Personal cap-and-trade and other CO2 reduction ideas

Recently, someone in my neck of the woods floated an idea of extending the cap-and-trade carbon emissions thing right down to individual citizens. In other words, everyone would get a stack of carbon credits every year, and they'd get deducted when you buy gas, pay your electricity bill, buy fuel oil for heating, buy a plane ticket, bus ticket, train ticket, and what not. And, of course, you'd be free to sell any surplus credits you have on the open market as well as buy more if you're running out.

I kinda like the idea. This scheme would have an effect on my personal behavior.

Let's take a practical example. It's possible to have an electricity contract with the power utility, where you pay a bit more for "green electricity" -- i.e., power generated with hydropower, wind, solar, and what have you. The utility doesn't sell more of these "green power" contracts than it actually produces "green power," and it uses the extra money to develop more of it.

I haven't switched to this type of contract.

The reason is that electricity is fungible. If I buy "green" power, that means that I'm lowering demand for "brown" power, which causes downward pressure on its price. As long as there's a market for "brown" power, that means that someone will just be getting his "brown" power for less -- a big chunk of my extra payment will, effectively, subsidize someone else's "brown" power. I don't want that. Therefore, as incentives go, a "green" electricity contract isn't a very good one. It will only be a good one if the market genuinely shifts; if "brown" power becomes so unpopular that the utility will have to start dismantling capacity rather than simply selling it for a bit less.

However, if I was participating in this kind of cap-and-trade system, presumably "green" electricity would count for fewer carbon credits than "brown" electricity. Meaning, I'd have an economic incentive to switch to "green" electricity, along with lots of other people. This just might be enough to create a market situation where the electricity utility would have an actual incentive to build "green" power and dismantle "brown" power.

I can think of lots of little ways in which I could shrink my carbon footprint, but which are similarly ineffective if only a small part of the population does it. This kind of incentive scheme would push much larger groups of people into them.

IOW, on the whole I like the scheme a lot, although it's not without its problems. It might not be easy to make it work in practice. I can think of a few ways, though -- for example, have dual pricing for gas, fuel oil, air tickets, bus tickets, and what have you, with "non-carbon-credited" prices much higher than "carbon-credited" prices, and then issue everyone a "carbon card" they can flash to deduct the credits and thereby get the lower-priced version.

Another problem is loss of privacy -- collecting and collating the information on carbon credits would concentrate a lot of data about me in one place, which is not good. (This could be done in a way that this would be mitigated; for example, by making the carbon-credit deductions "anonymous," with information needed for verification only stored at the point where the deduction was made.)

Thoughts, suggestions, better ideas, anyone?

I'd prefer that this not devolve into a global-warming debate, though, so I'd respectfully request that those of us who believe, for whatever reason, that it's pointless even to try to cut our carbon emissions opt out of the discussion (if there is one).

I like the idea in principle - I wonder about the overhead of running what would essentially be a parallel currency though and whether all those little individual savings would be a better return than alternative aproaches.

I would suggest that you visit http://www.myfootprint.org

That test includes more on your "ecological footprint" than just CO2 reduction, which might bring you some inspiration on how this system could be a more complete framework to encourage a sustainable lifestyle.

I ended up 1.01 on the scale and my cohabit got 0.76. Most noteable problem we had was related to our use of water that could be much improved.

I have to agree with V7. I like the idea in theory, but I have no idea how practical it would be in reality or what negative side effects there would be. How would you cover, say, people being responsible? In terms of "if I leave the room I turn off the lights/tv" or "I don't set the AC to Arctic temperatures"(i'm guilty of this one, heh). Would you get credits for car pooling or taking public transportation? I don't drive and I only take the Metro whenever I go places (well, except in the once a month occassion where I'm going far away from DC). Therefor getting a gas discoutn would be meaningless to me. Would your theoretical carbon card give me discounts somewhere else? Could I apply it to (say) a lower electricity bill or metro fares?

JemyM said:

I would suggest that you visit http://www.myfootprint.org

That test includes more on your "ecological footprint" than just CO2 reduction, which might bring you some inspiration on how this system could be a more complete framework to encourage a sustainable lifestyle.

I ended up 1.01 on the scale and my cohabit got 0.76. Most noteable problem we had was related to our use of water that could be much improved.

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I need about 3 earths to sustain my living. Well, it's not entirely correct, since I put living alone, but we're 5 people and stuff, let me try again. Since we're all students, we have no income lol.

Still 3

Rithrandil said:

I have to agree with V7. I like the idea in theory, but I have no idea how practical it would be in reality or what negative side effects there would be. How would you cover, say, people being responsible? In terms of "if I leave the room I turn off the lights/tv" or "I don't set the AC to Arctic temperatures"(i'm guilty of this one, heh).

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That'd show up in your electricity bill. The idea is that you'd spend your carbon credits on that, and the number of credits you'd spend might depend on how your electricity was produced. So that's covered.

Would you get credits for car pooling or taking public transportation?

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That's covered by fueling the car -- you don't pay credits to drive a car; you pay them when buying gas. Presumably the people car-pooling would agree to divide the cost of gas in credits as well as dollars between themselves. Public transportation has a carbon cost too, so that would go out of your credits whenever you buy a ticket; of course, if you take a less carbon-heavy form of transport, you pay less in credits. I would expect that driving alone in a car would end up costing a great deal more credits than taking public transport. So no, you wouldn't get credits, but you'd spend less than otherwise.

I don't drive and I only take the Metro whenever I go places (well, except in the once a month occassion where I'm going far away from DC). Therefor getting a gas discoutn would be meaningless to me. Would your theoretical carbon card give me discounts somewhere else? Could I apply it to (say) a lower electricity bill or metro fares?

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Nope, but you could sell your surplus credits on the carbon credit market. That's the "trade" part of "cap and trade."

What would this do to the cost of shipping or the agriculture industry(or construction, I guess? You know, big vehicles that use fuel to do things.

V7 said:

I like the idea in principle - I wonder about the overhead of running what would essentially be a parallel currency though and whether all those little individual savings would be a better return than alternative aproaches.

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Yeah, it's not that obvious how this could be set up in practice. I think some kind of opt-in system based on dual prices could work. Currently gas costs about 1.25 euros per liter here (that'd be about $6.50 per gallon to our trans-Atlantic friends). If they made it so that you can buy it for 1.50 without any carbon credits, or 1.00 with them, it would encourage people to buy into the system and use their credits; if they don't want to bother, they could just sell off all their credits and pay the higher prices.

Thing is, I don't think the end-user -- consumer, whatever -- would have to be tracked for all that many commodities. With manufactured goods, the carbon credit cost would be on the manufacturer and distributor, and would factor in the dollar/euro cost of the good. We'd have to figure out exactly what goods to target: if we looked at stuff like transportation, heating, and power, these are comparatively easy to track. We already have a personal "travel card" for the public transport system in Helsinki; it'd be very easy to add carbon-tracking to that. Utility bills are easy to track as well. Air tickets are easy.

The system wouldn't have to be perfect, mind -- just good enough that it would price in at least *some* of the carbon cost that's currently not priced in. People do respond to incentives, both in good ways and bad!

Rithrandil said:

What would this do to the cost of shipping or the agriculture industry(or construction, I guess? You know, big vehicles that use fuel to do things.

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It would add somewhat to the cost, I'm sure. However, (and I'm sorry I don't have the references to hand; someone has in fact done the arithmetic, and I've seen the numbers) the cost burden won't be huge -- we're talking a few percentage points, not, say, 25% or more. In fact, it's even arguable that increasing transportation costs for goods would be a *good* thing, since it'd make for more diverse local economies; if it wasn't practically free to ship stuff back and forth between China, Europe, and the USA, more manufacturing might stay closer to where the goods are consumed.

For construction in particular, I'm fairly certain the cost burden would be negligible. How do I know? 'Cuz I'm doing some home improvement right now, and the biggest cost item is compensation for labor. Transportation costs aren't even a rounding error in the total.

Prime Junta said:

Nope, but you could sell your surplus credits on the carbon credit market. That's the "trade" part of "cap and trade."

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I also like the idea in principle, in particular the idea to make individual responsible.
However I see the risk in the issue above: When used for companies the effect was that the biggest companies bought rights from smaller ones or from ones who didn't need them and ended up polluting more then before. But exactly these biggest companies would of course had the best preconditions to improve their technical installations and to reduce pollution.

Some countries ended up in producing more CO2 then the goals from international treaties said, because their industry could afford it.

So the problem is the idea that market mechanism have positive effects, which may not be correct.

So simple direct regulations (ban products, which do not fulfill certain requirements) might be more effective.



On individual level it might be similar: Poor people would sell their rights for money and richer people would buy as much as they need so they can avoid changing their habits.

Prime Junta said:

It would add somewhat to the cost, I'm sure. However, (and I'm sorry I don't have the references to hand; someone has in fact done the arithmetic, and I've seen the numbers) the cost burden won't be huge -- we're talking a few percentage points, not, say, 25% or more. In fact, it's even arguable that increasing transportation costs for goods would be a *good* thing, since it'd make for more diverse local economies; if it wasn't practically free to ship stuff back and forth between China, Europe, and the USA, more manufacturing might stay closer to where the goods are consumed.

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I know right now that fuel prices are high enough that Agriculture is hurting pretty badly (my stepdad is in the Agri-business). He was telling me that it's so bad that people are breaking into farms/whatever and siphoning off diesel and that the problem has gotten so bad the FBI has actually come down and started investigating. Even without the diesel thieves it costs a lot of money to run all of the agriculture equipment plus pay for shipping. This, of course, would result in increased food prices, and I doubt putting the squeeze to low income families (or even middle class families) would be a good outcome of your plan.

Prime Junta said:

For construction in particular, I'm fairly certain the cost burden would be negligible. How do I know? 'Cuz I'm doing some home improvement right now, and the biggest cost item is compensation for labor. Transportation costs aren't even a rounding error in the total.

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Ah, cool. I was thinking of bulldozers and cranes and other things. Was just curious.

I'm 3.30 earths -- because of air travel. I clock up about 20,000 km a year, and it shows.

4.13 earths? I'm almost half in terms of carbon foot print, I'm 2 or 3 points above the food average, I'm only 10% in terms of housing foot print, and I'm less than half in goods and services.

So basically I need to only eat broccoli for every meal to get this lower?

International agribusiness is a godawful mess, and this time it really *is* because of governments interfering with markets. Subsidies screw everything up, and make everybody worse off -- including the farmers receiving them.

But that's a whole 'nother tangent, and I really don't feel like going into it now.

5.48 earths. That's nonsense!! Many options didn't really apply, ie I don't recycle glass, cause we don't buy glass things, but there was no option for that. It asked if I used natural gas, but didn't ask how much , etc.

One more reason for the couch potatos to justify their nature affinity...perhaps in the near future they will able to make a small fortune by selling their CO2 credit. PJ never hear of the term "unintented consequency".

mudsling3 said:

One more reason for the couch potatos to justify their nature affinity...perhaps in the near future they will able to make a small fortune by selling their CO2 credit. PJ never hear of the term "unintented consequency".

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Indeed I haven't. However, I am familiar with the term "unintended consequences." And yes, in any scheme like this, they're bound to surface -- which means that there must be mechanisms to adjust it on the fly to get rid of them.

Funny, though -- I thought you guys would be all over something like this. It is, after all, a market solution based on simply pricing in the externalities that the market currently doesn't price in. Oh well...

I got 2.85 Earths from the test. I didn't like answering the questions though. I question the way they estimate how many Earths my way of consumption might burn. And I couldn't help but to think the site asking for donations was created by some special interest group working towards political agendas.

As for pj's idea of citizens trading C02 credits, wouldn't the C02 credit market become similar to stock market if people bought and sold their spare credits? Only that there would be only one kind of stock with rising and lowering prices. Since we are discussing politics again regulation and taxation of the profits might find their way to the C02 credit trade if someone would start reaping real benefits just from trading the credits.

And the ones who could spare the most credits would be the zealously green cave men hippies ofcourse. Obviously the system is profitable to them. Which would only serve to increase their influence. That is, they would have good deal of influence on the C02 credit market as sellers of the spare credits.

Since I got a decent score on the test, maybe I would be left with credits to sell. But I fear the C02 trade on citizen level would create a bureaucratic hassle.

Surlent said:

As for pj's idea of citizens trading C02 credits, wouldn't the C02 credit market become similar to stock market if people bought and sold their spare credits? Only that there would be only one kind of stock with rising and lowering prices. Since we are discussing politics again regulation and taxation of the profits might find their way to the C02 credit trade if someone would start reaping real benefits just from trading the credits.

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It wouldn't be a stock market, because there would only be one kind of good being traded -- you wouldn't have carbon credit X going up while having carbon credit Y going down.

I'm sure there would be speculation on the credits as well, just like there are with currencies. There's a quite a lot of experience in managing situations like that, though.

And the ones who could spare the most credits would be the zealously green cave men hippies ofcourse. Obviously the system is profitable to them. Which would only serve to increase their influence. That is, they would have good deal of influence on the C02 credit market as sellers of the spare credits.

Since I got a decent score on the test, maybe I would be left with credits to sell. But I fear the C02 trade on citizen level would create a bureaucratic hassle.

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I think it could be done in a fairly streamlined way. It's not unlike plugging a secondary currency in the system, and we already have an infrastructure in place for tracking currency transactions; I don't think it would necessarily add a lot of administrative or bureaucratic overhead.