Alex Paterson

Think Tank Round-Up, Volume 5: April 19, 2013

April 19, 2013

Before we delve into what our network’s been producing, we want to thank everyone who came out to our event ‘How to sell carbon pricing to Canadians’ on Wednesday 17 April.

This was the fortieth event that Canada 2020 has hosted and it was, by all measures, our largest. The overwhelming response (both in terms of numbers of people who attended and livestreamed and press coverage) has shown there is a real appetite for an ‘adult conversation’ on pricing carbon in Canada.

At the event, the Hon. Jean Charest noted three important reasons why we might be able to recast the carbon debate: (i) President Obama has made the environment central to his second term in office; (ii) a carbon tax is now viewed as a sound fiscal tool; and (iii) China is also moving on this issue, having announced its intention to implement a carbon tax and having signed an agreement with the U.S. on climate change and green technology collaboration.

The video from the panel – featuring Jean Charest, Elizabeth May, Bob Inglis, Eric Newell and Kathryn Harrison – is now online, so please do take time to watch if you were not able to attend in person.  And please also stay involved as we take the debate forward over the next several months.

Carbon and the environment

As M. Charest pointed out, things are shifting in the United States on environmental policy. The IMF came out with a report encouraging countries to remove or decrease their subsidies on fossil fuels, while the Obama budget also takes aim at ‘Big Oil’. The President’s proposal is to eliminate the $39 billion in special tax breaks enjoyed by these companies.

This chimes with the views of our panelist, Bob Inglis, whose core message (“We have to change what we tax: tax the bads not the goods”) echoes the progressive call for linking tax reform with environmental goals.  

The Economist of April 20 reflects on of the European Emissions Trading System (ETS) (ETS, RIP?). It calls the tool a mess: a cap-and-trade scheme, with too many permits, that has been hit hard by the recent recession. The result is that the price of these permits has tumbled to around $3/tonne, three times below California permit prices. The building of 69 new coal energy plants in the EU would also suggest that the impact of the ETS is minimal.

With difficulties in reforming the system at the EU level, we can expect future action to focus at national level. Thinking about that national level, Chatham House this week released a report on the Cost and Consequences of Increasing Biofuel Use in the UK. The report finds that EU policy that has spurred increased biofuels use is ill-founded. Current biofuel standards do not ensure that biofuel use is sustainable and, to make matters worse, biofuel use is not a cost effective way of reducing emissions from road transportation.

The International Energy Agency also produced a critical report (Tracking Clean Energy Progress 2013) this week. The report argues that market failures have stalled progress in the development of clean energy solutions. Although Canada has been an important player in developing carbon capture and storage (CSS) systems, with high levels of funding from the public and private sector, the technology is not yet ready to be marketed (as we know, two major proposed CCS projects in Canada have failed to get off the ground).

If the world is to reduce its emissions without CCS, we must find ways of reducing our reliance on fossil fuels much more quickly. The report states that Canada must make long-term credible commitments to reducing emissions if it is to make real progress on climate change policy. This sentiment is echoed in our recent report, Why would Canadians buy carbon pricing? by Diana Carney.

Income inequality

This week, Matt Bruenig of Demos posted an interesting blog about measuring income inequality. In The Trickiness of Measuring Inequality, Bruenig argues that we need to bring clarity to the debate by finding more accurate metrics. He points out that household income figures can hide important intra-household differences.

Families can look the same on paper but be very different in reality. Two families may both have an income of $50,000. But if one family consists of two adults, each earning $25,000 and the other consists of a couple in which one partner earns $50,000 and the other partner chooses to stay at home, these two families are actually strikingly different. Furthermore, aggregate income statistics do not reveal important differences in hours worked (for the same salary).

Persistent across all indicators though is the fact that incomes in the U.S. have not kept up with economic and productivity growth.

The Center for American Progress has taken a – somewhat – lighthearted approach to the growing wage gap with The Game of Wages, an interactive web launched in honour of April 9, Equal Pay Day in the EU, US and Australia. As we have mentioned multiple times, gender is a determining factor of income inequality. CAP illustrates the lasting implications of  gender wage inequality and the lingering distance between men and women in the workplace.

The Centre for American Progress also produced a study (How Pay Inequality Hurts Women of Color) illustrating the double pay gap faced by women of color. This is a critical issues since 53.3% of black households have a woman as the primary breadwinner.

Competition and Productivity

Briefly: Deloitte has emerged as a leading authority on studying Canada’s innovation and productivity challenges. Their team has put together a smart and quick infographic that positions Canada’s productivity against other major economies. It is a good starting point for a refreshed discussion.

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