History is rife with stories of government policies that not only failed to accomplish their desired objective, but managed to create other problems.
If the actions of a single government have a high risk of failure, just imagine the potential for perverse outcomes when multiple governments from around the world get together. The Kyoto Accord will go down in history as a prime example of an agreement so flawed it couldn't possibly have achieved its objectives.
My last column focused on what I called the great carbon offsets boondoggle, the root of which lies in what the Kyoto Accord calls the CDM (clean development mechanism). It allows individuals and companies to avoid reducing their own emissions by purchasing "carbon offsets." India alone has over 300 such projects including tree planting, hydro dams and nuclear plants. As in many other countries, the cash put into carbon offsets frequently goes to projects that would have occurred anyway or to dubious, unmonitored projects that enrich the offset brokers and their local associates.
A close cousin to carbon offsets is called "cap and trade," whereby businesses have caps placed on their emissions, and must purchase "carbon credits" if they can't meet the cap. Europe was the first to implement cap-and-trade, with some bizarre results. For example, with the shutdown of numerous uncompetitive industrial facilities following the demise of the Soviet Union, Russia has enormous carbon credits for sale. With little that can be done to reduce emissions from their already state-of-the-art facilities, economically struggling European manufacturers end up sending billions of dollars to Russia.
Here in Canada, environmental groups and some provinces are clamouring for the adoption of a cap-and-trade policy. This is puzzling since both Kyoto's carbon offsets program and its cap-and-trade cousin facilitates huge cash transfers to those who aren't doing anything they wouldn't have done anyway, or to those who game the system with dubious, unsubstantiated projects; neither of which materially reduces emissions.
There is a much simpler and more effective solution for our country. The first step is to implement predictable, long-term, progressive targets for emissions reduction tied to each unit of a plant's output. This approach, called "intensity-based targets," has been attacked by environmental groups because it allows for the building of new or expanded facilities. But the alternative is to shut down growth of economic output and jobs, a disastrous prospect. Global warming is a long-term problem and the big solutions lie in technological advancement. Having intensity-based targets, which ratchet down over the new technology implementation cycle, is the only practical way of achieving substantial net emissions reductions.
But how do you enforce intensity based targets? Well, rather than getting off the hook by buying emissions credits from places such as Russia or alleged tree-planting offsets in India, Canadian businesses who fail to meet their targets could pay a set price per excess tonne to a federally administered emissions fund. This pool of cash would be designated to specific national environmental objectives; for example global warming adaptation and mitigation studies, energy-efficient city design including densification and public transit, or programs to encourage personal emissions reductions such as home energy efficiency improvements.
The folly of CDM-driven carbon offsets and emissions credits is momentous, but these pale in comparison to Kyoto's biggest flaw - the exclusion of developing countries from any requirement to control emissions. Breathtaking industrial growth has driven developing country emissions above that of the developed world. China's emissions rate is rising so fast that it takes only a few months for it to rise by more than Canada's entire output.
There is also an enormous economic displacement. China and its Asian neighbours dominate global manufacturing and Kyoto's current structure would force manufacturers in developed countries to become even less competitive by taking on emissions reduction costs that competitors don't shoulder. Adding to the economic damage is the fact that China's energy consumption per unit of production is two to five times higher than that of Western-developed countries and enormously more damaging due to sulphur and nitrogen oxides combined with toxic particulates from reliance on dirty coal.
This means a product made in China has created substantially higher and dirtier emissions than if it were manufactured at home. Clearly, burdening our own manufacturers with emissions reduction costs while buying goods from freely emitting developing countries is a recipe for exporting jobs and importing pollution.
At the recent Kyoto talks in Bali, China reaffirmed its stance against making any emissions reduction commitments. Meanwhile, our Canadian government was vilified for insisting that the next phase of Kyoto eliminate its most fatal flaw. It is crucial both to the economic interests of Canadians and to the world's environment that the next phase of Kyoto contain developing country emission reduction commitments.