Carbon Policy – The only thing we have to fear is fear itself
“So, first
of all, let me assert my firm belief that the only thing we have to fear
is...fear itself — nameless, unreasoning, unjustified terror which
paralyzes needed efforts to convert retreat into advance.”
Franklin
D. Roosevelt
The
preservation and enhancement of our environment is the most critical issue of
our time. The entire breadth of humanity’s existence rests on our ability to
steward the earth’s resources properly. This task of attending to the
environment is so important we must prevent it from being hijacked for other
purposes.
There are
terrifying cultural underpinnings within segments of the environmental movement
that subordinate the sanctity of human life to perceived climate concerns. These segments are advocating policy that puts the bottom billion at risk,
perhaps more. These environmental movement segments are gaining traction
due to their propagandizing of apocalyptic predictions. The “negativity bias”
in the public’s consumption of data is growing irrational hypotheses to epic
proportions and taking us in a calamitous direction.
The
discourse related to climate change is fear-based. The goal is to create a
culture of fear now, to prevent a perceived danger in years to come. Assuming
every assertion being made by climate alarmists were true, the magnitude of the
challenge was exactly as they are reporting, causing widespread fear would be a
bad thing. The fact is there is little evidence to support the magnitude of
their claims as being accurate. Climate activists have wrought the public's map
of reality and have offered virtue-signalling instead of effective environmental
policy. The hyper-attention to Carbon Reduction has distracted us from other
environmental challenges that need our attention. From the Canadian
perspective, nothing we do in Canada will alter the course of climate change,
that’s a fact, there is plenty we can do to harden our environment against all
possible challenges to it in the future.
The entire
climate issue is really quibbling over the degree and nuanced variation across a
multitude of variables. This effects two realities, nobody knows for sure, and
it is an issue that makes the perfect opportunity to raise nameless, unreasoning,
unjustified terror. The problem is that
irrational policy response is harming the environment and the economy in Canada
for no reason.
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Framing The Issue
Whereas Canada only
emits 1.5% of global emissions, and the goal is reducing global emissions, then
Canada must project the solution to the world because perfection in Canada will
have no effect on the challenge.
Canadian
emissions represent 1.5 % of total global emissions or 708,000,000 Tonnes per
year (2022 Stats Canada). There are 367,000,000 Square Hectares of Boreal
Forest (Environment Canada). Forests very in their capacity as carbon sinks –
Canada forests very, World Resources Institute suggests 3 tonnes per hectare
Elephantiacs suggest 6.4 tonnes per hectare. The writer, in the interest of
being conservative, chooses 3 tonnes per hectare. This means that our forest
sequesters 1,101,000,000 tonnes per year. The result is net carbon
sequestration of 393,000,000 tonnes per year.
People will quibble depending which side of the argument they are on,
the point is true, they may be able to quibble to the degree.
Please note
the infographics below. If Canada eliminated all emissions, we’d have no effect
on CO2 emissions and no real impact on climate change since the non-OECD
nation’s gains in emissions would negate our reduction in emissions. So rather
than directing funds toward something that no domestic effort can impact, we
should direct resources to preparedness, hardening our environment and
adaptation.
These
graphs indicate that non-OECD countries will be growing their carbon footprint.
Please note the thin green line, that is renewables. People tout them as the
solution, but they are in fact predicted to have very little impact on emissions.
I think any
rational person can look at these facts and deduce that nothing Canada does
domestically will have any effect on climate change. There is only one solution
to carbon emissions, an emission-free $50 / barrel of oil equivalent. I should
note also that these estimates are very optimistic given even Canada seems
unable to meet climate targets. Assuming for a moment that curtailing carbon emissions
is critically important, then if Canada wants to be a part of the global
solution, Canada needs to project technologies outside its borders.
Why would
we rather build dams that destroy millions of acres of important wildlife
habitats, when modern nuclear power is safe and effective? Why has Germany shut
down the nuclear plants and been a "leader" in climate policy only to
send Russia $1 billion per day for natural gas? Why has Canada failed to
respond to the coming energy crisis in Europe by getting LNG up and running? Why
have we implemented a Carbon Tax that slows the economy, effects inflation, is
extremely regressive and fails to meet its objective in a meaningful way. Governance
in Canada has taken an irrational turn and unless we change it, we'll be
leaving hell behind us for our grandchildren.
Where is
Canada?
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The Effects of the Carbon
Tax
The carbon tax
is bad policy. It is regressive, it slows the economy, and it contributes to
inflation, worst, however, it has little effect on carbon emissions. The degree
to which lower-income people are affected by artificially inflated oil prices is
disproportionate to people in higher income brackets and most programs to
mitigate this are ineffective. The damage to the economy is twofold; firstly,
for every $10 added to a barrel of oil equivalent BOE there is an approximately .2
to .3 % downward pressure on Gross Domestic Product GDP, secondly, carbon tax
effects inflation at a rate of .5 to 1 % annually – the cumulative effect of
the two is significant. Most importantly, carbon tax as a price signal to curb
consumption has little or no impact – there can only be consumer response to a
negative marginal rate for substitution if there is a substitute, there is no
substitute.
Any
negative effect on the economy is always amplified on lower-income people and
the marginalized. It is estimated by the Fraser Institute that due to increased
carbon prices GDP will decrease by 1.8% causing a loss of 185,000 jobs, real
household income will decline by 1% and the budget deficit will grow by $22
Billion. By 2030 the writer estimates the added cost of carbon will effect a 1
to 2% annual increase in inflation. The people hurt most by inflation are fixed-income people, seniors, people with disabilities etc.. The government’s Healthy
Environment and Healthy Economy (HEHE)’s downsides are reported to be offset by
the Climate Action Incentive Payment (CAIP). Effectively the government claims
that the carbon tax paid out will be returned dollar for dollar with some
benefit to lower-income people. CAIP fails, however, to compensate for the loss
of opportunity or the fact more people will be forced to dependence. Further,
it has been reported by the Parliamentary Budget Office that the public is
failing to be reimbursed for the carbon tax paid.
“Drivers
of global inflation. Oil price shocks were the main drivers of variation in
global inflation with a contribution of over 38 percent, followed by global
demand shocks with a contribution of about 28 percent over the past five
decades, and much smaller contributions of global supply shocks and interest
rate shocks. Impulse responses also suggest a more significant role for oil
prices and global demand shocks. For instance, following a positive oil
price shock of around 10 percent, global inflation increases by 0.35 percentage
point within a year, and 0.55 percentage point within three years.”
“In
addition, oil price and global demand shocks were the main drivers of movements
in global inflation around every global recession since 1970 (1975, 1982, 1991,
2009, and 2020).”
World Bank Brief Global Inflation
The Marginal Rate of Substitution (MRS)
is a fundamental concept in microeconomics, particularly in the analysis of
consumer behaviour. It measures the rate at which a consumer is willing to
substitute one good for another while maintaining the same level of utility
(satisfaction). The advocates for carbon tax assert that the tax effects a
price signal that moves the consumer of energy away from fossil fuels to other
less damaging energy sources. The challenge is that there is no viable
substitution, the consumer has no options. Nor are there likely to be more
options soon. Please note the graph below from the US Energy Information
Administration, the thin green line represents the predicted uptake of “green”
options. Given this reality, the carbon tax will deter
discretionary fossil fuel use, once discretionary use is curtailed, however,
demand hardens and the response to the price signal fades.
Please note
the graphs below. Note the price volatility of fossil fuels and note the steady
demand.
In British
Columbia, the Carbon Tax was implemented in 2008 and the data is unclear as to
whether it has had a positive impact. There are reports of a 5% - 15% reduction
in carbon emissions. The challenge is finding a means of attributing this
modest reduction in emissions to the tax. BC is a retirement mecca; we have
many people coming here to retire and a large cohort of our local citizens
retiring – this population uses less energy. This is just one example of an
influencing factor putting downward pressure on fossil fuel use. There is also
the growing intellectual economy and the relative waning of the industrial
economy.
Assuming
that reducing carbon emissions is important, we should use policies that work.
We should seek a policy that has as few negative externalities as possible.
Before we sacrifice our energy sector, we should be sure that we are doing so
for global results, rather than hoping that setting a good example will
convince the non–OECD countries to sacrifice their newfound prosperity.
The other
distressing effect of a carbon tax is that it provides yet another channel for the government to tax and spend – or tax and influence. In Canada, the government
takes about half of people’s money in taxes and fees and then gives a little
back if we do what they want. This would be less distressing if there were
actual study given on the pros and cons of a given course of action, it is rare
to find cost-benefit analysis done by the government on decisions they make – if
there is a study it is hard for the public to find and use – opacity is the
hallmark of our competitive political process.
Cap & Trade
A properly
designed Cap and Trade program is GDP neutral, and inflation neutral,
provides opportunity for new entrants to the marketplace and puts competitive
pressure on reducing the cost of sequestering carbon.
Cap and Trade, rather than taking money out of the economy
into government coffers, simply moves one bit of GDP from one party to another.
By way of example, if an oilsands company exceeds their cap, they post the number
of tonnes they need to be sequestered on an exchange.
There are many people who want the “business” so they bid for the
work, perhaps a company in BC plants trees or has some other means of
sequestering carbon – perhaps they can sequester carbon for $50 / tonne or
less, so they get the “business” rather than the person that charges $100 /
tonne. The market mechanism accelerates sequestration and reduces the cost per tonne of
carbon emission reduction.
The carbon tax is in effect a fine applied by the government and
it is an arbitrary number of $175 per tonne by 2030. Whether or not that $175 / has any
effect is ambiguous at best and the negative externalities render mute any
benefit that may occur. In contrast, a tonne of carbon sequestered is
unambiguous, and the cost of sequestering that carbon is an exchange between
two actors in the economy with a near-neutral effect on the overall GDP
picture.
Where Fear-Based Thinking Has Taken Us – The irrational destruction of millions of hectares of the most
important habitat in Canada.
One issue
that brings resolution to the challenge of fear of carbon driving decision-making is the way in which governments promote reservoir Hydroelectric power
generation as “green”. The mere fact that it produces electricity with a low
carbon footprint gives it a get-out-of-jail-free card on massive environmental
damage. Williston Lake, Lake Koocanusa, Arrow Lakes Reservoir, Kinbasket Reservoir,
Revelstoke Lake, Nechako Reservoir, Seton Lake, and Carpenter Lake collectively
have flooded 295,000 hectares – land that was key wintering habitat, rivers
that were once salmon rivers, vast areas with other potential in industrial
pursuits. Had we chosen Nuclear Power
instead, the same amount of power generation would have had about a
2000-hectare footprint and a fraction of the environmental damage.
This is in
no way a bid to reclaim this land, nor really to condemn the choice to build
Dams, this is a call to stop letting fear rule the roost and start letting
reason and science drive decision-making. It was fear rather than reason that drove the
damming of rivers, building thousands of miles of right of way for transmission
lines and the resulting depletion of habitat and reduction in other income
opportunities. This folly rages on, British Columbia built the Site C dam and
Quebec is planning more hydro development. Hydroelectric power, while short of
being carbon neutral, is a low carbon source of energy – it is devastating to
the environment generally, people flock to it out of the fear of carbon and the
fear of a possible accident from the safest form of energy we have.
Let’s take
a look at Williston Lake and the WAC Benett Dam.
Williston
Lake and WAC Benett Dam have a reported capacity of 15 GW. As a result of the
dam, we lost 129 thousand hectares of wildlife habitat, and river bottoms typically
are critical wintering habitat. The reservoir emits 252 KG per MWh the dam is responsible for approximately 2 million tonnes total per year. The approximate
dollar value of the timber destroyed by flooding and the timber value that the
reservoir precludes from producing to date is approximately $8 Billion. All
other industrial values precluded, tourism, mining etc. are outside the writer’s
capacity to quantify, they are sure to be substantive. All the acreage lost to
transmission lines and the way transmission lines mar the landscape are an
additional price we pay.
Nuclear and Hydro have nearly the same safety
profile.
It is
clearly indicated by the data that Nuclear is as safe as Hydroelectric and is
much less damaging to the environment. So how have we ended up ruining
thousands of hectares of land for no good reason? I submit that the answer is
irrational fear.
Fear of
carbon emissions has us doing nonsensical things. How many hectares of salmon
reds could we have built for the 30 billion dollars we dedicated to electric
battery manufacturing when batteries would have been constructed with or
without government funding. Contemplate the accumulated value of every level of
government’s action related to carbon reduction, why have we spent that money
or committed to spending more – when nothing we do in Canada will change the
trajectory in carbon emissions. We’d have been better off attending to pressing
environmental issues like habitat maintenance and enhancement, like protecting
our waterways from contamination, like managing our forests so they are
resilient and resistant to fire. Why, when we know we are less than 1.5% of the
world problem, have we failed to contribute to the world solution? The fear of
carbon is irrational, on what amounts to speculation, we have declared carbon
emissions the enemy. Do carbon emissions affect climate YES, it is the degree that
is unclear. If you assume carbon emissions are the problem, they are
inevitable, so prepare for them by attending to the environment and prepare for
them by contemplating and pursuing a global solution.
We should
be rational in the choices we make, Nuclear is safe, and effective and we are
leaders in the technology – we should use more of it. We should be exporting
LNG and displacing coal use in Asia and Europe. We should stop letting social
engineering hijack the critical task of protecting the environment.
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