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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