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Canada’s GHG plans: Where the buck stops Provinces respond sharply to case made by study that greenhouse gas reduction goals would be met by transferring wealth regionally Gary Park For Petroleum News
Leaders of Western Canada’s petroleum-fueled provinces and the Canadian government have wasted no time shredding the most detailed estimate yet of how much it will cost to meet climate-change targets.
The report, financed by the TD Bank and prepared by the David Suzuki Foundation and the Pembina Institute, using economic modeling developed by M.K. Jaccard and Associates, compared three options.
If nothing is done to lower greenhouse gas emissions, Canada’s Gross Domestic Product is projected to grow 27 percent in the decade from 2010 to 2020.
Following the Canadian government’s target of a 20 percent reduction in GHGs from 2006 levels by 2020 will trim GDP growth to 25 percent.
Adopting more stringent, internationally recognized goals of a 25 percent cut in GHGs from 1990 levels, will see GDP grow 23 percent.
Regional re-balancing But, assuming action is taken, it will involve an extensive regional re-balancing of the Canadian economy, with money flowing from Western Canada to the rest of the country.
Either through direct taxation or imposing a cap on greenhouse gas emissions and forcing the largest emitters to buy carbon credits, the Canadian government would collect an annual C$46 billion (under the federal strategy) to C$72 billion (under the environmental goal) from the sale of carbon credits.
That money would be redistributed through spending and personal tax cuts to offset rising home-heating costs; in subsidies to industries most severely affected by higher energy costs; in promoting alternative energy sources, mass transit and high-speed rail; and in purchasing offshore credits.
The Pembina-Suzuki report argues that the overall impact on economic growth would be minimal and employment would actually increase as Canada re-structures to become more energy efficient.
“With strong federal and provincial policies” Canada can meet even the most ambitious targets “and still have a strong, growing economy, a quality of life higher than Canadians enjoy today, and continued steady jobs,” the report said.
It said that continuing “business as usual” would see 1.8 million jobs added between 2010 and 2020, but more stringent goals would boost employment by 60,000 jobs to 1.86 million.
Pierre Sadik, director of government relations at the Suzuki foundation, while conceding that dealing with climate change in Canada “is certainly not going to be as easy as changing our light bulbs, it won’t be as bad or economically difficult as some fear-mongers have been saying.”
And those costs will pale in comparison with the environmental and economic impact of unchecked GHG growth, he said.
TD Bank: fiscal shock TD Bank chief economist Don Drummond was not quite as sanguine.
Meeting the targets “will be the biggest fiscal shock in Canadian history, but the study shows it can be done,” he said.
The report said the federal goal would require a levy on GHG emissions by industry of C$40 per metric ton (the Alberta government already has a levy of C$15) in 2010, rising to C$100 by 2020, while the environmentalists’ target would need an effective carbon price starting at C$50 next year and reaching C$200 by 2020.
Pembina climate researcher and study co-author Matthew Bramley said that unless the federal government moves faster than it has to date it will “not even be close” to meeting its 2020 goals, unless federal and provincial governments do the unthinkable and act immediately.
Who will carry cost burden?
The sticking point for Western Canada and the Canadian government is contained in the study’s breakdown of who will carry the cost burden.
Depending on which formula the federal government works with, Alberta’s economic growth would take a hit ranging from 8.5 percent to 12.1 percent; Saskatchewan would lose from 2.8 percent to 7.5 percent; and British Columbia would lose 2.5 percent to 4.8 percent.
Alberta, because of its reliance on the oil sands sector and Canada’s highest per-capita GHGs, would provide about C$5 billion a year more in revenue than it would receive back, although the province would continue to lead Canada in economic growth.
Federal Environment Minister Jim Prentice said there is no way Western Canada could be expected to absorb the economic hit forecast by the
Describing the conclusions as “irresponsible and divisive,” he said Canadians across the country would not accept the report’s advocacy of Pembina-Suzuki report emissions targets for 2020 that would reduce GDP by 3 percent nationally and 12 percent in Alberta.
To advance the notion that negative economic growth of 3 percent is “acceptable (is) not the case,” Prentice said. “Nothing this government has ever put forward has found those economic consequences to be acceptable.”
He said the economic conditions contained in the report will be avoided if Canada works with the United States to develop a continental climate-change plan, estimating that a harmonized plan is currently estimated to require carbon costs of C$28 per metric ton.
“The kind of economic consequences you see in this report are not necessary if this is done in an orderly way,” said Prentice.
He said Canada will not act alone to cap emissions, adding he expects the U.S. Senate will not approve new climate rules until 2010.
Alberta, Saskatchewan hot The response from Alberta and Saskatchewan might have contributed to global warming.
Alberta Premier Ed Stelmach said he will reject any climate-change plan that transfers more money out of the province.
“There won’t be another wealth transfer to Ottawa under my watch, I can tell you,” he said in an indirect reference to the National Energy Program of 1980-85, when the federal government imposed made-in-Canada oil prices, siphoning an estimated C$60 billion in revenue from Alberta.
Stelmach said Alberta, under Canada’s existing revenue re-allocation plan, has sent C$117 billion to the federal government in the past decade.
He argued Alberta is already doing a “very good job” of protecting the environment while developing its resources.
Alberta Environment Minister Rob Renner said his province is “not asking for special privileges, nor are we asking to get some kind of free pass” on environmental standards. “We’re in this; we’re taking it seriously and we’re going to do everything we can to mitigate the issue of carbon dioxide as it relates to Alberta.”
He said the Pembina-Suzuki report does make the case that significant reductions in GHGs are technically possible, adding Alberta is investing heavily in carbon capture and storage projects towards that end.
Saskatchewan Energy Minister Bill Boyd said his province would be “extremely opposed to any kind of carbon tax or some other kind of tax that would result in significant wealth transfer to any other province or area of the country.”
He said the answer to climate-change concerns is through technology, not moving wealth among provinces.
However, the TD Bank said that although technological breakthroughs might help lower GHGs over the long term it is not reasonable to expect they “will provide a solution” by the 2020 target date.
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