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TEQs (Tradable Energy Quotas) What they are How they work Why we need them Context 1. Climate change IPCC (Sept 2007): “If warming is not kept below 2 degrees C, which will require the strongest of mitigation efforts, and currently looks very unlikely to be achieved, then substantial global impacts will occur, such as: species extinctions and millions of people at risk from drought, hunger and flooding, etc.” (my emphasis) 2. Resource depletion (Peak Oil) Global peak oil production around now. Extreme and unprecedented price volatility. Not just oil – energy resources including gas, uranium and even coal. What is needed? “Large-scale problems require largescale solutions” ? "Large-scale problems do not require large-scale solutions; they require small-scale solutions within a large-scale framework." ~ David Fleming What is needed? Personal Level – Us Local Level – Transition Towns/Woking/Eigg/Fintry/… --- National Level – Support TEQs (Tradable Energy Quotas) International Level – Collective responsibility (COP?) WHAT TEQs ARE FOR 1. Guaranteeing that our national carbon budget is achieved 2. Empowering communities and building a common purpose 3. Securing fair access to fuel at a time of deep scarcity IN OUTLINE What are TEQs? Tradable Energy Quotas are an electronic system for rationing carbon-rated energy, at national level, for all energy users. All individuals receive an unconditional Entitlement to TEQs units. All other users obtain their units through the weekly Tender (auction). Units are surrendered in addition to cash payment when fuel or energy is purchased. Individuals who use less than their Entitlement may sell them and benefit from their energy-thrift. Those who want more may buy them from those who are selling. Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON SURRENDER Fuel extractors BUDGET MARKET Citizens Primary dealers Organisations £ COMMITTEE ON CLIMATE CHANGE Fuel wholesalers/ electricity generators Fuel/electricity retailers UNITS FLOW THROUGH THE ENERGY CYCLE Tradable Energy Quotas CARBON BUDGET COMMITTEE ON CLIMATE CHANGE THE CARBON BUDGET 1. Establishes the total quantity of TEQs units (rations) that may be issued 2. Sets a long-term time-horizon Year 1 Total carbon units (index) 100 0 0 Commitment Intention 5 year 5 year 5 Forecast 10 years 10 Years 15 Year 2 Total carbon units (index) 100 0 0 Commitment Intention 5 year 5 year 5 Forecast 10 years 10 Years 15 THE CARBON BUDGET 1. Establishes the total quantity of TEQs units (rations) that may be issued 2. Sets a long-term time-horizon 3. Set by the Committee on Climate Change… …which frees up the Government to focus on achieving the Budget (and TEQs provides money for this!) Tradable Energy Quotas QuotaCo REGISTRAR CARBON BUDGET COMMITTEE ON CLIMATE CHANGE Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON BUDGET COMMITTEE ON CLIMATE CHANGE THE ISSUE OF UNITS 1. By equal Entitlement to all adults (40%) 2. By Tender to all other users (60%) The Tender is a weekly auction at which organisations (industry, government etc.) purchase the TEQs units they need THE RATING SYSTEM Carbon units: 1 unit = 1kg CO2 (gwp) (fuel rated by carbon content) OR Fuel units: 1 unit = 1 litre oil 1 unit = 1 metre3 gas 1 unit = 1 kWh electricity (etc) Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON BUDGET MARKET Citizens Primary dealers Organisations COMMITTEE ON CLIMATE CHANGE THE MARKET FOR UNITS Everyone has access to the same market. The market price is set by the Tender. Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON BUDGET MARKET Citizens Primary dealers Organisations £ COMMITTEE ON CLIMATE CHANGE Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON BUDGET MARKET Citizens Primary dealers COMMITTEE ON CLIMATE CHANGE Organisations £ UNITS FLOW THROUGH THE ENERGY CYCLE Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON BUDGET MARKET Citizens Primary dealers Organisations £ COMMITTEE ON CLIMATE CHANGE SURRENDER Extractors /importers Fuel wholesalers/ electricity generators Fuel/electricity retailers UNITS FLOW THROUGH THE ENERGY CYCLE THE SURRENDER OF UNITS A hands-free scheme 1. Utility bills: direct debit 2. Petrol: by card 3. The cash option Embodied energy in other goods Tradable Energy Quotas ISSUE 40% Entitlement 60% Tender QuotaCo REGISTRAR CARBON SURRENDER Extractors /importers BUDGET MARKET Citizens Primary dealers Organisations £ COMMITTEE ON CLIMATE CHANGE Fuel wholesalers/ electricity generators Fuel/electricity retailers UNITS FLOW THROUGH THE ENERGY CYCLE TEQS: THE CRITICAL FEATURES TEQS: THE CRITICAL FEATURES THE GUARANTEE What is the Guarantee? Assurance that the carbon reductions defined by the Budget will actually be delivered TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD Why the need to plan ahead? 1. The long lead-times needed by conservation and renewables 2. Structural change - the proximity principle - means a deep transformation in our lives Changing infrastructure and lifestyles takes time TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD LEAVES MONEY WITH THE USER Why leave money with the energy user? 1. The transition to Lean Energy will be costly 2. Economic prosperity cannot be assumed TEQS: THE CRITICAL FEATURES THE GUARANTEE PROGRESSIVE TIME TO PLAN AHEAD LEAVES MONEY WITH THE USER Progressive 1. Benefits poorer households 2. An equal allocation to every adult 3. Equity redefined in the light of climate change and peak oil TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION LEAVES MONEY WITH THE USER Why is an assured ration needed? 1. Without an assured ration, defined in terms of quantity - not money - the poor could be out-bid for energy 2. This is especially a risk if the Government has to intervene in the energy market, selling at a lower price than that of the international market TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY Why does it need to be specified in terms of energy? 1. The problem is an energy problem, and will call for imaginative energy solutions 2. If it were seen as a money problem, it would be just one more charge on the household budget TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR FUEL SCARCITY AND CLIMATE LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY Why set up an instrument for both fuel scarcity and the climate? The solutions to each aspect of the problem need to be mutually consistent TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR HANDS-FREE FUEL SCARCITY AND CLIMATE LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY Why is “hands-free” so important? 1. It won’t happen without 2. The focus of interest has to be on the energy descent, not on the scheme put in place to support that descent TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR HANDS-FREE FUEL SCARCITY AND CLIMATE LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY GOVERNMENT THERE TO HELP What is the role of Government? 1. In it together 2. There to help the energy descent happen in the context of the common purpose 3. Budget decisions are made by an independent agency - the Carbon/Energy Policy Committee TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR HANDS-FREE FUEL SCARCITY AND CLIMATE COMPETITIVE ADVANTAGE LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY GOVERNMENT THERE TO HELP What Competitive Advantage? 1. Energy-efficient technology 2. Lower energy costs (energy volumes lower) 3. An orderly rationing system 4. Moral leadership TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR FUEL HANDS-FREE SCARCITY AND CLIMATE COMPETITIVE PULL ADVANTAGE LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY GOVERNMENT THERE TO HELP What is Pull? It is the opposite of push! A system which empowers people to think for themselves, cooperate and bring in only those resources which are needed TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR FUEL HANDS-FREE SCARCITY AND CLIMATE COMPETITIVE PULL ADVANTAGE LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY GOVERNMENT THERE TO HELP COMMON PURPOSE What is Common Purpose? Shared effort towards a shared goal. There is a common and clear objective for the whole society With TEQs, price is under the nation’s control, unlike internationally traded energy resources TEQS: THE CRITICAL FEATURES THE GUARANTEE TIME TO PLAN AHEAD PROGRESSIVE AN ASSURED RATION BOTH FOR FUEL HANDS-FREE SCARCITY AND CLIMATE COMPETITIVE PULL ADVANTAGE Carbon tax? LEAVES MONEY WITH THE USER SPECIFIED IN TERMS OF ENERGY GOVERNMENT THERE TO HELP THE COMMON PURPOSE TEQS vs TAX NO GUARANTEE NO TIME TO PLAN AHEAD REGRESSIVE NO ASSURED RATION WHOLLY HANDS-ON UNSUITED FOR FUEL SCARCITY COMPETITIVE PUSH DISADVANTAGE TAKES MONEY FROM THE USER SPECIFIED IN TERMS OF MONEY GOVERNMENT THERE TO PUNISH NO COMMON PURPOSE TEQS vs TAX NO GUARANTEE NO TIME TO PLAN AHEAD REGRESSIVE NO ASSURED RATION WHOLLY HANDS-ON UNSUITED FOR FUEL SCARCITY COMPETITIVE PUSH DISADVANTAGE TAKES MONEY FROM THE USER SPECIFIED IN TERMS OF MONEY GOVERNMENT THERE TO PUNISH NO COMMON PURPOSE An equitable, effective and efficient way of managing our country’s energy descent - guaranteeing emissions reductions, empowering individuals and communities and ensuring fair access to fuel and energy for all. www.teqs.net