Tuesday, November 03, 2009

Putting a price on greenhouse gas cuts

It has taken a big bank to bring some focus to the talk about fighting climate change and Canada's role.
And, on balance, the news is good. Greenhouse gas emissions can be reduced significantly without too much economic damage.
But there will be costs and the burden is going to hit some industries and regions much harder than others. And the changes are going to have to start happening much more quickly.
Governments have been vague on all those details.
So when TD Economics released a report suggesting Alberta and Saskatchewan would take the biggest hit from greenhouse gas reduction efforts, there was a flurry of headlines, hand wringing and criticism from politicians.
The report, commissioned by the TD Bank's economics branch, identified the impact of different levels of carbon emission reductions.
Heading into world climate talks in Copenhagen next month, the Harper government has pledged to reduce emissions to 20 per cent below 2006 levels by 2020. That's the equivalent of three-per-cent below 1990 emission levels. And a big step back from the Kyoto Accord, which called for a 5.2 per cent reduction from 1990 levels by 2012.
B.C. has already committed to a 33-per-cent reduction from 2006 levels by 2020.
And the TD Economics study also looked at much more ambitious cuts that would take emissions to 25 per cent below 1990 levels in the same period. That's the minimum reduction the Intergovernment Panel on Climate Change said is needed from western nations.
The good news is that both targets can be hit without huge overall economic impact.
The bad news is that there will be some hard-hit sectors and regions.
First, the big picture. Meeting the Harper government's target would mean reduced economic growth, but the pain is moderate.
The study's computer model predicts that cutting emissions by 20 per cent would mean overall Canadian economic output would be 1.5 per cent lower in 2020. That's about $20 billion - not chicken feed.
But the reduction would be spread over a decade. Annual national GDP growth would be just under 2.3 per cent instead of 2.4 per cent. Significant, but not wrenching.
This matters because economic growth means, as a rule, more jobs and higher pay. Slower growth means fewer opportunities.
Even meeting the much greater reduction sought by the international panel would mean less than half of one per cent a year in lost economic growth.
Here's where it all gets interesting.
The TD Economics' report assumes the government is going to put a price on carbon emissions, through cap and trade and a carbon tax like the one B.C. has introduced.
Industries that don't produce greenhouse gases will roll along happily. Those that do will face big extra costs.
The report says this would create "a major structural change in the Canadian economy," away from carbon emitting industries, like the oil and gas sector and coal mining. Mining, smelting, trucking and others would also suffer.
And since the oil and gas industry is significant in Alberta, Saskatchewan and B.C., those provinces take the big hit.
While meeting the Harper government's targets would mean 1.5 per cent less economic growth over the next decade, Alberta would be reduced by 8.5 per cent; Saskatchewan 2.8 per cent; and B.C. by 2.5 per cent. (Or about 4.5 per cent, based on the Campbell government's more aggressive commitments.)
That's a significant cost, but not crippling. And it has to be balanced against the costs of doing nothing. If forest fires continue to worsen and droughts bring water shortages and forests grow more slowly as global temperatures rise, the province's economy suffers.
One of the challenges in all this is trust. Things will get more expensive as carbon taxes are implemented, the study assumes. But governments will get a huge windfall in new tax revenue and return it to people. They'll be OK.
The bottom line? Kudos to TD Economics, for bringing clarity to the fuzzy world of climate change.
Footnote: The economic model comes from Marc Jaccard and Associates. Jaccard is a Simon Fraser University professor and deservedly influential analyst, with no political agenda. It is interesting to note the assumptions include significant change, including a 100-per-cent shift to electric heating for new construction in B.C.

2 comments:

Frank said...

Lower income taxes and higher carbon taxes will increase inequality. At a time when we should be worried about the rich getting richer and the poor getting poorer we're going to change our tax system to make it even more regressive.

That will in the end cause our society more pain than global warming.

seth said...

Jaccard has no political agenda? What hogwash!!!

The report was written by Jaccard's associates for a high priest of the new age "renewable" religion, David Suzuki and a notorious Gordo supporter. Weren't the two of them spewing Gordo's Green Tax nonsense trashing the NDP's cap n'trade at every opportunity on every MSM outlet possible. I note that not one local outlet, has published Nobel Prize winner in economics Paul Krugman's series of articles in the New York Times trashing Jaccard's Green Tax, thoroughly discrediting the Chicago school theories expounded in the Suzuki paper.

The reports rejection of nuclear power using nonsensical argument is typical of these type of biased reports, several all similar which have come out in the last few weeks.

Ironically, it's DaGucci associate James Hoggan's book exposing Big Oil's finance of the Denialist campaign, that shows the tactics Big Oil uses on its anti nuke campaign. One of their favorites is the no nukes fake study like this one released to compliant editors and pundits (Willcocks) in the mainstream media. These studies all emanating from Big Oil funded astroturfers like DaGucci, quote each others bull as fact, use the same tired arguments, and come to the usual conclusion.

This critique of a Big Oil funded turfer article on the front page of a massively Big Oil funded magazine fits DaGucc's article almost perfectly.

http://bravenewclimate.com/2009/11/03/wws-2030-critique/

Here's a debunking of another similar report from the WWF.

http://nextbigfuture.com/2009/10/wwf-funds-another-biased-climate-change.html

Where DaGucci deviates from the normal is his wholehearted embrace of clean coal a deadly and toxic method of generating power with hundreds of millions of people worldwide now sickened and dead from its radioactive dust, mercury, and arsenic wastes. This discredited and foolish waste of money is just a politicians way of keeping donations rollin' in.

http://www.cbc.ca/technology/story/2009/09/23/carbon-capture-study.html

He also uses a 20 cent a kwh figure for nuclear when costs are veering to less than 1 cents for new mass produced nukes. Areva's recent Ontario bid was $24 billion for 60 years of 3.3 gigawatts in nukes all costs considered which works out to 1.5 cents a kwh.

http://www.thestar.com/article/668157

The Areva reactor cost of $4 billion each is double the predicted $1000 a kw for mass produced nukes and recent costs coming in from new Indian nuclear plants.

Germany has already wasted 10 years and $100 billion dollars on DaGucci's wind power and has not reduced its greenhouse emissions one iota. To help with its new found addiction to Russian gas, it is planning a massive build of dirty coal plants to meet its baseload power requirements.

The Canadian nuclear industry with a $150 billion investment in mass produced nuclear power brought in over a few years and paid for by quickly weaning us off the $100 billion the we spend annually on fossil fuels could with a World War Two scale effort here eliminate fossil fuel use - a two year payback period.

Old generation nuclear waste is used as fuel for Gen IV reactors eliminating the waste problem.

The conversion from fossil fuel to nuclear is cheap and with the current recession the industrial capacity is there. It eliminates our air pollution, creates a huge employment boosting domestic and export industry, and makes our economy far more competitive than the renewable crippled US and Europe. Even the deniers here would go for it. We can do this.

Whether it was making sure George Bush got elected by supporting Green Leader Ralph Nader, reelecting Canwest/Gordo and Harpo, or driving us right over that as little as ten years civilization ending Climate/Peak oil crisis with their silly "renewable" religion, by supporting Big Coal/Oil's fight against nuclear power, the new age “renewable” priests like DaGucc seem bound and determined to kill lots of folks in very big ways.