GreenPolicyProf

George Hoberg and Stephanie Taylor

January 12, 2010 (with February 2, 2010 updates)

Canada has committed to reduce greenhouse gases by 20% below 2006 levels by 2020. The federal government has yet to release any credible plan for meeting those targets or an analysis of what the impacts of meeting those targets would be. In this policy and analytical vacuum, NGOs and think tanks have begun to put forward policy scenarios and cost estimates. The most prominent analysis was that released by the Pembina Institute and the David Suzuki Foundation (DSF) in October 2009, which prompted a strong backlash from politicians and the media.  Alberta Premier Ed Stelmach characterized the policy proposal as nothing more than a regional wealth transfer, saying “there won’t be another wealth transfer to Ottawa under my watch. There’s already one wealth transfer program and that’s equalization.” The National Post editorial board went further, arguing that “such an effort would shake the very pillars of Confederation.” The Canada West Foundation (CWF) joined the criticism, stating that the disproportionate burden to be borne by Alberta and Saskatchewan made the policy scenarios unfair and doomed to failure. Of the Pembina/DSF report, the CWF states that “[t]ough luck is the message we are hearing, and this is not only unfair but counterproductive in terms of implementing effective climate change policy in Canada” (p. 16).

(February 2 update:) The CWF expanded upon this point in a January 2010 report, in which they emphasized the negative economic effects for the rest of the country if the West were to bear a disproportionate burden of carbon emissions reductions: “the western Canadian economy is critically important to the rest of the national economy [emphasis theirs]… Hence, if the oil and gas sector that underpins so much of the western economy is hamstrung by policies aimed at curbing greenhouse gas emissions, the whole country will suffer” (p. 4).

Background on Regional Equity in the Canadian Federation

In a federation such as Canada, regional equity issues are inevitable, and much of Canadian political history has been about how to address them. The most obvious example is equalization payments made through the federal Equalization Program, which seeks to maintain a roughly equal level of government services across the country by transferring federal money to poorer provinces. Equalization payments are determined by taking the difference between a province’s revenue-raising capacity and the average revenue-raising capacity of all provinces. Another example would be Employment Insurance payments to citizens, for which eligibility is tied to a province’s unemployment rate. Both examples are the subject of much dispute by provinces.

Given the vastly different natural resource endowments of provinces, and the effect that these natural resources have on provincial economies, the federal government has sought to include resource revenues in equalization payment calculations. However, a series of exemptions previously shielded nearly all of this natural resource-derived provincial revenue from inclusion in the calculations. As a result, despite all the heated rhetoric emanating from the province, Alberta’s vast resource wealth has not historically been included directly in the equalization formula.  In the 2007 budget, a new equalization formula was introduced, in which 50% of natural resource revenues would be included in the equalization formula. This angered Nova Scotia and Newfoundland and Labrador, both of which had signed offshore oil and gas development agreements with the federal government that excluded their offshore resources from inclusion in their equalization calculations. As a result, the federal government gave all provinces the choice of adopting the new formula or retaining the previous formula, which effectively shielded natural resource revenues from inclusion in the equalization formula.

Regional Equity Implications of Climate Policy

Climate policy figures prominently in considerations of regional equity as well. Just as different provinces have different natural resource endowments, they also have different greenhouse gas emissions (which are often tied to their natural resources). The most affected provinces are those whose economies are disproportionately dependent on fossil fuels, namely Alberta and Saskatchewan.  As a result, these provinces would be expected to achieve greater greenhouse gas emission reductions than the rest of the country. Because the policy instruments under consideration – a carbon tax or a cap and trade system* – would create new revenue flows to the federal government, some Westerners are concerned that a regional wealth transfer between the West and the East will result. (February 2 update:) Others, such as the CWF, are concerned that the opposite will occur – that the negative economic impacts of GHG reduction policies in the West (namely in the oil sands) will infect the rest of the country, bringing with it a painful economic malaise.

Serious climate policies do not necessarily result in a regional transfer of wealth, however. It depends on how they are designed. In particular, regional distributional consequences of climate action would be strongly influenced by how the carbon-based government revenues were allocated by governments.

For example, even the controversial Pembina Institute and DSF analysis proposed that a portion of the revenue from carbon pricing go toward payments to individuals to compensate for regional variations in household energy cost increases (Albertans would receive the highest payments - p. 9) and payments to certain manufacturing sectors (such as mineral mining and metal smelting)  to ensure that output levels would not drop below 2008 levels. But most of the new revenues in their policy scenarios were used to reduce personal income tax rates. That policy has many advantages, but it would have a less direct impact on the regional distribution of economic activity. If regional balancing was considered more important than income tax reduction, the mix of fiscal policies for allocating the carbon revenues could be changed to emphasize those that put a greater emphasis on differential costs of compliance or some other relevant factor.

A valuable December 2009 report by Snoddon and Wigle for the Institute for Research on Public Policy went further. They model a policy scenario where all carbon tax revenues are allocated back to provinces in proportion to their initial emissions, and then allows the provinces to decide how to allocate the revenue. In their model, because of revenue recycling, Alberta and Saskatchewan are actually better off after the climate policy is put in place (p. 11).

The regional impacts of climate policies are not inevitable and they are certainly not something generated by a modelling exercise commissioned by environmental groups. They are policy design choices made by governments.

Conclusion: We Need Real Dialogue Now

Addressing the climate crisis will result in increased costs to consumers and producers; as we move to internalize the cost of greenhouse gas emissions, this outcome is inevitable. These costs will only increase the longer it takes for policy to be implemented. As the Pembina/DSF analysis made clear, economic growth is still possible, even in the hardest hit provinces under their policy scenario. Under their assumptions, growth will be reduced from business-as-usual levels, but it is still robust economic growth. It is true that there will be a change in the regional redistribution of costs and benefits of carbon-intensive economic activities. But this does not need to lead to the type of tax revenue grab that many Westerners fear. To the extent that we wish to limit regional impacts we have a range of fiscal policy tools to do so, such as decentralized revenue recycling and even broader policies like the Equalization Program.

Given the urgency of the climate change problem, it is necessary for Canada to have a reasoned debate about how to address the regional impacts of climate policy. We may decide that some degree of regional redistribution is a good idea because the economy will need to adjust to pricing carbon. But if we choose to minimize the regional implications of the policy, there are policy tools available to do that.  There is no doubt that such a debate will be a significant challenge to the federation, but it is hardly an insurmountable obstacle to climate policy.  What is most critical is that this debate begin immediately so that we can make progress on developing and implementing a climate policy in a timely fashion. Perhaps, like Nixon in China, our Conservative Albertan Prime Minister is ideally placed to begin this debate. If he continues to refuse to exercise constructive leadership on this issue, civil society will need step forward to facilitate this dialogue.

* A cap and trade system would not necessarily generate government revenues. Government revenues would be available if allowances were auctioned off, as many economists would prefer. However, it is also possible to distribute allowances for free, as the bill passed in the US House would do. Free granting of allowances based on current or historical emissions is another policy tool available to address the distributional consequences of climate policy.

Andrea Rivers and George Hoberg

November 9, 2009

Hansen at a coal mining protest, where he was arrested.

Four Models of Scientists and Politics

The literature on advocacy in science and policy contains four models: traditional, science communication, expert advocacy, and political advocacy. An overview of these models helps to evaluate Hansen’s actions as a scientist and advocate, providing a revealing case study of the implications and consequences of science advocacy.  

The traditional model separates science from politics with the expectation that scientists should put forth objective data when pertinent without further involvement in the policy process (Lach et al, 2003).  This model suggests Hansen should remain strictly within his area of research, as he did for a significant portion of his career.

A second model, science communication, acknowledges the distinction between science and politics but implies that scientists should do more then simply hand off their data. They should be interpreting and explaining their findings to both policy makers and the public. After all, they are often on the leading edge of knowledge in their respective areas (Mills and Clark, 2001). Hansen, on the fore front of knowledge in climatology and modeling, made a well-known appeal to a Congressional committee in 1988 to take acknowledge the reality of global warming and take the threat of climate change seriously. This appeal included results of his research and future climate projections, falling under this model of science communication.

The expert advocacy model is based on the belief that scientists should be involved by communicating their research with an ethical obligation to act as advocates (Mills and Clark,  2001).  Advocacy in this form is defined as the process of informing policy makers, managers, and the general public about issues that arise in one’s area of expertise (Brussard and Tull, 2007). Dr. Hansen’s research has led him to believe that 350 parts per million (ppm) is the safe limit for atmospheric carbon dioxide, and therefore should be acknowledged in emissions reduction policies. The acceptable limit was previously thought by many scientists to be in the range of 450 ppm. Hansen, with help from others, has communicated this perceived quantity for target atmospheric CO₂ to policy makers and the public. His findings have been recognized and well received by some, spawning new global initiatives for climate action. This model holds that scientists are qualified to be involved in decision-making processes, but it deems advocacy for specific policy preferences as inappropriate (Lackey, 2006).

Under the final model, which we call political advocacy, a scientist advocates a position beyond their core are of scientific expertise. In this case, according to Lackey, the arguments “ sound like science, read like science, are presented by people who cloak   themselves in the accouterments of science but who are actually offering nothing but policy advocacy masquerading as science” (Lackey, 2006, p. 15).

Hansen’s recent activities definitely reflect this concept of political advocacy.  His political advocacy is evident in his participation in coal-related protests in Washington and West Virginia; references to coal plants as  “death factories”; an appearance in a UK court to testify on behalf of climate activists; letters to Prime Minister Gordon Brown, the Obamas and the Government of Australia stating his position on climate change, necessary emissions reductions and policy recommendations. Hansen has controversially opposed the Waxman-Markey Bill and presented his own policy suggestions such as carbon taxation instead of cap and trade. Eileen Claussen, President of the Pew Center on Global Climate Change speaks on Hansen’s policy suggestions:  “I wish he would stick to what he really knows because I don’t think he has a realistic view of what is politically possible, or what the best policies would be to deal with this problem” (Kolbert, 2009, p. 44). Claussen is pointing the distinction between expert advocacy and political advocacy. Hansen’s expertise makes him well positioned to advocate a safe level of greenhouse gases in the atmosphere, but he is not an acknowledged authority on the relative merits of climate policy instruments or on the political process.

Advocacy and Credibility

Underlying all of these models is the inherent risk of credibility loss, which significantly increases the farther scientists move away from the traditional model and from their area of expertise. Although Hansen has been recognized as a highly respected scientist for decades it appears that his venture into the political realm has tarnished his credibility as a research scientist. This change is exemplified by the controversy over Hansen as the 2009 recepient of American Meteorological Society’s highest honor, The Carl-Gustaf Rossby Research Medal.  Specifically, this controversy surrounded the public communication component of the award and the argument that Hansen conforms scientific data to his political opinions. In Hansen’s defense it could be argued that, conversely, his science has shaped his political views. Even if true, Hansen’s credibility as a scientist still suffers.

Credibility within the science community is critically important as its loss can compromise the utilization of research results (Aycrigg et al. 2006) and jeopardize the important contributions that science can offer to policy decisions (Pielke 2004). It is recognized that “science, politics and policy are inextricably connected” (Pielke, 2004, p. 406) and for this reason it is important for scientists like Hansen to move beyond the traditional model and communicate their science to policy makers and the public. Yet, the higher risks to credibility associated with political advocacy may be too great as they can compromise the contribution of potentially important research in policy-relevant issues.

Print Sources

Aycrigg, J.L., G.R. Feldman, R.T. Lackey, A.B. Pidgorna, D.A. Rupp, J.M. Scott, D.I. Stanish, and R.K. Steinhorst. 2006. “Policy advocacy in science: prevalence, perspectives, and implications for conservation biologists.” Conservation Biology 21: 29-35

Bowen, Mark. 2008. Censoring Science: Global Warming and the Political Attack on Dr. James Hansen. New York: Penguin.

Brussard, P. F. and J. C. Tull. 2007. “Conservation biology and four types of advocacy.” Conservation Biology 21: 21-24

Kolbert, Elizabeth. 2009. “The Catastrophist.” The New Yorker.  29 June 2009. p. 39-45

Lach, D.L., P.C List, B.S. Steel, and B.A. Shindler. 2003. “Advocacy and credibility of ecological scientists in resource decionmaking: a regional study.” Bioscience 53(2): 170-178

Lackey, R. T. 2007. “Science, scientists and policy advocacy.” Conservation Biology 21: 12-17

Mills, T. J. 2000. Position advocacy by scientists risks science credibility and may be unethical. Northwest Science 74(2): 165- 168

Mills, T. J. and R. N. Clark. 2001. Roles of research scientists in natural resource decision-making. Forest Ecology and Management 153: 189-198

Pielke, R.A. 2004. “When scientists politicize science: making sense of controversy over the skeptical environmentalist.” Environmental Science and Policy 7: 405-417 

George Hoberg and Stephanie Taylor

October 30, 2009

This week the Pembina Institute and the David Suzuki Foundation jointly released a report that finds that Canada can meet its greenhouse gas emissions reduction target – and even more stringent goals – without bringing the economy to a halt. While acknowledging that the policies necessitated by emissions reduction targets will have different effects for different provinces, the report emphasizes that the impact on economic growth for even the most carbon-intensive provinces will be relatively modest.

As expected, the report has prompted hyperbolic responses from the defenders of Canada’s fossil energy establishment:  several Western provinces, federal Minister of the Environment Jim Prentice, and the Globe and Mail editorial board. Prentice characterized the report’s findings as “irresponsible” and stressed that Canada could meet its targets through other means, namely by harmonizing its climate change plan with the United States’ as-yet-unfinalized plan. He also made it clear that the costs of any emissions reduction plan must be acceptable to all regions of the country. Such agreement over an effective climate action plan is all but impossible as long as Alberta refuses to “touch the brake” on its oil sands operations. And even before factoring in provincial reactions, such hyperbole coming from the federal Minister of the Environment casts doubt on the sincerity of Canada’s commitment to its own greenhouse gas emission reduction target by 2020.

Politicians from Alberta and Saskatchewan were even more vocal in their opposition to the report. Alberta premier Ed Stelmach denounced the report’s recommendations as nothing more than a wealth transfer to other parts of the country: “There won’t be another wealth transfer to Ottawa under my watch. There is already one wealth transfer program and that’s equalization.” Saskatchewan Energy Minister Bill Boyd echoed Stelmach’s “wealth transfer” theme, adding that technology is the key to combating climate change. Alberta and Saskatchewan have placed large amounts of faith and money in carbon capture and storage (CCS) technology, despite questions surrounding its reliability and cost-effectiveness. Recently the federal government has joined in, pumping $343-million into a CCS-equipped coal-fired generation plant in Wabamun, Alberta while declaring that “Carbon capture and storage has the potential to help us balance our need for energy with our duty to protect the environment.”

This dismissive and defiant rhetoric is part of a long history of resistance and denial that at some point Canada, and especially Alberta, would need to reconcile its energy and climate policies with modern notions of sustainability and, especially, an evolving international climate regime. The ghost of the National Energy Program has given Western provinces a de facto veto over national climate change policy.

National newspapers joined the condemnation. The lead Globe and Mail editorial yesterday denounced the report:  “its all-out attack on the oil and gas sector is politically and economically unacceptable, and would euthanize a vital Canadian industry.” It says the report’s policy recommendations are “unsaleable and dangerous.” In its most extreme rhetoric, it proclaims “Canada cannot take its national unity for granted and must not, in the service of international obligations, allow itself to be immolated by a government policy of such wrenching dislocation.”  The National Post editorial board joined in the hyperbole, rejecting the report because it “would shake the very pillars of Confederation.” A National Post commentary joined the editorial excess, claiming “there will be blood.” Reactions from farther west are not so shrill. Vancouver Sun columnist Craig McInnes claims the report demonstrates that “with a political will, there’s a way.”

The Report

Pembina and DSF enlisted MK Jaccard and Associates (MKJA) to consider the feasibility and cost of two greenhouse gas emissions reduction targets: 1) a 25 percent reduction below 1990 levels by 2020, as proposed by environmental NGOs (ENGOs), and 2) a 20 percent reduction below 2006 levels by 2020, the Canadian government’s proposed target. Both scenarios were found to be feasible, though only with significantly stricter policy packages than those proposed thus far by the provincial and federal governments. Of particular interest are the carbon dioxide equivalent emissions prices under each scenario: $50/tonne in 2010 rising to $200/tonne in 2020 under the ENGO scenario, and $40/tonne in 2010 with an increase to $100/tonne in 2020 given the government’s target.

Unfortunately, even the stringent policy packages proposed by MKJA (including carbon pricing) are not enough to reach the emissions reduction targets in either scenario.  Thus, the policy package examined by the authors includes purchasing of international offsets, pursuit of carbon capture and storage (for the environmental option), and a number of other policy responses to close the gap.

Economic Impacts:  National and Regional

Under both scenarios, the report projects that Canada will experience significant economic growth, but not quite as much as it would under the “business as usual” (BAU) scenario of no new controls. Under the BAU scenario, Canadian GDP is projected to grow 27% by 2020. Under the scenario implementing the Government of Canada’s target, GDP would grow 25% by 2020, and under the environmental group target scenario, GDP would grow 22%. The changes in GDP growth are projected to have different affects on different provinces. Growth will be less than projected under BAU in all regions except Manitoba and Ontario. The gap between GDP under both policy scenarios and under BAU is by far the largest in Alberta at 8% under the government scenario and 12 percent under the ENGO scenario.

The number of jobs will increase between 2010 and 2020 in all provinces. Interestingly, job growth will exceed business as usual (BAU) levels under both scenarios in BC, Manitoba, Ontario and Quebec. Alberta is the sole province to whose job growth is less than BAU levels under both scenarios, though it is important not to confuse reduced job growth with negative job growth. Pre-tax salaries in 2020 will also continue to grow under both scenarios, but at a slower rate than under BAU in all regions except Manitoba, which grows faster than under BAU.

GDP per capita will continue to grow in all regions under both climate policy scenarios, though the change from BAU levels will be greatest under the ENGO scenario. Under BAU, Alberta would see per capita GDP growth of 42%, as opposed to 25% under the ENGO scenarios and 31%under the government scenario. As the authors point out, this model does not account for the effects of population growth on GDP per capita. Specifically, population growth in Alberta is likely to be lower under both policy scenarios than under BAU (due to a relative decrease in expected energy sector jobs), which will lead to higher GDP per capita numbers than those projected under the policy scenarios. 

Conclusion

 As the report clearly shows, effective climate action is possible in Canada without plunging the country, or even the Western provinces, into economic chaos. The report’s authors should be congratulated for advancing the climate policy debate in Canada. By conducting serious economic policy analysis on what needs to be done to significantly reduce Canada’s greenhouse gas emissions, they have spoken truth to power. In so doing, however, they’ve exposed the hypocrisy of Canada’s persistent claims that it is committed to emission reduction targets without having a plan or the political will to do meet those targets. By being transparent about the regional impacts of climate policies, the report also challenges the foundation of political-economic power in the West, and provoked a formidable rhetorical backlash.

If Canada wants to be a responsible member of the international community, it will need to reduce its greenhouse gas emissions, and do so significantly and relatively quickly. This cannot be done without significantly raising the cost of energy production from fossil fuels, including the oil sands as well as coal and natural gas. The Canadian economy will need to adjust to these changes, and the impacts of these costs will have differential impact on regions, just as the regional endowment of fossil energy and the wealth generated from that has had differential impacts on regions. The fact that some areas in Western Canada will not grow as much as they might otherwise cannot be used as a justification for failing to act on our generation’s greatest challenge.