Monthly Archives: October 2007

McGuinty’s new man

Meet John Gerretsen, Ontario’s new environment minister:

JohnGerretsen

This is a disappointing appointment, considering that Premier Dalton McGuinty’s Liberals made environmental policy one of the pillars of their re-election campaign, up there with health and education and, to a lesser extent, the economy. McGuinty’s health and education ministers are carryovers from his cabinet before the election, and they’re two very strong members of cabinet. In charge of health is George Smitherman, with whom I disagree on a lot but who’s a bulldog of an advocate for his party’s policies, and at education there’s Kathleen Wynne, a popular former school-board chair who beat the leader of the opposition in a local battle for a seat.

But Gerretsen for the environment portfolio? The former mayor of Kingston was minister of municipal affairs and housing in the previous cabinet and was distinctly undistinguished in that role. He shepherded the creation of a massive greenbelt around Toronto, it’s true, but that was very much the premier’s baby. And he handled some changes to the Planning Act that were long overdue and largely uncontroversial. His bio takes credit for a $600-million social-housing program, but the province’s role in that is largely limited to writing cheques to municipalities, which are overjoyed to take the money.

A creative, exciting, innovative guy, John Gerretsen ain’t, is my point, with no particular background in either economics or environmental policy. I’d been hoping for Michael Bryant, the ambitious young attorney-general who’s been sent to the purgatory of the Aboriginal Affairs ministry in the hope he’ll either solve one of the country’s most pernicious social-policy problems or explode spectacularly. And while I knew it was unrealistic, Dwight Duncan — the new finance minister, who’s gone a long way toward fixing the province’s nuclear plants and promoting green power in roughly four years as energy minister — would have been a superb choice.

If you really take the file seriously and recognize how important it is for Ontario’s future as a high-tech manufacturing centre, that’s the calibre of minister you need in charge.

At least Gerretsen’s not Laurel Broten, his predecessor who became notorious for fighting her neighbours so she could build a four-car garage onto her house. But that’s a mighty low standard.

Campbell’s next move

FraserRiver
Photo credit: “Fraser River Rainbow,” Flickr/name.invalid

While the feds are still screwing around, B.C. Premier Gordon Campbell is charging ahead, making deals to join carbon-trading systems worldwide:

B.C. Premier Gordon Campbell joined politicians from around the world in signing a partnership agreement that would create a global carbon market for trading the environmental damaging emissions.

Campbell was Canada’s only representative and signatory at the ceremony Monday, but he said he doesn’t see his attendance at the Lisbon conference as overshadowing the federal government’s actions on climate change.

“I don’t expect this is a surprise to the prime minister,” Campbell told reporters on a telephone conference call.

The lead on the story overstates the case a bit: the International Carbon Action Partnership (ICAP) is really an agreement to share best practices and whatnot, not to actually establish a market, though that is the long-term goal. From the news release:

ICAP will provide an international forum in which governments and public authorities adopting mandatory greenhouse gas emissions cap and trade systems will share experiences and best practices on the design of emissions trading schemes. This cooperation will ensure that the programs are more compatible and are able to work together as the foundation of a global carbon market. Such a market will boost demand for low-carbon products and services, promote innovation, and allow cost effective reductions so as to allow swift and ambitious global reductions in global warming emissions.

I am, I don’t mind saying, pretty surprised that Gordon Campbell is leading the Canadian provinces on this file. I scrummed Campbell more than once during my short stint working on the west coast, and he struck me, close up, as a British Columbian Mike Harris with a pronounced tendency toward goobishness. Business-friendly populism to the max, and for all B.C.’s reputation as a land where granola grows on trees, it’s a place heavily reliant on mining and forestry and other high-intensity primary industries.

But maybe Campbell’s more forward-looking than I gave him credit for and sees where the money’s to be made in decades to come. (Or maybe he’s just seeing the messages the pine beetle’s leaving behind as it chews through B.C.’s forests at a prodigious rate.) The Lower Mainland has a fledgling high-tech industry, and if B.C. can get in on the ground floor of a genuine carbon-trading scheme, with its built-in cultural predisposition toward green energy and vehicles, it could lead Canada’s green economy of the future.

Price rage

I nearly bought Hot Air, the new book on Canadian climate-change policy co-written by the Globe‘s Jeffrey Simpson and environmental economists Mark Jaccard and Nic Rivers. Had it in my hand in Chapters. Signed copy and everything. Then I saw that the Canadian price was $29.99 and the U.S. price was a mere $19.99.

I haven’t been too worked up about Canadian retailers’ sloth in noticing that the Canadian dollar is worth more than the American, but come on. This is a book about Canada, by Canadians, published by a Canadian publishing house. Why on Earth should it cost 50 per cent more (actually even more than that, given the exchange rate) to buy it in Canada than in the States?

Except that it’s almost inconceivable any Americans would want to buy it, so the price had better be absurdly low there if they’re going to sell any copies at all.

McClelland and Stewart, which printed the price on the jacket, and Chapters, which didn’t cover it up with a new price sticker of their own, have a right to charge whatever they want. I have a right to put the thing back on the shelf. I did.

Stelmach’s choice

Alberta Premier Ed Stelmach is hiking royalty rates on the province’s hydrocarbons to bring in about an extra $1.4 billion for the government starting in 2010.  A review panel had suggested the figure ought to be $2 billion, starting sooner.

The industry’s unhappy:

Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said he had “tremendous concern.”

“Financial markets are going to respond negatively,” Mr. Alvarez said, adding that the government didn’t listen to industry’s questioning of the costs to produce oil and gas in Alberta.

“The market may be surprised that more was done than less, and that the government didn’t back off on more of the provisions,” said Ari Levy, a vice-president at TD Asset Management Inc. “I fear the risk premium may rise on future projects built in Alberta.”

So’s the Left:

But NDP Leader Brian Mason says the premier has caved in to Big Oil.

“The phasing in of the royalty program means that the take will be significantly less … than the royalty task force has proposed,” he said. “I think the premier has compromised yet again on a report that represented a compromise in the first place.”

He said Alberta will continue to be one of the lowest royalty jurisdictions in the world under the new formula.

While Stelmach’s betting Albertans will be satisfied and — having become premier after the last guy retired and not yet won an election — might call an election to reinforce popular support for his choice.

Is it the right call? As I wrote last week, nobody has the faintest idea, though I’m pretty confident that one government-set price for anything is likely to be wrong.

The only way to set a “fair” price for Alberta’s oil and gas, as Andrew Coyne echoed yesterday, is to make the companies decide how much the rights are worth for themselves and bid on them. Anything else — the existing price, a higher one or a lower one — is bound to lead to an inefficient, inappropriate price.

Think BEFORE you speak, Senator

From TheHill.com:

 “One reason why we have the fires in California is global warming,” Senate Majority Leader Harry Reid (D-Nev.) told reporters Tuesday, stressing the need to pass the Democrats’ comprehensive energy package.

Moments later, when asked by a reporter if he really believed global warming caused the fires, he appeared to back away from his comments, saying there are many factors that contributed to the disaster.

Complexity is difficult to express for people accustomed to speaking in soundbites (which they do in part thanks to pressure from people like me), but it’s essential, when we’re talking about environmental problems, so we don’t say stupid things.

Warm weather — yes. Dry conditions — yes. High winds — yes. All things that contributed directly to the wildfires (dangerous construction, too), and all things likely to be among the consequences of global warming over time. But just like Hurricane Katrina, the wildfires can’t be connected in a direct line to a phenomenon whose effects we’re just seeing. There’s an impenetrable cloud of other factors in between, and there always will be; definitive statements like Reid’s are easily dismissed by people who are determined to spend their time scoring debating points against the environmental movement rather than helping keep it honest and constructive.

You see it in hyperbolic claims that global warming could mean the end of life as we know it, or that other pollution will “destroy the earth.” It’s not true. What’s at risk is our quality of life and our prosperity and comfort, which ought to be bad enough — but to catch the attention of the indifferent and the skeptical, too often we overreach.

Elizabeth May profile in Maclean’s

Complete with backbiting comments from anonymous party insiders:

May’s praise of [Liberal leader Stéphane] Dion rankles many Greens. As does her constant vilification of Harper. Her comment last March that Harper’s stance on the environment is “a grievance worse than Neville Chamberlain’s appeasement of the Nazis” created a furor. May said she was just paraphrasing a British journalist. A party insider sees the incident as telling of May’s intransigence. “She threw gas on it. She could have smoothed it over as any professional politician would have, but she prefers to fight. She turned a three- or four-day story into a three-week story by not finding her graceful exit and moving on.”

That’s a salaciously nasty bit, but it’s a serious piece Anne Kingston has written, shedding a lot of light on the ongoing civil unrest in the Green Party of Canada. Very, very worthwhile.

ecoUH-OH

So we bought a house in Ottawa. It’s a house with a lot of old stuff in it — old wooden trim, old light fixtures, old stucco on the outside. Old insulation. And an old gas boiler in the basement, heating water to circulate in the old radiators.

You don’t need to be an engineer to know that a 26-year-old boiler with an open pilot light that runs 24/7 isn’t exactly the green-friendliest appliance on the block, and we decided that while getting it updated wasn’t our No. 1 priority (that was replacing the kitchen and all the old appliances in it, and taking out the asbestos-laden insulation in the attic, on which more later), it was on the list.

At a minimum, though, we wanted to get it inspected to find out just how bad the thing is and to find out, if nothing else, that the boiler is safe.

The heating contractor came yesterday evening, drilled a pinhole in the venting duct and stuck a probe in there. Before activating the probe, the guy told me that if the contents of the duct included more than 100 parts per million of carbon monoxide, he’d have to “red-tag” it as being unsafe to operate. Anything over 50 parts per million in the ambient air will get the fire department to order you out of the house, he said, and if your boiler is spitting out gases quite that poisonous, it’s only a matter of time.

He fired up the handheld computer the probe was attached to. Waited. Watched some numbers climb. Flipped through a couple more screens.

“Huh,” he said, blinked and shook his head. He extracted the probe, waved it in the cool air, reset the computer, started over.

“Huh,” he said again.

Turns out the boiler is safe, amazingly so given its age. Very low carbon monoxide content in the gases coming out. Unfortunately, it’s so safe precisely because it’s so monstrously inefficient. It’s burning so incredibly hot that all the dangerous products of combustion are being obliterated before they get anywhere — specifically, before they ride the tide of that incredible heat all the way along the duct, up the chimney and out the roof.

Out of the box — this is back when I was a small child — the boiler was maybe 75-per-cent efficient. Now, it’s much, much less. Ditto the hot-water heater, which is basically just a big dumb tank in which hot water sits, cooling off and being reheated until it’s used.

For this and other reasons, he successfully sold me on getting on with a high-efficiency upgrade forthwith. Among those reasons was the fact we’d be eligible for a $600 help-out grant from the Canadian government through its ecoENERGY program, and one from the Ontario government to match it. Ballpark, the job will cost something like $10,000, but we’ll start seeing savings on the gas bill right away, and $1,200 worth of help would sure take some of the sting out.

I hit the Web, looking for details.

Argh!

We are eligible for the $1,200 in grants if we follow this procedure:

  1. Have an energy audit done on the house. This is a two- to three-hour process, generally available only during weekdays, and it costs $350 by itself from a local non-profit that does them (the Ontario government will kick back a bit of the cost). A report would take two to three weeks to get afterward.
  2. Then we’d get the new system.
  3. Then we’d have a second energy audit to demonstrate we’d done the work.
  4. Then we’d apply for the rebate. We’d also get some proportion of the $350 back, too, but we’d only be eligible for the full amount if we followed all the audit’s recommendations, whatever they might be. In an old house, the things we could do might be staggering.

This is accountability run amok. Two separate inspections, a delay of many weeks (with winter approaching), and so much out-of-pocket spending on the accountability process that it eats up a sizeable chunk of the benefits we’d get.

The point of these audits is to grasp the so-called low-hanging fruit, to help people do the stuff that has a financial payoff as well as an immediate environmental one. Somehow, I won’t be surprised if this one fails.

How to distort a debate

Create a survey that breaks apart fine distinctions into wholly different answers, then report some of the results out of context.

Hoist by their own katana

A persistent rumour around official Ottawa is that the Conservative government, in its agenda-setting Speech from the Throne in Parliament this evening, will finally and formally declare Canada’s Kyoto Accord targets unachievable.

This is a palpably true statement; according to Statistics Canada, the country emitted 747 megatonnes of carbon dioxide and its equivalents in 2005, and there’s no reason to believe that figure’s gone down last year or will be lower this year. Our Kyoto targets, which kicks in in two-and-a-half months, is about 500 megatonnes. We’re not getting there, period.

Such a statement of fact is being billed as a possible “poison pill” meant to force the opposition Liberals to reject the throne-speech agenda and bring down the government — they’re the ones who forced through a bill aimed at requiring the government to honour the Kyoto Accord just last winter.

According to the Globe and Mail, the language of this passage will somehow be made unantagonistic, so the Liberals won’t find themselves honour-bound to do anything:

While there will likely be a mention of the fact that targets under the Kyoto accord for reducing greenhouse-gas emissions are no longer attainable, Conservatives said that, in their view, the language will not be antagonistic.

And yet there would be some justice if it were, and if it did put the Liberals in a jam. They’ve been harping on an impossible target for so long, they’d deserve to find themselves required either to back down on it or push the country to the polls in defence of a claim that’s demonstrably false.

It drives me crazy that the Conservatives, who clearly don’t consider greenhouse gases an important problem, have a more reasonable position on the matter than the opposition, led by a former environment minister who climbed to his party leadership partly by waving his genuinely respectable green credentials.

Ed Stelmach de Bolívar

The Globe and Mail‘s David Ebner has an occasionally wordy but comprehensive survey of Alberta’s oil patch, which is holding its breath waiting for an announcement from the provincial government on whether and how it’ll change the royalty scheme whereby oil and gas companies pay the government to exploit an officially public resource.

In a nutshell, this is how it works: Alberta’s oil and gas, like that of other Canadian provinces, are owned by the provincial government. Oil companies lease the rights to explore and exploit those resources, and pay the government a percentage on what they find, extract and sell. And Premier Ed Stelmach is to make up his mind by the end of the month on how much that percentage will increase.

Stelmach, responding to a sense among Albertans that they were being taken for a ride by low royalty rates set when the industry was practically dormant, asked a review panel to make a recommendation on new rates. Simplistically put, the panel recommended jacking up the royalties on mature projects from 20 per cent of profits to 33 per cent, on the grounds that, indeed, Albertans weren’t getting a “fair share” of the profits from their publicly owned natural resources.

Aaaiiiiiiieeee!, the oil industry responded, including in an instant-classic analyst’s note from Deutsche Bank comparing Alberta to Venezuela (PDF). Behind that overblown rhetoric from the kind of Wall Street analyst who gives Wall Street analysts their superior reputation for probity and manners, there’s a fair point: Alberta’s oil reserves are exceptionally expensive to extract. Many projects are borderline even with oil costing $80 a barrel, and if Alberta wants to increase its royalty rates, maybe riskier but higher-profit projects in places like Saudi Arabia and Angola make more corporate sense.

Partway into Ebner’s story is this reminder that for all the talk of the economic riches and environmental perils of the oil sands, work on “unconventional” reserves in Alberta is really just getting started:

The critical and most controversial issue – natural gas – has underpinned Alberta’s economic success and its overflowing treasury. The so-called Calgary oil patch is in fact a gas capital, with a shift only now beginning to swing to the oil sands. Canadian Natural Resources Ltd., the country’s second-largest producer, is the embodiment of this evolution, beginning life in the deep recession of the late 1980s as a scrappy gas producer and growing into a giant gas producer – and now making a big, long-term bet on the oil sands.

But the oil sands remains a tomorrow story, a key source of the province’s long-term revenues.

And the key to that key source of long-term revenue is just how much Alberta wants to extract from the oil companies. This is not a simple question, as Ebner explains.

It’s Stelmach’s job to try to set a royalty rate that maximizes the oilsands’ value to his taxpayers and voters. His trouble is that it’s an impossible task, requiring him not only to set one provincewide rate where rates for individual projects would be more appropriate, and to “balance,” somehow, the reasonable arguments made in Deutsche Bank’s note with a vague “feeling” among Stelmach’s voters that they’re being hard-done-by. Not only that, but we’re talking not only about maximizing the price the province gets from the oil, but maximizing the oil’s long-term value — which means factoring in the other economic activity the oilsands support.

The Star‘s David Olive points out that in the long term, the vastness of Alberta’s reserves likely matters more than the cost of extracting them:

Global oil firms are desperate for reserves, and Alberta’s oil sands represent more than 50 per cent of the world’s reserves available for non-state investment. Threats to move to other jurisdictions are almost laughable. Where will the producers go in search of a similarly giant reserve base that also boasts a politically stable regime – Russia, Kazakhstan, Iraq, Venezuela, Sudan?

In other words, whatever the royalty rate Alberta sets, there will eventually come a world oil price where digging all that oily muck is worth the effort. Indeed, the longer Alberta makes the oil companies wait, the more the oil will be worth. But all the jobs in pipefitting and trucking and fabrication and engineering are worth an awful lot, too, in 2007 prosperity that could set the stage for an oil-independent economy by, say, 2050.

You’d almost think that this problem of trying to maximize the oilsands long-term value would be one better set by, well, a market, rather than this system, reminiscent of the Klondike era, of staking claims and paying arbitrary percentages and having provincewide policy decisions made by one guy.

What’s a particular project worth to an oil company? Why not make them put their cards on the table and bid? Let the companies do all the exploring they like (and no leasing exclusive exploration rights that are little more than lottery tickets with multibillion-dollar payouts) but before they can put a steamshovel in the ground, they’d have to tell the government what they’re willing to pay for the oil they get out. A flat amount, a percentage, whatever the company thought would be fair. Let anyone else bid, too, and take the best, maybe with some automatic payout to the finder if that company doesn’t win the bidding.

Whatever form it took, it’d almost inevitably be superior than leaving Alberta’s whole economic future to one farmer from just northeast of Edmonton, no matter how clever a fellow Stelmach is.