…environmental economics and the implications of environmental policy

Archive for November, 2007

A Slow Boat to China…Abatement Costs and Competitiveness

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Once again we see “Globe and Mail” economics dominating the climate debate, where the costs of action and the threats of adverse competitiveness impacts drive the discourse. What Minister Baird is saying here, is that our abatement targets are going to drive firms out of Canada:

“If we simply move production from Canada and the European Union to China or the United States, we won’t have accomplished anything for the environment.”

Well, recent modeling completed by MKJA and myself indicate that the large final emitters would see production cost increases of about 1% in 2020 from a 25$ emission price, and would rise to about 3% at ~75$, the minimum emission price needed to hit the current government’s Regulatory Framework targets (-20% from 2006 in 2020). So, are cost differentials of about 3% on products enough to trigger companies to put their production lines on a slow boat to China? If this is the case, Canada has a much larger productivity issue that should, perhaps, be the focus of more political hot air and broadsheet ink. But, since productivity is not the burning issue, perhaps Canada could move forward for a change.

Written by Dave Sawyer

November 30th, 2007 at 2:31 pm