9/2007jaccard-simon fraser university1 mark jaccard school of resource and environmental management...

9/2007 Jaccard-Simon Fraser University 1

Mark Jaccard

School of Resource and Environmental Management

Simon Fraser University

September, 2007

emrgemrgenergy and materials research group


Canada’s Failed Greenhouse Gas

Reduction Policies


Canada’s policy failureemrgemrgenergy and materials research group


• Since 1988 Canadian governments have set several targets for reducing future greenhouse gas emissions and have implemented policies to achieve them. But none of the targets have been met. In fact, emissions have continued to rise.

• In spite of this unequivocal evidence of failure, our governments boldly claim that their new targets will be achieved and their new policies will be successful. Amazingly, much of the media and public still seem to accept these claims, as evidenced by editorials and public opinion polls.

• As an independent researcher, I have focused for 20 years on assessing policies that seek to influence technological change toward reduced energy use and/or reduced energy-related emissions. I report here on some of the findings of research by myself and others and its relevance for past and future Canadian climate policies.


Recent publicationsemrgemrgenergy and materials research group


2007 2006




Targets, policies, emissions

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Solid line shows actual emissions;dashed line shows forecast emissions.

Green Plan

National Action Program

Action Plan 2000

Climate Change Plan for Canada

G7, Rio

World Conference onChanging Atmosphere

Kyoto Protocoltarget

Project Green

ecoENERGY




Canada’s Kyoto performance

–40 –30 –20 –10 0 10 20 30

Romania

Russian Federation

Poland

Hungary

Slovakia

Iceland

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EU-15*

Switzerland

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Australia*

Japan

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New Zealand

Canada

Actual emissions relative to Kyoto Protocol commitment (per cent)

Failing commitmentsExceeding commitments


Broad lessons from the evidence



• Targets are meaningless without the simultaneous implementation of effective policies.

• The predominant reliance on non-compulsory policies – information programs and subsidies – is the reason why emissions have not declined. This evidence is counterintuitive to some industry experts, government officials, politicians and environmentalists. Subsidies appear to be effective, information programs appear essential.

• It is highly unlikely that emissions will decline until government policy places a value on using the atmosphere – charging a financial penalty for emissions (a carbon tax) and/or restricting emissions by regulation (an emissions cap with tradable permits). These policies must have economy-wide application to be effective.

• The latest concern for Canadian climate policy is that government will finally implement taxes and/or emission caps but in a watered-down format that will still produce ineffective outcomes.




A quick reminder: actions to reduce greenhouse gases

• Energy efficiency (if using fossil fuels)• Fuel switching (away from carbon-intensive

fuels)• Pollution control (carbon capture & storage,

process changes to reduce emissions, landfill gas recovery)

• Changes in agriculture and forestry (to prevent emissions and store carbon)


A quick reminder: the policy options

• Information (labeling, ads, awards)• Financial carrots – subsidies (tax credits,

grants, low-interest loans)• Command-and-control regulations• Financial sticks – taxes (GHG taxes,

equipment levies)• Market-oriented regulations (cap and

permit trading, niche market regulations)




Energy efficiency: the favoured action to reduce emissions

“Focusing on energy efficiency will do more than protect Earth’s climate – it will make businesses and consumers richer – Amory Lovins, Scientific American, Sep. 2005”

Problem 1: Global energy use will climb. So energy efficiency effort must not divert from effort toward near-zero emissions energy systems.

Problem 2: Strong evidence shows that energy efficiency not as easy to accelerate as its advocates maintain.




Full micro-economic costs of energy

efficiency



Issue #1 – overlooks risks and quality differences in technologies (transit vs. cars, lightbulbs)

• ignores new tech and long payback risk (option value)

• ignores consumers’ preferences (consumers’ surplus) as technologies are rarely perfect substitutes

If losses of option value and consumers’ surplus are included, efficiency cost can increase significantly.


Full macro-economic effects of energy

efficiency



Issue #2 – misplaced optimism about the aggregate effect of energy efficiency actions

• rebound effect relates to individual services and may be

small in many cases but large in some (air mobility)

• mega-rebound effect: more generally, gains in energy productivity drive economic growth, spill over to other energy services and foster the creation of new services (decorative lighting, patio heater, desk-top fridge, wine cooler, beer cooler, water cooler)

If all rebound factors are included, the net energy reduction is less.


The example of lighting services: UK from 1800 -

2000



Year 1800 2000

GDP A A x 15

Lighting service cost

B B x 1/3,000

Per capita consumption

C C x 6,500




What limit to energy services?


Policy challenges to energy efficiency



• ineffectiveness of information and subsidies

• information limitations• subsidies and free-riders

• political challenge of higher prices and regulation

• energy taxes versus emission taxes• economy-wide emissions regulations




Efficiency advocates and the policy

assessment gap Identification and estimation of an idealized technico-economic potential

using service-specific analysis

Integrated energy system simulation model using only technico-economic data to estimate potential with simple feedbacks

Estimation of full micro-economic costs of efficiency actions, including quality, risk and time preferences of decision-makers, and stock turnover

Estimation of effectiveness of each policy option to induce efficiency actions; estimate total costs

Estimation of full, long-run macro-economic and technological response to energy productivity gains, including direct, indirect, macro-economic and innovation

most analysis stops here

cognitive barrier

Avoid or ignore analysis here

Identification and estimation of an idealized technico-economic potential using service-specific analysis

Integrated energy system simulation model using only technico-economic data to estimate potential with simple feedbacks

Estimation of full micro-economic costs of efficiency actions, including quality, risk and time preferences of decision-makers, and stock turnover

Estimation of effectiveness of each policy option to induce efficiency actions; estimate total costs

Estimation of full, long-run macro-economic and technological response to energy productivity gains, including direct, indirect, macro-economic and innovation

most analysis stops here

cognitive barrier

Avoid or ignore analysis here




Forecasting policy effects

Canada and other countries need transparent tools, with independent review, for assessing the effect of emission reduction policies

e.g., US EIA with NEMS model

In the absence of this, our research group has conducted simulations of Canadian policies using modeling tools and parameters that are internationally recognized.




The last Liberal plan: Project Green

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Business-as-usual emissions

Emissions after policyimplementation




The Conservatives respond to public pressure to act




Latest government policy initiative

EcoAction and Regulatory Framework for Air Emissions – to reduce GHG emissions below current levels by 20% in 2020, and on a path for 65% reduction by 2050

• Various subsidy and information programs

• Potential regulation of vehicles

• Intensity-based cap and trade for large industrial emitters (early action, technology fund, offsets – 10 % overseas, 100% possible domestically)




The recent Conservative effort:

Eco-energy




Our simulated policies

• Gradually rising greenhouse gas tax with revenues recycled 100% back to regions equal to tax contributions

• Emission caps on industry combined with either: (1) further caps on small emitters, or (2) GHG tax on small emitters.

• Market-oriented regulations on emissions and technologies in individual sectors (vehicle performance standards, building performance standards, carbon management standard, etc.)

2010 2015 2020 2025 2030 2035 2040 2045 2050

Less aggressive policy$15 $20 $60 $100 $120 $120 $120 $120 $120More aggressive policy$15 $20 $60 $120 $180 $180 $180 $180 $180




Moderate and more aggressive scenarios

2010 2050 2050 2050Business-as-usual

More aggressive

policy

Less aggressive

policy

Electricity Generation 127 178 23 35Oil and Gas Production 176 325 117 203Energy-intensive Industry 112 194 59 93Non Energy-intensive Industry

23 66 22 33

Residential 41 19 7 9Transportation 193 272 95 136Services 42 102 33 49Other 100 156 43 43Total 813 1,313 400 601All values in megatonnes of CO 2 equivalent



emrgemrgenergy and materials research group Moderate scenario

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Emissionsafter policyimplementation

Efficiency

Fuel switching

Carboncapture andstorage

Agriculture,waste, andother

Business-as-usualemissions




More aggressive GHG price increase

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Emissionsafter policyimplementation

Efficiency

Fuel switching

Carbon captureand storage

Agriculture,waste, andother

Business-as-usualemissions




Electricity bills in Alberta

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Policy lessons for the public

If politicians set targets, but do not explain how they will be achieved, assume failure.

If politicians set targets, and talk of the need for consumers to change behaviour and businesses to invest, assume failure.

If politicians set targets, and implement information and subsidy programs, assume failure.

If politicians set targets, and implement regulations with large opportunities for those who are regulated to grow their emissions while paying others to do so-called offsets, assume failure.

If politicians set targets, and then implement intensity targets with no transition to absolute emission reductions, assume failure.



9/2007jaccard-simon fraser university1 mark jaccard school of resource and environmental management...

Documents

emissions cap

new policies

energyrelated emissions

canadian climate policy

energy efficiency effort

reduced energy use andor

carbon tax andor

government policy places