Global Energy Rewards

Global Energy Rewards

GER gives energy consumers rewards if they reduce their emissions of green house gases by reducing their energy consumption below a set level per head or if they reduce their consumption from previous levels. Consumers who use more than their allocated level pay more for their energy, which in turn funds the Energy Rewards.

GERs are electronic tokens that are transferable and can be sold, but may only be redeemed (ie spent) on designated projects that will assist in the reduction of greenhouse gases. These could range from the purchase of energy saving devices for the home through to direct investment in sustainable technology development.

The system helps to change consumer behaviour by encouraging people to consume less; by discouraging consumers from using more than their allocation because of higher prices; plus it increases energy investment by requiring that the extra funds generated be spent on sustainability measures.

GER will give billions of consumers funds that may only be spent on projects that help to reduce greenhouse gases. The amount of funds will vary between countries but it can be set at whatever level is required to fund the infrastructure needed to reduce greenhouse gases and it can be set at whatever level each country deems desirable.


GER requires no global agreements but does need governments to facilitate the system. A government imposes a surcharge on all greenhouse gas producing technologies. It also legislates that this money must be returned to consumers via a rewards program. How the money will be returned will be the role of the GER which could be controlled by an elected board where the electors are all consumers who join in the GER system. All monies collected in a country can be spent within that country, so it requires no transfer of funds between nations. As the system enhances efficiency and productivity of energy for each country that adopts it, GER is likely to find wide acceptance.


The system will create a market for greenhouse-reducing technologies which will all compete for funds for their project. Projects have to sell themselves on economic as well as greenhouse reducing ability to potentially billions of customers. It can be expected that the methods that reduce greenhouse gases for the least cost will be the systems that will get the most investment funds.

The generation of funds will contribute to the reduction in greenhouse gases because people only earn rewards if they reduce their energy consumption. Also high consumers of energy will be encouraged to reduce their energy consumption because of higher prices.

The concept behind GER is being trialled for water at the not for profit www.waterrewards.org

Economic Assertions for Rewards vs Permit Trading

Increasingly, trading schemes are advocated as the economic tool of choice to allocate public goods efficiently and to alleviate public bads. Two well known schemes are Carbon Permits for reducing greenhouse gases and Water Permits to allocate water. These schemes work by creating artificial commodities to represent the problem being solved such as the limited supply of water and the high level of greenhouse gas emissions. For water, a cap is set for the consumption of water from sources such as rain and ground water. The cap is then apportioned between members of society and the allocations can be traded. For greenhouse gases a cap is set on emissions which are represented by carbon permits (the allocations allowing people to emit greenhouse gases). These permits can be generated by different activities that either reduce the amount of carbon emissions or that produce energy or other products which are emission-free.

A Rewards scheme works in a different way. People are paid to reduce their consumption, with payment coming from a surcharge on those who use excess water or whose activities emit greenhouse gases. Rewards may only be spent (or redeemed) on ways to solve the problem being addressed.

A measure of economic efficiency for both Permit Trading schemes and Rewards schemes is the total amount society pays to achieve the desired result. For water it is the total cost paid by the community to remove the need for water restrictions. For greenhouse gases the measure is the total cost to reduce greenhouse gas emissions to the desired level.

It is asserted that a Rewards scheme is at least twice as economically efficient as a Permit Trading scheme, as measured by the total amount of money needed to achieve a desired result.

Rewards schemes are the more economically efficient method because:

  • They pay people to help achieve the desired result. That is, there is a direct economic benefit to the consumer from reduced consumption.

  • They change behaviour through both higher costs and through incentives.

  • They foster and enhance trading systems for technologies that help solve the problems being addressed.

  • They deal in real products that are not subject to manipulation and to abuse which may in turn cause economic inefficiencies.

  • They ensure that money collected over and above the cost of production is spent addressing the problem being solved.

  • They cost less to administer.

It is asserted that a Rewards scheme will require less than half the amount of money to be spent to solve the problem being addressed, compared with a Permit Trading scheme. For example, if society wishes to reduce carbon emissions to 20% of the current level then a Rewards scheme will produce that reduction for less than one half of the cost of a Permit Trading scheme. Furthermore, if an urban community wishes to remove the need for water restrictions then a Rewards scheme will achieve the desired result for one half of the cost of a Permit Trading scheme.

5 thoughts on “GER Outline

  1. Hi Kevin,

    Why would a “Rewards scheme” be economically better than a “Permit scheme”? The rewards scheme seems (on my reading of it) to be a particular case of the permit scheme and one that is less flexible than a permit scheme.

    Like

  2. Actually, a few months ago I was thinking that maybe one way to deal with the urban water supply/demand problem is by fixing a certain quantity each person/household could use and (i) charging a high rate per extra litre of water used and (ii) paying the consumer a certain amount of money for each unused litre of water, which sounds like the Rewards scheme you write about here.

    Like

  3. Sacha – answer to Q1
    A Rewards scheme is fundamentally different from a Trading scheme. It is really a compulsory savings surcharge scheme. That is, there is surcharge on some (all) consumers but the money is returned to consumers who must now spend the money on the problem being addressed. Economists say it is not the most efficient because it is restricting the use of the money. They are missing the point. When we have a problem like global warming we want the money collected for emitting carbon to be spent on technologies to reduce greenhouse gases. It will be the most efficient way to spend because we have created a market in sustainable technologies and markets where the person spending the money spends their own money to benefit themselves is the most efficient way of spending. I have tried to give a few more reasons at https://cscoxk.wordpress.com/2007/06/02/rewards-versus-trading/

    Like

  4. Sasha – answer to Q2
    Yes the scheme you have suggested is part of the solution but the critical extra in Rewards is restricting the use of the money to investment in the sustainability of the water supply. This then gives an investment compounding effect which is a major reason why we get a reduced cost in the problem being solved. It is interesting that one of the differences between Rewards and Trading is that in Trading we invent Permits that are traded while with Rewards we invent a currency (Rewards) that is used to trade in technologies to solve the problem.

    Like

  5. Thanks Kevin for your explanations. So, in relation to your thoughts about Q1, economists might say that a rewards scheme is less efficient than a permit trading scheme because the money *has* to be invested in one general kind of investment, but you are saying essentially (is this right?) that this is warranted by the circumstance that as much investment needs to be done into these kinds of technologies this as possible.

    In relation to your response to my Q2, practically speaking, if the price signals are strong enough, this might be the easiest way for people demand to be managed. I wonder though how much of the savings from using less water than desired would be able to be invested in water saving “things” – there is presumeably a limit to how much a resident could spend (“invest”) so much before doing all the water savings improvements to their residence.

    In a rewards scheme, is it the idea that the savings from using not much water could be used to improve water efficiencies anywhere in society (or the world)?

    There’s the aspect that it’s good if incentives can be built into the system so that individuals use less water – an idea – if individuals are mandated to use the money they are given because they don’t use very water on particular “things” (eg water efficient technologies), that might not be a monetary incentive (although there would be a social incentive). Just thinking out loud.

    Personally, I think that with the right incentives/disincentives, you can influence behaviour enormously.

    I agree with your comment on my blog that it’s great to communicate and ask questions as it deepens our knowledge and understanding.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s