Monthly Archives: March 2008

Carbon tariffs

Free-trader though I generally am, I’m forced to agree with the Toronto Star‘s editorial board that some kind of carbon tariff is in order. Once we have a carbon-taxing regime of our own in place, anyway. Here’s the Star:

With the growing realization in the West that the economy and the environment are but two sides of the same coin, a consensus is emerging that the only sure way to halt climate change is to put a realistic price on carbon that captures the environmental damage it is doing. This view, however, is being fiercely resisted on the other side of the planet, where carbon emissions are surpassing those of the West.

But putting a carbon price on goods produced in the West, through either a carbon tax or a cap-and-trade system, will raise the price of those goods and thus lead to the export of even more jobs to countries that refuse to impose a price on the carbon that goes into the goods they produce. The net effect would be an economic loss in the West without any gain on the global climate change front.

When the link between trade and climate change are viewed from that perspective, the solutions become obvious. If developing countries are not willing to incorporate the price of carbon into the prices of the goods they produce, the industrialized world will have no choice but to impose a carbon tariff on imports from those countries.

The Edmonton Journal has some more technical details.

It’s become pretty clear by now that treating the atmosphere like a dump with infinite capacity isn’t going to work — that it amounts to a subsidy for wasteful industrial production. Now, often the thing to do with subsidies is to not permit them yourself, but take advantage of the other guy’s, so that you get cheap goods at the expense of your trading partner’s taxpayers.

Unfortunately, it’s everybody’s atmosphere. So if you put a carbon tax on your own economy, but allow free imports of goods from countries that don’t follow suit, you just end up transferring production elsewhere while doing nothing constructive at all for the environment, precisely as Canada’s Conservative government has warned:

“Our position internationally has been clear — while Canada is doing its part at home, we still need action on the world stage from countries like China, India, and the U.S., rowing together in the same direction,” said [Environment Minister John Baird’s spokesman Eric] Richer.

“Otherwise we won’t reduce greenhouse gases at all.”

So Canadians would get to pay some of the subsidy, by supporting damage to our own atmosphere with our own trade dollars. That’s a bad deal.

From one perspective, this is an argument for doing nothing, or very little, until everybody’s on board. From another, it’s an argument for playing rough with the competition, slapping a carbon tax on imports as well as your own domestic production. Given the amount we import from places like China, this could prove damned expensive, all the more so since the import tariff would have to apply to fuel used to transport things across an ocean, too.

Is it ideal? No. But if you think climate change is an urgent problem, it’s better than the alternative.

A series of unfortunate events


Photo credit: “Migraine!” , Flickr/annia316

Well, one. I was busy and neglected my domain registrar’s warnings about how the and .ca domains were about to expire.

Pieces gradually being picked up. Sorry for the inconvenience, and thanks for finding your way here despite my best efforts.

Earth Hour’s compromises

Citizen reporter Katie Daubs has put together a piece on the moral complexities of tonight’s Earth Hour events. It’s centred on Ottawa, but the questions are of general application:

Organizers acknowledge that turning off the lights won’t save the world. They say their point in killing the lights for an hour is largely symbolic. But it raises the question: When you’re trying to bring new supporters to your cause, how much can you afford to compromise your message to get their attention?

Changing public opinion is daunting. Neither hard-core environmentalists nor those who oppose them are easily moved. The key demographic is the mass in the middle who could be swayed either way. Marketing experts say that asking this group to flip a few switches is a brilliantly simple way to engage them.

Reverse psychology or talking like a grown-up?

If Prime Minister Stephen Harper is talking about higher energy prices as a scare tactic, it’s not obvious from Canadian Press’s story.

Reason for pessimism

Economist Tyler Cowen thinks all this global warming business is going to be a lot tougher to sort out than some people are letting on:

Chinese CO2 emissions are much worse than we had thought, China resists outside pressure, Chinese governance is often of very poor quality, China is currently subsidizing energy consumption, China thinks it is our problem to solve, China won’t automatically keep on becoming prosperous, the super eco-conscious Europeans in fact haven’t made much of a dent in the problem in terms of percentage change, the U.S. has done better on carbon emissions than most of the Kyoto signatories, the price of oil rose fivefold in a relatively short period of time without much helping, a gradual increase in carbon taxes (in a Hotelling model) can lead to more extraction today thus worsening the problem, and if the rich countries massively cut their carbon consumption the prices of coal and oil would plummet and the incentive for someone to buy and smoke the stuff will be all that much stronger.  Valuable stuff in the ground tends to be dug up and used.  And by the way, curing the ozone problem was easy and even a “simple” international organization such as WTO gets tied up in gridlock.

Did I mention that some of the world’s nations might even benefit from global warming, most of all Russia, and thus they might wish to sabotage various partial solutions and that Russia holds a permanent seat on the Security Council of the UN?  And that geo-engineering is massively risky and might be considered by some countries to be an act of war?
That’s not even all the arguments I can think of.  And no, they are not arguments for ignoring the problem but they are arguments against optimism.

Canadian carbon market to open May 30

Good news that the infrastructure for trading carbon emissions is nearly reality in Canada, with the Montreal Exchange planning to open the doors (well, flick on the computers) May 30 this year. The head of the exchange, Luc Bertrand, has previously been lukewarm on the viability of such a market, given the weak federal regulation of emissions, but apparently he’s changed his mind:

The Government of Canada has provided greater regulatory certainty regarding intensity-based emissions reduction targets and the definition of a single compliance standard for tradable credits,” added Mr. Bertrand. “This will enable emitters to more accurately forecast their individual intensity-based reduction targets and exposures.”

“Clear regulations are always welcome news for buyers, sellers andmarket operators. Our aim is to offer a market based solution that will optimize the policy guidelines set by the federal Government and support the reduction of carbon emissions in a cost effective manner.”

My guess is, they’re expecting tougher targets eventually and want to be up and running well in advance. It’ll be very, very interesting to see what price the market puts on emissions credits, given the government’s regulations.

Dion’s dithering

This is, unfortunately, indicative of the way Stéphane Dion has been leading the federal Liberal Party:

Liberal Leader Stéphane Dion says he would place a price on carbon as part of his government’s commitment to environmental leadership, but he steered clear of calling for a tax, at least for now.

Mr. Dion told a forum for emerging environmental leaders Friday morning that it’s the government’s job to manage the economy and environment responsibly.

The Liberal Leader acknowledged that the concept of pricing carbon is still a work in progress for his party and the end result could be either a cap-and-trade system or a tax.

I was pretty pleased when Dion snuck up the middle to take the party leadership. It seemed as though, at last, both the major federal parties would have adult supervision. As it turns out, not so much (in either case).

Dion was elected to lead the Liberals in 2006 on a platform whose most interesting and prominent component was environmentalism: he went so far as to add it as a “third pillar” to the party’s traditional two priorities of social justice and economic growth. In addition to which, he was supposed to be both smart and stubborn, as evidenced by his handling of separatists in Quebec when he was the minister in charge of that file. Maybe Dion didn’t inspire as a leader, but look at what he did.

But it’s coming up on a year-and-a-half since then, and Dion’s party is still dithering around what the leader himself as presented as the key public-policy question of our time. I mean, no kidding it’s going to take a carbon tax or cap-and-trade, or more likely a combination of both in different sectors of the economy. This is as far as you’ve gotten?

Dion’s best bet, short of waiting for the Conservatives to self-destruct (which any party will, eventually, viz. the Liberals under Dion’s predecessor Paul Martin), is to be the guy who’s done his homework, who can make policy promises backed up by unimpeachable research and compelling argument. “Yes, we need a carbon tax, it should be this much on these commodities, here’s what that will do, these are the places where they’ve tried it, here are the experts who agree, and here are the economists who have projected the effects five, 15, 25 years out. Now, here are our cap-and-trade plans…”

If you want to be the government, you’ve got to prove you’re better than the one we have now.