Tag Archives: economy

Steep carbon tax could actually stimulate economy: report

It’s not every day you read a glowing news report about the Green Party in the National Post, but we live in interesting times. The story in yesterday’s paper has the same headline as this blog entry, and begins as follows:

OTTAWA — It was denounced by Environment Minister John Baird as “the mother of all taxes,” but a new report for the federal government says a $50-per-tonne carbon tax to reduce greenhouse gas pollution would do little harm to the Canadian economy.

The study – titled “Cost Curves for Greenhouse Gas Emission Reduction in Canada: The Kyoto Period and Beyond” – was submitted to the government in January.

Green party Leader Elizabeth May said it proves the Conservatives knew the top experts were urging them to accept her proposal of a $50-per-tonne carbon tax as the most effective tool to fight global warming.

“The Canadian public can conclude that the Harper government is deliberately misleading them when they claim that a carbon tax does serious damage to the economy, because they know it’s not true,” May said at a news conference.

In an analysis of carbon taxes ranging from $10 per tonne up to $250 per tonne, the report, obtained by May through an Access to Information request, concluded that the $50-per-tonne carbon tax could even have a positive effect on the economy by 2015. The Green party has proposed a tax shift by transferring revenues from the new carbon tax to reductions in payroll taxes for companies and in income taxes for individuals.

Mark Jaccard, whose consulting firm produced the study and who has been recognized by senior government officials as “one of Canada’s top climate policy experts,” went on to say, “if we’re serious about reducing greenhouse gases, we have to have a carbon tax or its equivalent. So in fact, Elizabeth May is the only politician who’s being honest to Canadians right now.”

In summary, our government has had a report in their hands since January, from one of their own trusted experts, that says they’re wrong and we’re right. They tried to keep this report secret, and we only now know about it because Elizabeth May obtained it through the Access to Information Act.

They know it’s not true that action on climate change would cripple the economy. They know that a carbon tax is needed to avoid the worst effects of climate change. They know that the Green Party’s “tax shift” idea (reduce income and payroll taxes, add carbon and pollution taxes) could actually stimulate the economy.

Faced with those facts, they decided the best thing to do would be to try and keep this information from Canadians. Honestly, what kind of mind works like that?

Our Economic Pyramid Scheme

Some mornings, for no discernible reason, I wake up much earlier than others. That means that I get to hear Metro Morning’s business analyst Michael Hlinka, who throws in his daily two cents on the CBC Radio One morning show at around 6:45am. Yesterday morning was one of those days.

I used to live in Michael Hlinka’s building. He’s extremely friendly and outgoing, and we’ve had several good chats. Both before and after meeting him, I’ve often listened to him and agreed strongly with whatever he had to say. Yesterday morning was not one of those days.

Hlinka was reacting — like everyone else — to the new Statistics Canada census data that was released the day before. To make a long story short, Canada’s population is growing faster than any other country in the G8. Most of the attention in Ontario has been focused on Milton (one of my old stomping grounds), which has grown by 71% in just five years.

Hlinka was ecstatic at this “great” news. You see, he explained, (and I’m paraphrasing here) we used to have this guy named Malthus who thought that population growth was all bad and would eventually cause society to collapse. Now, however, we’re enlightened, and understand that population growth is, without reservation, a good thing, because people create wealth, so more people means more wealth. Also, we’re going to have a large retired population soon, so we need lots of younger people to pay for the care of the older ones. And, ultimately, we need to keep making more and more stuff (he actually used the word “stuff”), because we need more stuff swirling around all the time to keep this whole machine running.

In other words, Hlinka was arguing that we need to encourage infinite population growth in order to support infinite economic growth. It’s becoming increasingly clear to me that the dogma of perpetual economic growth has been given the status of infallible religion by many, and is causing otherwise intelligent individuals to ignore the blatantly obvious.

Let’s start here: surely we can agree that population cannot grow forever. We don’t give this much thought because it doesn’t seem like an immediate problem, but even if we’d argue about how much the Earth’s human population can grow (or if it’s already too high), we have to acknowledge the fact that all ecosystems have a carrying capacity, and that at the end of the day this planet of ours has limits.

From there, we have to agree that economic growth, at least as we know it now, is pretty tightly linked with population growth. That’s why some economists get excited about growing populations. It’s also why Ronald Wright has described our current economy as a pyramid scheme: it only works as long as you’re constantly introducing new inputs of people and resources.

Arguments like Hlinka’s, that people “create wealth,” are fundamentally flawed. In a resource-based economy, people do not “create” wealth, they extract it from the Earth. Or, in other words, they move it from the public realm to the private. In that case, a resulting increase in a country’s GDP is actually a measure of how much natural capital has been used up. That’s like taking $20 out of the bank and claiming that by so doing you had generated $20.

Now sure, this is all just semantics as long as you’ve got another pay cheque on the way. But in the case of the tar sands, for example, currently one of Canada’s largest sources of economic growth, there’s no chance of having that bank account replenished. What we’re calling “wealth creation” in the tar sands is just a one-time massive withdrawal from a savings account that took millennia to accumulate.

But this is a conversation that we as Canadians (and especially politicians) don’t have very often, probably because most of us don’t know where to begin solving the problem. For example, some might (wrongly) approach it from the population end, suggesting we need government-mandated population control. But that presents too many human rights concerns, and is often unworkable. Others would choose to blame immigration, without recognizing that immigrants (a group to which all of us save Aboriginals belong — and, on a long enough timeline, them too) contribute great value to our country and define who we are as a people. (Not to mention the fact that population is a global phenomenon, making any attempt to deal with it by geographic isolationism not only morally questionable, but environmentally and practically ineffective.)

So, as we approach solutions, we need to start by guarding against temptations towards xenophobia or drastic measures. We’re all in the same boat here. Then, we can focus on the good news. For example, it turns out that birth rates stabilize as women’s rights and access to education increase, and as poverty and infant mortality decrease. Surely those are desirable goals anyway. Also, we need to tackle the economic side of the problem. Many economists (including Dr. Peter Victor at the University of York) are developing resilient economic models that don’t depend on the pyramid scheme of growth.

In fact, we already have a model for that: the human body. We only grow until around the age of eighteen, but does that mean we stop developing, learning, or getting better? Let’s start to have a conversation about how we can be more without having more.

Whether we agree on if growth is good or not, the reality is that it can’t continue forever. We’d better deal with that fact, or else it will deal with us. And besides, we already have a word for something that grows forever in an unrestrained way. It’s called cancer.

One morning soon, I hope to wake up to a world where we place a higher value on quality over quantity, and where we measure genuine progress. And please, no more stuff for stuff’s sake.

Dr. Peter Victor – Managing Without Growth

The following is one post in a series: “Reporting Back: Green Party of Canada Policy Conference, Halifax

Dr. Peter Victor from the University of York York University went next, with a presentation called “Managing Without Growth.” Building on what Colman had said, Victor observed that economic growth has become “the over-arching policy objective” (as in, the ultimate objective of most government policies, towards which their effectiveness is measured) of countries around the world.

This development is extremely new, having only emerged about fifty years go. Go back only a little further on a evolutionary timeline — say, four hundred years, and we didn’t even have the modern notion of “progress.”

Victor demonstrated three main realities:

  1. Whether you like it or not, growth is not possible in the long term.
  2. Growth does not bring happiness. While real income has increased in the US since 1945, the percentage of people who describe themselves as “very happy” has decreased. While early levels of income increase do contribute to happiness, the effect drops off after a point. The results are matched around the world.
  3. Growth is not particularly effective at eliminating poverty, creating full employment, or safe-guarding the environment. Since 1976, as both the GDP and greenhouse gas emissions have gone up consistently, levels of unemployment and poverty have bounced around.

(During the question and answer period following his presentation, we discovered that point number one really needs to be hammered home with some economists. They’ve been taught that growth is not only good, but critical. Victor kept repeating something to the effect of, “ok, fine, but you can’t have growth for ever, so even if you’re right about how great it is that’s irrelevant.”)

Much of Victor’s presentation was actually very technical, but also possible for a lay person like me to understand. He’s created an economic model called LOWGROW, where he can plug in different variables (income tax, carbon tax, etc.) and see what happens to the economy (GDP, greenhouse gas (GHG) emissions, unemployment, etc) over a timeline. It’s sort of like a simulation video game, where the goal is to lower GHGs as much as possible, while also raising levels of employment and holding the GDP steady.

The fun thing (well, fun for nerds like me at least) is that you can play with the model yourself if you want. It’s available for download here.

It’s important to note that Victor is not advocating for a zero or low growth policy exactly. He’s simply trying to demonstrate that you can have a healthy economy and environment without growth. That’s important, because concern about maintaining economic growth is often a barrier for people who would otherwise be sympathetic to green policies.

Elizabeth May often points out that humans stop growing once we enter adulthood. That doesn’t mean we don’t continue to “develop” in a qualitative sense.