Kiran Stacey British lawmakers propose energy rationing

A group of MPs have suggested that the UK should introduce a system of energy rationing to deal with what they view as impending energy and climate crises.

Under the proposed system, a set number of tradeable energy quotas (TEQs) would be issued and used to purchase energy, whether through fuel or electricity.

The amount of energy being used would essentially be capped, and anyone wishing to use more than their personal allowance would have to pay a market rate for that.

The scheme, as proposed by the All Party Parliamentary Group on Peak Oil, would run like this:

  • The Committee on Climate Change issue TEQs on a weekly basis, 40 per cent of which would be given for free to individuals and 60 per cent of which would be auctioned off. This part of the scheme works in much the same way as the issuance of government bonds.
  • When users, whether individuals or businesses, pay for energy, they pay the monetary value but also surrender a certain amount of TEQs (the amount depends on the amount of carbon used in producing the energy). Effectively, energy users pay double for their energy.
  • Each entity that gets paid for their energy pays in turn for their energy through TEQs, all the way up to the primary producers, who then redeem that with the government.

The primary objection is obvious: this leaves the (presently cash-strapped) consumer paying lots more for the energy they use – not only in terms of the power they consume at home, but also in terms of the extra cost of everything they buy. After all, manufacturers are hardly likely to absorb all the extra costs themselves.

Those who support the proposal say it would cost less than the inevitable price spike that will come our way when we hit peak oil — better to ration our energy use now than have it forcibly rationed by a lack of oil.

But their main evidence for an approaching oil crisis seems to be flow rates for the next five years, which is nowhere near enough information to declare for certain that peak oil is around the corner. And even if it was, the shale gas boom is making a mockery of the idea that we’re about to run out of hydrocarbons.

It would be better instead for the group to focus on how this policy would help reduce emissions and tackle climate change. We have to reduce energy by this much to hit our emissions targets, the reasoning would go, all we’re arguing about now is how to allocate what is available – and as a market-driven system, this is possibly the least draconian.

Of course, the consumer still ends up footing the bill, and the system could effectively price poorer people out of the market – but then that is true of almost any other system devised also, including all types of carbon trading.

Two problems lie in wait for this motley group of backbenchers and business leaders: their reliance on the idea that we’re about to run out of oil and gas; and the fact that Chris Huhne, the energy secretary, has just endorsed a carbon floor price as the best way to tackle this issue.