Monday, June 02, 2008

The Small Men of Confederation

With Charest more popular than ever in Quebec, John Baird decides to go on the attack:

QUEBEC CITY–An Ontario-Quebec accord on climate change has yet to be officially unveiled, but Ottawa is already slamming it as nothing more than "smoke and mirrors."

Premier Dalton McGuinty and Quebec Premier Jean Charest are to release their proposal for an inter-provincial carbon-trading market at a joint meeting of their cabinets here today.

Under this so-called cap-and-trade system, companies that produce fewer greenhouse gas emissions than their caps permit could sell their unused quota on an open market to big polluting firms that exceed their emissions cap.

The leaders of Canada's two largest provinces say their historic deal proves they are leading the fight to save the environment, and they made it clear they believe the federal government is dragging its feet on climate change.

But federal Environment Minister John Baird yesterday dismissed the premiers' proposal, telling the Star the scheme is virtually meaningless without an enforcement component to punish polluters.

[...]

But Baird, speaking from Ottawa, said that "a trading regime is only good if you have laws forcing big polluters to reduce their greenhouse gas emissions."

"This could give big polluters another three or four years before they're forced to do anything," he said, urging the provinces to buy into federal proposals intended to cut Canada's greenhouse gas emissions to 20 per cent below 2006 levels by 2020 and penalize scofflaws.


For those who missed Baird’s QP interview on Sunday, it was truly something else. In it, he praised Mike Harris and the Alberta government for the their efforts to cut emissions, while repeatedly lashing out at McGuinty and Charest. All of this on an issue he could have dismissed with a “this isn’t the most effective way to go about it in our opinion, but we welcome any moves the Premiers make to reduce their greenhouse gas emissions”.

Not that gratuitous attacks on McGuinty are newsworthy – but Charest? Vewy Intewesting…

Labels: , ,

27 Comments:

  • Oh Dear!

    dion can now send his interior decorator into the PMO.

    By Blogger JimTan, at 6:18 PM  

  • The Edmonton Journal/CanWest has the same story today. Except their version includes a hilarious picture of Baird, in which it appears his head is exploding. It was a great start to my day.

    By Anonymous eh, at 6:19 PM  

  • So what, exactly, are industrial players trading, if the "caps" mean nothing?

    Why would I spend money on "credits" (assigned to some industrial players arbitrarily by bureaucrats, one presumes) if the alternative is for me to spend no money to exceed my "cap"?

    In other words, what good does the McGuinty-Charest deal do if there are no enforcement mechanisms on big polluters?

    Unless smoke-and-mirrors is your thing.

    By Blogger paul.obeda@, at 6:28 PM  

  • If this IS more than smoke and mirrors, you have to wonder whether McGuinty is trying to screw Ontario's economy even worse than he already has. Cap and trades are not bad policy, but when it is just Ontario and Quebec, you have to imagine that it is Ontario bearing the brunt of the cost.

    PS: I think the Charest-McGuinty rift reflects a sense from Charest that 1. Harper is no longer a major advantage in Quebec. Nor is conservatism (eg. ADQ decline). 2. McGuinty and Charest now have a common interest in pogey (with Ontario's newfound poverty). 3. A Harper majority is not going to happen anytime soon, while in a continued minority Harper needs Charest as much as the other way around.

    By Blogger hosertohoosier, at 6:37 PM  

  • "In it, he praised Mike Harris and the Alberta government for the their efforts to cut emissions, while repeatedly lashing out at McGuinty and Charest."

    Of course, Harris' policies brought more nuclear capacity online and Alberta actually has a carbon market in the tarsands. As for McGuinty's environmental policy ... pretty much summed up by Nanticoke's continued presence.

    Still, it's truly a great day for any party proposing a federal carbon tax when the two provinces representing 2/3 of the population and 60% of the GDP (could they repeat that stat often enough?) decide to go with cap-and-trade. Way to consult, Dion!

    "Cap and trades are not bad policy, but when it is just Ontario and Quebec, you have to imagine that it is Ontario bearing the brunt of the cost."

    As they say, the devil is in the details. If the press conference was anything to go by, the details haven't been hammered out yet. Which means, as with most Liberal environmental policies (the current BC Liberals being a rare exception), this is going nowhere.

    By Anonymous Anonymous, at 7:00 PM  

  • It'll all depend on what kind of quotas are placed under the cap and what sort of price that will result in. It might just be for show, like Charest's carbon tax, but at the very least it will get a system in place so that it would be easier to drop/raise caps.

    But any carbon market should really be at least national, or even international, for it to work.


    (for some reason, it won't let me post using my blogger ID)

    By Anonymous Calgary Grit, at 7:17 PM  

  • Baird is right without any sticks this will not amount to anything. However, why the hell did he praise Harris and Klein? Canada's raise in emissions over the last 18years is do to increase production in the oil sands and coal production in Ontario.

    By Blogger Koby, at 8:03 PM  

  • "It'll all depend on what kind of quotas are placed under the cap"

    I think that says it all, doesn't it?

    The cynic in me (and I won't hold my breath for the MSM to chime in) can imagine it going something like this: "You gave money to the Liberal Party? Okay, your quota is ZZZZ. You supported the other guys? Okay, your quota is Z."

    And, "I like your industry, so we'll make your quota ZZZ. I don't like your industry (not enough Liberal voters), so we'll make your quota Z."

    Maybe I should be a big polluter today, so I can make a mint off taxpayers by selling "credits" after claiming to cut back my emissions tomorrow?

    Cap-and-trade systems can easily create a "perverse incentive" - increasing emissions, rather than decreasing them.

    What has this new announcement done to actually reduce emissions?

    By Blogger paul.obeda@, at 9:08 PM  

  • Sadly, this announcement is actually raising emissions - it's got John Baird speaking in public again.

    By Anonymous zachjeffries, at 11:08 PM  

  • "It'll all depend on what kind of quotas are placed under the cap and what sort of price that will result in."

    Are you having carbon tax deja vu yet? How long do you think we will have to wait for the details of the McGuinty-Charest cap-and-trade scheme?

    By Anonymous Anonymous, at 11:29 PM  

  • McGuinty has just sold out Ontario. The biggest emitters of CO2 in Ontario are the electrical generating plants. Quebec, on the other hand, gets a large proportion of its electrical energy from Labrador at fire sale prices. This is clean hydro power. So, Ontario's power generators will be paying Quebec huge sums for power that Quebec gets from Labrador for prices way below market value. Quebec wins both ways. Newfoundland and Labrador are getting hosed and have been trying to change the deal with Quebec for years since Quebec reaps a fortune by shipping the power to New York. Now Quebec will collect again because Ontario's power comes primarily from coal and they will do so without even having to provide any of the power to Ontario. These Quebecors are some great negotiators. They can spot a sucker a mile off.

    By Blogger Powell lucas, at 11:35 PM  

  • powell - I'm not an expert on this stuff but, unlike a carbon tax, it strikes me that a cap and trade can be set up within industries...ie, one set of targets for hydro, one for coal. That's my understanding at least, I may be wrong. But if that is the case, I'm sure they'll reach a deal that doesn't punish one province dramatically more than the other.

    By Blogger calgarygrit, at 9:11 AM  

  • Can someone correct my possibly selective memory? Did the Liberals ever make it a habit of out-and-out attacking provinces or premiers?

    By Anonymous Anonymous, at 9:55 AM  

  • Well anon 9:55 - they certainly didn't make a habit of it in provinces where they hoped to gain seats.

    Trudeau might not have been in love with Levesque, and he was fairly contemptuous of Bourassa in his first incarnation, but Trudeau owned virtually every seat in Quebec. Harper does not.

    Obviously the federal Libs haven't enjoyed the most cordial relations with Alberta during the Klein years, but again, they had no reasonable prospect of making gains there.

    It's traditional for provinces to attack the feds and for the feds to pretend to be above it all.

    There's nothing wrong (although it's not exactly classy) in attacking people who will never, ever vote for you anyway. When they attack Toronto it may be a good strategy, but Ontario isn't just Toronto. Not only are there plenty of seats held by both the federal and provincial Liberals, there are plenty of federal CPC seats that belong to the provincial Liberals. Assholes like Baird, Van Loan and Flaherty are putting them in jeopardy.

    By Blogger Reality Bites, at 10:35 AM  

  • "But if that is the case, I'm sure they'll reach a deal that doesn't punish one province dramatically more than the other."

    This sounds like the mythical Dion carbon tax that isn't going to be applied to gasoline, won't unduly hurt people on fixed incomes, and won't force anyone to change their lifestyle but will somehow be effective and save mankind.

    For any plan to be effective, it will hurt Ontario more than Quebec. That's the nature of the problem.

    By Anonymous Anonymous, at 11:28 AM  

  • So let's see, provincial governments representing 2/3 of the voters of the entire country announce an environmental plan that is at odds with your environmental plan. Do you, as the federal government, respond:

    (a) "Hmm, interesting. I'll wait until I see the details before commenting further."

    (b) "While I'm not sure this is an effective plan, it is encouraging to see two provincial governments exercising their jurisdictional authority, a provincial jursidiction we respect unlike the Liberals. We will work with them for the better of Canada without overstepping our own jurisdictional limitations."

    (c) "While it is good to see that Ontario and Quebec share our commitment to reducing harmful emissions, experts consider that a production levels approach such as the one the Conservative Party adopted (after years of the Liberal Party doing nothing) is the most effective at reducing emissions in order to meet our commitments."

    (d) "The real embarrassment for Jean Charest and Dalton McGuinty is that Stephen Harper is getting tougher with corporate polluters than they are. [Their cap-and-trade plan is] a huge shell game that is all about more talk and less action. Jean Charest and Dalton McGuinty are the odd men out [among provinces]."

    If you are the Conservative government, there is oh so very obviously only one possible answer to that questions: (d).

    And the curious thing is that they continue to wonder why they can't grow their support and why a majority government remains so elusive.

    By Blogger Ted, at 1:50 PM  

  • The structure of the cap and trade will probably look like this:

    -Caps for industrial sectors (ie. agriculture, vehicle manufacturing etc..etc...)

    -Higher baselines for Ontario industries than Quebec ones because Ontario's power gen is inherently dirtier (Quebec is very hydro heavy)

    -Everyone will be forced to drop an equal percentage from their baseline by some target year

    -The marginal cost of abatement should be the same or potentially even higher in Quebec

    -Abatement could be more expensive in Quebec because their power gen is already so clean, which means any incremental improvement must come from expensive technological means, whereas there is more lower hanging fruit in Ontario

    By Blogger Ivan, at 2:18 PM  

  • "-Everyone will be forced to drop an equal percentage from their baseline by some target year"

    Therein lies the nature of the perverse incentive: while this would seem to be a reasonable approach for the politicians, the only rational reaction for industry is to delay any possible emission reductions to ensure their baseline is set as high as possible.

    After all, Toyota doesn't want to subsidize GM any more than Ford wants to subsidize Subaru.

    So it is entirely possible that this announcement causes an increase in emissions over what would otherwise happen.

    By Blogger paul.obeda@, at 4:39 PM  

  • "Higher baselines for Ontario industries than Quebec ones because Ontario's power gen is inherently dirtier (Quebec is very hydro heavy)"

    You're kidding yourself if you think Quebec would agree to this. It's not Quebec's problem that Ontario is inherently dirtier. Quebec would simply demand to know why they are effectively being punished for being greener. Even if they use the same baseline Quebec is being punished for being greener since the marginal abatement costs in Quebec are likely going to be higher making those companies more likely to purchase credits, which basically amounts to Quebec companies financing clean technology improvements in Ontario. It's a good deal if Ontario can get it, but it's not going to.

    "Everyone will be forced to drop an equal percentage from their baseline by some target year"

    Or they could just set a cap on emissions and auction off the credits and who cares about where the emissions end up coming from. That way they avoid the political quagmire of determining quotas for particular industries and in different provinces. Problem solved, except for what to do with the money raised through the auction but perhaps that can be used to fund an enforcement mechanism.

    By Anonymous Anonymous, at 5:23 PM  

  • Paul: A baseline would be set at some point in the past.

    Kyoto has 1990. The Harper government has 2006. Baselines are never set forward into the future for precisely the reason you mentioned

    Anon: Doesn't matter what Quebec agrees to. If it's a cap and trade then a baseline has to be set at some past year, and sectors or companies will have to be some % below that baseline. That's how it works.

    An overall cap would still have sectoral emission cut targets (just like they do in the EU ETS)

    And I agree that allowances must be auctioned off (not given away)

    By Blogger Ivan, at 5:40 PM  

  • "Doesn't matter what Quebec agrees to. If it's a cap and trade then a baseline has to be set at some past year, and sectors or companies will have to be some % below that baseline. That's how it works."

    First of all, you are assuming that Ontario and Quebec will agree to the same percentage underneath that baseline as their starting point (or that they will agree to a combined overall cap). We already have a prominent example where that did not happen ... Kyoto. The baseline was the same for every country 1990, but the percentage in relation to that baseline was quite different. Canada was 6% below, America 5% below, Australia 3% above. Who's to say that Quebec will be satisfied entering a cap-and-trade with Ontario on a level playing field when they can argue that they have already done something in terms of a carbon tax while Ontario has not? If I were Quebec, I wouldn't.

    As for sectoral limits, that's how some cap-and-trades work but they don't have to work that way. One of the main benefits of cap-and-trade is that it keeps government out of the way. Artificially created sectoral limits are the very definition of government getting in the way. Do we have a particular interest in making sure coal-fired generators reduce their emissions by a given percentage, aluminum smelters by another percentage, pulp and paper mills by another percentage? Or is our interest to reduce total emissions by a given percentage as cheaply as possible?

    I would argue that it is the latter so we should simply set the cap, auction the credits off and allow industry and the financial sector to solve the problem while government's sole role is to ensure the accuracy of reported emissions and provide enforcement for non-compliance when necessary.

    By Anonymous Anonymous, at 6:05 PM  

  • "A baseline would be set at some point in the past."

    So you're saying the more manufacturing plants GM moves out of Ontario, the more money they can make.

    And that companies who invest in emissions reductions early (when the investment is relatively expensive) are to be put at a competitive disadvantage against those companies who reduce emissions later (when the technology is cheaper).

    Yeah, that makes sense.

    By Blogger paul.obeda@, at 6:50 PM  

  • Anon: You're right as to the sectoral caps... those were designated by government in EU countries for the most part in a "share the pain equally" type thing

    Paul: That's why governments love setting sectoral caps. As sectors grow and shrink the 'pain' can be re-distributed. So if GM shut down all their plants the overall cap might remain the same but the allocating authority (government) may choose to impose even more of a target on them from their baseline.

    Second, why would you assume that earlier reductions would be more expensive?

    McKinsey (the world's leading management consultancy) says there is plenty of 'low hanging fruit' in terms of energy efficiency and carbon abatements in the US (and It's not a stretch to say that would apply in Canada)

    http://www.mckinsey.com/clientservice/ccsi/greenhousegas.asp

    By Blogger Ivan, at 7:04 PM  

  • "That's why governments love setting sectoral caps. As sectors grow and shrink the 'pain' can be re-distributed."

    Governments love setting sectoral caps because governments love interfering in markets for political purposes. No other reason.

    Redistributing sectoral caps to "share the pain" is code for subsidy. Government would have a hard time resisting the urge to play with the sectoral caps if it meant "saving" a sizeable industry in a battleground riding. Especially if it meant postponing its closure until after the next election. They should not leave themselves open to the temptation. Nothing less than a full auction of credits.

    By Anonymous Anonymous, at 8:03 PM  

  • "impose even more of a target on them from their baseline"

    That's precisely what I was suggesting above, to which the response was that baselines were set to past emissions levels.

    It simply cannot be both that baselines are set based on past emissions, and that baselines are reset based on current facts.

    Which, as anon suggests by his comment, brings us full circle to being susceptible to political rewards, not environmental rewards. Because environmentally, you want every manufacturing plant shut down. It's just that economically that would be disastrous, so you interfere instead to reward those industries you like.

    By Blogger paul.obeda@, at 6:33 PM  

  • "It simply cannot be both that baselines are set based on past emissions, and that baselines are reset based on current facts."

    Setting industry-specific emissions targets via baselines are another perversion of cap-and-trade systems by governments looking to interfere.

    If a government were to simply decide what total emissions they wanted during a given time period, auction off the credits on the open market to all players, and allowed unrestricted trading between all players it would eliminate any justified complaints by early actors about being treated unfairly, eliminate justified complaints amongst different industries about bearing the brunt of the costs (if your industry holds all the credits it's because emissions reductions in your industry are the most expensive, if your industry holds none, it's because reductions were the most affordable) and eliminate the ability of government to protect politically important industries by playing with the caps and baselines. The freer the market the better the result.

    Of course, there is always the issue of industries moving to different jurisdictions not covered by the cap, but if a North American cap-and-trade did emerge, I suspect the main driver of these industries to other countries would still be the difference in the cost of labour and not the cost of GHG credits.

    By Anonymous Anonymous, at 8:54 PM  

  • To my mind one and all must browse on it.

    By Anonymous www.muebles-en-asturias.com, at 2:41 AM  

Post a Comment

Links to this post:

Create a Link

<< Home