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Trading in a carbon limited world

Reducing carbon emissions requires all of us to change our behaviour. But how? Matt Prescott explores the potential for a market mechanism that will transform our personal economies and could help save the planet.
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The idea of trading carbon as commodity began with Kyoto. Now the carbon market appears to be here to stay. There is a strong interest at all levels – individual, business and government, in engaging with this newcomer  in the financial world.  

Carbon is an unusual commodity. It evokes a great deal of emotion and is tied to areas of social and environmental thinking that have never previously been aligned with conventional capitalist thinking. But through the carbon market we are  beginning to see the ecological future of our planet priced and traded as a commodity.

Whilst this may sound like an unfeeling solution to the climate change crisis, environmental groups in the west are warming to the carbon market’s potential.  Why? Because we need to reduce emissions dramatically in the next ten years, according to the world’s leading climate scientists. With time so short, we have to go with the biggest tool we’ve got – the market. 

Carbon trading is one of the mechanisms approved by the Kyoto Protocol for nations to reduce their emissions of greenhouse gases. The Kyoto Protocol created the Clean Development Mechanism (CDM) to enable emissions being saved in one part of the world to be sold in another. The result is a vast number of projects, mostly in developing nations, being certified for emissions reductions. Renewable energy projects such as wind power are common. These are checked to avoid ‘double counting’ and sold into one of a number of carbon markets from where the credits can be purchased.

The outcomes, in terms of environmental and social impact have been mixed so far, and the Kyoto Protocol is under fire for failing to deliver anything near the emission reductions the world needs. Indeed global emissions are continuing to rise and few countries can claim to have bucked the trend. But much has been learned since Kyoto and the learning curve is getting steeper. 

Learning from the EU

The European Union has been operating an Emissions Trading Scheme (EU ETS) since January 2005, with the first phase due to end in December 2007. beyond which the second phase will coincide with the first Kyoto commitment period which operates from 2008 to 2012 and requires signed-up developed nations to have reduced their greenhouse gas emissions by around 5% below their 1990 levels. At its peak, the price for a tonne of carbon (CO2 equivalent) was above €30. Currently it is hovering around €12. 

This is a "cap and trade" scheme. In such a scheme, those that emit carbon are each given credits -- an allowance that entitles them to emit a specific amount of carbon. The total amount of credits cannot exceed the cap – which is the overall limit of total agreed emissions. The EU ETS covers around 40% of total greenhouse gas emissions from EU nations in several industry sectors such as paper, mineral and energy. The basic logic of any cap and trade scheme is that the market will find the cheapest savings. Any organisation covered by the scheme has two options if it exceeds its permitted allowance. It can purchase the more emissions rights in the market or it can reduce its own emissions through greater energy efficiency. According to the theory of the market, each installation will tend to make the most economically rational decision within its capped "carbon budget".

Global impacts 

Many project-based carbon reductions take place in China and India – two fast growing economies which offer many opportunities to deliver verifiable reductions because the pace of development of their energy infrastructure is so fast. Investment in clean renewable energy technologies aided by the finance made available through the carbon market makes low carbon developments more attractive to them. As the market for carbon expands, there is an ever greater opportunity to further reduce emissions.  

On many fronts, carbon trading has so far proved to be a successful mechanism, though some criticise it for its traditional capitalist approach. However, criticism is muted, given the current lack of  alternatives. Given the urgent need to reduce emissions,  a strong carbon market offers a way to unlock the creative potential of many of the world’s great financial and cultural centres to try to solve the greenhouse gas emissions problem. 

You, the new actor

At the present time, 44% of emissions in the UK are attributable directly to individuals, but the  individual is not currently a player in the carbon market. In a globalised carbon market, the initiative to reduce emissions may not stay with governments. Companies and communities who recognise the scale of the threat of climate change to their own futures and the future of their families  could themselves become the drivers.

As a concerned citizen, one could buy verified carbon reductions and not sell them – hence removing carbon from the market and therefore forcing the price up, but the RSA does not believe this is enough. We are  looking at an entirely new approach to individual carbon trading which we hope could hold the key to balancing the development of the economy with the need to control carbon emissions in a fast, effective and equitable manner. It is the new show in town. 

At present, there are few actors in the EU ETS – 12,000 installations, representing approximately 45% of EU CO2 emissions. The RSA conceives of every individual in the UK becoming an actor and, if the scheme succeeds, every individual in the EU – nearly 500 million people.

It would work like this: The government of the UK would allocate to each adult in the UK an equal per capita share of the 44% of the country’s emissions that are attributable directly to individuals (through fuel and electricity purchases). The remaining 56% of the UK’s carbon emissions would be auctioned to government and business.

That 56% operates in much the same way as the EU ETS. However individuals are now actors in the same market. If they emit less than their personal allocation, they can sell their emissions rights to those emitting more than their share. 

Decoupling emissions from growth

So what would happen if each person was financially responsible for his or her own emissions? Firstly we would find out where our allowance was going: do we drive a big car? Do we leave the lights on? Do we have the heating turned up too high? Do we take many flights? If there was a strong financial incentive and individual access to the market, we think we would see a rapid move away from wasteful to low-carbon lifestyles. People would look for low-carbon products and services to save on their emissions allocations. If there was demand for low-carbon products, entrepreneurs, in turn,  would develop and produce them for the market.  

Each year, to fight climate change, the carbon budget will have to shrink.  As the budget is shrunk,  the goods and services required to meet the  lowered targets will become available and affordable and a new low-carbon culture will continue  to propel this change. 

It would be good in other ways, too. It would enhance public health and energy security  and, indeed, the Contraction and Convergence model could also be delivered through this mechanism. So what starts out looking like an idea with a strong core of market economics, on closer inspection turns into something which speaks to the heart of a strong and just society.

Matt Prescott is the director of CarbonLimited. The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) is at the heart of work to further the debate on personal carbon trading through the CarbonLimited project. CarbonLimited runs until December 2008 and is delivering a programme of research, public debate and piloting. www.rsacarbonlimited.org

Homepage photo by Marek Futrega

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匿名 | Anonymous







To construct an innovative country

To construct an innovative country, we should have the spirit of innovation!The space of the globe is limited, the resources is limited and its capability to carry on the environmental pollution is limited as well. Under these circumstances, how to realize the maximized richness of socialist material fortune? How to realize communism? How to construct a harmonious society and have a harmonious development? China has the first-class scientific and technological researchers; but we do not have a complete development of all the top scientific technologies in the world. Why? Fundamentally, it is because of the backward of scientific mechanism.
A lagbehind policy, up to today, still remains as the fundamental issue as how to explore a full development road of China's science and technology.
Juzizhoutou 111

Default avatar
匿名 | Anonymous


马特弗瑞斯科特的文章描写一种扩展欧洲 (ETS)的方式。不过,我们一些欧洲人对ETS持着格外批评的态度,而且更想用另一种体系。比如,我们不喜欢ETS给世界上化石燃料消费最大的公司所有权来利用地球大气为免费的碳吸存(carbon sink)。因为碳许可证拥有市场价格,给公司提供免费的许可证,就相当于奖励最大的污染者。如今,由于地球大气作为一个缺货而且必须由我们分配地利用,大气在市场上便得到一种缺货价格。但是,谁得到这个缺货价格的收入呢?谁所有它呢?
在碳市场上,我们正在划定全球共享空间的界限;而且,正如几个世纪前欧洲共用土地的情形,共享空间的所有权同样属于社会中权力最大的利益集团。但是,如果个人享有用地球大气为碳吸存的权利,那么,这个权利肯定就是我们共同的所有权,而并不是世界上最大的污染者的!为此,有不同的计划可行, "上限与交易" 就是其中一个方式。"上限与交易",即一种简单的限制碳排放的体系,给全国公民提供增补的收入来赔偿减少化石燃料将引起的日益增高的价格。无论在国家、大陆,还是全球, 所有的范围内都可以实行,并且与其它以限制农业、采伐森林及垃圾掩埋法造成的排放为目标的项目并用。
这个体系的具体程序如下:为了实行这个体系,“上限 A” 政府便给国家经济的碳排放量规定一个上限。上限每年降低,如此逐步地降低到得再也不引起气候变化的程度。还有,政府制定立法来使所有的用煤、汽油、石油等化石燃料的公司,不论是生产者还是进口者,必须得到足以赔偿其售卖燃料造成的碳排放的许可证。需要许可证的,只有这些供应能源的公司;能源的消费者,不管是家庭、公司还是公用事业企业,都不需要。然后,政府会给每个公民分配一个按每年确定的排放量上限计算的许可证,以便分配排放的责任。
我们收到许可证的人,就将它卖给银行、邮局等提供最实惠价格的金融机构。然后,这些机构将许它卖给化石燃料的供应者, 而且他们按规定必须将它交给政府的检察员。每年,收到许可证的人会给我们个人增补收入来赔偿碳排放日益增高的价格。随着上限越来越低,得到许可证的竞争就越来越激烈,而且我们售卖许可证的收入也越来越高。

Cap and Share

The article by Matt Prescott describes one way of extending the European ETS system. However some of us in Europe are very critical of the ETS system - and would prefer another system. For example we don't like the way the ETS gives ownership rights to use the earth's atmosphere as a carbon sink free to the largest fossil fuel using companies on what is called a "Grandfathering basis". (Where the proportional allocation of carbon permits is based on the proportions of previous emissions by the big polluters). Because carbon permits have a market value, giving the permits to the companies for free is effectively rewarding the biggest polluters. Now that the use of the earth's atmosphere is a scarce good and must be rationed the use of the atmosphere gains a scarcity value in the market. But who gets the rent from this scarcity value? Who owns it? What is happening is in the carbon market is the enclosure of a global commons - and like the enclosure of the common lands in Europe several centuries ago ownership is being handed to the most powerful interests in society. Yet surely, if the right to use the atmosphere of the Earth as a carbon sink belongs to anyone it belongs to all of us equally - rather than belonging to the planet's biggest polluters!

Schemes can be organised in different ways. One alternative is the "Cap and Share" approach. Cap and share is a simple system to put a cap on the emissions from fossil fuels in a way that provides a supplementary income for all citizens to compensate them for the rising costs that reduced fossil fuel use will mean. It is a system that can be applied at a national, continental and global level, along with other initiatives to limit emissions from agriculture, deforestation and landfill. It would work like this:

the cap

A government would apply the system by imposing a cap on the greenhouse gas emissions for which its economy was responsible. The cap would be tightened each year so that the emissions eventually fell to a level at which they were no longer contributing to climate change. Legislation would be passed requiring all companies introducing fossil fuels - coal, oil and gas - into the economy, whether as actual producers or importers, to obtain enough permits to cover the carbon emissions from the fuels they sold. Only these energy suppliers would need permits. Fuel users, whether families, companies or utilities would not.

the share

The government would then share out the emissions by issuing permits covering the total amount it had decided to allow in a year to all its citizens equally. We, the recipients, would then sell them to whichever bank, post office or other financial institution offered the best price and the institutions would sell them on to the fossil fuel suppliers who would be required to surrender them to government inspectors. The sale of the coupons every year would provide all of us with a supplementary income to offset the rising cost of fossil fuel use. The tighter the cap became, the fiercer the competition for permits would be and the more we would get when we sold them.


Default avatar
匿名 | Anonymous


1971年,社会学家和犯罪学家汤姆斯 麦蒂森提出,一个新的概念、选择或者行动,如果它是能够改变社会基础的,就应该对现有的社会基础具有一个反作用的效果,或者竞争的效果。因此,他认为一个改变社会的理念应该是在现有系统之外的,而不是和现有的社会现实交织在一起。这其中,最重要的事情就是避免那已经被现有体系所吸纳的理念和行动,例如在本身就会改变的发展进程或者社会基础上谈改革。近几年,许多学者对已经知晓的问题提出各种观点,但是他们关心的却是经济改革,导致经常在经济学的问题中引进一个道德层面去反映生态的可持续发展和社会公平。





A new science of common sense
In 1971 the sociologist and criminologist, Thomas Mathiesen, contended that a new idea, or choice of action, if it is to contribute to fundamental change, must have a ‘counteractive’ or ‘competing’ effect on what is fundamental in the existing system. He argues convincingly that a socially transforming idea must not be woven into what exists but must be ‘alien to the system’. The most important thing is to avoid ideas and actions that can be absorbed by the system, such as reforms without any effect whatsoever on the basic structure or the course of development that is to be changed. Many academics have in recent years put forward ideas to address the problems already outlined in this booklet, but they are usually concerned with the reform of economics. Often the basis of the arguments is to bring a new ethical dimension into economics that better reflects ecological sustainability and social justice.

Economic growth is driven mainly by competition, greed and gambling. The counteractive concept suggests that a new science (the name suggested here is ‘socionomics’ ) is needed to provide a proper framework for ideas and actions that will lead humanity away from the disastrous course it is currently set upon. The first task of this new science would be to establish both the ‘embodied’ energy and the greenhouse gas emissions involved in all items of production from the gathering of the raw materials to the consumer.
Animal concern, fair trade, and other matters related to human rights and ethical and sustainable development, could also be brought under this framework to provide information to the general public and inform economic and political policies to determine the ‘true cost’ of products, not just the financial cost. This new science would be driven primarily by a different set of values - sharing, co-operation, fellowship and honesty.
Globalisation needs to be stopped and a new emphasis placed on local trade and local production for local needs. Governments should, for example, provide incentives for energy saving and taking holidays closer to home, prevent the construction of supermarkets and promote local currency systems to reduce the amount of damaging investment currently operated through the main high street banks. Incentives and education should also be directed towards persuading people to give up their cars and switch to a combination of walking, cycling and public transport.
A first step in the counteractive approach could be applied to carbon trading and based on the principle of ‘contraction and convergence’ outlined by the Global Commons Institutute which proposes that tokens to use fossil fuels be distributed to countries according to their populations within gradually diminishing cap on the amount of fossil fuels. An extension of this principle is described in the Cap and Share campaign in the previous comment.

Default avatar
匿名 | Anonymous



evidence please

please provide a proof that global warming is caused by human-made carbon emissions!