User response and equity considerations regarding emission cap and by xfo14057

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									User response and equity considerations
   regarding emission cap and trade
          schemes for travel


              Adriaan Perrels - VATT



   Entretiens Jacques Cartier – Lyon – 4&5-12-2006
                Main Conclusions

• Transport cap & trade systems at the individual
  household level are in principle possible, but not
  necessarily always preferable
  – If for transport only, a supply side oriented system is
    probably more effective
  – If at household level per se, the base should be
    widened (other consumer expenditures and actions)
• In a largely grandfathered cap&trade system
  purchasing power effects are mostly fairly
  modest; some special groups may face larger
  inequitable effects
                      Structure of the paper

•    The necessity of cap & trade systems
•    Identification options for carbon budgets
     of households
•    Responsiveness to quota
•    Practical issues and transaction cost
•    Equity considerations
•    Conclusions
N.B: Full reference information on sources can be found in the conference paper.
The transparencies provide only abridged references.
                                                 1. Necessity
   Technology will have an important role but income elasticity
   and rebound effects seem to necessitate additional action.

   Yet, we should not entirely forget cost efficiency (cost/ton CO2)
                  Austria   Denmark    Finland    France    Germany     Italy    Netherlands   Spain    UK      EU15
CO2 emissions
in tons/capita
per annum
           1980      7,42      12,28      11,61      8,43       13,54     6,44         10,87     5,05   10,17    9,21
           1990      7,32       9,84      11,01      6,06       12,15     7,05         10,51     5,31    9,78    8,51
           1995      7,49      11,08      11,05      5,97       10,68     7,21         11,04     6,00    9,20    8,27
           2000      7,73       9,39      10,59      6,20       10,16     7,36         10,88     7,09    8,94    8,34
       of which
      transport
           1980      1,58       1,77       1,76      1,63        1,66     1,27          1,59     1,21    1,61    1,57
           1990      1,75       2,02       2,37      1,99        2,02     1,70          1,76     1,65    2,15    1,97
           1995      1,86       2,27       2,24      2,11        2,07     1,88          1,90     1,85    2,18    2,08
           2000      2,22       2,25       2,36      2,30        2,12     1,96          2,06     2,30    2,25    2,25
  Source: Tapio et al. in Energy Policy, January 2007
             2.1 Identification - what basis?
•   Consumer expenditure based
    –   I/O model (less accurate; projections possible;
        benchmarking instrument)
    –   Specific transaction / supply chain (accurate; no
        projections; tracking instrument)
•   Separately observable transaction is important
    –   feedback features (DSM experiences)
    –   Form: e.g. CO2 debit card
•   Only transport (or one mode) or wider?
    –   If steering technology choice important, supply side
        preferable
    –   If household level deemed inevitable, than wider
        consumption base recommendable, it gives leeway
        to optimise and may help to reduce price volatility
                   2.2 Identification – what aims?
Comparison of embodied CO2 via consumption-production chains:
• capturing household behaviour and its impacts for effects/sectors not
  addressed through other policies, …or
• motivating transport providers (incl. car owners) to redress their
  choices regarding technology, performance, etc.

In the background loom choices whether an addition to the policy
portfolio is aimed at or a larger rearrangement. In the latter case
interaction effects with existing instruments can be important.
 Expenditure categories                            kg CO2 per euro
 Foodstuffs                                                           0,9   Source:
                                                                            Perrels and van Arkel,
 Appliances (excl. electricity during their use)                      1,0   ECN, 1995
 Heating and lighting at home                                        10,3
 Transport fuels                                                     12,7
 Transport services                                                   0,5
                  2.3 Identification – air travel
Air travel would be a relatively easy mode to address
-       Rapidly growing (IPCC: 2050 level 3x~ 6x the year 2000
        level of radiative forcing)
-       Does interfere less with daily travel patterns (so less
        opposition from electorate)
-       Clearly defined technology; limited number of firms
-       Example calculations for a EU scheme (Wit et al, 2005)
        1400 km haul: ticket price +1 to +10 euro (depending on
        tightness of the cap)
-       Likely sector responses:
    -     More efficiency in operations; (earlier) fleet renewal
    -     Buying permits from CDM and JI
                 3.1 Responsiveness
• The following types of responses can be
  distinguished (for a household based system):
  – reduction of the total amount of vehicle kilometres
  – switching from a mode with higher emission intensity
    to one with lower emission intensity
  – improvement of the vehicle stock’s fuel efficiency
  – fuel switching (to a source with essentially less or no
    greenhouse gas emissions)
• Concrete reactions for:
  – households: economising car use, car sharing, mode
    switch, tele-services, residential relocation, etc.
  – Public authorities / companies: logistics and traffic flow
    management, supportive measures for households
    (more public transport, promotion of tele-working, …)
Responsiveness - interlude




    Is it ??
    ...
    Or that ???
               3.2 Responsiveness
Suppose:
• Grandfathered transport CO2 emission rights to
  households based on fairly but not too strict
  benchmark which allows for some variation in
  household characteristics
• Households can rearrange their travels and/or buy
  emission rights from others (via an electronic trade
  platform)
• Both own and public modes are charged
• Matching of travel performance and emission rights
  held is checked annually (cf. income declaration); yet
  regular tracking of match is recommended
             3.3 Responsiveness

Comparison with what kind of elasticities?
• Fuel price ?
• Road pricing ?
• Car use ?
Budget reallocation: for most households not more
  than a few 100 euro (paying or receiving)
Distinguish between short term and long term
  responsiveness
Probably differences between daily trips and long
  distance trips
                                    3.4 Responsiveness
                                                 short run #                    long run *
Household income – fuel demand                                                    1,0 ~ 1,3        Sources:
Fuel price – fuel demand                          -0,2 ~ -0,3                    -0,4 ~ -0,8       Storchmann (2005) in
                                                                                                   Energy Economics;
Household income – car stock**                                                    0,9 ~ 1,2        Santos and Fraser
Car cost excl. fuel – car stock**                                                -0,8 ~ -1,1       (2006) in
Fuel price – car stock**                                                       -0,05 ~ -0,15       Economic Policy
Household income – fuel demand **                                                 1,0 ~ 1,1
Car cost excl. fuel – fuel demand **                                              0 ~ -0,5
Fuel price – fuel demand **                                                      -0,8 ~ -1,0
generalised cost – urban trip by car^                  -0,96 (private cars); -2,67 (taxis)
congestion charge – (urban) trip by car^                             -0,27
congestion charge – (urban) trip by taxi^                             0,35
                                          There was no noticeable effect on use of the
                                          underground. Instead the boost in the bus system was a   Supportive
                                          success. The number of passengers of inbound and
                                          outbound buses rose by 37% and 29% respectively. As
                                                                                                   measures
congestion charge – public transport use^ also the number of buses rose, the number of passenger
                                          by bus rose by 8% (inbound) and 2% (outbound)
                                                                                                   are
(London case)
                                          respectively. Overall average bus speeds increased by    important
                                          7% in and nearby the charging area and by 3% across
                                          Greater London. Waiting time for bus passengers
                                          decreased by 24% across Greater London.
             4. Practical issues
Variability of household circumstances:
• Location, income changes
• Increase/decrease of no. of household
  members
• Dissolution of the household
• Allocation within household
Participation in trade
• Transparency and transaction cost
• Practical permit market access
                    5. Equity
• Without revenue recycling it would be
  regressive, but by devising a benchmarked
  grandfathered system regressive effects can be
  strongly reduced or even reversed
• Purchasing power effects usually small (often
  <-0,5% for buyers); overall ~ -0,2%
• Poorer households in sparsely populated areas
  may be ‘cornered’
• For poor car dependent households assistance
  by means of green loans, adapted benchmarks,
  etc.
• Elderly in cities may be net gainers, provided
  they are easily involved in the trading system
                   6.1 Conclusions
• Transport cap & trade systems at the individual
  household level are in principle possible, but not
  necessarily always preferable
  – If for transport only, a supply side oriented system is
    probably more effective
  – If at household level per se, the base should be
    widened (other consumer expenditures and actions)
• In a so-called (largely) grandfathered cap&trade
  system purchasing power effects are mostly
  fairly modest; some special groups may face
  larger inequitable effects
                   6.2 Conclusions
• In order to establish adequate benchmarking and
  tracking systems, additional research and recurrent
  updates will be necessary
• A household based system with a wider capture
  than transport only, needs to be properly delineated
  to avoid overlap with EU-ETS
• It is recommendable, notably for the broader
  schemes, to assess interaction effects with the
  existing relevant policy portfolio, and to redress that
  portfolio if necessary (and/or the permit scheme)
Thank you




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