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TEQs Tradable energy quotas: A policy framework for peak oil and climate change

From the APPGOPO press release:

Fuel Rationing Will Be Needed Before 2020 According To Major New Report

New parliamentary report warns of coming energy scarcities and outlines a rationing system which could ensure fair access to energy and guarantee emissions reductions

18 January 2011, London: A report launched today by the Lean Economy Connection, commissioned by the All Party Parliamentary Group on Peak Oil, calls for a nationwide system for ensuring fair and equal access to fuel as energy scarcities develop. Dr Caroline Lucas MP; Dr Jeremy Leggett, chairman and founder of Solarcentury and SolarAid; and John Hemming MP spoke at the launch, held at Portcullis House, Westminster this morning.

The report, entitled Tradable Energy Quotas, sets out a detailed proposal for a scheme which would ensure fair and equal entitlements to fuel and energy under conditions of scarcity, while also guaranteeing that the government meets its commitment to an 80% reduction in carbon emissions by 2050.

The report proposes an electronic energy rationing system called TEQs (Tradable Energy Quotas). Under TEQs, units of ‘energy credit’ are distributed free to all adults. Surplus units can be bought and sold, meaning that there is no upper limit set on the number of units owned by one person. Businesses and government bid for their energy units at a weekly tender, creating revenue to help fund the infrastructure and skills that the economy needs to end its dependence on fossil fuels.

Caroline Lucas MP, leader of the Green Party, said: “TEQs have long been Green Party policy, as we believe that we need a fair and transparent system to reduce energy demand and give each person a direct connection to the carbon emissions associated with their lifestyle. The TEQs scheme would guarantee that the UK’s targeted carbon reductions are actually achieved, while ensuring fair shares of available energy.”

Jeremy Leggett, chairman of Solarcentury, said: “What I like about TEQs is the fairness of it. When the energy crunch hits us, government and industry must ensure equitable access to available energy within a national budget. TEQs is the kind of approach we will need if we are to mobilise the infrastructure of a zero-carbon future fast, under pressure. It would increase the chances of working our way through the grim times to renaissance-through-resilience."

The report warns that, without a scheme such as TEQs, the UK will not only fail to achieve the steep emissions reductions promised by the Climate Change Act, but will find itself unprepared for energy scarcities when they arise, and unable to sustain an orderly market. Fuel poverty would rapidly develop, leaving the most vulnerable people in society at risk.

Speaking at the launch today, John Hemming MP, chairman of the All Party Parliamentary Group on Peak Oil, said: “What is needed is an intelligent response both to climate change and to fuel depletion. We therefore welcome the model set out in the Lean Economy Connection’s report, which addresses both sides of the problem. It is the first coherent proposal to attempt to do this, and it merits close attention.”

Shaun Chamberlin, Director of the Lean Economy Connection and co-author of the report, said: “It is essential that we prepare now to mitigate the energy shortages of the future. We are calling on the government to move beyond research and into the development of a framework to reduce carbon emissions, to ensure that the UK is ready to implement energy rationing at short notice.”

Commenting on the need to involve citizens fully in the task of controlling climate change, Mr Chamberlin added: “Tradable Energy Quotas are the only way we can reduce carbon emissions and at the same time guarantee that everyone gets fair access to limited energy supplies. This is also an alternative to carbon taxation; we are in difficult times, and we should not take money away from people when they need it the most. TEQs is about motivating people to cooperate in the common challenge of drastically reducing our dependence on fossil fuels.”

Copies of the report, Tradable Energy Quotas (TEQs): A Policy Framework for Peak Oil and Climate Change, can be downloaded or ordered from www.teqs.net/report.

From the report:

Executive Summary:
TEQs (Tradable Energy Quotas) were designed from the outset as a response to the two sides of the energy problem: climate change and the depletion of fossil fuels.

Any framework designed to address either side of the problem must deliver in two ways. It must achieve a steep, but managed reduction in the use of fossil fuels. And it must forestall fuel poverty by guaranteeing fair entitlements to the energy that is available at the time. TEQs is designed for both these tasks.

No need to measure emissions
The design of TEQs is based on the insight that all emissions from energy-use within a national economy can be measured simply and efficiently by assigning a rating to fuels and electricity, based on the quantity of carbon dioxide and other greenhouse gases generated by their production and use. The emissions attributable to them thus become implicit in the quantities listed as usual on invoices, utility bills and till receipts. The TEQs system simply uses this information, making it unnecessary to measure carbon emissions directly.

Effective motivation
It is usually taken to be self-evident in the field of energy/climate policy that the key to persuading energy users to take action to reduce their dependency on fossil fuels is to offer a set of financial rewards and penalties. But outside this field, that simple carrot-and-stick assumption is now recognised to be flawed.

What motivates people to carry out a difficult task – one requiring thought and inventiveness – is, above all, confidence that the task is an interesting and worthwhile one. There must be a sense that it is in their own direct interests to participate, a belief that they can rely on the cooperation of others, and an assurance that those managing the scheme are accountable to the participants, and are themselves required to participate.

The TEQs model fulfils these criteria. It provides a framework in which it is clearly in energy users’ own interest to invent and develop ways of reducing their consumption of fossil fuels in line with the agreed national Budget.

The Government study
In 2008, prompted by the work of other research centres, the UK Government undertook a pre-feasibility study into TEQs, but this considered only emissions reductions, and not TEQs’ role as a system guaranteeing energy entitlements. It also limited its economic appraisal to a vaguely-defined scheme for individuals only; and it did not provide the detailed systems-audit of TEQs which could be the basis of a decision on whether to take the scheme forward to implementation.

Common Purpose
Nations around the world are experiencing deepening energy scarcity. There is no doubt that the needed steep reduction in reliance on fossil fuels will not be achieved unless there is a sense of common purpose within nations, with citizens and communities fully involved and strongly motivated to invent their own solutions. We need a revolution in the way we use energy. TEQs provide the culture and framework for the common purpose and inspiration which could draw us together to that end.

From the Introduction:

...The structure of the report is as follows:

Part 1: A Plan for All Seasons

1. TEQs: Guaranteeing Emissions Reductions
The defining features of TEQs are summarised. The Rating System gives all fuels and electricity a rating defined in terms of the carbon dioxide they will produce. The Entitlement guarantees individuals’ access to fossil fuels, measured in carbon units. The Carbon Budget sets the rate of reduction in carbon emissions and in the use of fossil fuels. A market enables carbon units to be bought and sold within the limits set by the Budget.

2. TEQs: Assuring an Entitlement to Energy
If fuel scarcity, rather than emissions reduction, is the tighter constraint on the economy, a rationing system will be required to sustain a fair entitlement of the available fuels. Without this, fuel poverty would quickly turn into actual fuel deprivation. This use of TEQs as a rationing instrument requires only a switchover to new settings in the software which governs the system.

3. Motivation: Climate Policy’s Missing Link
This chapter argues that a steep reduction in the demand for energy will require an effective and proven motivation structure. It must be built around (1) an intrinsic incentive – as distinct from an extrinsic regime of financial rewards and punishments; (2) “pull” – the principle by which participants respond to local conditions rather than merely complying with instructions from the authorities; (3) a framework for the full participation of all energy users; and (4) a setting for cooperation between all actors in the common task of achieving the energy descent.

4. How do TEQs fit with the EU ETS?Part 2: The Science and Policy Context

5. The Two Sides of the Energy Problem
This chapter summarises the latest evidence on peak oil and climate change, and argues that when the interactions between them are properly understood and combined with our UK energy outlook, our only realistic option is a steep reduction, leading to a phase-out, in the demand for fossil fuels.

6. Policy Update
Although the model of TEQs was first described in 1996, and first presented at the House of Commons in the following year, the rate of diffusion into political thinking has been slow. This chapter outlines the sequence of events, and analyses the Government’s research into the scheme in the light of the work of other research centres, concluding that the Government’s own criteria for a full feasibility study have now clearly been met.

Conclusions

The report concludes that we require a policy framework that guarantees emissions reductions while sustaining fair entitlements to fuel in conditions of scarcity. To do this, it must engage with and motivate the whole of society in the task of phasing-out our dependence on fossil fuels. TEQs is the only instrument available to achieve this ambitious, but essential, aim.

Editorial Notes: Here is a Bloomberg article about the report. The TEQ website is here.

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