Climate Bill: Not ready for a change?

The Climate Bill has gone dead in waters in the Senate. While the post-mortem continues throwing up interesting perspectives, the cap and trade part of the Bill has been characterized as "the biggest corporate welfare program". With economy still shivering and job recovery beyond the horizon any big change will not necessarily be accepted as the one everyone will believe in...

Notice that lack of widespread support for cap and trade is also due to a perception that polluting plants (coal fired power plants) will pass the cost to consumers and an individual family will have to fork out additional $15 in their energy bill.

This highlights the fact that we are not yet ready for a cap and trade that is asking individuals for sacrifices...

Before we look for any alternative approaches to garnering general acceptance to a Personal Carbon Trading system, it will be useful to list some individual actions in support of clean environment:

1. Energy saver bulbs: driven by saving on energy bill and long life
2. Energy Star or energy efficient appliances: saving on energy bill, local regulations
3. Energy efficient houses: savings on energy bill, local regulations
4. Hybrid cars: Feel good; takes over 5 years to generate ROI, concessions and rebates
5. Solar panels: Feel good and savings. However it takes longer to get ROI. Needs funding support
6. Garbage and packaging recycle: feel good
7. Carbon offset on travel: feel good
8. Car pooling: Commute convenience

I am sure I missed a few. Fell free to suggest...

Then there are other tax elements like plastic disposal charge levied at point of sale or oil disposal tax when you change the oil in your car.

There is no mechanism to recognize individual contributions in carbon saving initiatives beyond some diffused savings accrued on energy bills. No system exists today that looks towards rewarding people via market mechanism for their participation.

Clearly feel good cannot trump fear of job loss or bearing the economic burden of carbon saving programs.

We need a new approach.

Personal Carbon Trading: A Utopia?

Only 50% of American are concerned with Global warming; 57% do not believe that global warming is in fact happening. Only 47% believe that Global warming is caused by human activities.

Most American’s believe that more research into developing alternate form of energy is needed and they support increasing consumer education and awareness.

There is a lukewarm support for cap and trade scheme specially when it is seen as raising the cost of household energy bill.

“When cap and trade is explained, 58 percent support the policy, but this support drops to approximately 40 percent if household energy costs increase by $15 a month, or 50 cents a day. Sixty-six percent support cap and trade, however, if every household were to receive a yearly bonus of $180 to offset higher energy costs. In addition, 59 percent of Americans said they would likely spend the bonus on home energy efficiency improvements. This increases to 71 percent if the government offered to double the bonus if it was spent on energy efficiency improvements.”

Clearly following the taxation route to reduce carbon emissions is an uphill task.

Clearly following the taxation route to reduce carbon emissions appears to be an uphill task till the general opinion veers around to accepting the impact of our energy consumption on global environment.

Implicit in this reported opinion is a widespread perception that global warming is not my problem. With all the research going into global warming and strong leadership backing the environmental initiatives, it is surprising that public opinion has not coalesced in the right direction for any policy initiative to take off...

I believe the issue lies in lack of sense of participation. There is nothing that can galvanize everyone into action (like a war or natural calamity of mega proportions). One can argue that a carbon cap and trade could help in establishing a sense of personal responsibility. But the only perceived outcome of such a scheme is raising taxes.

Personal Carbon trading scheme?

This interesting concept has been examined in some detail by Sustainable Development Commission in UK back in 2006. The Commission has approached this from the angle of Personal Carbon Allowance (PCA) or Tradable Energy Quota (TEQ) as suggested by David Flaming of Tyndall Center, UK.

Allocating individual energy quota raises all sorts of issues that will quickly become intractable i.e. how do you decide how much to allocate to an individual, how will this allocation affect energy poor or how do you operate a scheme like this on a global level?

An alternative approach is needed to draw people in and gain their widespread support in carbon control through carbon trading.

Such an approach is not too difficult to devise given the level of sophistication in technology and a system that will provide gains to individuals for participating in carbon trading.

More about this in the next post...