TEQs - Tradable Energy Quotas for Effective Climate Action

1. TEQs(Tradable Energy Quotas)What they are How they work Why we need them

2. 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.

3. What is needed? “Large-scale problems require large-scale solutions” ?

4. "Large-scale problems do not require large-scale solutions; they require small-scale solutions within a large-scale framework." ~ David Fleming

5. 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?)

6. WHAT TEQs ARE FOR • Guaranteeingthat our national carbon budget is achieved • Empowering communities and building a common purpose • Securing fair access to fuel at a time of deep scarcity

7. IN OUTLINEWhat are TEQs? Tradable Energy Quotas are an electronic system for rationing carbon-rated energy , at national level , for all energy users.

8. 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.

9. QuotaCo REGISTRAR ISSUE SURRENDER Fuel extractors CARBON 60% Tender 40% Entitlement BUDGET Fuel wholesalers/ electricity generators MARKET Primarydealers COMMITTEE ON CLIMATE CHANGE Citizens Fuel/electricity retailers Organisations £ UNITS FLOW THROUGH THE ENERGY CYCLE Tradable Energy Quotas

10. CARBON BUDGET COMMITTEE ON CLIMATE CHANGE Tradable Energy Quotas

11. THE CARBON BUDGET • Establishes the total quantity of TEQs units (rations) that may be issued • Sets a long-term time-horizon

12. Commitment 5 year Intention 5 year 0 5 10 15 Years Year 1 100 Total carbon units (index) Forecast 10 years 0

13. Commitment 5 year Intention 5 year 0 5 10 15 Years Year 2 100 Total carbon units (index) Forecast 10 years 0

14. 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!)

15. QuotaCo REGISTRAR CARBON BUDGET COMMITTEE ON CLIMATE CHANGE Tradable Energy Quotas

16. QuotaCo REGISTRAR ISSUE CARBON 60% Tender 40% Entitlement BUDGET COMMITTEE ON CLIMATE CHANGE Tradable Energy Quotas

17. THE ISSUE OF UNITS • By equal Entitlement to all adults (40%) • 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

18. 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)

19. QuotaCo REGISTRAR ISSUE CARBON 60% Tender 40% Entitlement BUDGET MARKET Primarydealers COMMITTEE ON CLIMATE CHANGE Citizens Organisations Tradable Energy Quotas

20. THE MARKET FOR UNITS Everyone has access to the same market. The market price is set by the Tender.

21. QuotaCo REGISTRAR ISSUE CARBON 60% Tender 40% Entitlement BUDGET MARKET Primarydealers COMMITTEE ON CLIMATE CHANGE Citizens Organisations £ Tradable Energy Quotas

22. QuotaCo REGISTRAR ISSUE CARBON 60% Tender 40% Entitlement BUDGET MARKET Primarydealers COMMITTEE ON CLIMATE CHANGE Citizens Organisations £ UNITS FLOW THROUGH THE ENERGY CYCLE Tradable Energy Quotas

23. QuotaCo REGISTRAR ISSUE SURRENDER Extractors/importers CARBON 60% Tender 40% Entitlement BUDGET Fuel wholesalers/ electricity generators MARKET Primarydealers COMMITTEE ON CLIMATE CHANGE Citizens Fuel/electricity retailers Organisations £ UNITS FLOW THROUGH THE ENERGY CYCLE Tradable Energy Quotas

24. THE SURRENDER OF UNITS A hands-free scheme • Utility bills: direct debit • Petrol: by card • The cash option Embodied energy in other goods

25. QuotaCo REGISTRAR ISSUE SURRENDER Extractors /importers CARBON 60% Tender 40% Entitlement BUDGET Fuel wholesalers/ electricity generators MARKET Primarydealers COMMITTEE ON CLIMATE CHANGE Citizens Fuel/electricity retailers Organisations £ UNITS FLOW THROUGH THE ENERGY CYCLE Tradable Energy Quotas

26. TEQS: THE CRITICAL FEATURES

27. TEQS: THE CRITICAL FEATURES

28. What is the Guarantee? Assurance that the carbon reductions defined by the Budget will actually be delivered

29. TEQS: THE CRITICAL FEATURES

30. Why the need to plan ahead? 1. The long lead-times needed by conservation and renewables • Structural change - the proximity principle - means a deep transformation in our lives Changing infrastructure and lifestyles takes time

31. TEQS: THE CRITICAL FEATURES

32. Why leave money with the energy user? 1. The transition to Lean Energy will be costly 2. Economic prosperity cannot be assumed

33. TEQS: THE CRITICAL FEATURES

34. Progressive 1. Benefits poorer households 2. An equal allocation to every adult 3. Equity redefined in the light of climate change and peak oil

35. TEQS: THE CRITICAL FEATURES

36. 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

37. TEQS: THE CRITICAL FEATURES

38. Why does it need to be specified in terms of energy? • 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

39. TEQS: THE CRITICAL FEATURES

40. 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

41. TEQS: THE CRITICAL FEATURES

42. 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

43. TEQS: THE CRITICAL FEATURES

44. What is the role of Government? • In it together • 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

45. TEQS: THE CRITICAL FEATURES

46. What Competitive Advantage? • Energy-efficient technology • Lower energy costs (energy volumes lower) 3. An orderly rationing system 4. Moral leadership

47. TEQS: THE CRITICAL FEATURES

48. 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

49. TEQS: THE CRITICAL FEATURES

50. 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