- Reaction score
- 35
- Points
- 560
It is always nice to have these debates with real numbers: David Suzuki without vs the Canadian Manufacturers society with.....
http://hespeler.blogspot.com/
http://hespeler.blogspot.com/
Kyoto Economics: The Cost to Canada - Part 1
The second Canadian Kyoto report I looked at was Pain Without Gain: Canada and the Kyoto Protocol by the Canadian Manufacturers & Exporters. This one is the polar opposite of yesterdays Suzuki Foundation report, with very pessimistic, although I think far more realistic, conclusions. This report looks at Kyoto from an industry perspective almost exclusively.
It runs on a couple of base assumptions, Number one that to meet Kyoto goals energy consumption would have to decrease 4.5%/year between 2002 and 2010 - 48.6% over the 8 year period. That number assumes high amount of carbon credit purchasing. If energy use reduction is done "through domestic action alone" (i.e. no carbon purchasing), as Suzuki's report suggested was preferable and likely, then the rate of energy reduction would be 7.8/year, or 82.35% over the same 8 year period. Finally, they take the assumed range of the cost of carbon to be between $7 and $120 per tonne (at 90 mega tonnes that's between $840 million and $14.4 billion). true carbon cost is likely to be $40-$50 range, giving a true cost range of $3.6- $4.5 billion.
They also make two strong points. One, any carbon reductions due to job losses aren't true net reductions because the jobs would move, increasing carbon somewhere else. Possibly they would move to a regime with less economic regulation causing a drop in Canada's carbon release, but an increase globally. The second point is that Canada already produces 80% of it's electricity from clean sources. Many countries can change over from coal to hydro, nuclear or natural gas and achieve huge carbon savings. Canada does not have that option because a vast majority of our electrical production is already from clean sources:
Canada is more energy-intensive but less carbon0intensive than other OECD economies because of its low reliance on coal. One of the least expensive ways of reducing GHG emissions is by switching from coal to natural gas, especially in the generation of electricity.
Even energy conservation measures would have very low impact because we are just conserving energy that is produced clean. This means even more of our carbon reductions must come from other sources. The report suggests a 10%-100% increase in the price of electricity, depending on province, with Alberta and Ontario being hardest hit, likely due to their increased reliance on coal. However, any increase in electricity prices would likely cause a importing of energy from the U.S. (and investment and jobs with it), that again causes Canada to off load carbon to other countries, but not reduce emissions globally:
Higher electricity costs in deregulated markets would lead to a displacement of electricity generation to less expensive jurisdictions, and most likely the displacement of emissions, investment, and jobs to the United States.
In the world of gasoline, they predict a rise in the price of gasoline, in the magnitude of 80% - to $1.10 litre. Hey we're paying that now, without reducing our carbon footprint very much. I will get into my projections in a few days, but do not expect to meet Kyoto targets below $1.50 a litre, and I think that's low! Also, bear in mind that raising gas prices causes people to A) drive less or B) buy more fuel efficient vehicles. Option B is the most likely scenario, but it takes years
to work through the system: we are talking about a 2010-2012 time frame. Remember that when Stephane Dion says he can get it done in three years, even if all the components were put in place today, it will take 5-10 years for many of the processes to be effective.
The study also expects lower demand for gasoline will cause 2,000 service stations to close across Canada (all the better to compete with, my dear), and the closing of two refineries. This is where it gets interesting; those refineries would be, according to The Canadian Manufacturers and Exporters, in Ontario and Quebec or the Maritimes. Whenever some politician starts attacking the oil patch, remember the first jobs to go will be in Ontario and Eastern Canada. This makes intuitive sense, as you would expect the jobs farthest from the oil to be the most expendable, especially when you factor in the increased cost of transportation.
The study also expects steel and auto production to be hard hit (Ontario again), with an 8.2% reduction in auto production vs. business as usual projections. Furthermore an economy wide hit of 450,000 jobs is projected, many of them, of course, on Ontario and Alberta. Furthermore, it concludes, Canadians would:
Drive less, drive smaller cars or take public transit that would, in turn, require massive infrastructure spending on the part of government.
Re-insulate our homes, change our furnaces, windows and appliances - at a cost that would probably average about $30,000 per household.
Pay more taxes...
I like the bit about 30,000 per household. Wonder what the polls would say if we asked "should Canada enforce Kyoto compliance if it means a $30,000 per household investment in upgrading your home?"
Kyoto Economics: The Cost to Canada - Part 1
I have reviewed three Canadian papers on Kyoto to try and get a gauge of what implementing Kyoto would mean. Previously I looked at Germany and Europe, and have taken some of that analysis into my figuring on the Canadian situation.
The first paper I looked at was The Suzuki foundation's Keeping Canada in Kyoto. Suzuki modestly predicts a 300M cost to Canada from Kyoto implementation, and even hopefully offers up one study that suggests a 2B benefit to Canadians. He further makes some claims, such as global warming has already cost Canada $5B in agricultural losses due to a 2001 drought in Western Canada, and potential loss due to forest fires, timber loss, even perma-frost melting destabilizing pipelines.
Suzuki, however, makes many claims and backs none of it up. On top of that, this Suzuki Foundation analysis rests upon a couple of false assumptions. First that Canada will be making real reductions, not just buying carbon:
The federal government has frequently and publicly declared that Canada will make the majority of its emission reductions through domestic action. This ensures that the reductions will be real and not just "hot air" purchased internationally.
However, how Canada can reduce 600 Megatonnes without purchasing carbon, and still be in business, is never explained. In fact, Canada is likely to buy huge amounts of carbon. Which leads us to Suzuki's second bad assumption, that carbon will trade around $10 per tonne. The European Studies I reviewed two weeks ago suggested that carbon was moving into the $40-$60/ton range. Even the economic report that people like Suzuki adore, the new testament of environmental economics, The Stern report, calls for $30-$50 ton, which means Suzuki's numbers on buying (had the report deemed it important enough to actually include numbers) are off by a factor of somewhere between 3 and 6. Further his claim that the majority of our reductions will be through domestic reduction means his numbers, whatever they may be, are skewed to the low side before we factor in price. Which means, it's hard to take the conclusions very seriously. Here they are, however:
With carbon dioxide valued at $10 per tonne, emissions reduction measures for specific sectors and an emission trading system for large fossil fuel users, the following economic impacts are forecast:
the Canadian economy grows by 30.4 per cent by 2012, from $1 trillion to $1.315 trillion
the Ontario economy grows by 35 per cent; $426.6 billion to $575.9 billion.
the Alberta economy grows by 35 per cent, from $118 billion to $150 billion
the oil and gas sectors grow by 24.6 per cent
machinery and equipment manufacturing grows by 65.7 per cent
transportation equipment grows by 28.3 per cent
electrical and electronic components grow by 47.8 per cent.
But what's never even close to explained is how Canada is going to be the first economy ever to dramatically reduce energy use, and dramatically expand the economy. And make no mistake, Canada has very few options for meeting it's Kyoto commitment without dramatically contracting it's energy use, both in electrical conservation and, far more specifically, petroleum products. Even using Suzuki's base assumptions of $10/tonne for CO2, and a $30 million cost to Kyoto, that would buy 1/3rd of the required reduction. The other 60 megatons will have to come from conservation, and that calculation doesn't allow for any cost during the conservation of 60 MT of CO2. More likely, Suzuki plans on a reduction of upwards of 90%, 80 MT of CO2. You can't make those kinds of reductions without hurting the economy. Or at least, it's never been done before.
And that's why this report is hard to take seriously. Without any true documentation it comes across as pie-in-the-sky economics.
ff Grid via ::EcoRazzi
