Torys, the eminent Toronto law firm, distributed a bulletin the other
day that described the cross-border frenzy to develop carbon emissions
policies across North America. Provinces are working with provinces.
States are working with states. Provinces are working with states.
Other states are working with other provinces. These partnerships,
Torys notes, are frequently pursued independently of either federal
government.
The Torys review makes it apparent that provinces and states are
running in all directions in pursuit of contradictory environmental
goals. Looked at from a continental perspective, we will have multiple
carbon taxes, multiple cap-and-trade markets, multiple restrictions on
some industries – and multiple exemptions on others. (Note that British
Columbia will exempt from its carbon tax industrial emissions from the
oil, gas, aluminum and cement industries.) We will have multiple
vehicle emissions standards. (Note that Quebec will adopt California's
standard rather than the U.S. Environmental Protection Agency [EPA]
standard; and note that Ontario will adopt the EPA standard.)
Here are some of the alliances.
British Columbia, Manitoba, Ontario and Quebec will try to establish
their own emissions trading regime – even as B.C. and Manitoba work
separately with seven states (led by California) for a West Coast
regime.
The Atlantic provinces, along with Ontario and Quebec, will work with the New England states for an East Coast regime.
Alberta will pursue its own path – the first jurisdiction in the
continent to implement a cap-and-trade regime, however “soft” it may
be. Alberta will rely on carbon capture and storage to reach its goals,
which will construct a completely different regime from everyone else's.
On cap-and-trade, the Torys bulletin says, the provinces are motivated
to go their own way because of disagreements with the federal
government “over what targets and means should be used to combat
climate change” – disagreements, in other words, on everything.
This is serious. If you can't define your objective, you probably can't
reach it. If you can't agree on means, you probably can't agree on
ends. Which, precisely, is what? Is it to stop the absolute rise in
global mean temperature by the year 2100? Is it merely to impede the
rise? If so, by how much? A difference of a single degree Celsius
radically alters the selection of strategy – and the investment.
The problem with this continental, do-your-own-thing approach is quite
simple: It won't work. Finance Minister Jim Flaherty, to his credit,
has expressed this same judgment – emphatically. The country must work
together, he has warned, or incur needless costs. Mr. Flaherty has
impeccable academic support on his side.
Yale economist William D. Nordhaus is an authority on the economics
of climate change policy. Basing his conclusions on decades of research
(beginning in 1978), Prof. Nordhaus advises – as the most important
single global principle for combatting climate change – “harmony.”
Prof. Nordhaus says countries must either work together – or forget it.
Without global consensus on ends and means, he says, we will be better
off doing nothing at all. He calculates the environmental damage caused
by doing nothing for the next hundred years at $23-trillion (U.S.) (in
future, discounted dollars); he calculates the remedial cost of even a
partial fix, as recommended by Al Gore and the celebrated Stern Review,
at $22-trillion. (“The Gore and Stern proposals are more costly,” he
says, “than [doing] nothing.”)
Prof. Nordhaus would jettison cap-and-trade (which is “conducive to
corruption”). He would jettison Kyoto. He would jettison coercive
regulation – including fuel efficiency standards for cars. He would
start with a very modest but universal tax on all fossil fuels and
increase it gradually over coming decades.
You can't afford financial error in the beginning, Prof. Nordhaus
warns, because time multiplies small errors into catastrophic
consequences. People, he says, need to understand the dynamic of future
dollar discounting: “The funds used to purchase Manhattan Island for
$28 in 1626, when invested at a 4-per-cent real interest rate, give you
the value of all the land in Manhattan today.” Time turns a few
dollars, in other words, into trillions of dollars. And the maximum
investment we need to reduce greenhouse gas emissions, he says, is
$3-trillion – measured in 2100 future discounted dollars.
For economic efficiency, Prof. Nordhaus would exempt no one from a
modest carbon tax – not farmers, not the aged, not industry. “If you
exempt half of the economy because of politics,” he says in his
illuminating 2007 report, The Challenge of Global Warming, “then the
cost of obtaining your objective rises by 250 per cent.”
Prof. Nordhaus quotes Leonardo da Vinci on the design of complex
solutions: “Simplicity is the highest form of sophistication.” Keep it
simple, he says. Choose the best single policy option you have – “and
implement it slowly, steadily, predictably and boringly.” Source
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