We won’t beat back climate change with more corporate welfare

By: Tasha Kheiriddin

Article originally published on Nov 23, 2015 by iPolitics and is available here: http://ipolitics.ca/2015/11/23/we-wont-beat-back-climate-change-with-more-corporate-welfare/  

Liberal leader Justin Trudeau and Ontario Premier Kathleen Wynne take part in a joint news conference in Ottawa, Thursday January 29, 2015 ahead of a meeting of Canadian Premiers.
THE CANADIAN PRESS/Adrian Wyld

The climate, it is a changin’ — and this time I’m not talking about greenhouse gases. The federal policy climate is heating up, stumbling out of the Harper administration’s Ice Age cavern like a revived woolly mammoth. The premiers have poured into Ottawa to meet with Prime Minister Justin Trudeau for a long-overdue discussion of Canada’s climate change strategy.

But the effects of Harper’s climate policy deep-freeze linger on, and may hamper Trudeau’s pursuit of national goals. In the absence of any federal conversation, the provinces have acted alone, and decisively. B.C. imposed a carbon tax. Quebec and Ontario joined a carbon pricing market. Now, Alberta has announced its own carbon tax. Next door in Saskatchewan, Premier Brad Wall is resisting any carbon pricing as his province struggles with low oil prices and a stagnant economy, though he’s pledging that half of the province’s energy needs will be met by renewables.

Ontario Premier Kathleen Wynne is right when she says that there is no “one-size fits all” solution — though one would hope that’s the only advice Trudeau takes from her on energy issues. Ontario’s Green Energy Act has been a fiasco since it was introduced by her predecessor Dalton McGuinty in 2009. Modeled on the European concept of encouraging renewable power development through government-guaranteed prices (ie: public subsidies), it did boost production of solar and wind energy through guaranteed Feed-In Tariffs (FIT).

But to offset the subsidies to green power through the FIT, the Ontario government created the “Global Adjustment”, an accounting method that spreads the cost of these subsidies to all consumers. As a result, from 2003 to 2014, the cost of electricity for the average Ontario personal consumer spiked from $780 to over $1,800 a year. On the commercial side, the Ontario Chamber of Commerce estimates that one in twenty Ontario businesses will close in the next five years due to skyrocketing electricity costs, while two in five businesses cite electricity costs as a reason for delaying or canceling investment decisions.

Why are Ontario’s subsidies failing to produce cost-effective electricity? As was the case in Germany, “rather than allowing the cheapest forms of renewable energy to take hold and provide renewable power, the FIT ensures that investment will flow to those technologies receiving the largest government handout — not those that make the most economic sense.”

The Ontario government is now fading out some of the FIT, leaving many who hopped on the solar bandwagon hopping mad — particularly farmers who plowed thousands of dollars into so-called “micro-FIT” programs.

Over in Alberta, Premier Rachel Notley also has opened the door to subsidization, but has not out-and-out committed to a FIT. Instead, she stated that her government “will keep the costs of renewables as low as possible by using market mechanisms, such as auctioning.” While this is preferable to Ontario’s approach, the devil will be in the details. The reality is that as long as fossil fuels remain the most cost-efficient and reliable form of energy, they’ll be preferred to renewables. Any attempt to artificially create a “green energy economy” will require subsidization by government — taxpayers — and hike energy costs as a consequence.

Carbon taxes also will increase the price of energy. Alberta’s carbon tax will add an average of $900 to every household’s energy bill by 2030, which Notley claims will be “revenue neutral” thanks to government rebates (a misnomer if there ever was one). The cost of compensating coal plant workers for the loss of their jobs will also come out of provincial coffers, currently bare. And while Notley offered up a lovely visual of energy industry leaders (minus Exxon, one should note) standing together with First Nations and environmentalists, those executives are probably smiling because their companies aren’t the ones who will be paying the tab: it’ll be passed down to the consumer. This will dampen economic growth and do nothing to lower unemployment figures.

On a national scale, the different approaches and carbon pricing mechanisms adopted by B.C., Alberta, Ontario and Quebec distort the Canadian carbon market, just as different prices, pricing mechanisms and subsidy programs distort the global market. As described by Professor Jack Mintz of the University of Calgary, the result is a patchwork that may or may not reduce carbon output — but will certainly add to consumers’ energy bills.

We can’t approach climate change by doing nothing about carbon emissions — but we ought to at least concentrate on doing the things that make the most sense. Those things — even according to economists as market-friendly as Milton Friedman — involve putting a price on carbon that accounts for the “externalities” (costs) created by the use and production of carbon-intensive fuels which negatively affect human health and the environment. Those things do not include subsidizing alternative energy industries with green corporate welfare.

Will Trudeau be able to muster the goodwill necessary to create a uniform carbon pricing system in Canada, while resisting the siren call of subsidies? It would be a great achievement. Canadians shouldn’t hold their breath, though. We all share the same environment. But sharing a common national environmental vision? That’s something else entirely.