U.S. Neo-Con calls for revenue-neutral gasoline tax

I can't resist bringing attention to this article appearing next week in the neo-conservative journal, "The Weekly Standard". Columnist Charles Krauthammer calls for a "net-zero gas tax", in a rather detailed piece subtitled, "a once-in-a-generation chance". It's ironic, but utterly unsurprising to me, how neo-conservatives (albeit thinking neo-cons) are favouring a policy so close to what Stephen Harper and his supporters tried so hard to trash (Stéphane Dion's Green Shift) this past summer in Canada and during the Canadian election campaign.

When conservatives, liberals, economists, and environmentalists are all pushing for the same thing, you gotta believe there's some validity to it.

Update Dec. 29, 2008: James Hansen calls on Obama to implement a revenue neutral carbon tax at Guardian.co.uk
Update Jan 1, 2009: Financial Times of London uses its first issue of the new year to call on Obama to implement a revenue-neutral carbon tax.
Update Jan 1, 2009: Whoa, so does the Boston Globe in its New Year's wishes.
And even this from an AP story today:

Charles Whittington, chairman of the American Trucking Associations, which supports a fuel tax increase as long as the money goes to highway projects, said Congress may decide to disguise a fuel tax hike as a surcharge to combat climate change.

Transportation is responsible for about a third of all U.S. carbon emissions created by burning fossil fuels. Traffic congestion wastes an estimated 2.9 billion gallons of fuel a year. Less congestion would reduce greenhouse gases and dependence on foreign oil.

"Instead of calling it a gas tax, call it a carbon tax," Whittington said. "As long as we label it as something else we may have the momentum and acceptance to move forward."

Wow - this coming from truckers, the same people who, in Canada, opposed the Green Shift, even with some special provisions for the industry.

One idea for economic growth: fight spam

I'm going to talk about spam. Yes, email. But first a little background:

To get out of this recession, one of the things we need to do is find worthwhile investments. It's only half a strategy for the government to try to stimulate the economy by spending money. If you don't do anything productive with that stimulus money you'll just end up creating inflation down the road. A conservative commentator suggested reducing income taxes to get us out of recession. My reply to that is the same. If there aren't any good investments, people who have income will just hold on to the extra money. No jobs will be created, no investments will be made. That's what's happening right now. Prices are falling. US treasury bills were recently auctioned at 0% interest!

(I'm not saying that the government should not spend until a good investment is identified. Obviously we have to help out families where, say, a job has been lost)

So, let's look for riches that can be unlocked. In history, the availability of new resources such as land, energy sources, technology, or trade opportunities were a source of economic growth. Where is the next big opportunity? I'm not sure, but here is a small one.

Cisco recently put out their 2008 Annual Security Report. They find that spam accounts for 200 billion messages a day, about 90% of all email messages. An enormous amount of time and infrastructure is wasted because of spam.

That's a store of value that can be unlocked, and can serve as a magnet for investment. I'd recommend fighting spam (e.g. figuring out how to implement a charge, say, of 0.1 cents per message) as a worthwhile opportunity to create economic growth. If we can put together a hundred of these ideas, perhaps we'd have a reasonable plan for spending our way out of this recession.

Now, the City of Kingston, Ontario spends $300 million a year on energy. That's $300 million that leaves the Kingston economy every year. Perhaps there's some value to be unlocked there...

Ten weeks later...

Ten weeks ago we read this during the election campaign:

The Conservative official, who refused to speak on the record during a conference call with journalists, accused Liberal leader Stephane Dion of "fear-mongering around the economy for his political gain."

The opposition leaders are "cheering for a recession," the Conservative official charged.

and this

Conservative Leader Stephen Harper accused his Liberal opponent of cheering for a recession as he notched up his appeal for a majority government to run the economy his way.

I've already blogged about how listening to the signals the financial markets are giving is not fear-mongering. Stéphane Dion was willing to listen. Now, long after the signals started flashing red, we have this admission

Stephen Harper has delivered his bleakest forecast yet for the Canadian economy, warning yesterday the future is increasingly hard to read and conceding the possibility of a depression.

"The truth is, I've never seen such uncertainty in terms of looking forward to the future," the Prime Minister told CTV News in Halifax.

"I'm very worried about the Canadian economy."

Get ready for a sweetheart Conservative budget next month!

When Joseph McCarthy took on the U.S. Army...

... it was the beginning of the end.

Here is a letter to the editor that appeared in the Kingston Whig Standard this morning:

Every time I hear about another of our young soldiers being killed in Afghanistan, it breaks my heart. I am so grateful to the young men and women fighting on our behalf to uphold the way of life many of us take for granted. I am also grateful to the families that have raised such dedicated soldiers, and to the wives, husbands and children they leave behind to fight on the side of freedom.

It is mainly for this reason, but certainly not only for this reason, that I am appalled at the way the Canadian opposition in Parliament is trying to take over leadership of Canada.

To unseat the government by way of a coalition is to throw mud in the face of democracy - the same democracy that these young people are dying to protect. It is, therefore, also a slap in the face to the soldiers and their families if we let this happen.

We, as Canadians -regardless of which party we voted for in the recent election -must stand up and fight for all that our votes stand for: freedom, democracy and the right to choose how we live our lives. Don't let the loss of 100 Canadian soldiers be in vain.

Laurie Campbell

and here is my letter to the editor in reply (it could use some more work but I don't have a lot of time!):

Dear Editor,

It was disturbing to see the letter from a reader (Coalition scheme is anti-democratic, December 12, 2008) who showed disrespect for our courageous soldiers in Afghanistan by attempting to use them as pawns to advance her political views, and in particular to misrepresent our Westminster system of government. It is one thing to support the political party forming the government in parliament. It is quite another to accuse elected opposition MPs of being anti-democratic and un-patriotic, as the letter writer, certain members of parliament, and a parade of other editorialists have done. How much longer should we allow these people to damage our public institutions? Perhaps it is time to ask them the question, "You have done enough. Have you no sense of decency?"

Kingston Liberals/NDP/Greens continue to meet

Following up on a rapidly organized and successful town hall (literally) meeting last weekend in Kingston, Ontario, members of the Kingston and the Islands Liberal Party, New Democratic Party and Green Party met again tonight to discuss how to work together over the next seven weeks (and beyond) to promote the proposed coalition government.

What is most amazing is how well we get along and how smoothly we have worked together (I'll admit I was ready to throttle the NDP over a couple of issues during the recent federal election campaign). Hats off to Mr. Harper and the Conservatives.

Stay tuned for more developments...

Progressive Coalition Event at City Hall, Kingston, Ontario

Progressive Coalition to Host Meet and Greet in Kingston

This Sunday, December 7 at 2:00PM, Kingston's Memorial Hall will play host to a 'Meet and Greet' in support of the proposed Progressive Coalition Government.

The event has been coordinated by representatives from Kingston's Liberals, Greens and New Democrats, and is supported by the Kingston District Labour Council. It is aimed at helping concerned Kingston and area residents to better understand what is behind the current political crisis and how we can best work together to resolve it. Speakers will include prominent local political figures and an expert on Canadian constitutional practice.

According to Kim McFarlane, President of the local federal Liberal Association, “Only a week ago, all parties signalled their willingness to work with the current Government by accepting its Speech from the Throne. Rather than building on that, Mr. Harper responded with destructive partisanship that irretrievably cost him the confidence of the House. Under our parliamentary system, that requires his resignation. The Coalition Accord represents a sincere effort on the part of the majority of the members of the House of Commons to make this Parliament work for Canadians to deal with the real problem, which is the state of the economy. We fail to understand how Mr. Harper’s move to shut down Parliament for almost two months will help those Canadians facing job losses.”

Eric Walton, the Green candidate in the last election added that “by proroguing Parliament primarily for reasons of self-preservation, Stephen Harper has deeply damaged Canada's democratic system and for that reason alone should be voted out at the first opportunity.”

The local gathering has been designed with a focus on socialization, education, and community spirit. The event is open to the public and refreshments will be provided.

“We all agreed that rather than holding another rally, the wide-range of political support in Kingston might be best-served by a more social event where we can get to know one another and commit to working together on a local level.“ said Daniel Beals, President of the local New Democrats.

It should be noted that Kingston has a history as a site of unification and cooperation, having hosted the first meeting of the Parliament of the united Upper and Lower Canadas on June 13, 1841.

"Now is not the time for political posturing. In the face of an economic crisis it is crucial that we work together for the good of all Canadians. Nobody can question the sincerity that underlines the Coalition Accord." said Debi Wells, President of the Kingston District Labour Council.

- 30 -

Inquiries: Ron Hartling

Policy Director - Kingston & the Islands Federal Liberal Association

613-384-5710

Daniel Beals

President - Kingston & the Islands New Democrats

613-549-8399 (h)

Eric Walton

International Affairs Critic - Green Party Shadow Cabinet

613-542-9365

Debi Wells

President - Kingston District Labour Council

613-548-4952

A smart comment about Stéphane Dion in the Globe and Mail

Here is a smart comment by one "d s from Canada" in the Globe and Mail.

Let me also add that Stéphane Dion is the go to guy who can make sure some good policies are worked out and ready to go when Canada's new coalition government begins.

Who should lead the coalition?

I don't pretend to know what's going on. I just read the news, cautiously. So when I read these lines from the CBC from a report by Keith Boag on the details of the coalition agreement:

"The real obstacle to this deal going through is still within the Liberal party," Boag said, adding the deal is being negotiated by Dion, who believes he has the right to be prime minister.

But it's unclear whether the party wants him to continue, and the leadership candidates were meeting Sunday evening to discuss the matter, Boag said.

I tend to assume that the reporter is just smelling around for some conflict to report on, as they are wont to do.

But, just in case, I wish to declare that I, as one individual among the many who make up the Liberal party, support Stéphane Dion as our interim leader and the leader of a possible coalition government. The Liberal party's membership should be the ones who choose their next leader.

NDP and Bloc pre-coalition talks: as it should be!

CTV has broken the story that the NDP and the Bloc have had talks for a "considerable period of time" about a coalition. CTV is taking the angle that this means there are "political motives" to bringing down the government. That is, CTV and their favourite commentators (I'm listening to Ezra Levant right now) are implying that they were not really motivated to act by Flaherty's financial update.

I disagree. In a minority parliament, when minority governments are likely to be the norm in the foreseeable future, and when we've just had an election, I believe that opposition parties should be ready to present an alternative should the governing party try to act unilaterally to do something which the opposition thinks is harmful to Canada. The alternative can't be an election at this point in time, and so the opposition should be ready to govern, if necessary.

Even though the Conservatives have now retreated on public funding of political parties, and on taking away the right of civil servants to strike, and are moving up the date of the budget, the organization of an alternative, coalition government should continue. It is needed to keep the government honest and focused on the important issues of the day.

Prepare the coalition and keep the engine running to, at the very least, keep the party in power honest and focused on governing.

Coalition Government: one reason to go for it

A number of commentators have been using chess metaphors to describe what's going on in Ottawa this weekend. Well, I'm a chess player and here is a very relevant chess proverb:

"The threat is stronger than its execution"

I think that the exercise of readying a coalition government is a good one if only to provide a credible alternative to the Conservative government and thereby to help the opposition parties do their job.

In a minority government, an effective opposition must be willing and able to present an alternative. Otherwise they have no way to induce the comprises that voters have given them a mandate to negotiate. Usually the alternative is to return to the polls, but with an election having been held so recently, and with the prospect of minority governments being the norm in the foreseeable future, opposition parties must be ready with a credibly viable alternative government, if only simply to be able to do their jobs effectively.

What did Pierre Poilievre just say?

Did I just hear what I thought I heard? I believe MP Pierre Poilievre (Nepean-Carleton) just said on CBC's The House that a year ago Stephen Harper foresaw the economic problem that Canada finds itself in right now.

Can anybody confirm that?

Fighting the Conservatives Together

There is talk today about opposition parties perhaps being willing to form a coalition government. This is in response to the Conservatives' lack of definite policies to address the global economic crisis and use of the crisis as a screen to seek political advantage. They want to save $30 million by cutting public funding for political parties - a move that would, in the short term, greatly favour the Conservative party, but do nothing to address the economy. The government may fall on a confidence vote in the next few days and the possibility of a coalition amongst the current opposition parties would be a very strong bargaining chip.

Today I received an email from Steven MacKinnon, Michael Ignatieff's national campaign director. The email draws attention to the Conservatives' move to cut public funding and then asks for donations to Mr. Ignatieff's leadership campaign because, "Michael Ignatieff can only succeed with your support."

That rubs me the wrong way. It rubs me the wrong way because it's taking a direct and imminent threat to the Liberal Party and the Canadian political system, and using it to appeal for funds to a particular leadership candidate's campaign. Even though we have a Liberal Party leadership race under way, in the House of Commons we, the Liberal Party, should still be fighting the Conservatives together. If we do not fight them as one team, we won't win. If the NDP, Bloc Quebcois and the Liberal Party can get together to form a coalition, surely the Liberal caucus could work tous ensemble.

Fight the Conservatives as a united party. Support Stéphane Dion in the House. Fight the leadership race elsewhere.

What is the true cost of nuclear energy?

I wish I had an objective assessment of the true cost of electricity from nuclear power in Ontario (in Ontario because that's where I live). I haven't seen a careful analysis of that from either friends or foes of nuclear energy.

Here's an example of a slightly hidden subsidy and an example of why it's important to look at the numbers when you read the news.

Star reporter Tyler Hamilton wrote an article for today's edition pointing out significant investment losses in an account whose funds are set aside for the decommissioning of nuclear plants. He mentioned another account whose funds are set aside for managing nuclear fuel waste. Both funds were created five years ago in 2003 and Ontario Power Generation pays into them annually.

The fund managing waste fuel, currently valued at $4.792 billion, has grown. The province guarantees it a rate of return of 3.25 per cent annually above inflation.

The good news, I suppose, is that the money for managing waste fuel has not been lost in the recent stock market meltdown. What I want to point out is that over the last five years the yield on the long term (30 y) Canadian government real return bond has ranged from 1.44% to 2.79% with an average of 1.95%. Most recently it has been around 2.5%. But the province of Ontario has guaranteed a rate of return of 3.25% above inflation.

That's a subsidy.

Now, I'm not accusing anybody of trying to hide a subsidy. In 2003 the long term real return bond yield ranged from 2.8% to 3.2% so it's possible 3.25% above inflation was a fair guarantee for the initial deposit of funds into the waste fuel account. But payments in subsequent years have benefited from an above-market rate of return and that's where the subsidy lies.

What's so bad about subsidies? Well, Ontario has a nascent renewable energy industry. If that industry has to compete with subsidies to nuclear energy and subsidies to fossil fuel energy (i.e. being able to emit greenhouse gases for free), it will have a hard time growing -- which is the case! To counter that, the government of Ontario is subsidizing renewable energy and energy conservation, but it takes extra work to figure out where all the counter-balancing subsidies have to be applied and in what amounts.

National Post flubs global warming denial attempt

National Post writer, Lorne Gunter, has written a column today following other global warming skeptics in trying to make a mountain out of a molehill about a data entry error. Some September temperature data were copied into October, making a report from the Goddard Institute for Space Studies seem to indicate that October was very warm. In fact, GISS pulled the report after less than a day, got a new report from the source that sent them the erroneous data (about 10% of their data stations were affected), and fixed their report a couple days after that. From a scientific point of view, it's good to have skeptics (good scientists are skeptics, especially of their own work, which is more than I can say for most global warming deniers). The more skeptics do their work, the more solid the scientific conclusions become. That's how science works.

Mr. Gunter seems to think this incident is evidence of bias by researchers at Goddard. He writes, "...unscientific bias at GISS and elsewhere in the global warming community -- has been exposed by this incident." He doesn't think that a quickly identified and corrected programming error or data entry error could have simply been just that.

Now Mr. Gunter, look at your own article:

Look at the fourth paragraph (and the reason I included an image is in case the Post corrects their online article:


"Moreover, sea ice expanded so rapidly it covered 30% more of the Arctic than at the end of October, 2007. (Of course, you saw few stories about that, too, since interest in the Arctic ice cover is reserved for when it's melting.)"

Wait a minute, we're talking about October 2008, not October 2007. Would that be a data entry error on your part, Mr. Gunter?

Selling on the lows, part 2

This is a continuation of my last post on Conservative finance minister Jim Flaherty's plan to sell government assets now, after a historic crash in asset prices, to balance the federal government budget during the coming global recession.

It looks like Prime Minister Stephen Harper has had to backtrack, according to this report from The Canadian Press on ctv.ca:

Prime Minister Stephen Harper insisted Friday there will be no fire sale after his finance minister, Jim Flaherty, said the government is considering an asset sale to raise cash and try and stave off a budget deficit. "The government of Canada will never engage in a fire sale of assets," Harper said prior to heading off to Washington for an emergency summit of global leaders on the economy.

But I think wasn't hard for the CP reporter to find people with credentials to agree that the Conservatives have a bad idea:

"It's hard to believe this is an ideal environment to sell any asset," said Bank of Montreal economist Douglas Porter. "And it raises the bigger issue of just how hard should the federal government press to keep its books balanced. My view is if it comes down to selling the family silver at a discount rate just to make the books balance, that doesn't make sense."

Scott Brison, the new opposition finance critic just appointed by Stephane Dion, is a pretty sensible and knowledgeable fellow:

Brison said Canadians should be especially concerned because Flaherty was finance minister in Ontario when the provincial Conservative government of former premier Mike Harris sold the electronic toll Highway 407 north of Toronto for $3.1 billion in 1999. Three years later, a private investment bank valued the property at four times the sale price. "After three years of bad tax policy, and big spending, Flaherty has put the country in deficit. Now he wants to sell the house to pay for the groceries," said Brison.

There are still groups with tunnel vision, though. The CP reporter was able to count on the Canadian Taxpayer's Federation (CTF) for this quote:

Adam Taylor of the Canadian Taxpayers Federation said the government should do whatever it needs to -- including selling assets -- to balance the budget. "The government owns things that have no strategic value to Canadians and they could be sold," he said. "Property values haven't completely bottomed out and when the government owns thousands upon thousands of acres, there's a legitimate argument for selling a lot of it."

If Mr. Taylor really meant what he said (do whatever it needs to...to balance the budget), he'd advise the government to also consider the possibility of raising taxes (or rescinding promised tax cuts). But that's the last thing the CTF would ever say, so they can't be that serious about balancing the budget, especially since they've been applauding the various tax cuts that helped get us to our current fiscal position.
There are, moreover, a lot of economists who are questioning the rationale for balancing the budget right now (and I agree with them). In a severe recession, balancing the budget may come only at the price of a lot of pain for economically vulnerable Canadians, and reduce the number of options the government has to manage the economy and plan for its eventual recovery.
I see that Mr. Taylor is a market-timer who thinks he knows that, after a sale sometime in 2009 or 2010, property prices will continue to fall. If that's so obvious, I'd challenge the CTF to open a trading account, put its money where its mouth is, and sell some S&P Case-Schiller home price index futures on Jan 1, 2009. Hey guys, bet the house because maybe you'll be right!
Finally, the whole idea of balancing the budget by selling assets is based on their being valued on the government books at old, below-market prices. Any revenue you get from their sale is purely accounting revenue - not real added value for Canadian taxpayers.

Selling on the lows

I used to be a trader many years ago, so I can't resist commenting on the story today from the CBC:

The federal government is considering the sale of some of Crown assets as a way of balancing its budget and avoiding a deficit, Canada's finance minister said Thursday.

I thought Mr. Flaherty was smarter than that! World asset prices have just collapsed and now he wants to sell?!?!

I further suspect that selling assets to avoid a budget deficit is only a bookkeeping trick to take advantage of certain assets being valued on the books at very old, below-market values. Perhaps he wants to hide behind the economic crisis while he pursues his real agenda of downsizing the federal government. Or, perhaps we had better quickly set up the "sweetheart deal" detector.

Minister Flaherty, let's compromise. How about if you get some expert disinterested parties to independently value the federal government assets whose book value seems way too low. Then you mark to market, and presto, you get to avoid a deficit without having to sell for real into the worst market in decades.

Greenhouses burning coal

Tyler Hamilton of theToronto Star had an excellent piece yesterday documenting how Ontario greenhouses are turning to burning coal because of higher oil prices. This piece documents critical examples that illustrate why high oil prices are no substitute for a carbon tax when it comes to an incentive to reduce greenhouse gas emissions.

Here is an excerpt:

The Toronto Star has learned that dozens of other greenhouse operators in Ontario ... have switched or are considering a transition to coal as a way to save on fuel costs.

The impact so far appears small, but the trend is gaining momentum. As it does, it could undermine the environmental benefits of an Ontario government plan to wean the province off coal-fired power generation by 2014.

"Coal is expanding in the province, despite a policy to phase out coal," says Roger Samson, executive director of REAP-Canada, an independent group that encourages sustainable farming practices. "The Ontario government has no plan on how to mitigate this."

...

It's estimated that greenhouses in Ontario cover 2,823 acres, and that the average greenhouse requires 9,500 gigajoules of energy per acre every year. This works out to 26.8 million gigajoules annually.

Convert that energy into electricity potential and it works out to 7.44 terawatt-hours a year – more than three times the 2004 electricity output of the Lakeview coal-fired generating station in Mississauga (which has since been closed down and demolished).

To those of you participating in the local food movement: don't forget to think about the possible implications of greenhouse-grown food.

Remembrance Day and reducing consumption

Msgr. Don Clement gave the benediction at the City of Kingston's Remembrance Day service today and he provided, I'm glad to note, a wise exhortation. To paraphrase Msgr. Clement, he called on us to use the liberty won by the sacrifices of our soldiers to ensure that the resources of the world be utilized for the benefit of all people, in all nations, now and in the future.
How can the average Canadian support our troops overseas?
The more I learn about the economic drivers of conflict around the world, the more I appreciate the contribution of the consumption of material goods by people in developed countries. As an example, most recently in the news, the humanitarian crisis in eastern Congo has, as an underlying cause, a struggle to control valuable mines.
So I would venture to say, one way of supporting our troops is by making a personal sacrifice. Cut your personal consumption of "stuff". You'll be making a small but real contribution to peace around the world and making future peacekeeping efforts a tiny bit easier.

0.7% of GDP development aid target = revenue from a $30/tonne carbon tax, numerically and morally

At the recent Carbon Pricing and Environmental Federalism conference in Kingston, Ontario, one thing that was brought up by a couple of speakers (one of them was Matthew Bramley of the Pembina Institute) was the idea that taxes on greenhouse gas emissions, "carbon taxes", are actually a "recovered subsidy", and that, as a consequence, one could argue that it was more fair for the federal government to collect this tax (as opposed to provincial governments).

Let me explain this a bit before getting to my idea. Greenhouse gases are causing climate change, and that will be bad for everybody. Right now, people get to emit greenhouse gases (from burning fossil fuels) for free. But it's really not free because people in the future that will be burdened by climate change will pay the price. In effect, those people are giving a subsidy to the people who pollute for free today.

Money collected from a tax on fossil fuels would recover some of this subsidy. Who should get the proceeds? Well everybody benefits from reduced greenhouse gases, and the federal government would seem to have a better claim to represent "everybody" than individual provincial governments. Therefore, from this point of view it makes more sense that the federal government deserves the money.

Now to my point. Why stop there? We know that people who will really pay the price for climate change are the poor who live (or could have lived) in certain developing countries in the future. Aren't they the ones who are morally entitled to the proceeds of our carbon tax (in whatever form it is implemented)?

If you agree with my point then consider this: a $30/tonne tax on CO2, as proposed by the third year of Stephane Dion's Green Shift plan, would generate about $11b in revenue. That's coincidentally about 0.7% of Canada's $1.6 trillion GDP. Perhaps we should be considering fully funding Lester Pearson's (and the U.N.'s) suggested international development aid target using a $30/tonne carbon tax, and concentrating that aid on development that will prepare future generations to deal with climate change. What a great way to try to settle our debts and respect intergenerational equity.

Carbon Pricing and Environmental Federalism

This weekend I attended the Carbon Pricing and Environmental Federalism conference in Kingston, Ontario. This meeting, organized by Queen's University's Institute of Intergovernmental Relations, brought together many of Canada's experts in the field of public policy on climate change.

Needless to say, Stephane Dion, the Green Shift and the recent election were not far from everybody's thoughts. The mood was a bit somber in this respect as exemplified by Prof. Kathryn Harrison of UBC, a political scientist, who said that with last week's vote, optimistically, action in Canada on climate change will be pushed back by at least ten years. Various people had unkind words for the NDP and the Conservatives for campaigning against the Green Shift with misinformation and scare tactics. More than one person told me that the best use of my time now, as an activist, would be to talk to kids, with the sad implication that changing the minds of older generations, as a whole, was a lost cause (although as a younger person and somewhat of a kid-at-heart, I am not willing to give up so quickly).

Economist Nancy Olewiler (an organizer of the letter signed by 250 economists during the election campaign supporting a carbon tax) of SFU, however, amid her own observations of the difficulties that the fight against climate change faces, did say that we should celebrate one thing: that the recent federal election in Canada was the first Canadian election where pricing policy (as opposed to voluntary initiative or incentives) for carbon emissions was a major issue.

Climate change will be challenging us for a long long time. How to reduce greenhouse gas emissions will be a political issue for a long long time. As long as we have a market economy, the price of emissions, however it is generated, will also be a political issue. And so I think that Canadians will be talking about Stephane Dion and the Green Shift for many years to come.

Stephane Dion put a clear policy forward for carbon pricing as a first step to combat climate change. It was supported by environmentalists and economists. It was roughly in line with the Green Party's proposal, and it was based an old idea going back in the political arena at least as far as a policy proposal by a US Republican party presidential candidate in 1979, John Anderson, and implemented in one form or another in many countries since then.

In my opinion we are indebted to Stephane Dion for bringing some intellectual honesty to Canadian politics. Perhaps his mistake was to be so honest as to call a tax a tax. One of the conclusions of this conference was that, politically, Canadians are not ready for that. Conference participants concluded that we should never again associate carbon emissions pricing with the word "tax", and simply disguise it with names such as, "cap and trade", "public benefit funds", "renewable portfolio standard", or "foreign oil security fee".

I believe that history will show that Mr. Dion should be accorded more respect than he has been receiving from certain (close) quarters in the last week. We need more people like him in Canadian politics.

On the Harper government's plan to purchase mortgage securities

The $25 billion purchase of mortgages announced by the federal government was described as follows:

From the Toronto Star: "Under the plan, the government is buying $25 billion of mortgage-backed securities to ease the liquidity problems of Canada's major banks. Harper described the securities as solid, government-insured investments..."

From the Ottawa Sun: ' "This is a transaction in which the government of Canada, the taxpayers of Canada will not lose money," Harper said. "Quite frankly, because the costs of our borrowing are lower than the value of these mortgages, we'll probably make money when this transaction is over." '

I'm not an expert in Canadian mortgage securities but here's my simple risk-return thinking:

Let's suppose these mortgage securities have an expected return that is slightly higher than the interest rate on Canadian government bonds, as Stephen Harper says.

Now Harper says that the Canadian government can buy the mortgages, financing the purchase at the interest rate paid on Canadian bonds, and earning the difference between the rates of return on the two legs. A profit for Canada?

But wait, these mortgage securities are probably insured (presumably through the CMHC) by the government of Canada! In this case, if anybody but the government of Canada purchases them, it's a purchase of insured mortgages. But if the government of Canada purchases them, there is no insurance any more for the purchaser. In fact, there is no free lunch. If the government expects to make a little money from this investment, it's only because it is taking on the risk of mortgage defaults because it is insuring its own investments.

I hope that the government takes a haricut on the price of these mortgage securities to account for how much the CHMC mortgage insurance is worth, and the fact that the CMHC is the government. If not, Stephen Harper's claims might be false and misleading. Again, I would caution the reader that I'm not an expert in mortgage securities - just knowledgeable enough to be worried about Stephen Harper's plan.

"buying opportunity": not just an insensitive statement from Harper, but unjustified

Anybody who knows financial markets would know that unless you really do your homework, you cannot say when there is a 'buying opportunity'. Certainly it would be wrong to say that, based on a casual application of the (economically unjustified) notion that stocks always bounce back after they go down, there was a buying opportunity back on Tuesday. That's what Stephen Harper did. Professionals who have done a lot of trades will tell that, unless you have done your homework and understand why a market is not being efficient, you won't make money betting on any simple strategy like mean reversion.

Now this post is not just about Stephen Harper. It's about commentators like Susan Riley of the Ottawa Citizen, who wrote, "...his logic is impeccable: stock markets go down, but eventually go back up", and Andrew Coyne who wrote of, "...Harper’s perfectly sensible observation that the present panic on the stock markets presents a remarkable buying opportunity ". Experience trading in the markets will tell you that, unless you figure out why somebody sold a stock down too aggressively, you don't have a better than even chance betting on it bouncing back. Right now, I'd say very few people, if any, really know exactly how bad the financial crisis is, and certainly not casual commentators who are mainly focused on Canadian politics.

Don't tell me that if you wait long enough, stocks will bounce back. If you wait, you have inflation to worry about. Look at the inflation adjusted return on stocks in the 1970's. Moreover, you can only wait until you die. In the long run we are all dead, as Keynes observed. For single stocks, consider an extreme example -- look at Lehman Brother's share price. Is it going to bounce back?

No, Stephen Harper's statement was not a sensible or logical statement that was simply insensitive. It was just wrong. As an economist, Harper should know something about market efficiency and how difficult it is to predict whether a stock price will go up or down. But I guess it was just too good an opportunity to try to express to voters his belief that the economy is probably okay.

Explaining the crisis in LIBOR

A nice article that explains a bit what is going on with the London Inter Bank Offered Rate (LIBOR) is here. LIBOR is an important global interest rate benchmark. LIBOR is high because banks want to avoid lending to one another. They don't know if one of their counterparties is going to be the next bank to become insolvent.

LIBOR is a benchmark that is used to set a lot of floating rate business and consumer loans. When it goes up, as it is right now, loan payments go up.

From that Bloomberg article:

The spread charts and financial acronyms mean real pain for people like Maureen McNally of Trenton, Florida. The monthly payments on her Libor-linked mortgage from Countrywide Financial Corp. have climbed to $769 from about $500.
``I had to give up my cable television, I had to give up my house phones, because I had to cut back completely,'' said the 53-year-old gift processor at the University of Florida in Gainesville. ``I am so disgusted with this whole mortgage thing I never want to own a home again.''
McNally says she's had her house on the market for nine months without an offer.

It's (already) a disaster, not a buying opportunity, Mr. Harper.

A lot of people have already commented but here is my take on Stephen Harper's statement to reporters yesterday (Oct. 7, 2008), "I think there are probably some great buying opportunities emerging on the stock market as a consequence of all this panic" and the statement on the Conservative Party website related to the belated release of their election platform, "The Liberals and the NDP are both a vote for financial disaster" (their emphasis).

Look, it's already a financial disaster (I won't quote somebody else. I'll back that statement up with my past years of experience working in the financial markets). If the Conservatives really believe a vote for the Liberals is going to turn this situation into one, they don't understand what's going on. Maybe they don't want to, or can't. Hey, C's! It's already a disaster guys.

Note how the Conservatives are lumping the Liberals and NDP together so that they can criticize the Liberal Party on economic management. From the Financial Post, Stephen Harper said, "The Opposition proposes raise taxes. In particular, and look at the stock market today -- where the big hits are on energy and commodity prices. And the Opposition proposes carbon taxes. The Opposition proposes to raise taxes on companies in the energy business and other commodity businesses." They have to add in the NDP's plan to cancel planned business tax cuts. They can't simply criticize the Green Shift any more, especially with the publication of the open letter from 230 economists supporting a carbon tax as the best way to fight global warming.

Look, nobody is blaming the financial disaster on the government. This is an international problem, but it is a disaster. Hey, C's! It's already a disaster guys.

The questions Canadians should be asking themselves as they head to the polls on October 14th are, "Who is going to acknowledge the economic crisis as more than a buying opportunity on the stock market? Who has economic management experience? Who will, given that a recession is a near certainty, also look out for the vulnerable members of our society?". That would not be the Conservative Party.

Harper and energy prices

Yesterday, Stephen Harper was quoted in the Globe and Mail saying, "What I worry is this is just the tip of the iceberg if we get a carbon tax on energy." If he is implying that higher energy prices are bad, I have this to say:

Let's forget about taxes (and the fact Harper is yet again ignoring the shift in the green tax shift) for the moment. Hasn't Mr. Harper noticed how much the price of oil and the Canadian dollar have dropped as this economic crisis progresses? That's real dollars lost to Canada as a whole because we are net exporters of oil.

If Stephen Harper only cared about the Canadian economy, especially in the short term, he should be worried about lower energy prices. That would make Canada poorer. If the worst predictions, like those made by bank economists yesterday, come to pass, we might enter a depression where low commodities prices and not high prices would be part of the problem.

But, apparently, he may not care about the economy because he has an election to worry about.

Listening to the markets is not fear-mongering

The Conservatives have been accusing Stephane Dion of "fear-mongering around the economy for his own gain". I used to work in the financial markets and one of the fundamental things you have to know there is that market prices contain information. Nobody has to "fear-monger". Prices in the stock and bond markets make it clear that there is a serious risk of global recession.

Almost everybody is used to following the stock markets, but almost nobody follows something called the interbank offered rate (e.g. LIBOR, the rate set in London). This is the rate that banks use as a benchmark to charge each other for loans. LIBOR is also a reference rate for businesses and consumers borrowing money and is a critical number in the international money markets. What is unprecedented is that difference between ('risky') LIBOR and the interest rate on ('riskless') US treasury securities has exploded and halted a lot of financing of business activity around the world. The stock market drop is nothing compared to what is going on in LIBOR. Do not think that this stock market decline is the same as any other you've seen in your lifetime.

Canada is not the master of its own fate as to the question of whether or not there is a recession. All of that depends mostly on the U.S. economy. Our choice on October 14th is whether or not to acknowledge the possibility of a serious recession, how ready we want to be for it and for protecting our most vulnerable fellow Canadians.

Conservatives have been saying that there is no serious financial crisis amongst Canadian banks. That may be true. But even if the world's financial problems do not impact the Canadian financial system, the slowdown in the world's (especially the U.S.'s) economies will impact (or already have impacted) Canada's economy - and that means job losses. We should be getting ready to take care of each other.

Doing nothing is the risky option. Not admitting the real possibility of a painful recession makes it worse. The choice between a Conservative government and a Liberal government is even clearer.

Conservative candidate fabricates "facts"

(gosh, if the Conservatives are going to manage Canada's economy, maybe plagiarism isn't so bad, at least not as bad as acting on purely fabricated "information")

Have a look at this posting by Conservative candidate Brian Abrams in Kingston and the Islands. I took the screen shot in the early morning hours of Oct. 1, 2008. Look at the very bottom where he attacks the carbon tax by using that "fact" the German unemployment rate is 12%. The number immediately struck me as high. In fact, you can easily check online that the German unemployment rate was 7.6% in September and 7.7% in August. Brian Abrams just made up his unemployment number out of the blue.

The link is here but who knows how long it will remain uncorrected.

You know if Mr. Abrams is elected and if the Conservatives are returned to power, he may very well become a cabinet minister. Harper's bench is not very deep. Anything could happen.

With the economic storm clouds gathering, it would be a lot safer to send one less "economic fact fabricator" to Ottawa. Vote for Peter Milliken in Kingston and the Islands!

If Chantal Hebert says so too...

I thought Stephane did well in tonight's French language debates, but I can't trust my own objectivity. In the discussion segment during the subsequent CBC/Radio-Canada news broadcast, Chantal Hebert also said that Dion did well, so, it must be true :-)

The Economy: keeping on track may mean being run over

I think the point has to be made that the Conservatives' "keeping Canada on track", steady-as-she-goes, economic management philosophy may be just the wrong thing for an economy threatened by a global recession.

Sometimes staying the course is the most risky thing to do.

The financial crisis that began with the collapse of the (mostly US) housing bubble, spread to subprime mortgages and the credit markets, and became a systemic threat to the financial system is not over. I'm looking at the Interbank Offered Rates in the financial markets this morning and the high rates there show that despite the US government's rescue package, international banks are still reluctant to lend. The effect of this financial crisis on the overall (global!) economy has yet to be revealed and we must be prepared to take action to deal with a possibly severe recession.

Look at the dramatic moves to lower interest rates, open up lending, and take over illiquid mortgage assets that US authorities have had to take.

In the face of an imminent economic crisis, I'm worried that a Conservative government could only imagine sitting tight, like a deer caught in the lights of an on-coming freight train, 'keeping Canada on track' only to let us be run over by a global recession.

The Conservatives' inability to imagine taking bold action: that's risky. Don't let them win votes by taking advantage of the current financial crisis to scare Canadians away from making a change to a government with the ability to admit to the truth and to take decisive, informed, and well-considered action.

Cross Country Checkup went well

Stephane Dion's appearance on Cross Country Checkup went very well I thought. It had an intimate 'fire-side' feel, and the discussion didn't seem rushed. The questions were pointed but Dion could take the time to explain his policies and show how much he cares about Canadians and their future. I can't explain it, but the radio show seemed to go much better than any television interview I've seen.

Sign wars

Yesterday we discovered that our lawn sign had been stolen after only being out for a couple of days. We have some Dion signs in our front window so perhaps, for the next four weeks, if I need to drive my daughter somewhere then I should be checking our car's brakes first...

Why a mandatory cap and trade system would take time

Jack Layton claimed recently that his cap and trade proposal for limiting greenhouse gas emissions would not take a long time to set up. This claim is important to rebut because the reason Stephane Dion decided to change his mind and to go with both a carbon tax and cap and trade, is because a mandatory cap and trade system would take a long time (a few years) and lots of resources to set up.

First, let's show Mr. Layton's quote from the Globe and Mail:
“The forcing of big polluters to pay, taking that money and investing it in solutions which is the cap-and-trade system, has already happened. It's already going on in Canada on a voluntary basis.”

The crucial point is the difference between a voluntary cap-and-trade system and a mandatory one. In a mandatory system, here are some of the headaches you are going to have to deal with, and find answers that everybody across the country can agree to:

1. Who is in and who is out? Where are you going to set the boundary between large emitters and small emitters? Everybody is going to try to be exempted, either partially or wholly (lots of people/institutions will feel it's unfair to them). What's your plan to 'consult with the public'? Are you going to include non CO2 greenhouse gases? What are the standards you are going to apply to offset projects?
2. What new regulatory and operational body are you going to construct to oversee the mandatory emissions market?
   
3. How is the auction going to be conducted? How many emissions credits are you going to auction? If you try to limit the supply of credits and push down the total cap on emissions, the price for credits might go up. Is there no limit on the price for emissions credits? If there is a limit or safety valve, what is it? (notice that in this case the cap-and-trade system becomes a hybrid cap-and-trade/tax system without the hard limit on absolute emissions that Mr. Layton wants.)
   
4. What do you do about early action? How, exactly, do you reward, or at least not penalize those who have already taken action to reduce emissions? How do you set baseline levels for offset projects in a way that people will agree is fair?
   
5. Are you going to harmonize with the various US markets and/or the European emissions market? Are you going to allow CDM or JI projects to sell offsets? How long will negotiations with them take?

Mr. Layton is picking a fight between a cap-and-trade proposal and a carbon tax proposal that is not going to help Canada deal with climate change. Splitting the non-Conservative Party vote is bad enough, let's not have an unproductive fight about climate change policy that will distract Canadian voters from the critical point that a Conservative Party government will not do anything substantial to fight climate change.

MKJA report also shows GHG reductions

The MKJA report quoted in the Green Party press release yesterday also answers the question (in a political sort of way because the Conservative government was in possession of this 'secret' report) that many critics have posed about how much and when greenhouse gas emissions would be reduced under a Green Shift or Green Tax Shift.

Check out Table 3 of the report, entitled "Emissions Reductions Under GHG charges". The authors of a report have a model with which they can give a rough idea of when and how much emissions will be reduced under a certain level of carbon tax.

Of course all of this is less important than the fact that this report shows that the economic impact of the proposed carbon tax, either by the Liberals or the Greens, would be to reduce GDP by only about one-tenth of one percent in the first five years or so, but then actually increase the GDP 15 years down the road. The Conservatives knew that this information was in the report by MKJA that they did not make public, and yet they persisted in claiming in the first week of the election campaign that the Green Shift would "plunge Canada into a recession" and threaten national unity. If you can't be honest with yourself, how can you be trusted to run somebody else's (the country's) affairs?

Source of skilled people to do all of those energy retrofits

Grumpy Voter's comment on my last post deserves a response in a separate post.

I'd like to let you know about a program called the,
"Energy Systems Engineering Technician and Technologist" program at our local community college in Kingston, Ontario: St. Lawrence College.

Students in this program are trained in areas like energy audits, building insulation, renewable energy equipment, environmental impacts and life-cycle analysis. They just graduated their first class this past year and every student got a job in the energy field (talk about green jobs!). What's also nice is that these students are particularly energetic and inspired. Similar programs are being created in other post-secondary institutions.

It's not coincidental that Kingston, a city of 100,000 people, is blessed with five local businesses that install renewable energy equipment (solar PV panels, solar hot water systems, wind turbines, wood stoves etc.).

Reinforcements are coming!

New Home Retrofit Program Proposal

I'd like to applaud the announcement today of a home retrofit and green mortgages program by Stephane Dion.

As the director of a sustainable energy association, I hear over and over again that a major hurdle to doing home energy retrofits is paying an upfront cost and waiting for the payback in the future, even if the net cost of the retrofit is expected to be negative. Now this is not necessarily irrational because any construction project has risks associated with it. The risk-adjusted cost of a retrofit project may not be negative.

Grants and green mortgages will help very much in making projects move forward, unlocking value in our economy (that's what I mean by costs of certain building energy retrofit projects being negative), helping to develop businesses, and creating jobs.

One thing I would caution about this proposal is that I think we also need to have more trained and experienced tradespeople to do these energy retrofits and installations. Anecdotally, (and people who know the labour markets will be able to make this statement more solid), there is a serious shortage out there of good tradespeople, and it might not be a bad idea to put some resources into nurturing more of them.

Elizabeth May's book coming out on Oct. 2

I received a notice from amazon.ca that Canadian Green Party leader Elizabeth May's book, "Global Warming for Dummies", part of the extensive "... for Dummies" series, is being released in the middle of this federal election campaign on October 2. Coincidentally, it's the same date as the English language party leaders' television debate, one of two debates that were recently the source of so much public outcry when Stephen Harper and Jack Layton tried, unsuccessfully, to exclude her.

Shaving diesel taxes: Stephen Harper joins a retail bandwagon

Free gas is being used to sell stuff
As I've mentioned before, gasoline subsidies are now being used by retailers to sell all sorts of things: not only big gas-guzzling vehicles and hotel and resort stays (you have to drive to get to your vacation spot), but even prescription drugs and financial services. All of this amounts to a negative carbon tax. These promotions are encouraging the production and consumption of fossil fuels, not to mention consumption in general - exactly the opposite of what we should be doing to prepare for the future.

Even by some churches?!
It is also amusing to see that in the U.S., even some (non-mainstream) churches have been giving away free gas to boost attendance and attract new members. Needless to say, that has attracted criticism from church groups.


Stephen Harper too
Well I guess Stephen Harper has joined this retailing bandwagon in order to sell his election platform, such as it is. Yesterday he announced an election promise to cut the federal excise tax on diesel by 2 cents per litre over the next four years. This amounts to a roughly $8/tonne negative carbon tax on diesel.

More greenhouse gases
This would be an incentive to consume and produce fossil fuels and greenhouse gases. This would be an incentive to put off the transformation that Canada must undergo to prosper in the 21st century.

And who will have to pay for it?
The cost of these cuts to the federal treasury is estimated to be $600 million annually. How are we going pay for that? Will there be stealth income tax increases like the one from 15% to 15.5% on the lowest tax bracket that accompanied the first GST decrease in 2006? Or perhaps we should ask what federal government programs will be cut? The recent cuts to arts funding programs that caused such an outcry were to save $46 million annually. How many more such cuts would the next Harper government make?

Don't make future generations pay for our energy subsidies
Or, would a Harper government borrow the difference and let future generations pay for it - future generations that will be struggling with the consequences of our delays in transforming Canada's energy economy?

Why Dion's election campaign carbon offset makes Canada richer, fairer, and greener

There has been some criticism coming from Conservatives about the Liberal Party's purchasing of credits to offset the greenhouse gas emissions of Stephane Dion's election travel. Basically the criticism is that the purpose of this purchase is simply to appear environmentally friendly, while the jet that the Liberal Party procured for this election is older and less efficient than the jets obtained by the NDP and the Conservatives (it's the only jet the Liberals could get).

The criticism is invalid and here are the reasons:

First of all, Dion committed the cash-strapped Liberal Party to offsetting his campaign travel as far back as February-March 2007. The point is that this commitment was made before decisions were made about campaign travel. Therefore, it gave an extra incentive for the cost-conscious Liberal Party to make his campaign travel as efficient as possible.

Second, the projects that generate voluntary offsets should satisfy a property called "additionality". This means that the money from the sale of offsets (or the anticipated sale of offsets during project planning) should make a difference in whether the project goes ahead or not. The offset vendor used by the Liberal Party, Carbonzero, says that all of its projects are additional. (By the way if you are interested in their voluntary offset methodology document, which contains a very good definition of additionality, look here.)

So the money from the Liberal Party's offsets really made greenhouse gas emissions go down somewhere else. That is how voluntary offsets are supposed to work. According to a Carbon Zero news release, "The offsets purchased by the Liberal Party of Canada will be directed by Carbonzero to a Quebec project which replaces inefficient gas boilers in heating systems with new units employing heating controls and new energy efficient piping systems...the project includes new solar heating collectors and retrofits the buildings to allow heat recovery from domestic wastewater, and switches heat generation systems from natural gas to electricity."
I'm also told that the offset project involves retrofitting non-profit housing - these are people who would have a hard time putting money upfront to make energy retrofits. Money spent on retrofits would otherwise be taken out of money spent on providing non-profit housing. So we can see why this project satisfies "additionality".

Look at what is happening with the money from Stephane Dion's campaign travel offsets:

• Stephane Dion is reducing Canada's greenhouse gas emissions and fossil fuel consumption. Good for the environment, making Canada greener.
  
• Stephane Dion is making it cheaper for low-income people to live in non-profit housing. Good for social justice, making Canada fairer.
• Stephane Dion is supporting businesses and workers that do energy retrofits, and supporting Canadian manufacturers that build green technology (e.g. see Enerworks, Renewability Energy, ECO GFX, Quantum Renewable, Ecoalternative Energy) Good for the economy, making Canada richer.

Making Canada greener, fairer, and richer: these are the promises that Stephane Dion has been making for a long time, and I think that he has kept his promise in deciding to purchase voluntary greenhouse gas offsets for his campaign travel.

Joe Clark and Kim Campbell support a price on carbon!

A group of prominent Canadians called Canadians for Climate Leadership, including former Progressive Conservative prime ministers is calling for a price on carbon and that revenue from an emissions tax should be redistributed to those hardest hit.

This story just out this morning from the CBC!

The news release is here.

A quote from Joe Clark:

"I am very concerned by the lack of decisive action by Ottawa on climate change," said the Right Honourable Joe Clark. "We are falling further behind other comparable nations, and simply cannot afford another round of posturing and denial in this next election - more than ever, we need a clear and honest commitment by all parties for strong, simple and effective climate laws."

The Economy: Stephen Harper has cast away any intellectual anchor

One claim that Stephen Harper is making on the campaign trail is that he has, "the 'sensible balance' to handle uncertain economic times", according to the CBC.

On the contrary, I would say that Mr. Harper cannot be trusted to be a good manager for the economy because he has cast away any intellectual anchor in that field.

This should have been obvious in his desire to cut the GST (a consumption tax) in the face of the overwhelming opinion of economists that cutting income tax would be better at stimulating productivity and growth. More recently, Mr. Harper also over-ruled his Finance Minister, Jim Flaherty, (who, wisely, is [was] wary of the government choosing investments and trying to pick winners and lowers, a sentiment I seem to remember that is shared by former Saskatchewan NDP Finance Minister, Janice McKinnon) to dangle an election goodie - $80M for a Ford Motor Co. plant.

But what I want to mention today is that Mr. Harper has even cut his intellectual links with free market titans like Milton Friedman. Friedman said, "The legitimate role for government is, in so far as it can, to control and check negative externalities." Polluting for free, greenhouse gas emissions in particular, is a perfect example of a very serious negative externality that threatens the planet. On this, Friedman continues with, "...government should be involved by setting a fee on the activity concerned. And that is something else that has increasingly developed. You have markets now in pollution abatement."

Now, what did Mr. Harper have to say about Stephane Dion's Green Shift? He simply dismissed the Green Shift (after misrepresenting it by reducing it to a carbon tax) by saying that it would, "screw everybody across the country", in complete opposition to almost all economists, even ones that might be considered libertarian, right-wing, or conservative.

Where is Mr. Harper's intellectual anchor when he's thinking about the economy? What are his terms of reference? Perhaps he's just out to get votes? What else could there be? If economic times are uncertain, a guy like Stephen Harper is not a good person to rely on for sound management of the economy.

Conservative campaign workers are easier to train

Yesterday I got my first taste, I think, of the Conservative Party ground campaign for the 2008 federal election. I had on my Tournant Vert button and was walking around downtown Kingston, Ontario. A fellow out of the blue turned to me and muttered some anti-environmentalist stuff ending with "... green shaft" before walking away.
Then it occured to me that the C's have an easy time training their volunteers. I can imagine it now. One guy with a bullhorn shouting, "Repeat after me, 'greeen shaaaft'".

Stephen Harper and the conversation the Governor General needs to have with him

Her Excellency, the Governor General (HE), needs to have this conversation with Stephen Harper (SH) when he comes to visit Rideau Hall later this week (in the style of Andrew Coyne):

HE: Mr. Harper, you've come to ask us to dissolve parliament and call a new election, we are told.

SH: Yes, your excellency.

HE: We trust that you are not doing so because you think you could win a majority in the next parliament?

SH: Oh no, your excellency! Certainly not. That would be against the spirit of Bill C16, the fixed election date legislation that my government proposed and parliament passed last year. No, parliament is dysfunctional. It's dysfunctional now. That's why I'm here. We passed a bunch of legislation before but now, now it has become dysfunctional.

HE: We are glad to hear that you are respecting the spirit of Bill C16. We suspected as much when we read what you said, "My expectation would be that we will have another minority. I think that's the reality of the current political environment," when you visited Tuktoyaktuk. Pray tell Mr. Harper, how do you know that parliament is dysfunctional now?

SH: Well, your excellency, I've just had meetings with the leaders of the three opposition parties. We disagree so much on the issues that I believe our government doesn't have the confidence of parliament.

HE: But what if we get another minority government? What will have changed?

SH: Like I said in Tuktoyaktuk, I want to get a fresh mandate out of an election, even if it's another minority government.

HE: But, assuming you win a minority government, the opposition leaders will still be the same, and they will still have the same disagreements with you.

SH: Your excellency, parliament will be different. There will be new MPs, new ministers, new critics, new committees. Parliament will be different.

HE: But you haven't consulted parliament. You've only consulted the party leaders. Mr. Harper, perhaps we should consult with this parliament before we spend $300 million on another election just so that you can empty the opposition parties' coffers, and so leave them in the position of not being able to threaten to go to the polls. (Yes, we have been reading Mr. Flanagan's exposition of your battle plan.) Is that what you really mean by a "fresh mandate"? We are going to have to think about all of this for a few days before we would be able to grant your request to dissolve parliament.

Lisa Raleigh for Florida Circuit Court Judge

I've been helping my dear friend, Lisa Raleigh, run for Florida circuit court judge this summer. Lisa is a special counsel in the Florida Attorney General's office. I've been volunteering some time to do data processing for Lisa. In Florida you can get information on who voted in recent elections (e.g. who bothers to vote in primaries), their address, age, gender, party affiliation, how they voted (early, absentee, or election day), and even race. So there's a lot of things you can do to choose which voters you'd like to target. Lisa doesn't have a lot of money so this sort of targeting is very important to her.

Well, the amazing thing about Lisa's campaign is not that she made it out of a three way primary race and will be on the November ballot (along with Barack Obama and John McCain) for the run-off, but that she did it while being outspent about 12 to 1 ($159,000 to $13,000) by her run-off opponent, Frank Sheffield (shown here on the campaign trail).

Now, Mr. Sheffield is probably a good guy, but I know that Lisa is smart, hard-working, honest, caring, and a very experienced public prosecutor. If there are any Americans reading this, please consider helping to make sure that we have one more high quality public servant in the world by having a look at Lisa's campaign website and donating to Lisa's campaign.


Watch this video

My Suggestion to Her Excellency the Governor General of Canada

The amendment to the Canada Elections Act of 3 May 2007 (Bill C-16) sets a fixed federal election date of roughly four years after the preceding election. The purpose of this Act is to take away the power of the governing party to call an election when it is to its own advantage to do so. The amendment begins, however, with an affirmation of all of the powers of the Governor General, including the power to dissolve parliament at his or her discretion. By tradition the Governor General also acts on the advice of her prime minister.

What is expected to happen in Canada shortly is that the prime minister, Stephen Harper, will ask the Governor General, Michaëlle Jean, to dissolve parliament and call a new election before the next fixed election date of October 19, 2009. He will claim that the current parliament is "disfunctional", a matter of considerable dispute and, I would say, if true, then certainly caused by his own party who, for example, wrote a 200 page handbook for its members on how to disrupt parliamentary committees.

Mr. Harper will be at least circumventing the spirit of his own government's newly passed law, if not breaking it.

I don't know if Her Excellency the Governor General would consider this transgression sufficient to justify denying the prime minister's request, but I would suggest that she at least assert her long-standing role as the ultimate safeguard against abuses of the law and abuses of our democratic system by taking a few days to "consider" her prime minister's request before granting it.

Is the amount of resources devoted to the Olympic Games getting out of control?

Well, the summer Olympic Games are over. I enjoyed watching some of it on television, but now I feel a bit guilty!

The August 18th issue of Business Week contains an article which states that $6.5 billion was spent on security for the Games in China. It goes on to say that much of that has gone to foreign firms, which suggests to me that the $6.5 billion was real money as opposed to an internal accounting figure.

Wow, that's enough to finance a small war or make a dent in any of the world's pressing problems. According to the Center for Arms Control and Non-Proliferation, $6.5 billion is more than Sweden's projected military spending in 2008. The United Nations Peacekeeping Operations budget in the current fiscal year is only slightly more: $7.1 billion.

The money spent on the Olympic Games sure seems out of control here.

Good news for the Green Shift from the Canadian Taxpayer's Federation

The Canadian Taxpayer's Federation (CTF) released yesterday a "Green Shift impact analysis for Ontario Businesses". They said that new costs of $1.5 billion per year would be paid by 111 power plants and that tax cuts of $811 million would be shared by 365,649 Ontario businesses.

Why is this good news for the Green Shift?

If you look a little more carefully than they did at their own figures, you'll see that about three quarters of the extra tax paid is accounted for by the four coal burning power plants of Ontario Pwer Generation, owned by the people of Ontario.

But the McGuinty government's plan is to phase out these coal plants! A lot of the slack will be taken up by conservation and renewable energy. The Green Shift contains business tax breaks for using green technologies (accelerated depreciation) and a 25% refundable science, research and experimental development credit.

Furthermore, Ontario Power Generation's take of the federal income tax cut would be insignificant (OPG's annual report for 2007 shows income before taxes of $477M and $576M for 2007 and 2006 respectively) compared to all the businesses operating in the province.

So, very roughly but not so much more rough than the Canadian Taxpayer Federation analysis I would say, after the coal plants are shut down (or stop burning coal - there are plans to use biomass to fuel them) the carbon tax paid by the companies than own Ontario power plants would be about $380M while the business tax cuts would still be about $800M (and this economic stimulus does not include the stimulus from developing the green energy sector).

It is interesting to note that while publically owned Ontario Power Generation's plants occupy positions 1,2,4,5,6 on CTF's top greenhouse gas producers list, position 3 is occupied by a plant owned by TransAlta Corp., an Alberta company; position 7 is occupied by Exxon Mobil, the US based corporation; and in position 8, ATCO, is an Alberta company. So some of the private businesses the CTF is shedding tears for aren't even Ontario based businesses.

BigCityLib Strikes Back: High Gas Prices As A Natural Carbon Tax, Part Whatever

Big City Lib asks the question (I'm paraphrasing), "Does the recent drop in gasoline prices (over the last 3 weeks) make the Green Shift an easier sell?" in this blog post:
BigCityLib Strikes Back: High Gas Prices As A Natural Carbon Tax, Part Whatever

I think the answer might be very slightly yes. There is a concept from behavioural finance called "anchoring". When gas prices went up over the last few years, people felt that prices were too high because they were used to lower prices in the past, and did not take into consideration how the supply and demand for oil has changed in the past decade.
Now that prices have fallen somewhat, people may feel that gasoline is relatively cheap. Gas prices may not make the news headlines until a new high is reached. A tax on non-gasoline fossil fuels may be more palatable (in combination with the Green Shift's tax cuts)
Of course gas prices are not the full story, especially as the Green Shift proposal does not increase the federal tax on gasoline, consumer electricity and natural gas prices are regulated (and so don't follow global energy prices in the short term), and there hasn't been a winter heating season since the spike in oil prices in the spring and early summer.
Nevertheless, the economic focus of the average consumer might now be on whether or not there is a recession coming, and not so much the price of energy. For that reason the tax cuts and credits of the Green Shift might be appealing to some voters. This is just a suspicion of mine, not a claim of fact.

Global warming allows Lyme disease to invade Canada

The Kingston Whig Standard carried an article today by reporter Jennifer Pritchett about the spread of Lyme disease across Canada. An aunt of mine in the U.S. has suffered from it for many years. It wasn't treated soon enough or aggressively enough and got into her heart. This nasty disease is carried by the blacklegged, or 'deer' tick. Ticks are bad enough - seeing a creature with its head burrowed into your flesh is a bit distrubing - but those deer ticks are tiny little buggers and really hard to check for. Believe me, I have had to do it for friends.

(Image from the Public Health Agency of Canada website)

Canadians are especially susceptible because they are relatively ignorant about Lyme disease.

The Whig Standard article concludes with a warning from one scientist:

Jim Sutcliffe, a medical entomologist at Trent University, said bird migration has been the source of the ticks moving north into Canada. Global warming is enabling those ticks to survive and reproduce in more northern latitudes.
"The thing that's different is that the climate is changing - it's warming gradually so our summers are getting warmer and our falls are becoming warmer," he said. "The temperatures stay higher for longer throughout the year and that's making southern Canada receptive for the blacklegged tick."

We have to worry about not only greenhouse gas mitigation (reducing the concentration of greenhouse gases) but global warming mitigation. Global warming has already started and we'll have to deal with (pay for) the consequences.

Do you want to pay for a government program to deal with Lyme disease? If so, where would you divert resources from? Would you cut spending elsewhere ? Raise taxes? Borrow from the future?

Explaining the Green Shift from another vantage point

This is based on a piece I wrote recently for a local newsletter:

The Liberal Party of Canada just put out a major policy initiative called the Green Shift. I’d like to explain how the Green Shift will help make taxes fairer and position Canada to succeed in the 21^st century.

Have you ever thought about why the government chooses to collect revenue in certain places but not others? Let's ask the question, “What taxes should be collected to pay for government programs?” I think you’d agree that taxes are a drag. Whenever you tax something you discourage that activity. But you’ve got to raise money somewhere. One place where governments raise money is excise taxes on tobacco and alcohol. Taxes on consumption of those products are not as harmful to society as taxes on other activities. So it’s “safer” to tax those things.

Well then what about income taxes? If you think about it, income taxes discourage people from hiring workers and from earning incomes. Workers are more expensive to hire, and they take home less pay.

Are there things we don’t mind discouraging, that we could tax instead of income? Why not pollution? If we taxed pollution we would only be discouraging something which we don’t want anyways. So let’s lighten, a bit, the taxes on our income and shift the burden over to one kind of pollution: greenhouse gases! Greenhouse gases are emitted when we burn fossil fuels. There’s already a federal excise tax on gasoline, so we can leave that alone. But there is no such tax on, for example, coal, the dirtiest fossil fuel of all. Let’s phase in the shift over four years to let people adjust. That’s the idea behind the Green Shift. The tax on greenhouse gases is called a carbon tax because when you burn a fossil fuel, like coal, you emit carbon dioxide and contribute to climate change. Climate change is threatening the welfare of our children, grandchildren, and many generations to come.

We are shifting taxes in the Green Shift, not raising them. So income taxes will be lowered using the money raised from the carbon tax. There are also a number of protections built into the Green Shift plan for those who are especially vulnerable to energy price increases. Seniors, children, middle and lower income earners, rural and northern residents all get extra money back. A $1 billion contingency fund will be set aside to help out municipalities, schools, hospitals and other non-profit institutions. Everybody, including individuals and businesses, will get a tax break. A 50 year old with an income of $30,000 would get $350 a year. Make it a rural resident and they would get $500 a year. Add a child and that goes up to $1078.

More importantly, everybody will be working together. Everybody will pay for the greenhouse gas pollution for which he or she is responsible. Everybody will earn a reward if they consume less. The Green Shift is just one step. We have to develop technology, build infrastructure, and change our habits. But with the Green Shift, everybody will have a financial incentive to do his or her part to change how we use energy, to energy-proof our economy by reducing our dependence on fossil fuels, and to position Canada for success in the 21^st century.

You want to avoid having Climate Cops?

There was an article in this past weekend's National Post entitled, "Children enlisted as 'Climate Cops', U. K. utility ad campaign raises Orwellian fears". I won't comment here on whether or not the reaction to a U.K. utility's climate change and energy conservation campaign has been blown out of proportion. But I will say this to readers of the National Post (especially to those who are principled conservatives): if you don't want the government telling you how to live, if you don't want your friends and neighbours looking over your shoulder and checking your energy consumption habits, if you don't want the problems of climate change and fossil fuel dependence being turned over to the 'Climate Police', then support the implementation of a carbon tax. For conservatives who like less government, the best way to deal with climate change is to tilt the playing field, and eliminate the current, unfair advantage that burning fossil fuels enjoys, that of being able to pollute for free. People will then be 'free to choose' (C'mon C's! Put a smile on Milton Friedman's face. Join your economists who support a carbon tax!) how to respond to this tilt - change driving habits, use less hot water, conserve electricity, heat with wood, insulate, or whatever.

Ugh! Here come negative carbon taxes - gas subsidies from the automakers

I see that automobile companies are giving out gas cards worth roughly $1000 (got a flyer from Chrysler Canada in my mailbox recently saying they were giving out cards with $750 to $1,500 in gas depending on the model you buy) in an attempt to sell their big cars. Let's do an order of magnitude calculation and see what level of subsidy that amounts to. Let's assume that this vehicle gets 10 litres/100 km and is driven for 200,000 km over its lifetime. Then, over its life, it would use 20,000 litres of fuel. A gas card worth $1000 means a subsidy of 5 cents per litre of fuel over the life of the vehicle, order of magnitude.
Hmmm... the car companies, who are the best people in the world at selling cars, think that 5 cents per litre, equivalent to a negative carbon tax of about $20/tonne, will allow them to sell their gas guzzlers, that otherwise would rust on their lots. So, couldn't a positive carbon tax of that amount (roughly what's happening in BC) do an equivalent amount of good by causing people to buy fuel-efficient vehicles?

Okay, that was a pretty simplistic and rather rhetorical statement, but the point I want to make is that consumers do respond to price signals, and businesses even more so. It is quite incorrect to claim, as some do, that a carbon tax won't do anything to reduce greenhouse gas emissions.

How old is the green tax shift idea?

I just noticed this entry on the Carbon Tax Center website:

In August 1979, Rep. John Anderson (IL) called for a 50-cent-per gallon energy conservation tax on motor vehicle fuels to reduce consumption and dependence on foreign oil. He proposed using the revenues from the tax to reduce payroll taxes by 50 percent, increase Social Security benefits, compensate those who were not on a payroll and thus not subject to the payroll tax, exempt farmers and allow tax credits for businesses "unfairly penalized."

Older folks (like me) might remember John Anderson as the Republican congressman from Illinois who was an independent candidate for U.S. president in the 1980 election. What a gutsy guy! Gasoline was about $1 a gallon back then so he was calling for a 50% increase in the price of gasoline.

The Green Tax Shift idea has been around for a while.