Climate Crazy Ontario

Commentary, Ross McKitrick

The latest news out of Queen’s Park is that Kathleen Wynne’s Liberals plan to deindustrialize Ontario. Of course they don’t call it that; they prefer the term “decarbonize.” But for an industrial economy, the government’s new climate action plan, leaked to reporters this week, amounts to the same thing.

The proposed scheme beggars belief. Having phased out coal-fired power, the province now plans to phase out natural gas, the only reliable alternative for non-baseload generation. Despite electric cars being extremely costly and unpopular, more than one in 10 new car sales will need to be electric, and every two-car household will have to own at least one electric car. All homes listed for sale will require a costly energy audit. Home renovations will have to be geared around energy efficiency as the government defines it, not what the homeowner wants.

Around the time that today’s high-school students are readying to buy their first home, it will be illegal for builders to install heating systems that use fossil fuels, in particular natural gas. Having already tripled the price of power, Queen’s Park will make it all but mandatory to rely on electricity for heating.

There will be new mandates and subsidies for biofuels, electric buses for schools, extensive new bike lanes to accommodate all those bicycles Ontario commuters will be riding all winter, mandatory electric recharging stations on all new buildings, and many other Soviet-style command-and-control directives.

The scheme is called the Climate Change Action Plan, or CCAP, but it would be more appropriately called the Climate Change Coercion Plan: the CCCP.

Reportedly there has been some pushback against this lunacy from within cabinet. While Environment Minister Glen Murray is driving it forward with enthusiasm, his colleagues with economic portfolios are expressing some reluctance. One imagines they have an intuitive sense the CCCP is misguided, but they struggle to say why.

Perhaps I can help. Even if one accepts mainstream climate science as interpreted by the Intergovernmental Panel on Climate Change (IPCC), it does not imply that carbon dioxide emissions impose infinitely high costs and should be driven to zero. It only tells us that such emissions may impose modest external costs on other people that emitters should pay for. Nor does it tell us that those emission-related costs are greater than the costs of trying to stop climate change. In fact, the IPCC reports strongly suggest otherwise. Chapter 10 of the IPCC Working Group II report concludes that at low levels of warming (up to two degrees Celsius) the costs will be small relative to the impacts of other economic changes in peoples’ lives, and may well be negative (i.e., a possible net benefit from mild warming).

Translated into practical economics, we could assume that emitting a tonne of carbon dioxide causes a small amount of harm to other people: roughly between zero and 20-dollars’ worth. So emission-reduction policies that cost less than $20 per tonne to implement could be justified based on mainstream science and sound economics. Policies costing more cannot.

The Murray plan however is laden with policies that will cost hundreds or thousands of dollars per tonne to implement — far more than the value of any environmental benefits they generate. They will drive away investment and employment, raise the cost of living and eliminate economic opportunities. No longer will Ontari-ari-ario be “A Place to Grow”; it will be a place to get the hell out of if you want a job and a decent standard of living.

For years, anyone trying to inject sanity into the climate debate was told it is forbidden to question the authoritative pronouncements of the IPCC. So it is worth quoting the IPCC verbatim on the economic issues here. After tallying up the projected effects of warming and the likely economic impacts, and placing them in the context of all the other social changes that are expected in the years ahead, it concludes, in Chapter 10, “For most economic sectors, the impact of climate change will be small relative to the impacts of other drivers (medium evidence, high agreement).” In Figure 10-1 it shows that modest warming is as likely to be a net benefit as a net cost. And in the Working Group I report, the IPCC marshals evidence that warming has been proceeding at a lower rate than expected so far this century.

Putting it all together, even if the Murray plan were to stop global warming in its tracks, the policies would do more economic harm than the averted climate change. But of course the CCCP won’t have any effect on global warming, because Ontario is responsible for such a tiny fraction of global emissions. The Wynne government repeatedly defends its bungling of the electricity sector on the grounds that at least it closed two coal-fired power plants. Meanwhile, in 2015 alone, China approved construction of 155 new coal-fired power plants. CCCP is all cost, no benefits.

Adding to the insult, it includes a carbon-pricing scheme in the form of cap and trade. The economic logic of carbon pricing is that the market identifies the cheapest abatement options and weeds out the rest. Yet with revenues from its cap-and-tax plan, the government plans to subsidize the abatement methods the market rejects. In other words, the Liberals have selected the one use of funds that destroys the economic properties of the policy instrument.

The climate file has pushed deranged extremism into mainstream policy planning. Perhaps the would-be opponents in cabinet of this disastrous proposal self-censor out of fear of being labeled — gasp! — deniers. But realism is the opposite of denialism, and what is needed now is a huge, cold blast of realism.