The economic impact of carbon controls

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There's a reason why Tory Environment Minister Jim Prentice labelled the report released last week outlining the cost and benefits of carbon control "irresponsible."

If we seat-rich Ontarians really got the meaning of these findings, the Tories would be tumbling in the polls and out on their asses faster than you can say "Michael, Jack."

The study, Climate Leadership, Economic Prosperity, funded by the TD Bank, is the first detailed attempt to foresee how policies pushing targeted greenhouse gas reductions will affect Canada's economic growth.

The short answer for Ontario? Pretty damn well. Jobs, transit, take-home pay, opportunity, investment. Alberta not so much, but there's no need to feel guilty -- that province will still have the best growth rate in the country, with plenty of jobs and other potential goodies, too.

Not so bad considering the true costs Albertans will face if unrestricted oil sands production is allowed.

But now we know for sure that as far as Ontario is concerned, even using a mainstream economic lens, carbon pricing and emission control policies are actually where our bread is buttered.

The study, commissioned by the Pembina Institute and the David Suzuki Foundation and carried out by the firm M.K. Jaccard and Associates, is only a model and certainly not to be mistaken for the word of God.

Last year's unforeseen economic crash speaks volumes about the hazards of predicting the future -- especially when it comes to assumptions about how "business as usual" might unfold, which in this study is assumed to be an orderly rise of 2.4 per cent a year for the next 10 years. (Yeah, right.)

But still, the model is the most comprehensive yet on the subject. The TD Financial Group deserves credit for anteing up the $100,000-plus price tag. But even business commentators are asking why the government of Canada, which is the only entity outside of Jaccard and Associates with the modelling capacity to pull this kind of study together, has chosen not to.

Hmmm. Let me guess.

The fact is that the Harper government hasn't even implemented policies that come close to achieving its own wimpy carbon reduction targets (3 per cent below 1990 emission levels by 2020), let alone the minimum science-based target favoured by enviro NGOs of 25 per cent below the 1990 level by 2020.

(The latter target is based on holding average warming to 2° C and is the minimum post-2012 target agreed upon by Kyoto signatories in 2007.)

To reach the government's own goal, the study says it's necessary to put a significant price on greenhouse gas emissions, introduce a broad complement of new regulations and invest public funds in many new areas both to encourage reduction capacity and address the new problems created by carbon pricing and regulation.

The same is true, only more so, for the more ambitious and more realistic NGO target. It is not a simple task, and as one TD Bank official affirms, "The longer the government waits to take action, the more expensive it will be."

But on the whole, the report offers up a ton of really good news for the whole country. Employment in all regions of the country grows in all scenarios over the 10-year period, but somewhat more robustly when climate policies are introduced -- so thumbs up for green jobs.

And the economy grows almost as much with carbon control measures as without.

Emission Economy

Comparison of cumulative economic growth (Gross Domestic Product) and emission rates (2010 to 2020) by carbon control strategy.

No Carbon Controls

• 27% growth in GDP

• 47% increase in emissions over 1990 levels by 2020

Feds' Carbon Plan

• 25% growth in GDP

• 3% decrease in emissions from 1990 levels

NGOs' Carbon Plan

• 23% growth in GDP

• 25% decrease in emissions from 1990 levels

Of course, the effect is biggest in Alberta and to a lesser extent Saskatchewan, and hence the report has been called "divisive." Alberta's booming 57 per cent economic growth would be trimmed back to a respectable 38 per cent under the strongest carbon cap.

Still, refusing to impose controls on oil sand exploitation is only an option if you're in complete denial.

If you acknowledge climate change, as the federal government currently does, there's no debate. If you fail to enact reduction strategies, then you're simply a criminal.

And here's where we need to be frank about the benefits for Ontario. According to the report, Ontario (and Quebec and Atlantic Canada) GDP is modestly negatively affected by climate controls, but that is offset by an influx of capital that would otherwise have been invested in the fossil fuel industry. At the same time, employment gets a boost.

Plus, the analysis shows that carbon pricing would deliver $45 to $70 billion per year to government coffers by 2020. The study returns almost half of this to Canadians in the form of reduced personal income taxes.

And it provides huge dollars to fund public transit and smart grid transmission implementation, creating cost-effective alternatives to coal and nuclear.

It funds regionally based per-household compensation for increased energy costs, and offers up dollars to protect the international competitiveness of the most vulnerable manufacturing sectors. It provides subsidies for efficiencies -- and the list goes on.

These are all attractive outcomes. As well, another glaring economic reality outside the scope of the report must be factored in.

It's the dollar. Bank of Canada governor Mark Carney has repeatedly cautioned that the rising Canadian dollar is the biggest threat to Canada's economic recovery and future health.

While some of our dollar's current strength is the result of the decline of the U.S. dollar, a lot of it can be attributed to the oil sands boom, which if unchecked will continue to put major upward pressure on the loonie. Everyone, including most businesses outside the oil patch, will pay the economic price.

It is painfully obvious that Ontario's economy has suffered in tandem with Alberta's boom. We were officially declared a have-not province just last year.

It isn't divisive for Ontario citizens to want government policies that favour a more equal distribution of wealth across the country. In fact, there is a shockingly fortuitous alignment between the best interests of Ontario and the best interests of the planet right now.

And kudos to the provincial government and the city, both of which have been smart to come to the table with a good start on the kinds of environmental policies we need to see.

If we Ontarians wake up to our huge collective self-interest in demanding federal climate control policies, and start throwing our parliamentary weight around, we could do wonders.

This is an intense time leading to next month's Climate Change Conference in Copenhagen, and it is depressing to watch expectations for a solid deal around global emission control crumble, in part due to the posture of the Canadian delegation over the last two years.

Right now we have a government in denial that values the oil industry over the interests of its citizens. In this province, we have the political power to put an end to that. What are we waiting for?

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