The Viability of Personal Carbon Trading

April 11, 2022 by James C. Ryan

Chemical symbol for carbon

By Hunter Johnston, Staff Editor

Personal carbon trading refers to a variety of downstream cap-and-trade policies that allocate rights and responsibilities for those greenhouse gas emissions caused by individual consumption of energy during household energy use and/or personal travel.[1] The various personal carbon trading schemes differ according to numerous criteria, including: their inclusiveness, the scope of emissions covered, the level of individual engagement, and the rules and procedures for allocating, surrendering, and trading carbon units.[2]

Despite this variety, all Personal carbon trading schemes share several core features: rights for carbon emissions are allocated to individuals for free; emissions from household energy use and/or personal (i.e. non-business) transport are covered; emissions rights are tradable; emissions allocations reduce year-on-year in line with a declining national carbon cap; and the scheme is mandatory, with no opt-outs.[3] Whereas traditional cap-and-trade policies focus on industry emitters of greenhouse gasses, personal carbon trading is peculiarly concerned with downstream purchases of fossil fuels and emissions generated by an individual or household activity. In assuming this downstream-facing posture, personal carbon trading has invited an additional level of complexity on top of the logistical, administrative, and policy issues raised by traditional cap-and-trade schemes.

How does personal carbon trading work?

Under a personal carbon trading scheme, an independent board or committee establishes a national carbon cap, complete with an annual carbon budget, applicable to all private individuals.[4] As in a traditional cap-and-trade system, the annual carbon budget decreases annually, ensuring a lower carbon cap in later years.[5] Thus, the carbon budget establishes a firm time horizon, allowing energy users to plan their transition from fossil fuels to sustainable sources of energy.[6]

Under a typical personal carbon trading regime, the government allocates personal carbon allowances for free to all citizens on an annual basis, the sum of all allowances being equal to the government’s annual target for household energy consumption.[7] As in Tradable Energy Quotas, personal carbon allowances are deducted from individuals’ budgets when purchasing transport or home-heating fuels and paying electricity bills.[8] Further, personal carbon allowances are tradeable – individuals or households experiencing a shortage of allowances may purchase additional credits in the personal carbon market.[9] As a point of comparison, some models permit transactions of allowances or credits between individuals and industrial sources of emissions, expanding the scheme to regulate both personal and corporate emissions.[10]

Is personal carbon trading a viable regulatory scheme?

While innovative and aspirational, personal carbon trading remains a divisive, impractical solution to reducing carbon emissions.

As a category, personal carbon trading may validly claim a number of strengths. First, the policy uniquely targets individual emissions, which cap-and-trade and other emissions reduction regimes typically ignore. Second, personal carbon trading effectively harnesses the power of norm-activation, which suggests that information that induces an individual to make personal judgments about what behavior is right or wrong (personal norms), or what behavior will be socially sanctioned or rewarded by others (social norms), tends to influence a wide range of behaviors,[11] to cause wide-spread changes in public attitudes toward climate change, in favor of personal responsibility for emissions reductions. Finally, personal carbon trading schemes may produce more equitable results for society, benefitting low-income households at the expense of industrial sources of emissions.[12] Indeed, personal carbon trading may promote a form of distributive equity as low-income households would be expected to receive allowances in excess of their emissions, while high-income households would not receive enough allowances to meet their needs.[13]

Yet, personal carbon trading harbors a number of weaknesses that threaten both its efficacy and its prospects for adoption, particularly in the United States. First, as a policy invention, personal carbon trading’s novel structure may hinder its national adoption. Second, the technical complexity inherent to the policy model is likely to result in high costs, which threaten its favorability and economic feasibility. [14] Third, personal carbon trading is relatively politically unpalatable, particularly in the United States, due to both its intrusive reliance on personal data and its character as an environmental protection policy. Finally, it may validly be argued that personal carbon trading schemes might actually serve to decrease equity by disproportionately burdening low-income households with high adoption costs.[15]

Conclusion

Despite progress on a number of fronts, personal carbon trading remains too personally invasive to attract meaningful consideration by United States legislators. Several of the greatest barriers to adoption cited in the 1990s and 2000s, namely, prohibitively high implementation costs, technological constraints, and administrative feasibility, do not loom so large in 2021. Technological advances, particularly in artificial intelligence and banking systems, have rendered such a scheme practically achievable. That said, those very same breakthroughs serve to harm personal carbon trading’s political palatability. The policy’s intrusive use of personal information, namely, individual carbon fuel consumption, cuts against its prospects in the United States. What’s more, its radical nature further threatens its political feasibility, particularly in the United States, which has struggled to pass even the most conventional forms of environmental legislation since the 1990s.

Ultimately while not currently feasible, personal carbon trading provides a glimpse of what an environmentally sustainable future might look like. Should national norms shift in favor of environmental sustainability and personal responsibility for climate, personal carbon trading might be adopted without much opposition. For now, the policy remains entirely hypothetical.

[1] Tina Fawcett & Yael Parag, An introduction to personal carbon trading, Climate Policy, Jun. 15, 2011, 329.

[2] Id.

[3] Fawcett & Parag, supra note 1, at 332; Tina Fawcett, Personal carbon trading: A policy ahead of its time?, Energy Policy, Jul. 1, 2020, 6868 [hereinafter Ahead of its time].

[4] Fawcett & Parag, supra note 1, at 330; TEQs, at a glance, https://www.flemingpolicycentre.org.uk/teqs/ (last visited Dec. 13, 2021).

[5] Id.

[6] TEQs (Tradable Energy Quotas), https://leanlogic.online/glossary/teqs/ (last visited Dec. 13, 2021).

[7] Martin Burgess, Personal carbon allowances: A revised model to alleviate distributional issues, Ecological Economics, Aug. 20, 2016, at 1.

[8] Francesco Nerini, Tina Fawcett, Yael Parag & Paul Elkins, Personal carbon allowances revisited, Nature Sustainability, Aug. 16, 2021, at 1.

[9] Id.

[10] Fawcett & Parag, supra note 1, at 330.M330, TEQs (Tradable Energy Quotas), https://leanlogic.online/glossary/teqs/ (last visited Dec. 13, 2021).

[11] ARTICLE: THE CARBON-NEUTRAL INDIVIDUAL, 82 N.Y.U.L. Rev. 1673, 1705.

[12] Tina Fawcett, Personal carbon trading in different national contexts, Climate Policy, Jun. 15, 2011, 343

[13] Id.

[14] Fawcett & Parag, supra note 1, at 333.

[15] CLIMATE CHANGE: THE EQUITY PROBLEM, 26 Va. Envtl. L.J. 55, 61-2.