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The Political Economy of Deep Decarbonization: Tradable Energy Quotas for Energy Descent Futures [1]

['Alexander', 'Floyd', 'Samuel Alexander', 'Joshua Floyd']

Date: 2020-01-23

A year’s supply of TEQs units is issued on the first day of operation. This is topped up on a weekly basis, so that a rolling one-year supply of credits is maintained in participants’ accounts. Each TEQs unit represents 1 kg COemitted. Fuels and electricity are rated in terms of the quantity of carbon dioxide emitted per metered unit, over each energy unit’s full life cycle. TEQs units equivalent to the corresponding emissions are then surrendered whenever fuel and electricity are purchased. The system’s designers envisage unit transactions being handled automatically via integration with the existing credit- and debit-card systems for financial transactions [ 1 62 ], thereby avoiding the need for a separate ‘carbon card’.

An equal share, or quota, of the national budget is then freely issued to every adult, collectively covering the share of national emissions accounted for by household energy use. Anyone wishing to use more than their free share must purchase additional units from those using less than theirs, in a market set up for that purpose. All non-household energy users (businesses, service providers, Government entities at all levels) purchase their emission quotas/units by tender in a weekly auction.

TEQs would achieve such equitable engagement by putting a hard cap on a nation’s emissions from energy use [ 62 ]. At the centre of the TEQs system is a national emission budget that sets the quantity of carbon emissions permitted in any year. In the event that supply scarcity constrains fossil fuel availability more tightly than would be the case via the national emission budget, the annual budget would be adjusted accordingly so that the TEQs system adapts seamlessly to the new circumstances.

Equitable and just transition to post-fossil fuel societies will entail engaging all sectors of society, and in fact every citizen, in the transition challenge. At the political level, this requires policy instruments that support and influence such a level of engagement, and that enable people to work together towards a common goal. The Tradable Energy Quotas (TEQs) system devised by David Fleming is designed specifically to close the gap that currently exists between the physical reality of energy use impact on climate, and the political reality of social lock-in to the existing economic system [ 1 ]. TEQs is intended to engage every member of society in the task of reducing dependence on fossil fuels, on an equal footing.

4.2. Why Tradable Energy Quotas Can Manage Energy Descent in Optimal and Equitable Ways

We are now in a position to return to the question posed at the end of Section 3 . Voluntary simplification, we contend, offers a viable strategy for bridging the gulf between current large-scale societies reliant on levels of per-capita resource use so extreme that they undermine their own future prospects, and forms of society that could enable large populations to enjoy decent and rewarding lives while allowing their descendants similar opportunity. At the same time, we recognize that sound reasoning and enthusiastic advocacy have little prospect of moving this beyond a fringe view, while cultural narratives of wellbeing are built on imperatives that either entail directly, or require as a condition of their pursuit, ongoing growth in aggregate resource consumption. This places civic leaders, especially in liberal democracies, in an invidious position. Even if the implications of increasing resource consumption for the integrity of the biosphere and continued functioning of human systems are fully appreciated, moves to address this by forcing a shift away from reliance on finite and dangerously polluting resources implies curtailing established and expected freedoms. While the freedoms to use depleting and polluting resources remain unchecked at the population scale, voluntary simplification, which requires self-imposed limits on these freedoms, is even less tenable.

In order for voluntary simplification to become desirable and attractive at population scale, it first needs to be perceived as a pathway to, rather than a constraint on, greater freedoms than are otherwise available. This means that collective mechanisms for limiting the use of depleting and polluting resources must first be in place for voluntary simplification to be effective. Such limits could be either institutionally self-imposed via formal statutes and regulations (as is the case with laws to control pollution), or imposed by biophysical constraints. The latter is evident, for example, in situations where water shortages are imposed on populations through drought, and hence where political-economic power differentials determine relative access to finite water resources. In such cases, power differentials can be ameliorated via statutory or regulatory means.

TEQs is of particular interest in this light. Its basic design allows it to function both as a means of institutionally limiting fossil fuel pollution, and as an institutional response to mitigating inequities in access to supply-constrained fossil fuels. Moreover, TEQs is designed only to limit collectively-agreed social ills (reducing aggregate greenhouse gas pollution within an agreed emission budget, or reducing societal dependence on a supply-constrained essential resource, while in both cases ensuring equitable distribution of the costs). It is non-prescriptive with respect to the alternative social and economic pathways enacted in order to adapt to these limits. As such, it establishes an institutional context within which voluntary simplification has the opportunity to emerge as a viable alternative, without mandating that it be adopted. If it does emerge as a broad social movement, then this will be by collective choice, resulting from its recognition as a viable means of pursuing preferred futures.

The prospect of energy descent, discussed in Section 2 , provides the backdrop against which we see the emergence of broader support for voluntary simplification as plausible. Indeed, in the absence of energy descent—if access to energy services continues instead to expand—then we concede that pursuit of ‘sustainability’ will continue in line with Tainter’s model of problem-solving via socio-political complexification. At least, that is, until non-energetic constraints such as ecological collapse or supply-side limits for other critical resources take over. TEQs establishes an institutional context in which the question of energy abundance or sufficiency will be resolved.

From the viewpoint of orthodox policy and economic analysis, the expectation is that restricting the burning of fossil fuels will drive substitution of the associated energy from other sources, principally wind and solar PV, but also nuclear, and smaller shares from other renewables. However, if the collective will is established to self-limit the burning of fossil fuels, then TEQs provides the limiting mechanism and incentive structure for doing so, while remaining silent on what will substitute in its place. Effective functioning of TEQs is measured in terms of reduced fossil fuel use, regardless of the roles played by various supply- and demand-side responses in the substitution task. Under TEQs, fossil fuel consumers are in this sense free to proceed according to whatever non-fossil fuel alternative best meets their expectations for life satisfaction. They are equally free to pursue alternative expectations of life satisfaction, for instance, through voluntary simplification, as they are to pursue alternative energy sources in support of their existing expectations.

The question that remains, however, is why has TEQs received such meagre attention and support? This is not the forum to present a ‘theory of change’ [ 17 63 ] or review the range of social, economic and political obstacles that lie in the way of TEQs being implemented. Nevertheless, we do acknowledge two primary obstacles. First, public recognition of the gravity of the overlapping challenges of fossil energy depletion, climate change and degradation of ecosystems remains poor. These issues are being discussed to varying degrees, of course, but the magnitude of the energetic predicament underlying a post-carbon transition is still marginalized and understated in mainstream discourse. This is partly due to a prevailing techno-optimism, which broadly assumes that technology, innovation, market mechanisms and better product design will resolve environmental problems (via ‘green growth’) without much in the way of reconfiguration of existing societal structures and cultural values [ 5 ]. If the prospect of energy descent or societal collapse is not clearly seen or its gravity appreciated, then there is little socio-cultural impetus to develop and implement coherent policy responses, such as TEQs. Promisingly, as this paper was under review, 100 prominent economists published an open letter in a mainstream newspaper calling for governments to actively phase out the fossil fuel industry [ 64 ]. Is TEQs an idea whose time might soon come? This is ultimately governed by political decision-making, and hence indeterminate. It does seem though that the ground is currently being laid for more widespread public discussion in which TEQs might be given serious consideration.

The second reason TEQs may be struggling to lay down roots in a policy context is a simple political reality: the ‘powers that be’—especially corporations, their lobby groups, mass media and the nations and institutions doing well under the growth paradigm—have little incentive to transform a mode of societal organization that is (for the time being at least) offering them great rewards in terms of wealth and power. If TEQs is inconsistent with the interests of the dominant powers in the existing, globalized economic system, then perhaps it is no surprise that politicians and corporations and even those enamored with consumption-oriented ways of life, have little drive to deliberately induce, via TEQs, a paradigm shift in political economy in the direction of voluntary simplification. In short, despite the coherency of TEQs as a tool for managing energy descent, its implementation would depend on both a successful public relations campaign, and sustained socio-political will amongst advocates. However, none of that is likely to occur until energy descent is seen as a plausible future, and TEQs is seen as a coherent and even attractive policy for managing energy descent. It is that preliminary work to which this paper is intended to contribute.

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[1] Url: https://www.mdpi.com/1996-1073/13/17/4304

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