Signing Kyoto is Not Sound Environmental Policy

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posted March 8, 2002
Many politicians, media commentators, and spectators believe that what is best for the environment is obvious: sign Kyoto. The only thing left to debate is whether we can afford it. Kyoto’s price tag is a legitimate concern. If Canada ratifies the treaty, we are committing to reduce greenhouse gas emissions to 6 percent below 1990 levels, sometime between 2008 and 2012. Since emissions are currently 15 percent above 1990 levels and expected to be even higher by 2008, we are really talking about reducing emissions by roughly 30 percent.

Where do the emissions come from? They are largely the result of burning fossil fuels, an essential ingredient to much of what Canadians produce and consume. How do we reduce emissions by over thirty percent? No one, including Environment Minister Anderson and Prime Minister Chretien, is quite sure. But to achieve such a major reduction will almost certainly involve making fossil fuels more expensive—likely a lot more expensive.

What will this mean for you? Either heavier taxation on consumption of fossil fuels or detailed rationing schemes or a combination of the two. It ends up meaning higher prices for almost any Canadian made good or service you can imagine from the bread at your grocery store to the gasoline that powers your car. Meeting the Kyoto targets will reduce our standard of living.

Since the federal government does not yet have a concrete plan for how Canada will meet its Kyoto target, perhaps they can be forgiven for not explaining to Canadians what Kyoto will mean for our pocketbooks. But given this state of affairs how can they possibly be forgiven for saying they may sign Kyoto as early as June?

Unlike our Prime Minister, President Bush has no intention of signing. He claims it will damage the U.S. economy and throw 4.9 million people out of work. This makes our federal government’s position look even more ridiculous since making energy more expensive in Canada will put us at a competitive disadvantage with our biggest trading partner. What does this mean? Lower incomes for Canadian producers and higher levels of unemployment.

But what do the economic costs of Kyoto have to do with protecting the environment? Here environmentalists and those politicians intent on signing Kyoto could learn an important lesson from economists: what’s bad for the economy is bad for the environment. This is because environmental amenity is what economists call a “normal good.” When people’s incomes go up, so too does their demand for environmental protection.

The worst pollution problems in the world, lack of access to safe drinking water and the use of highly polluting fuels like cow dung, are problems we in Canada can hardly imagine. In fact, like indicators of health, most indicators of pollution improve as incomes increase. In simple terms, richer is cleaner and healthier, poorer is dirtier and sicker. Signing Kyoto will make us poorer leaving us less concerned with other environmental and non-environmental priorities.
How much poorer is yet to be determined.

One government study put the price tag to Canada alone at around $40 billion in lost economic output by 2010. What else could we do with forty billion dollars? Several years ago the Canadian Water and Wastewater Association estimated that we need to invest $27.5 billion in water treatment and distribution over the next 15 years. Not a sexy environmental problem but an important one.

Or consider our concerns about health care. Canadians currently wait an average of 12 weeks for access to an MRI machine. To bring MRI availability to the top of OECD countries would require an additional 327 machines. How many extra machines would the costs of Kyoto allow us to have? Thirteen thousand.

A $40 billion sacrifice might be worth making if we knew that the proposed remedy was a cure. But nobody believes that without the US and developing nations such as India and China committed to reducing their emissions that Kyoto will have any effect at all. Peel the onion back one more layer and you will find that scientists don’t even know how much of the observed warming is natural and how much of it is a result of human emissions. In summary, Kyoto is an expensive remedy that will not work, designed to cure a disease we may not have.

Why would Canadian policy makers support such nonsensical policy? A generous explanation is that they believe it will do some environmental good. A less generous interpretation suggests they care more about appearing green than really being green.

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