Beyond Carbon Pricing
This is the Abstract, Executive Summary and Introduction of the paper. Full text available here.
Reconciling scientific reality with realpolitik: moving beyond carbon pricing to TEQs – an integrated, economy-wide emissions cap
This article considers why price-based frameworks may be inherently unsuitable for delivering unprecedented global emissions reductions while retaining the necessary public and political support, and argues that it is time to instead draw on quantity-based mechanisms such as TEQs (Tradable Energy Quotas).
TEQs is a climate policy framework combining a hard cap on emissions with the use of market mechanisms to distribute quotas beneath that cap.
The significant international research into TEQs is summarised, including a 2008 UK government feasibility study, which concluded that the scheme was “ahead of its time”. TEQs would cover all sectors within a national economy, including households, and findings suggest it could act as a catalyst for the socio-technical transitions required to maximise wellbeing under a tightening cap, while generating national common purpose towards innovative energy demand reductions.
Finally, there are reflections on the role that the carbon management community can play in further developing TEQs and reducing the rift between what climate science calls for and what politics is delivering.
- Politics is not reflecting the urgency of climatology findings.
- Interdisciplinary analysis shows that carbon pricing is an unsuitable policy framework to guide the unprecedented emissions trajectory required.
Carbon pricing cannot deliver four essential features of an effective climate policy framework:
- Ensuring real and radical emissions reductions in practice.
- Facilitating public/political acceptability for the implementation of such cuts.
- Embedding a longer-term perspective into societal decision-making.
- Integrating cross-sector engagement with intrinsic motivation and society wide co-operation.
An alternative policy framework: TEQs (Tradable Energy Quotas)
- TEQs is similar to a national electronic rationing scheme for energy, but with legally tradable allowances. It could meet the four criteria outlined above.
- It combines downstream engagement with upstream enforcement and would cover all sectors of a national economy, including households.
- It would act as an umbrella framework, ensuring a hard cap on emissions and supporting other climate policy.
- Research into the scheme suggests that it may be expected to meet with greater public acceptability than carbon pricing frameworks, as it is a progressive scheme that would safeguard entitlements to energy while leaving households to manage their consumption as they see fit.
- TEQs draws on principles from social psychology in engaging a nation's ingenuity in reducing energy demand. It attempts to define new norms of acceptable carbon consumption and create a clear shared goal, generating common purpose around intrinsic shared desires to overcome climate change and retain secure access to essential energy services.
A political history of TEQs
- TEQs was first developed in 1996.
- A UK government feasibility study in 2008 declared it “ahead of its time” on grounds of cost and public acceptability, and so the government withdrew from funding further research at that time, although expressing continued interest.
- Substantial research since, including 2011’s high profile cross-party parliamentary report, has challenged these negative conclusions.
- As members of the carbon management community, we must frankly recognise the shortcomings of carbon pricing frameworks.
- Hard cap based schemes are called for, and TEQs is the best-placed to reconcile the rift between science and politics.
- Governments must be challenged on their failure to implement their own carbon targets, and why they do not implement frameworks suited to do so.
- The carbon management community has a key role to play in refining, promoting and driving the implementation of TEQs in a national context.
The essential problem is easily stated: there is a rift in realism. Realism about the findings of climate science demands dramatic and immediate emissions reductions if we are to avoid catastrophic destabilisation of the global climate [1,2]. Anderson and Bows argue that these reductions must be in the region of 10% per annum in industrialised (UNFCCC Annex 1) countries [3,201]. Yet present political reality in these countries says that such reductions are unthinkable . While realists about climatology rightly argue that physical reality 'bats last' and does not negotiate, realists within politics argue with equal validity that any approach that tries to radically transform society against society's wishes will be resented and, soon enough, rejected.
The failure to reconcile these viewpoints is perhaps the greatest obstacle facing the field of carbon management, since without clear agreement about where society is transitioning to, it becomes virtually impossible to effectively enable the sociotechnical changes required, and to retain the necessary public backing. If we are seeking only to tweak the economy for marginal, politically palatable emissions reductions, then carbon pricing might be an appropriate framework. For example, it can serve to stimulate the incremental adoption of 'low hanging fruit' such as overdue efficiency improvements . However, climatologists are ever clearer that we require dramatic and unprecedented emissions reductions in order to avoid the worst ravages of climate destabilisation .
As Intergovernmental Panel on Climate Change lead author Josep G. Canadell recently stated in this journal, “The time has come to truly build carbon management into the deepest inner workings of society” . Canadell goes on to state the common assumption that “no doubt” this should be achieved through carbon pricing. His recognition of the need for a coherent, overarching framework to harness the many facets of climate policy and action towards the goal of dramatic global emissions reductions is entirely justified. However, in this article we raise significant doubts that carbon pricing is the most appropriate candidate to deliver the speed and depth of change required, regardless of whether prices are set via carbon trading (e.g. the European Union Emissions Trading Scheme) or carbon taxation. The dominance of the argument that price-based mechanisms are best able to deliver change in an efficient and cost-effective way [8,9] may be concealing other options from view, but alternatives are both available and much needed.
As is widely recognised in the field of socio-technical transition, in order to achieve deep societal change, the path-dependency and political and cultural lock-in which underpins current carbon usage must be addressed. This requires careful consideration of the multiple levels where change can be directed, and where pressure can be brought to bear , in order to nurture individual and organisational agency and develop alternative practices [11,12]. Smith et al. and others within the field note that marginal approaches that “treat regime transformation as monolithic and dominated by rational action”  may have been appropriate for addressing problems such as acid rain or water pollution, but are unlikely to succeed when applied to more challenging problems like climate change and resource depletion, which require a range of fundamental, complex and interrelated system changes [11,13]. A fresh approach is therefore needed.
As such, we, the carbon management community, have contributed to the widening rift between science and politics by attempting to respond to the imperatives of climatology with policy interventions that do not reflect the workings of society. As the literature on socio-technical transitions shows, a reconciliation will require action from us all: scientists, policy makers, campaigners and the public [11,12,13,14]. Within academia, we can begin by improving our cross-disciplinary communication, in particular by aligning the latest climate science more closely with findings in the fields of socio-technical transitions, social psychology and climate policy, and vice versa. One of the aims of this Perspectives article is to contribute to this process.
We begin by arguing for certain necessary features that any successful carbon management framework needs to display if it is to enable the scale and depth of changes required, both technically and socially. We consider several ways in which current policy frameworks fail to meet these, and then go on to assess an alternative with significant political and research history – TEQs (Tradable Energy Quotas) – and whether it demonstrates the required features. Finally, we draw conclusions about appropriate pathways for future climate policy.