Tradable carbon permits : their potential to reduce CO2 emissions from the transport sector

Abstract

Given the severity of the impacts arising from climate change and the short timeframe available regarding mitigation, it is imperative to reduce emissions of greenhouse gases. Road transport is a significant contributor to UK CO2 emissions, with the majority arising from personal road transport. A working model of a Tradable Carbon Permit (TCP) scheme was therefore designed to achieve a 60% reduction of CO2 emissions from personal road transport by 2050. A proportion of the annual carbon budget would be given to individuals as a free carbon permit allocation. Following the consumption of the free carbon permits, an individual must then purchase any permits required in the future from a centralised market. Alternatively, there is an opportunity to sell unused permits. Fuel price increases were recognised as having the potential to achieve an identical emissions target at a much lower cost. Hence, conventional elasticities were used to derive a comparative measure to the TCP scheme. A range of practical considerations regarding both policies were discussed, including approximate costings, social impacts and implementation. An innovative survey design was developed to explore the feasibility of applying a TCP scheme and a system of fuel price increases (FPI) to the personal road transport sector. A series of individual interviews were conducted to gather opinions related to the impacts (including costs and benefits), effectiveness (ability to meet the emissions target), fairness and acceptability of both measures. Bespoke software was used to record behavioural response and display respondents' travel data alongside their free permit allocation and estimated spending at three points in time. A range of qualitative and quantitative results are reported. The findings revealed a stark contrast in opinions and attitudes towards the TCP scheme and FPI, with the TCP scheme being more favourable in every aspect in addition to achieving a much greater level of behavioural response and hence carbon reductions