…environmental economics and the implications of environmental policy

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In Bali, Canada said there must be a “balance” between the environment and “economic prosperity” …Just not now

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When the Canadian government laid down some long-term aspirational targets, many argued it was a ploy to detract from taking action in the present. At the time I thought the government should be applauded for looking beyond the next election and out to where we need to be mid-century. When we peer out that far, we can understand the breadth and depth of the change required to achieve the significant targets they announced (-20% below current in 2020 and -60 to 70% below in 2050). Importantly, looking out allowed Canada to see some risks, four of which are notable:

Delay is costly. Analysis indicates that when climate policy is delayed, it becomes more expensive later on. Simply, we are stuck with high emitting capital that is costly to convert to low emitting capital;

Delay has target attainment risk. Again, the longer you delay, the more risk there is that your high emitting capital stock can’t be switched out for lower emitting stock, and thus affordability and technological limits increase the risk that future targets can’t be obtained;

Technological change is slower. Without price certainty on carbon there is no incentive to innovate and invest in R&D. This means that new technologies may not emerge that can help later and reduce costs;

More cumulative emissions. While targets are fine carbon is a stock pollutant and with delay in action you emit more, even if targets are attained. Thus, delay results in more cumulative emissions, which is a bad thing.

With Canada’s position in Bala (see here), the underlying current, whether intentional or not, is delay. But delay on global action will end up costing everyone more and lessening environmental effectiveness. For now, I still think looking out to mid-century is a good thing. I am just wondering when a vision of the future will emerge in current climate policy.

Written by Dave Sawyer

December 6th, 2007 at 3:46 pm