Personal carbon trading

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Emissions trading schemes (also known as ‘cap and trade’ schemes) are one of the policy instruments available for reducing carbon dioxide (CO₂) and other greenhouse gases. Personal carbon trading, a term coined by the Royal Society of Arts, describes those proposed greenhouse gas emissions trading schemes that directly involve individuals in trading.

The proposals that fall within this category include:

Domestic Tradable Quotas (DTQs) - devised by environmental writer, David Fleming, who first published the idea in 1996. The UK's
Tyndall Centre for Climate Change Research has been researching DTQs since 2003. David Fleming now describes his scheme as Tradable Energy Quotas (TEQs).

Personal Carbon Allowances (PCAs) - described in the book “How we can save the planet” by Mayer Hillman and Tina Fawcett. Work on PCAs is ongoing at the Environmental Change Institute, Oxford, UK

All of the above proposals rely on the allocation of emissions credits to individuals on a per capita basis. This could be done on a national, or international (e.g. EU) basis. Individuals would most likely hold their emissions credits in electronic accounts, and would surrender them when they make carbon-related purchases, such as electricity, heating fuel and petroleum – PCAs would also require individuals to use credits for public transport and air flights.

As the name implies, personal carbon trading schemes are flexible. Individuals that are over-allocation (i.e. need more emissions credits than they have been given) are able to purchase additional credits from the open market, and individuals that are under-allocation can sell. This means that personal carbon trading schemes are less regressive than a carbon tax, as some low income people are likely to be better off, whereas with a tax all low income people are worse off, prior to revenue redistribution.

Proponents of personal carbon trading claim that it helps increase ‘carbon literacy’, thereby allowing individuals to make a fair contribution to reducing carbon dioxide emissions. It also allows the burden of reducing emissions to be shared evenly throughout the economy, rather than focusing all the attention on business and governments, and should encourage more localised economies.

Personal carbon trading has also been criticized for possible complexity and high transaction costs. As yet, there is minimal reliable data on these issues. There is also the criticism that personal carbon trading will be publicly unacceptable. Some have criticised the system saying that it would allow the rich to buy extra carbon rations and so go on polluting while the poor have to cut back, but this has generally overlooked the fact that the rich could only buy additional rations from the poor, thus achieving wealth redistribution, while in no way reducing the effectiveness of the scheme in reducing carbon emissions.