When Will Climate Policy Hit the Wall? Text of Robert Lyman’s Presentation.

Contributed by Robert Lyman © 2023. Robert Lyman’s bio can be read here.

Remarks by Robert Lyman to the friends of Science Society’s 20th Annual Climate Science Event – Break Free from Climate Tyranny: Evidence Over Ideology.”

Note: Friends of Science Society, as an organization, is apolitical. The following remarks reflect Robert Lyman’s perspective.

Calgary, Alberta, October 17, 2023

Slide 1 – INTRODUCTION

Good evening, ladies and gentlemen. I am delighted to be in Calgary, and I would like to thank Ron Davison and the Board of directors of the Friends of Science for inviting me back to speak.

Three years ago, the Canadian federal government declared that it was Canada’s objective to reduce greenhouse gas emissions to meet a “net-zero” target. This evening I want to explore with you some of the barriers that may ultimately constrain governments’ ability to attain that goal. I will approach the issue from the perspective of a retired energy economist who spent almost 30 years analyzing and advising on energy, environment and transportation policies in the federal government. And I am desperately hoping you won’t hold that against me.

For those of you who prefer to get to the “bottom line” right away, my thesis is that the implementation of the present and planned measures to reduce emissions will have so many adverse impacts on Canadians’ lives that attaining the net-zero goal eventually will become impossible. This will happen when and if public attitudes in Canada find the situation intolerable, and vote for change. In other words, public perceptions will be key. There is no doubt in my mind that the harm that will be done if present policies continue will warrant a U-turn in policy. Predicting when that will happen is the hard part.

Slide 2 – WHAT DOES NET-ZERO MEAN?

Net-zero essentially means eliminating almost all the greenhouse gas emissions produced as a result of the consumption of hydrocarbons – oil, natural gas, and coal in the Canadian economy, and doing so within 27 years, by 2050. The “net” is a reminder that in some cases allowances will be made for the offset of emissions through purchase of carbon credits  and by sequestering, or storing, carbon dioxide in various ways.

This  obviously presents an immense challenge. Canadians now rely on oil, natural gas and coal to meet about 73 per cent of our energy  needs. These energy sources provide services that are essential to our incomes and wellbeing – secure, reliable and affordable heat, lighting and motive power to move people and goods and the food, medicine and other critical services to sustain us. Without these energy sources, we would all be poorer, colder, less mobile and less able to compete in the global economy.

Yet, all the major national political parties, the governments of most provinces, most of the mainstream media, most of the major industry associations, and most of academia support the net-zero goal. They accept the thesis that human GHG emissions are causing both potentially catastrophic long-term climate change and a harmful increase in near-term extreme weather events.

SLIDE 3 – THE FEAR FACTOR

Most of the time, government efforts radically to transform the energy economy probably would meet with overwhelming public resistance. Today,  however, a climate of fear prevails. The public is constantly bombarded with claims that a changing climate threatens catastrophe, the end of civilization, even extinction of the human race. Anyone who dares dissent is condemned as a “denier” akin to someone who denies the Nazi Holocaust. Further, by embracing artificial deadlines for certain emission reduction targets, climate alarmism creates a dangerous pretense of urgency. We are told that there is not enough time to deliberate or experiment. Every aspect of climate policy must be addressed in a hurry.

Many federal politicians are afraid to challenge the perceived climate consensus. When one raises considerations based on science, engineering or economics, the most common reaction of many politicians is “that battle is lost”.  This does not mean that those of us who value evidence-based decision making should stop our efforts. It does mean that we must be realistic about what may need to happen for current climate policy to become politically untenable.

SLIDE 4 – THE CLIMATE POLICY FRAMEWORK

The federal government has elevated reducing greenhouse gas emissions to the pre-eminent goal of public policy. Its policy framework includes the passage of the Net-Zero Emissions Accountability Act. This Act legally binds the government to a process to achieve net-zero emissions by 2050 and to set five-year emissions reduction targets and plans towards that end. Carbon dioxide pricing is a core feature – since 2019 every jurisdiction in Canada has had to have a system of carbon dioxide taxation or emissions trading in place. The government is implementing a vast array of regulations that prescribe emissions-intensity targets and/or mandate the phase out of hydrocarbons use. To enlist the support of industry associations, the government has provided dozens of direct and indirect subsidies and tax incentives, all paid for by Canadian taxpayers. It is almost impossible to keep track of the more than 400 measures that have been implemented by federal and provincial governments, or to know how much overlap and duplication they create. 

In my view, this policy approach is fundamentally flawed. I had a front-row seat in the design and implementation of Canadian energy policy through the period from 1979 to 2006. Based on that experience, I can tell you that the number and intrusiveness of the measures being implemented in federal government climate policy today make the 1980’s National Energy Program look like a kindergarten exercise by comparison.

SLIDE 5 – CARBON TAXES

The federal government describes the carbon pricing regime as the centre of its climate strategy. In theory, revenue-neutral carbon dioxide taxes are the most economically efficient way to reduce emissions, provided that they are used in place of so-called direct action measures like subsidies and regulations. In fact, the Canadian carbon dioxide tax regime bears no resemblance to the theoretical ideal. It is far from revenue-neutral, the rates bear no relationship to the alleged costs of climate change, and the financial costs imposed are excessive, especially for firms exposed to international competition.

Consumers already see the high costs of climate taxes and fees. The federal standard levy of $65 per tonne is scheduled to rise in steady increments to $170 per tonne in 2030. These rates are far above any similar carbon dioxide charges imposed in Canada’s principal trading partners.  The United States has no national carbon dioxide tax. In China it is $8 per tonne and in Mexico it is $4 per tonne. After 2030, the Canadian tax rate will almost certainly rise to $300 per tonne and higher.

To this taxation has recently been added the Clean Fuel Standard, a regulatory regime that seeks to reduce the carbon intensity of liquid fuels used in transportation. The Parliamentary Budget Office’s review of the Clean Fuel Standard found that the annual cost per household in 2030 will be over $1,100 in Alberta and Saskatchewan in 2030 and that, across Canada, the burden will fall most heavily on low income households.

SLIDE 6 – THE HEAVY HAND OF REGULATION

Taxes are only part of the story. Governments have added a mountain of regulations. Albertans may be most familiar with Bill C-69, the so-called “no more pipelines” Act. That act politicized the regulation of pipelines in Canada, doubled the scope of assessment and increased the opportunities for opponents to delay and block new pipeline construction. It also changed the system of environmental assessment and review so that almost all new infrastructure in the economy must be consistent with the net-zero objective. The Supreme Court recently ruled that much of the legislation is “ultra vires”, or unconstitutional where it applies to projects exclusively within provincial jurisdiction, but it left intact the federal government’s authority on federal lands and over inter-provincial and international infrastructure.

The electricity sector now copes with regulations to ban the use of hydrocarbons by 2035. Also, by that date, motor vehicle manufacturers must stop selling internal combustion light duty vehicles, which will add thousands of dollars to the purchase price of a new vehicle. Regulations prescribing emissions intensity standards increasingly limit industry and consumer choices across a broad spectrum of consumer appliances. Before long, all modes of transport, including trucks, railways, marine vessels and aircraft, will be subject to emissions regulations that will increase costs and reduce buyers’ choices.

The pending introduction of a cap and trade or supplementary carbon tax system on the oil and gas industry marks a whole new chapter in the regulatory onslaught. The system seeks to reduce emissions from the industry by 42 per cent by 2030. This target far exceeds what is possible with carbon capture and storage in that timeframe. It can only be achieved by reducing production. According to the Montreal Economic Institute, the cap will reduce oil and gas production in 2030 by 789 million to 1.4 billion barrels of oil equivalent. Depending on the scenario, the caps will  result in industry financial losses of at least $45 billion per year.

SLIDE 7 – ECONOMIC IMPACTS

Amazingly, no one really knows the total cost to Canada of attaining net-zero. The modelling of costs usually assumes that governments will rely exclusively on carbon dioxide pricing as the policy mechanism, when we already know they won’t do that. The Royal Bank estimated the cost of transitioning the whole economy at about $2 trillion. That is clearly an under-estimate. In the 2023 Budget the federal government projected its own expenditures to be an astronomical $125 billion to $140 billion every year until 2050, or something in the range of $3.4 trillion to $3.8 trillion. That’s almost twice Canada’s current GDP, or one hundred thousand dollars per person now in Canada.

Actual federal government expenditures on emissions reduction measures over the last seven years alone exceeded $120 billion, or an average of $17 billion per year. Let me try to put that expenditure in context. There are about 8,000 cities and towns in Canada . With $120 billion we could have built, equipped and staffed a brand new hospital in every single one of those cities and towns.

Of course, this has hurt investment. Over a two-year period alone, in  2017 and 2018, over $100 billion in project capital investment in the petroleum industry was foregone as a result of the disapproval, cancellation or deferral of petroleum production and transportation projects. Many industrial firms have either closed or left Canada. The taxes are making it very difficult for emissions-intensive industries in the resources and manufacturing sectors to compete.  Regulations forcing the accelerated phaseout of coal-fired power plants and granting preferential access and rates to renewable energy sources have doubled residential electricity rates in some provinces. The subsidies paid by federal and provincial governments to renewables and other “clean energy” firms are adding to Canada’s already inflated public debt and increasing inflation.

The economic burden of pursuing net-zero is appalling. As you well know, much  of that burden has fallen on the petroleum industry and on Alberta and Saskatchewan. But, the emissions-intensive industries are spread right across Canada. They include mining and metal fabrication, petrochemicals, cement, steel, heavy manufacturing and pulp and paper. Almost 600,000 people are employed directly or indirectly in petroleum-related industry, but the number employed in the emissions-intensive industries whose competitiveness is threatened by taxes and emissions restrictions is far higher. Canada is deindustrializing, to Asia’s advantage. Many of the best-paying jobs are being lost in the process.

In 2021, the Fraser Institute published the results of its macroeconomic analysis of the effects of carbon dioxide taxes to 2030. They will cause a 1.8% drop in Canada’s GDP, which works out to about $1,540 per employed person and the loss of about 184,000 jobs countrywide. That estimate refers to the outcome after the labour market has cleared; in other words, after taking into account the increases in employment that might be produced as a result of the policies. It is not a measure of temporary unemployment but of permanent job losses. Most of the job losses from the taxes alone, surprisingly, would take place in Ontario and Quebec, a point seemingly lost on politicians in those provinces.

A study produced by Rystad Energy on behalf of the Canadian Energy Centre projected that under a net-zero scenario by 2050, the government’s plan would essentially wipe out the net present value of Canada’s oil sands holdings. Oil sands  capital expenditures would fall from US $8 billion in 2022 to under $370 million in 2050. That’s a 95% decline. On a cumulative basis, between 2020 and 2050, almost $720 billion that governments take from taxing the oil sands industry would be placed at risk. Considering the strategic importance of the oil sands not only to Canada but to the entire OECD area, this is like shooting ourselves in both feet .

Slide 8 – “Clean Energy” to the Rescue? Hardly.

In its recently released discussion paper advocating a “just transition”, the federal government acknowledged that climate policies will throw hundreds of thousands of people out of work. It, however, claimed that the growth of new job opportunities in so-called clean industries would more than make up for these losses. The evidence says precisely the opposite. The studies of actual experience in Germany, Italy, Spain, and England showed that, for every job created in the renewable energy industries, two to three jobs were lost in other sectors due to the effects of higher electricity prices.

Since 2007, Statistics Canada has reported on what it calls the “clean technology” sector. The definition is very broad; for example, in addition to renewable energy and energy efficiency it includes waste management services and site remediation and decommissioning activities that have nothing to do with climate mitigation. This sector accounted for 3% of Canadian GDP in 2007. In 2021, following more than a decade of many billions of dollars of government subsidies, the sector’s share of Canadian GDP was still 3%. It is not growing.

SLIDE 9 – THE POCKETBOOK ISSUES

Then there is the prospect of rising inflation.  Many things cause inflation and understanding them can be difficult, but the effects are easy to understand.  Inflation is what happens when I pay $30 for a $20 haircut that I used to get for $10 when I had a lot more hair. However, it is more than that. In normal times, energy typically accounts for about 10% of the cost of most goods and services. So doubling the cost of energy will have an inflationary impact on the average price tag for everything we buy that must be transported.

The rising cost of housing is of special concern. To eliminate all GHG emissions from housing in Canada would require some combination of retrofitting existing housing and installation of new heating systems like heat pumps. Heat pumps will not work in Canada without a backup natural gas furnace or electric resistance heating for the coldest months and with additional home insulation.

Using estimates of building costs by the Canadian Home Builders Association, Dr. Ross McKitrick assessed the total cost of the federal government proposal to increase the energy efficiency of new residential buildings by 65% by 2030. While the costs would vary across Canada, the national average would be about $55,000. Canada already faces a housing crisis and most young people are being priced out of the housing market. Climate policy will make this situation worse.

SLIDE 10 – CENTRAL PLANNING WON’T SUCCEED

At the root of the climate policy framework is the political elite’s distrust of decisions made in free competitive markets. In other words, they don’t trust the people. The government has implemented a level of central planning and control of the energy economy that is unprecedented in peacetime. In my view and based on my experience, politicians and officials simply lack the knowledge and skills to supplant the marketplace.

When individuals and businesses make decisions about what to invest in, produce and consume they inevitably make trade-offs. Maybe you want to buy a car that costs less and can be reliably refueled rather than an all-electric one that allegedly produces fewer emissions but costs more . Governments increasingly believe that in making such trade-offs the views of the collective should prevail over the those of individuals and that emission reduction should prevail over all other considerations.

The perversity of this situation was illustrated this August. Environment Minister Steven Guilbeault, after announcing new federal regulations to eliminate emissions from electricity generation, responded to Premier Scott Moe’s statement that Saskatchewan may instead stick to its own power generation plan. Guilbeau said that such action could be  subject to criminal charges under the Canadian Environmental Protection Act. So now emitting carbon dioxide in ways contrary to federal policy can get you thrown in jail? This is not only foolish. It is profoundly anti-democratic. Eventually, such policies will be recognized as such and voters will reassert their democratic rights to make decisions free from government control.

SLIDE 11 – THE FINANCIAL BARRIERS TO GLOBAL CLIMATE COLLABORATION

Many Canadians today believe that Canada must “do its part” in a war in which all countries are engaged to reduce greenhouse emissions. They ignore the ever-growing divergence between what the United Nations advocates in terms of emissions reduction and what is actually happening in the world. In fact, the non-OECD developing countries now account for over two-thirds of global GHG emissions and almost 100 % of emissions growth. More important, under the Paris Agreement, any emission reduction commitments made by developing nations are contingent on developed countries giving them enough technology and money. If we don’t pay, they won’t play.

Over the last three years, the developing countries have increased their demands for climate aid. They want $1.3 trillion for climate mitigation every year from 2026 to 2030, with more beyond then. They want $600 billion per year to help them adapt to climate change. At COP27 last year in Egypt, they also demanded  compensation for past and “loss and damages” resulting from historic emissions. In other words, every time there is a severe weather event in a developing country, Canada and other wealthier countries would be sent the bill for damages.  The compensation would be virtually unlimited.

In 2022, the wealthier countries gave US $204 billion in Official Development Assistance,  or foreign aid, for economic development. To meet the developing countries’ demands for climate aid would mean increasing total foreign aid more than ten times.

Let’s be clear about what this means. The wealthier countries will never agree to pay so much. So, the developing countries will consider themselves under no obligation to incur the economic costs associated with emissions reduction. Consequently, the global net-zero goals will not be met.

Even for climate activists, it should be obvious that Canada cannot “save the world” by itself. What happens when the Canadian public finally understands that global emissions will grow regardless of what we do?

SLIDE 12 – THE POLITICAL DIMENSION

My starting thesis was that at some point within the next decade climate policy will “hit the wall. I admit that “hitting the wall” is an imperfect metaphor.  It implies that there may arise a sudden insurmountable barrier to further movement. It is equally likely that there will arise a series of problems that cumulatively become intolerable to the public. Under such conditions, voters might rebel against current climate policy and vote out of office all those responsible for it.

Judging by events in Europe, it takes an energy crisis that creates a “heat or eat” dilemma before the public may react. Even then, the advocates of climate alarm are very skillful at shifting the blame for their policy failures on to others. So, unless we can change the discussion, climate policies are likely to get very much worse before they get better and do deep, lasting harm.

So far, Justin Trudeau believes that his climate policy is making him more popular, especially in Quebec. There, at least, people wave at him using all their fingers. He is, I believe, ideologically committed to net-zero policies. By that, I mean that the Trudeau Cabinet seeks a fundamental transformation of Canadian society based upon a fairly narrow set of progressive political goals of which reducing GHG emissions is only one. There will be no change in policy as long as it is in office.

At present, the only viable alternative to the Liberal-New Democratic Party alliance that has governed Canada since 2015 is the Conservative Party. It too has publicly endorsed the net-zero objective while strongly criticizing the carbon dioxide tax and generally endorsing large public subsidies to technologies like carbon dioxide capture and storage. The Party’s recent gains in the polls may make the leadership shy about taking any positions that the media can condemn as “anti-environment”, “reactionary” or “Trump-like”. I doubt, therefore, that the Conservative Party will change its public position on climate policy before it gains a decisive election victory and can rule with a majority. Even that is uncertain.

The other way potentially to change federal climate policy is through the collective efforts of some key provincial governments. The recent passage of the Alberta Sovereignty within a United Canada Act perhaps indicates that the province is willing to contest the enforcement of federal government laws and regulations that Alberta considers unconstitutional.

As lawyer Andrew Roman has pointed out, however, the Supreme Court of Canada’s decision in the 2021 carbon tax case set a precedent that the provinces may find it impossible to overcome. In that decision, the Court held that GHG emissions represent a pollution problem that is serious and global in scope. This left less room for provincial natural resources jurisdiction. Not one single province contested the claims that global action was needed to fight a climate crisis and that Canada had committed to emissions reductions in the 2015 Paris Agreement. What an omission! Or perhaps, what an extraordinary demonstration of political cowardice! In either case, Canadians will pay dearly for this.

SLIDE 13 – CONCLUSION

Do I see an alternative, more hopeful, scenario? At this stage, it is difficult to see one before 2030. After that, the timing of a policy U-turn may depend upon Canadians’ capacity to tolerate lost opportunities and a lower standard of living. I think a U-turn is inevitable but I worry about how long it will take.

Young people in particular seem mesmerized by the prospect that governments can take care of them and that possibly they can “own nothing and be happy”. Even my son said that he found the idea kind of appealing. I did not understand so I asked him, “Where will you live and how will you get around?”. He said, “Well, I would stay with you and borrow your car.” So, now I get it. 

This may seem funny but it isn’t.

The roots of the public divide over climate policy go beyond ideological differences over the merits of free markets or central planning. For some people, there are billions of dollars to be made by pushing the climate agenda. For others, what is ultimately at stake are two different perspectives on the value of human existence in relation to nature. The underlying premises of radical environmentalists are that humans are the enemy of nature, that economic growth is bad, and that the world needs de-growth and de-population. Confronting those views is the optimists’ premise that human ingenuity can and will achieve a favourable balance among the world’s economic, social and environmental goals and that we should get on with the business of improving the lives of humans. That is a debate optimists absolutely must win.

Thank you.

~~~~

Related:

Robert Lyman’s 2017 presentation to Friends of Science Society – “Can Canada Survive Climate Change Policy?

Videos and power points of Friends of Science 20th Annual Climate Science event will be posted on our event page as they become available.

See all of our past events.

3 Comments

  1. Lorne Cooper

    Robert Lyman’s lays out a scary and all too real assessment of where Canada is going! In early 2000’s, while engaged ( at an admittedly low level) in industry and gov’t/ industry discussions on climate policy, I expressed fear that by “soft shoeing” industry’s opposition and concern about the unreasonable response to fears of CC, we were losing the “reasonable response” battle against climate fanatics.
    Now here we are today, paying the price because we couldn’t collectively agree that the nutbars of the world would really win over reasoned analysis…

  2. Norm Kalmanovitch P. Geoph.

    It is physically impossible for the CO2 emissions produced in the burning of fossil fuels to cause any detectable global warming which means that all Trudeau’s economy crippling “climate legislation” has been legislated under false if not fraudulent pretext.
    This applies specifically to Trudeau’s exorbitant carbon tax which at current rate of $65/tonne is a tax of 130% on the natural gas that Canadians use to heat our homes.
    When the carbon tax goes up to $170/tonne in 2030 the tax on natural gas will be 340% which will result in the cost of natural gas being over four times what it should be if there was no carbon tax.
    Please check http://jimpeden.blogspot.com/2009/11/norm-kalmanovich-on-global-warming-hoax.html in which I used the “saturation argument” to completely destroy the (silly) “climate change narrative”.
    This is the sort of information that needs to be brought into the climate debate to put an end to Trudeau’s fraudulent climate legislation that is crippling our fossil fuel energy based economy!

  3. Norm Kalmanovitch P. Geoph.

    It is physically impossible for the CO2 emissions produced in the burning of fossil fuels to cause any detectable global warming which means that all Trudeau’s economy crippling “climate legislation” has been legislated under false if not fraudulent pretext.
    This applies specifically to Trudeau’s exorbitant carbon tax which at current rate of $65/tonne is a tax of 130% on the natural gas that Canadians use to heat our homes.
    When the carbon tax goes up to $170/tonne in 2030 the tax on natural gas will be 340% which will result in the cost of natural gas being over four times what it should be if there was no carbon tax.
    Please check http://jimpeden.blogspot.com/2009/11/norm-kalmanovich-on-global-warming-hoax.html in which I used the “saturation argument” to completely destroy the (silly) “climate change narrative”.
    This is the sort of information that needs to be brought into the climate debate to put an end to Trudeau’s fraudulent climate legislation that is crippling our fossil fuel energy based economy!

Leave a Reply! Please be courteous and respectful; profanity will not be tolerated.


Privacy Policy Cookies Policy
©2002-2023 Friends of Science Society
Friends of Science Calgary