Volontary C02 compensation fee

 “So you fly round the world to talk about climate change….”  airplane

 For the EAERE 2008 conference, we have decided to introduce a very simple voluntary CO2 compensation fee for participants travelling by air to Gothenburg. Let me motivate this decision:  Climate change is, as the Stern Review puts it, the biggest externality in world history. It transcends the usual discussions of “Pigou tax versus regulation” and permeates into various arenas becoming for many people an ethical issue of lifestyles. It is clear that our personal heating or cooling, showering, eating and travel decisions do in fact collectively make a decisive difference. It would be quite natural for many economists to say that we analyze the policy instruments necessary but find no reason to change our personal behaviour until those instruments are actually in place (at which time everyone will change their behaviour). Others would regard this as an overly  comfortable position and some would see it as hypocrisy. Clearly some Europeans could come by train and we hope many will choose this option. We are struggling to make contact with the railways to get them to be an “official carrier” but they do not seem to be as quick to assume this role as some airlines. For the rest of us – from the US or Africa, there is no third alternative: either we fly or we stay at home.  It seems this is the reason why it has become fairly popular to compensate for air travel lately. Type “climate neutral flying” or similar into a search engine and you will find a large range of alternative schemes. Many of the airlines themselves offer you the possibility of compensating for their emissions (!). But does all this make sense or is it greenwash? Some believe we are just paying to ease our conscience and many have compared this to the sale of indulgences in the Middle ages. 
Air traffic related emissions and climate change 
Air traffic does use large amounts of fuel and does emit large amounts of carbon dioxide, water vapour and nitrogen oxides, volatile organic compounds and so forth.Carbon emissions vary with aircraft type, distance and load factors etc. A very rough figure appears to be a fuel consumption of about 0,05 litres of fuel per passenger kilometer which would be similar to driving an energy efficient car on your own or two persons in a more conventional car. The trouble is however that distances can be very long. A return trip of 1000 km would imply fuel use of 100 litres of fuel and emissions of something like 360 kg of CO2. A further complication is provided by the emissions of water vapour and other gases plus the fact that all the emissions are at high altitude which may make them more serious but this is complex and we will not focus on this complication. A relevant fact is however that airtransport is carried out with untaxed fuel while land transports (in Europe at least) is taxed with high fuel taxes. It seems the aviation companies are aware of this asymmetry and keen to join in to the EU trading system. The 2008 prices for a ton of CO2 are on that market roughly 20 €/ton and thus the hypothetical return trip of 1000 Kms would cost roughly 6 € to compensate. It is worth noting that many European countries have fuel, carbon and excise taxes on fuels for road transport that amount to about 0,7 €/litre which would have implied a cost of 70 € extra. It is possible that this explains why the industry wants to get into the EU ETS (to avoid taxes which could be ten times as expensive).  

Is this of any use or just greenwash?
The reduction is real since we are buying ETS rights which are capped. However, if you buy compensation today at levels that are like the EU ETS price then clearly this is much too low to reach ambitious carbon reduction goals. A company such as Greenseats, http://www.greenseat.com/us/Menu-Tekst.asp?iddoc=25, uses exactly the same emission factor as we do in the example above (0,18 tons CO2 for 10 km for short flights – but 0,11 tons CO2 for longer flights) For a short European flight to Gothenburg (or say 1500 kms) this will end up being at least 500 Kgs CO2. Greenseat actually only uses €10/ton but we choose to use the actual current ETS price of 20 €/ton which gives 10 €. For international flights we could calculate with 10 000 kms each way but a lower emission coefficient of 0,11 which would give 2,2 tons and thus 44 € which we round off to 40 €. 

Is this the end of air traffic, international contact, tourism and conferences?
If carbon emissions are to be reduced by 50-80% within just a handful of decades then clearly air transport and road transport cannot continue growing but must rather decline unless there is an unexpectedly fast expansion of alternative technologies, e.g. air and road transport using hydrogen from renewables. This does however not mean that there would be no air transport. If European fuel taxes were applied ticket prices would increase by the order of 100 € for a 1500 km return (European) flight as shown above. For long international flights we would be looking at increases of the order of 500 € which would add 50% to ticket prices. This would clearly reduce air transport demand but hardly stop it. Current European fuel taxes for land transport are already high – much higher than most of the proposals for carbon taxes discussed but clearly we might ultimately need even higher levels. This will stimulate the emergence of more energy efficient planes, maybe biofuels and trains. It will also reduce but not in any way eliminate long distance travel.  

Indulgences and the selling of good conscience

During the middle ages the Church made lots of money from the sale of “indulgences” which promised the sinner redemption. This was much criticized by amongst others the emerging protestants and today there are those who compare the sale of compensation rights with the Church’s indulgences. In the historic case it was primarily the Church that was criticized for selling since it was seen as enriching itself rather than insisting on moral values and repentance. Today it seems it is the buyer of carbon credits who is the target of moral critique: they pay some attention to climate issues but do not really change their behaviour. Instead they are seen as buying moral satisfaction at others expense. This critique is formulated in different ways. A really witty version is found on the website Cheatneutral
http://www.cheatneutral.com/. “
When you cheat on your partner you add to the heartbreak, pain and jealousy in the atmosphere. Cheatneutral offsets your cheating by funding someone else to be faithful and NOT cheat. This neutralises the pain and unhappy emotion and leaves you with a clear conscience.”The website has really amusing sections on what to do if “you have to cheat because of your work” and similar. The small print section informs you that actually it is a hoax intended to fuel the debate about carbon credits. It does this nicely although my conclusion may be different from that of the authors, I am not sure. I think however that there are two decisive differences between cheating on your partner and lighting a more conventional fire and thereby emitting carbon. Firstly carbon emissions are not primarily a moral issue although we now realize there are moral implications since we contribute for instance to drowning people in Bangladesh. Secondly it is the collective not the individual emissions of carbon which make a difference – whereas with cheating it is the opposite: the significance is at the individual level: the collective level of infidelity is an almost meaningless concept. In my mind these and other characteristics make it meaningful to consider designing trading schemes for carbon (as opposed to cheating).

Our model
Our own concerns about carbon concentration are rather that this ought to be a collective and compulsory system rather than a voluntary and individual one. We would therefore be inclined to see this as first step or as a way of starting a debate on an issue. In the light of this, there are issues of distribution that are complex: should we for instance see this as a joint responsibility for the whole conference and share the costs so that we subsidize the long distance travelers (some but far from all of) who may be from low income countries. As it happens many of these will receive travel support anyway and so we discarded that possibility in favour of relating carbon costs to actual emissions somewhat. The current prices of carbon are much too low to effectively solve the climate challenge and therefore the exact numbers (kilometers and carbon emissions) for each traveler are somewhat less important. We have therefore used just two levels of compensation: Travelling by air from European countries and intercontinental travel. This is a great simplification and based on the assumption that an average European return flight emits around 0,5 tonnes of CO2, and an average transatlantic return flight emits around 2 tonnes of CO2. The prices we have used are EUA dec 2008 which is about €20/ tonne C02 (actually 23€ according to Carbon Market Daily 14 November).We are thus suggesting:
a) that you take the train or ship if you can.
b) that you voluntarily pay 10€ for a European trip
c) or 40€ for an intercontinental trip.
These options are found in the registrationform.
Finally: we will use the money to buy EU ETS permits and discuss the results at the conference. 

On behalf of the LOC, Thomas Sterner,