Updated on 2022-07-01 by Adam Hardy
Personal Carbon Trading or PCT is a mechanism for increasing flexibility and efficiency in a carbon rationing or cap-and-trade scheme. It is a component in our policy for a carbon currency based on carbon allowances.
In a quota-based or rationing system where each participant receives a fixed amount of carbon tokens that allow the emission of a certain amount of CO2, there are two problems where personal carbon trading helps:
- participants with an already low carbon footprint are not incentivised to take any more action if they can’t sell tokens they don’t use
- participants, especially businesses, who manage their quota badly or suffer unforeseen issues impacting their carbon spending, fall off a cliff edge, known as “carbon bankruptcy”
Allowing people to sell their excess emissions quota or buy more when they run out solves both of these problems.
Doesn’t personal carbon trading mean the rationing is less effective?
There are many reasons to view buying and selling of tokens with suspicion. It’s true that without a market to sell their excess tokens, many participants would have tokens that go unused, so reducing CO2 emissions further than planned.
But that extra win in CO2 emissions reduction (through people being stuck with tokens they don’t want to use) can’t be an input to the planning process. It’s an externality that depends on a variety of factors, and as such, it can’t be relied on by the carbon authority running the scheme.
If the plan is to reduce CO2 emissions by a certain amount, then that is the amount that should be issued as carbon tokens. Not only does that guarantee clarity, intent and results, but it also allows participants an extra but costly convenience and flexibility, should they run into issues managing their carbon allowances.
“Carbon bankruptcy” is not desirable in any way and the threat of it would raise resistance to the introduction of the scheme in the first place.
The rich will always buy their way out of the restrictions – surely?
Only to a limited extent. The carbon token supply is limited – when no-one is selling, the price will go up until some people find it attractive enough to sell. Some people who aren’t “carbon literate” might be tempted to sell what they have and end up in difficulties later. Is that an equitability issue? In a small number of cases, maybe, and such cases should be catered for by the carbon authority to prevent anyone falling through the net.
In the first place though, carbon allowances on a per capita basis are inherently fair. People buying extra rations to enable their lifestyle will be compensating the more carbon-neutral people – and the more they do so, the higher the price they will pay. Admittedly like any market, there is a danger of touts, cheats, con-artists, spivs and even taxes, but how that is managed is a question of implementation.
There is already a real, live PCT scheme in Lahti, Finland. If you go to visit, don’t forget your phone – the whole scheme runs via an app on your mobile. All of this area of carbon policy and carbon footprint reduction is the focus of Oxford University’s Environmental Change Institute where Dr Tina Fawcett (in the video) carries out her work.
Resources
The UK government Environmental Audit Committee’s report: https://publications.parliament.uk/pa/cm200708/cmselect/cmenvaud/565/56504.htm and the PDF: https://publications.parliament.uk/pa/cm200708/cmselect/cmenvaud/565/565.pdf
Dr Fawcett & Dr Parag’s academic paper from 2014: Personal Carbon Trading: a review of research evidence and real-world experience of a radical idea
A newspaper article from the time: https://www.euractiv.com/section/uk-europe/news/tory-mp-calls-for-personal-carbon-trading-scheme/
