Global warming is certainly the environmental issue of the decade. In fact, I believe that the debate over global warming has risen to a level where it actually begins to detract from other environmental causes. As I have previously noted, I believe that global warming is a real threat, and at least partially caused by human activity, but I also recognize that a cool Earth is no use if it is a cool wasteland. Global warming must be dealt with, but not at the expense of dealing with other problems.
The prognosis on global warming is as follows, according to Wikipedia:
"Increasing global temperature will cause sea levels to rise and will change the amount and pattern of precipitation, likely including an expanse of the subtropical desert regions. Other likely effects include Arctic shrinkage and resulting Arctic methane release, increases in the intensity of extreme weather events, changes in agricultural yields, modifications of trade routes, glacier retreat, species extinctions and changes in the ranges of disease vectors."
Clearly, if some of these consequences can be mitigated, it is our responsibility to take action. In order to develop a pragmatic and effective apprach to global warming, the externalities associated with it must be identified.
Research suggests that of the atmospheric changes that can reasonably be attributed to human activity, about 75% is attributable to the burning of fossil fuels and most of the rest is due to land use change, such as deforestation. It follows (obviously in this case) that the action needed to mitigate global warming-related externalities must address both these issues.
I will discuss proposals for land-use reform in a future post, and will here discuss strategies to reduce greenhouse gas emissions. About 86% of world energy needs are provided through the burning of fossil fuels. More specifically, about 37% come from oil, 25% from coal and 23% from natural gas. Coal is the largest contributor to GHG's, with most coal being used for electricity generation. Most natural gas is used for heating or fertilizer production, as well as growing amounts in transportation and electricity generation. Crude oil is overwhelmingly (84%) used for transportation, with the rest being used to make other products, including asphalt, sulfur and plastics.
Given those statistics, it is logical that any attempt to reduce GHG's from fossil fuels will focus on the primary uses of these items, those being transportation, electricity generation, heating and fertilizer production.
Electricity production is probably the area where the most potential for change exists (It produces more emissions than any other source). Proven alternatives exist like wind, solar, hydroelectric, geothermal and nuclear fission, and other potential alternatives are in development, like tidal generation or nuclear fusion.
Transportation is the second biggest producer of emissions, and perhaps the largest sticking point, as few credible alternatives exist. Biofuels are (probably) only marginally better in terms of emissions, and require additional agricultural production (bad news..see later posts). Hydrogen and electric vehicles simply shift more emissions to electicity generation, so the success of those alternatives depend on the success of renewable generation.
The usage of natural gas for heating and cooking present a different problem. It turns out that using fossil fuels here is actually more environmentally friendly because so much energy is lost in electrical transmission and most electricity is produced using fossil fuels. It is unlikely that much can be done to reduce these emissions unless renewable generation becomes endemic.
Finally, the issue of producing fertilizer from natural gas via the Haber process must be addressed. Reductions here can be achieved mainly through agricultural innovation, which I will discuss in the later posts on land use change and agricultural conservation. It must be noted, however, that these reductions are also dependant on reliable supplies of renewable electricity.
Because the strategies for reducing GHG's from fertilizer production, heating/cooking and to some extent, transportation rely on the development of clean electricity, I believe that that must be a primary goal. The other primary goal that I can see is emphasizing efficiency over elimination, because that will allow progress to be made on all fronts without waiting for renewable generation to be the norm.
The most difficult part of policy fomulation in this case is taking the theoretical conclusions and objectives and tying them to effective and pragmatic strategies. In this case, a few strategies could be employed.
The biggest incentive to companies (especially power generation companies) to reduce their emissions is to price in the cost of the externality. For GHG's, this is much less difficult than for other externalities because they are easily measured. Two proposals have emerged, that of an emissions trading framework or that of a carbon tax. I tend to favour the trading approach for three reasons:
1. Carbon Taxes do not neccessarily result in emissions reductions. It would be extremely difficult to balance the tax so that it achieved substantial GHG reduction while still allowing businesses to be competitive.
2. Carbon Trading reflects the fact that in some industries it would be easy and cheap to reduce emissions, while in others it would be very expensive and difficult. A uniform Carbon Tax would be much less efficient at allocating emissions reductions to the sectors where they would do the least economic harm.
3. In Canada, a carbon tax is essentially a method of equalization. Most of the tax revenue would come from the wealthier, industrial areas like Alberta and Ontario, and the offsetting tax reductions would likely be spread evenly across the country. A Carbon Trading scheme could be built to avoid this problem.
The type of Carbon Trading scheme I would build would be one where absolute emissions would be capped at current levels and decrease by ~2-3% per year for 50 years. Emissions credits would be distributed at the beginning of each year. Initially, I would propose that credits be allocated based 75% on current emission levels and 25% based on an auction format, and that the percentage of credits auctioned off increase by 2% each year until it reaches 100% . However, to prevent regional wealth transfer, the auction revenues would be divided based on provincial emissions percentage and returned to the provinces for use in funding the other measures I describe below.
Carbon Trading is useful in reducing overall emissions and increasing efficiency, but it is not a comprehensive solution. It does not go far enough in incentivising the development of renewable power generation, a key goal. Also, it only achieves emissions reduction from businesses, and not individuals.I would therefore propose the following additional measures.
1. Usage of the auction proceeds from above, on a provincial basis, for funding provincially-appropriate measures to encourage renewable energy development.
2. Creation of a series of research grants and prizes for the development of certain technologies key to long-term renewable energy supplies as well as nuclear fusion.
3. Canada should immediately rejoin the ITER project, which it left in 2003.
4. A moritorium on new coal-fired powerplants that do not have carbon capture technology should be considered, and implemented if the economic cost would be reasonable.
5. Modification of the GST should be considered, towards a revenue-neutral system where items have three classifications: Harmful (A), Neutral (B) and Benefit (C), based on their environmental impact. Category A items should be subject to 10% GST, 5% for B items, and C items should be GST-free. Companies should be able to obtain a refund on the extra GST in Category A, because they already participate in emissions trading. These changes would be subject to a review of the administrative costs, which could be high, but I believe they are neccessary to encourage emissions reduction among private citizens.
These measures, I believe, would start Canada on the road to substantial emissions reductions. The emissions trading scheme alone would reduce emissions by around 50% by 2050, and with the other measures it could be even more substantial. I also believe that these proposals are sensible and pragmatic, and would not result in excessive economic harm or the substantial enlargement of government.
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