The Canadian Government’s Flawed Climate Change and Clean Air Plan Avoids Economic Reality – by Paul Stothart

Paul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

The climate change issue has always been unique among environmental challenges in that, more than any other issue, it is a direct byproduct of our modern lives.

Other high profile environmental issues generally have a limited set of contributors and an obvious choice of fixes. Depletion of the stratospheric ozone layer, for example, implicated emitters of chlorofluorocarbons and was addressed through technological improvements to air conditioners and refrigerators.

Acid rain was caused by pollution from a relative handful of coal-fired power plants and smelters and was addressed through introduction of technologies to reduce sulphur dioxide emissions. Local water pollution problems, such as in the Great Lakes or nearby rivers, also offer relatively easy solutions—invest in better wastewater treatment, some new storm sewers, and a few marine regulations, and the problem is on the way to resolution.

Unfortunately, climate change does not hold the promise of such an easy fix. Indeed, in one critically important respect, it resides at the opposite end of the spectrum from previous environmental challenges. Simply put, climate change is caused not by a few “bad actors” but by the everyday actions of average people.

Every day, hundreds of millions of average people make decisions that increase greenhouse gas (GHG) emissions and therefore contribute to climate change. They buy a house in suburbia. They demand improved highways. They drive to the corner store for bread. They charge their cell-phone battery. They buy imported fruit. They fly to a business meeting. They play hockey. They crank up the furnace or the A/C at home. They log on to the Internet. They watch the evening news while sipping a coffee.

Each of these seemingly benign actions places a demand upon the supply from electricity grids, pipelines, oil companies, and gas stations. Each of these billions of daily decisions increases the release of GHGs into the atmosphere. In this sense, with the possible exception of a few hermits living in mud huts, the staunchest of environmentalists is playing in the same societal arena as the most right wing of business tycoons. Shopping, eating, heating, driving, living—and contributing to GHG emissions growth.

More critical still is the reality that 1.3 billion Chinese citizens and one billion Indian citizens desire the pleasures and comforts that we take for granted in western society. Over the coming decade, the existing ratio of two autos per 100 people in China will move towards the U.S. intensity of 100 autos per 100 people. This, and the similar gradual narrowing of the gap in hundreds of other consumer benchmarks, will mean very dramatic increases in global GHG emissions.

As has been evident in Canada and most other advanced countries over the past 15 years, governments are not particularly proficient in dealing with environmental issues such as climate change. Governments do not like antagonizing those who elect them. A politician, whether Liberal, Conservative, or other stripe, does not like telling the 120,000 residents in his constituency how to change their lives, let alone forcing these changes, knowing he will be seeking their votes a few short months down the road.

The climate change and clean air regulatory plan proposed by the federal government in April 2007 provides the latest evidence of this fundamental flaw. Despite its ostensible priority focus on reducing air pollutants and smog, the plan leaves aside the consumer element of Canadian society—in other words, the exact element that is the main contributor to smog! As such, Canadians will face no constraints using inexpensive gasoline to cruise with total inhibition on the country’s roads and highways, joining millions of other Canadians driving in Toronto, Montreal,  Vancouver, Windsor, Hamilton, Calgary, and other high-smog zones. These consumers may be comforted to know, however, that a smelter or iron ore company located hundreds of miles from urban smog zones is being hit by the plan with severe smog-reduction requirements!

A few other basic realities of political life are also implicit within the government’s plan and broader strategy. First, the government is actually encouraging greater economic consumption and GHG emissions through investing billions of dollars in new infrastructure for cars, trucks, airplanes, and consumers.

Second, governments adhere to a fundamental political requirement to be seen as “doing the right thing” and, in the present minority government situation, are competing to unveil environmental plans that are “the toughest on industry” while leaving average voters comfortably on the sidelines.

In this context, it is telling that three of the most symbolic examples by the government of “being seen to do the right thing” will have virtually zero impact in reducing GHG emissions:

• New tax subsidies to users of urban transit have been judged by most analysts as insufficient to entice new riders.
• The fees associated with a new vehicle feebate program are insufficient to change car-purchase practices in any significant way.
• New subsidies to encourage ethanol use will increase food prices and reward farmers, while offering minimal life-cycle GHG benefits over standard gasoline.

Each of these measures ranked low on the government’s own internal effectiveness assessment that was conducted a few years ago; however, the measures are benign to Canadian consumers and they are symbolically positive for voters who want to see their governments do the right thing. The measures, therefore, have been adopted. Other actions, such as buying some new twisty lightbulbs for one’s home, fall into this do-good category as well.

A further consequence of a fixation on “being seen to do the right thing” is that governments inevitably tread into each other’s turf in their search for votes on high-polling issues. In this sense, the proposed federal plan is destined to lead to federal-provincial duplication—and a potential hodgepodge of regulatory and reporting obligations placed upon Canadian businesses.

And how will Canada’s value added mining industry survive all of this? Stay tuned.

This column was written in September, 2008.