The Rich Must Face Their Personal Carbon Responsibility

The Rich Must Face Their Personal Carbon Responsibility
Dear Sir/Madam,

We would like to take this opportunity to follow Sunita Narain’s invitation in her latest Editorial
(“Climate: the market's Achilles heel”, CSE's Fortnightly News Bulletin, 30 November 30, 2006)to discuss how we can “make space for emissions.”

We wholeheartedly agree with Ms Narain’s assessment that the warming of the global
atmosphere is possibly the biggest and most difficult economic and political issue the world has
ever needed to confront. And we agree with emphasising – in line with Sir Nicolas Stern’s recent
review – that the cost of taking mitigation action now is a small fraction of what we would have
to pay as the cost of inaction: i.e. the cost of climate change impact damages which we will have
to face if we fail to act now. Costs, it has to be emphasised that will be – and, indeed, are already
– falling predominantly on the poorest and most vulnerable who are least responsible for the
problem. Climate inequity extends beyond mitigation!

Ms Narain rightly points out that “the world has changed [and that] there is clear understanding that the rich and the emerging rich world needs to make the transition to a low carbon economy”.

But we feel the world has changed even further. While Ms Narain’s discourse is still couched in
terms of ‘worlds’ – i.e. remains at the level of countries – we believe the urgency of the situation, and indeed justice, demand that we start including responsibilities and capabilities of individuals as well as of countries in our deliberations on how we deal with the problems of climate change.

An Issue of Distributive Justice

To explain this, let us assume that we agree, for reasons of equity, to calculate emission
restrictions after the Kyoto targets expire in 2012 on a ‘per capita’ basis. More precisely, let us
assume that each country would be allocated an emission cap – an ‘assigned amount’ of emission
permits – totalling some target per capita amount (a fraction of today’s global average emissions
per person) multiplied by the country’s (present day) population.

In the case, for example, of India – whose current emissions per inhabitant are much lower than
the world average – this would entail a considerable surplus of emission permits. And as long as
there are surplus permits, India would hence not be forced to introduce emission mitigation
measures to stay within its assigned amount. Indeed, under an international trade in such permits,

India could legitimately earn significant export revenues from the sale of these surplus permits.
So much for the ‘big picture’. To illustrate our point let us now take a closer look at the domestic
situation. In other words, let us ask what would be an equitable distribution of, to stay with the
example, India’s domestic ‘ecological space’. Even though the national emission cap – i.e. the
over-all size of this space – would not require India to introduce any domestic mitigation
measures, we believe that considerations of domestic equity would do. Why? Because anyone
emitting more than the agreed average target would occupy part of the Indian ecological space of someone in India who is emitting less. And distributive justice would demand that those who
occupy more than their fair share of domestic ‘ecological space’ – i.e. who emit more than that
target average – should either make room for those of their compatriots who do not (i.e. reduce
their emissions), or at least compensate them for the use of their space.

The fact that a national target is ‘non-binding,’ in other words, does not mean that ‘business as
usual’ is morally justifiable, for the strictures of distributive justice would still demand that the
(carbon) rich either reduce their carbon footprints to give the (carbon) poor their fair share of the domestic ecological space, or pay an appropriate compensation.

Of course, it is unlikely that India – or, for that matter, any other developing country – is going to adopt any form of cap on their overall emissions in the near future, which makes the issue of
equitably sharing a limited domestic ecological space a rather moot one. And yet there are other,
equally pertinent reasons why (carbon) rich individuals have a moral duty to reduce their
emissions, where ever they may be domiciled.

An Issue of Compensatory Justice

The crucial fact, particularly from the point of view of the poor and vulnerable, is that emissions
are not just a matter of occupying one’s fair share of ecological space, it is also a matter of
causing harm, something which is in danger of being overlooked if one’s focus is solely on the
just allocation of emission rights.

Indeed, the principle of common but differentiated responsibility and respective capability
demands that whoever is capable should not only reduce their responsibility but contribute to
compensate for the harm done. And this, we believe, applies not only to countries, but also to
individuals, regardless of creed, colour or, for that matter, nationality.

For example, if we assume that the global sustainable ecological space – i.e. the level of
emissions that can annually be emitted without causing harm – were given by the 1900 global
fossil fuel emissions level (approx 2GtCO2), the personal sustainable ecological space would
currently be around 300kgCO2/cap. In other words, everyone on the planet would have a budget for (at most) 300kg of harmless fossil carbon emissions. Any additional emissions are harmful and thus carry responsibility. Of course, in a great many cases, the additional emissions are due to subsistence activities and thus should not be held culpably responsible. However, there are personally attributable emissions, such as the ones associated with (international) air travel, which can hardly be excused on these grounds. People who travel by air are capable to face the personal responsibility for that activity and should be made to do so.

This is why we support the idea put forward at the recent Nairobi UN climate conference by
Bangladesh on behalf of the Group of Least Developed Countries to introduce an international air travel adaptation levy. And this is why we would like to reciprocate Ms Narain’s call to action
and invite the Centre for Science and Environment to join us in promoting the idea that (carbon)
rich individuals, as well as countries, need to face up to the responsibility entailed by what its
founder Anil Agarwal so aptly referred to as ‘luxury emissions.’

Yours sincerely

Dr Benito Müller
Oxford Climate Policy (ocp)
Oxford Institute for Energy Studies (OIES)

Dr Saleemul Huq
Bangladesh Centre for Advanced Studies (BCAS)
International Institute for Environment and Development (IIED)

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.

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