What to make of the Harper government’s conviction that meeting our Kyoto commitment would drive the country into recession and leave thousands unemployed and facing soaring gas and energy prices?
According to federal environment minister John Baird, the deep reductions in emissions starting as early as next January required for Canada to start living up to its Kyoto commitments is “not the answer we’re looking for”. The why is clearly obvious, according to Baird: “the numbers just don’t add up.” An analysis that Baird presented to a Senate committee found that by 2009, over 275,000 Canadians would lose their jobs, electricity bills would jump by 50% after 2010, prices at the pump would shoot up by 60%, and natural gas prices to heat homes would double, if the ruling Conservatives had to comply with a Liberal bill passed by the House of Commons requiring the government to meet its Kyoto targets for reducing greenhouse gas emissions.
It would be easy to dismiss Baird’s comments as mere fear mongering. After all his party fought against the accord, voted against its ratification, voted against reaffirming Canada’s commitment, and seems quite comfortable with making Canada the only country to sign the international accord and then abandon it. But, still, I think his concerns, deserve the benefit of the doubt.
After all, what if he’s right? The transportation sector in particular would suffer tremendously because it would be a primary target. Transportation activities generated more than one-quarter of Canada’s greenhouse gas (GHG) emissions in 2004 and accounted for 28% of their growth from 1990 to 2004 (during which time GHG emissions from transportation increased 30%). And trucking is the mode most likely to go under the magnifying glass, largely thanks to its success. From 1990 to 2003, the amount of freight carried by the for-hire trucking industry grew nearly three times faster (75%) than all other modes combined (up a collective 27% over the same period).
So Baird’s concerns do warrant investigation and consideration. But so do the many things left out of Bairds comments.
To begin with, we need to understand what would happen if Canada walked away from Kyoto. The Kyoto Accord is a legally binding treaty and Canada ratified it after a majority vote in Parliament. The target agreed to by Canada is not optional. By deciding to abandon Kyoto, Canada would be violating international law. If Canada doesn’t meet its commitments, or buy credits from other nations to help it get there, other trading nations can impose sanctions on Canadian exports under World Trade Organization rules. What would be the cost to the Canadian economy of that?
To be fair, the government report provides only a partial view of the costs of Kyoto because it did not examine any economic benefits. Why did Baird choose to deliberately ignore the benefits that come from better energy efficiency, lower energy use and jobs related to the benefits of emissions reductions?
The link between less reliance on oil consumption is not as clearcut I think as Baird would have us believe. Consider the example of the US economy. In 2007, total energy expenditures in the US will come to more than a quadrillion dollars, which amounts to about a tenth of the country’s gross domestic product. You would think a sizeable reduction in this activity would have a definite impact on the economy. Yet when we look at period of 1977 to 1985 when oil use fell steeply in the US (by about 17%), the economy actually grew by 27%.
If Kyoto is so disastrous to economic activity, why have so many countries signed on? The accord has been signed by 180 countries, including 38 industrialized countries. I find it hard to believe Canada is the only nation with a ruling government that cares about its economy.
Finally, the government report doesn’t answer what would be the economic costs of not taking action on climate change through Kyoto (although, again to be fair, the Conservatives will be releasing its own plans for GHG reductions). Sir Nicholas Stern, the former chief economist of the World Bank, produced an authoritative review of climate change economics that was released last October. Stern found that unchecked climate change would devastate the world’s economy, costing between 5 and 20 per cent of global GDP. In contrast, the cost of solving the climate change problem is just one per cent of the world’s GDP. Stern’s conclusion was that “Tackling climate change is the pro-growth strategy; ignoring it will ultimately undermine economic growth.”