Survey
Personal carbon trading: A critical survey
Part 2: Efficiency and effectiveness
Richard Starkey ⁎
Tyndall Centre for Climate Change Research, Pariser Building, University of Manchester, Sackville Street, Manchester, M13 9PL, United Kingdom
a b s t r a c ta r t i c l e i n f o
Article history:
Received 10 May 2010
Received in revised form 7 September 2011
Accepted 28 September 2011
Available online 28 November 2011
Keywords:
Personal carbon trading
PCT
TEQs
Efficiency
Effectiveness
Equity, efficiency and effectiveness are three key criteria use to assess environmental policy instruments. Part
1 of this survey shows that, in terms of equity, Tradable Energy Quotas (TEQs) – a widely discussed personal
carbon trading (PCT) scheme - cannot be differentiated from Cap and Dividend (C&D) or Cap and Share
(C&S). Hence, Part 2 explores whether they can be differentiated in terms of efficiency and/or effectiveness.
The paper reviews two studies that compare the efficiency of TEQs and C&D. Whilst their estimates of the
costs and abatement potential of TEQs differ, neither study considers that there is a case, on efficiency
grounds, for its implementation. The paper goes on to sketch two arguments for the implementation of
PCT that might, nevertheless, be made on efficiency grounds and one – relating to public acceptability –
that might be made on effectiveness grounds. Exploring the various public surveys conducted on the acceptability
of PCT, the paper concludes that support for PCT is not obviously greater than for alternative instruments
and notes a methodological limitation in the work reviewed. The paper concludes that, to date, the
case against implementation of PCT is stronger than the case for.
© 2011 Elsevier B.V. All rights reserved.
1. Introduction
Equity, efficiency and effectiveness are three key criteria for comparing
environmental policy instruments. Part 1 of this survey describes a
range of personal carbon trading (PCT) schemes and compares, in
terms of equity, the two most widely discussed PCT schemes
▪ Tradable Energy Quotas (TEQs)
▪ Personal Carbon Allowances (PCAs)
with two proposed alternative trading schemes
▪ Cap and Dividend (C&D)
▪ Cap and Share (C&S)
This comparison shows that these schemes can be equally fair: that is,
no one scheme is inherently more equitable than another. As the schemes
cannot be differentiated in terms of equity, Part 2 examines whether
TEQs, C&D and C&S can be differentiated in terms of efficiency and/or
effectiveness.1
A scheme is effective if it can deliver a prescribed emission reduction
target. A necessary condition for effectiveness is that a scheme's
implementation is technologically feasible, and research indicates that,
for all three schemes, there is no technical barrier to implementation
(AEA Energy and Environment, 2008; Lane et al., 2008). A scheme is
efficient if it can deliver the prescribed reduction target at low total cost,
with total cost defined here as the sum of implementation, participation
and abatement costs. The implementation and participation costs of the
three schemes are compared in Sections 2 and 3 whilst Section 4 explores
their abatement and total costs. Section 4 concludes by reviewing two UK
studies, one by the Department for Environment, Food and Rural Affairs
(Defra) and the other by the Institute for Public Policy Research (IPPR)
that, on the grounds of efficiency, do not support the implementation of
TEQs. In contrast, Section 5 outlines three arguments that might support
its implementation. The last of these relates to another necessary condition
for effectiveness, public acceptability, which is discussed in Section
6. Section 7 concludes.
2. Implementation Costs
2.1. TEQs and C&D
2.1.1. Lane et al. Study
In 2008, Defra published its pre-feasibility study into PCT. This comprises
fourreports:Laneetal.(2008),Defra(2008),Owenetal.(2008)andThumim
and White (2008). The first three are considered in this paper.2
Lane et al. (2008) compare implementation costs of Fleming's
TEQs and an economy-wide upstream trading scheme. However,
this upstream scheme is not C&D, as its auction revenue is not allocated
to individuals (Table 1).3
Dresner (2005) argues that the UK's
Ecological Economics 73 (2012) 19–28
⁎ Corresponding author. Tel.: +44 161 306 3700; fax: +44 161 306 3255.
E-mail address: r.starkey@ntlworld.com.
1
Given its similarity to TEQs, PCAs is not included within the comparison.
2
The fourth is referenced in Part 1.
3
Thus, the comparison is not one between two equally equitable instruments (Part
1, Section 5.2).
0921-8009/$ – see front matter © 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.ecolecon.2011.09.018
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Ecological Economics
journal homepage: www.elsevier.com/locate/ecolecon
largely integrated tax and benefit system would make the administrative
cost of allocating auction revenue to individuals through adjustments
to their tax allowances and benefit rates close to zero.4
Hence, figures for the implementation costs of this upstream scheme
can be taken as indicative of those for C&D. Given this, and that its
participation costs (Section 3) would be identical to C&D, this upstream
scheme is, for continuity, referred to as C&D.
Lane et al. estimate the set-up costs of TEQs at £0.7–2 billion and
the annual running costs at £1–1.8 billion5
(Table 2), whilst estimating
the set-up costs of C&D at £50–100 million and the annual running
costs at £50 million. They propose that, under TEQs, high street
banks should run individuals' carbon accounts alongside their cash
accounts, estimating the annual running cost of a carbon account at
£15–20. Lane et al. recognize that not everyone has a bank account
but, assuming, for simplicity, that everyone does and that there are
50 million carbon accounts in all, they calculate the annual cost of
running individuals’ accounts at £0.75–1 bn. This sum – by far the
largest component of total annual running costs - covers, amongst
other things, the cost of posting individuals a monthly account statement,
Lane et al. (2008, p. 45) noting that
only a minority of the adult population currently uses internet
banking services, so it would be imprudent…to eliminate hard
copy statements of carbon credit usage.
Lane et al. estimate the remaining annual running costs at £0.2–0.8 bn
(Table 2).
Whilst organizations under TEQs have the option of opening a
carbon account to engage in Type 1 surrender (S1), Lane et al.
(2008, p. 41) assume that all will engage in Type 2 surrender (S2)
i.e. surrender at the point of sale.6
2.1.2. IPPR Study
In the IPPR's assessment of Defra's pre-feasibility study, Lockwood
(2009) accepts Lane et al.'s estimates for the set-up costs of TEQs and
C&D and the running costs for C&D but suggests that their estimate
for the running costs of TEQs may be too high. According to
Lockwood, evidence from Europe suggests that current bank accounts
can be run at an annual cost of £14–17.50 and he argues that, as carbon
accounts would be simpler to run, their annual running cost
would be lower. Furthermore, he suggests that most individuals
could access a carbon statement electronically (although a paper
statement should be available to those who want or need one). On
this basis, he concludes that the annual cost of running an individual's
carbon account could be £10–15 which, assuming 50 million accounts,
gives a total annual figure of £0.5–0.75 bn (Table 2). Whilst
Lockwood's focus is on implementation costs of TEQs as they relate
to individuals, he appears to accept Lane et al.'s assumption that organizations
under TEQs will engage in S2.
Lockwood, like Defra (2008), takes 2013 as the earliest implementation
date for TEQs. Although in 2010, around 75% of UK households
were connected to the internet, only around 40% of adults banked online
(Table 3). This figure suggests that Lockwood may be optimistic
in proposing that, by 2013, “most” individuals would access electronic
statements. However, the proportion doing so would grow as computer
literacy amongst the population increased, and making paper
statements “opt in” would utilize this literacy to reduce costs.
Lockwood further argues that the remaining annual running costs
of TEQs will be substantially lower, estimating them at £0–0.25 bn
(Table 2).7
For example, given Lane et al.'s proposal that an individual's
carbon account runs alongside their bank account, Lockwood
argues that the verification of identity required for that individual to
open their bank account is sufficient for them to obtain a carbon account,
and that the costly additional verification for carbon accounts
proposed by Lane et al. is not required.
2.2. C&S
Whilst C&D involves an upstream auction with revenue allocated
through the tax and benefit system, C&S involves posting emissions
rights out to individuals, individuals selling their rights at banks or
post offices, and these market makers selling them on to fossil fuel suppliers.
Thus far, no quantitative comparison of the two schemes' costs
has been made but, in its study of C&S, AEA Energy and Environment
(2008) reasonably estimates the set-up and running costs of C&S to be
higher. However, as C&S neither requires the provision of carbon accounts
to individuals nor systems for S1 and S2, its implementation
costs will be considerably less than those of TEQs.
4
Some individuals eligible to be allocated auction revenue will be neither tax payers
nor benefit recipients and so some other means of transferring revenue would also be
required, which would bring some additional cost.
5
They note that “The broad range is reflective of analysis conducted at a very early
stage of feasibility testing” (Lane et al., 2008, p. 6).
6
For details of S1 and S2 see Part 1, Section 3.1.
Table 2
Estimates of annual running costs for TEQs.
Cost category TEQs: annual running
costs (£m)
Lane et al. Lockwood
Accounting and transactions
Running carbon accounts 750–1000 500–750
Other 90–350 ↑
Overall management b10
Enrolment, ID verification and allocation 100–300 0–250
Auction and trading b20
Compliance and enforcement 10–100 ↓
Total 950–1750 500–1000
Table 3
Internet use and internet banking in the UK.a
UK adults and households 2006 2007 2008 2009 2010
Adults using internet (%) 60 67 71 76 77
Internet users banking online (%) 42 45 49 54 54
Adults banking online (%) 25 30 35 41 42
Households connected to internet (%) 57 61 65 70 73
a
Sources: Office of the National Statistics (2006, 2007, 2008, 2009b, 2010).
7
Lockwood does not provide cost estimates for the individual cost categories in Table
2, hence the global figure. However, it seems reasonable to presume that these
costs must be greater than Lockwood's lowest estimate of zero.
Table 1
Variants of PCT and upstream trading assessed by Defra and IPPR.
Feature Defra IPPR
PCT Upstream PCT Upstream
Scope Scope Auction
revenue
allocated to
individuals?
Scope Scope Auction
revenue
allocated to
individuals?
Implementation EWa
(TEQs)
EW No EW
(TEQs)
EW No
Participation IOb
IO No IO IO No
Abatement IO IO No IO IO No
Public
acceptability
EW
(PCAs)
EW
(C&D)
Yes IO IO No
a
EW=economy wide.
b
IO=individuals only.
20 R. Starkey / Ecological Economics 73 (2012) 19–28
3. Participation Costs
3.1. Which PCT Scheme?
Defra's pre-feasibility study does not assess a single version of PCT.
For example, whilst Lane et al. (2008) assess Fleming's TEQs, Defra
(2008, p. i), in its comparison of the efficiency of PCT and C&D, considers
a PCT scheme under which only individuals are allocated emissions
rights (Table 1).8
Defra (2008, p. i) justifies this individuals-only
focus as follows.
Alternative designs have been proposed, including more ambitious
economy wide schemes, however considering the net benefit of introducing
trading [for individuals] provides an insight into the added
value of personal carbon trading generally. Downstream trading already
covers all energy intensive industries through the EU ETS9
and
after the introduction of the Carbon Reduction Commitment in 2010
will cover large non-energy intensive organizations too. The unique
aspect of personal carbon trading schemes is that such downstream
trading would be extended to individuals' energy use.
Although Defra analysis focuses only on individuals' participation
and abatement costs, its acceptance of Lane et al.'s assumption that
all organizations engage in S2 means that one can infer its view on
what organizations' participation and abatement costs would be
were its individuals-only scheme extended economy wide to become
TEQs (Section 4.8). For this reason, and for continuity, Defra's scheme
is henceforth referred to as TEQs. Although the IPPR similarly focuses
only on individuals' participation and abatement costs (Table 1), its
apparent acceptance of the Lane et al. assumption means the scheme
it assesses is, for continuity, likewise referred to as TEQs.
3.2. TEQs
Defra estimates that individuals would spend between two and six
hours each year participating in TEQs, with a central estimate of 4 h.
Assuming 50 million participating individuals and a value of £5 for
an hour of their participation,10
the total annual participation cost
Table 4
Comparison of total annual cost of TEQs and C&D.
Items Annual cost and abatement estimates
Defra Lockwood
Low Central High Low Central High
Annual implementation and participation costs
TEQs
Set-up costsa,b
(£m) 84 163 241 70 135 200
Running costsc
(£m) 1000 1500 2000 500 750 1000
Participation costs (£m) 500 1000 1500 400 575 750
Implementation+participation costs (£m) 1584 2663 3741 970 1460 1950
Implementation+participation costs per individuald
(£) 31.68 53.25 74.81 19.40 29.20 39.00
C&D
Set-up costse,f
(£m) 9 9 9 10 10 10
Running costs (£m) 50 50 50 50 50 50
Participation costs (£m) 0 0 0 0 0 0
Implementation+participation cost (£m) 59 59 59 60 60 60
Implementation+participation cost per individual (£) 1.18 1.18 1.18 1.20 1.20 1.20
Difference in implementation+participation cost 910 1400 1890
Difference in implementation+participation cost per individual (£) £30.50g
£52.07 £73.63 £18.20 £28.00 £37.80
Abatement
Permit price=2013 shadow price of carbon (£/tCO2) 29 29 29
Permit price=2020 non-traded carbon price (£/tCO2) 60 60 60
TEQs
EE^ (%) 0 2.5 5
E′E^ (MtCO2) 0 5.9 11.9
Value of EPHE^ (£m) 0 172 344
Value of EPHE^ per individual (£) 0 3.44 6.87g
C&D
EE′ (%) 0 0.5 1
EE′ (MtCO2) 0 1.2 2.4
Value of EPFE′ (£m) 0 34 69
Value of EPFE′ per individual (£) 0 0.69 1.37
Difference in abatement value (E′FHE^) per individual (£) 0 2.75 5.49
Size of EE^ for TEQs' total cost per ton of abatement to equal permit price (%) 23.1 38.8 54.4 6.8 10.3 13.7
Size of EE′ for C&D's total cost per ton of abatement to equal permit price (%) 0.9 0.9 0.9 0.4 0.4 0.4
Size of E′E^ for TEQs' total cost to be equal to that of C&D 22.2 37.9 53.5 6.4 9.9 13.3
a
Set-up costs from Lane et al. (2008) amortized over 10 years by Defra with interest rate applied.
b
Set-up costs from Lane et al. (2008) amortized over 10 years by IPPR with no interest rate applied.
c
Whilst Lane et al. estimate annual running costs at £1–1.8 bn, Defra assume costs of £1–2 bn.
d
50 million participating individuals assumed. Under TEQs, each is assumed to have a separate carbon account.
e
Defra uses only the central estimate from Lane et al. (2008). Costs amortized over 10 years with interest rate applied.
f
IPPR uses only the upper estimate from Lane et al. (2008). Costs amortized over 10 years with no interest rate applied.
g
Defra notes that, even making the most optimistic assumptions about TEQs (i.e. low implementation and participation costs and EE^ equal to 5%) and the least optimistic about
C&D (i.e. EE′ equal to 0%), the amount by which abatement costs under TEQs are lower per individual (£6.87) is 4.5 times smaller than the amount by which implementation and
participation costs are higher (£30.50).
8
These rights cover individuals' energy and aviation emissions. Whilst Defra characterizes
this scheme as PCAs, Part 1 notes that, under PCAs, individuals are, in theory at
least, allocated rights covering their energy emissions plus all their public transport
emissions, whilst organizations are allocated rights via the carbon market.
9
European Union Emissions Trading Scheme.
10
This figure is based on the value of £4.94 that, in 2007, the Department for Transport
placed on an hour of non-work time for the purposes of cost–benefit analysis.
21R. Starkey / Ecological Economics 73 (2012) 19–28
comes to between £0.5 and 1.5 billion with a central estimate of
£1 billion (Table 4). Defra (2008, p. 54) notes that, although a
“rough estimate”, its central value of 4 h per person “underline[s]
that the costs associated with the time burden would be nonnegligible
for a PCT scheme”. However, the IPPR (Lockwood, 2009)
argues that Defra's estimates are too high and puts annual participation
at 1.6–3 h per individual with a central estimate of 2.3 h. Assuming
the same number of participants and value for participants' time,
the total annual participation cost comes to £0.4–0.8 bn with a central
cost of £0.6 bn.
If all individuals engaged solely in S2, then once they had put in
place an arrangement for a market maker to purchase their carbon
units, annual participation time would be zero. For even though,
under S2, they would be purchasing and surrendering units at the
point of sale, their transaction would consist of a single monetary
payment (for energy+units), that would take no longer than a payment
(for energy only) prior to the implementation of TEQs. Thus,
both Defra and the IPPR implicitly assume that all individuals engage
in S1. Defra and IPPR's assumption that all organizations engage in S2
implies that organizational participation costs are zero.
3.3. C&D and C&S
Under C&D, there would be no participation cost to individuals or
organizations for, just as prior to the introduction of the scheme, all
purchases of energy would be purely monetary transactions. According
to Defra and the IPPR this absence of participation costs and its
lower implementation costs, means that the annual implementation
and participation costs per individual are from £20–75 lower than
for TEQs (Table 4). Under C&S, the only participation time for an individual
would be the small amount involved in the sale of rights to
market makers.
4. Abatement and Total Costs
Sections 2 and 3 addressed implementation and participation
costs. Abatement costs, and the sum of all three costs i.e. total costs
are addressed in Section 4.
4.1. The ENCORE Hypothesis
With regards to emission reductions, various authors have suggested
that individuals may respond differently to TEQs than to C&D
or C&S.11
For example, Fleming (2007) suggests that TEQs will
engender an increased sense of responsibility for emission reduction.
Kerr and Battye (2008, p. 8, 40) similarly suggest that TEQs will give
individuals “transparent responsibility” for emission reductions and
that one of its likely strengths will be that of “engaging and empowering
individuals”. Starkey and Anderson (2005) suggest that TEQs
may cause them to become more aware of their emissions than
under other instruments, that is to become more “carbon conscious”
(Starkey, 2008, p. Ev 24). And this may lead them to undertake a
more intensive search for emission reduction opportunities, which
in turn may lead to them discovering and taking advantage of lower
cost emissions abatement opportunities.
Thus, it can be hypothesized that, as the result of a differential
psychological impact, namely that of engendering a greater level of
engagement, consciousness, responsibility and empowerment (ENCORE)
individuals' abatement costs will be lower under TEQs than
under C&D and C&S.12
Section 4.2 illustrates how these lower abatement
costs might result in TEQs being the most efficient of the three
instruments.
4.2. ENCORE and Total Costs
Fig. 1 is a stylized marginal abatement cost curve, showing the ten
most efficient measures for reducing individuals' energy emissions,
some of which have a negative cost. An emissions cap is set at a
level which requires abatement EE*. When implemented, Instrument
1 generates high levels of ENCORE, which in turn results in the five
most efficient measures being discovered and implemented. However,
Instrument 2 fails to generate such high levels and, as a result,
measures 3, 5, 7 and 8 are not discovered and abatement is achieved
through the implementation of measures 1, 2, 4, 6 and 9. Fig. 2 shows
the marginal abatement costs curves for Instruments 1 and 2, with
the increased ENCORE under the former leading to abatement costs
that are lower by amount A. In Fig. 3 the curves are further stylized
with abatement costs under Instrument 2 equal to A+B+D, abatement
costs under Instrument 1 equal to B+C+D and the difference
equal to A−C.
The total cost of an instrument is its abatement costs (AC) plus
the sum of its implementation and participation costs, here referred
to as other costs (OC). Using this terminology, TEQs will be more
+
Abatemenntcost
E
5 6 7 8 9 104
Abatement
-
1 2 3 E*
Fig. 1. Stylized marginal abatement cost curve: theoretical potential.
11
Organizations are discussed in Section 4.8.
12
Fleming and Chamberlin, 2011 propose that TEQs would also engender a (greater)
sense of “common purpose”. The author remains unconvinced of the intelligibility of
this concept. However, a separate analysis is required as, unfortunately, there is not
space here for the detailed discussion required.
Abatementcost
E
+
-
A
I2
I1
6
4
9
1 2
3 54
6 7 8 9 10
AbatementE*
Fig. 2. Stylized marginal abatement cost curves for I1 and I2.
22 R. Starkey / Ecological Economics 73 (2012) 19–28
efficient than C&D or C&S (C&D/S) if
ACTEQs þ OCTEQs b ACC&D=S þ OCC&D=S
In other words, TEQs will be more efficient if its abatement costs
are lower than those of C&D/S by an amount greater than that by
which its other costs are higher, that is if
OCTEQs − OCC&D=S b ACC&D=S − ACTEQs
If, in Fig. 3, TEQs and C&D/S are substituted for, respectively, Instruments
1 and 2,13
then TEQs will be more efficient if
OCTEQs − OCC&D=S b A − C
4.3. ENCORE and Irrational Abatement
One of the components of ENCORE is the notion of “responsibility”,
which Defra (2008, p. 39) discusses as follows.
A rational approach to trading would include an understanding
that the overall level of emissions is set by the cap and that the
best way of taking ‘responsibility’ for ones own level of emissions
is to engage in the personal carbon trading market. This is important,
as a sense of personal responsibility has been highlighted as a
key benefit of personal carbon trading…However, if the sense of
responsibility means that individuals see their allocation as a
limit or target, or a reflection of what a ‘fair’ level of personal emissions
is, then this will prevent trading from achieving least cost
abatement, and this will represent an additional cost arising
from the implementation of personal carbon trading.
The additional cost arises from above-allocation individuals engaging
in what Defra refers to as “irrational” abatement i.e. reducing
their emissions to the level permitted by their carbon unit allocation
when it would cost less to emit above this level and purchase units to
cover their above-allocation emissions.
Under C&D, there is no individual allocation of emissions rights to
treat as an upper limit or target. And whilst C&S does provide individuals
with an allocation of rights, it does not provide a mechanism that
enables them to ascertain whether and by how much their energy
emissions are above or below allocation. However, TEQs does provide
such a mechanism, namely S1. Thus, to the extent that individuals engage
in S1, there is the potential, not present under C&D and C&S, for
them to treat their allocation as an upper limit — and, hence, for irrational
abatement.
Whilst irrational abatement is plausible, Defra (2008) does not
discuss its likely prevalence and how this is factored into its wider
analysis. However, Defra certainly does not argue that such abatement
will prevent TEQs' abatement costs being lower than those of
C&D (Section 4.6). Equally, authors (e.g. Bird and Lockwood, 2009;
Fleming and Chamberlin, 2011) who discuss Defra's analysis do not
address the likely prevalence of irrational abatement under TEQs.
4.4. More on ENCORE
If, despite any irrational abatement, increased ENCORE under TEQs
may result in lower abatement costs, it is important to clarify which
of TEQs' features may give rise to increased ENCORE.
When, under TEQs, individuals engage solely in S2, the experience
at the point of sale is very similar to that under C&D and C&S, namely
a single monetary payment. However, TEQs differs from C&D and C&S
in requiring the surrender of carbon units. And as fuel receipts and
utility bills under TEQs show the quantity of carbon units surrendered,
individuals could, in theory, determine their total energy emissions
by summing the emissions on their bills and receipts. However,
this difference is not significant as
1. it would be straightforward under C&D and C&S to have emissions
associated with an energy purchase printed on fuel receipts and
utility bills.
2. calculating emissions from receipts and bills would, in any case, be
too laborious for most.
3. there are other ways of determining ones energy emissions
(Section 4.5).
If, under C&S, emissions were printed on receipts and bills then, in
relation to individual energy emissions, S2 under TEQs would be virtually
identical to C&S.14
That is, under both schemes, individuals
would be allocated rights covering their energy emissions, sell them
to market makers, transact only in money at the point of sale and receive
receipts and bills showing emissions. Thus, if ENCORE is greater
under TEQs than under C&S, it can only be because TEQs has the option
of S1 and at least some individuals take this option up.15
Given that lower abatement costs under TEQs are dependent upon
at least some individuals engaging in S1, it is important to understand
the factors that favor individuals choosing to engage either in S1 or
S2. These are now discussed in a UK context.
4.5. S1 or S2?
At the time of Defra's comparison of TEQs and C&D, it used the
shadow price of carbon for policy appraisal, a price based on estimates
of the damage costs associated with greenhouse gas emissions.
However, due to considerable uncertainties surrounding these estimates,
the Department of Energy and Climate Change has introduced
a “target-consistent approach” to pricing carbon (DECC, 2009, p. 2).
Under this approach, the price of carbon is the estimated marginal
abatement cost required to meet a particular emissions reduction target.
In fact, the government has developed estimates for two carbon
prices: a traded price covering abatement under the EU ETS and a
non-traded price covering abatement in other sectors. As individuals'
energy emissions fall into these other sectors, the IPPR uses the nontraded
price (Section 4.7) which is also used below.
13
This is not to suggest that TEQs will necessarily result in the lowest possible abatement
cost, only that it has a lower abatement cost than C&D.
14
TEQs and C&S differ in their treatment of COGS and INDIE emissions. See Part 1.
15
S1 is one reason why ENCORE may also be greater under TEQs than under C&D.
C&D also differs from TEQs and from C&S (Section 4.9) in that individuals are allocated
auction revenue rather than emission rights.
+
I2
I1
Abatementcost
E
B
Abatement
-
C
E*
D
A
Fig. 3. Further stylized marginal abatement cost curves for I1 and I2.
23R. Starkey / Ecological Economics 73 (2012) 19–28
Three factors favor S1.
1. Knowledge of energy emissions. If, under TEQs, individuals are interested
to know whether and by how much their energy emissions
are above or below allocation, it is only by engaging solely in S1
that they can know this from their carbon statement.
However, S1 would not be necessary if individuals had alternative
means of conveniently determining their energy (i.e. residential
+private transport) emissions. Such means may soon be available.
The UK government's aspiration is that, by 2017, all households
will have a smart meter able to calculate residential emissions
and, according to Champion (2008), there is potential for onboard
computers to calculate, and for dashboards to display, vehicle
emissions.
2. Bid and offer spread. Assume that a TEQs scheme covering all gases
was implemented in the UK in 2013. Under such a scheme, individuals
would be allocated carbon units permitting annual emissions
of around 4 tons of carbon dioxide equivalent (t/CO2e).16
Assume
too that all individuals engage in S2. Finally, assume that individuals'
energy emissions are equal to those permitted by the carbon
units they are allocated and, thus, that on average, they buy back
the same quantity of units they were allocated.17
In this case,
with a non-traded carbon price of £54 t/CO2 and a bid and offer
spread of 5%,18
individuals would face an average penalty of
around £11. In comparison the average penalty under S1 would
be zero.
3. Risk aversion. For a risk-averse individual, the disutility of a loss is
greater than the utility of an equivalent gain. According to Defra
(2008, p. 38), when an individual engages solely in S2, she has a
roughly even chance of an equivalent gain or loss i.e. that the
price at which carbon units are sold at the point of sale will be
higher or lower by the same amount than the price at which she
sold her units to a market maker immediately upon allocation. If
so, then risk-averse individuals would prefer S1.
However, it has been suggested that risk aversion may be lower
when potential losses are low (Erev et al., 2008). Assuming the average
carbon price was £54 t/CO2 and could rise or fall by 30%,19
individuals would, under S2, face the prospect of a loss or gain of
up to around £65. Arguably, for many, this does not represent a
significant loss and, if so, may reduce the preference for S1.
Two factors favor a choice of S2.
1. Understanding. Some individuals will engage in S2 out of a belief,
correct or otherwise, that they will be unable to cope with S1 i.e.
with using a carbon card, understanding a carbon statement and
trading with market makers.
2. Time. As S2 at a petrol station does not involve the use of a carbon
card, transaction time will be quicker than under S1. And if all customers
engage in S2, queuing time will also be shorter than under
S1 (Starkey and Anderson, 2005). Furthermore, under S2, there is
no time spent considering carbon statements and trading with
market makers. Thus, those individuals who prefer to minimize
the time they spend on TEQs will engage in S2.
Ultimately, an individual's choice of S1 or S2 will depend on how
they weight these various factors. Whilst Defra (2008, p. 35, 37–38)
acknowledges that some individuals may prefer to engage in S2, it
makes no assessment of what the S1:S2 split might be (and neither
do others who have written on PCT). Instead, in its comparison of
TEQs and C&D, Defra assumes, as does the IPPR, that all individuals
engage in S1. Under this assumption, abatement costs are at their
lowest and so TEQs is at its most efficient. But as not all individuals
will engage in S1, Defra and the IPPR compare C&D with an account
of TEQs that is implausibly efficient.
4.6. Defra: Comparing TEQs and C&D
For simplicity, Section 4.2 proceeded as if TEQs or C&D was the
only existing mitigation instrument and all abatement took place domestically.
However, Defra's comparison assumes that TEQs or C&D
would be implemented in addition to existing instruments and the
UK purchases international credits to assist in meeting its emission
reduction targets.20
With regard to Defra's analysis, EE* in Fig. 4 represents 2013
abatement achieved through the purchase of international credits in
the absence of TEQs or C&D.21
Defra assumes that the credit price P
is the shadow price of carbon (£29/tCO2) and explores whether
implementing TEQs or C&D in 2013 might achieve a portion of abatement
EE* at a cost less than P.
Defra suggests that TEQs can raise the visibility of individual energy
emissions in three ways.22
First, TEQs provides indirect feedback
on emissions at the point of sale. Whereas direct feedback occurs in
real time (e.g. feedback by a smart meter), indirect feedback is retrospective
or prospective (e.g. the display on utility bills or motor fuel
receipts under TEQs of the emissions associated with an energy purchase).
Second, under S1, an individual's carbon statement provides
information on their overall energy emissions. And, third, S1 provides
a moment to “stop and think” about one's private transport emissions
(Defra, 2008, p. 34–37).
1. Indirect feedback. Individuals' energy emissions consist of residential
and private transport emissions. Defra argues that the direct
feedback provided by smart meters will raise the visibility of residential
emissions such that no additional visibility would result
from the indirect feedback under TEQs on utility bills. Defra further
argues that requiring petrol pumps and motor fuel receipts to display
emissions associated with a fuel purchase would provide the
16
3.8 t to be precise. This assumes (1) individuals eligible for rights are those 18 and
over (2) eligible individuals number 50.3 million (Office for National Statistics, 2009a)
(3) eligible individuals are responsible for the same percentage of energy emissions as
in 2008 i.e. 40% (4) UK inventory emissions are 566 Mt/CO2e (DECC, 2010b) and (5)
energy emissions make up the same percentage of total emissions as in 2008 i.e. 85%.
17
Individuals' energy emissions could be higher (lower) than those permitted by the
carbon units they are allocated if, on aggregate, they purchase units from (sell units onto)
the carbon market (Part 1).
18
From Defra (2008, p. 38).
19
From Defra (2008, p. 39).
20
Arguably, TEQs or C&D would be best implemented as a sole UK-wide trading
scheme. However, in practice, they would have to co-exist with the EU ETS which
covers around 50% of UK CO2 emissions. Thus, implementation of a UK-wide scheme
would entail substantial double regulation (Starkey, 2008, p. Ev 22).
21
Whilst Defra (2008) considers the option of the UK meeting its target solely
through domestic abatement, it regards the purchase of credits as more likely. Thus,
only this latter option is discussed here.
22
“Visibility” is a similar concept to the “carbon consciousness” component of
ENCORE.
Abatementcost
UT
F
G
P
TEQs
H
I
J
% abatement of
237 MtCO2
E*E^E´E
Fig. 4. Marginal abatement cost curves for TEQs and C&D.
24 R. Starkey / Ecological Economics 73 (2012) 19–28
same indirect feedback on private transport emissions as TEQs, but
at a fraction of TEQs' implementation costs.
2. Information on overall emissions. Under S1, the carbon statement
provides individuals with feedback on their overall energy emissions.
However, Section 4.5 notes the potential to receive such
feedback from alternative sources.
S1 enables individuals to compare their energy emissions to the
national average and Defra argues those who realize they have
above-allocation emissions may be motivated to undertake abatement
they would not have undertaken had they not been able to
make the comparison. However, if this leads to irrational abatement
(Section 4.3), the cost of abatement will rise.
3. “Stop and think” moment. Defra suggest that surrender by carbon
card under S1 will make individuals purchasing motor fuel more
aware of the associated emissions than under C&D i.e. they are
more likely to stop and think about (reducing) these emissions.
Defra estimates that, by 2013, existing instruments will have
reduced individuals' energy emissions to 237 Mt/CO2 and estimates
the portion of EE* that TEQs could, as a result of increased visibility,
deliver at an abatement cost less than P as up to 5% of this 237 Mt/
CO2 sum.
A reduction in personal carbon emissions greater than 5% purely
as a result of the raised visibility delivered by personal carbon
trading is unlikely. Evidence for effectiveness of indirect feedback
provides suggested savings of between 0 and 10% of personal
carbon emissions…Given that personal carbon trading
would exist alongside other policies that deliver visibility, notably
smart metering, and that much of the low hanging fruit in
terms of technological measures will already have been delivered
by other policies, additional savings, at the high end of
this range, are highly unlikely to be realized. A figure of a 5%
…can be used as an upper bound for the additional abatement…(Defra,
2008, p. 66).
In Fig. 4, EE′FG and EE″HI represent Defra's marginal abatement
cost curves for, respectively, C&D and TEQs. Given Defra's view that
much low-hanging fruit will have been picked by existing instruments,
no negative-cost abatement is assumed. Instead, under C&D,
it is assumed that an amount of zero-cost abatement (EE′) is followed
by abatement more costly than P. And, under TEQs, it is assumed that
a larger amount of zero-cost abatement (EE^) is, again, followed by
abatement more costly than P. Thus, abatement costs under TEQs
are lower than those under C&D by E′FHE^. Defra (2008, p. 70) sees
much of the additional zero-cost abatement under TEQs resulting
from behavior change e.g. switching off lights when leaving a room,
and cycling or walking to the local shops instead of driving (Defra,
2008, p. 25).23
Defra's low, central and high estimates for zero-cost abatement
under TEQs (EE^) are, respectively, 0, 2.5 and 5% (Table 4). However,
although Defra (2008, p. 62) argues that zero-cost abatement will
also take place under C&D (EE′), no estimate range is offered. A low,
central and high estimate of, 0, 0.5 and 1% is assumed here.
Table 4 sets out what size EE′ and EE^ must be for the total cost
per ton of this abatement under, respectively, C&D and TEQs to
equal P. Abatement under TEQs must then be greater than E′E^ for
it to have a lower total cost than C&D. Even taking the low estimate
for TEQs' implementation and participation costs, EE^ must be over
23% for the total cost per ton of abatement under TEQs to equal P,
and E′E^ must be greater than 22.2% for TEQs to have a lower total
cost than C&D. Given it estimates the maximum value of EE^ at 5%,
Defra concludes that “it seems unlikely that [TEQs] would be able to
past the cost-effectiveness test” (Defra, 2008, p. 70).
4.7. IPPR: Comparing TEQs and C&D
Like Defra, Lockwood (2009) assumes that all individuals engage
in S1 and that TEQs and C&D have the same sort of marginal abatement
cost curves i.e. zero-cost abatement followed by abatement
more costly than P. However, unlike Defra, Lockwood assesses the
abatement potential of TEQs in 2020 rather than 2013 and assumes
P equals the non-traded carbon price (£60/tCO2).24
Based on a review of behavioral economics and social psychology
(Capstick and Lewis, 2008), Bird and Lockwood (2009, p. 22) argue
that, in addition to increased visibility, TEQs may give rise to other effects
that lead to greater abatement
through changing preferences by spreading norms about appropriate
behavior and through effects associated with perceptions
of fairness and co-operation.25
Given this, and based on research by the Committee on Climate
Change (CCC) and others, Lockwood estimates EE^ (Fig. 4) under
TEQs in 2020 at 3.5–8.5%. Under his central (high) estimate for
TEQs' implementation and participation costs, Lockwood calculates
that EE^ would have to be 10.3% (13.7%) for the total cost per ton of
abatement to equal P. However, under his low estimate, EE^ would
have to be 6.8%. And for TEQs to have a lower total cost than C&D, E
′E^ must be greater than 6.4%. Thus, if (1) Lockwood's low estimate
for TEQs' implementation and participation costs is realistic and (2)
EE′ under C&D is less than 2.1%, then it is possible for the total cost
per ton of abatement under TEQs to be both lower than that under
C&D and lower than P. Nevertheless, Bird and Lockwood (2009,
p. 46) conclude that
PCT will be a risky policy in any circumstance, because of the inherently
unknowable dimensions of its [additional abatement] effects
and the range of possible [other] costs. A government will
only consider it seriously if other policies are seen to be failing
or to be unable to reach deeper emissions cuts, and when the political
pressure to act on climate change increases. This could be
some time off, but policymakers should keep open the option of
some version of PCT in the future.
Thus, although they reach somewhat different conclusions regarding
the potential for the abatement of individual energy emissions
under (an implausibly efficient version of) TEQs, neither Defra nor
the IPPR supports its implementation.
4.8. Organizations
On the basis of Defra and the IPPR's assumption that all organizations
will engage in S2, organizations' abatement costs under an
economy-wide TEQs scheme would be no different to those under
C&D. Thus, from Defra's perspective, the criticism of Fleming and
Chamberlin (2011, p. 42) that it does not consider organizations in
its analysis carries little weight. However, Fleming (2007, p. 4) assumes
that all organizations will engage in S1 stating, with regard
to organizations purchasing carbon units, that
they will generally do so in the easiest possible way — that is, by
23
Others view the cost of behavior change as negative (CCC, 2008, p. 226). Of the
three ways in which Defra suggests TEQs might raise visibility, only the second has
the potential to bring about, for example, greater switching off of lights. (The third relates
to transport emissions and the introduction of smart meters mean the first will
fail to result in additional visibility.)
24
Lockwood offers no explanation for his assumption that there are no negative-cost
abatement opportunities under TEQs, nor any between £0 and £60/tCO2.
25
Unfortunately, the review fails to apply the insights of behavioral economics and
social psychology to the important issue of preferences for S1 or S2 (Section 4.5).
25R. Starkey / Ecological Economics 73 (2012) 19–28
giving instructions to their bank. Each week, the bank will take
part in the Tender26
...where it will buy enough…units to meet
the needs of all its customers.
Given that S2 requires no effort at all, it seems odd to characterize
S1 as the “easiest possible way” for organizations to participate in
TEQs and implausible to suggest that all will engage in S1. But even
assuming they did, what would be the implications for the efficiency
of TEQs? Discussion around participation in the UK's CRC Energy Efficiency
Scheme (CRC) is instructive here.
The CRC, which began operation in 2010, is a mandatory emissions
trading scheme to improve energy efficiency in large public and private
sector organizations not regulated by the EU ETS. It has around 5000
participating organizations. Under the CRC, organizations are required
to engage in a process similar to S1. It was originally proposed that organizations
with a half hourly metered electricity consumption of at
least 3000 MWh per year should be required to participate but the
threshold was subsequently raised to 6000 MWh so as to exempt
small energy users “for whom administrative costs would outweigh energy
efficiency benefits” (DECC, 2010a, p. 34). This suggests that whilst
S1 under TEQs might reduce the total costs of larger organizations,27
it
might actually increase those of the millions of smaller organizations.
Thus, even if in the unlikely event that all organizations were to engage
in S1, it is by no means clear that organizational total costs would be
lower under S1 than under S2 and, hence, under C&D.
4.9. C&S
As noted in Section 4.5, the experience at the point of sale is the
same under both C&D and C&S and, thus, the only difference between
them is that, under C&D, individuals are allocated revenue whilst
under C&S, they are allocated rights. To date, no comparison has
been made of likely abatement costs under the two instruments but
C&S will have lower abatement costs only if the allocation of rights
leads to greater ENCORE than the allocation of revenue. And C&S
will have lower total costs only if its abatement costs are lower than
those of C&D by an amount greater than that by which its other
costs are higher. A similar point is made at the Cap and Share website
(Cap and Share, 2011) which notes
[Cap & Dividend] is a simpler system, and hence cheaper…The advantage
of Cap & Share over Cap & Dividend is purely psychological....It
is for the government and the public to decide whether this
is worth the extra complication and cost of C&S over Cap &
Dividend.
5. Possible Arguments for TEQs?
In the light of Defra and the IPPR's rejection of TEQs on efficiency
grounds, this section outlines three possible arguments for TEQs. To
date, none has received a detailed exploration in the literature.
5.1. Higher Carbon Price
The £60/tCO2 price used by Lockwood is the “central” 2020 nontraded
carbon price. If instead the “high” price of £90 was used,
then E′E^ would have to be greater than 4.3% (rather than 6.4%) for
TEQs to have lower total costs than C&D.28
Under the UK's targetconsistent
approach to carbon pricing, the more demanding the
emission-reduction target, the higher the carbon price (DECC, 2009,
p. 37). Thus, proponents of TEQs might attempt to argue that the
UK target should be more demanding, that a “high” carbon price
should be used, and that together these would result in E′E^ being
sufficiently large to make TEQs cheaper than C&D. However, whilst
Fleming and Chamberlin (2011, p. 44–45) note that the comparison
of TEQs and C&D is sensitive to the carbon price, they stop short of
proposing that a higher price be used.
5.2. Peak Oil
Heinberg (2006) and Hirsch (2008) have argued not only that
conventional oil supply will peak in the near future but that, in a
post-peak world, developed nations will need to ration oil. Fleming
(2007) further argues that, post peak, an electronic allocation system
such as that proposed for TEQs will be required to ration oil rights and,
thus, that the marginal cost of also using the system to allocate emissions
rights would likely be small. Thus, even if, in the absence of an
electronic allocation system for oil rights, TEQs is not the most costeffective
means of emission reduction, proponents might argue that
it will become so if it operates in the presence of such a system.
A detailed study on oil peaking (Sorrell et al., 2009, p. x) concluded
that the various uncertainties surrounding oil production make it impossible
to predict the timing of the peak with precision but that
On the basis of current evidence we suggest that a peak of conventional
oil production before 2030 appears likely and there is a significant
risk of a peak before 2020.
Thus, near-future peaking cannot be ruled out. Nevertheless there
has been little discussion to date as to whether, in such an event, oil
rationing might be required. This is an important issue into which further
research would be valuable.
5.3. Public Support
Chamberlin (2008) suggests that, whilst TEQs, C&D and C&S all set
carbon budgets, given the deep cuts in emissions that will be required
to effectively tackle climate change, TEQs may be the only instrument
capable of maintaining public support for staying within a demanding
carbon budget i.e. the only effective instrument. Presumably this
would be so as a result of TEQs engendering a (significantly) greater
level of ENCORE than the other instruments. The next section explores
whether there is any support for Chamberlin's hypothesis in
the survey work that has been conducted to date on the public acceptability
of PCT.
6. Public Acceptability
Five surveys comparing PCT with alternatives are described and
discussed below.
6.1. Survey Description
6.1.1. Owen et al.
Owen et al. (2008) conducted a series of 12 focus groups involving
92 participants drawn from the seven segments in Defra's
26
Fleming's terms for the auction of carbon units.
27
It would be possible to subsume CRC within an economy-wide TEQs scheme.
28
DECC (2009, p. 65) notes that “The high to low [price] ranges of both the 2030 and
2050 values cover most of the available [abatement cost] model estimates for relevant
emissions trajectories”.
Table 5
Rating of three instruments in survey by Owen et al.
Options PCAs C&D Tax and share
Very positive (%) 2 1 1
Quite positive (%) 24 7 12
Neither positive nor negative (%) 18 24 29
Quite negative (%) 13 34 24
Very negative (%) 41 34 33
26 R. Starkey / Ecological Economics 73 (2012) 19–28
environmental segmentation model (which classifies the public
according to environmental values and attitudes). In the focus groups,
participants were asked to compare three instruments: PCAs, C&D
and an upstream carbon tax under which revenue is allocated to individuals
on an equal per capita basis (“Tax and Share”). The results of
this comparison are set out in Table 5 (Owen et al., 2008, p. 46).
Note that, in terms of equity, PCAs is not equivalent to C&D and
Tax and Share, as auction revenue is not allocated to individuals on
an equal per capita basis (Part 1, Section 5).29
6.1.2. Harwatt
Harwatt (2008) compared a PCT scheme and a carbon tax as alternative
means of reducing personal road emissions. Under Harwatt's
Tradable Carbon Permit (TCP) scheme, emissions rights covering personal
road emissions are allocated to individuals on an equal per
capita basis. However, under her fuel price increase (FPI), the tax revenue
is not allocated on the same basis but is, instead, hypothecated
for investment in public transport. Thus, again, the schemes compared
are not equivalent in terms of equity. Harwatt (2008, p. 24)
conducted interviews with 60 individuals and found that
Respondents were much more positive about the TCP scheme
than the FPI. In addition, the average ratings revealed the TCP
scheme to be more favorable in every aspect. Hence, whilst fuel
price increases and tradable permit schemes are very similar in
theory, the public response revealed stark differences in terms of
how the policies were perceived.
6.1.3. Bristow et al.
Bristow et al. (2008, 2009) conducted a computer-based stated
preference exercise with 208 participants. Each was asked to compare
two versions of PCT and then one version of PCT and one version of a
carbon tax, with the versions compared varying from participant to
participant. The versions of PCT varied in terms of, for example, how
emissions rights were allocated and the versions of the carbon tax
varied in terms of, for example, how the tax revenue was used.
Thus, an insight could be gained into the design features of both instruments
favored by participants. For example, with regard to PCT,
participants preferred an option of “children receiving an allowance
and extra support for those with greatest needs”30
and, with regard
to a carbon tax, participants preferred revenue recycling into measures
that would further reduce emissions either through spending
on technology or on measures to make behavioral change easier
(Bristow et al., 2008, p. 55).
Again, the versions of PCT and a carbon tax with which each participant
was presented are not equivalent in terms of equity.
6.1.4. Bird et al.
Bird et al. (2009) conducted an online survey of 1081 individuals
who were asked to compare three instruments: a PCT scheme, a carbon
tax and upstream trading covering individual emissions
(Table 1). Participants were asked their views on the introduction of
each instrument (“initial”) and again once all three had been introduced
(“final”). Their views are set out in Table 6 (Bird et al., 2009,
p. 17).
Once again, the instruments compared are not equivalent in terms
of equity as, under the carbon tax and upstream trading scheme, the
revenue is not allocated to individuals. The authors state that
In our research, we did not suggest that revenue from taxation or
upstream trading would be returned in this way. We believe that
based on existing policy and attitudes within the Treasury that
this represented a politically realistic comparison for respondents
to consider (Bird et al., 2009, p. 16).
However, if the authors believe the Treasury would be prepared to
countenance an instrument as novel as PCT, one wonders why they
hold it would not countenance allocating revenue to individuals
when doing so is arguably less novel and would be equivalent, in equity
terms, to implementing PCT.
6.1.5. Jagers et al.
Jagers et al. (2010) asked 2000 Swedes whether they would prefer
to keep the current Swedish carbon tax or shift to a PCA scheme. 66%
stated they would prefer to keep the current tax. The authors found
this unsurprising noting that “people have a tendency to favor the
state they are currently in” (Jagers et al., 2010, p. 415). Once more,
the two schemes compared are not equivalent in terms of equity.
6.2. Survey Discussion
In Jagers et al.'s survey, an actual carbon tax is preferred to a hypothetical
PCT scheme but in the surveys conducted by Owen et al., Harwatt
and Bird et al., support for a hypothetical PCT scheme is equal to
or higher than for a hypothetical upstream trading and/or a carbon
tax.31
However, the initial support for TEQs falls off slightly over the
course of the survey conducted by Bird et al. and slightly more participants
are very negative about PCAs than upstream trading or a carbon
tax in the survey conducted by Owen et al. But, whilst these
surveys yield some interesting insights into public attitudes, the comparisons
offered to participants are not able to yield any insight into a
crucial research question.32
Alternative instruments can be equivalent in terms of equity. For
example, TEQs-EAR, a variant of TEQs under which auction revenue
is allocated to individuals is equivalent to C&D, C&S and Tax and
Share (Part 1). In other words, any particular conception of equity
can be delivered using alternative instruments. And, thus, if survey
participants are presented with a selection of instruments that are
equivalent in terms of equity and which they understand to be so
equivalent, then an insight can be gained into which particular instrument
they favor to deliver a particular conception of equity. However,
this insight cannot be obtained from any of the above surveys as the
instruments presented do not have equivalent allocations.
In terms of equity, the instruments compared by Owen et al. are
the most nearly equivalent and the fact that they are not exactly so
would, arguably, not matter had participants perceived them to be
29
In his description of PCAs (Part 1), Hillman makes no mention of what is done with
the auction revenue. Owen et al. (2008, Appendix 15) told participants only that the
revenue “would allow the government to reduce the level of taxes in the economy”.
30
By this the authors mean parents receiving an additional allowance because they
have children (Bristow et al., 2009, p. 1826).
Table 6
Rating of three instruments in survey by Bird et al.
Options Initial Final
PCT Carbon
tax
Upstream
trading
PCT Carbon
tax
Upstream
trading
Tend to support/strongly
support (%)
31 19 23 25 20 24
Neither support nor
oppose (%)
20 17 23 29 24 29
Tend to oppose/strongly
oppose (%)
40 58 41 42 53 44
Not sure (%) 8 6 12 4 3 4
31
As each participant, in Bristow et al.'s survey was presented with a different version
of both PCT and a carbon tax, straightforward comparisons are not possible.
32
The survey by Wallace et al. (2010) also provide useful insights into public attitudes
to PCT but is not discussed in detail here as it does not compare PCT with other
instruments.
27R. Starkey / Ecological Economics 73 (2012) 19–28
exactly so. However, Owen et al. (2008, p. 50) note that some participants
felt that PCT “may be more equitable than the other two options”,
when, in fact, C&D and Tax and Share are, from an egalitarian
perspective at least, more equitable.
Furthermore, in none of the surveys were participants given information
about the comparative implementation and participation
costs of the instruments. It is interesting to speculate how participants
would respond if they were asked to compare TEQs-EAR and
C&D and it was made clear to them that (1) the instruments were
equally equitable and (2) the implementation and participation
costs of TEQ-EAR might be fifteen times those of C&D. Finally, from
the survey work done to date, there appears little obvious support
for Chamberlin's hypothesis.
7. Conclusion
Part 1 of this survey shows that TEQs, C&D and C&S can be equivalent
in terms of equity. Thus, Part 2 seeks to establish if these instruments
can be differentiated in terms of their efficiency or
effectiveness. Sections 2–4 show that, whilst the studies by Defra
and the IPPR reach somewhat different conclusions regarding the efficiency
of TEQs, neither endorses its implementation. In the light of
this, proponents of PCT might seek to make a case for implementation
by developing an efficiency or effectiveness argument such as those
set out in Section 5. However, to date, proponents have not, at least
in the view of this author, made a compelling case for the implementation
of PCT.
Acknowledgements
Stephen Elderkin assisted greatly in clarifying the issues discussed
in Section 4.6 Dan Calverley provided helpful comments on an earlier
draft of the paper. Two anonymous referees also provided helpful
comments.
I was first introduced to TEQs by its originator, David Fleming
(1940-2010) and I am very grateful to David for generously giving
over a considerable amount of his time to discussing TEQs with me.
Although our views did not always coincide, I benefitted greatly
from our discussions, and his influence on my thinking has been
considerable.
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