Energy Disincentives
Despite the Financial Post’s ‘Junk Science Week’ articles, and all the global warming skepticism, there are two things I am pretty convinced of:
- Oil is a finite resource that we could theoretically completely use up.
- Burning oil, coal or any of the fuels made with these resources pollutes our air. Whether or not the CO2 emitted leads to global warming is an important discussion, but regardless of the answer, curbing use of oil and coal is a good idea anyway.
So, there’s a bunch of stuff we can do:
- Encourage the purchase of hybrids and alternative fuel vehicles.
- Reduce energy usage, both consumers and businesses. More energy efficiency is key.
- Build new greener power plants to replace traditional sources (wind, solar, tidal, and where possible, hydroelectric). Force power monopolies to purchase private green energy; better yet, break up the monopolies and fasttrack development applications for green energy sources.
- Encourage development of a vibrant consumer market for micro-power (like solar calculators and wind-up radios, but preferably neater stuff).
Part of the problem with the ‘incentives’ around Kyoto is that they have largely acted as disincentives. The minute the Federal Government signed onto the Kyoto Protocol, the market forces and incentives began working against the environment, and the foot-dragging on actions only exascerbated the problem. What we need now is a concrete, decisive environmental plan. This is what I expect to see from the Conservative Government very soon, and we have seen bits of it already (i.e. ethanol initiative).
Here is how the Kyoto Protocol has created disincentives that have harmed the environment:
- Industry did not know by what measure they would be granted carbon credits, and what incentives the Government would give to them. Presumably there would be a date on which things would be measured. To ensure they get the maximum allocation, the incentive was to pollute ‘as much as possible’ until then.
- Investing in more energy efficient operations might have resulted in a lower allocation (which, even if they didn’t need it, it would be a good asset to sell).
- Investing in more energy efficent operations might have been counterintuitive, because they would have had to made big investments for these. What if they did this, and then the Government came along and subsidized all their competitors to catch up. They’d miss out on the big pay day.
- Electricity in Canada is too cheap, and artificially so. Consumers and businesses should pay the actual cost. If we did this, we would all consume less, and there would be more money with which to build the greener power sources for the future.
- Consumers didn’t replace old appliances with newer more energy efficient ones because they were waiting to see if the Government would help pay for it. In cases where broad-based incentives to replace the old appliances were introduced, people bought second-fridges and freezers, perversely increasing energy consumption.
- Consumers will buy a hybrid car if it makes economic sense to do so. There could have been incentives years ago to make the price of hybrids closer to the price of internal combustion engine cars, but the Government missed the boat, and have another six million or so gas guzzlers on the road as a result. Only now are the prices starting to get close enough for the average Canadian to see the obvious benefit.
We will eventually run out of oil. Pollution leads to health problems and other miseries. That’s reason enough to change our ways, but we cannot ignore the market and the way incentives work. If the Government is to give people and businesses incentives to change their ways, they need to consider them carefully.
Advertising campaigns like the ‘One Tonne Challenge’ and flawed agreements like the Kyoto Protocol do nothing.
I think Canada should do something.
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