What's Wrong with Baird's Anti-Kyoto "Economics"?

"The purpose of studying economics is... to learn how to avoid being deceived by economists." --Joan Robinson

John Baird claims that complying with Kyoto would cause a recession (Press Release, Full Report). Baird and the economists supporting him ignore the costs of inaction (which could further undermine post-Kyoto talks). They forget that emissions trading creates incentives to cut emissions. Finally, they ignore mitigating economic strategies -- and the many benefits of action. Other economists disagree with Baird, which he has failed to mention. Meanwhile, Germany is already reaping a bonanza of jobs and exports from renewable energy. Why can't we?

• Failure to properly account for all the costs of inaction.
  

• This goes beyond the direct effect of Canada's emissions over a few years on the global climate:
  

• By officially giving up on Kyoto for fear of a supposed recession, we would also undermine post-Kyoto negotiations (even more than we already have under this Government). Other countries could use Canada's example as an excuse to delay their own emission reductions for years. The effect on the global climate would be compounded.

• Failure to understand the economic incentives of emissions trading.
  

• The fear that we would need a carbon tax of $195 per tonne is based on a rejection of unlimited international trading in carbon credits.
  

• If unlimited trading is allowed, the Baird Report itself admits that we would only need to pay the international price of $25 per tonne.
  

• So why are they rejecting unlimited international trade in carbon credits? The main argument is this:
  

"Assuming that 80% or so of Canada's Kyoto target would be met through international credits, somewhere in the range of $6 billion annually would be required for these purchases, while at the same time there would be little incentive for domestic investment in energy efficiency and GHG [Greenhouse Gas] reduction technologies" [emphasis added].

• Let's see: businesses would pay $6 billion per year for carbon emissions -- but they would have "little incentive" to reduce this cost?! Ignoring a $6 billion/year incentive for energy efficiency and GHG reduction might pass for "economic analysis" around the Harper Cabinet table. But how did it not get red-lined by the (formerly) level-headed economists endorsing the report?

• Failure to account for the benefits of action, and mitigating economic strategies:

• "...the report he [Baird] presented also states that its calculations do not take into account the benefits of green technology infrastructure, or the jobs created by new investments in that technology. Neither does it consider the impact of monetary policies the government could implement to diminish losses." (Source: Globe & Mail, emphasis added.

• Failure to disclose that other economists reviewing the draft Report had refused to endorse it:
  

"Baird did not mention that other economists who were asked to review the study came to different conclusions.

"'While Canada cannot plausibly meet its Kyoto commitments by domestic action, I think the report overstates the difficulty of implementing policies in the short term,' said David Keith, Canada Research Chair in Energy and the Environment at the University of Calgary.

"'The difficulty of meeting Kyoto is not an excuse for inaction.'"

(Source: Canadian Press, via Yahoo!)

• Meanwhile, Germany is already making Stephane Dion's famous "megatonnes of money" on green energy.
  

• Here are the details from United Press International. They are worth quoting at length:
  

"Great export numbers and thousands of new jobs -- Germany is expecting a 'green' economic boom sparked by its renewable energy sector.

"As early as 2020, sales from wind and solar energy companies will surpass those of automobile and machinery companies, right now among the largest industry sectors in Germany, according to a study from international consulting firm Roland Berger.

'The 'green' sector is turning into a leading sector in Germany,' Torsten Henzelmann, a senior official at Roland Berger, told the Frankfurter Allgemeine Sonntagszeitung weekly. 'It really is a job motor. In 2020, the renewable energy and environment technology sector will employ more people than the machinery or car sector. Today already, companies complain that they can't find enough qualified personnel.'

"The study, commissioned by the German Environment Ministry, polled officials at 1,500 German renewable energy and environment technology firms. [...]

"The world market for environmentally friendly products has a volume of roughly $1.3 billion, and that will double by 2020, the study said. The main drivers of this growth will be renewable energy generation and energy-efficiency technologies, thus handing Germany great chances for additional economic development.

"Already, the country's renewable energy sector is among the most innovative and successful worldwide. Nordex, Repower, Enercon (all wind energy), SolarWorld and Conenergy (solar energy) -- renewable companies based in Germany -- dominate the world market. Every third solar panel and every second wind rotor is made in Germany, and German turbines and generators used in hydro energy generation are among the most popular worldwide.

"Most companies in German told Roland Berger they want to hire more staff because they expect even more growth.

"Nearly 800,000 people work in the German environment technology sector; an estimated 214,000 people work with renewables in Germany, up from 157,000 in 2004, an increase of 36 percent.

'Last year alone, the number of people employed in the German renewable energy sector grew by 24,000,' German Environment Minister Sigmar Gabriel said last month in Berlin. 'This is a real success story.'"

The author of this study has no doubt that setting clear GHG emissions targets would help solidify Germany's lead:

"Berlin should formulate 'clear goals' for carbon dioxide emissions, support innovative research projects and fund "green" education programs at universities." (Emphasis added throughout.)

So the Germans get it. What are we waiting for?

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