What's the deal with personal carbon trading?
January 25, 2012 By David K Thorpe
Personal carbon trading is at the heart of a new proposal from academics to reducing energy use in buildings and help meet the aims of the Green Deal.
It comes in the form of a strategy document, Achieving Zero, being launched today by Dr. Brenda Boardman of Oxford University's Environmental Change Institute, which she hopes will help transform the UK’s built environment in a fair and equitable way.
Clinching the Green Deal
Dr. Boardman claims her recommendations will "lift millions of people out of fuel poverty, and improve the UK’s energy security" in a way that is "considerably cheaper than providing new energy supply".
The report comes at a critical time, as DECC's mandarins are now mulling the responses to questions about the Energy Company Obligation (ECO) and Green Deal's implementation in the recent consultation process.
The Environmental Industries Commission’s Executive Chair, Adrian Wilkes, has pointed out that "its successful implementation will be no easy feat" since it must "have widespread appeal and take-up from all sectors and demographics if it is to be successful".
Not only does it need the "required skills for Green Deal Assessors", but a broad "list of qualifying measures, products and systems" to cope with "the disparate number of building sizes and uses".
Most importantly, "it is vital that the scheme is felt to be financially viable in the eyes of both the suppliers and the consumers," he said.
Dr. Boardman's low carbon diet plan
Dr Boardman, who has long been a passionate advocate of domestic energy efficiency as a way of curbing fuel poverty, takes the view that the Green Deal must be seen strategically as part of the move towards the 2050 zero carbon use target.
“The change in perspective is substantial," she said, launching her report at Salford University, "as in future the value of our homes and offices will be linked to their energy efficiency.
"Reducing our demand for energy becomes an investment for every property owner.”
Achieving zero describes a triple-win situation through jobs, improvements to infrastructure, and energy security.
“We already spend ￡35bn a year on improving and maintaining our buildings," she says. "We need to refocus 40% of this into energy-efficiency and spend less on expensive kitchens and conservatories.”
Her key recommendations include:
- progressively more challenging, legally-binding standards of energy efficiency for properties, based on Energy Performance Certificates in homes and display energy certificates (DECs) for business properties
- a network of Low Carbon Zones set up by local councils that target the worst performing homes, especially those occupied by the fuel poor, using the legal obligation to eradicate fuel poverty (where reasonably practicable) by 2016 under the Warm Homes and Energy Conservation Act 2000
- remaining emissions in households being mopped up "through some other policy that covers all energy use, such as personal carbon allowances (PCA)".
Personal carbon allowances
PCAs have been promoted by Dr. Boardman before. They give individuals an annually reducing carbon budget and they are rewarded if they live within their budget by being able to trade surplus allowances.
DECC has previously rejected them as unnecessary, given the existence of the Emissions Trading Scheme.
However, the failure of this scheme to provide sufficient incentive to invest in large low carbon infrastructure due to the oversupply of credits and their consequent low price, has led to scepticism and the Treasury's crestfallen contemplation of the cost implications of its commitment to introducing a carbon price floor.
PCAs, because they promote fairness and personal lifestyle change, remain attractive and for this reason are the explored by a new book, "Sharing for Survival: Restoring the Climate, the Commons and Society" to be published next month, co-authored by a group of campaigners that includes the late Richard Douthwaite.
PCAs are being used in practice now by one pioneering firm to reward employees and stakeholders for making energy efficiency improvements.
Green consultancy WSP Environment and Energy's scheme has 2,200 individuals taking part on a voluntary basis from 15 different organisations, including National Grid, Ecclesiastical Insurance and the London Borough of Haringey.
Its director, David Symons, says the scheme helps "staff understand that sustainability is relevant to them".
One of the scheme's members, Inga Doak, Head of Environment at Invensys Rail praises the scheme, as it "demonstrates pro-active leadership... It was fascinating to see people's perceptions of their carbon footprint and it helped to blow some carbon myths out of the water."
The home refurbishment mountain
Dr. Boardman sees PCAs as complementary to actions which reduce the carbon emissions burden of things that are outside individuals' control, like the state of the buildings they use.
The rate of activity required to meet the Green Deal targets is staggering: for every hour over the next 39 years, 82 existing buildings should be retrofitted to the level of band A on the energy performance certificate, Dr. Boardman calculates.
This is a 25% faster than has been achieved over the last 40 years.
If this were to be done, by 2050, all of the UK’s 28 million properties would be so well-insulated that they would require no external energy for space heating.
Electricity use, per property, would be halved and supplied solely from renewable electricity on the grid as a result of policies on lights and appliances, the report says.
How would this be financed? The report envisages that building improvements will continue to be the responsibility of the property owner, with Government providing zero-interest loans to low-income owner occupiers.
Once minimum standards are attained, properties would become more valuable, and be an asset in which lenders may have an equity stake.
Other financial inducements could come in the form of reduced tax liability (stamp duty, council tax, VAT), but at a scale required to ensure popular support in conjunction with the regulatory framework.
The size of financial incentives is inversely proportional to the certainty of the regulatory environment, particularly on minimum standards, Dr. Boardman says.
Value for money
An emphasis on reducing energy demand would result in the most cost-effective cuts in the UK's carbon emissions, with the benefit of lower bills and greater comfort for consumers.
The alternative, being touted by some in the Coalition Government, of a higher level of new, expensive electricity-generating capacity, implies considerably higher bills for users, thus pushing more households into fuel poverty, without providing any improvement in the level of energy services or spreading wealth by improving building value, or raising public awareness of energy use.
It therefore represents greater value for money.
Crucially, it all rests on the level of the interest rate at which capital is lent to finance the work and the period over which it is to be repaid.
Dr. Boardman concludes, "The UK cannot meet its legal obligations on eradicating fuel poverty by 2016 and 80% reduction in greenhouse gases by 2050 without most, if not all, of the proposed initiatives".
This is a cross-post from TheEnergyCollective.com.
The Energy Collective is the web's premier site for sophisticated energy policy discussion. TEC is an independent, moderated community of professionals focused on the complex challenges of meeting the world's energy needs sustainably.
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