... 2003/87/EC). The EU-ETS represents the most prominent EU-wide policy to reduce GHG emissions (Parag and Fawcett, 2014) but it covers only 45% of total emissions and does not apply to many sectors, including agriculture, food industry, and transport (European Commission, 2016). Moreover, due to its market-based nature, the ETS defines CO 2 prices in a highly variable system, with changes that often depend on market conditions (e.g. ...
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