Alex Paterson

Think Tank Round Up Volume 4: April 3, 2013

April 3, 2013

Think Tank Round Up – Volume 4

Easter has come and gone, and while you may have been resting, we at Canada 2020, have been working away to produce your latest bi-weekly think tank round up.

Carbon and the Environment

A pipeline rupture in Arkansas on March 29th led to 10,000 barrels of Canadian crude being spilled in a residential area, raising ever more questions about the merits of building new pipelines.

But it is not just the transport of fuel that is a concern, it is where that fuel comes from in the first place that is worrying many (see Thomas Homer Dixon’s latest op-ed in the New York Times about Canada’s oil sands). In Adding Fuel to the Fire: The Climate Consequences of Arctic Ocean Drilling, Kiley Kroch and Howard Marano of the Center for American Progress look further north, arguing for a ban on Arctic drilling. They note that we have no real idea how to extract oil from fragile areas such as the Arctic without causing damage, citing in support the challenges faced by Royal Dutch Shell (traditionally one of the most experienced and environmentally aware oil companies). The report advocates the development of clean technologies, internalizing the price of pollution and investing significantly in climate resiliency.

It should be possible to generate support for such strategies, if recent polling is to be believed. On April 2, the Center for Climate Change Communication at George Mason University published the results of a climate change survey conducted amongst 726 self-identified Republicans or Republican-leaning Independents (A National Survey of Republicans and Republican-Leaning Independents on Energy and Climate Change). The polling found that the vast majority support an increase in the use of renewable technologies in the US with most recognizing that this must happen immediately.  Moreover, 64% of respondents said that the US should take action to reduce dependence on fossil fuels, and the majority believed that the US would benefit from reducing the use of fossil fuels. Only 26% of respondents did not believe that climate change is taking place.

In other energy sector work, the Pembina Institute produced a report (Getting on Track to 2020) arguing that regulation of the oil and gas sector in Canada must achieve intensity improvements of at least 42% if this sector is to play its part in helping Canada achieve its Copenhagen commitments (17% reduction from 2005 levels by 2020). Tellingly, the current Alberta carbon regime calls for only a 12% improvement in intensity (per barrel emissions) and no overall cap. The Pembina report also argues for reducing companies’ ability to choose offset credits instead of efficiency improvements or payments into the carbon fund (which, it argued, must rise to between $100 and $150/tonne from the current $15). High as these numbers seem, the authors’ analysis shows these sums would add only $3 to the price of a barrel of bitumen in 2020 (by the time other changes in cost and revenue have been taken into consideration).

Elsewhere, the Canadian International Council published an interesting online info-graphic on water scarcity and access to water (Are We Running Out of Water?). Canada is, as we know, very well-endowed, but many countries are not. Interesting to consider this in the week that we discovered that the Government had pulled out of the UN Convention to Combat Desertification.

Income Inequality

On March 21, the Center for American Progress published States at Work: Progressive State Policies to Rebuild the Middle Class which analyses what the various states have been doing to shore up the middle classes (while noting that all levels of government have a role to play). We were reminded how important this is by an article by Edward Luce in the FT on Sunday which noted that median household income in the US has declined by 5.6% since 2009.

The CAP report finds that trickle-down is failing most Americans and that the US has less economic mobility than most other developed countries (as our recent panel, Equality of opportunity: a Canadian dream? discussed). It presents 100 policy reforms to help the middle class, ranging from improving the quality of existing jobs to rebuilding America’s crumbling infrastructure (something which Canada 2020 speaker, Larry Summers, has repeatedly advocated).

We also heard last week from the Brookings Institution about their forthcoming study, The Missing One-Offs: The Hidden Supply of Low-Income, High-Achieving Students. Christopher Avery and Caroline Hoxby have examined the records of every student in the US that scored in the 90th, or higher, percentile in the SAT (2008), following their progression through high school, college applications and college itself. They found the ratio of high-income to low-income students in this group was 2:1, somewhat lower than college recruiters had actually assumed. When it came to graduation rates, there was no difference between the income levels, which is good news for economic mobility. This is an interesting study as it provides data to support or challenge many commonly-held preconceptions about income and achievement. We look forward to the final report being issued.

On April 2, the Economic Policy Institute of Washington DC and the Century Foundation of New York, published A review of the economic research on the effects of raising ordinary income tax rates. Looking at the period since World War II, the authors found that higher tax rates have had no statistically significant impact on economic growth, which runs counter to the widely-held belief that raising tax rates dampens the economy. Lowering top marginal tax rates does, though, have a tendency to increase both pre- and post-tax income inequality.

Meanwhile, in Australia, the Government Productivity Commission came out with a report entitled Trends in the Distribution of Income in Australia. This shows similar findings to studies from Canada. Real individual and household income has increased between 1988 and 2010 in Australia while the distribution of income has become more uneven with less concentration around the average.

That’s a wrap for this volume of the Think Tank Round Up – See you in two weeks!


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