Cap and Trade :Ontarior

                      Comments due by April 25, 2015

Canada's provinces are taking command of the nation's battle against climate change, seizing the initiative from a reluctant federal government as the clock ticks down to a crucial international climate agreement later this year.
Ontario Premier Kathleen Wynne on Monday signed a historic deal to join Quebec's cap-and-trade system for carbon emissions, while British Columbia Premier Christy Clark was invited to promote her province's carbon tax at the World Bank – an honour not usually accorded to a provincial leader.

And on Tuesday, Quebec Premier Philippe Couillard will play host to a meeting of provincial and territorial leaders to start crafting a national strategy to co-ordinate further climate action across the country.
"Climate change is one of the greatest challenges humankind has ever faced. This is about preserving a world for our children and our grandchildren," Ms. Wynne told reporters after meeting Mr. Couillard in his office near the National Assembly. "We cannot wait for a particular moment when the federal government decides it is going to engage."
Many of the details in Ontario's cap-and-trade system still have to be worked out over the next six months, but it is likely to look similar to the joint system run by Quebec and California. In that model, the government sets a cap on emissions and hands out some permits to industry for free while auctioning others off. The proceeds are then plowed back into other green programs, such as public transit.
Once Ontario's system is operating, 62 per cent of Canada's population and more than half its economy will be under the same carbon market. Including B.C., which uses a carbon tax instead, some three quarters of Canadians will be covered by provincial-level carbon pricing.
Ms. Clark on Monday said her message to leaders at the World Bank, which she will address Friday in Washington, will be to match B.C.'s success in slashing emissions through the tax: "The climate action challenge we're making to other governments is clear and simple: meet it or beat it."
While the federal government is moving forward with some climate-change measures – such as new regulations to make trucks more fuel efficient, and a plan to phase out coal-fired power generation – Ottawa has adamantly refused to support carbon pricing.
"We are very clear we don't want ... what is effectively a tax on carbon which would increase the cost for consumers and on taxpayers – the cost of electricity, of gasoline, of groceries," Finance Minister Joe Oliver told reporters Monday in response to Ontario and Quebec's deal. "We think this would be negative for the economy; it would be negative for consumers and for taxpayers. And that's why we oppose it."
The federal government is also leaving it up to the provinces to set their own emissions targets and report them to Ottawa, rather than attempting to forge a national strategy.
Mr. Couillard lamented this Monday, arguing that the federal government should negotiate with the provinces to set a clear plan that spells out exactly how much each province will cut in terms of emissions, and what each will do to achieve these targets.
The government must table its emission-reduction targets ahead of the UN climate summit in Paris in December, which will pull together an international accord for cutting greenhouse gas emissions.
"[The federal government should help with] getting to Paris with a common, well-documented position, which would include the global target for Canada and the allocation for different regions," Mr. Couillard said.
In the absence of the federal government, the provinces will be attempting to co-ordinate this themselves Tuesday.
But a spokesman for Environment Minister Leona Aglukkaq said Ottawa is attempting to work with the provinces and has received little feedback.
Ms. Aglukkaq has sent two letters to her provincial counterparts – one in November and another on Sunday – asking them to lay out their targets and plans beyond 2020. She told her colleagues the federal government will use that information, plus its own plans to regulate, to build a national submission for Paris.
However, Ottawa has rejected calls to lead a national negotiation on climate and energy policies and regional burden-sharing.
There are still major hurdles. Oil-rich Alberta, whose emissions are growing by leaps and bounds, must take tougher action to cut carbon if Canada is to achieve a net reduction over all. But Premier Jim Prentice, in the middle of a provincial election campaign, is skipping the Quebec meeting, leaving his province's plans up in the air.
Ms. Wynne, meanwhile, took a drubbing from the provincial opposition over her plan. Progressive Conservative environment critic Lisa Thompson argued that all cap-and-trade will do is make life more expensive for consumers in order to direct money into the treasury; she declared the plan a "new revenue tool to cover their wasteful spending."
Ms. Wynne appeared to anticipate this argument, and hit back at it as she unveiled the cap-and-trade plan at ecobee, a green-tech company in downtown Toronto, before flying to Quebec for her meeting with Mr. Couillard.
"When my granddaughter, Olivia, looks at me and says 'Grandma, what did you do [on climate change], I am not going to say to her 'I put my head in the sand because I was worried that maybe there would be a cost somewhere that I couldn't explain,'" she said. "I'm not going to do that."
(The Globe and Mail April 12, 2015)

Economic Growth vs. The Environment

                                                    Comments due by April17, 2015

When it comes to economic growth these days, people often point out that it must be sustainable or "green growth." To what extent is a combination of economic growth and sustainability really possible?

With its Energiewende, the energy transition policy from nuclear to renewable energies, Germany aims to gradually increase renewable energies like solar, wind and hydroelectric power. Some say it's an important step towards a more sustainable lifestyle. But not Karl-Heinz Paque.

"If we do these things in Germany, it's not really going to have much of a global impact. We're too small for that," Paque, a professor of economics at the University of Magdeburg, told DW. "It's going to be decisive what happens in those countries that are now trying to catch up on economic growth - and they make up two-thirds of the global population."

Should developing countries and emerging economies follow the path Europe took? For centuries, Europeans fostered their own economic growth and wealth, before discovering their heart for environmental protection.

"Environmental protection as a priority stems from affluence," Paque said. "For us, it only started in the 1970s, no earlier. In China, it's only just beginning, and it will take a little longer in India."

Comeback for coal

There is much to make affluent and environmentally active Europeans nervous. Across the world, coal - the energy source that in most European countries has a reputation as being particularly dirty - is booming.

"Coal is about to enjoy the biggest renaissance in the history of economics," said Ottmar Edenhofer, deputy director and head economist at the Potsdam Institute for Climate Impact Research.

In the 1990s, many countries substituted coal with gas. But this trend is now being reversed, since coal has become "incredibly competitive," Edenhofer said.

Attempts to limit greenhouse gas emissions internationally have been unsuccesfull

"Above all, China's economic growth is strongly powered by cheap coal. The same holds true for India, South Africa, as well as some Eastern European countries," he added.

When coal or other fossil fuels are burned, CO2 is emitted, polluting the atmosphere - and contributing to making climate change more likely. Projections by the International Energy Agency (IEA) say that annual medium temperatures could rise 5.3 degrees by the end of the century, if countries across the world don't take action.

But negotiations towards a new international agreement on climate protection have been a failure. Whether it's about limiting greenhouse gas emissions or agreeing on emission rights trading, the interests of the various countries are simply too different.

Devaluing resources

"A global climate agreement would probably lead to a reduction of coal and oil consumption," said Carl Christian von Weizsäcker of the Bonn-based Max Planck Institute for Research on Collective Goods.

That, in turn constitutes a problem for countries with large fossil fuel resources. "A climate agreement would lead to decreasing prices for the resources in these countries," Weizsäcker said. "That makes it even harder to reach an agreement."

To complicate things further, some countries are changing their negotiation positions. Since new oil and gas fields were discovered in Kenya, and Canada found ways to make tar sands exploitation more lucrative, these countries have practically lost interest in a achieving climate agreement; Any limitation to pollution would reduce the value of their resources. 

After the failure of the UN climate talks in Copenhagen in 2009, the chances of reaching a quick agreement are slim, many experts fear. And it's even more unlikely to expect countries to agree to less, or no, economic growth. Even so, many environmental activists in western industrial nations dream of a world in which economic growth is unnecessary.

Improvements without growth?

From a global perspective, zero-percent economic growth is not a serious option.

"The huge disparities, for instance between Africa and Europe, or between Africa and the Americas would be not acceptable," Ottmar Edenhofer said, referring to calculations he undertook for the Potsdam Institute on Climate Impact Research.

Few, if any, countries in the world are likely to agree to limit their own economic growth

"For Africa to reach living standards similar to those in Latin America, the United States would have to reduce its per capita incomes by 80 percent," he said. "Resulting social conflicts would be severe."

Thus, it seems unlikely there will be a conscious limit to economic growth, just as it's unlikely universal targets for climate protection will be agreed anytime soon.

Regional efforts, such as the trading of emissions rights within Europe, only work partially or not at all. That's why many experts see humanity steering towards an apocalypse.

Economist Karl-Heinz Paque, however, is cautious when it comes to such scenarios, pointing out that reliable predictions about the future are simply impossible to make.

"Imagine you had made a prediction in 1913, exactly 100 years ago, about the future of the world - but starting from the state of technological development back then," he said. "What has happened since, within less than three generations, would have been completely beyond your imagination. That's why we have to be very careful about our predictions."

Don't panic, humanity will come up with solutions - that seems to be the bottom line to this argument. Paque, who has been active in politics with the liberal FDP party, believes such technological progress can be reached with as little state regulation as possible.

Yet Gerd Wagner, who heads the German Institute for Economic Research (DIW) in Berlin, argues that regulations set by nation states will indeed be necessary. "If you want to reduce environmental exploitation you need regulations."

California Should Increase The Price of Water.

Comments due by April 10, 2015

 

There has been a lot of discussion of the drought in California and the new regulations that the state is putting in place.  But there has been little mention of the obvious (to an economist) solution: Raise the price of water.

This would do more than any set of regulations ever could.  For example, the governor is not going to force people to replace their old toilets with newer, more water-efficient ones.  But a higher price of water would encourage people to do that.  A higher price would also give farmers the right incentive to grow the most water-efficient crops. It would induce entrepreneurs to come up with new water-saving technologies. And so on.

Some may worry about the distributional effects of a higher price of a necessity.  But the revenue from a higher price could be rebated to consumers on a lump-sum basis, making the whole system progressive.  We would end up with more efficiency and more equality. ( Greg Mankiw)