Personal Carbon Trading in Mobility May Have Positive Distributional Effects

Personal carbon budgets and trading (PCT) is an innovative and ground-breaking downstream policy, which locates rights to and responsibilities for emissions at the individual level. In addition to emission reductions, it may also provide a method for earning and evening out the income distribution. The economic impacts of PCT for a single person depend greatly on the method of allocating emission rights. Currently, it is not known how the economic impacts for various income levels differ between different allocation methods. Herein, we present a PCT model for mobility and various methods for allocating emissions rights. The economic impacts on various income levels are calculated based on Finnish statistical mobility data and using a PCT pilot in the city of Lahti. Results show that greenhouse gas emissions from mobility are lower for people with a low income, and PCT could provide additional income and even out the income distribution. The financial benefits and payoffs depend on the carbon cap, carbon floor price and emission right allocations. The results of this study provide basic information on how PCT can be put into action, what options there are for emission allocation, and how PCT can be used to even out the income distribution.