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TEQs & Their Limitations

 
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Sun Jun 15, 2008 11:25 pm    Post subject: TEQs & Their Limitations Reply with quote

As anyone reading this will probably already know : Mark Lynas, the celebrated author, speaker and columnist, has done an about-face.

Where once he saw the reasoning behind Carbon Rationing, now he has signed up to Oliver Tickell's Kyoto2 (book forthcoming), which basically promotes the notion that the best way forward on Carbon control is to Auction Carbon Extraction Rights.

Seemingly under Oliver's tutelage, Mark repeats the accusation that the poor and clueless will lose out with personal Carbon Trading as they will succumb to the temptation to sell their Carbon Allowances immediately they receive them and be held hostage to the daily Carbon Spot Price thereafter for all their Energy and Fuel purchases.

I think it is a shame that Mark Lynas has not understood the basic principle of Carbon Shares within a Carbon Budget, but I think he still has something there.

This has stimulated my thinking, as his point needs countering.

I accept that there are potential limitations with any and all of the schemes currently put forward for Carbon Allowances, including TEQs.

Let me unpack a few of my proposed alterations to the basic TEQs formulation :-

1. TEQs & Twin Carbon Markets

The division of Corporates and Citizens in the TEQs Carbon Market creates two sectors, 60% for Corporates and government functions, and 40% for Citizens.

I would put it that this creates two Carbon Markets, one upstream (the start or input of the Carbon/goods/services pipeline) and the other downstream (end consumer).

My contention is that any trading of any Carbon Quotas/Allowances should be kept strictly within the original market to avoid corrupting the Carbon Cap, through the operation of "grey goods" for example.

2. TEQS & Citizen Trading

I would argue that only a certain portion of a Citizen's Carbon Allowance may be traded at any one time (this is the same argument I used against Cap & Share yearly certificates).

The original reason for trading Carbon between Citizens is to allow for the fact that the original Equity - Equal Carbon Shares - may not be sufficient for all Citizens - and so surpluses need to find their way to where they are needed.

High volatility in the price of traded Carbon Allowances should be contained, as it would victimise those with unusuallly high Carbon needs, even if those needs are only temporary.

I would even suggest that the TEQs price should be fixed on a monthly or quarterly basis.

3. TEQs & Structural Change

Obviously, TEQs by themselves cannot cause de-Carbonisation.

In Zero Carbon Britain we call de-Carbonisation "Powerdown and Power Up", where we need to aim for greater Energy efficiency, real emissions reductions and the sharp ramping up of Renewables.

TEQs needs to be accompanied by assurances that the funds raised by the Auction of Corporate Carbon Quotas must be used for the Powerdown and Power Up transition away from Fossil Fuels.

4. TEQs & Cartel Issues

The Auction of the Corporate Carbon Rights cannot ever be truly competitive.

For a start, only the big players will win in the Auction for Carbon Rights.

And by winning the Carbon Rights, the big players will secure their position for future Auctions.

I call this "Wealth-as-Usual".

Basically, the Carbon Quotas Auction could become a cartel operation, because there are so few big players that would win in the Auction, and these could consolidate their position in the future.

I would propose to have Corporate responsibilities split : if they want to be permitted to participate in the Carbon Quota Auction, they need to show they are de-Carbonising their business.

In other words, if a company wants the right to continue to emit Carbon Dioxide, it needs to show that it is investing in non-Carbon-Dioxide production into the future.

BP and Shell would need to shape up with their Green Wings, I mean, get back to Green Energy plans.

5. TEQs & Legitimising Carbon

The Corporate Auction of Carbon Rights under TEQs suffers from the same issues as any of the other regimes of selling Carbon to the big players - it effectively privatises the atmosphere.

However, by limiting TEQs Auctions to 60% of the whole Carbon Budget it does not allow complete "ownership" of Carbon.

Those who win Auctions will continue to win Auctions, as they used their original wealth derived from Carbon to perpetuate their right to burn.

This ringfencing of Carbon, this protection and prolongation of Carbon business, is a major stumbling block.

I propose that this cannot be left hanging in the air, and that there should be an explicit requirement to do "Carbon Disclosure", full publicly available Carbon Accounting, and following on after that, institutional guarantees to the company's shareholders (or a government stakeholders) that de-Carbonisation is taking place (with plans and evidence).

Eventually, coal-fired power stations will be ruled illegal. We have to anticipate that some Energy technologies will become banned, and plan for that.
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RevdTess



Joined: 24 Nov 2005
Posts: 2933
Location: Newquay

PostPosted: Mon Jun 16, 2008 2:18 pm    Post subject: Re: TEQs & Their Limitations Reply with quote

jo wrote:
Seemingly under Oliver's tutelage, Mark repeats the accusation that the poor and clueless will lose out with personal Carbon Trading as they will succumb to the temptation to sell their Carbon Allowances immediately they receive them and be held hostage to the daily Carbon Spot Price thereafter for all their Energy and Fuel purchases.

I think it is a shame that Mark Lynas has not understood the basic principle of Carbon Shares within a Carbon Budget, but I think he still has something there.


I think he's understood it perfectly well! It's the proponents of such a scheme who don't seem to understand the risks.

But at least we're getting into debating the problem now and suggesting alternatives and fixes (fudges), rather than just dismissing the issues out of hand.

The main problem to be addressed is how to handle teq price speculation. You mention some possible solutions above - I am sure there are solutions out there. The important thing is to make sure all the bases are covered, not trust to a free market to set a fair price.
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jo



Joined: 20 Oct 2007
Posts: 184
Location: London

PostPosted: Mon Jun 16, 2008 11:13 pm    Post subject: Actually, I think Mark doesn't get it at all... Reply with quote

@Tess

Actually, I don't think Mark Lynas really understands Citizen Carbon Shares of a Carbon Budget at all...

For me, the whole story of Carbon Abuse centres around the Criminal Neglect of the Environment that is an outcome of Lowest Cost Options.

Hydrocarbon fuels have been the cheapest, most condensed form of Energy used on Earth, with massive trade flows into the bargain.

Their sourcing has been virtually cost-free, apart from exploration and initial development.

Their use has contributed the equivalent of roughly ten units of mechanical labour for every one unit of manpower.

Hydrocarbon use is the basis of all wealth, now that we have moved our social and economic systems to be dependent on hydrocarbons.

Faced with a choice of using cheap hydrocarbons or using some other form of Energy, we have chosen cheap hydrocarbons.

And this, despite the bare facts that hydrocarbon extraction and utilisation causes measurable Ecological Damages.

We choose the cheap option, the lowest cost option. The choice of the cheapest option is now enshrined in international, regional and local trade and commerce rules.

The value of Money itself is dependent on Carbon.

Simple systems analysis can show that since the value of Money depends on Carbon, that Money cannot be used to control Carbon with any significant effect.

I cannot lift myself off the ground by pulling on my shoestrings.

The Auctioning of Carbon Extraction and Production Rights can only serve to impoverish the Economy, as the source of Wealth is Taxed, Wealth itself diminishes. Carbon is our Wealth.

For this reason, Carbon itself should become the Currency.

Our remaining cheap Hydrocarbons should be used to develop the basis of true long-term Sustainable and Renewable Energy resources. They should not be burned to provide one-time-only Energy.

We must move the Energy Economy to a position where we ringfence the use of Hydrocarbons for the vital task of de-Carbonising.

This can only be achieved with any real numbers by restricting the use of Hydrocarbons. This can only be achieved by Equitable systems. In fact, this can only be achieved through the setting of a Capped Carbon Budget, and the distribution of Carbon Shares.

The proposed TEQs regime is all about valuing Hydrocarbons, and ascribing a true negative value to the overuse of Hydrocarbons.

The eventual position under a TEQs regime will be that after the Atmosphere is Stabilised under a Total Global Carbon Budget, that the rest of the Hydrocarbons remain in the ground until it is safe to use them for building Renewable and Sustainable Energy systems.

Auctioning of Hydrocarbon Extraction and Production Rights wouldn't work for the United Kingdom anyway : we're running out of North Sea Oil and Gas. We're net Hydrocarbon Importers, so we'll be made poorer by Kyoto2.
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RevdTess



Joined: 24 Nov 2005
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Location: Newquay

PostPosted: Mon Jun 16, 2008 11:41 pm    Post subject: Re: Actually, I think Mark doesn't get it at all... Reply with quote

jo wrote:

For this reason, Carbon itself should become the Currency.


I was right with you until this line.

There are I feel some similarities between a carbon currency and a gold-backed currency. Both are linked to something tangible that has limited supply (unlike fiat currency). The trouble with gold-backed economies was their inevitable pull towards military or economic colonialism or expansionism to maintain levels of wealth as populations grew. cf pretty much every empire in history.

Fundamentally, we need to totally transform our mindsets away from economic growth as a primary goal of human activity. Until then, I fear it wont matter one jot what we use as a currency because all our activity will be centered around gaining more of it, either as individuals or nations, at others' expense.

I may be suffering from a failure of imagination, but I can't fathom the circumstances under which a global agreement could be reached to apply a 'true negative value to the overuse of hydrocarbons'.
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jo



Joined: 20 Oct 2007
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Location: London

PostPosted: Tue Jun 17, 2008 12:22 am    Post subject: The name's Bonds. Energy Bonds... Reply with quote

In fact we should only make Carbon the Currency for a while, just long enough to convert to Sustainable and Renewable Energy resources, and increase our efficiency in the use of Energy.

In the Zero Carbon network we feel that roughly 25 years would be enough time to make the transition.

Economic Growth is a self-limiting system in a finite resource space, I mean Earth. The incentives used within the model of Economy that promotes Growth are not backed by any real, lasting value. It's all vapourware, and it's about to meet its Waterloo.

The Banks create virtual money by making loans to people, with interest payable. This usury creates obligation to draw in the fruits of labour and natural resources to repay the loan. The net result of all of this is the pillage of the Earth.

It's also the pillage of the Global South, who are something like 11 times more productive than the Global North, yet the riches keep flowing northwards so the south never benefit from their own hard work.

[ ASIDE : How to be a Citizen without having a Debt ? Don't know. ]

Anyway, the pattern of debt creation has made us operate economy on the basis of negatives, so making Carbon the currency, with a negative value, will easily slot in.

=x=x=x=x=x=x=x=

With Peak Energy upon us - Peak Oil will be sharply followed by Peak Natural Gas and not long after by strict controls on Coal - the UK Government should accept its responsibilities to provide clean Energy for its Citizens going forward.

Clearly the Hydrocarbon Markets cannot continue to provide - even a junior-level economist can work out that the Growth Model will fail with Peaks in resource inputs.

What the British people will demand is ACCESS to Energy - and the Government should systemise its provision.

First of all, obviously, in a world of Hydrocarbon Scarcity, the easy provision is in enforcing Energy Efficiency and re-designing systems of delivery and transportation of goods to minimise Energy use.

This should be on a purely legislative basis, not voluntary.

There is always some slack in Energy-using systems. But what can be done after the first 10% to 20% of Energy use has been cut by improved Efficiency and Energy Cuts ?

Clearly the availability and flow of Hydrocarbon Energy will still be stressed and in clear decline. This is where the Government has to seize the moral obligation to provide the infrastructure, the investment and the services and issue a government-backed Energy Bond - assuring Energy consumers (i.e. all of us) that they will continue to provide what we need.

If necessary, this Energy Bond can be priced - exchanging a guarantee of Energy to all with an Income Tax percentage added. The Revenue will obviously have to go towards supporting directly the burgeoning Renewable Energy industry - and, using the new lax Planning Framework, Renewables could be imposed - although care and sensitivity to genuine ecological concerns should be taken into account.

Again, if necessary, private companies should be contracted to do the projects, but under strict rules of engagement and cost. All private companies are motivated purely by profit, so best of all would be to set up a State Energy Company instead - a national non-profit.

=x=x=x=x=x=x=x=
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RevdTess



Joined: 24 Nov 2005
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PostPosted: Tue Jun 17, 2008 12:59 am    Post subject: Reply with quote

Hmm.

I'm with you on the goal but your means seem to lack a certain pragmatism.

It could I suppose be done by an authoritarian government that willingly chooses the path of altruistic self-denial for its people, even in the face of others continuing their rape of the earth, and which is willing to repress all dissent.

If we're not careful and we try to impose solutions on a population who have not been convinced, I think we will walk straight into some form of fascism, either of a green variety, a racist variety or a corporate variety.

I don't believe assigning a negative value to carbon will be enough to change the prevailing mindset of greed and selfish gain. The approach will simply become to gain by using less carbon and by gaming whatever market or regulatory mechanisms have been put in place to achieve that. The symptom may be temporarily eased but the underlying disease will be strong and healthy.

In addition, is there really any 'reasonable' level of carbon use in countries like the UK or US that would be feasibly fair on a global basis? How likely is it that rich countries will agree fair shares for all? Is it necessary that they do?
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jo



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PostPosted: Tue Jun 17, 2008 10:05 am    Post subject: Pragmatism & Impact Reply with quote

@Tess,

Really, if you met me, you would discover that I am highly pragmatic.

However, I do not accept the current policymaker version of pragmatism which can be paraphrased like this : "Yes, Climate Change is real, and it's happening now, and yet we can't do anything big about it, that would ruffle too many feathers, so let's tinker with things until people get the picture, and then maybe they'll make changes all by themselves and these small changes will add up to something." Oh no they won't.

Tess, you have to "release your inner eco-fascist" to start to see what scale of change is required to make a genuine difference. By thinking about the possibilities of the new lax Planning Laws, you can see that crazy anti-wind-farm protesters can be swept out of the way, finally, whilst still looking at birdstrike and birdkill issues from an EIA environmental impact assessment way.

The politics that I practice is as far as possible consensus-building, peacemaking, tolerant, inclusive. However, since there are huge barriers to commonsense and effective Carbon Policies, I have to agitate a little, and upset people with strong words and sometimes stark actions (always non-violent, I stress, and non-violent towards Property as well as People, as violence towards infrastructure and property causes Energy and Resources to be wasted in their repair, which causes Greenhouse Gas Emissions etc). I do try to steer clear of propaganda, however.

Greed and selfish gain are not the enemy here. The real enemies are cowardice and voter sensitivity. Corporates do what corporates are designed to do : make money and protect their operations. It cannot be anthropomorphised. Companies are not people with feelings and desires.

I agree with you that appealing to principles cannot cause a real change in the way that solves the underlying disease. However, thinking through the value of Carbon clearly should be the basis of all Economic and Social Policies, which utilise the natural behaviour of the Citizens and the Corporates and the Government structures to good effect.

There are "reasonable" levels of Carbon use that can be calculated. The Total Carbon Budget is regularly calculated and announced, based on the research into Carbon Sources and Carbon Sinks and the Carbon Dioxide CO2 in the Atmosphere.

I agree that ONE NATION making the move to Carbon Control cannot be of sufficient weight to have a rolling wave impact. But Europe can. Europe is a large enough entity to make a difference, both inside and without its borders, as it is both a major trade partner with other regions of the world, and a major Carbon emitter (although some nations within Europe are Carbon Neutral or even Carbon Negative, like Austria (Schellnhuber)).

For this reason, the next project for Zero Carbon is Zero Carbon Europe. Please help us do the research. Let us know of any people we should interview regarding moving to Zero Carbon in any sector.
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