Burn the Money: The Grossly Misleading Saskatchewan Government Report on the Cost of a Carbon Tax

(July 5, 2018)

Recently, the Government of Saskatchewan in conjunction with the Institute for Energy, Environment and Sustainable Communities at the University of Regina released a grossly misleading, seriously flawed study on the impact of implementing a carbon tax on the provincial economy. Based on this report, the government has attempted to justify it’s position that carbon pricing in Saskatchewan would be overly costly while accomplishing little to reduce greenhouse gas emissions. These conclusions contrast the vast body of serious academic studies and the accumulating global evidence from existing carbon pricing systems as to the cost and effectiveness of applying a price to pollution.

A recent study from Stanford University estimates that the cost of damage from extreme weather events, sea level rise, loss of agricultural productivity and other outcomes of 2.5-3°C in global warming will reduce end of century per capita global economic output by 15-25%. With a 4°C increase in temperatures, economic performance is projected to drop by more than 30%. Inadequate action on our part over the next 20-30 years to combat climate change will impose extreme costs and hardships on future generations. A Yale University study estimates a 4.25% annual rate of return on investment in climate action plans designed to effectively mitigate future climate damage. Simply put, investing in effective climate action plans in not only an obligation to future generations but an exercise in common-sense economics.

A properly designed economic analysis on the impact of carbon pricing will include a cost/benefit analysis. However, the analysis employed in the Saskatchewan government-funded report does not consider the benefits of mitigating climate change. Further, the analysis is restricted to 3 scenarios that do not begin to approach the cost efficiencies of a well-designed climate action plan. In 2 of the scenarios no consideration of redistribution of carbon fees is considered. Under these scenarios, the revenues from carbon fees simply vanish. The third scenario assumes that revenues are distributed to households without provisions for refunds to industry or any other considerations. This scenario is less costly than the “burn the money” scenarios but is far from an ideal plan tailored to the specifics of Saskatchewan’s economy.

A well-designed made in Saskatchewan climate action plan would be based on a combination of carbon pricing mechanisms and policies adapted to the specific circumstances of the provincial economy. The Saskatchewan government correctly points out that the relative contribution of emissions intensive trade exposed industries to the provincial economy is greater than is the case for Ontario or Quebec. These industries can be protected through the implementation of a hybrid carbon pricing/trading system of output-based trading allowances. This would be supplemented by additional carbon fees and policies with targeted exemptions. In a revenue neutral system, carbon fees would be distributed to households, farmers and industry using formulas designed specifically to fit the specifics of the economy of the province.

Canada’s Ecofiscal Commission concludes that carbon pricing with well-designed systems of revenue recycling will be effective in reducing emissions without significant impacts on the Canadian economy. Actual net costs extending to the year 2032 are within the margin of error in predicting future GDP growth rates.

Rather than assessing a well-designed Saskatchewan-specific program of carbon pricing and climate policies, the study focuses on absurd scenarios that ignore revenues from carbon fees or at best restrict revenue recycling to households and thus fail to support industry. Not surprisingly, based on this report, one can conclude that it is costly and inappropriate to burn the money of the people of Saskatchewan. The government should consider a responsible alternative and burn what is a grossly misleading, incomplete, and biased report on the costs of carbon pricing to the Saskatchewan economy.

The Danger of NO Nukes

(March 25, 2018)

Since publication of The Price of Carbon I have been challenged by some within the environmental community as to the strongly stated position in the book that nuclear power is not only safe and sustainable but required to efficiently decarbonize power grids within the timeframe required to limit future surface warming to less than 2°C.
Without doubt, the level 7 nuclear disasters at Chernobyl and Fukushima resulted in massive and costly cleanup and remediation projects that will stretch over decades. There is no denying this reality and the need to continuously advance safety in the design of nuclear power stations and to establish safe long-term solutions to manage high-level nuclear waste.
However, a narrow focus on the potential damage of future nuclear disasters and issues of waste management often leads to the conclusion that a global shutdown of nuclear power plants and full moratorium on future builds is in order. This outcome would be lead to a catastrophic increase in the use of fossil fuels to produce electricity over the next 30 years. There are vast regions of the planet that are lacking in sufficient biomass, hydro and geothermal options to produce electricity. Renewables in the form of wind and solar are variable energy sources and grid penetration beyond 40% of total power supply becomes largely impractical based on current technologies. In the absence of hydro and geothermal, the options for baseline power production consist of fossil fuels and nuclear power. If you remove the nuclear option, the critical decarbonization of the electricity supply sector as required over the next 30 years is likely to be impractical. Given the remaining budget of emissions under a less than 2 degrees surface warming scenario there is no luxury of time to delay decarbonization of the electricity supply sector as will happen in the absence of nuclear power.
In Japan, the post-Fukushima shut-down of nuclear power stations, resulted in a compensatory increase in fossil fuel use and an 7% increase in national emissions. Japan plans to re-introduce nuclear power to the energy mix such that nuclear would contribute 20% of the total power supply by 2030. Prior to Fukushima, Japan had planned an ambitious year 2030 low emissions energy mix of 52% nuclear, 19% renewables and 29% fossil fuels. Post Fukushima the 2030 targets have been revised to 20% nuclear, 23% renewables and 56% fossil fuels. As a result, Japan’s ambitions to curtail GHG emissions and to contribute to the global effort to combat climate change have diminished since the Fukushima disaster.
India’s latest energy plans calls for no new fossil fuel power plants to be built, beyond those already under construction, until at least 2027. The massive increase in electricity supply within India over next 9 years will be covered by zero emissions hydro, renewables and nuclear power. This program is vital to the global effort of decarbonize power supply by mid-century.
In 1975, a massive storm dropped a year’s worth on rain within a 24-hour period in the drainage area of the Ru river in China leading to the collapse of the Banqiao dam. Casualties from Banqiao dam catastrophe were estimated at 171,000 deaths and with 11 million displaced. In contrast there were 0 fatalities associated with the Fukushima disaster and the Chernobyl disaster lead to 134 cases of immediate radiation sickness with 28 confirmed deaths from acute exposure. Post Chernobyl there were another 19 deaths from cancer associated acute exposure and there were 9 deaths from thyroid cancer from exposure to radioactive iodide.
Based on a statistic of early death per unit of power production, nuclear, wind, solar and hydro (including Banqiao dam collapse) are safe methods of power production. The WHO estimates that globally there are 7 million early deaths per year due to air quality issues and coal combustion accounts for well over half of this mortality.
In describing the Banqiao dam disaster my intention is not to raise concerns over the safety of hydro power but to put the safety concerns of nuclear power into context and to illustrate the damage potential of unmitigated climate change. With unchecked emissions, and subsequent future global warming the frequency and damage potential of extreme weather events will markedly increase.
The global focus to combat climate change cannot deviate from curtailment of emissions and progressively decarbonization of economic sectors. Nuclear power has a key role in providing a zero-emissions alternative to fossil fuels to produce electricity in regions that are lacking in hydro and geothermal alternatives.

The Emissions Abatement Potential and Cost Savings of Operating an Electric Vehicle

(February 30, 2018)

Concern is often expressed as to the higher costs of gasoline and diesel following the implementation of effective carbon pricing mechanisms and the impact that this will have on the consumer. With the emergence of competitively priced electric vehicles there is a substantial cost saving alternative to “gas price anxiety” that comes with considerable lower emissions of greenhouse gases. However, these advantages must be clearly and accurately communicated to the public.

Calculations of operating costs and emissions from gas and diesel fueled and electric vehicles often use complete life cycle greenhouse gas assessments. Emissions associated with each step in the process of building the vehicle and producing the fuel or electricity are used in this assessment. This analysis requires assumptions as to the energy mix used to produce electricity and the emissions associated with extraction and processing of fossil fuels. Electricity produced in Manitoba and Quebec is largely produced by zero emission hydro power. This is not the case in Saskatchewan where coal is a significant contributor to the electricity supply sector. Further, factors that define costs and emissions are not static and indeed progressive deep decarbonization of economic sectors is required going forward to mid century if future surface warming is to be held to less than 2 degrees C.

The objective of introducing carbon pricing mechanisms is to provide an incentive for change in practice to lower cost, lower emitting options. By switching to an electric vehicle, consumers have an opportunity to abate carbon dioxide emissions while achieving a substantial annual saving in operating costs. Carbon pricing mechanisms will further the savings potential and thus incentivise consumer preferences for lower emitting vehicle options.

The potential saving and emissions abatement opportunity for switchover to an EV must be conveyed to the consumer via a simple and accurate message. By comparing similar sized vehicles and using a reasonable cost for fuel and electricity the cost savings are clear and by restricting the analysis of emissions to tailpipe emissions no assumptions as to energy sources for electricity production are needed. The consumer compares a simple set of facts as to the cost of charging or fueling and what come out of the tailpipe (if there is a tailpipe).

Based on a gasoline cost of $1.05/L and an electricity cost of $0.11/kWh, charging a Chevy Bolt as required over 1 year of operation and 18,000 km travelled will cost $984 less than the cost of fueling a Honda Civic and will avoid 2.8 metric tonnes of tailpipe carbon dioxide emissions.