Fair trade: Can personal carbon trading really make a difference?

Personal carbon trading is about to sweep the nation, letting us all balance our eco-sins against others' low-energy lifestyles. But is it just a stunt, or can it really make a difference? Ian Herbert joins Britain's first trials to find out

Cast your mind ahead to 2013 and a world where we're all being forced to do something about our carbon emissions. You've cycled diligently to school with the children all week and kept the car in the garage, but it's Friday and you arrive at the gates to find that little Tommy's forgotten his maths book. He needs it by 9.30 so you belt back and start out to school again by car – but the tank's empty, you fill up and hand your credit card to an attendant, who spots that you've just exceeded your annual carbon limit. "That's going to be £30, plus £10 carbon top-up and a transaction fee," he tells you, as he swipes your credit card. It is one of the term's more expensive maths lessons.

The prospect will sound either like a nightmare or utopia, depending on your views about carbon emissions, but it is an increasingly likely one. The concept of personal carbon rations, enthusiastically endorsed in May by the then Environment secretary, David Miliband, is currently under active examination by the Government and has just been put to the test for the first time by a group of residents in Manchester who were asked to try out a carbon trading system in which who live within their carbon limit may sell credits to those who do not.

Manchester's experiment – the latest undertaking by the city's Manchester is my Planet (MIMP) project, which has been encouraging residents to reduce their emissions – brought together 70 people to be given personal carbon-ratings based on analysis of their lifestyles. Those with a low rating had carbon rations – in the form of poker chips – to sell while those whose emissions were higher had to find someone to release some.

It provided a sense of the controversies we may become familiar with if personal carbon-rations head towards the statute book. How would you feel, for instance, if you've had a "good" carbon month and have credits to trade, about the idea of your wealthy neighbours getting their hands on them to run their gas guzzling cars? Pete Able, a freelance researcher whose low-carbon lifestyle provided him with three units to trade, wasn't exactly happy. "I don't want to end up being a share dealer but, at the same time, I wouldn't want any old petrolhead getting his hands on my carbon rations," he said.

Susan, another participant, and one of many who didn't want to give their surnames, agreed. "Maybe I'd trade with my family and friends, but why should I help someone who's ruining all my good work?" Dave, another low carbon user, had a message for those who wanted his credits: "Show me you are changing your behaviour and I might sell you some credits."

So could this really be the chance to get level with the Hummer driver down the road? Theoretically yes – although you're unlikely to have the satisfaction of knowing it. Under any such scheme, the Government would set an annual "carbon budget" and allocate everyone over the age of 18 – an estimated 64 million people – the same number of credits, initially allowing them to emit five tons of carbon a year. While businesses would get 60 per cent of the total carbon cake, 40 per cent would go to consumers, whose domestic greenhouse-gas emissions are responsible for 44 per cent of Britain's total output.

The Tyndall Centre for Climate Change research, which has already published a paper on the idea, has envisaged everyone getting a carbon card, which would be topped up as credits ran out. But the Royal Society of Arts, which has established a CarbonLimited programme to study of the concept for the Government, has concluded that consumers would be unhappy about carrying an extra card, and that a scheme might need banks, or mobile phone operators, to provide "top-ups" and to collect a transaction fee in return.

The Manchester session, which CarbonLimited will follow with a similar experiment in Cardiff early next year, provided the first sense of how fiendishly difficult the establishment of such a scheme may be. Pete Able was one of several participants, for instance, who were unconvinced by the limited range of products covered by carbon rations. The current thinking is that it might be limited to petrol, gas and electricity bills, and air travel, but Able – who has an allotment in Manchester and buys local produce whenever possible – doesn't see why more purchases shouldn't be included. "There didn't seem to be consideration of food at all," he said. "But when I raised it I got the message that it was too complex a proposition to include."

Would the scheme be fair on those who have a heavy carbon-footprint, despite being thoughtful about the environment? Tom is from a family of vegetarians who recycle, and plants trees each year to reduce his footprint. But his 120-mile daily commute undoes all this good work. "That's my employer's responsibility, not mine," he said.

Another participant, Sheila, runs a car on bio-fuel but is forced to take long-haul flights because of unusual personal circumstances. And what about those who have children, who can be major carbon-emitters despite the best efforts of their parents?

CarbonLimited says it anticipates adjustments to the system to help those who have special cases. The carbon cap might be adjusted or removed for the disadvantaged, for example. And, for those who don't like the idea of rich polluters getting hold of credits, there may be the potential to "retire" those which consumers are unwilling to sell. That would have the effect of pushing up the overall market price, which might encourage those who emit more to cut back. Picking up the Manchester group's concerns, CarbonLimited is also examining whether trading could be confined to specific geographical areas to make people feel more connected and comfortable with the system.

But the prospect of being able to operate as a carbon-share trader by holding on to your credits and selling them when the price goes up seems unlikely. "We do see that creating problems, and making them too expensive," said Matt Prescott, CarbonLimited's project director . "We envisage an expiry date being set on credits."

Not everyone is convinced. Greenpeace has said that it believes that environmentalists should be focusing on tackling UK domestic energy systems, which waste two thirds of energy generated, rather than a carbon trading system.

But the MP Colin Challen, the chair of the All Party Parliamentary Climate Change Group, believes that it may succeed where voluntary initiatives have failed.

One of the beauties of the system, according to its advocates, is that it is socially progressive, because poorer people tend in general to cause fewer emissions. For example, the pensioner who doesn't take flights abroad and spends a minimal amount on transport will have credits to sell. And, if the potential complications can be dealt with, the net result should be positive. Consumers will demand more energy-efficient white goods with fewer standby buttons and fuel efficient vehicles.

David Miliband, when Environment Secretary, argued that, if the four main transactions which account for more of our carbon – electricity, gas, petrol and aviation – could be incorporated, then it would be an option. The mechanisms for such a system may soon be in place, as his Climate Change Bill has set out "enabling powers" to allow government to extend carbon trading across the economy.

For MIMP's director Keith Boxer, the public discussion alone is valuable because it makes consumers think of carbon as a commodity. "We can't just sit back and expect big business and the Government to act on climate change without exploring what we as individuals can do," said.

Able agrees. "Of course there are problems," he said. "If food is included, how do you measure imported produce against domestic produce heated in polytunnels? But if we're to reduce emissions to the levels they're talking about by 2050 then it's going to take a bold strategy like this."

How we could trade carbon

* Each adult would get a 5kg carbon ration, a figure which would be reduced over time

* Credit cards or mobile-phone technology could be used to record usage and allow top-ups

* Rations would have to come down before 2050, by when the UK's carbon emissions need to be reduced by 90 per cent, according to the Institute for Public Policy Research

* Purchases included within the scheme would be likely to include petrol, airline tickets and fuel bills

* The RSA will report next year. It believes that a scheme could be in place by 2013

* CarbonLimited has launched a website, Carbondaq, to enable people to mock-trade (www.rsacarbonlimited.org/emissions/default.aspa)