Andrew Sheer’s Flawed Climate Policy

Contributed by Robert Lyman © 2018

Robert Lyman is an Ottawa energy policy consultant, former public servant of 27 years and prior to that a diplomat for 10 years.

Executive Summary

In a recent interview, Conservative Party Leader Andrew Sheer promised that before the next national election his party will publish a ‘detailed and comprehensive plan” to attain Canada’s greenhouse gas (GHG) emission reduction targets, and this plan will not include carbon taxes. These comments demonstrate a shallow understanding of the “global warming” issues and of the dangers to Canada of the radical environmentalism that encourages the adoption of such targets.

The Conservative Party has long opposed the imposition of carbon taxes (or “carbon pricing”, the term referring to emissions trading systems) because it recognizes that Canadians generally oppose higher taxes as a solution to any problem and that new, onerous taxes will severely impair the competitiveness of Canadian firms, especially when our major trading partner, the United States, is reducing taxes.

Some economists favour carbon taxes on theoretical grounds as potentially more efficient and fair than the wide scale use of regulations, subsidies and other government measures that seek to engineer changes in Canadians’ energy consumption habits. They also argue that a “revenue-neutral” carbon tax regime, in which all the revenues collected were reinjected back into the economy through reductions in other tax rates, could actually promote economic development. Governments, however, have no plans to eliminate all the other intrusive measures or to forego the opportunity to spend a carbon tax revenue windfall on new programs that benefit their supporters.

The real question that the Conservative Party should focus its policy attentions on is whether the costs of emissions reduction, at the levels implied by Canada’s current targets, match the benefits.

In fact, contrary to the general perception, Canada is not bound by the COP21 Agreement signed in Paris in 2015 to reduce emissions by any specific amount. The present targets are entirely political, and there is no legal penalty for not meeting them. This is fortunate, as none of the international emissions reduction targets that have been set since global warming first became a prominent issue in 1988 have ever been met. In fact, global GHG emissions in 2016 were 55% higher than they were in 1990 when the first targets were adopted.

The present Canadian political commitments are that Canada will reduce emissions to 17% below 2005 levels by 2020 and to 30% below 2005 levels by 2030. There are two ways to achieve cuts of this magnitude. One is through a severe economic recession as serious as that experienced from 2007 to 2009, only extended for the next decade. The other is by eliminating almost all energy consumption, and therefore economic activity, in one or more of the following sectors – oil and gas production, industrial activity, transportation, agriculture or buildings. To give some sense of how major and costly is the transformation involved, eliminating every single car, SUV and pick-up truck used for personal transportation would reduce emissions by only 11.5%, taking us only slightly more than one-third of the way to the 2030 target. The reality is that there are no options that are technically and economically feasible, and likely to be politically acceptable to the Canadian public, to meet the 2030 target.

There also would be no environmental benefits in doing so. Canada constitutes only 1.6% of global emissions, and all of the world’s emissions growth is taking place in the developing countries, and especially in Asia. While the United Nations claims that global emissions must decline to 16 gigatonnes (Gt) of carbon dioxide equivalent by 2050, all of the authoritative sources on global energy supply and demand trends project emissions to rise sharply from today’s level of 32 Gt, driven by the desire of the world’s population for economic development.

Andrew Sheer may believe that his party will gain more votes by aligning itself with those who believe that emissions growth will lead to environmental problems a century hence than it will lose by betraying those, especially in western Canada, who today experience firsthand the effects of global warming alarmism. In fact, he may be seriously under-estimating the long-term political fallout of such cynicism. Worse, embracing emissions targets that will not, indeed cannot, be met will earn the Conservatives no friends among the radical environmentalists, simply lock the party forever into trying to appease their new but unforgiving allies.

A full discussion of Robert Lyman’s analysis follows. This short video clip interview with Robert Lyman outlines the challenges of reducing greenhouse gases to meet Paris targets.

Andrew Sheer’s Flawed Climate Policy

In a recent interview on CTV, Conservative Party Leader Andrew Sheer expressed his party’s strong opposition to a federal carbon tax but promised that before the next election the Conservatives will publish a “detailed and comprehensive plan” to attain Canada’s existing emissions reduction targets because “Canada has to be part of the solution”. He is quoted as saying that “We all have an obligation to pass on a better environment to our kids. I’ve got five kids, I want them to have a cleaner environment.”

These comments demonstrate a shallow understanding of the “global warming” issue and of the dangers to Canada of the radical environmentalism associated with it. They constitute bad policy and even worse politics.

Carbon Taxes Are Not the Issue

The Conservative Party has long publicly opposed the imposition of carbon taxes on Canadian residents, whether in the form of direct taxes or carbon prices resulting from the use of “cap and trade” (i.e. Emission Trading Systems). This opposition appeals both to Canadians’ contempt for higher taxes as a solution to any problem and to the genuine risks posed by higher taxes on the competitiveness of Canadian firms when our major trading partner, the United States, is reducing taxes.

There is a vigorous debate among economists about the use of carbon taxes to reduce greenhouse gas (GHG) emissions. Supporters argue that, by raising taxes on fossil fuels (oil, natural gas and coal), governments will provide an incentive to reduce energy use and emissions; this incentive will affect all fossil fuel users and be transparent in its effects. Doing so through the price mechanism is more economically efficient and fair than doing so through the use of subsidy programs, regulations, and other government intrusions into the economy that have to be operated by large numbers of public servants and end up treating every industry and every person differently. This assumes, of course, that in introducing carbon taxes a government would eliminate all or most of the existing subsidies, programs and regulations. Governments have no intention of doing this. Proponents also argue that the revenues received from carbon taxes, if “recycled” back into the economy through reductions in other broadly based taxes like sales taxes or income taxes, may actually stimulate economic growth. According to a recent worldwide survey of the use of carbon taxes, over 70% of the revenues were used to fund other new programs, not reduce the tax burden on citizens. In practice, carbon taxes have been a revenue grab. (1)

Andrew Scheer, in rejecting carbon taxes and prices as means to reduce GHG emissions but endorsing the attainment of the targets, has implicitly chosen to use a vague collection of regulations, subsidies and government programs to alter the Canadian energy economy. This amounts to “more of the same” of the hundreds of government regulations and programs now in place.

The result is a massive, expensive and intrusive set of government interventions into the energy marketplace based on the presumption that governments know better than their citizens which energy sources should be used and that reducing GHG emissions is more important than anything else. No one has ever even attempted to estimate the cost of this because the interventions are so pervasive; they surely run to several billion dollars per year. Worse, they are almost certainly more expensive than carbon taxes. (2)

The real question to which the Conservative Party should turn its attention is whether the costs of emissions reduction, at the levels implied by Canada’s current emission reduction targets, match the benefits of doing so.

Canada is Not Legally Committed to Reduce Emissions

Andrew Scheer appears to be under the impression, widely promoted in the media, that the 2015 U.N. Conference of the Parties Agreement (COP21) requires Canada to reduce GHG emissions. This is not true. COP21 actually has very few legally binding provisions, and reducing emissions is not one of them. The COP21 agreement also contains no penalties for non-compliance. (3) It is largely a hollow agreement masquerading as a treaty.

There are only two significant political commitments embedded in the agreement. One is to submit an Intended Nationally Determined Contribution (IDNC) plan for emissions reduction every five years.  The other is that “Annex 2” countries, including Canada, must make contributions to the Green Climate Fund. The latter fund is intended to help finance emissions reductions and climate adaptation measures in developing countries. The level of contribution to the fund is supposed to be at least $100 billion per year starting in 2020, but there is no agreement either on the allocation of contribution obligations among donors or the distribution of the funds among recipient developing countries. Many of the developing countries have stated that their INDC emissions reduction plans were contingent on receiving their desired levels of funds from the Green Climate Fund. The decision of the United States to withdraw from the COP21 Agreement, and thus from funding the Green Climate Fund, made it virtually certain that the Fund would not meet the developing countries demands.

It helps to place in historical context the claims that Canada must abide by international targets. In 1990, global carbon dioxide emissions were 21.5 gigatonnes (GT). Since that time, there have been a series of multilateral agreements to reduce emissions. In 1990 it was agreed to stabilize emissions at 1990 levels by 2000; in 1997, it was agreed to reduce emissions by at least 5% from 1990 levels by 2010; at the 2010 U.N. Climate Conference in Cancun, several countries agreed to deeper emissions cuts. Canada, for example, agreed politically to reduce emissions by 17% below 2005 levels by 2020 and by 30% from 2005 levels by 2030. Some European countries have agreed to reduce emissions by 40% below 2010 levels by 2030. The IPCC and several environmental groups are arguing that it will be necessary to reduce emissions by at least 50% below 2010 levels by 2050, and to eliminate emissions entirely by 2100 if “catastrophic warming” is to be avoided.

Every multilateral target set to date has been missed. By 2000, emissions were 23.0 gigatonnes (GT), by 2010 they were 31.5 GT and by 2016 they were 33.4 GT. (4) So, between 1990 and 2016, global emissions increased by 11.9 GT, or about 55%. Based on the experience of the last 28 years, emissions reduction targets adopted at international conferences can be regarded as political statements aimed at local “green” voters and not as serious commitments.

What would it take to meet the Canadian Emissions Targets?

According to statistics from Environment and Climate Change Canada (ECCC), Canada’s GHG emissions were 611 megatonnes of carbon dioxide equivalent (Mt) in 1990. They rose to 638 Mt in 2005 and 722 Mt in 2015. The emission reduction goals are therefore 530 Mt by 2020, 447 Mt by 2030 and (using the 80% reduction target) 122 Mt by 2050.

The following table shows the most recent sectorial breakdown.

Source: Environment and Climate Change Canada (5)

To attain the 2020 target of 530 Mt, emissions would have to decline by 192 Mt from 722 Mt in 2015, an average of 38.4 Mt per year. The only years since 1990 when emissions dropped by anything comparable to that was during the worldwide economic crisis period 2007-2009, when emissions declined by 61 Mt, or an average of 30.5 Mt per year. We would need to have a far more serious economic crisis extending from 2015 to 2020 to place us on the path to meeting the 2020 target. Fortunately, this is not happening.

Looking further out to the 2030 Canadian target of 447 Mt, this would require a reduction of 275 Mt, or an average of 18.3 Mt per year from 2015. Apart from the worst recession years, that has not happened in the past.

In the absence of a prolonged recession, from where might emission reductions of that magnitude come? Let us examine the possibilities.

There has been a sharp reduction in coal-fired electricity generation. Consequently, emissions from coal declined from a peak of 106.4 Mt in 2000 to 61 Mt in 2015. Continuation of the same policies would result in the phasing out of all remaining coal–fired generation by 2030; that would eliminate the remaining 61 Mt.  Such a change may be partially offset by an increase in natural gas-fired generation needed to provide the backup capacity for intermittent solar and wind energy power generation.  However, a net reduction in electricity emissions of 50 Mt is certainly possible by 2030.

Reducing, and eventually eliminating, coal-fired electricity generation is very expensive and has eliminated one of our most economic and reliable generation sources. Coal, of course, is very carbon-intensive, so the emissions reductions were disproportionately high; it represented the “low hanging fruit”. From here on, the choices for emissions reduction become more expensive and disruptive.

No doubt, environmental groups will make every effort to prevent any growth in oil and natural production and exports, and they will continue to urge that industry “leave it in the ground”. Eliminating absolutely all oil and natural gas production in Canada, if that were possible, would subtract 2015’s 189.5 Mt. Added to the 50 Mt net reduction from electricity generation would reduce emissions by 239.5 Mt, and take us 87% of the way to the 2030 target, leaving only 35.5 Mt to reduce in other sectors. More likely, with increasing production resulting from past investments, it seems that oil and gas emissions will grow, not decline. That would mean that about 225 Mt (275-50) in reductions would have to be found in the others sectors.

The other sectors include transportation, buildings, heavy industry, agriculture, and waste. They produced a collective 453.6 Mt in emissions in 2015. If one were to reduce emissions proportionately across all of them, it would mean cutting emissions in each sector almost in half. That would certainly spread the pain around, but the opportunities for reductions are not equally distributed.

Alternatively, governments could focus their efforts almost entirely on reducing emissions from transportation. Many people think that transportation-related GHG emissions come almost entirely from passenger transportation in cars and light duty trucks. In fact, the total of these two categories in 2015 was 83 Mt, less than half of the transportation total. So one could eliminate every single car, SUV and pick up truck in Canada, and you would only cut Canada’s emissions by 11.5%.

Despite the dreams of some, it would not be remotely possible to electrify a substantial portion of the transportation system by 2030, and people will still insist on moving regardless of how high the carbon taxes and fees become. So the chances of completely eliminating the 173 Mt of emissions from transportation by 2030 are, in practical terms, nil. Even if one could, it would still leave Canada 52 Mt short of the target.

Every other combination of ways to achieve a 225 Mt emissions reduction by 2030 presents enormous quandaries. How about shutting down all heavy industry (auto and parts plants, refineries, mines and smelters, petrochemical plants, cement, aluminum and steel plants, etc.)? If one did that, and eliminated all emissions from agriculture, that would reduce emissions by 147.4 Mt, leaving only 77.6 Mt to be eliminated from transportation. Of course, the employment, income and population effects would be severe.

The reality is that there are no options that are technically and economically feasible, and likely to be politically acceptable to the Canadian public. This does not even take into account the likelihood that Canada’s economy and population will grow between now and 2030, thus stimulating higher emissions.

At the Global Level, There are No Benefits

Whatever else it is, global warming is indeed a global issue. The emissions are occurring everywhere in the world and the benefits of emissions reductions, if any, will only occur if global emissions decline.

How do present trends compare to the IPCC’s proposed targets? Reducing global emissions by 50% from 2010 levels by 2050 would mean reducing them to about 16 GT. The U.S. Energy Information Administration, one of the most authoritative sources of energy supply and demand analysis, projects that global emissions will be 43 GT in 2040 and go on increasing after that. (6) While they disagree on the details, the other authoritative sources of global energy supply and demand projections (i.e. the International Energy Agency, ExxonMobil and British Petroleum) project a substantial increase in emissions to 2040. In other words, according to every authoritative source, global emissions will be much higher, and probably close to three times as high, as the current targets that the IPCC and environmental groups are calling for.

Virtually all of the emissions growth is occurring in the developing countries and especially in Asia (China, India and Southeast Asia lead the way). (7) (8) Emissions in Canada and the other countries of the Organization for Economic Cooperation and Development (OECD) are projected to remain roughly stable over the next 25 years.

The “bottom line” is that the multilateral emission reduction goals simply will not be met. In fact, they will almost certainly be significantly exceeded, regardless of anything Canada does.

It should be possible to make a convincing case in this regard by simply referring to the arithmetic. Canada’s GHG emissions constitute 1.6% of the global total. All of the emissions growth is occurring in the developing countries. According to the most authoritative sources of global energy supply and demand forecasts, GHG emissions will continue to grow, not decline, for the foreseeable future. So, Canada could disappear completely, and produce not one ounce of emissions, and global emissions would continue to grow.

The Political Consequences of Accepting the Alarmist Position

Andrew Sheer may be calculating that the Conservatives stand to gain more votes in the next election by catering to claims about alleged catastrophic global warming, even if they lose the support of those who see the real-world adverse economic effects of the emissions reductions policies. Perhaps he perceives this as a simple electoral tactic that can be safely ignored once in office.

However, such a political strategy has some decided disadvantages. It will leave without a national political voice those whose livelihoods depend upon resource development or who are skeptical about global warming catastrophe claims. Who else can they vote for?   This cynical betrayal of those who have experienced first hand the effects of global warming alarmism, largely in western Canada, can only further stimulate secessionist groups and encourage the formation of populist parties that will cut into future Conservative support.

Further, continuing to pretend that taxing or regulating to reduce emissions is desirable even when they threaten the economic viability of Canada’s resource and manufacturing industries simply plays into the hands of radical environmentalists. These groups have shown themselves to be single-minded and extreme in their view that reducing emissions is a goal that overrides all other public policy objectives. As the political battles over new oil pipelines have shown, radical environmentalists are unreservedly committed to shutting down the Canadian oil industry. They do not accept the results of independent, professional regulation, they reject the rule of law, and they ignore the jurisdiction of the courts, even while using the courts and the public hearings processes as weapons. In simple terms, they cannot be trusted to support the goals of economic development to which most Canadians are committed. Embracing their climate goals leaves any future Conservative government hostage to never-ending criticism about targets that will not, indeed cannot, be met.

Conclusion

Simply opposing carbon taxes has some merits because of the potential future damage that carbon taxes could impose on the Canadian economy. The present federal government policy is that taxes in all provincial and territorial jurisdictions must rise to the equivalent of $50 per tonne of carbon dioxide by 2022. In pursuit of the 2030 and later targets, governments could raise carbon taxes to $300 per tonne and more after 2025, as recommended by the former National Roundtable on the Environment and the Economy in 2009. (9) The result of that would be an economic catastrophe far more certain than the global warming catastrophe environmentalists warn about a century hence.

Nonetheless, opposing carbon taxes without acknowledging that the alternative could be worse is not credible. It betrays a failure to think through the real nature of the problem and to move towards a more viable solution.

A credible climate policy is one that properly weighs costs and benefits for Canada, that implements the most cost effective emissions measures first, that applies a consistent and credible methodology for evaluating the benefits of emissions reductions, and that places far more emphasis on research and development. Above all, Canadian climate policy must recognize that our climate policies must not fall far out of alignment with those of the United States, with whose economy we are closely integrated.

Scheer’s comment that he wants to leave a better world for his children is understandable. He errs by thinking this can be achieved by Canadians cutting emissions. Driving Canadians into energy poverty by raising energy prices and destroying the economic backbone of the country, while paying tribute to environmental catastrophism, will not assure a better future for any Canadian child.

Notes

1. “Global Panorama of Carbon Prices in 2017”, The Institute for Climate Economics, 2017.
2. McKitrick, Ross. “A Practical Guide to the Economics of Carbon Pricing”, University of Calgary School of Public Policy Research Paper, September, 2016.
3. Paris Agreement, United Nations, 2015
4. British Petroleum Statistical Review of World Energy, 2017, page 47.
5. “Canadian Greenhouse Gas Emissions by Economic Sector”, Environment and Climate Change Canada, April 2017
6. “International Energy Outlook 2017”, U.S. Energy Information Administration, September 2017
7. Lyman, Robert. “China, India and COP21”, Friends of Science blog, October 2016
8. Robert. “India – The Next Greenhouse Gas Emissions Giant”, Friends of Science blog, August 2017
9. “Achieving 2050: Carbon Pricing Policy for Canada”, National Roundtable on the Environment and Economy, 2009