Hot Air: Meeting Canada’s Climate Challenge

Jeffrey Simpson, Globe and Mail Columnist, along with Mark Jaccard and Nic Rivers have published a book that examines Canada’s policy failures in meeting the climate challenge, and makes some sound suggestions on policies that would move us in the direction we need to go.

The book has a fascinating summary of how we arrived at where we are today, a Kyoto signatory, with emissions more than 30% above our targets.  Big promises, and minimal actions.  He pulls no punches as he takes on politicians for their big promises, and their failure to implement effective policies.  He correctly points out that Canada’s policy so far has been to ask for voluntary measures through advertising and education (with minimal impact), and to implement subsidy programs for housing retrofits, renewable energy, and other programs that have only a small impact.  He is scathing in his indictment of politicians for not leveling with the Canadian people about what is really required.  We have no Al Gore or Tony Blair.
He rightly tries to get us to stop talking about meeting Kyoto commitments in the 2008-2012 period, the flavour du jour in parliament.  We will not and cannot meet these commitments, at least not at this late date.  He correctly points out the problem with subsidy programs.  If you provide a consumer with a coupon to buy a compact fluorescent light bulb that they would have bought anyways, you have spent tax dollars with no incremental emission reduction.  The extent of this “free ride” is difficult to estimate, but it is no doubt substantial.  But he makes sound suggestions on policies that will begin to move us to a low emission economy in the long run.

His policy prescriptions make sense.  He suggests a carbon tax, beginning at $15/tonne of CO2, and rising to $120-180/tonne over time.  This will raise the cost of carbon based fuels, and result in fuel switching (eg. wind instead of coal), carbon sequestration, efficiency and conservation.  He proposes to do this in a revenue neutral way, so that other taxes are simultaneously reduced.  The other option, perhaps used in combination, would be an effective cap and trade program, that would cap, and then reduce allowed emissions, with a market established so that the company that can reduce emissions most economically could proceed first, and sell their surplus reductions to others.  It is interesting how the policy prescriptions proposed – the ones that will work – have been adopted as a policy position by only one political Party – the Green Party.
The book suggests there is still a role for subsidies, especially for R+D on emission reduction technologies, and on certain difficult areas like social housing, where consumers can’t afford the capital investment required to achieve reductions.  I also think there are some technologies where deployment can be enhanced with little “free rider” problem as there is virtually no market today.  An example of this would be solar hot water heating, which is a very small market, and which has substantial emission reduction potential.

The book also correctly points out that there is a substantial role for regulation of automobile efficiency, appliance efficiency, building codes etc.

This is a policy book, and therefore by its nature is a bit dry.  But it is written in very accessible language, with clear examples.

There are no punches pulled in taking on the environmental community either.  I have to confess I am still of the belief that we can achieve substantial results from conservation and renewable energy.  The book admonishes these claims as wildly optimistic.  I disagree.  I know about the conservation results first hand – I achieved a personal emissions reduction of 70% with a few changes – replaced an old oil furnace with a ground source heat pump, replaced a 15 year old refrigerator, a few light bulbs, and switched to a hybrid car from a 4X4 pickup.  Total expenditures were about $45,000, but my furnace was wearing out, and I needed a new vehicle anyways.  I figure I made about an 8% return after tax on these investments from energy savings – and that was with energy prices in 2000.  Throw in a carbon tax, and today’s higher fuel prices and the return would increase.  Conservation can make a huge contribution.

The area I know best, of course, is wind.  And in this area, the book is sorely lacking.  In many parts of the world, wind energy is viewed as having the greatest potential of all for emissions reductions.  It works today (unlike carbon sequestration which is still in the pilot stage, and the economics are not yet clear), it is rapidly deployable (unlike nuclear), and it is largely unutilized, especially in North America.  The book says “wind power could exceed 10,000 MW by 2050″.  This is far more likely to be reached by 2015.  Over 700 MW were installed last year, bringing the total to over 1500 MW, 400 MW are under construction, and over 900 MW are scheduled for 2008.  And contracts or provincial policies for installation of thousands more MW’s are in place already.  So wind installation is happening.  10000 MW would supply 4-5% of Canada’s electricity in 2015.

The book also repeats some widely discredited studies done by a couple of European utilities (that have coal plants) saying that it costs 2-3 cents/kWh to “firm up” wind.  At the relatively low penetration of 10,000 MW, it would cost almost nothing, as the firming up can be done by existing hydro installations, that can store water on windy days.  Studies by numerous North American utilities and system operators estimate .2-.5 cents per kWh.  While I admire Jeffrey Simpson as a person, and consider that most of his opinions are sound and well reasoned, his facts on wind energy are wrong.  Of course he is not alone – this is conventional thinking among most of the North American utility establishment.

Still, the book makes a very useful contribution to policy discussions.  It is right on many counts.  Politicians need to level with us.  The price of energy matters.  Policies so far have been costly and ineffective.  Kyoto in the 2008-2012 is not achievable at this time, and our focus should be on 2020, and beyond.  Better policies can make a difference.  The book’s closing line is, “The time for hot air is over”.  I couldn’t agree more.

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