Bit of a sidebar - French environmental group L'Alliance pour le planète is asking people worldwide to shut off all electric appliances for five minutes tomorrow (February 1st) as a symbol of support for action on climate change. The date was chosen because the IPCC's 4th assessment report will be coming out on Friday, February 2nd. Apparently the Eiffel tower will be shut off as well.
The initiative is being widely taken up here in Quebec. Lights out will be at 18h55 Paris time, 13h55 EST.
Link to l'alliance
Link to Greenpeace.ca coverage
Link to news coverage
Wednesday, January 31, 2007
Climate Action Network proposed amendments to Bill C-30
A bit more recent here: Climate Action Network Canada (CANet Canada) published a backgrounder with proposed amendments to Bill C-30 (the Clean Air Act) on January 22nd. Lots of points, but sticking for now to carbon taxes and emissions trading - it strongly recommends
My comments: I definitely agree with both points. As mentioned in an earlier post, the large final emitter permit-trading system under development by NRCan was flawed. The emissions targets didn't reflect industry's share of responsibility for our emissions, and all permits were given freely to polluters - which actually ends up being a huge revenue transfer once permits begin gaining in value. The CANet recommendations solve both of these problems.
- A fixed cap on absolute emissions that extends a ‘Kyoto-level’ target to heavy industry for the2008-2012 period9 – i.e. a reduction in emissions to 6% below 1990 levels;
- A permit-trading system to facilitate efficient allocation of emissions reductions. A percentageof the permits should be auctioned and the revenues applied to further GHG reduction initiatives. Canada’s trading system should be linked to other Kyoto-compliant trading systems.
My comments: I definitely agree with both points. As mentioned in an earlier post, the large final emitter permit-trading system under development by NRCan was flawed. The emissions targets didn't reflect industry's share of responsibility for our emissions, and all permits were given freely to polluters - which actually ends up being a huge revenue transfer once permits begin gaining in value. The CANet recommendations solve both of these problems.
Stephen Harper's position on carbon taxes
From a Canadian Press article published back in June 2006: "Harper rules out federal carbon tax as a climate change strategy"
"The federal government absolutely disagrees with a carbon tax and will not impose it," he said outside a cabinet meeting.
"We believe if a carbon tax is effective at all, it will ultimately be effective only because it will raise gas prices on consumers.
That's not something we're going to do."
My comments: Well, that takes care of that. Not a big surprise given his Alberta base and political instints.
CBC Backgrounder on carbon taxes
CBC.ca has a backgrounder on the carbon tax concept from August 2006 - responding to Ignatieff's mention of the idea and Quebec's announcement of its carbon tax. The backgrounder covers the basic idea, some pros and cons, and gives examples of current use and proponents.
Link
My comments: An alright introduction to the idea, but it lacks meat and makes some strong unsubstantiated claims - the biggest being that "most economists are skeptical of the merits of a carbon tax" - my sense is that most (environmental) economists see it as the most efficient and least distortionary way to bring the GHG externality back into markets. A few relevant points it makes are that (a) oil prices are already high enough to be changing consumer behaviour at this point and (b) that additional carbon taxes could be inflationary in the short term. Fair enough, but even today's dollar a litre gas prices won't make a substantial dent in our GHGs, and those prices aren't necessarily here to stay.
Link
My comments: An alright introduction to the idea, but it lacks meat and makes some strong unsubstantiated claims - the biggest being that "most economists are skeptical of the merits of a carbon tax" - my sense is that most (environmental) economists see it as the most efficient and least distortionary way to bring the GHG externality back into markets. A few relevant points it makes are that (a) oil prices are already high enough to be changing consumer behaviour at this point and (b) that additional carbon taxes could be inflationary in the short term. Fair enough, but even today's dollar a litre gas prices won't make a substantial dent in our GHGs, and those prices aren't necessarily here to stay.
Tuesday, January 30, 2007
Stephane Dion on carbon taxes and emissions trading
Just looked over Stephane Dion's energy and climate change plan from last fall's Liberal leadership race. He rejects a carbon tax in favour of emissions trading, arguing that a carbon tax a) won't work since fossil fuel prices are already high b) is a flat tax and therefore 'will not inflate with a bull market or recede in times of difficulty' and c) misses out on a key advantage of emissions trading - that of allowing emissions reductions to happen where they are cheapest to implement.
He seems to commit to keeping the emissions trading system for large final emitters (LFEs) that was being developed under his government, although this isn't entirely clear. He spends a lot of time talking about creating a Climate Fund which will buy offset credits from municipalities, farmers and home industry businesses, etc.
Link to Dion's energy and climate change plan (see pages 29-32)
Link to a my 2004 website describing the emissions trading program for large final emitters
My comments
I found Dion's dismissal of a carbon tax too brief - it could be used as a tool alongside an emissions trading scheme, for example, if need be. His first argument (high energy prices have no effect) doesn't make sense - regardless of currently high oil prices, a long term tax will still provide a useful price signal. His flat tax argument is easily countered - the GST for example, is also a flat tax - and the disproportionate burden of a carbon tax on low-income Canadians could be compensated for with proportional income tax cuts. I don't understand his point about bull markets vs times of difficulty - neither will emissons permits under cap and trade. Only the last argument is fair, in my mind - emissions trading does allow polluters facing high costs for reducing their own emissions to buy credits from others who have cheaper reduction costs.
Re his emissions trading position: I'd be happy to see the LFE system implemented since it at least imposes some limits on big industrial emitters. That being said, it is a fairly weak system as it stands - it uses sectorial intensity targets instead of an absolute cap on emissions (i.e., total emissions could still grow with the economy), the government guaranteed a maximum cost of $15.00/tonne, and the overall targets didn't reflect industry's responsibility for Canadian emissions.
Dion's talk about buying offsets with a Climate Fund also rang a few alarm bells for me. (A) Offsets should be bought by the emitters, not by the government, that is the point of the offset system. (B) Some of the emissions reductions he uses as examples of offsets are activities that were funded by other parts of the Liberal's climate change plan, such as home renovations- this could mean paying twice for the same reductions.
See the Pembina Institute's many critiques and contributions on the LFE system for more details: Link
He seems to commit to keeping the emissions trading system for large final emitters (LFEs) that was being developed under his government, although this isn't entirely clear. He spends a lot of time talking about creating a Climate Fund which will buy offset credits from municipalities, farmers and home industry businesses, etc.
Link to Dion's energy and climate change plan (see pages 29-32)
Link to a my 2004 website describing the emissions trading program for large final emitters
My comments
I found Dion's dismissal of a carbon tax too brief - it could be used as a tool alongside an emissions trading scheme, for example, if need be. His first argument (high energy prices have no effect) doesn't make sense - regardless of currently high oil prices, a long term tax will still provide a useful price signal. His flat tax argument is easily countered - the GST for example, is also a flat tax - and the disproportionate burden of a carbon tax on low-income Canadians could be compensated for with proportional income tax cuts. I don't understand his point about bull markets vs times of difficulty - neither will emissons permits under cap and trade. Only the last argument is fair, in my mind - emissions trading does allow polluters facing high costs for reducing their own emissions to buy credits from others who have cheaper reduction costs.
Re his emissions trading position: I'd be happy to see the LFE system implemented since it at least imposes some limits on big industrial emitters. That being said, it is a fairly weak system as it stands - it uses sectorial intensity targets instead of an absolute cap on emissions (i.e., total emissions could still grow with the economy), the government guaranteed a maximum cost of $15.00/tonne, and the overall targets didn't reflect industry's responsibility for Canadian emissions.
Dion's talk about buying offsets with a Climate Fund also rang a few alarm bells for me. (A) Offsets should be bought by the emitters, not by the government, that is the point of the offset system. (B) Some of the emissions reductions he uses as examples of offsets are activities that were funded by other parts of the Liberal's climate change plan, such as home renovations- this could mean paying twice for the same reductions.
See the Pembina Institute's many critiques and contributions on the LFE system for more details: Link
Monday, January 29, 2007
Vancouver Sun Backgrounder on carbon taxes
A good 2 page review of the carbon tax concept from the July 3 2006 Vancouver Sun: "Properly Designed Carbon Tax Could Help Canada Battle Global Warming" by Jon Kesselman, a Simon Fraser University prof. Discusses taxing all energy produced in Canada versus taxing only domestically-used energy; the Quebec "carbon tax" (and whether or not its really designed as a carbon tax), using carbon taxes revenues to lower income taxes, and the alternative of cap and trade emissions trading.
Link
Link to Jon Kesselman bio
My comments: One point I appreciate is that Quebec is going against the goal of a carbon tax by insisting that cost increases from our new tax shouldn't be passed to the consumer. If the increase isn't passed on, then consumers don't change their behaviour, and keep on burning the same amounts of GHG. An assertion he makes about cap and trade systems is that they end up "stifling efficient growth by handicapping new and dynamic firms". But how? I'll email and ask; will post any results.
UPDATE January 30: Jon Kesselman wrote back like lightning, very appreciated. Here is his response in full:
"My statement was based on the most common method used/proposed for these systems. They allocate initial rights to emit based on the individual firm's historic emission rate (or some proportion less than 100% of that rate; some systems may allocate based on other criteria, such as production level). Hence, a firm newly entering the industry (or considering entry) has no entitlement to emit, meaning that it faces a competitive disadvantage vis-a-vis the incumbent firms in that industry (it has to purchase permits to emit for all of its production, not just a small part of its production). Similarly, a firm that (for whatever reason) is positioned to grow more quickly than its existing competitors in the industry will also face higher production costs due to the need to purchase permits to emit on a larger share of its production. Conceivably, one could design a system to obviate these problems, but I have not yet heard of anything that would do that effectively, efficiently, and equitably."
Link
Link to Jon Kesselman bio
My comments: One point I appreciate is that Quebec is going against the goal of a carbon tax by insisting that cost increases from our new tax shouldn't be passed to the consumer. If the increase isn't passed on, then consumers don't change their behaviour, and keep on burning the same amounts of GHG. An assertion he makes about cap and trade systems is that they end up "stifling efficient growth by handicapping new and dynamic firms". But how? I'll email and ask; will post any results.
UPDATE January 30: Jon Kesselman wrote back like lightning, very appreciated. Here is his response in full:
"My statement was based on the most common method used/proposed for these systems. They allocate initial rights to emit based on the individual firm's historic emission rate (or some proportion less than 100% of that rate; some systems may allocate based on other criteria, such as production level). Hence, a firm newly entering the industry (or considering entry) has no entitlement to emit, meaning that it faces a competitive disadvantage vis-a-vis the incumbent firms in that industry (it has to purchase permits to emit for all of its production, not just a small part of its production). Similarly, a firm that (for whatever reason) is positioned to grow more quickly than its existing competitors in the industry will also face higher production costs due to the need to purchase permits to emit on a larger share of its production. Conceivably, one could design a system to obviate these problems, but I have not yet heard of anything that would do that effectively, efficiently, and equitably."
Sunday, January 28, 2007
FoE Canada's Carbon Tax Proposal
Friends of the Earth Canada released a carbon tax proposal for Canadian Large Final Emitters on Thursday Jan 25 - an opinion piece they released detailing the proposal ran in the Montreal Gazette on Jan 27.
An interesting point about the proposal - taxes paid by each emitter would go into their own individual trust account. they would then have the chance to spend that money on emissions-reducing initiatives at their own facility, but only have a few years to spend it before losing it.
Link
My comment -
This seems innovative to me and potentially useful - although any comments on drawbacks I've missed would be appreciated. The biggest challenge I see would be the criteria for emissions-reduction initiatives. You would want it criteria-based to encourage innovation, you would need to have strict standards for any offset credits like soil management or forestry initiatives, and you would want to keep the costs of approving and monitoring all of these initiatives minimal. But if I were a company, I think I'd prefer a 'tax' I could then spend on myself to one the government keeps...
An interesting point about the proposal - taxes paid by each emitter would go into their own individual trust account. they would then have the chance to spend that money on emissions-reducing initiatives at their own facility, but only have a few years to spend it before losing it.
Link
My comment -
This seems innovative to me and potentially useful - although any comments on drawbacks I've missed would be appreciated. The biggest challenge I see would be the criteria for emissions-reduction initiatives. You would want it criteria-based to encourage innovation, you would need to have strict standards for any offset credits like soil management or forestry initiatives, and you would want to keep the costs of approving and monitoring all of these initiatives minimal. But if I were a company, I think I'd prefer a 'tax' I could then spend on myself to one the government keeps...
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