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An upstream alternative to personal carbon trading

journal contribution
posted on 2023-06-07, 21:01 authored by Steven SorrellSteven Sorrell
An upstream trading scheme is described that could operate alongside the EU Emissions Trading Scheme (EU ETS). In this proposed scheme, fossil fuel producers (or suppliers) surrender allowances for the carbon contained in their fuel sales. Since the administrative costs are relatively low, such a scheme could provide a simpler, cheaper and more practical alternative to personal carbon trading, while at the same time delivering comparable economic and environmental benefits. The incentive effect for downstream consumers would be similar to a carbon tax. However, instead of a fixed and visible tax rate, the carbon price would be variable and largely hidden within the price of fuel. Consideration is given to the distributional impacts of the scheme and the potential benefits of linking to the EU ETS - including improved liquidity, reduced price volatility and reduced scope for exercising market power. It is argued that an upstream scheme is likely to have greater political acceptability, while at the same time delivering comparable performance in terms of economic efficiency, environmental effectiveness and social equity.

History

Publication status

  • Published

Journal

Climate Policy

ISSN

1469-3062

Publisher

Taylor & Francis

Issue

4

Volume

10

Page range

481-486

Pages

6.0

Department affiliated with

  • SPRU - Science Policy Research Unit Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-02-06

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