19 August 2006

Ignatieff Makes a Move

Those of us who have been clamouring for some real policy matters in this Liberal leadership race will no doubt be pleased with this. I'm glad that Ignatieff is taking a lead role in getting some important debate going, and his candid admission that we're not going to meet our Kyoto requirements is a good step in setting a framework for a real policy. We'll see how it matches up with what the Tories offer this fall, but in the meantime we can among us discuss the merits and shortcomings of his vision.

I've never been a big fan of credits when it comes to environmental policies, and that's this leaves me a little ambivalent:

Mr. Ignatieff is also proposing a cap on maximum aggregate greenhouse gas emissions for major industrial emitters, according to the official.
It would require industry to buy tradeable emission permits.
Companies that find ways to reduce their emissions below the limit could sell their unused room as “credits to companies that are over the limit, creating an economic incentive to reduce emissions.
“The absolute cap would decrease over time,” said the official. “This puts a price on the costs of industrial emissions and is an
example of ‘polluter pays.'”

This is almost like a Kyoto within Canada, isn't it? The industries that do meet their target will benefit economically, but it still allows those who go over the limit to purchase "get out of jail free" cards that don't fully tackle the problem: environmental degradation. If Industry A is 20 points below the limit, and sells its credits to Industry B, which is 20 points over the limit, it's the same as having both Industry A and B right at the limit. I understand that this creates incentive for B to get its act together and get under the limit, but until it does, good old Mother Nature is still taking a shellacking. I see it as a good thing that the "polluter pays," but unless the price of credits is so high that it outweighs the costs of restructuring to fit within the rules, thus creating true incentive to change to keep the bottom line up, some Industry may continue to operate in current fashion and just use surplus capital to buy credits and avoid getting with the program. So if the credit system is to work, make the cost of credits really high, but that could alienate business from government and create other problems.

It's a mixed bag, really, and I'm hoping that some of my greener friends can step in here and show me a thing or two about this in greater detail.


C. LaRoche said...

I think the problem, Richard is you can either:
1. Force companies to become green by penalizing them when they don't
2. Encourage them to do so by giving them incentives

This seems to be a mix of both. I think a simple tax-scheme might work better: give companies that are green tax breaks when they prove it. Unfortunately, this runs into the same problem you point out: bigger, richer companies might simply ignore the legislation. And if the tax break does not make up for higher cost of operation associated with making the industry green, companies won't do it.

I'm not particularly sure how much "greenifying" various industries would cost, either. A good idea might be to simply say the government will recoup your additional costs by charging you less in taxes (proportionately), but who knows how much some of this stuff will cost.

RGM said...

A few years into the Kyoto regime, there should be some states that we can look at as examples of how much "greenifying" costs. There's got to be at least a couple larger industrial states that are meeting their Kyoto targets, so if we were to take a look at how their economy and formerly-polluting idustries have been doing throughout the process that might give us an idea.

The more I think about it, the more I'm warming (no pun intended) up to Ignatieff's strategy. It really all hinges on the level of taxation in order to make it truly effective and worthwhile.