there are no 'good guys' and 'bad guys' in climate change | Ecofiscal

There are no ‘good guys’ and ‘bad guys’ in climate change

Improved carbon pricing could make socially responsible investing easier
Climate and Energy

This Report on Business Insight piece by Chris Ragan originally appeared in the Globe and Mail on March 10, 2015.

Last week, The Globe and Mail released the results of a new survey showing that 71 per cent of Canadians support new taxes on businesses that emit greenhouse gases (GHG). Yet only 41 per cent are willing to face new taxes on gasoline and even fewer approve higher taxes on heating oil. These results point to a troubling conundrum that we need to confront if we are going to be smart about addressing climate change.

The good news from this survey is that the majority of Canadians recognize climate change to be a genuine problem and favour increased action to reduce GHG emissions. They also support using fiscal tools to drive that action, which is sensible because pricing carbon is almost certainly the most cost-effective way of cutting emissions. But there is also a troubling disconnect in the survey results – about who should be the main focus of any policy.

When it comes to greenhouse gas emissions, it is tempting to depict businesses as the “bad guys” and consumers as the “good guys.” If only those bad guys took responsibility for their emissions, everything would be okay. But that’s not how markets work. Consumers and businesses are equally involved in market activity. When consumers demand carbon-intensive products – and we all do, every day – businesses naturally provide them. And if new policies force businesses to incur higher costs when making those products, consumers will need to pay more to get them. So businesses and consumers will all feel the effects of a carbon-pricing policy.

But that’s exactly why carbon pricing is so effective. By raising the relative prices of emissions-intensive products, everyone will face powerful incentives to reduce emissions. Consumers will change which products they buy and how much; firms will adjust which inputs they use and how they produce, and will also innovate cleaner ways of doing business. The reduction in emissions will be good for the environment; the innovation will be good for the economy.

It is especially important to recognize the central roles of consumers and businesses in a country like Canada, where we both consume and produce lots of fossil fuels. Many Canadians seem to believe that the production of oil, but not its consumption, is the main problem – and so they think climate policies need to be aimed mostly at oil companies. Hence the extreme view that if we are to reduce carbon emissions, we need to place dramatic limits on Canada’s oil patch, maybe even with an outright moratorium on development.

But the truth about oil’s GHG emissions is actually quite striking. Of the total emissions that eventually come from a barrel of oil, roughly 80 per cent occur when the oil is used – typically when it is burned to produce energy. Only 20 per cent of the emissions are generated when the oil is actually produced.

An effective carbon-pricing policy should thus be aimed at all the millions of users – not just the producers – of fossil fuels. Alberta and Saskatchewan and Newfoundland and Labrador could implement comprehensive and well-designed carbon-pricing policies and still have large and profitable oil sectors. In fact, a widespread carbon price in those provinces would drive a cleaner and more innovative oil sector – one much better positioned to compete in a global economy in which low emissions are increasingly being valued.

This gets me to a final, critical point. Canadians are justifiably concerned about how a carbon price would affect their wallets. But most of us don’t realize how much we’re already paying because of climate change. From property damage due to extreme weather events to the loss of economic value of our forests, and many other things in between, these costs are large and mounting. In addition, our governments could always choose to follow British Columbia’s example and return every penny of the carbon-pricing revenues by reducing existing income taxes.

The world is gradually moving away from carbon, and will move much further over the next 50 years. The sooner we start pricing carbon in a simple and transparent way, the sooner our businesses and consumers will begin their transitions toward a cleaner and more innovative economy. And the better positioned they will be to compete in a lower-carbon world.

It’s time to get beyond debates about “good guys” and “bad guys.” Canadian businesses, consumers and governments should all come together and focus on doing what works.


About the Author

Chris Ragan is an associate professor of economics at McGill University and Chair of Canada’s Ecofiscal Commission.

2 comments

  1. Kristen Perry

    It would be excellent if fossil fuel corporations started taking responsibility for their own emissions- especially in the tar sands, which are around 3 times more carbon intensive to produce than conventional oil (that adds on an extra 17% to the emissions of the full lifecycle, INCLUDING combustion, which is more or less the same for other types of oil). Hopefully a carbon tax would support that; or even make the tar sands (“game over for the climate” -James Hansen) less financially viable since they already have such a relatively low margin of profit.

    That said, this is not just about the carbon emissions of fossil fuel corporations; it’s also about their sustained efforts to lobby against environmental regulation and meaningful climate policy. It’s in their interest to do so; they have around 3-5x more fossil fuels in reserve than scientists say we can burn (if we have a chance at maintaining a livable climate, that is). Their business models and bottom lines are fundamentally dependant on getting as much of that carbon to market as possible; even if that would equate to climate catastrophe. And THAT is what positions them as the “bad guys” in any fight for positive action on climate change. Until they take action to ensure that ~60-80% of that carbon stays locked up, they are at odds with a future in which human society can exist.

    It would be great if individuals would take action to reduce their personal emissions too. However, individual action is insufficient without political action, and the political system has been largely stagnant on the issue of climate change for too long. I’m still going to do everything I can to reduce my individual impact, but that would be practically meaningless if I didn’t also work with my fellow citizens to influence the institutions I’m involved with to do the same on a larger and much more influential scale. http://divestmcgill.com

  2. Sam Quigley

    What about the fossil fuel industry’s well documented bankrolling of denialist “scientists” and lobbying against climate action? I think that lands these companies pretty squarely in the “bad guys” camp when it comes to solving climate change.

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