This post is to discuss the ideas of how to ration a declining energy supply in a Post Peak Oil world as fairly as possible, while encouraging the maximum economic activity possible. This will be a world of steadily declining fossil fuel energy availability, especially oil based liquid fuels, which also requires reducing the CO2 emissions from fossil fuels simultaneously.
The UK has developed a plan to ration fuels in order to solve the carbon emission problem involved in meeting the Kyoto Accords. However the idea is easily extended to ration the fuels themselves.
I first came across this idea at the ASPO Ireland website.
http://www.peakoil.ie/newsletters/603
A good reason for introducing an energy ration is because Britain’s indigenous oil and gas supply is set to continue to decline to near exhaustion in about fifteen years, as confirmed by the Department of Trade and Industry. More political halos are evidently won by describing it as a response to climate change induced by burning fossil fuels. In any event, it is an excellent proposal especially if the ration could become a form of tradable currency, making the energy content of goods and services a primary component of their cost.
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British residents could face a form of energy rationing within the next decade under proposals currently being studied to reduce the U.K.'s carbon dioxide emissions to comply with the Kyoto Protocol. Under the proposals, known as Domestic Tradable Quotas (DTQs), every individual would be issued a "carbon card," from which points would be deducted every time the cardholder purchased fossil fuel, for example, by filling up a car or taking a flight. Over time, the number of points allotted to each card would decline. High-energy users would be able to purchase points from low-energy users, with the end result being a trading market in carbon similar to the one already in place in the U.K. for industrial users.
The idea is a blend of government allocation and free market principles called Domestic Tradable Quota (DTQ) or a “carbon allowance” (Google carbon allowance) This allowance involves a “carbon card” that works much like a computerized Bank debit card and is used to make any purchases of fuels, electricity, airline tickets etc. For example, one gallon of gasoline is 9 carbon units.
The US currently uses a somewhat similar system to buy and sell air pollution allocations to industry.
The role of government is to establish and pass the laws, set up the computerized system and divide the total amount of energy available by allocations. The rest of the system is handled by the free market. The system would be integrated into today's credit/debit card system.
The government decides how much energy is available and sets the allocations that are free to individuals. The essential parts are:
• An equal annual ration of carbon consumption is allocated for each adult citizen, with a smaller one for children
• Rations are tradable and can be bought and sold. Those not using their full ration can sell carbon units to others who use too much and can pay for them. People who power down can get a money income as payback for their investments in energy conservation. They are paid by people living in energy wasting McMansions, and refusing energy conservation who must buy carbon units in the market. .
• The ration covers the direct energy used in the household and for personal travel including such things as an airline ticket.
• A phased year-on-year reducing ration is signaled well in advance each year as energy resources decline allowing planning and intelligent purchase decisions. Carbon units used would be required on product labels and as part of money pricing. This is similar to fuel surcharges added today.
• The arrangement is mandatory, and enforcement would be needed similar to tax evasion and theft laws.
Business users are not discussed in the UK plan that I saw, but would probably be required to purchase their carbon units in the market or collect them from their customers. For example if an airline ticket had one seat share of the fuel used as its carbon charge, the airline breaks even if all seats are full, but must purchase carbon credits for empty seats flown. The system then becomes an energy tax applied to the commercial sector. This is not new, since fuel surcharges and energy taxes are part of the economy today.
I will not try to cover all the details here, but refer you to the links below.
The benefits I see are as follows:
• The carbon allowance uses free market principles which force consumers to plan their limited fossil fuel budget, just as they plan a limited money budget. Careful planning can increase money income.
• The carbon allowance has the potential to manage a Power Down scenario.
• The carbon allowance could be used by governments to encourage development and use of alternative energies by direct carbon allowance credits.
• The carbon allowance accounts for and reduces environmental degradation due to fossil fuels and produces a managed decline in CO2 emissions.
• The carbon allowance charges users for depletion of a finite energy resource in the earth.
• The carbon allowance introduces financial incentives into the free market system to conserve energy and consider the long-term sustainability of the earth.
• The carbon allowance would encourage electricity from non fossil fuel sources, since there would only be a prorated carbon charge for that fraction of the electricity generated from fossil fuels. Zero carbon charge if no fossil fuels went into the electricity.
• The carbon allowance would encourage EROEI analysis, and would discourage schemes like using natural gas to produce "green" hydrogen fuels. Hydrogen from natural gas would still have a carbon charge, but fossil fuel free hydrogen would not have a carbon charge.
•The carbon allowance is the first type of “new money” for a new world with limited fossil fuels. In time as the world fuel shortage becomes more serious, a carbon allowance could BE the new money
There is an alternative that free market economists prefer- let the money price rise to whatever it takes to ration supply. This is classic economics. This is a product of the industrial revolution. Using only price is an idea that has both its merits and problems of fairness to the poor. Using only money pricing to control fossil fuel use has none of the advantages above; rather it encourages exponential growth instead of a power down mentality. The carbon allowance plan would be vehemently opposed by the present economic system, but that system is flawed.
This introduction has not begun to explore the pros and cons of this idea. I think it deserves discussion.
Further details are at:
http://www.eci.ox.ac.uk/pdfdownload/ene ... _doc_l.pdfAn American adaptation of this idea is described at this link:
http://www.fcnp.com/519/peakoil.htmThe Peak Oil Crisis: Rationing
By Tom Whipple
It has to come sooner or later. As oil becomes scarcer and scarcer and price rises higher and higher, pressures will grow for a formal allocation system. Rationing will come, if only to calm the havoc at the gas lines and the social upheavals that are bound to occur as long as rationing is only by price.
America ’s most recent experience with rationing goes back to World War II. You have to be nearly 70 to remember the little square “A”, “B”, and “C” stickers affixed to the windshields of ever car. These stickers, when accompanied by a sheet of rationing stamps, allowed one to buy gas. Everybody got an “A” sticker (a whole 4 gallons a month just for the asking). To get a “B” or “C” sticker, one had to appear before a rationing board and make the case their mobility was vital to the war effort or at least the well-being of their fellow citizens.
If one ponders for a few minutes on how a modern rationing system might be structured, it is soon apparent nearly any scheme is full of inequities and would be subject to massive and, no doubt, ingenious fraud— especially when an American’s ability to drive his beloved car is at stake. Do you allocate fuel by vehicle? Buy a yard full of clunkers and drive to your heart’s content or until you run out of money. Or allocate gasoline by person, by licensed driver, by commute distance, by adjusted gross income? Problems abound everywhere.
Once again our friends in Europe , this time in Britain , appear to be out in front in thinking about this problem. The ostensible British concern, of course, is global warming and the contribution made to this phenomenon by the combustion of fossil fuels. While we Americans, and particularly our government, seem little bothered by the idea that Florida might one day be under water, the British seem much more upset by the notion the melting artic ice cap will set the Gulf Stream to warming someplace other than Northern Europe.
A couple of weeks ago, the British press reported that Her Majesty’s cabinet is considering a plan to ration energy consumption. The immediate reason for implementing such a system is to reduce the UK ’s emission of greenhouse gases as required by the Kyoto Treaty. The plans authors, however, claim that if the proposal works, it will deal equally well with equitably allocating dwindling energy supplies caused by peak oil.
Given the seriousness with which the British are taking global warming, it is natural that they should put their finest minds to work on the problem. In this case, the Environmental Change Institute at Oxford and the Tyndall Centre for Climate Change Research, a consortium of ten other British Universities. The current proposal has been in development for ten years and, given the organizations involved in its preparation, has obviously been subject to much intellectual rigor. While the details, pros, and cons of the plan fill many pages, the general concept is simple enough to outline here.
The major feature of the allocation system is that it covers all fossil fuels, not just gasoline; and it makes a real effort to be fair to all, by giving consideration to the needs of the poorer folks.
Under the plan, every adult in the country would be given (for free) an annual “Personal Carbon Allowance” (PCA). This allowance would be measured in “carbon units.” One carbon unit would be equal to one kilogram of carbon dioxide emitted into the atmosphere when the fuel is burned. Carbon units can be equated easily to gallons of gasoline, heating oil, diesel, or jet fuel, or to pounds of coal, BTUs of natural gas, or KWh of electricity. For example, one gallon of gas would be the equivalent of about nine carbon units. Thus, for every gallon of gas purchased, nine carbon units would be subtracted from your account.
The annual allowance would be the same for all adults, with possibly a smaller allowance for dependent children, and would be tracked on a central electronic system similar to a credit card account. The size of the annual individual allowance would be based on what a government panel believed would be the total amount of fuel available for consumption in a country during the coming year, divided by the number of energy consumers. Whenever one purchased or consumed fuel, such as on an airplane trip, an appropriate deduction would be made from one’s PCA account. With oil depletion, of course, the annual carbon allowance would shrink with each successive year.
The next most interesting feature of the plan is the government would also establish an electronic free market to buy and sell carbon units. Thus, those who have no need for their complete annual carbon allowance would be free to sell their excess units for cash at the market price. Those individuals who want and can afford more than their allocated share can buy as much as they want at the going price. Note that above-allocation consumers would not only have to pay for the energy, they would also have to pay for the right to buy the above-allocation energy. Non-residents visiting a country would not be given an annual allowance, but would have to buy the carbon units they use on the open market as they consume energy. Businesses that consume energy would buy their carbon units on the open market and would pass the cost on to the final consumer either money or in cases such as airplane rides as a PCA debit.
The object of all this, of course, is to force people to cut back on their energy use in a systematic way. With full knowledge of the projected costs and allocations of energy, people could make choices between SUVs or bicycles, McMansions or efficiencies, and train or plane rides.
Way below average energy users could make some money under the plan. While the very rich would not be bothered in the slightest, most people would start making energy saving choices in their lifestyles -- smaller cars, better-insulated homes, less air travel. As demand for energy drops in response to conservation measures, then the costs of energy would drop even in an era of oil depletion.
The plan’s developers claim that declining amounts of energy will be allocated equitably and with minimum government interference. For, aside from setting up the system and determining the annual carbon ration, the free market would be left to work out the details of oil depletion.
Edit Note added: The name for these carbon allowances has been updated to Tradeable Energy Quotas or TEQ.
julianj provided a link to a 2004 thread on this same subject
http://www.peakoil.com/fortopic4556.html
see:
http://www.teqs.net/