Canada's plan to ration energy Carbon dioxide 'credits' would limit amount of fuel burned to reduce greenhouse gases Tom Spears The Ottawa Citizen
Saturday, November 24, 2001 Canada is considering energy rationing -- limiting the amounts of gasoline, electricity and heating fuel available to consumers and businesses -- as a way to meet our international promise to fight climate change. Limits on how much fuel we can burn would drive up the cost of driving a car, heating a home and running any electrical machine, the government's top advisers say. It would cause inflation and perhaps also an economic slowdown -- up to $40 billion a year of lost GDP (gross domestic product). But a new report by government economists picks it as perhaps the only effective way of meeting a dramatic new international agreement on greenhouse gases such as carbon dioxide, the gases blamed for global warming. The effect, says one of the authors, would be much like gasoline rationing in the Second World War. Only a few energy types such as nuclear and hydroelectric power, wood-burning and the tiny amounts of "green" electricity sources such as windmills would be exempt in the most wide-ranging of their forecasts. Beginning in six years, if we ratify the Kyoto Protocol on greenhouse gas reductions, Canada will have to cut back our reliance on gasoline, coal, oil and natural gas dramatically or face international penalties. These penalties haven't been specified yet, and Canada hasn't ratified the international deal. But the federal government, silent in public on measures to meet our promise of cutting fuel use by at least 25 per cent and probably more, is studying the use of fuel permits behind the scenes. In the "tradeable permits" system, any industry that wants to burn fuel would have to get a government permit for every tonne of carbon dioxide that fuel would produce. Here's how such a system works: "You pick a certain group of emitters (of carbon dioxide) such as power companies or steel companies," says Ross McKitrick, a University of Guelph economist specializing in the environment. The government gives each industry permits to produce a limited amount of carbon dioxide a year. "You tell them they are free to trade the permits. But at the end of the year they must hold permits for every tonne of CO2," and this limits how much fuel they may use, he says. That in turn limits how much electricity is produced, how much gasoline can be sold to drivers, and how much heating fuel can be sold to homeowners. "It's like rationing," Mr. McKitrick said. "The only difference between this and wartime rationing (of gasoline) is you don't have a ration book. Instead the oil company has the permits, and you buy from them." "The best modern example would be taxi licences or dairy quota." Both of those are limited to owners of existing taxis and dairy farms, meaning any newcomer who wants to start (or expand) a dairy farm or drive a taxi must buy the right to do so from someone who already has that permit. There are two ways of having permits: With or without a "cap," or limit on the amount of gases that can be produced, says University of Ottawa economist Philippe Crabbé. He's a member of the Analysis and Modeling Group, the committee that drew up the report. But he said there's little point in issuing permits if the number of them is unlimited, so an "emissions cap" -- in effect, rationing energy -- is what the economists are studying. "You would divide the allowable emissions into permits, and that would amount to a limited number of permits," he said. "Business is never very friendly to environmental enhancement, and therefore they may resist the imposition of a cap," he added. The Analysis and Modeling Group isn't sure how such a permit method would operate. "Each allocation method would present its own unique set of consequences," its final report says. Therefore the report's findings on effects on our economy are "preliminary and provisional." Still, whatever method is used, there's no shying away from the permit system in some form. And that would cause an economic burden. - "At the national level, attainment of the (Kyoto) target results in sustained, long-term, negative economic impacts." The overall effects of the likeliest permit system would reduce Canada's growth rate. Between now and 2010 our growth if we take no climate change action would be about 30 per cent, the forecasters say. But with cuts in CO2 emissions, we can expect growth somewhere between 26 and 30 per cent, depending on how we go about it. "This (worst case) is equivalent to the loss of roughly one year's growth, or, viewed in absolute terms, in 2010, the loss in annual economic output of approximately $40 billion a year (or $1,100 per capita)." - There could be "leakage of investment to countries that have lower (costs), or no costs, to industry under the Kyoto Protocol," the report notes. "While difficult to quantify, it is a risk to the Canadian economy." - Allocating permits "results in inflationary pressures," it adds -- at least according to the analytical method used so far. That's because the fuel shortages drive up fuel prices. - There would be a short-term benefit from the burst of investment required to meet goals (for instance, buying more efficient furnaces and cars). "Thereafter, however, higher production costs, deterioration in competitiveness and lower incomes combine to reduce GDP" below levels we could expect without Kyoto controls. The trading system in permits would also allow us to pay fuel users in other countries to cut back instead of cutting back ourselves, since it makes no difference to the environment where emissions are reduced. The modeling group consists mainly of economists from federal and provincial departments that deal with climate change and natural resources, with a few academics and business representatives. © Copyright 2001 The Ottawa Citizen THE END ==^================================================================ This email was sent to: archive@jab.org EASY UNSUBSCRIBE click here: http://topica.com/u/?bUrHhl.bVKZIr Or send an email to: [EMAIL PROTECTED] T O P I C A -- Register now to manage your mail! http://www.topica.com/partner/tag02/register ==^================================================================
