Thursday, August 09, 2012

The Economic Price of Climate Change

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One notices, after reading scads of material on the environmental movement and its skeptics or opponents, that one of the central conflicts in this debate is the notion that taking care of the environment and economic growth are somehow incompatible. This debate, if we accept the premise of the environmental movement – that our bloated consumption practices will lead to the untimely demise of much of the life on earth currently – is arguably the most crucial debate of all. In this push and pull between those who privilege the economy and those who value other species, the health of the oceans and the atmosphere above all else, it becomes difficult to sort out fact from convenient fiction and truth from  falsehood. Mind you, we must take into account that this debate will take different forms, strategies, and approaches depending on where it takes place. In Canada, the primary argument against investing in research and development for renewable energy sources such as wind and solar is that it is not economical. This is a knee-jerk response that is taken as self-evident truth among many people.

Let’s examine what is behind this claim, and the abundant facts that contradict it. Canada, through a rather arbitrary turn of events, happens to have incredibly large reserves of petroleum, locked up in “tar sands.” Make no bones about it, this is the dirtiest form of extracting petroleum on the books right now, except maybe for Venezuelan heavy crude. However, the depression in 2008 hit, and the economy became a grave concern; we can’t afford to not develop the tar sands became the argument of choice. As an exploitable resource for the most important commodity in the world, our oil reserves make for a very compelling reason for Canada to want to disregard the simple fact that extracting petroleum from tar sands is relatively speaking, very dirty and not very efficient. Thus, the Conservative government in Canada spent oodles of taxpayer money for commercials attesting to the environmental safety of the tar sands. You can fool some people some of the time, but you can’t fool all of the people all of the time. But, in a representative democracy like Canada, where a political party can earn a majority of parliamentary seats in the House of Commons with about 25%   (this is a generous estimate) of the total vote, fooling enough of the people turns out to be quite easy and efficient. There is a long line of psychological research that suggests that the more you repeat something, the more the listener will tend to regard it as true, regardless of whether the statement or claim made is true or not.

Granted, there must be some reasonable Conservatives that concede that the tar sands aren’t the cleanest manner of oil extraction, but still maintain the priority of the economy. This is a statement you can’t really oppose. I would be more willing to accept their argument that we can’t afford not to develop the oil sands if it was actually benefitting Canadians. Here I must concede that the tar sands boom has done well for Alberta. However, because Mr. Mulroney privatized Petro-Canada in 1991, the potential benefits to the rest of Canada are slim indeed. After all, Sinecorp and Exxon/Mobil are the main developers of the sands, and they are a Chinese and an American company. To find evidence of this lack of benefit for ordinary Canadians, one simply needs to look at the price of gas at the pump. We are in the top ten producers of oil, and yet we still pay more on average than Americans do for gas. While it is true that we don’t have the refining capacity to turn crude oil into gasoline, and thus incur the costs of shipping it to and from refineries, nothing (that I know of at least) has been done to build refining capacity so that our advantage in oil production would actually benefit Canadians at the pump.

Let us now address the contention that renewable energy sources are not “economical.” Denmark has pledged to produce 100% of its electricity from renewable sources by 2050. It already has considerable renewable energy production capabilities. It also has much less unemployment than Canada – nearly half as much less in 2009, a quarter as much less in 2010. Furthermore, Denmark’s youth   unemployment rate was 11.2 % , while Canada’s was 15.3% in 2012. Somehow, Denmark seems to be economically robust while investing in renewable energies. Also, Germany the economic powerhouse of the EU broke records last year by producing 50% of their energy from renewable sources on peak days. Both its general unemployment and youth unemployment rate are lower than Canada’s. Most importantly, both Denmark and Germany’s governments have run much smaller deficits than the Conservative government despite the economic instabilities in the EU. I must be missing something here, because these two paragons of renewable energy seem to be thriving, economically speaking.

Finally, I would like to introduce an issue I have not seen addressed by either side of this ongoing debate, which is the economic damage precipitated by climate change. Climate change has become the rallying cry of the environmental movement. 2012 is sizing up to be the hottest year on record in the Toronto region, and many others as well. Despite the boatloads of evidence supporting the climate change hypothesis, some still deny it. Others admit it exists, but matters little because the world is ending, whatever that means. I hypothesize that increasing  temperatures decrease productivity. Certainly, many places have air conditioning, but this itself is a very energy-intensive technology and will put further strains on the energy sector (these are well-documented and self-evident). Because much of the energy sector depends upon fossil fuels, this in turn increases the rate at which the earth’s climate changes. Also, not all places have air conditioning, and productivity in these places, usually small to medium sized businesses, will suffer in summer heat waves. This argument, mind you, must take into consideration that warmer winters could alternatively see an increase in productivity to balance the concomitant decrease in the summer. However, is there any greater stimulus to activity than a slight chill in the air? These hypotheses need testing, though, which is unlikely to happen in the current political climate of economic cuts for research and development, and a stimulus plan that focuses almost entirely on construction (not all of it even necessary, at that).