Thank you, Mr. Chairman, and committee members.

I appreciate the chance to speak to you today.

I hold a Ph.D. in economics from the University of British Columbia, where I specialized in natural resource and environmental economics. At the University of Guelph, for 25 years I have taught courses in environmental economics and policy, econometrics and microeconomic analysis.

Canada is a world leader in finding ways to protect the environment while maintaining growth, economic opportunities and living standards. I hope that the information learned through your hearings will assist your committee as you aim to continue doing so.

While most of my research is aimed at peer-reviewed academic publications, I have also written extensively in the public domain, including think tank reports and media op-eds. Anyone familiar with my writings will know that I have certain biases, which I can summarize very simply.

I believe that policies should be critically analyzed to ensure the benefits exceed the costs. Not every environmental goal is sufficiently valuable to be worth the cost of achieving it. When a goal has been chosen, it is incumbent on policy-makers to try to achieve it at the lowest possible cost. The disaster regarding Ontario's electricity restructuring is a cautionary tale of what happens to an economy when this lesson is ignored.

I have done research for the Macdonald-Laurier Institute on the costs and benefits of Canadian biofuels policy. I'm referring to work I did with my colleague, Doug Auld, in 2014. I have also done research for LFX Associates on the costs of the proposed clean fuel standard, published last year, and for the Fraser Institute, published earlier this year as part of a study on the costs of the proposed carbon tax in Canada.

The biofuels report that I co-authored with my colleague, Professor Doug Auld, at the University of Guelph, showed that over the 2008 to 2012 interval, Canadians paid about three dollars in costs for every dollar in environmental benefits attained through biofuels. In arriving at this conclusion, we made assumptions as favourable as possible to the biofuels case. However, the expert literature has shown that switching to corn ethanol does not necessarily lower greenhouse gas emissions on a life-cycle basis compared to using gasoline. The rapid expansion of the biofuels sector after 2006 was driven by government support programs, not by the underlying economics.

My research for the Fraser Institute showed that the costs of blending ethanol go up in a convex fashion, meaning the costs go up non-linearly as the carbon intensity target gets lower. Since ethanol has less energy per litre than gasoline, consumers have to fill up the tank more often to go the same distance. Based on elasticity estimates in the economics literature and parameter values from other published sources—and there I relied chiefly on the Canadian Energy Research Institute in Calgary—I estimate that a 5% cut in carbon intensity below the current baseline will increase the cost of gasoline on a per kilometre basis by about 17%, while a 10% cut will increase it by 48% and a 20% cut will increase it by 156%.

My work for LFX Associates involved macroeconomic modelling of the proposed clean fuel standard. We modelled a policy package that would achieve a 30 megatonne greenhouse gas emission reduction. We estimated that even using a relatively high social cost of carbon metric, in other words, assigning benefits at the high end of the range, the policy would cost the Canadian economy six dollars for every dollar in environmental benefits, with net costs averaging $440 per employed person per year.

We also estimated it would cause a permanent loss of 30,000 jobs nationally, even after taking account of expanded employment in the biofuels sector, and it would put $22 billion in capital at risk of exiting the domestic economy. We also noted that in the context of population and income growth, the total emission reductions would be offset by a 7% increase in the size of the labour force. This means the actual emission reductions as of 2030 would be far smaller than 30 megatonnes, and would likely be zero or less.

I also note that a larger problem with climate policy generally is that emission reductions in Canada often lead to carbon leakage in which the emitting activity does not disappear. It simply moves to China or India or other competitive countries, taking the jobs with it.

The common catchphrase about the costs of climate inaction leads to a muddled argument.

Transcript

Discussions (0)