My Latest on the Globe and Mail’s Economy Lab

10 responses to “My Latest on the Globe and Mail’s Economy Lab”

1. 
   Rick Hoff April 8, 2011 at 6:41 pm | Permalink | Reply

   Gotta say, I’ve read and re-read your article and I am left scratching my head. You’re way ahead of the debate and way ahead of the available information for 99% of us plebs. What matters about the cap and trade debate, or a carbon tax, to me? Obviously that answer is – what is it going to cost me?

   You are making a huge leap of faith with your post, and that is the workability of any proposal. What we need before any debate about the merits of Plan A or Plan B is a framework under which political interference won’t influence how any GHG rollout is implemented. Intuitively, as an Albertan, I think I understand that there is very good chance that a centrist government would find a way to exempt industry in a region that has the highest number of ridings from any potentially punitive legislation. (HINT – think auto industry and Kyoto.)

   GHG legislation will NEVER work without equitable distribution. Screw over one part of a skeptical populace and it degrades into an us against them cat fight, with opportunistic politicians taking sides in an effort to garner support from wherever they can get it.

   1. 
      Andrew April 8, 2011 at 7:02 pm | Permalink | Reply

      Hi Rick,

      Thanks for reading (multiple times). I guess it’s good to be ahead of the debate, but I hope not too far ahead. At least I got you to read the article multiple times, and I did end on what you see as your key issue. I feel very strongly that governments have to make the case for the policies to the people here in Canada, and I believe that case can be made for more aggressive carbon policy. It can’t be made for 100% of the people, but that’s true of 100% of the policies we have in this country.

      Although I am not a native Albertan, I have a strong attachment to the province, and I think you will see through my posts that I stand up for Alberta very strongly. I think we need to see the larger benefits of these policies, but also be very much aware of their potential to act as a revenue lever.

      One thing that has hurt GHG policy here is that it has been sold as being tied to liberal (or Liberal) ideas, which need not be the case. In fact, I am very much a fiscal conservative. I am very attached to the idea of taxes I can avoid. This is why I like photo radar, and to an even greater degree why I like carbon taxes and similar policies. I would much rather cut my carbon emissions, which all come from things which cost me money, than cut my income to avoid taxes. Unfortunately, the carbon pricing plans put forward in Canada have not been tied to decreasing taxes, but rather to increasing program spending. This does not resonate with me nor does it resonate with very many conservative (small-c) people.

      It will be a long road, but someday I hope we will get there.

      Andrew

2. 
   Mark April 10, 2011 at 10:30 am | Permalink | Reply

   So after reading Rick’s comment I got interested to see what the Liberal and Conservative GHG plans where and this is what I found.

   LIBERAL

   TARGET:
   Liberals have committed to a long-term greenhouse gas reduction target of 80 percent below 1990 levels by 2050. (Page 48 of liberal platform)
   METHOD:
   -“A Liberal government will establish a cap-and-trade system – a mechanism that sets a ceiling on the total amount of permissible greenhouse gas emissions by large industrial facilities, and then auctions off emission permits to companies who can trade them amongst themselves to remain compliant under the law.”(Page 49 of liberal platform)
   Green Renovation Tax Credit means that you can qualify for a tax credit of up to $13,500 for renovations to green your home. (p.46)
   -Renewable Power Production Incentive (RPPI) (p.47)…..an investment of $1 billion in RPPI over the coming years will increase Canada’s renewable energy mix to 10 percent of our total electricity output by 2017
   -Oil sands development must become more sustainable as this major resource continues to con- tribute to Canada’s prosperity. Increase the rigour with which the federal government exercises its regulatory responsibilities relevant to oil sands development;(p47)

   CONSERVATIVE

   TARGET:
   aligned our climate-change targets with those of the Obama Administration – our goal is a 17-percent reduction in domestic greenhouse gas emissions from 2005 levels by 2020;…..established the Clean Energy Dialogue between Canada and the United States, to enhance collaboration on reducing greenhouse gases and combating climate change; (page 41 of conservative platform)
   METHOD:
   -We will support economically viable clean energy projects that will assist regions and provinces in the replacement of fossil fuel with renewable fuel sources. (p.42)
   -ecoENERGY RETROFIT-HOMES PROGRAM ($5000)

   I am going into this election concerned about environmental policy and GHG targets. I am not so concerned about the targets as the Liberals have picked a Kyoto accord target and the Conservatives have published a US target. Either way it’s a target in the not so near future and a lot can change between now and then. So….they both have a target, Great.

   Next question…how are we going to get from the here and now to that target. Conservatives method is to align with US on whatever they do, and offer subsidies to clean energy projects along with home retrofit programs. In my opinion, a little weak to say we will just follow the US, especially if any thought of GHG policy in the states has been scrapped till after elections and their economy pulls itself back together. In my mind, that pulls a conservative GHG policy off the table.

   Liberals plan is seemingly a lot more detailed with specifics. So I think they have a better method for achieving a target then the conservatives. The liberals differ as they are not waiting for Obama admin to put forward a GHG policy.

   I would like to make clear that you can have a cap & trade like liberals propose without it affecting the economy, just give all the permits away every year….free. So when I hear the argument that we will effectively kill our manufacturing economy at the start of a C&T program I have a little chuckle. Obviously it will do nothing for ghg reductions….(will it? i.e. signaling?), but it’s a start.

   Overall, a federal GHG policy is going to be messy when considering provincial vs. federal powers.

   1. 
      Andrew April 10, 2011 at 6:07 pm | Permalink | Reply

      Hi Mark,

      Glad to have you reading, now that hockey season is over.

      Thanks for pulling all of this out. I am working on a couple of diffferent pieces right now, but am on the road for a couple of days so won’t likely post much until wednesday. I think the key issue that most people still fail to see in Alberta is that there is no party pushing business-as-usual. This is not a choice between the world as we know it or some draconian policy. The goals of wach party are similar in terms of economy-wide GHGs but the methods differ a great deal. To get anywhere near 15% below 05 by 2020 we will need a significant policy shift, so I am hoping to get that across.

      Cheers,.

      Andrew

3. 
   Rick Hoff April 10, 2011 at 5:56 pm | Permalink | Reply

   No doubt you’ve seen the NDP platform released today. I won’t go into the billions of dollars Jack Layton wants to spend, but I will point out that by all accounts he plans to skim off the top of (drumroll please) a cap and trade agreement he would levy against “Canada’s biggest polluters” to cover what otherwise would be massive shortfalls in the NDP revenue projections. This is after he would raise the corporate tax rate to pay for just about everything else that apparently needs money spent on it.

   It’s just all so nuts. At some point, the lunatics are going to get a chance to put their policies in place. I can guarantee you then GHG emissions will begin to fall, but we’re not going to like it much.

   1. 
      Andrew April 10, 2011 at 6:13 pm | Permalink | Reply

      Hi Rick,

      I did see it. Definitely the lines are drawn. Now every party has an aggressive target, and (interestingly) only the CPC has said nothing about what they will do in the oil and gas sector. Remember, the CPC initially floated a regulation that would require all new oil sands plants to deploy CCS after 2016. The NDP is certainly at one end of the spectrum, with a policy that would draw billions of dollars in revenue from fossil fuel industries and use it to fund renewable energy. Libs are somewhere in the middle, with an aggressive approach, but a commitment to cleaner oilsands. Hopefully we can get to a point of having a sane discussion about these policies, which are each going to cost 10s of billions of dollars. There is potential damage both from parties all playing the target game, committing to targets which would each lead to us having the most stringent carbon policy in the world. I hope we can get to a discussion of what we can do, and how to do it. I’m not optimisitc.

      Andrew

4. 
   Rick Hoff April 11, 2011 at 6:14 am | Permalink | Reply

   Andrew – as you develop your ideas, I hope you don’t look too far ahead and make too many assumptions about getting from “here to there”. Part of any GHG policy needs to include reality checks, and one I consider to be missing from most discussions is exactly how green energy is going to meet our needs. I think we have an excellent case study developing in Ontario, where we undoubtedly are going to get a first hand look at whether renewables can indeed fuel a modern economy.

   We don’t need to go there yet, but if you get a few moments have a look at this article discussing the environmental impact of rare earth mining in China and specifically the production of neodymium, used in large quantities in the latest generation of wind turbines. Dirty wind, anyone?

   http://www.dailymail.co.uk/home/moslive/article-1350811/In-China-true-cost-Britains-clean-green-wind-power-experiment-Pollution-disastrous-scale.html

   1. 
      Andrew April 11, 2011 at 10:14 pm | Permalink | Reply

      Hi Rick,

      Agreed that there need to be reality checks, which is part of why I am in favour of carbon pricing as opposed to a regulatory approach. A carbon price drives innovation and encourages firms to find solutions, but will also reveal quickly where there aren’t any easy ones. You likely know from your experience that an innovation that saves a company 10 cents/bbl can make an engineer’s career. The same would be true of an emissions-saving innovation. By contrast, policies which pick winners explicitly may have unintended consequences, as you point out, and may also discourage innovation.

      Cheers,

      Andrew

5. 
   Mark April 11, 2011 at 10:40 am | Permalink | Reply

   Rick & Andrew,

   I got to take a look at the NDP platform this morning. It made me feel so warm and fuzzy inside. With the lack of budgeting numbers it does all sound like a big spend I agree. Back to the Climate change policy though, Im a big fan of this section:

   4.3 Establishing green bonds to fund research and development
   A guy named Tom Rand is heading up a push for these and if you google “green bonds” you will see his website.

   Basically, gov’t subsidizes ‘cost’ of borrowing by ‘backing’ bondholders. Allows the public to determine level of investment in renewables via green bond purchases. Gov’t expenditure basically amounts to the cost of securing the bonds against default. With some savvy administrators this could be minimized.

   This seems like a cheap way to put green energy on the grid, as from some discussions cost of borrowing is often high for these guys and ROI is lower than traditional energy investments making their projects a hard sell.

   1. 
      Andrew April 11, 2011 at 10:27 pm | Permalink | Reply

      Yes, the green bond concept is interesting except that the return on them needs to be backstopped. I think that the tie back to the consumer is limited if the consumer isn’t taking risk on the green tech due to gov’t backstop. I need to learn a little more about them before saying much more.

      Andrew