Economic Shortsightedness of Pulling Out of the Kyoto Protocol

by Chris Bisson

Last night Environment Minister Peter Kent reported that Canada would be pulling out of the Kyoto Protocol.  This disappointing announcement came under the guise of a Canadian economic crisis.  The statement that Canada needs fiscal austerity instead of the most basic and already existing climate policy is absurd considering that it is one of the most stable economies out of all OECD countries.  Last night’s statement is not only recklessness towards the climate, it reflects poor economic thinking.

The recently passed Durban Platform from COP17 did not result the sort of comprehensive or legally binding agreement necessary to avoid out of control climate change.  In the negotiations parties like the European Union, who has been experiencing waves of sovereign debt crises, made fair efforts to achieve such a commitment.  The EU is also well on track to meeting its KP emissions reduction targets.  The idea that Canada cannot afford staying in the protocol is not only patently false, the country is also among the most capable to make commitments well beyond the targets of the Kyoto Protocol.  Furthermore, failure to make sufficient commitments today will result in far higher costs related to climate change in the future.

Minister Kent suggested that staying in KP will cost Canada $14 billion in penalties.  These numbers have yet to be substantiated however such penalties would come in the form of purchasing carbon credits, which would go towards offsetting the failure of successive Canadian governments to bring reductions in line with its KP emissions targets.  The OECD recently reported that in the global economic slowdown Canada’s economy is among those contracting the least, while the Eurozone GDP continues to decline.  With the Bank of Canada’s announcement that the debt-to-income ratio has surpassed that of the United States, Canada continues to hemorrhage money into the costly and inefficient Alberta oil sands in the order of $1.4 billion, and developers are also given a 100% capital gains tax break until 2015. Furthermore the Government of Canada is missing out on vast amounts of revenues in carbon taxation and more progressive corporate income taxes on high emitting industries.  The government is also missing out on opportunities to invest in the growing renewables market. Hard and predictable emissions caps would give industry and investors the opportunity to make the shift towards the burgeoning green economy.  There was even a lot of talk at this year’s COP of a “Robin Hood Tax”, which would take a portion of all high volume financial transactions in order to both help regulate the out of control financial industry and create a large revenue source for a just transition to a green economy.

These missed opportunities for revenue, and continued subsidy of such a market-inefficient industry as the tar sands shows that Canada’s commitment to the polluters does not reflect an interest in stabilizing the Canadian economy.  It does not even reflect the false logic of free-market capitalism.  It is advanced neoliberalism, which sees the role of state to insure the profits of a small group of elite industries.  Effectively, the Government of Canada is protecting the profits of polluters at the expense of the people.

Beyond the bogus economics of the pull-out and continued subsidy of market-inefficient and dirty industries, there is also the inevitable cost of impacts from climate change that Canada is committing to through its inaction.  The National Round Table of the Environment and the Economy reported in October this year that by 2020 climate change will cost Canada $5 billion, and between $21 to $43 billion dollars by 2050 in damages and losses in productivity.  What the government of Canada is effectively doing is subsidizing carbon emissions today with debt from future generations, and the interest rate as reported by the NRTEE will be very high.

Canada could avoid the penalties by signing on to a second commitment period,  carrying over its commitments to a second period would mean that it could work harder in then to mitigate both sets of emissions.  Beyond making good on its promises to meet its KP targets, which it is among the most capable among developed countries to meet, Canada is missing major opportunities to invest in the green economy.  The announcement last night by Minister Kent is not only environmentally reckless, it also does not reflect good economic thinking (even under their supposed free-market capitalist ideology).

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