By Francesco Fuso Nerini Originally published August 12, 2021

Abstract

Here we discuss how personal carbon allowances (PCAs) could play a role in achieving ambitious climate mitigation targets. We argue that recent advances in AI for sustainable development, together with the need for a low-carbon recovery from the COVID-19 crisis, open a new window of opportunity for PCAs. Furthermore, we present design principles based on the Sustainable Development Goals for the future adoption of PCAs. We conclude that PCAs could be trialled in selected climate-conscious technologically advanced countries, mindful of potential issues around integration into the current policy mix, privacy concerns and distributional impacts.

Main

Climate change could undermine the achievement of at least 72 Targets across the Sustainable Development Goals (SDGs)1. The development of a just and equitable transition to a net-zero society is vital to avoiding the worst impacts of climate change1. However, by May 2021, Climate Action Tracker2 estimated that climate policies implemented across the world at present, including the effect of the pandemic, will lead to a temperature rise of 2.9 °C by the end of the century. Thus, although many countries have made pledges of net-zero emissions by 2050, implemented policies and pledges are insufficient to deliver the Paris Agreement ambition of limiting global warming to well below 2 °C (ref. 3). To take a national example, the United Kingdom has made strong progress in reducing carbon emissions, and was an early adopter of a net-zero by 2050 target. However, the government’s independent advisory climate body advises that policy steps taken so far “do not yet measure up to meet the size of the net-zero challenge“4.

In this context, the introduction of personal carbon allowances (PCAs), a mitigation policy proposal developed in the 1990s5, is ripe for revisitation. This policy aims to link personal action with global carbon reduction goals. A PCA scheme would entail all adults receiving an equal, tradable carbon allowance that reduces over time in line with national targets. In its original design, the allowance could cover around 40% of energy-related carbon emissions in high-income countries, encompassing individuals’ carbon emissions relating to travel, space heating, water heating and electricity6. Allowances were envisioned to be deducted from the personal budget with every payment for transport fuel, home-heating fuels and electricity bills. People in shortage would be able to purchase additional units in the personal carbon market from those with excess to sell. New, more ambitious PCA proposals include economy-wide emissions, encompassing food, services and consumption-related carbon emissions7, for example.

Several variations of mandatory PCAs or personal carbon-trading schemes have been proposed in the literature under different names8. For instance, centrally allocated and tradable PCAs have been examined by the UK government, looking at a design covering household energy and personal travel9. Electronic Tradable Energy Quotas (TEQs) were also proposed in the United Kingdom, covering the whole economy and divided among individuals (40%) and other energy users (60%)10. In Ireland, cap and share certificates covering the whole economy were proposed, giving all adults emission certificates for an equal share of national emissions. Such certificates were proposed to be sold by individuals via banks and post offices to fossil fuel companies11. In California, household carbon trading was proposed for household energy, and managed by the utilities12. In France, centrally managed tradable transport carbon permits were assessed related to private transport13. Scholars from the University of Groningen have proposed European Union (EU)-wide emissions trading for households and transport, embedded in the EU Emissions Trading Scheme (ETS) design. In this design, free carbon allowances are allocated to each category of small emitters on the basis of their historic emissions (grandfathering), then surrendered with the purchase of energy from distributors, which in turn give them up as they obtain fuel from fuel producers and importers, who then have to match with allowances their supply of fuel14. Furthermore, tradable consumption quotas have been proposed to cover all consumption emissions related to manufacturing processes15. The mandatory nation-wide designs described above are complemented by voluntary schemes, some of which have been trialled in several locations8.

The literature highlights the importance of economic incentives, cognitive awareness, prevailing social norms and education as drivers for pro-environmental decision-making and behaviour16,17. Research indicates that behavioural change could be engendered by creating a direct and visible incentive to reduce carbon emissions14,18. Studies show that people tend to adhere to the prevailing norm and that descriptive social norms and comparison with others influence decisions about electricity use19,20 and mode of transport21. Building on this literature, PCAs are envisaged to deliver carbon-emissions-related behavioural change via three interlinked mechanisms: economic, cognitive and social22 (Fig. 1). Similar to a carbon tax, a policy with which it is often compared, the economic mechanism of PCAs is envisaged to influence decision-making by assigning a visible carbon price to the purchase and use of fossil-fuel-based energy in the first instance, and possibly also to consumption-related emissions in more advanced PCA designs. However, in addition to the economic mechanism, PCAs aim to influence energy and consumption behaviour by increasing carbon visibility, by evoking users’ cognitive awareness of carbon in their daily routines and by encouraging carbon budgeting. Moreover, the shared goal of emissions reduction and the equal-per-capita allocation of PCAs is envisaged to create a social norm of low-carbon behaviour. These three interlinked mechanisms are hypothesized to promote low-carbon lifestyles in a synergetic manner.

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