How to meet Canada’s climate targets

2010-09-20

in Canada, Economics, Geek stuff, Law, Politics, Rants, The environment

The biggest problem with Canada’s climate change policy is that our plans are not sufficient to meet our targets. Furthermore, our plans aren’t even being implemented.

The government says it wants to cut Canadian emissions to 17% below 2006 levels by 2020, and to 60-70% below by 2050. If they really wanted to do that, they could achieve that outcome simply by doing the following:

  1. Choose a series of annual emissions targets, starting this year and running out to 2050 and beyond.
  2. In each of those years, auction a quantity of permits for the production and import of fossil fuels. Also require permits for activities that generate other greenhouse gases, such as methane. Anybody who wanted to produce fossil fuels, import them, or emit greenhouse gases in other ways would require a quantity of permits equal to their emissions. The price of the permits would be determined by auctioning.
  3. Take the auction revenues and send an equal share to every Canadian each quarter by direct bank account deposit or cheque.

This approach would be simple and fair. It would not cost much to administer, since the permits would be auctioned at as high a level as possible. It would conform to the polluter pays principle, since they would do just that. It would send price signals to consumers, as the firms that bought permits passed along the cost. And the whole system would be revenue neutral, since all the revenues would be returned to Canadians. Critically, it would ensure that Canada hit its greenhouse gas emission reduction targets, each and every year.

This kind of approach is known as cap and dividend.

So, why doesn’t the government just go ahead and do this? The major reason is that people who have emitted greenhouse gases in the past feel that gives them the right to do so in the future. If this plan was put in place, all the industries that have been using the atmosphere as a free dumping ground for CO2, methane, and other greenhouse gases would suddenly need to pay for their waste disposal. This could seriously affect the growth prospects of some industries.

That said, since the cap would begin at current levels and gradually shrink down toward the target, no businesses would get obliterated immediately. They would simply need to adapt, in a fair way, to the kinds of business models required to meet the government’s stated climate change targets. The fact that the government is not pursuing an approach that would cause them to do so is the clearest indication that Canada’s government is not serious about dealing with the issue of climate change.

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{ 20 comments… read them below or add one }

Tristan September 20, 2010 at 8:36 am

“The major reason is that people who have emitted greenhouse gases in the past feel that gives them the right to do so in the future.”

This seems ridiculous. Are there more people who “feel” they have this right than “feel” that the survival of the species is worth the costs? The major reason is the existing structures of power, which prioritizes short term gain, and especially individual maximization of profit, over all other human values.

As long as you think solving climate change is about convincing someone of some fact or principle, your politics will remain liberal and ineffective. Even if you were able to convince several important CEOs of the importance of mitigating climate change, any immediate action they took to shut down projects like the tar sands would simply get them fired.

Byron Smith September 20, 2010 at 12:21 pm

@Tristan:
Are there more people who “feel” they have this right than “feel” that the survival of the species is worth the costs?
Probably not, but those who feel they have this right generally also have the feeling of having much, much more money than everyone else.

@Milan:
This is familiar enough, though it’s always been a little unclear what happens to corporations that emit more than they have permits for and who don’t or can’t buy permits. What kind of censure or punishment do they face as a result? More fines? These would have to be higher than the carbon price to make it worthwhile.

Tristan September 20, 2010 at 12:40 pm

“Probably not, but those who feel they have this right generally also have the feeling of having much, much more money than everyone else.”

It’s highly likely that the elites which sponsor climate denial PR campaigns do not believe in them themselves, and do not believe that it is right to destroy the world for subsequent generations. Their actions follow from institutional pressures – if they did not do them, someone else would.

Milan September 21, 2010 at 9:21 am

This is familiar enough, though it’s always been a little unclear what happens to corporations that emit more than they have permits for and who don’t or can’t buy permits. What kind of censure or punishment do they face as a result? More fines? These would have to be higher than the carbon price to make it worthwhile.

To me, this seems like an easy problem. Firms that produce or import fossil fuels need permits to cover their productions or imports. For any unpermitted imports or productions, large fines can be applied – say, $1,000 a tonne in 2010 rising to $10,000 a tonne by 2025. Firms that rack up too many fines, say $1,000,000 or more, could have their licenses to operate suspended.

The state is extremely powerful, when it chooses to be.

Tristan September 21, 2010 at 10:18 am

“The state is extremely powerful, when it chooses to be.”

This is your fundamental miscomprehension. We live in a new “time of troubles” when the state is extremely weak – in fact it is simply propped up by one half of the business party against the other half. It relies near entirely on business support – and business is largely united against doing anything about global warming.

Your call for “an extremely powerful state” action is akin to my sarcastic call for a new “Peter the Great” – which I quickly dismissed as unfeasible and gave other conditions under which genuine political leadership could come to pass.

Milan September 21, 2010 at 10:22 am

Just as health inspectors can easily close down restaurants for health code violations, environmental inspectors could shut down companies that refuse to acquire adequate permits.

As ever, the problem is the lack of political will to deal with climate change, not the lack of technical, legal, or regulatory mechanisms for dealing with it.

Byron Smith September 21, 2010 at 12:27 pm

Yes, Milan is right to say that on the books, the government has the ability to do this, but Tristan is right to point out that the political will is entirely lacking in a system deeply indebted (in mutiple ways) to the lobbyists and the pleasure of the corporations they are meant to be watching. Closing a restaurant is one thing. Applying the death penalty to a corporate “person” is another when that person has an annual budget larger than most countries. I really want to see this happen, as an example. Enron was a great opportunity missed.

Milan September 21, 2010 at 12:35 pm

Companies that produce fossil fuels already pay royalties to governments, and pass along those costs to their customers. If they had to buy auctioned carbon permits, they would do the same thing.

The system above may not be the best one possible, but it at least resembles what would be necessary if the government was serious about its targets.

Right now, they hold up empty promises as evidence that Canada is doing its share. People need to do much more to call them on that.

Tristan September 21, 2010 at 2:24 pm

“Just as health inspectors can easily close down restaurants for health code violations, environmental inspectors could shut down companies that refuse to acquire adequate permits.”

Inspectors have the amount of power which the business party allows them to have. Health inspections threaten a tiny minority in the business party (just look at the business party in BC with regards HST and restaurant owners). The entire business party has much to gain by preventing any effective environmental regulation – especially on carbon because it is the most universal externality of capitalism.

Milan September 21, 2010 at 2:27 pm

Most businesses, like most individuals, don’t care where their energy comes from: what powers their machines, or drives their vehicles.

It’s the few industries and companies that really do care that have a survival interest in blocking effective climate policies, and their influence that must be overcome.

Once the full effects of climate change are visible, overriding their objections should be easy. The trouble is, we need to take action earlier, due to all the lags in the climate system, as well as in technology deployment.

Tristan September 21, 2010 at 2:27 pm

“Companies that produce fossil fuels already pay royalties to governments, and pass along those costs to their customers. If they had to buy auctioned carbon permits, they would do the same thing.”

Companies know that raising prices means reducing consumption, and unless the margins can be increased, reduced profits. So, companies use the threat of raising prices to get consumers onside against regulations. But, in fact, raising prices hurts companies far more than it hurts consumers. Consumers can afford to pay 3% more for goods – but companies can not afford to have their margins eaten away at, or the consumption of their products decreased.

Milan September 21, 2010 at 2:28 pm

Incidentally, I am not saying that dealing with climate change will be easy – obviously, it is not. That being said, repeatedly underlining the fact that it is hard doesn’t achieve anything for us. We need to show people that moving to a zero-carbon economy is possible and the right thing to do.

Tristan September 21, 2010 at 2:29 pm

“Most businesses, like most individuals, don’t care where their energy comes from: what powers their machines, or drives their vehicles.

It’s the few industries and companies that really do care that have a survival interest in blocking effective climate policies, and their influence that must be overcome.”

This doesn’t make any sense. Every business has an interest in minimizing its energy cost. And since CEO terms are outrageously short, they have a structural interest in minimizing the short term cost rather than minimizing the long term cost.

The influence of short-term thinking must be overcome. But that means a radical transformation of a system based on the short-term profit motive.

R.K. September 21, 2010 at 2:32 pm

Critically, it would ensure that Canada hit its greenhouse gas emission reduction targets, each and every year.

Though this success could be an illusion, if we just drive emissions into unregulated economies by importing goods that are emissions intensive to produce.

For the cap-and-dividend approach to really be environmentally credible, you need a carbon tariff on imports as well. It could also be automatically redistributed.

Tristan September 21, 2010 at 2:36 pm

“We need to show people that moving to a zero-carbon economy is possible and the right thing to do.”

People play virtually no role in modern politics. Elections are bought based on the strength of PR campaigns (i.e. Obama’s award for best advertising campaign), which is mostly a product of campaign financing.

If you think the majority of the business party will begin less heavily discounting future profits, far beyond CEO tenure periods, then perhaps this miraculous shift could produce support for the required environmental regulation. This seems incredibly unlikely for reasons I continue to enumerate. But, if you think it’s true, then talking to average people is basically a waste of time – you should only be meeting with members of the business community.

Tristan September 21, 2010 at 2:44 pm

“Though this success could be an illusion, if we just drive emissions into unregulated economies by importing goods that are emissions intensive to produce.”

Exactly. And, if we are funding those unregulated economies – or worse – if Canadian investors profit off them, in what sense are those emissions not “Canadian” emissions”?

What our investors do overseas is as much an exercise in foreign policy as what our army does overseas. If you don’t understand that, you can’t understand anything African conflicts, for instance.

R.K. September 29, 2010 at 11:33 am

Also, one issue with a system based around 100% auctioning is that it doesn’t provide certainty about the future price of emissions. If the market for permits suddenly tightens, prices could jump. Similarly, if supply exceeds demand, prices could plummet.

That could make forward planning challenging for firms.

badmash October 22, 2010 at 3:14 pm

I just signed up to your blogs rss feed. Will you post more on this subject?

. January 31, 2011 at 11:40 pm

Liberal environment critic Gerard Kennedy said the Harper government’s failure to regulate the oil industry’s emissions has left the sector subject to international criticism and rising concerns among institutional investors.

“It does seem that the government is tethered to the oil sands in a way that even the operators of the oil sands understand is dangerous,” Mr. Kennedy said. “They’re getting international criticism … simply because there isn’t a credible government regulating and setting up the predictable environment from them.

He said Conservatives clearly have no plan to meet the emissions target.

The Harper government is reluctant to impose regulations on “energy-intensive industries” like the oil sands in the absence of comparable U.S. moves, arguing that to do so would damage Canada’s economic competitiveness.

. May 8, 2011 at 12:44 am

The truth that the entire United Nations-inspired plan to reduce global emissions through the Kyoto accord and its offspring is unworkable.

The truth that it’s doomed to fail as long as China and the U.S. — the world’s top two emitters — don’t buy in.

The truth that Kyoto and its successors are and will be unfairly punitive to a big, cold, northern, sparsely-populated, First World, fossil-fuel-exporting country, like our own.

But instead of leading that debate, the implications for our economy and the real choices we face, Harper is making the absurd claim Canada can reach his government’s goals for reducing emissions (which are much less onerous than those in the U.N.’s Kyoto accord) through regulation.

Problem is, the math doesn’t add up.

The Conservative government says it will reduce Canada’s emissions to 17% below 2005 levels by 2020.

That means our major industries would emit an estimated 607 megatonnes (Mt) of greenhouse gases annually by 2020, compared to the 850 Mt they would emit if we did nothing to lower emissions.

The government says its initiatives to date will lower emissions by 65 Mt, to 785 Mt annually (850 Mt-65 Mt) by 2020.

This means the Conservatives claim in less than a decade they can introduce as-yet-undefined regulations getting major industries to reduce current emissions by 178 Mt annually (785 Mt to 607 Mt) by 2020.

Well, those must be some regulations.

Because cutting 178 Mt of emissions annually would be the equivalent of shutting down the entire Canadian transportation sector.

And since one assumes that isn’t the Tory plan, it would be helpful if Harper would tell us what it is.

But please, prime minister, talk to us like we’re adults.

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