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The peak oil crisis: British proposal for Tradable Energy Quotas

Last week the British MPs, who make up the All Party Parliamentary Group on Peak Oil (APPGOPO for short), released a proposal for allocating fossil fuel-based energy to control carbon emissions and to ensure equitable allocation of energy during an era of declining availability.

The proposal is rather ingenious in that it incorporates a mechanism to limit and control carbon emissions into the atmosphere as well as dealing with the shortages that will develop from declining production of oil, coal, and eventually natural gas. A plan to equitably allocate energy and to restrict carbon emissions by all the peoples of the earth obviously has too many intricacies to discuss in detail here (If you are intrigued, as you should be, visit the following web site http://www.teqs.net/report/).

The general idea of the plan, however, is to set up a system of "Tradable Energy Quotas" (TEQs) that would be used, in conjunction with money, to "purchase" carbon-based energy - electricity, oil products, coal, and natural gas. TEQ's would only exist electronically and would be deducted from a purchasers individual TEQ account at the time a debit or credit card was used to pay for the energy. The plan envisions that every adult in a country, or perhaps the world if international agreements can be reached, would be given a free basic allocation of TEQ's that would each be worth the emission of 1 kilo of CO2 into the atmosphere. The various forms of energy we purchase -- gasoline, diesel, electricity etc. - would then be rated in terms of how much CO2 was emitted in the production and use of that energy. The appropriate number of TEQ's would then be subtracted from the purchasers TEQ account as it was sold.

There also would be an open market for TEQ's. Those individuals, with a low carbon life style could sell off some of their TEQ's and those needing more than the basic allocation could buy more at the going market price. As the free basic allocation TEQ's would only go to individual adults, other entities using energy such as businesses, and governments would purchase TEQ's from a central "registrar" at auction-established rates. Business could recover the costs of buying the TEQ's they need to operate by collecting TEQ's from their customers in return for goods and services. TEQ's acquired by sellers of energy and goods and services from their customers would flow back up the supply chain to the wholesalers and finally to the miners, oil producers and importers who would then return them to the "registrar" as they mined, pumped or imported more energy.


The alternative to this, or some sort of allocation scheme, is energy anarchy.

The number of TEQs in circulation would be controlled by an independent government-appointed commission, somewhat akin to the Federal Reserve Board, that would decide on the rate that TEQs are created, oversee the weekly public auctions, and the general functioning of the system. If everything works, the TEQ system by itself would be sufficient to control emissions and hopefully control fuel shortages; for the commission would determine the pace at which energy is consumed in a country. If you don't have or can't afford more TEQ's then you must cut back consumption.

Should some of the fossil fuel energy supply develop shortages -- most likely oil -- software adjustments could easily add "Tradable Oil Quotas" to the system to deal with the specific problem of oil shortages.

Although there obviously will be many problems buried in the details of a proposal as broad and comprehensive as this one, and there are already many critics, the basic idea of seeing that every person is given equal access to enough energy to survive (warmth, cooking fuel) is a noble one. It is well worth the costs in terms of avoided civil unrest if people come to believe that declining amounts of fossil energy is being allocated fairly. Those addicted to high-carbon life styles are free to purchase as much as they can afford at the going rate for TEQ's. The incentives for most to rein in their use of carbon fuels at a measured pace will be very high.

The alternative to this, or some sort of allocation scheme, is energy anarchy. As we saw during the energy embargoes 40 years ago, it does not take much of a shortage to throw a motorized nation into turmoil and the economy into a tailspin.

Interestingly enough, the British government, which likely will be faced with serious energy problems a few years earlier than in the U.S., seems to be taking the proposal seriously - at least to the point of studying it. Britain has already enacted legislation calling for a 34 percent reduction in carbon emissions by 2020 and the government is mulling whether personal carbon quotas such as the TEQ system might not present a coherent path to this goal.

In the United States, where the majority of the people are in complete denial that climate change has any connection to carbon emissions or that there is a danger of carbon fuel supplies starting to run short in the near future, acceptance of the need for a carbon allocation program is likely years or perhaps even decades away. The recent election established that a majority of Americans believe that controlling emissions is a barrier to job creation and want none of it. If history is a precedent, the US seems certain to enter the era of oil depletion without having taken concrete steps to mitigate the situation. This of course will lead to much needless suffering.

The British at least have come up with a comprehensive plan that may have the potential to equitably control carbon emissions and deal with some of the consequences of declining supplies of fossil fuels. While there are likely to be numerous problems and shortcomings should TEQs or something similar ever be implemented, the underlying principles seem sound. We should all wish them luck for they could provide a model for the rest of us.



Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.

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