Sept/Oct 2010

MAC Economic Commentary

Greenhouse gas emissions: No progress in policy, some progress on the ground

By Paul Stothart

Throughout the history of the global environmental movement, no issue has seen anything approaching the elaborate policy structure and negotiation frameworks that surround the climate change and greenhouse gas mitigation area.

International climate change policy has been focused around the UN Framework Convention on Climate Change (UNFCCC) and the Intergovernmental Panel on Climate Change (IPCC) for over 20 years. IPCC is a United Nations entity created in 1988 that writes extensive reports, drawing upon input from 2,500 scientific experts, 800 contributing authors, 450 lead authors and 620 expert reviewers. IPCC reports typically stretch into the thousands of pages.

The UNFCCC has coordinated 15 Conference of the Parties (CoP) sessions over the past 15 years, which have featured hundreds of environmental groups, business delegations and government departments. Thousands of bureaucrats congregate at CoP sessions, often held in exotic locations that entail enormous travel distances and related airline GHG emissions. Between CoP sessions, numerous working groups interact and themselves congregate in sub-committee meetings at locations around the world. There are some 192 countries engaged in the UNFCCC process and these individual countries in turn support their policy discussions and documents with equally substantial resources and bureaucracies. Some countries, such as Australia and the United Kingdom, have created entire government departments around climate change policy.

In Canada, at least eight “climate change strategies” have been unveiled since the mid-1990s — five by Liberal governments and three by Conservatives — each plan outlining targets, actions and commitments supported by the loftiest of communications rhetoric and printed on the glossiest of paper. Through the years, the federal government has outlined plans and processes for clean development mechanisms, offset systems, early action credits, technology funds, reduction targets, emission trading systems, cap and trade systems and carbon taxes. One particularly memorable offset document contained a 34-page glossary. The combined worth of these documents, plus a toonie, would today buy a Starbucks coffee.

Globally, for all of this bureaucracy, for all of the costs and all of the time elapsed, it is difficult to claim much return on investment beyond the production of a decade-old scientific conclusion regarding anthropogenic climate change. After 15 years of discussion, there are no emission reductions targets bound through any form of global agreement. There is no carbon emissions trading regime anywhere in North America or Asia, and the Emissions Trading Scheme (ETS) in Europe has been so fraught with exemptions and wiggle room that its overall effect in a decade-plus has been negligible There have been no national carbon pricing schemes introduced in the past decade and there are none on the horizon. Large emerging economies such as China have implemented no GHG-reduction measures of note, and whatever energy efficiency measures that have been introduced were internally driven by energy supply concerns. Looking ahead, the regional GHG mitigation initiatives in the United States are generally in disarray, there are no signs of any effective GHG policy or compromise emitting from Washington, and the prospect of any real Copenhagen Accord targets or actions being bound on the world’s key emitters is remote.

Ironically, outside of this bloated climate change policy apparatus, there are some signs of progress in the real world — where some old-fashioned vehicle emission standards may have effect and where there are real prospects of moving towards lower-carbon fossil fuels. Two illustrations are worth highlighting.

First, it is interesting to note that shale gas has become an increasingly important source of natural gas in the United States over the past decade, and interest has spread to potential reserves in Canada, Europe, China, India and Australia. One noted economist has called the emergence of U.S. shale gas development “the biggest energy innovation of the decade.” Some estimate that shale gas could supply half the natural gas production in North America by 2020. Given that there are 30 U.S. states facing major carbon challenges (where their coal-fired power plants have as large or larger carbon footprint than Alberta’s oil sands), it is evident that any potential transition towards lighter forms of fossil fuel in the United States could have beneficial impacts in GHG emissions.

Coal similarly fuels 70 per cent of China’s power grid and the ability to shift in any significant way to traditional natural gas or shale gas would have major impacts on that country’s carbon footprint. In India, as well, the potential shale gas supply and GHG impact is noteworthy. In Canada, with potential new shale gas supplies in British Columbia and elsewhere, federal regulations to phase out thermal coal combustion over the coming decades could presumably be accommodated through such lower carbon fuel developments.

Second, it is worth highlighting the recent momentum seen in the United States to enhance vehicle fuel efficiency standards. The United States government finalized new fuel standards in April 2010 that will take effect in 2012 model years — these will require roughly five per cent improvement per year and, in 2030 GHG terms, would equate to taking 30 million cars and light trucks off the roads. Canada will also move to harmonize with these standards. In heavy-duty trucks and buses, the United States announced in May that new regulations would apply to 2014 model years. These vehicles presently average only six miles per gallon efficiency and offer significant, yet untapped, efficiency improvement potential.

Given the lack of GHG mitigation results on the policy side over the past two decades, it is encouraging to at least see some progress driven through more traditional forces. Measures to encourage the discovery and development of lower carbon fuels and government regulation of vehicle efficiency standards are two such forces that are having an effect and that will contribute positively to Canadian and global GHG mitigation efforts over the coming decades.

Paul Stothart
Paul Stothart is vice-president, economic affairs, at the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

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