More money for low carbon R&D and energy efficiency in Australia – Budget 09 summary

The government tonight released the budget for 2009-10. The big themes were infrastructure spending and debt, but I want to focus specifically on the programs relevant to climate change. Robert Merkel at LP rated it as having a “distinctly camouflage mottled hue”, but I’m a little more positive, albeit with some criticisms. See my analysis below.

RD&D, innovation and skills

The biggest area of spending, and the biggest increase in spending, came in what I have categorised as RD&D, innovation and skills. Then headline items in this area are under the umbrella of the $4.3 billion Clean Energy Initiative, which includes $3 billion of new money – mostly going to Carbon Capture and Storage (CCS) and the Solar Flagships Program (which will fund up to 4 very large solar thermal or photovoltaic installations, totaling 1GW of capacity). There is also a $1.3 billion Green Car Innovation Fund, and $100 million per year for the Global Carbon Capture and Storage Institute, both 10 year programs that were announced last year.

So by my calculations (see below), this adds up to $6.9 billion of commitments in this area, up from $3.4 billion previously. One important point is that in the area of low carbon stationary energy, $4.9 billion is allocated to specific technologies – CCS and large scale solar, compared with only $615 million to technology neutral, competitive funding. Admittedly, there are several competing technology options within CCS and solar, but this amounts to a fairly significant picking of winners by the government. I’ll come back to this difficult issue in a future post.

Energy efficiency and small scale renewables

On the demand side of the energy equation, we have energy efficiency and small scale renewables. By my calculations, this budget is committing about $5 billion to this category, up from $4.1 billion before the CPRS was announced. Most of this is going towards domestic insulation and solar hot water through the Energy Efficient Homes Program. There seems to be a confusing array of 9 overlapping programs in this area, with various timeframes, 5 of which are relevant to domestic and 7 of which are relevant to business. Why so many? The $100 million smart grid funding is welcome, but should be larger and allocated to a wider national roll-out, rather than another demonstration project. The technology is well established and has been demonstrated ad-nauseum.

Miscellaneous spending includes $98 million allocated to Australia Climate Change Regulatory Authority (which will oversee the CPRS) and the National Carbon Accounting Toolbox.

Conclusions

Overall, there are some important boosts to the green economy in this budget. But is it enough, and is it well directed? I would have liked to see more going towards Renewables Australia and the Energy Innovation Fund, which are both good, technology neutral funds. Also, the Clean Business Australia program could have been a lot bigger, particularly in comparison to the massive Energy Efficient Homes package. Business energy efficiency is less visible to voters, but equally important. As I’ve already mentioned, more on Smart Grids would also have been welcome.

But I do support the big spending committments that were made, in CCS, large-scale solar, and green cars. Overall, I give the 2009/10 Budget 6 1/2 green stars out of 10.

Emissions trading – it’s time to support it

Last weekend, the Australian government announced several amendments to their proposal for an emissions trading scheme. I had a number of criticisms of the original CPRS scheme, which I discussed here, but with these changes, along with the newly expanded Renewable Energy Target, I would be prepared to support it. It’s time to get behind this legislation and support its passage through a hostile senate.

In a nutshell, the changes are –

• An effective delay of 2 years before emissions trading begins (with no trading in 2010 and a very low fixed price of $10/tCO2 in 2011)
• Increased compensation for polluters
• A “Carbon Trust” scheme to make voluntary emissions reductions meaningful
• Moving the conditional emissions reduction target from 15% to 25% by 2020

The first two changes are disappointing, but in the grand scheme of things will make little difference to the environmental outcome. I can accept that they are justifiable politically and economically.

The third change addresses one of the big criticisms that many environmental groups and green commentators had about the original scheme, that voluntary reductions (at a personal and household level) were not counted, and would only decrease the burden on industry. Personally I was, and still am, ambivalent about this issue, because I have a feeling that the scale of these voluntary measures would be pretty small.

The most important change to the environmental outcome of the CPRS was the fourth point above. The government is now saying that if a comprehensive international agreement is reached on reducing emissions, Australia will commit to a reduction of 25% on 2000 levels by 2020. That’s a significant improvement on their original position of 15%. It puts us in the right ballpark internationally and shows that we are prepared to lift our share of the burden. You could, if you were being generous, even call it a position of leadership, but I probably wouldn’t go that far.

Disappointingly, this position has been criticised heavily by some green groups – most notably the Australian Greens – and many left/green commentators. They still have their eye on the “unconditional” target of 5%, if no global agreement is reached, pointing out that this is our only real commitment. But I disagree. Frankly, if the world cannot reach a comprehensive agreement in the next few years, we’re all screwed. If we are still in a situation of business as usual by 2020, it may be too late to avoid dangerous climate change. In that case, it would be game over, and it wouldn’t matter one bit what reduction Australia had committed to. 5%, 15%, or 25%, if the world doesn’t come to the party, our actions are, sadly, pointless.

The global agreement is the whole point. That’s why having a big differential between the unconditional and conditional targets is good policy. The government is not trying to shirk our responsibilities, they are trying to add to the international pressure for action.

My other criticisms of the CPRS related to its support for innovation and green jobs. I would have liked to see a price floor on carbon, and a limit of the amount of abatement that can be outsourced to other countries. These criticisms still stand, but I am realistic enough to know that it probably won’t happen. And the consolation is that the expanded renewable energy target, which will force 20% of electricity to be renewable by 2020, along with other measures like R&D funding, state initiatives on energy efficiency and building standards, will help by supporting domestic innovation.

It’s time for green groups to stop pushing for some kind of theoretically ideal scheme and realise that this is as good as it’s going to get. The Australian Greens, in particular, need to realise that their absolutism has only made them irrelevant in these negotiations. If they want to have a positive effect on Australia low carbon future, they need to come down from the mountain.

Elsewhere: John Quiggin

If I were President of the World…

If I were President of the World, I would set a limit of the quantity of fossil fuels that could be extracted, worldwide. The amount would be determined by an independent body of scientists and economists, that would auction a fixed number of tradable permits every year – let’s call it the World Carbon Authority (WCA).

The WCA would be responsible for conducting audits and enforcement, and would be informed by very well funded scientific and economic research divisions. The revenue from the auctions would go partly to the WCA to fund its activities, partly towards complementary measures like stopping deforestation and promoting better land use, with the remaining revenue distributed to all countries based on their population, to offset the higher energy prices. All countries would receive the same per-capita income, but the less energy intensive countries would be net winners. This money would also be a strong incentive for countries to recognise the authority of the WCA.

It would be up to each national government to decide how to spend this money, but the natural incentive is for rich countries to spend it on improving efficiency and investing in renewable energy, and for poor countries to improve the general well-being of the population. It would be a force both for environmental responsibility as well as social equality.

The extraction industry and the emissions intensive industry would face the same conditions worldwide, so they would be able to pass through their higher costs to consumers, and would have no incentive to move their operations to unregulated countries.

Compared to an emissions trading system, an extraction trading system would also be far simpler, because it would cover only the thousands of organisations that extract significant amounts of coal, oil and natural gas, rather than the many millions of organisations that burn them.

This kind of system is not entirely without precedent. At a much smaller scale, some fisheries are managed in this way. And at the international level, OPEC  has been enforcing oil production quotas (although not always successfully) among its 12 member countries for many decades.

Of course, I’m realistic enough to know that I’ll never be President of the World (sigh…), and that this proposal will never be politically tenable. But its nice to dream.

Australia shuns the low carbon transition

Update: the government has released a number of amendments that have turned me around on this issue.

The Australian government is conducting a senate inquiry into climate policy, focusing on the recent draft legislation to set up an emissions trading system, called the Carbon Pollution Reduction Scheme. For me, the government’s climate policy increasingly looks like an exercise in avoiding change.

I added my 2 cents worth here (permanent link here) – submission number 391 out of 415 unique submissions posted so far and reportedly over 13,500 total submissions (including standard form letters from activist organisations). Probably it will just be lost in the noise, but there is no harm in trying.

On the “environmental” side of the argument, the criticisms of the scheme mostly fall into these categories:

• targets too weak (5% reduction on 2000 levels by 2020, or 15% if a comprensive global agreement is reached)
• excessive compensation to the big polluters
• “voluntary” emissions reductions not counted – household energy efficiency, for example, will only reduce the obligation of industry to reduce emissions

In the “big business” corner (if that is a fair categorisation), the arguments are mostly:

• targets are excessive
• insufficient compensation to industry X
• there is no climate change / there is climate change but its not anthropogenic / there is anthropogenic climate change but Australia is not the primary cause and shouldn’t be acting alone

That’s a very broad generalisation, and there are many exceptions on both sides, but that seems to be roughly how the argument is playing out.

I took a slightly different angle. To me, the biggest problem with the current draft is that the focus is on meeting our international obligations on emissions reduction at the lowest cost to the economy. There are two glaring problems with that. Firstly, the post-Kyoto negotiations are happening later this year, so why set these below-par national targets in stone now, other than to play the disruptive and self-serving role of – “Oh, we can’t possibly agree to that target because we’re already defined our national target in legislation”.

The second problem, which I concentrated on in my submission, is that the focus should really be on transitioning to a low carbon economy, rather than simply meeting targets. It is possible for us to meet our targets by buying all of our permits internationally, effectively outsourcing our emissions reductions by paying others to do it. This would impose a cost, without the attendant benefits of creating new jobs and industries. The world economy is changing – we simply have no choice – and the change brings with it enormous opportunities to the early movers. If we try to minimise the damage by minimising the extent of the change, we will be left behind. This point seems to be lost in the current debate.

For the record, here are my recommendations:

1. Implement a stronger conditional target of 25% by 2020 (in the event of a substantial international agreement)
2. Explicitly state the importance of the transition to a low carbon economy
3. Place a limit on the proportion of credits that can be purchased internationally
4. Establish a price floor in the permit market
5. Establish a broader innovation framework.

For details see my full submission. For a laugh, also see the sentence before my recommendations: “Four recommendations are addressed in this submission”. I threw that in to make sure they were paying attention.

Scientists vs Economists – II

Two opinion pieces in today’s Guardian prompted me to revisit the science vs economics face-off (a thread I began here). For all their successes, there is one thing these two disciplines are equally bad at – predicting the future.

The first opinion piece summarised a scientific paper that concluded that the risks posed by the new Large Hadron Collider should be re-assessed. Apparently the chance of catastrophic black holes forming is not as infinitesimally small as previously thought; a sobering, if not mildly terrifying, thought. The article (written by a consultant for New Scientist, presumably himself a scientist) concludes that:

“Science is not the arbiter of truth. All it can do is offer opinions about the answers to certain questions that we ask of nature. And it reserves the right to  revise those opinions in the light of future discoveries.”

This statement is as relevant to the science of climate change it is to theoretical physics.

As an engineer, I’m very happy to draw upon science’s knowledge of the fundamental things like the the conversion of energy and the behaviour of materials and fluids; but unfortunately most of nature’s processes are far too complex to be encapsulated in a handfull of relatively simple equations. Science, in its current form, cannot provide definite conclusions ahead of time to some of our most important questions.

What I find interesting with this point are the parallels I can see with economics. Despite all the theories and enormous amounts of data, economics is far from being the “arbiter of truth” when it comes to the fate of society. Very few predicted the economic crisis we are in now (prominent exceptions were Black Swan author Nassim Nicholas Taleb and “Dr Doom” Nouriel Roubini). The editorial in today’s Guardian highlights the failure of:

“… an entire class of professional economists who identified the period as the Great Moderation – an unprecedented era of stability, where inflation had been licked and all that was left to do was enjoy gentle growth.”

Sadly, structured disciplines that draw on tried and tested theories are alarmingly deficient in dealing with the problems of our age. One solution for this deficiency, promoted by sustainability advocates, is the Precautionary Principle, or as I prefer to call it, the Don’t Do Anything Unless You Can Be Absolutely Certain That It Isn’t Going To Harm Anything In Any Way Principle (or DDAUYCBACTIIGTHAIAWP for short). To me, DDAUYCBACTIIGTHAIAWP sounds like some form of paranoid paralysis that can be used as an argument against doing anything at all. This very anti-innovation philosophy, when taken to its logical extreme, will simply result in business-as-usual (or, more comically, the end of civilisation and all human life, since everything we do involves some negative impact).

So if this is not the solution, then what is?

A good first step would be to have much more cross-disciplinary cooperation and communication between these two vital disciplines. For example, economists would do well to understand that our society is fundamentally reliant upon the environment – to provide the materials and services on which we base our entire lives, and to accept and process our waste. Absolutely everything our environment provides has limits, some of which we are nearing. Any economic assumption which discounts that – “infinite growth” for example – is dangerously wrong.

Science, for its part, desperately needs to understand the pragmatic realities of economics for it to have any credibility at all. Any predictions of future carbon output should be strongly linked to economic models (imperfect as they may be), and be prescient about the effects of regulations and carbon markets. When the discussion moves to solutions, scientists should be aware of the near impossibility of breaking the stranglehold that fossil fuels have over our society at anywhere near the speed with which they would like.

With the debates and arguments likely to become more frequent over the coming years, the battle lines beween scientists and economists are only going to get sharper. A new spirit of cross-disciplinary thinking is increasingly vital.

Scientists vs. Economists – I

Leafing through some back issues of New Scientist recently I stumbled across this excellent special report from October 2008 (How our economy is killing the Earth) that challenges the assumption that limitless growth is a good thing, and looks at the environmental costs of economic growth.

It includes an essay by Herman Daly, one of the strongest voices against the growth dogma in recent times, and a vision of what the world would look like in 2020 with a sustainable, “steady state” economy. This is the essence of the vision:

In our society [of 2020], scientists set the rules. They work out what levels of consumption and emission are sustainable – and if they’re not sure they work out a cautious estimate. Then it’s up to the economists to work out how to achieve those limits, and how to encourage innovation so we extract as much as possible from every scrap of natural resource we use.

I’ll return to the question of whether growth is good or not in future posts. For now I want to pick up on the issue of the roles of scientists and economists in setting the levers of policy.

The vision of society presented in the quote above is an interesting idea, but it reads a little bit too much like a scientist’s wet dream. The obvious problem is getting scientists to agree on anything so important. Despite massive amounts of research and an unprecedented amount of collaboration and peer review, there is still no scientific consensus on the level of atmospheric CO2 we should aim for. A review of recent climate science by the journal Nature found estimates of between 350 and 550 ppm – a big difference when it comes to making policy.

There is a very good reason for such a high level of uncertainty, of course – climate change is a massively complex process, and we may not fully understand it until it is too late. Moreover, the scientific process, by tradition and (perhaps) by necessity, is inherently reductionist; that is, it takes a problem and divides it into smaller and smaller chunks until they reach a size that can be understood and studied in isolation. You then combine all the little bits that you have learned into a coherent model that is, hopefully, a reasonably accurate representation of the whole system.

The problem with complex systems, however, is that the whole can be quite different from the sum of the parts. So even if we understand the sub-processes involved in climate change perfectly (which currently, we don’t), we are still a long way from having a overall model that we can rely on.

So science, in its current form, is limited. Although it can be enormously successful as an explanatory tool, when it comes to predicting the future, it is no more powerful than economics was at predicting the current financial crisis.

Of course that does not mean that we should ignore or disregard the science – far from it. There absolutely must be a better connection between science and policy; economists have claimed a monopoly on policy making for far too long. My point is only that a political system where “scientists set the rules”, as proposed by the New Scientist article, is an interesting idea, but is not likely to be effective, workable, or even desirable.

“So,” you might ask, “what’s your brilliant solution then?”. The truth is I don’t know.

Obama’s energy policy

“CHANGE WE NEED” said the banners. Change we need indeed, and change we will get. But how much?

As interested as I was in the drama of election campaign, I’m just as interested in what happens next. The question is – how large is the gap between ideals and reality? Grand ideas, grand oratory is easy. Making things work is hard. The Hollywood ending is so ingrained in the American psyche that it is hard to imagine that Obama could fail to live up to his bold words, and to the hopes of so many people, both inside America and around the world. We’ll find out soon enough.

In keeping with one of the main themes of this blog, I have been looking at Obama’s energy policy.

In general, my impression is that ideas are right. One of the interesting aspects is the way it has been framed. European-style energy policies tend to have three pillars – conservation, efficiency and renewable sources (or, you prefer the more populist language of the London Plan, “be lean, be clean, be green”).

In the American context, that doesn’t fly. Similar end goals in both candidate’s energy policy are framed as something quite different – energy independence; or, in typical parochial terms, independence from “foreign oil”, as if the stuff is automatically evil because it comes from that most un-American of places – the Middle East. Specifically:

“Eliminate Our Current [oil] Imports from the Middle East and Venezuela within 10 Years”

This is apparently a more palatable sentiment for the electorate than “We will reduce our oil consumption by 35%”. Still, however it is framed, the idea is the right one. The problem was perfectly framed by the world’s favourite environmentalist, George W. Bush, in 2006 – “America is addicted to oil.” Whatever you might think of Dubbya’s legacy, he has, at least, given us that phrase – an excellent metaphor for the developed world’s seemingly unbreakable dependence on fossil fuels. This is no small challenge, and one of the most difficult and important aspects of Obama’s transformational agenda.

The next category in Obama’s energy policy his pledge on climate change:

“Reduce our Greenhouse Gas Emissions 80 Percent by 2050”

It’s is a bold, courageous aspiration. Or is it? 2050 is a long way off – ten and a half presidential terms, to be precise. Obama himself probably won’t be around to see it. For me, these kinds of goals are frankly quite meaningless. Things are changing so fast now, that the world of 2050 will probably be a very different place. Of course we must keep in mind the long-term future of our society when we plan our current actions, but to have such a specific goal that far in the future strikes me as the stuff of science fiction.

I have a feeling that in 2050, our descendants will think it rather strange that they should be measuring their current situation against a reference point that belongs in the history books (or whatever the electronic or post-electronic equivalent will be). By then, the physical reality of our climate system will either have condemned us or rendered our scientists Chicken Little fools – more likely the former.

His next campaign pledge is far more immediate:

“Provide Short-term Relief to American Families”

Translation: tax the hell out of the oil companies. Gordon Brown didn’t have the guts, Kevin Rudd wouldn’t dream of it, so we’ll see what kind of precedent Obama can set. Good luck getting it through Congress, Democratically controlled or otherwise. And finally:

“Create Millions of New Green Jobs”

Five million to be precise. This promise is really about building the renewable energy industry, along with other technology-based jobs in energy efficiency and clean coal. Early indications are that this will be at the top of his list of priorities – few politicians have the stomach to talk about deep emissions cuts in today’s economic climate.

Of all the great things that can be said about Obama’s presidental campaign, there is one thing he did not do very well at all, and that is managing expectations. He has an incredible job ahead of him. Good luck to him, and good luck to that country we too often love to hate.

The economic crash might have a downside

Following on from the last post, I thought I’d give some thoughts on the negative effects of the crash (I’m trying to avoid that terrible term “credit crunch”) on the environment.

In the realm of public concern, and in the marketplace of apocalyptic fears, climate change is now sitting one rung lower. The economic problems are far more immediate  and pressing, and it is easy for long-term considerations to be swept aside. Which possibility worries you more – rising sea levels or losing your job?

In the last few days, the green lobby is clambering to recover lost ground, but has been making little impact on the daily news cycle. One tactic is to draw a parallel, in ecological terms, between the culture of financial indebtedness and our propensity to draw on more of our resources than our environment is capable of delivering in the long term (making us “ecological debtors”). This is the approach of the WWF (et al) Living Planet Report*. Good luck to them, but I’m not sure they’ll make much ground at the moment – like John McCain, the media and the public can only concentrate on one crisis at a time.

At the same time, the Green Tech industry is going to suffer. Public sentiment and government regulation may be important in driving innovation, but it is up to business to deliver it. Although some measures, like reducing unnecessary waste and improving efficiency come for free or at a low cost, most energy saving or renewable energy improvements require investment. They involve a cost in the short term with probable medium or long-term paybacks. Anything that affects business confidence and the availability of credit will affect this industry as much as any other, and possibly more. The prospects of some large renewables ventures have already been dealt a big blow:

With banks reluctant to lend and their stock prices tumbling, many green-energy concerns are struggling to find the long-term funding they need to expand in a capital-intensive industry.

This may sound crazy, but another reason why the current troubles are bad news is that oil will be cheaper. Without wanting to discount the economic pain and suffering that high oil prices have caused recently, the positive side of these high prices is that it has helped us to understand that fossil fuels are a finite resource, and it is stupid for us to be so utterly reliant on them, and at the same time to be squandering them so thoughtlessly. My feeling is that high oil and gas prices have been more effective in inducing us to reduce our fossil fuel consumption than all of the scientific warnings about climate change. If prices stay low over the coming years, we may have the opportunity to test that theory.

But they won’t. I’ll explain why in my next post.

But back to the original question – recession, good or bad? I’ve been hedging my bets a little, but ultimately I have to say…

Bad. As much as it disappoints me to say it, environmental issues are treated as a kind of luxury item – an optional extra when times are good, but the first out the door when times are bad. It’s tough times ahead for bankers and environmentalists.

*Thanks to Dave for the link

Hurray for the crash

I was recently asked whether I thought the slow-down/credit crunch/recession/depression might have a positive side effect (specifically for the environment). It’s difficult to think along those lines in the face of the relentlessly apocalyptic news coverage, but the questioner apparently thought I might have a glass-half-full spin on it all.

Why? Because I had an article published in the online magazine New Matilda back in February provocatively entitled “Only a Recession can Save Us“, with the subject line “We should be looking at the slowing of the global economy with relief”. I was making the argument that climate change mitigation was going too slowly, and we needed the economy to ease off for a while before it was too late. Here’s an extract:

Before the Bali Conference last year, the world’s early warning system on climate change, the Intergovernmental Panel on Climate Change (IPCC), released their latest report. It was their most alarming yet. They then proceeded to criticise themselves for being too optimistic.

…

The problems are building too fast and we need to buy some time. A key measure of our efforts to mitigate climate change is called carbon intensity – the amount of carbon released per unit of GDP. It needs to go down, but at the moment, it’s stalling.

Only a recession can save us now.

…

[W]e should be looking at the easing of global demand with relief, not with dread. As well as buying us some time to deal with climate change, a global slow-down would ease the pressure on inflation, ease the housing affordability crisis [in Australia], and give us time to ease the skills deficit. In the long run, we would not be missing out on any opportunities in the resources sector. One of the advantages of relying on non-renewable resources is that anything we leave in the ground today, we are bequeathing to the next generation.

But that is not the way conventional wisdom sees it. The view is that Growth is unambiguously Good. The ‘growth religion’ pervades every aspect of today’s society, from the neoclassical economist’s pulpit to the faithful masses. Politicians argue over whose policies will lead to the most growth, like different denominations bickering over whose doctrine is the most holy. Economists who challenge this dogma – such as ecological economists – are cast aside as heretics.

All of this was written before things turned really ugly. Perhaps I should be more careful what I wish for.

But I should point out that the article was intentionally provocative, and deliberately one-sided. As I said in response to a negative comment:

You’re right, of course, that “let’s hope for a recession” is not an effective policy response. You’re right that there are better options, one of which is encouraging higher efficiency, that we need to aggressively pursue. My central point is really that the innovations are coming too slowly and the problems are coming too quickly. I’m trying to generate a sense of urgency, same as you.

At the same time, I’m calling into question the underlying assumption that pervades mainstream economics, that growth is some kind of cure-all for all our problems.

…

We have to get away from the idea that affluence will save us. The first step is to get these assumptions out in the open, so we can begin to examine them.

Returning to the original question, the events of the last few weeks have also shed some light on another potential positive of all this turmoil. With under-regulated free market capitalism apparently falling apart, western governments are decisively stepping in to take a much more central role. This, I hope, can only be a good thing for the environment. Governments should – and they must – act in the public interest, not in the interests of markets and profits. In the short term, we may see less focus on environmental issues like climate change, but hopefully once the dust settles, we will end up with governments that are more willing to intervene when they need to.

Of course, there are some fairly obvious downsides of a recession for the environment, which I’ll address in my next post.

Personal carbon trading – an option worth considering

Personal carbon trading is an idea for climate change mitigation that has been gaining ground here in the UK. Although it is far from achieving mainstream acceptance, it has one particularly high-profile supporter in possible future prime minister David Miliband (see, for example, this speech in 2006).

I was recently turned on to the idea by this article by Polly Toynbee. She explains how it would work:

each year everyone gets equal carbon credits to spend on petrol, home heating or air travel. People exceeding their quota can buy more credits. People who use less can sell credits. It encourages home insulation, energy saving and less driving or flying. Since low earners use less – 20% have no car, 50% don’t fly – they can profit by selling to those with big houses, foreign holidays and gas-guzzling cars. It would be a powerful but voluntary agent for redistribution.

Personal carbon trading has all sorts of political and administrative obstacles to overcome, but there are some attractive elements. It’s fairer, more flexible and more progressive than either rationing or a carbon tax. For political reasons (according to Toynbee), the idea was squashed by the prime minister, and branded as being “ahead of its time”. But perhaps that time might come sooner than most people think.

For me, the administrative issues are the biggest concern, particularly if the system is implemented here in the UK. This country just doesn’t seem to be very good at managing these kinds of systems, with a habit of making them more painful than they should be. Here are a just a few examples I’ve noticed:

• transfers between two UK bank accounts usually take 3 working days. WHY? I just cannot fathom why a process that requires no human intervention should take so incredibly long
• the government regularly “loses” confidential personal data about its citizens
• credit cards are very hard to get – I know plenty of well-paid professionals with flawless credit histories who have been refused for no apparent reason.

My worry is that a personal carbon trading system here could be the administrative straw that breaks the camel’s back. It is projected to cost £700 million – £2 billion to set up and £1 billion – £2 billion every year in running costs. That’s an incredible amount of new bureaucracy in a country that, to my mind, already has too much.

Overall, I’m undecided, but it is certainly something that warrants further consideration.

For those who are interested in the technical details of the system, here is a diagram of how it would work:

Update: The more I think about it, the less sense it makes. As Glenn points out in the comments:

Simple solution to overcome most administrative problems – impose carbon tax/trading scheme on business and use the money to provide an equal increase in income to all citizens.

The price of goods/services will increase in line with their use of carbon, with costs then passed on to consumers. People who use less of these goods/services (whether low income or not), will gain a net benefit while there will be a net cost for those who are more carbon-intensive

As far as I can tell, the main difference I can see between Glenn’s idea and the personal carbon trading option is that PCT would make people more immediately aware of the climate change impact of their actions (or at least, some of their actions). But does that matter? The essential goals are carbon reduction and fairness, and PCT seems like a very convoluted and expensive way of achieving those goals.