EnviroEconomics.ca

…environmental economics and the implications of environmental policy

Army Boots III: Regulations are Costly but Contradictions are Free

with one comment

Ok, so the Conservative Plan is good for oil sands and the Liberal plan is not. This must be the case because the National Post says so:

..his (Dion) “Green Shift” carbon-tax scheme is, by itself, enough to persuade us that he is the wrong man to be running this country. As our banking and financial-services sectors become strained by the worldwide credit crunch, this country is increasingly dependant on our oil and gas sector to sustain us through rough waters. Yet these are exactly the industries Mr. Dion wants to soak.

Huh?

Have not the smart folks on the Editorial Board read the Conservative Plan? Here are a few tidbits that show why the Conservative Plan, which is heavily based on regulations, could impose higher costs on the sector:

    – The current biofuel standard requires 5% of all gasoline to come from ethanol, which will reduce refining output correspondingly (lost profits anyone?). With the price differential between ethanol and fossil fuel supplied gasoline running at about 15% to 50% higher, the biofuel standard could raise gasoline prices 3 to 5 cents per litre thereby further suppressing demand somewhat (and recall the Liberals are exempting gasoline from the Carbon Tax);

    – CCS requirement on all new facilities will impose costs upwards of $100/tonne on new facilities, compared to the $40 liberal tax, before recycling to income tax;

    – It is not clear what the permit costs will be for the intensity trading system but the Technology Fund is capped at about $23 in 2017. So, these costs are not far off the Liberal $40 tax rate and when compared with CCS for new projects, and the recycling under the Liberal Plan, it is not clear the Conservative Plan is a clear cost winner;

    – And while the China and India ban on oil sands related exports would not cost producing facilities since there are no exports, it will distort investment decisions, and therefore lead to higher costs. That is, folks were planning pipelines to Vancouver to ship oil.

And this is a straight up comparison on economic impacts and not emission reductions – that is, what do we get for all this spending? Well, I am not in a position to say, but lots of smart folks think the Conservative Plan will be less effective. I am not so sure since the coverage of the Liberal Plan is limited, and so may deliver a limited set of reductions.

But perhaps I will let the National Post have the last word on the inherent contradiction that permeates the election coverage on carbon policy (here):

What regulators never tell anybody is that regulatory regimes, in practice, are always going to be wrong in the long run — mainly because they undermine and destroy markets.

Written by Dave Sawyer

October 8th, 2008 at 2:36 pm

One Response to 'Army Boots III: Regulations are Costly but Contradictions are Free'

Subscribe to comments with RSS or TrackBack to 'Army Boots III: Regulations are Costly but Contradictions are Free'.

  1. .

    ñïàñèáî!!…

    kenneth

    29 Jul 14 at 9:32 am

Leave a Reply