The Cost of Doing Nothing – Ottowa and Kyoto

Environment Minister John Baird presented a federal study supporting the devastating, recession creating effects of meeting the Kyoto targets.

• 275,000 Canadians would lose their job by 2009

• The cost of electricity bills would jump 50% after 2010
• The cost of filling up a car would jump 60%
• The cost of heating a home by natural gas would double

The study shows that Canada’s GDP would decline by over 4.2%. This is comparable to the deepest recession since World War II, which Canadians faced in 1981-82. Many still remember the pain of that time

Baird told the committee that analysis from economists shows implementing the Kyoto Protocol would mean the following:

• Gasoline will cost more than $1.60 a litre over the 2008-to-2012 period
• Job loss will cause unemployment rates to rise 25 per cent by 2009
• The decline of economic activity in the range of $51 billion

Baird said the study has been reviewed and approved by a number of leading economists including Don Drummond, chief economist of Toronto Dominion Bank Financial Group and Carl Sonnen, president of Informetrica.

It is all about the timing.

But as Drummond told CBC News, “it’s all in the timeframe.” If you accept the government’s contention that to meet the Kyoto deadline of 2012, big cuts — equivalent to almost 30 per cent of our current greenhouse gas emissions — have to begin in 2008, and the only vehicle for those is a tax.

“This would not be the approach I would recommend,” Drummond said. But other techniques would take time to implement, “and that’s why I grudgingly accepted that if you are going to have that type of timeframe, which is incredibly tight, you are going to have to go with a very blunt [instrument], such as a huge increase in the carbon tax.”

The government, the Liberals and now the Conservatives have had twenty years of climate change warnings and have done nothing about meeting Kyoto deadlines for the past 8 years. The time to implement slow and gradual changes has been wasted by political hand-wringing and pandering.

What Minister Baird did not present were the views of economists who did not agree with the conclusion of the study.

[Sir Nicholas Stern] in his case to the business and economics communities, which as a former World Bank economist he is well placed to make, is that action now will cost a mere 1% of global GDP by 2050, whereas business as usual could cost up to 20%.

According to Nicholas Stern the costs for a developed country to meet Kyoto targets would be less 2% of current GDP, much less than the 7% (of Canadian GDP ) predicted by the Baird report and significantly less than the 20% reduction of GDP as the cost of doing nothing.

… when pressed by senators, Mr. Baird was unable to present the figures the government used to forecast its bleak predictions.

The report has been further criticized:

The study assumes that Canada can get only 25 per cent of its reductions through international credits, even though the Kyoto treaty imposes no such restriction.

Stewart Elgie, a professor at the University of Ottawa who focuses on carbon markets, says that single assumption inflates the cost of compliance by 700 per cent. He also criticized the study for ignoring the benefits of curbing emissions.

… the government’s own study does admit that the costs could be much lower with different assumptions. Allowing polluters to buy as many Kyoto credits as they want on the international market would reduce the impact of a carbon tax to more like a \$ 25 tonne…rather than a \$195 per tonne.

The report does not account for the gains created by meeting target emissions:

…the report he presented also states that its calculations do not take into account the benefits of green technology infrastructure, or the jobs created by new investments in that technology. Neither does it consider the impact of monetary policies the government could implement to diminish losses.

Not to mention the incalculable benefit of actually starting to do something about Global climate change.

The current report is a deliberate attempt to pass responsibility once more and appear worried about Canadians while doing it. The government is more concerned about keeping the economic machine running, generating revenues for companies and governments rather than looking the future (as defined as more than the 4 years in office) . The main argument of the report of not trying to meet Kyoto targets is the great economic cost to ordinary Canadians. But the actual costs have been heavily inflated by making certain assumptions. Even the reported numbers as suspect because Minister Baird was unable to produce he actual data and math used for the inflated calculations.

By not providing tough guidelines for industry to follow, we are guaranteeing it will business as usual. Industry will always complain that some change or another will cause catastrophic losses or increases prices astronomically – implementing seat-belts, controlling acid rain, removing freon, stopping DDT…but without applying pressure to change there will be no evolution to a new business model. To do otherwise is to place short term comfort and gain over future disaster. As the saying goes – “no pain no gain.”