Wednesday, January 11, 2006

TEQs - a way out of Catch-23?

Tradable Energy Quotas are one idea to use human nature to escape from Catch-23 and tackle climate change.

Imagine filling your vehicle with fuel and handing over two credit cards. The first is your credit card; the second would be like a loyalty card, of the sort in wide use nowadays.

But when it's swiped, it's not bonus points being credited to you, but "carbon units" being debited. As Richard Starkey and Kevin Anderson put it, in a newspaper article in 2005, "welcome to life under carbon rationing".

TEQs is an electronic system for rationing energy in order to both reduce the carbon dioxide remissions and to maintain a fair distribution of oil, gas and electric power during shortages.

(They used to be called Domestic Tradable Quotas and featured in Colin Challen MP's DTQ bill last year.)

Here's how they are expected to work.
  1. Every adult is given an equal number of TEQs (pronounced “tex”) units. Industry and Government bid for their units at a weekly Tender.
  2. At the start of the scheme, a full year's supply is placed on the market. Then, every week, the number of units in the market is topped up with a week's supply.
  3. Units can be traded. If you use less than your entitlement, you can sell your surplus. If you need more, you can buy them.
  4. When you buy energy, such as petrol for your car or electricity for your household, units equivalent to that amount of energy are deducted from your TEQs account. Most transactions are automatic, using direct-debit technology.
  5. The number of units available is set out in the TEQs Budget, which looks 20 years ahead. The size of the Budget goes down week-by-week - step-by-step, like a staircase.
  6. The Budget is set by an independent Energy Policy Committee.
  7. The Government is itself bound by the scheme; its role is to work out how to live within it, and to help the rest of us to do so.

TEQs have been devised by David Fleming He first published the system of TEQs in 1996. He is founder of The Lean Economy Connection. You can find more at the TEQs web site.

Similar systems are being researched by the Oxford Climate Change Institute (Brenda Boardman), The Tyndall Centre (Richard Starkey), the RSA (Jonathan Carr-West) and the Sustainable Development Commission (Oliver Knight).

The Low Carbon Kid likes the principle as it appeals to human greed and survival instincts, just like loyalty cards, and turn the result into a positive cycle.

When citizens or organisations purchase fuel or electricity they would surrender corresponding units from their carbon card. Each card links to a national database and individuals would be able to trade units.

Those who don't have a car, or use less power, can sell their surplus. Those who need more can buy it. The overall number of units is capped, and therefore the quick wins for carbon saving are achieved the most economically. The scheme has the benefits of seeming to be fair and equitable, and of leaving choice with the end user rather than having cuts foisted on them by government.

The basic idea is like carbon trading for corporations applied to everyone. It takes the principles of Contraction and Convergence from the Global Commons Institute, and draws on ideas first expounded by David Fleming in 1998.

As Fleming puts it: "When anyone (consumers, firms or the government itself) makes purchases of fuel or energy, they surrender a quota to the energy retailer, accessing their quota account. The retailer then surrenders carbon units when buying energy from the wholesaler. Finally, the primary energy provider surrenders units back to the Register when the company pumps, mines or imports fuel. This closes the loop.

"The Carbon Budget is at the heart of the scheme. Firstly, it guarantees the targets for reduction in carbon emissions. Secondly, it provides a long term quantity signal. Intentional reductions in carbon emissions take time; people will therefore need to take action now in the light of their knowledge of the quantity of carbon units that will be available in the future.

"The Carbon Budget should be set (it is suggested) by an independent body."
It will be in individuals' interests to help others to reduce their carbon dependency, argues Fleming. "Your carbon consumption becomes my business: people will want to try to influence each other's behaviour for their mutual advantage."

It is also in everyone's interests that the price of carbon units should be low. "A high price would increase the cost of industry's purchases of energy, raising prices across the economy as a whole. However, the price of units would be to some degree under the control of the people who used them, since the more they were able to reduce their demand for units, the lower their price." Furthermore, carbon units lend themselves to local collective initiatives; they can be pooled as a fund, providing the basis for coordinated local action.

Supporters also believe that TEQs provide a framework for establishing carbon reduction at the centre of public policy, aligning social values with individual responsibility. Households, industry and the government would have to work together, facing the same Carbon Budget, trading on the same market for carbon units.

Everyone is given a stake in the system and would have a sense that their efforts at conservation will not be wasted by the profligacy of others, and that the system is founded on justice.

What about fuel-poor households? They generally use less energy and so most would be better off because they could sell their surplus units.

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