Simon Hughes MP

IPPR - Personal Carbon Trading conference

The story so far

The debate in the UK about forms of personal carbon trading is growing in participation and the contribution of IPPR to this welcome.

As we know the threat of catastrophic climate change and peak oil means urgent action is not optional; it is a necessity.

Let me share with people where I think the debate has got to nationally.

The Labour Government have considered and rejected personal carbon trading as national government policy. The government have refused to engage in further work at this stage although do not rule out its future use.

The Conservative party have also expressed opposition to a national personal trading scheme.

Realistically, the proposition that is now on the table is a pilot scheme. This is now the modified position of the chair of the Environmental Audit Committee, Tim Yeo.

Sequence of events

David Fleming originally conceived of an economy wide trading scheme in 1996

Following the enthusiastic support of the environment secretary David Miliband in 2006, DEFRA undertook a study of personal carbon trading.

DEFRA completed their pre-feasibility study in March 2008 - it was widely viewed as putting PCT into the 'long grass' and concluded that on grounds of low public support and with many concerns about things such as cost, complexity that such a scheme was 'ahead of its time'.

The Environmental Audit Committee reported on PCT in May 2008 - and was very positive about its potential. I will note at this stage that it was a Liberal Democrat, my colleague and environment spokesperson, Martin Horwood who was a dissenter on the committee and voted against it.

The Government response to the Environmental Audit Committee followed in October 2008 - it reiterated its concerns about effectiveness, fairness, public support and cost of a scheme and declined to undertake further research.

The Royal Society of Arts produced a report at the turn of the year which looked to the introduction of such a scheme at a community level and initially on an opt-in basis.

In June this year we had a Westminster Hall debate on the report of the Environmental Audit Committee and the government response.

In the debate the Labour and Conservatives confirmed their opposition to a national scheme. The Conservatives identified concerns about the intrusive 'big brother' state. The government reiterated its stated position.

Outside parliament, the Green party have strongly supported a personal carbon trading scheme.

I committed Liberal Democrats to a party consultation, which closes next week. We've had interest here and will publish a formal response in due course.

I think its fair to say that following strong initial enthusiasm, concerns about public acceptability, fairness, cost and effectiveness compared to other policy options have pushed personal carbon trading down the agenda as a policy response.

The IPPR report

The IPPR report addresses some of the issues in the political debate but misses others. The issues it includes are:

The fact that public awareness is low and following from that public support is by definition low.

The report recognises that PCT could not be implemented with everyone starting with an equal allocation of credits. And at this point implementing such a scheme becomes very complex. The report looks to engage with the benefits system to address this.

However, we all know one of the great failures of the modern welfare state with its child tax credits and pension credits is that there are real gaps in take up however long each part of the system has been in place.

The other thing which is not addressed in the report is the 'liberal response' - that this is another regulation, another imposition, however much what we are trying to achieve is important or urgent. That is a difficult issue, given the pressing nature of climate crisis on the one hand but the increasing worry about the 'big brother' state on the other.

The other issue which the report does not seek to address is, amongst the range of policy options governments could implement, where does PCT fit in the league of practical and available options now?

Where are we now?

In spite of the criticisms of PCT there are still strong advocates of such a system.

But the debate on carbon trading appears to have moved to pilot schemes. And the pilot options are being discussed in the context of geographically specific areas or sector specific areas.

For example, Norman Baker, the Lib Dem Shadow Transport Secretary, is seeking to urge on me that we look at transport or part of the transport sector for a pilot. Tim Yeo, the Conservative chairman of the Environmental Audit Committee, called for a trial in Babergh district council in his constituency (an area with 83,000 people). The RSA also made some interesting suggestions about how to introduce voluntary opt-in schemes at a community level.

Pilot schemes now seem certainly best way to test the effectiveness, efficiency and the equity of PCT. We cannot properly know, as this report acknowledges, how accurate our modelling is on fairness, public support and engagement or cost until these are trialled.

I would suggest that political logic supports pilots too.

People are increasingly accepting that action on our energy use and climate change is not just a matter for government. Governments need to show action and seen to be setting an example. But individuals and communities want to own this agenda too.

The more that central government can devolve and disperse power the more locally, the more innovation and creativity we will see. Liberal Democrats now run about 90 councils in Britain including in many of Britain's major cities. We are preparing an environmental assessment of these, which before the general election we will share. Local authorities are now much more engaged on the environmental agenda. I believe they are a crucial part of the national effort to reduce emissions. If national government is willing to give local authorities the freedom to take environmental initiatives then innovation and progress can only benefit.

The political context ahead

We are about to begin the last parliamentary year before a general election has to happen. I want to share with you where we are on the whole debate and where I think things could go.

The environmental crisis has moved up the public agenda. It has done so noticeably within the last year or two. If we hadn't at the same time had the economic crisis it would have been even bigger news. But I would argue that these are two crises born from the same mindset and if we can bring them together in the public mind there is a much better chance of rapid progress in dealing with both.

The environmental and economic crises are both products of a selfishness and search for instant gratification, without thought of our responsibility to others or the next generation.

People are realising the solution to the economic crisis is not simply to return to where we were before. The environmental crisis makes it also imperative we don't just return to business as usual.

Its not just people with flowing skirts, matted hair or sandals who realise they need to cut back on their airflights or their driving! Everybody who can afford to do so is starting to change their behaviour.

People are beginning to talk about economic recovery through 'green' jobs. What this should mean is sustainable jobs producing things which people will need in the next generation. Not what they needed in the last one.

Within each political party and outside there are people who are pressing to go faster and further. And at the general election you good people will need to decide which politicians are committed by their deeds as well as their words to moving the agenda forward and effectively meeting the challenges.

Interestingly, and just the other day, bursting in on the environmental debate is the 10:10 campaign, brought to you from the director of the 'Age of Stupid'. In contrast to most climate change negotiations which look to long term targets, it puts the compelling proposition that rather than doing things by 2020 or 2050 we really can and ought to do things now! It sets an immediate target for an ambitious but realistic emissions reduction. Sign up so far has been impressive. I was there for the launch and Liberal Democrats may well have a motion going to our federal conference this month to support the campaign.

I mention this campaign because I am optimistic about our environmental future and the commitment of people to it. Campaigns like this show what can be done.

The presumption of most political policy and action in this area is that success will be achieved partly through outward and visible measurement, signs and consequences of the action we individually and collectively take.

The whole idea of PCT is fundamentally a good proposition. Like the 10:10 campaign it recognises that personal behaviour is in the end the key to tackling climate change. Public policymakers are increasingly looking for opportunities to incentivise and disincentivise good and bad types of behaviour.

And the public responds more now to fiscal incentives and disincentives than to religious or political exhortation. Poor people and less well educated people equally understand the implication when something costs £5 rather than £1.

The challenge is to make personal carbon trading or a similar scheme practically and politically deliverable.

In the context of taxation policy as a whole

I would say that carbon or green taxes have a much bigger role to play. I believe we really do need to be more radical and less conservative about taxation as a country. We do not want to raise overall taxation but Liberal Democrats want fundamentally to change the way Britain is taxed. In a world of intergenerational responsibility we must ask what kind of taxation system do we want?

There is no reason why we can't move taxation from outputs to inputs. For example, on airflights it is our policy to move taxation from passengers to planes.

In theory, taxing income is a bad thing because we don't want to disincentivise wealth generation and prosperity. We need to tax 'bads'.

We are the party of land value taxation. Why? Because land is a limited resource and if not used properly can have very negative consequences.

As a party we are also committed to tax pollution not people. We are calling for a green tax switch - reversing the decline in green taxation. From 3.6 per cent of GDP in 1999 green taxes are now around 2.7 per cent.

We will offset green tax increases with a drop in the base income tax rate. In this way we can reward consumers for their green choices.

We ought to be looking at issues like PCT in the context of a new taxation order which does not just tax the things we have taxed for the last 100 years but looks at what and where to tax to drive the behavioural change we believe we will need for the decade or decades ahead.

Conclusion

We are in a much more interconnected world now where news and initiatives spread quickly. We see how President Obama's health care reform efforts in the US have used the UK model as a debating point. We heard yesterday of President Sarkozy's new carbon tax in France. And only today we have heard Professor David MacKay reminding us that the time has to come not to be opposed to everything but to be supportive of policies that will deliver the change we need.

I am certain of one thing, that the science suggests we need to be more radical than less and change our behaviour more than less. To say not now to PCT should not to be say no never. This is the time to be open to new ideas and find new solutions to a crisis of which we are abundantly aware and where we must take personal, national and international responsibility.