Archive for October, 2016

Why I think a carbon tax is a good option

I think I want to go out a limb here and explain why I think my fellow residents of Saskatchewan shouldn’t be so up in arms about this carbon tax idea.

I believe that the earth is warming. It is kind of hard to argue with temperature records. We have thermometers, we record what they tell us, we compare numbers. My own anecdotal observations only confirm this. Frosts come later in the year, we have actually had Christmas’ with no or little snow, and we had 30 degree weather in early May this year.

I believe it is most likely human activity that is causing it. Scientists have studied all sorts of alternative causes but none explain the warming better than green house gases. We know that certain gasses trap heat and we know they are increasing in the atmosphere. It is the best explanation. Far better than any skeptic has ever put forward.

So if global warming is really happening and we are causing it should we act to limit it. The long term social and economic ramifications are very likely to be much worse than the actions we should take to mitigate global warming. We are talking about forest fires, floods, droughts, coral bleaching, and rising oceans which will on balance out weigh the benefits we get from things like increased crop yields and lower heating bills. Droughts in the wrong area can cause upheaval and social breakdown. Before the civil war in Syria there was a massive long term drought and displaced countless farmers. Considering the cost war and refugees, switching to renewable power seems like a pretty cheap option.

Consider something a little closer to home: forest fires. According to one recent study the amount of forest lost to fires has doubled in the last 30 years. The forest fire season started very early this year and very likely contributed the size and scope of the fire that burned down 15% of Fort Mac at a cost of over 2.5 billion dollars. This is only going to get worse.

Recapping my points: warming is happening, human activity is causing it, and it is costing us money and heartache now and it will get worse.

So then what do we do? We have to reduce our GHG emissions too next to nothing by about 2060. Hopefully we will have discovered an efficient way to pull CO2 out of the atmosphere by then so we do reduce so much GHG emissions. What this looks like is limited use of diesel, gasoline, natural gas and coal. Our homes will be heated by electricity or wood, our transportation will be with electric cars and buses and all electricity will be generated by wind, solar, hydro and perhaps nuclear.

How do we get there? The 3 main approaches are regulation, cap and trade, and a carbon tax. Cap and trade is what Europe has done, and what Ontario and Quebec are planning to do. Companies can emit so much carbon. Companies that are under the cap have a credit which they can sell to another company who is over the cap. Regulation, is just making rules to force industries to change. It requires a large bureaucracy to make assessments to ensure all organizations are compliant. The 3rd is a carbon tax. A carbon tax increases the price of everything we want to eliminate so it curbs the demand of these things and creates an incentive to find alternatives.

All three of these options will result in some sort of drag on the economy but most economists agree the carbon tax is actually the easiest to swallow. You simply slap a tax on transport fuels, heating fuel, and electricity and let people make the best decisions in their own best interest. Some carbon taxes are less of a drag than other. BC returns all proceeds of their carbon tax back as income tax cuts which is the most popular approach among market economists. Cap and trade also creates a financial incentive to curb emissions but it is a more complicated and therefore a less efficient mechanism. Government needs to set caps, and mechanisms need to be in place to ensure companies are honest about their emissions, and a market for trading credits needs to be created. Regulation was the failed approach of the previous federal government. It might have done more, but they really didn’t implement anything. It generally regarded as the most expensive approach.

For an economy to thrive there needs to be an efficient and accurate pricing of items in its market. If the pricing is accurate the market can decide which is the best product or service to use. Sometimes however the total cost of a product isn’t reflected in the cost of its production. Taking cigarettes for example. The cost of putting tobacco in a paper and sliding them in a box is next to nothing compared to the cost of lung cancer treatment. Governments put a tax on tobacco products so the users end up paying something closer to the total real cost of that product.

The total cost of burning coal is much more than the cost of digging it out of the ground, constructing a power plant and burning it. If we factored the true cost of coal, and the warming resulting from it, energy from renewables and even nuclear power would seem cheap.

If we had to pay the trust cost of gasoline/diesel, coal and even natural gas we would act differently. We would likely live as close to work as possible, use public transport when we could, drive smaller vehicles and build well insulated energy efficient homes. There would be a greater impetus to innovate and find cheaper ways to do things. One of the bedrock assumptions of a free market economy is that in general individual people make better decisions than the government.

A carbon tax or carbon "pricing" is a mechanism to get people to pay the true cost of energy. Having that energy priced appropriately the market will figure out the most efficient way to deliver products and services.

To say that a carbon tax/pricing won’t reduce emissions is to disavow one of the fundamental assumptions of fiscal conservative market ideology. Increased price invariable results in decreased demand. To say that it will cost jobs and do nothing to reduce emissions is actually self-contradictory. There is a real risk that if a company is forced to pay the true cost of coal that they will simply pick up and move to place where they don’t have to pay the true cost. Which is why the rest of Canada will have little to no sympathy for Saskatchewan because BC, AB, On and PQ have already elected to pay a higher cost for carbon. It is easier to change provinces than countries. The only way through this is if we all act. Europe already has, it is our turn and hopefully the US will do the same.

There are industries which rely on fossil fuels for which there is no current viable alternative. I haven’t heard of tractor that runs on batteries or hydrogen. Any carbon pricing needs to tweaked so that it doesn’t unjustly punish operators that simply have no alternative to switch to. For the rest of us we do need to change.

The argument that Canada emits so little carbon we don’t matter is flawed. I think we are about 12th overall in the world in GHG emissions. If Canada and every country that emits less green house gasses than Canada decided they didn’t have act because they are such a small part of the problem that would leave ¼ of global emissions unchanged. There is no way we can reach our global goal leaving 25% of emissions unchanged. It also seems quite preposterous that we would expect much poorer countries to change while we do nothing. This is a global problem, and if we truly assessed responsibility there is no reason to divide along national lines. We are part of the same economy as the US, one could simply lump us together and as an economic block and suddenly we are now one of the largest emitters with India and China. In fact the only way to truly and fairly assess responsibility would be to assess emissions on a per-capita basis and on that measure Saskatchewan is pretty much the worst in the whole world.

I can just imagine how the people of India might consider us: So your GDP per capita is 30 times ours, but you think we should keep burning turds for energy while you get to drive your ¾ ton truck 50 kilometers to pick up your groceries at Costco.

There is a moral imperative to act. The most productive way to fight global warming is not regulations, cap and trade systems or a carbon tax. It is voluntary action. We can all be part of the solution to ensure that as a society we remain prosperous, safe and secure. Hopefully technology will evolve to make it less painful. The cost of renewable energy is steadily and swiftly declining. New breakthroughs in battery technology and CO2 capture may eventually make this far easier than it looks right now. There is a lot we can do right now. The easiest and least expensive changes are just found in becoming more energy efficient. If all you can do is spend $50 on LED bulbs do it. Call Saskpower to pick up your 30 year old beer fridge. Fix your leaky windows. Find work close to home. Walk everywhere you can. Drive a car instead of a truck when you don’t need to haul anything. Insulate your home. Share your stuff. The easy stuff actually saves you money.

These are just first steps, by themselves are modest measures, but the first biggest change has to happen in our conscious awareness. 

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