View source for Use-credit obligations

A use-credit [[obligation]] (UCO) is essentially a voucher that will be accepted as [[payment]] for future supply of goods and services. They’re most useful as ways of funding [[commons]] [[infrastructure]]. 

Imagine a group of local people or a community energy scheme who want to build a wind turbine or install solar panels on roofs to provide the community with electricity, but they don’t have the money to do it. Currently, they could go into debt or set up a company and give away part of it as equity, neither of which is ideal.

What they can do instead is to issue UCOs, denominated in units of electrical energy (effectively, kilowatt-hour vouchers) as a way of raising the money to put up the turbine. The UCOs are sold at a discount – i.e. less than the current price of electricity (because the issuing group is asking for your cash to do some work).

[[Chris Cook]], senior research fellow at the Institute for Strategy Resilience and Security at UCL, came up with a solution. He invented a two-stage process, whereby potential buyers were asked if they’d buy the ECOs when the new project was close to being operational – once a significant amount of risk had been removed, in other words. Buyers provided an expression of interest in buying a number of ECOs when a certain stage of construction was passed. Once the community had enough of these local promises, they could show them to (more hard-nosed) specialist investors and ask them to buy ECOs for the high-risk part of the project (at a larger discount, because of the higher risk), and show that they’d make a return by selling the ECOs on to locals, who’d already promised to buy them once the project was close to completion. (Even better, is to get the investors to agree up front that if enough locals make promises to buy, they will put the money up.)


=Avoiding ‘regulatory capture’=

Another important [[Chris Cook]] invention was to make UCOs ''assignable'', ''not transferable''. To explain: a £10 note is transferable. Anyone who gets it can spend it, and it doesn’t matter where they got it from. They might have found it, or got it from someone who stole it – but they can still spend it. No-one will question where they got it. ''Transferable'' is clean and anonymous. That’s not the same for a cheque, which has (had? Does anyone use cheques any more?) someone’s name on it (are ''assigned''). It used to be that cheques were ''assignable'' – you could cross out the name on the cheque and write another one (assign to another person). The banks didn’t like this, as circulating cheques meant that people needed to borrow less money from banks. Plus it made the money supply hard to control, and there were fraud issues etc. But you could make a cheque ''non-assignable'' by drawing two lines through it. That was called a ''crossed cheque''. Now, crosses are automatically printed on cheque books. So cheques became ''non-assignable'' and ''non-transferable''. Banks were very happy to make cheques non-assignable, because it increased their hold on everyone’s finances.

What assignable not transferable means is that the local project holds the register of who’s got the ECOs. If I own some, then I’m the registered holder of those ECOs in the ledger. If I want to sell them, I can only do so to those registered with the  group, and the  group can refuse to register anyone they don’t like, for ethical reasons, or because they think they’ll siphon profits out of their local area. The commons groups have control of who they have on the register. This means [[transparency]] – anyone who owns the ECOs can find out who else owns them, so the group can make sure that [[ownership]] doesn’t become too concentrated, and they’re not used for speculation.

This protects against ‘regulatory capture’. If you’re offering what look like investment instruments on the open market to the public, in the UK you’re going to be investigated by the Financial Conduct Authority; and if you get big enough, you’re going to be of interest to the Bank of England’s Financial Policy Committee. If you challenge the status quo, the govt. can introduce laws that make things hard for you. But if the issuer of UCOs is a membership [[organisation]] with a register of member-investors, the regulator has very little influence, because all members have signed up, and they’re all part-owners. Governments can ultimately do what they like, so it’s not impossible, but it’s much harder, without changing fundamental legal principles.

=UCOs as savings=

If people believe that the price of electricity is going to rise, they will want to buy expensive future electricity at today’s prices. This is why they’re such a good savings instrument – and particularly if you have a ‘basket’ of them. 

=What UCOs can be used for=

UCOs can help build the commons in all sectors, including housing (rent-credit obligations), land, water, food, digital infrastructure (broadband connection, mobile masts and a commons wifi connection for the town, that can be accessed by everyone) etc. Some are more complicated than others. Energy is denominated in kWh, but food isn’t standard – a loaf of bread and a pound of apples are completely different. So what do we denominate food-credit obligations in? There could be a UCO for a standard weekly veg box delivery, or there could be a standard ‘staple food basket’. It’s harder, but not impossible.

=References=
All the above comes from the following source. with minor modifications:
* [https://www.lowimpact.org/categories/use-credit-obligations Use-credit obligations - introduction]