The Relative Acceptability of Tradable Carbon Permits and Fuel Price Increases As Means to Reduce CO2 Emissions from Road Transport by 60%

The Relative Acceptability of Tradable Carbon Permits and Fuel Price Increases As Means to Reduce CO2 Emissions from Road Transport by 60%


H M Watters, M R Tight, Institute for Transport Studies, University of Leeds, UK; A.L Bristow, University of Loughborough, UK


This paper reports on the relative impacts, behavioural response and acceptability of two transport policies designed to achieve the same emissions target, a 60% reduction of Carbon Dioxide from personal road transport in the UK.


The transport sector is the fastest growing source of UK CO2 emissions, the majority resulting from personal road transport. This paper discusses findings from innovative research into the attainment of a significant long term reduction of CO2 emissions from road transport using two alternative measures, fuel price increases and a system of Tradable Permits. Expectations regarding the relative acceptability of both measures will be discussed in terms of effectiveness, efficiency and equity issues. Results from a series of interviews with individuals will be included to test the theoretical conclusions.

A working model of a Tradable Carbon Permit system has been designed to achieve a 60% reduction of CO2 emissions from personal road transport by 2050. Carbon emissions are reduced through the application of a Carbon budget, which decreases each year in line with the emissions target. On a practical level, Carbon emissions are controlled by the fuel purchase mechanism. Individuals are required to surrender Carbon permits corresponding to the amount of Carbon contained in their fuel purchase. A proportion of the annual Carbon budget is used to provide an allocation of free Carbon permits to individuals on an equal per capita basis, therefore allowing each individual to consume a certain amount of fuel each year without the need to buy Carbon permits. Following 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. This provides an incentive for individuals to reduce their Carbon consumption, and also provides monetary compensation for those who choose not to consume. A range of practical considerations regarding this scheme, including approximate costings, will be discussed. In contrast, a strategy based on fuel price increases has been designed to match the effect of the tradable permits. Unlike the regulatory approach of the trading scheme, the fuel price increases rely on the market response to achieve the desired reduction in CO2 emissions. The two policies therefore provide an array of interesting points of discussion, with this research ultimately contributing to the growing debate regarding the application of a pricing or trading measure to achieve emissions reductions.

Despite the growing literature on the application of trading schemes and several theoretical designs of how such a scheme could be applied in practice, so far there are no studies reporting the public response. In order to gain empirical evidence, a series of in- depth individual interviews are being 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. These surveys will be completed by April 2006. Respondents are asked a range of questions, repeated separately for both policies, with the use of bespoke software to record behavioural response. The software calculates current carbon consumption from a 7 day travel diary completed prior to the interview, and displays the free individual Carbon permit allocation and price (including fuel costs) at three points in time: 2010, 2020, and 2030. Respondents are given an opportunity to alter their Carbon consumption in each time period and for each policy. The order of presentation of the two policies is alternated, therefore reducing the possibility of response bias/fatigue that could occur if the interviews were always conducted in the same order, for example, the trading scheme followed by the pricing scheme. Instead, the trading scheme is discussed first in 50% of the interviews and the pricing policy discussed first in the remaining interviews.

Preliminary results reveal a much greater reduction in car kilometres and Carbon emissions in response to the Tradable Carbon Permit scheme compared with the fuel price increases. The trading scheme was perceived to provide many more personal and social benefits and fewer costs than the fuel price increases, and was considered as a fairer measure that would be much more effective at achieving the emissions target. The fuel price increases were considered to be unacceptable both personally and to society, whereas the trading scheme bordered on being personally acceptable, with an average rating of 4.6 (based on a scale of 1 to 7, where completely unacceptable = 1 and completely acceptable = 7). This result is surprising given the low levels of acceptability that characterise numerous studies exploring the acceptability of travel demand management measures. However, this initial result could possibly be explained by the high levels of environmental concern measured across the group and/or the small sample size (10 interviews). Further inferences can be made following analysis of the main survey comprising 90 interviews.

Both qualitative and quantitative results from these interviews will be reported, including results from an ordered probit model of acceptability, with comparative discussion on both policies. This paper will therefore report on a unique set of empirical data. The presentation will end with the implications of the outcomes of this research on transport policy and the direction of future research.


Association for European Transport