Category: Economics

Matters of money

Berman on the oil sands and decarbonization

Tzeporah Berman’s comments to the Alberta Teachers Association are well worth reading.

She highlights how Canada keeps operating with an outdated notion of how usable and competitive the bitumen sands are, and that the case for new pipelines collapses when you consider what the world as a whole needs to do to address climate change.

She also discusses the tone of the debate, which she sees as unhelpful, while acknowledging that civility itself cannot produce an answer. Canada is going to learn a hard lesson about the billions we wasted on the bitumen sands. The hope now is that we won’t waste billions more.

How much has been put into the bitumen sands?

Canadians (and especially Canadian politicians) seem to often work from the assumption that so much has been spent on developing Alberta’s oil sands that Canada is now committed to continuing with the project.

There are many problems with the argument. Particularly when it comes to new investments, it could be seen as a case of the sunk cost fallacy at work. When you have an investment which may already be unproductive it can be psychologically appealing but not actually strategically smart to invest more instead of working away from the danger you have set for yourself.

One article estimates that $200 billion has been invested since 1999. For comparison, Canada’s GDP is about US$1.53 trillion. That makes all the investment in nearly 20 years equivalent to 13% of one year of all Canadian economic activity. The Economist recently reported that Americans spent $498 billion per year on cars and car parts. That shows how the bitumen sands investment is really pretty small in global terms (and also how much could be gained from discouraging American car use, breaking up the cycle of cosmetic annual vehicle replacements, and discouraging new automobile infrastructure).

Since climate change literally threatens the economic prosperity of the entire planet, there’s no comparison between the losses associated with shutting down the bitumen sands versus the losses associated with unchecked climate change. Of course, the bitumen sands aren’t the only source of climate change. What they represent, however, is the self-destructive determination of the richest, dirtiest states to keep investing themselves in the most destructive forms of energy. That worsens the collective action problem which we all face and suggests to all other states that there is no point on holding back from realizing short-term profits from fossil fuels for the sake of averting global catastrophe.

We can afford to stop new bitumen sands development, and then to go on to gradually close down existing production, making it possible for Canada to follow an emission reduction pathway that represents a fair share of what the world needs to do to keep below 2 ˚C or 1.5 ˚C of warming. We can afford to help the workers who will need new careers.

Unfortunately, politicians, the banks, and the corporate media are terrified about any future where bitumen sands development and pollution do not continue to rise, making the idea politically impossible in Canada for now. Hence the need to change our politics, media, and perhaps our economic system.

Our appalling legacy

There’s another dire warning from the IPCC: Final call to save the world from ‘climate catastrophe’

There seems little reason to hope that people will react differently to this one than to the 1990, 1996, 2001, 2007, and 2014 reports.

Our collective future is a massive ethical blindspot. People who wouldn’t think about missing a pension contribution or not enrolling their kids in an enriched learning program are collectively deciding by default to ravage the planet which we all depend on, and our political and economic institutions are acting almost exclusively to encourage that outcome.

The right’s anti-carbon-tax hostility

A carbon tax is a liberty-respecting, economically efficient mechanism to help address the threat of climate change and build a sustainable, prosperous society. It ought to be welcomed and supported by policy-savvy fair-minded conservatives who want to live up to their ideals while stewarding the integrity of the planet for future generations.

Meanwhile in Canada: UCP Leader Jason Kenney and Ontario Premier Doug Ford to hold anti-carbon tax rally in Calgary

American decline on The Agenda

Steve Paikin’s show on TVO is a video equivalent to CBC’s The Current, in that they both tackle matters of going political importance, tend to get into the substantive matters involved, and feature hosts that press guests to go beyond sound bites.

The recent segment with author Chris Hedges on American decline – “The Collapse of the American Empire?” – is a good use for half an hour:

They also had a good recent segment on Ontario’s Ford government undoing carbon pricing and much of the pro-climate legacy of the Liberal Wynne government: The Cost of Ford’s Energy Shake-up. He tries to press the anti-carbon pricing panellist to go beyond criticism and offer solutions, but the other panelists are pretty effective in arguing that right wing critics are privately content to do nothing about climate change (the representative spouts some nonsense about how we can just adapt, regardless of the severity).

Open thread: climate justice

Both in the literature on fossil fuel divestment and when speaking with divestment activists the concept or worldview of “climate justice” is prominent. A good example is Jessica Grady-Benson and Brinda Sarathy’s paper “Fossil fuel divestment in US higher education: student-led organising for climate justice“. They contend that climate change is increasingly seen as a social justice issue.

As I understand it, the key features of the “climate justice” perspective are the view that climate change is not a distinguishable issue that can be isolated from others like unjust power differentials, poverty, or racism. That analysis helps produce a program of action that emphasizes intersectionality: the efforts of those in one justice-based struggle to assist those involved in others, even if the immediate connection between say, maternal health in low-income countries and environmental policy in European municipalities or conditions in American prisons, is obscure. The conceptual motivation connects to both networking and political pragmatism, through the hope that social movements can be mutually reinforcing and therefore that alliances between climate change activists and those advocating for racial or economic justice will help everyone achieve their policy goals.

This climate justice terminology is comparatively new. In a post back in 2007 I used the term to refer to the question of the fair international distribution of burdens in addressing climate change: a perspective much more along the lines of institutionalist liberal environmentalism which basically accepts the existing order of the world and seeks to make the institutions that already hold power change their behaviour for the sake of their collective longer-term interests.

The liberal environmentalist account sees problems like climate change as techinical, scientific, and with the potential to be solved within existing institutions. Climate change is an unfortunate accidental product of fossil fuel energy that doesn’t automatically carry any moral lessons beyond that. British Comedian David Mitchell has a ‘soapbox’ talk describing this view succinctly.

One relevant consideration concerns motivation. Even if I accept it intellectually, Mitchell’s portrayal of climate change as an accident that nonetheless obligates a response may lack the emotional heft needed to actually produce a change in behaviour. Another key issue is the need to not only adopt decarbonization policies but to maintain them for long enough (decades) to avoid the worst possible climate change effects. Arguably, this requires a political consensus that extends beyond the left or progressives and, in fact, a political program that demands agreement on every progressive cause risks being alienating and ineffectual rather than a path to solidarity and success.

All these questions are intensely contested, and certainly cannot be resolved in a blog post or subsequent comments. On the one hand, the case that climate change is interwoven with other issues of injustice is highly convincing; it’s because some people are privileged over others that it’s so easy to allow unfettered fossil fuel use for the benefits it provides to the privileged while ignoring the harms it imposes on the marginalized, non-human nature, and future generations. It’s also plausible that the climate change movement needs to forge and maintain strategic alliances to succeed. In the end, we can’t know in advance what will work because we have never faced a problem like this before. We may never have the opportunity to do so again, since a sufficiently bad failure on climate change carries the risk of making all other human political projects moot. As such it seems obligatory to me to open up and maintain multiple paths to success, including those that require reaching beyond comfortable networks of people who broadly agree and solutions that consist of behaviours that we largely see as desirable anyhow. Stopping catastrophic climate change will mean giving up a lot, not only in terms of personal comforts and indulgences, but also in terms of comfortable political associations and worldviews.

India and coal

One frequent talking point from people who see no problem with continuing to enlarge the bitumen sands is that action by countries like Canada is pointless as long as larger places like India and China continue to build large amounts of coal capacity.

The Economist recently reported (in an issue with a cover story about how “the world is losing the war against climate change“):

Although coal is horribly filthy, India is utterly dependent on it. It generates more than three-quarters of the country’s electricity. Mining it and turning it into power accounts for a tenth of India’s industrial production. It provides jobs as well as power. Coal India, a state-owned coal miner that is the world’s largest, employs, at last count, 370,000 people, and there are up to 500,000 working in the coal industry at large. Far from reining in production, Coal India plans to increase it, from 560m tonnes in 2017 to 1bn tonnes by 2020. The government’s target for national production is 1.3bn-1.9bn tonnes by 2030.

…

Coal’s life will be made harder by increased competition from cheap solar and wind. Because of that, Mr Subramanian suggests that Mr Modi, his solar-evangelist boss, should slow down his roll out of renewable energy. “In my ideal world India should do a bit less renewable and a bit more coal for the next 10-15 years,” Mr Subramanian said in May. Some dismiss his comments as deliberately provocative. Yet he has rubbed salt into the wounds of environmentalists by describing efforts to wean energy-poor countries such as India off fossil fuels as “carbon imperialism”.

Coal’s staying power may be reinforced by India’s sense of immunity from international pressure to clean up its act. India resists the idea that it cannot put carbon dioxide into the atmosphere simply because the rich world, which produced much more per head during its own development, has used up all the available “carbon space”. In fact, the government continues to support coal projects to keep them afloat. A report by the Centre for Financial Accountability, a think-tank focused on India, says that coal projects in India received almost three times as much support as renewable-energy projects in 2017, mostly from government-owned banks.

Dealing with climate change is only possible on the basis of broad and effective international cooperation. States like India which are still building huge amounts of new energy infrastructure have the capacity to make choices that will make avoiding catastrophic climate change impossible. Persuading them to make different choices requires many things, including financial and technical assistance, but critically it requires that countries like Canada be willing to move first and accept what seems like an economic sacrifice for the sake of a better future for everyone. I say “seems” like a sacrifice because in a world with extreme climate change the cash Canada is banking through continued fossil fuel development is liable to be meaningless.

Everyone who has to give something up or adjust their lifestyle about decarbonization seems to raise some kind of ‘fairness’ argument: why should I give up what I feel I deserve? Why should I act when others aren’t doing so? Countries like India where extreme poverty remains widespread have a genuine and convincing case that they should not have to sacrifice important human welfare developments for the sake of global decarbonization. Still, coal is so awful once you add up the health, environment, and climate costs that even the poorest places with the worst problems should not still be deploying it. For Canada and other rich states to credibly encourage that requires both far more aggressive domestic action to stop fossil fuel development and the determination to provide sufficient technical and financial assistance to help states like India decarbonize quickly enough to help us all avoid global catastrophe.

Explaining climate inaction

A couple of days ago the New York Times published a long and controversial article by Nathaniel Rich which purports to explain why, despite decades of strong scientific consensus about the seriousness of climate change and the action needed to keep it under control, we’re still on track for catastrophic warming: Losing Earth: The Decade We Almost Stopped Climate Change.

The account is disputed, among others by Naomi Klein who questions the idea that ‘human nature’ is to blame: Capitalism Killed Our Climate Momentum, Not “Human Nature”.

The Economist‘s cover story has a similar theme: The world is losing the war against climate change. I have written before about how inconsistent their coverage is and, in particular, how they have never reconciled their acceptance of the need to confront climate change with the unfaltering priority they accord to continued economic growth.

“Transition” isn’t adequate for what climate change will mean

Greyhound shutting down outside Ontario and Quebec

I got an email from Greyhound which confirmed recent headlines:

We are permanently cancelling all Greyhound Canada services in the provinces of Alberta, Manitoba and Saskatchewan.

In British Columbia, we are cancelling all services as well.

This is a shame both for me personally and in general.

It means the train is now the only available low-carbon travel option from Toronto or Ottawa to Vancouver, making a repeat of my bus-based Low Carbon Cross Country (LC^3T) trip impossible after the end of October.

It also makes remote communities and their inhabitants more isolated and vulnerable, especially for people who lack the credentials or vehicle access to drive. It also seems to represent a breakdown in the idea that Canada ought to be connected as an entity, especially alongside the high cost and low frequency of rail services.