Economics – Page 12 – a sibilant intake of breath

Canada and Toronto’s housing markets

Perhaps the hardest thing about doing a PhD in Toronto is finding decent housing and paying for it with the kind of income the university’s funding package and TA work provides. Since the 2008 financial crisis, governments around the world have undertaken exceptional monetary and fiscal stimulus to try to sustain employment and economic growth. Those ultra-low interest rates, however, have affected asset prices in at least two ways. First, since they cannot even earn the rate of inflation from savings accounts, people have been prompted to invest in all manner of speculative assets, from frothy tech stocks to bitcoin to the housing bubbles inflating around the world. At the same time, low interest rates have facilitated massive borrowing for house purchases, also helping to drive up the level of house prices.

Those dynamics have several unwanted current and future impacts. For one thing, I worry that the sense of affluence it fosters among house owners is contributing to an erosion of empathy. It is also worsening the intergenerational inequalities between people who bought houses decades ago and have experienced a huge jump in wealth as a result and the younger people who in past generations would have been entering the housing market now. When interest rates do finally need to rise (once inflation rises above target levels) many home owners risk being in the unfortunate position that the 2008 crisis caused for so many: being ‘underwater’ with a mortgage now larger than the market price of their home.

I think it would be prudent for governments to pay more attention to asset price levels alongside the inflation and employment rates when setting policy. Their efforts to juice their way out of the last crisis seem to be setting up the next one. It would also be desirable for countries to start requiring comprehensive disclosure of wealth as a prelude to wealth taxation.

House prices in Canada

Cultivating a conservative climate movement

Let’s begin with two simple premises:

The amount of climate change the world experiences depends on the total quantity of fossil fuels that get burned. As such, there is little value in avoiding burning particular coal, oil, and gas reserves in one time period if we then burn them in another
In Canada, the US, and the UK the electoral pattern for a century or more has been alternating between relatively left-wing and relatively right-wing governments

I think it follows from this that for climate change mitigation policy to succeed, it cannot only be supported by progressives or supporters of left-of-centre parties.

It’s true that the most prehistoric form of climate change denial (saying there is no problem, or it’s a problem too small to require action) is concentrated among political conservatives. It’s also true that the fossil fuel industry has outsize influence over conservative politics, parties, and politicians. To me — however — these observations are akin to the argument that since 85% of the world’s energy currently comes from fossil fuels it is imposible or unrealistic to try to replace them. In both cases, the depth of the current dependency demonstrates the need for change, rather than its impossibility.

Recently, UK Conservative MP Alicia Kearns and U.S. Republican congressperson John Curtis co-authored an article in the Times of London: The left should not dominate the conversation on climate change.

They also appeared in a recent panel hosted by the Hudson Institute:

Progressives tend to be very opposed to the argument or idea that conservatives need to be won over to climate change mitigation through fossil fuel abolition. The intersectional climate justice analysis holds that climate change is a symptom of systemic injustice and cannot be corrected through narrow solutions which do not eliminate colonialism or capitalism or patriarchy. It is a joined-together worldview that clearly motivates a lot of people, but I don’t think it’s a sound strategy for avoiding catastrophic climate change. Furthermore, I challenge the claim that only systematic change in our political or economic system can solve the problem. Progressives also tend to assert that renewable energy is cheaper and better in every way than fossil fuel, implicitly acknowledging that it could be possible to replace where our energy comes from without fundamentally changing much more about society.

I can see at least a couple of routes for moving forward with cultivating a conservative commitment to climate change mitigation.

Thinking about the span of the next couple of decades, I think conservatism in the English-speaking democracies may be posed for a huge splitting apart between comparative pragmatists who are willing to accept what science has unambiguously shown and pure ideologues whose policy preferences do not relate to what is really happening in the world. If that split can be enlarged to the point of crisis — when those on the empiricist side will no longer tolerate supporting the same candidates and parties as those on the fantasist side — those willing to consider evidence will likely have a long-term electoral advantage as those most implacably opposed to climate action die off, young people with a better understanding of climate change become politically dominant, and as the undeniable effects of climate change become even plainer.

Another plausible route to cultivating conservative support for climate change mitigation is through faith communities. The Catholic Church, United Church, Anglican Church, and others have been outspoken from the centre of their institutions about the need to control climate change. It’s true that there are some whose theology sees the Earth exclusively as a set of resources to be exploited, or who believe that a religious apocalypse will soon bring an end to the material world making long-term problems irrelevant, but I suspect there are many more in all faiths and denominations who can be won over to the view that we have a duty to care for creation and not to pass on a degraded world to our successors.

I think part of the progressive wariness about outreach to conservatives arises from how the intersectional view ties climate change into the social justice and economic redistribution agendas which animated the left long before climate change became a mainstream concern. Cooperating with conservatives on the narrow issue of replacing fossil fuels would not advance the general project of abolishing capitalism or re-ordering the global system. Some see climate change as a crisis which would be ‘wasted’ if our response only sustains planetary stability. Others convincingly point out that even without climate change as a problem the idea that resource use and waste production can increase indefinitely is fundamentally at odds with a finite planet. All that said, climate change seems to be the most pressing and serious societal problem facing humanity, and resolving it would give us more time and a more stable global environment in which to pursue other aims of justice.

I don’t believe either progressives or conservatives can or should win one another over to their entire worldview. The progressive climate change movement is an enormous success and source of hope, and I am not calling for it to be dismantled or fundamentally altered, though they ought to give more consideration to cross-ideological alliances on certain vital issues. As long as effective climate change policies are something which one side assembles and the other dismantles we cannot succeed, and so winning over conservatives to climate action is an indispensable condition of success.

Canada and a just transition off fossil fuels

At a town hall tonight on a just transition away from fossil fuels — organized by 350.org and attended by Green Party parliamentary leader Elizabeth May and NDP climate change critic Laurel Collins, but which environment minister Jonathan Wilkinson declined to attend — May repeatedly brought up the Task Force on Just Transition for Canadian Coal Power Workers and Communities as a model. In particular, she emphasized the importance of countering the narrative that escaping our fossil fuel dependence will be bad for jobs, and of respectfully consulting with the most affected communities when making policy.

The central nonsense of Justin Trudeau’s climate change policy is his unwillingness to accept that only fossil fuel abolition will let us avoid catastrophic climate change. Canada has already more than used up our fair share of the global carbon budget, and building new long-lived fossil fuel infrastructure will only increase the costs of our transition when we need to scrap them early and scramble even faster to build climate-safe replacements. Canada’s assertion that we can keep expanding bitumen sands and LNG production and exports is also entirely at odds with what fairness and pragmatism demand globally. The richest and dirtiest states need to lead the way, not keep making excuses, or the global logjam against sufficient action will be impossible to overcome.

Nuclear energy policy

This week’s Economist has a pretty solid middle-of-the-road editorial position on nuclear energy in a world with a climate crisis:

Solar and wind power are now much cheaper, but they are intermittent. Providing a reliable grid is a lot easier if some of its generating capacity can be assumed to be available all the time. Nuclear provides such capacity with no ongoing emissions, and it is doing so safely and at scale around the world.

Despite this, safe and productive nuclear plants are being closed across the rich world. Those closures and the retirement of older sites mean that advanced economies could lose two-thirds of their nuclear capacity by 2040, according to the International Energy Agency. If new fossil-fuel infrastructure fills the gap, it will last for decades. If renewables do so, the opportunity cost will be measured in gigatonnes of carbon. Renewables replacing nuclear capacity would almost always be better deployed to replace fossil-fuel capacity.

Sometimes the closure of nuclear plants is largely a matter of economics. In places where emitting carbon dioxide comes with no price, such as America, the benefits of being emissions-free are hidden from the market. That hurts nuclear, and it should be rectified. When closure is political, the onus is on Green politicians, in particular, to change their tune. To hasten the decline of nuclear power is wilfully to hobble the world in the greatest environmental struggle of all.

Related topics:

Papers on nuclear energy:

Canada’s nuclear industry:

Nuclear waste

Nuclear economics

Nuclear energy and climate change

New reactor types and designs

Nuclear energy and weapon proliferation

Accidents and safety

Open thread: British Columbia’s Site C Peace River dam

There’s already a thread on dams and climate change, but B.C.’s Site C project raises many different subjects of interest: how different climate-safe energy options compare, what purposes new generation will be serving, and who gets to make the decisions, with particular regard to Indigenous rights.

Canada and military procurement

Writing for Maclean’s, Scott Gilmore suggests that Canada should “ban the buying of made-in-Canada warships” because politicians have a bad record of fiddling with the process for their own purposes, and shipyards have a poor record of delivering. He presents it as a job protection scheme rather than national security, and a shockingly expensive one:

“But what about the jobs?!” I can hear the lobbyists cry. Yes, let’s talk about the jobs. According to the government of Canada’s own figures, only 11,100 people are employed in Canada’s shipbuilding industry (we have more massage therapists). If we were to add on those indirectly employed, that number creeps up to 15,200. Now, let’s pretend the Canadian frigate contract is the only shipbuilding job out there, and buying from France would mean every one of those 15,200 people would be out of work. If we were to give each of them $1 million in compensation, Canada would still save over $50 billion (in addition to getting the ships faster).

Similar political patterns seem evident in Canada’s long-running imbroglio about replacing fighter jets, though that may have more to do with the nuances of maintaining the Canada-US security relationship than with subsidizing Canadian firms and workers.

Malaria’s lifelong economic impact

Successful campaigns to eradicate malaria have been studied in a number of different countries. Each of these studies compares high-malaria-prevalence regions in the country with low-prevalence regions and checks what happens to children born in this areas before and after the campaign. They all find that life outcomes (such as education or earnings) of children born after the campaign in areas where malaria was once prevalent catch up with those of children born in low-incidence areas. This strongly suggests that eradicating malaria indeed results in a reduction in long-term poverty, although the effects are not nearly as large as those suggested by Jeffrey Sachs: One study on malaria eradication in the U.S. South (which had malaria until 1951) and several countries in Latin America suggests that a child who grew up malaria-free earns 50 percent more per year, for his entire adult life, compared to a child who got the disease. Qualitatively similar results were found in India, Paraguay, and Sri Lanka, although the magnitude of the gain varies from country to country.

Banerjee, Abhijit V. and Esther Duflo. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. Hachette; New York. 2011. p. 45

Lessons from successful fossil fuel divestment campaigns

Divest Canada — a self-initiated, volunteer-run effort to support fossil fuel divestment campaigns at Canadian universities — recently hosted a webinar on lessons learned from recent successful campaigns:

It is encouraging on several fronts. It’s great to see all these groups patiently implementing strategy on their own initiative and yet in parallel. It brings hope to see the commitment and dedication of the activists. Above all, it suggests that the most important success factor for a divestment campaign is being able to survive long enough for an opportunity to arise with sympathetic administrators, all the while building the intellectual and moral case along with campus-wide support.

Starlink in the Canadian north

SpaceX’s Starlink satellite constellation promises to provide low-latency high-bandwidth internet to anyone on the planet.

In November or so, the company announced a beta release in Canada. Some northern communities are already being connected, notably Pikangikum in northwestern Ontario with the charitable assistance of FSET Information Technology and Service.

With my brother Mica starting to teach at the Chief Jimmy Bruneau School in Behchoko, about 125 km down the highway from Yellowknife, we both wondered whether the satellite internet package might be useful for them.

So far, I have found three explanations for why Starlink isn’t available in the region yet:

SpaceX doesn’t yet have the necessary satellites to support access from that latitude
SpaceX needs ground stations in areas where there will be customers
Starlink needs to negotiate with Innovation, Science and Economic Development Canada (ISED) for use of the Ka radio band

I have reached out to bureaucrats and people in ministers’ offices to try to get authoritative information on what the issue is.

This post — based around this map — shows a station in Kaparuk, Alaska. I sent a message to the map’s creator for verification, since I can’t see how satellites going from pole to pole could cover Alaska but not the Canadian territories. This post shows a Starlink ground station in St. John’s Newfoundland.

If you have any relevant information please contact me. If you are also looking into getting a Starlink connection in northern Canada I don’t have any further information for now but I will provide updates when I do.

UVic’s partial divestment

It’s hard to know what the exact count is when you count partial divestments, but UVic has joined the set of Canadian universities acting on fossil fuel divestment by transferring $80 million to a short-term bond meant to reduce the CO2 intensity of their portfolio.

All told they have about $225 million and they have pledged to reduce the carbon intensity of the portfolio by 2030. I don’t know if the carbon intensity of a portfolio is really a meaningful idea (how do you divide responsibility for Boeing’s emissions between shareholders and customers, for instance?). I’m likewise skeptical about targets set beyond when the current leadership will hold power.

The hope with divestment is that universities would be persuaded by the arguments that investing in fossil fuels is unethical and financially dubious. Universities have found many ways to act which fall short of condemning the fossil fuel industry and withdrawing all financial support. These precedents arguable erode the case for action, since they substitute the idea that the fossil fuel industry is uniquely dangerous and unworthy of support with the idea that essentially business-as-usual investment management can somehow deal with the problem of climate change.