Conservation begins with a free market

Energy, Environment, Frontier Centre, Uncategorized, Worth A Look

Manitoba has one of the lowest electricity rates in the world. It’s a fact that its NDP government proudly trumpets as an advantage.

But is it? Has it created jobs and economic security, or does this strategy guarantee that Manitoba will remain a “have not” province, losing jobs and retaining its status as one of the world’s most energy-inefficient economies as electricity prices rise throughout North America? What are the costs for taxpayers, the economy and the planet?

Manitoba’s electricity rates are half the North American average. But the government-subsidized low prices are artificial. Since Manitoba receives $1.6-billion per year in equalization payments, and under-pricing has been estimated to cost the province roughly $1-billion in annual revenue, average Canadians are essentially subsidizing Manitoba’s cheap power policy. Manitobans consume almost 10 times the world average in electricity per person, and 2.5 times the OECD average: With prices so low, there is little incentive for individuals and corporations that do “the right thing” and install energy-efficient systems.

The artificially low rates will be difficult to maintain. As oil and gas prices continue to rise, electricity prices will rise as well. Meanwhile, as the pollution problems associated with burning coal become more acute — smog, acid rain and carbon dioxide emissions — public pressure will mount to reduce dependence on this form of power generation. Hydro power does not suffer from these problems. But there is a limited supply. And currently, Manitoba is wasting it.

Unpopular though it may be with consumers, the best hope is that the province adopt market prices. Such a step would encourage both energy conservation and the development of renewable energy sources such as wind power, the fastest-growing form of electricity production in North America.

Manitoba would also be forced to give more thought as to where the future of energy really lies, and to look elsewhere for inspiration. Japan, to take an example, is totally dependent on foreign oil. Mindful of the threat to its economy during the 1973 oil crisis, it began to reduce energy consumption dramatically. Japanese steelmakers, for instance, decreased energy usage by as much as 45%, making the industry more competitive than American producers. This policy ensured the long-term security of Japan’s industries — even though that country’s electricity rates are more than three times higher than Manitoba’s.

The $1-billion in government revenue that would be freed up by ending artificial energy rates could be used to jump-start a green economy. Businesses and individuals who couldn’t afford the transition to market prices would receive short-term financial support.

Manitoba’s government suggests that low electricity rates attract business. But those attracted tend to be big energy consumers that feed off government subsidies in the form of cheap power. Studies consistently show they don’t create many jobs relative to the size of their subsidies.

The world’s second-largest re-insurance company, Swiss Re, notes that global climate change will become the biggest business challenge in this century. So the future for Manitoba’s hydro industry is bright — provided that Manitoba stops selling off its natural heritage cheaply.

Jim Harris is the leader of the Green Party of Canada.

© National Post 2005