While these got me chuckling, more importantly they are spot on. And they were published in the Edmonton Sun, which continues to provide a nice window on that segment of Canadian society that thinks climate action is a crock.
The most a government can commit to is an input, not an output – a program, not a result. A government can attempt to commit itself on the variables it controls, but the promised results are only as credible as the commitment and the theory that generates the results.
This is a weakness of any effort to control inflation (or emissions) through expectations. It is hard enough for a government to commit itself reliably over a protracted period to what may be painful and unpopular; translating even a confidently shared expectation of government action into a shared expectation of results requires that a decisive subset of economic agents confidently share a theory, identical to the government's theory, of how program inputs relate to inflationary (or emissions reductions) outputs. Without the shared theory, only the inputs can be credible.
Who says economics is dismal? And oh yes expectations matter if you want folks to reduce emissions.
Gaz Métro passes it on $15 per year for residential customers… When the provincial government imposed the country's first carbon tax last fall, it wanted producers to pay….[But Gaz Métro has] began charging 0.67 cents per cubic metre of natural gas that it sells to its 170,000 customers. It will then remit $38 million to Quebec this year for its new $200-million annual green fund, aimed at reducing greenhouse gases. The hike means about $15 more per year for the typical Gaz Métro residential customer.
Is the firm worse off with this climate policy? Perhaps not, and in fact, if the total's are not reconciled, they could be better off. And is the household worse-off? $15 is eight double-double's at Tim's, a weeks worth of coffee for the average Joe. Hmmmm, not so bad maybe. Can we afford this? So far it seems like a yes. Are we getting reductions? Probably not many, but let's wait and see.
Perhaps it is better, after all, that consumers see the cost increase since carbon taxes are about reductions and not just revenue. In other energy markets, say gasoline, folks are insensitive to price increases, and carbon related increases may not stimulate reductions, but can raise revenue, as gas taxes demonstrate. In this case, the revenue can then be recycled back for any host of objectives, my favorite being reducing other taxes in a neutral shift or for investing in areas where markets fail, like R&D and some technology deployment.
But the big message from the article is that blanket assumptions that carbon costs will adversely hurt industry are clearly wrong. It all depends on the ability of the firm to pass on costs. Affordability is then the next question — can the firm or the consumer afford the cost increase? The only way to answer this question is to compare the cost with income (profits) or sales and determine if the Hit is large.
But in the case of the Quebec carbon tax, it is only Tim's that will suffer since the value of carbon in Canada continues to be measured in "coffees lost" and not tonnes reduced.
Targetality, the propagation of carbon targets that serve as a proxy for real action for the sole purpose of stimulating widespread indignation.
– And the proponents of said target are smug in their announcement that the problem is solved and all factions are dissatisfied.
Ok, I am being flippant. So, check out Chris Greene' excellent article on why the focus on targets is not, perhaps so good for climate policy (see my post here) .
So, lets get off the targetality bus. Focusing on 2050 is a nice roadmap for where we need to go and how we need to transition to a low carbon future. It also serves as a nice benchmark to compare the stringency of a government policy. But, perhaps more helpful is to figure out how we get somewhere, anywhere, and what we should do sooner rather than later.
Anybody for stimulus from carbon taxes? Yes, please, and reduce my income tax while you are at it.
With all the talk about the need to stimulate growth and keep the economy humming, how many policy leaders are going to be keen on new green and carbon taxes? Despite all the talk…no politicians I've heard are raising the idea. And what will Prime Minister Stephen Harper do with his various carbon initiatives now that the economy is teetering on the brink of diffucult (sic) times and growth forecasts are falling by the minute? We're in a new economic ball game, and the short-term rules are changing around economic and political policy. The first to go, I predict, will be talk of carbon taxes.
And this focus on the short-term will end up costing more in the future. Inaction results in higher costs later on, assuming one will eventually take action on carbon mitigation. Get going now and you avoid technology lock-in, that is, more stock of higher emitting technology that is long lived, and you stimulate, somewhat, technology development through both R&D but also learning by doing (cause we have more stock installed and learn as we go). Plus lower operating costs will eventually make some, but not all, more productive and thus competitive.
For those with real impacts, carbon policy can address the income hit though, for example, output-based recycling recycling which basically subsidizes output while maintaining the carbon price signal. This lessens the economic hit by returning revenue to industry assuming they have taken action to reduce emissions (i.e. they "see" the mitigation cost and reduce emissions and then are returned the tax on the remaining emissions since abatement occurred). Simply, policy design matters and preordained outcomes are therefore not certain.
So, myopia may sell ink, but it is no way to make rationale, economic decisions. And oh yes, markets tend to go up after they go down.
The unpublished working paper by the Joint Research Centre, the commission's in-house scientific body, says current EU proposals will cost the taxpayer 33-65 bln eur between now and 2020.
The cost-benefit study looks at whether using biofuels reduces greenhouse gas emissions, improves security of supply and creates jobs. It delivers an unenthusiastic opinion on all three counts.
'What the cost-benefit analysis shows is that there are better ways to achieve greenhouse gas savings and security of supply enhancements than to produce biofuels,' the report says.
'The costs of EU biofuels outweigh the benefits,' the researchers stated.
The big concern is of course the scale of it all. Growing the share of renewable fuels from very small to a large share in just 13 years places massive distortions in all kinds of markets – agriculture, food, refining, distribution (transport, storage and blending) and of course end use. Importantly, trade distortions seem inevitable. Simply, the large quantities required for compliance of say a 5% ethanol content will require imports of international feedstock. And those folks internationally are gearing up for it (see here).
Malaysia, along with Indonesia, will be closely monitoring developments within the European Union (EU) regarding a draft law that proposes to ban imports of certain biofuels.
While the trade folks understand the implications of this stuff better than I, I can't help but think the rising protectionism will lead to more problems. How does one label the product, differentiate it and enforce the ban? And what about trade law and protectionism, would there not be challenges? And how about the cost, would not intentionally acquired feedstock lower overall costs? Finally, while concern for degrading ecosystems is a sound basis for trade discrimination, it also seems a bit patronizing given western cropping practices.
So, while lots of folks hold out for the biofuel promise, it seems the worldwide policy enthusiasm has blight.