Tim Yeo MP: The Coalition should introduce Personal Carbon Trading

Tim Yeo MP is Chairman of the Energy and Climate Change Select Committee. 'Green Gold: the case for raising our game on climate change' is published today by the Tory Reform Group.

It has become fashionable, especially in right wing circles, to be sceptical about climate change. When leaked emails from the Climatic Research Unit at the University of East Anglia cast doubt on the integrity of some of the world’s leading experts on the subject, those who question the science of climate change couldn’t believe their luck. It provided what looked like compelling evidence in support of their theory that it is all a global conspiracy to peddle expensive green technology and impose hair shirt policies on the West.

‘Climategate’ involved around a thousand emails sent or received by Professor Phil Jones, Director of the CRU. His department’s databases on global temperatures have played a crucial role in building the case that climate change is happening and is likely to get worse. The messages appeared to show that Jones and some of his colleagues had crossed the line from objective research into active campaigning.

But after the fuss died down Jones was largely exonerated by the House of Commons Science and Technology Select Committee whose inquiry into the affair found no evidence that he deliberately withheld or manipulated data to argue the case that climate change is real and influenced by human activity.

But the damage was already done. For the first time since the early 1990s, being a climate change sceptic is fashionable again. It didn’t help that Europe endured the coldest winter for 31 years. Similarly much of the United States also experienced unusually cold weather. Not surprisingly, less attention was paid by the sceptics and most of the tabloid media to the exceptionally hot and dry conditions in other parts of the world such as Australia. No wonder mocking climate change is now the new cool.

There are many who are sceptical of the case in our own party as well. But I long ago became convinced of the case that the climate is changing, and changing because of human activity – since the days when I was appointed Environment Minister by John Major, and through my days as shadow environment secretary until 2005.

My belief in the case has inspired me to write a book, published today by the Tory Reform Group. In Green Gold: the case for raising our game on climate change I urge David Cameron to fulfil the promise he showed early in his leadership when he went sledding on the Norwegian glacier and urged us to “vote blue, go green”.

We must take radical steps and go further than the promising references to the environment in the Coalition Agreement. We must do more to cut emissions, and even introduce new regulation to do so - even if this is counterintuitive to many Conservatives.

Otherwise we could be left behind by larger nations such as China, which is actually moving faster than most Western countries to decarbonise its own high growth economy. The danger is that we wake up in ten years and find that suddenly China is hawkish about the need for tougher limits on global emissions and for faster action to cut them.

One innovative way to engage the public’s attention and to encourage individual action would be the introduction of personal carbon trading. This concept was examined in 2008 by the Commons Environmental Audit Committee, whose report concluded that it had considerable merit and recommended the establishment of a pilot project.

Personal carbon trading involves a trading system in which emissions credits are allocated to all adults on a broadly equal per capita basis, within an overall national carbon budget. Individuals surrender credits for activities that are linked to climate change and involve carbon emissions, like air travel and domestic energy consumption. Those who want or need to emit more than their personal allocation buy extra credits, while those who do not use their full allowance are free to sell their surplus credits for cash.

As Environment Secretary, David Miliband supported the idea of carbon becoming a new currency. Individuals would carry bank cards that stored both pounds and carbon points. He brushed aside criticisms that such a system would be too complex to administer, too utopian or too burdensome for citizens, arguing that it could work and could be fairer than traditional forms of tax and regulation. Sadly civil servants were less keen and in May 2008 DEFRA’s pre-feasibility study concluded that it was “essentially ahead of its time.” It was claimed, on flimsy evidence, that the administration costs were too high and the scheme too complex for people to understand.

Unfortunately, the Conservative Party was also cautious about the idea. The EAC report was greeted with scorn by some MPs. John Redwood, usually an advocate of market-based solutions, claimed it would “make the ID computer look modest, cheap and not so intrusive. Government inspectors would need to watch over everyone’s habits and try to find a way of recording just about everything we do.”

Of course there are concerns about some practical aspects of such an ambitious concept. However personal carbon trading has real potential to engage the whole population in the fight against climate change.

For a start it overcomes the problem that nearly all forms of green taxation are regressive in their impact. Everyone, rich and poor alike, pays the same fuel duty when they fill up their cars. By contrast, personal carbon trading is progressive in its effects. Poorer people and families who choose sustainable lifestyles do not have enormous homes or heated swimming pools. They do not fly abroad for several holidays every year. As a result they would have surplus emissions credits to sell and would therefore receive a cash benefit from their lower carbon footprint.

Personal carbon trading is the only green market instrument which redistributes costs from poor people to richer ones.

To simplify matters and minimise the risk of public confusion the system could be introduced in stages, perhaps beginning with home energy consumption. The per capita allowances could be weighted for different categories of people - allowing more credits for pensioners, people with disabilities and the housebound, for example. Individuals willing to keep their energy use relatively low would end up with a surplus, which they could sell.

The beauty of the scheme is the cash it would give to people who make greener choices.

The system could also apply to air travel. Individuals could be issued with a card that recorded and measured the GHG emissions from their flights, comparing these with their individual emission allowances. People who fly less would benefit while those who fly more would have to pay. Critics argue that this would leave wealthier families free to buy extra allowances but it is already the case that the rich can pay for more travel. The new factor would be the cash the system gave to the people who travelled by low carbon methods.

The administration costs for such a system could be borne by the industries concerned. To eliminate the expense and inefficiency associated with large-scale publicly-run projects the administration could be contracted out to the private sector. It is hard to believe that it would be more costly to run than the millions of individual loyalty cards already promoted by supermarket chains. The resistance of public officials to the idea may be based on their dislike of an idea which could be operated entirely without the involvement of the civil service or the establishment of new quangos.

David Cameron is inheriting a far more difficult and complex situation than anyone foresaw. When that iconic photograph was taken of him dog sledding in Norway, en route to view the retreating icebergs, nobody had any idea of the looming global financial meltdown. His green enthusiasm in the early days of his leadership proved how the Conservatives had changed but those were very different times. Nonetheless there is no going back now.