…environmental economics and the implications of environmental policy

The Great and Honourable Target Bun Fight: The Standing Committee “Debates” Deep Carbon Reductions for Canada

with 3 comments

The Standing Committee on Environment and Development is currently debating a private members Bill on deeper targets for Canada (Bill C-377). The Bill is all about more aggressive targets relative to the government’s plan. But, in actuality, these targets are in line with the Bali Footnote for 2020 (-25% below 1990) and not too far off from the Government’s Current Plan (Turning the Corner). The current plan calls for -20% below 2005, which is about minus 35% in 2020 below the business as usual, and the Bill is -50%.

Since Parliament is in a minority position, this Bill has not died and is given some due process. But, make no mistake, this Bill will not live to see the day given election fever.

I had the pleasure of seeing the target bun fight up close. My testimony to the Members is here: Standing Committee Testimony – Sawyer, including a cost estimate for the targets contained in both Turning the Corner Target and Bill C-377 (using C-GEEM, a CGE model and CIMS, the UBER Canadian emissions and energy model).

In a nut shell, carbon prices will need to be in the order of $100 for Turning the Corner and about $200 for Bill C-377. GDP impacts would then range between 0.6% and 1.2% annually, which is less than the forecast rate of growth (2% to 2.5%). While these impacts may not seem large, there are also impacts on groups, such as low income households and energy intensive exporters, that are much much larger. These impacts need to be better understood and policies devised to address the income hit while maintaining the emission signal. Energy prices would then rise, with electricity by something like 25%, petroleum products on average 15% and natural gas 10%. Or something like that.

All this assumes domestic action, a cap and trade system for large emitters, a carbon tax for you and me, performance regulations for vehicles and buildings, some subsidies to renewables and carbon capture and storage, and importantly a reduction in income tax to offset the carbon revenue. Whew.

And since costs rise rapidly after abatement of about -20% below the BAU, access to lower cost and real international reductions is critical if costs are to be contained and distributive impacts minimized.

My one observation from the Standing Committee was that most, but not all, of the Honorable Members were more interested in getting on record their own thoughts and not interested in probing the witnesses for information or insight. Which made me wonder what I was doing there?

And debate is a funny term for some of these folks. It was mostly a bun fight reminiscent of grade six…” your climate policy is stupid…of yah yours is even stupider and your shoes are lame”…..and that’s when I piped up and pointed out that, well, actually both of your targets are very similar and if you think his will wreck the economy, then so will yours. But that is not quit correct either, and if we do it right, and get going today, we can likely muddle through without killing the Canadian Golden Goose.

Written by Dave Sawyer

February 8th, 2008 at 3:10 pm

3 Responses to 'The Great and Honourable Target Bun Fight: The Standing Committee “Debates” Deep Carbon Reductions for Canada'

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  1. Hi Dave –

    Read you testimony, and liked it. As we’ve talked about before though, I disagree with: “Second, an effective policy package would provide subsidies to low emitting technologies such as to carbon capture storage and renewable electricity.”

    I’m not convinced this is true. At high carbon prices, renewable electricity will become cost-competitive. If it doesn’t, then presumably it isn’t cost effective relative to other abatement options. Likewise for CCS, although I can see arguing that federal support for one or two CCS developments could be useful because it is a relatively untried technology.

    But, I really think the focus on subsidies is misleading overall. Its a continuation of what we’re already doing, which isn’t working at all.



    8 Feb 08 at 6:35 pm

  2. Thanks Nic. You will notice I said “effective” and not efficient. Your observations have in fact worked their way into my thinking. I still think, however, targeted subsidies have a role to play. it is just a question of where. At deeper and deeper reductions the subsidies, assuming they are passed on to consumer, can reduce the cost impact on production (but would presumably be inefficient due to freeriders etc.). So I think of them in this regard — cost impact dampening through recycling. Some sort of income support, especially with the price impact on electricity and oil.

    Perhaps we could use C-GEEM to test alternative policies for a fixed emission reduction? Some sort of cost-effectiveness ranking of policies like marginal excess burden. That is assuming, we have a spare minute or two.

    Dave Sawyer

    8 Feb 08 at 8:41 pm

  3. .



    30 Jul 14 at 4:23 am

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