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Climate change & energy

Personal carbon trading

The Government is in the initial stages of analysing the feasibility of personal carbon trading (PCT). This is just one of a number of potential long term options being explored for making individuals better informed about, and involved in, tackling climate change. Our aim is to try and understand the issues surrounding personal carbon trading better.

What is personal carbon trading?

Personal carbon trading – variously described as personal carbon allowances, domestic tradable quotas, and tradable energy quotas – is a potential way of reducing greenhouse gas emissions. An overall emissions cap would be set, and emissions rights would then be divided equally across the population. These "carbon credits" or “allowances” would then be surrendered when purchasing fuel at a petrol station, paying home energy bills or booking travel tickets (note: coverage of activities varies between different models).

How would this help reduce emissions?

Those who were able to live within their allowance would be able to sell any surplus credits to those who needed or wanted to emit more than their allowance; hence rewarding low carbon lifestyles. Over time, the overall emissions cap (and hence individual allocations) could be reduced in line with international or nationally adopted agreements.

What does the Government think about it?

An initial scoping study was produced for Defra by the Centre for Sustainable Energy in November 2006, which concluded:

  • by having an overall cap on carbon, a personal carbon allowance could guarantee a certain reduction in domestic carbon emissions;
  • it is unlikely that such an allowance could work in isolation from other policies;
  • such a scheme might have the potential to achieve emissions savings in a fairer way than a carbon tax; and
  • there is little evidence currently available about key wider issues critical to the success of a personal carbon allowance such as public and political feasibility, technical feasibility, cost, and relative effectiveness.

The Government believes that the current system of taxation strikes the right balance between protecting the environment, protecting the most vulnerable in society and maintaining sound public finances. There remain many high-level questions about whether a personal carbon trading scheme could be a proportionate, effective, socially equitable and fiancially viable approach. Therefore, the Government has since developed a pre-feasibility work programme that aims to deliver an initial view on the value of personal carbon trading compared to other approaches to reduce individuals' carbon dioxide emissions. If in the future the Government thought that personal carbon trading could be a viable policy option, it would engage the public in a full debate.

What is the Government doing on personal carbon trading?

The Government is conducting a pre-feasibility analysis of personal carbon trading, exploring some key issues highlighted by the Centre for Sustainable Energy’s report, as well as through subsequent discussions with academics and organisations researching personal carbon trading. Issues being explored include:

  • the proportionality, efficiency and effectiveness of personal carbon trading compared or combined with existing policies and other ways of achieving the same emission reductions;
  • potential equity and distributional impacts, in order to understand how personal carbon trading might affect different groups in society and to consider the impact of different scheme designs (e.g. inclusion/ exclusion of public transport);
  • the technical feasibility of such a scheme, how it could be operated in the simplest way, and what supporting systems and IT might be required, as well as what it might cost;
  • whether it would avoid placing undue burdens on individuals, and if so how it could be designed in a way that would be most acceptable to the general public.

The above analysis will be brought together to review the potential value of personal carbon trading compared with other approaches to reduce individuals’ carbon dioxide emissions. An inter-departmental Project Board has been established to oversee, and provide strategic steer, to this pre-feasibility analysis.

More information

Page last modified: 17 October 2007
Page published: 11 December 2006

Department for Environment, Food and Rural Affairs