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.