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Doug Ford’s new climate plan makes the same fundamental mistake the carbon tax did

Opinion: Better to bite the bullet and abandon the pretense of abiding by the climate agreement

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The ongoing demonstrations by France’s gilets jaunes, or yellow vests, against climate-inspired fuel taxes offer Ontario Premier Doug Ford yet another reason to congratulate himself on repealing the provincial carbon tax.

Less reassuring however is that he plans instead to introduce a measure similar to the Australian “Emissions Reduction Fund” (ERF). After the Australian government also cancelled its carbon tax in 2014, the ERF was introduced as a sop to the leftists within the Australian coalition conservative parties. It provides funding for a reverse auction where, instead of taxing all emissions, (with the revenues theoretically being used to compensate those paying the taxes), the government invites bids from firms for the abatement measures they will undertake.

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Bite the bullet and abandon the pretense of abiding by the climate agreement

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Australia’s ERF is part of a suite of measures in place, including:

• Renewable energy subsidies that cost about $3 billion a year (all figures in Australian dollars);

• Direct federal investment of perhaps $500 million a year plus a similar amount for various state and territory programs;

• Regulations on light bulbs, buildings, appliances and more, designed to reduce energy;

• And a $10-billion government-funded Clean Energy Finance Corporation.

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In Australia, most ERF projects are agriculture based, and the government proudly boasts, “We are on our way to planting 20 million trees by 2020.” Other agriculturally based measures include re-vegetation, carbon fertilization of the soil and, ironically, burn-offs to reduce risks of major fires. Some eligible activities involve energy savings through the replacement of older equipment and also included are projects for savings of fugitive emissions from mining.

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Ostensibly, the total government funding for ERF is $2.55 billion, or about $400 million per year from 2014 until its scheduled end in 2020. But, as usual with government programs, there are strong pressures to extend it. The current program has a 236-million-tonne CO2-equivalent “abatement task” over its life. Over time, that’s estimated at about three per cent of Australia’s annual 550 million tonnes of emissions.

Compared to alternatives, the scheme’s cost-effectiveness, as reported by the government, has been quite high at $13 to $15 per tonne of CO2 equivalent. That is a considerable reduction from the $24-per-tonne carbon tax on electricity that was repealed. It is better value still than the US$190-per-tonne carbon tax that the Paris-based International Energy Agency says is needed to keep global warming under 2 C. And it is almost trivial compared with the US$135 to US$5,500 per tonne that the Intergovernmental Panel on Climate Change says will be necessary by 2030 to keep warming below 1.5 C.

The main problem with all this expenditure is that the effect is insignificant, and hence wasteful, given that few countries are committed to abatement schemes. Currently, it’s Japan, Korea, Canada and Australia, together comprising only one-fifth of global emissions. These countries are spending much and the result is largely only to make themselves less competitive.

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That aside, the policies suffer from the major shortcomings that subsidies are provided to those who would have undertaken the same activity anyway. It is easy to see that some of the tree-growing projects and carbon-soil enrichment and modernization of energy equipment would have gone ahead irrespective of the subsidy. New technologies and new farming techniques are almost invariably more efficient in terms of energy use than those they replace. Similarly, firms will present new projects for capturing gas to generate electricity, replace a leaking boiler or agreeing not to clear land when that was always their intent.

Moreover, it is likely to become increasingly difficult to attract new projects as the low-hanging fruit will volunteer itself earliest. Add to these the inevitable mistakes in selecting the qualifying project categories and considerable bureaucracy in assessing the projects and verifying they abide with the contractual provisions on an ongoing basis.

Doug Ford’s smarter alternative would be to just bite the bullet and abandon the pretense of abiding by the flawed Paris climate agreement and its “carbon dioxide is pollution” narrative, especially since Canada’s biggest competitor, the one to the south, is aggressively moving forward with, and benefiting from its program of energy abundance and dominance. All Paris-obedient nations — and provinces — will see a massive loss of competitiveness as Trump’s energy policies prevail.

Alan Moran is a research associate at the Frontier Centre for Public Policy. He is based in Melbourne, Australia and specializes in the economics of regulation. His latest book is Climate Change: Treaties and Policies in the Trump Era.

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