If one did extensive research for the purpose of determining the very
worst imaginable environment policy, that policy is cheap energy. Climate change and air pollution are called
environment issues but they are energy issues repackaged. Advocating lower energy prices is an assault on the environment.
Acknowledging the climate
problem and setting lofty emissions reduction targets are meaningless gestures
unless you can bring forward proposals to accomplish those goals. Since useful environment policy must involve
higher energy prices and more regulation, most politicians don't want to touch
it.
The environment vote
is an orphan
Effectively addressing environment
issues means using both markets and regulation to change the behavior of both
business and individuals. No politician
wants to tell voters that anything will cost more, even if that is the
necessary and correct policy.
Briefly, we had a party that
would buck the political problems and speak up about the environment. In 2008 Stephan Dion agreed not to run a
candidate against Elizabeth May in the safest Tory seat in Atlantic Canada, and
stole the “Green Shift” based on a carbon tax from her platform. The Greens had forced carbon tax into the
realm of credible public debate. It’s
the most important and useful thing the Greens have ever achieved.
May didn’t win a seat but
the Green Party got 6.9% of the vote. If
one is primarily concerned about the environment as a political issue, the
massive success of the 2008 campaign was undiminished because no Green members
were elected.
For some Greens this
substantial achievement was not enough.
The most talented organizers in the Party concluded that the best thing
to be done for the environment is to elect ME.
Green politics shifted from
talking about an issue to electing individuals.
The Greens now downplay the issue that made them relevant in the first
place because they don’t want to be a single issue party. The Greens don’t want to be an environment
group. They want to be the NDP without
the unions. The second half of “Vision
Green” (available on the Greens national website) reads like a collection of
resolution books from NDP youth conferences.
Green Party leadership
became so pre-occupied with trying to be a grown-up political party addressing
a broad range of issues that they took the environment vote for granted.
And it left.
Vote share
Ontario 2007 – 8%
Federal 2008 – 6.9%
Federal 2011 – 3.9%
Ontario 2011 – 2.9 %
Federal 2015 - 3.5%
Ontario 2018 - 4.8%
In percentage terms, in
2011, the national Green Party vote in the Federal election of 2011 declined
(6.9 to 3.9), more than the Liberal vote (26.3 to 18.9) or the Bloc vote (10.0 to
6.1) compared to 2008.
Politicians don't like
environment as an issue because addressing the issue requires unpopular
actions.
The environment vote needs a
home.
Removing the HST on
fuel is a subsidy for the oil companies
The easiest way to increase
sales of a product is to lower the price. It’s easy, but it costs the company
money. A populist policy of lowering
energy price by removing the HST on fuel would increase sales for the oil
companies by reducing the public share of the revenue from energy instead of
the oil companies’ share.
Not only will increased oil
consumption lead to increased emissions, it will also, inevitably, lead to
increased price. Demand driven price
increases will eventually wipe out any advantage to the consumer from cutting
the HST. increased demand will also
promote increased tar sands development.
Demand driven price
increases also provides substantial windfall profits for the owners of existing
conventional oil reserves. Big oil makes
more, while the taxpayers get less.
Transportation
Corporate Average Fuel Economy – CAFE
Canada should establish a
CAFE standard with the objective of doubling the fuel efficiency of the new car
fleet in ten years.
More than any other energy
issue, transportation depends on the choices of individual consumers. These decisions often have less to do with
energy economics than the same decision made by a profit driven
corporation. Fun, fashion statements, and
macho can all be found in cars. They all
have a cost. The fun part of driving is
discretionary rather than essential.
High gas prices have historically pushed fun out of the market (and
destroyed the SUV market). Smaller, more
efficient vehicles dominate sales (people still have to get around).
CAFE is a means to prevent reductions
in oil price from increasing recreational demand (and emissions). The government has an
interest in facilitating the movement of people and freight from one place to
another. The government has no interest
in promoting cheap status symbols or manhood enhancement.
The
good political news. By restraining
demand, CAFE keeps fuel prices low giving a reward to users who had already
pursued efficiency. CAFE is a subsidy to
shippers by lowering recreational demand and keeping fuel prices down. The impact of CAFE on
the economy is better than a tax cut.
Consumers can spend money that used to go into the gas tank
elsewhere. In addition, the oil isn’t
going anywhere. It gives Canada energy
security indefinitely.
The political bad news. Sound climate policy must make the fun part
of driving more expensive. Since 1972
the efficiency of internal combustion engines and transmission systems has
improved substantially. Over the
decades, individual consumers have preferred cars that exploit better engineering
for speed and image, rather than for better mileage. Government must use market and regulatory
measures to dissuade people from doing things they like doing.
CAFE is about marketing, not technology
The
auto companies complain that implementing a CAFE standard would be
expensive. In fact they could be CAFE
compliant without investing a dime by using pricing and marketing to change the
mix of vehicles they sell. There are
many cars already on the market that meet any sound CAFE standard. Expensive new technology (carbon fibre body,
hybrid drive power train) is only required if you want to make a Hummer CAFE
compliant. Under CAFE, the car companies
can still sell lots of cars. They will,
on average, weigh less. You will still
be able to buy a Hummer if that’s what you want. It will be more expensive. The companies will sell fewer gas hogs but
they will make a larger profit per vehicle.
Hybrid
Drive
Improving mileage will reduce emissions from the auto
sector faster and cheaper than moving to zero emission electric vehicles.
This approach would include hybrid drive
(gasoline/electric) vehicles such as the Honda Prius. Although they still have some emissions, they
are much cleaner than normal gasoline powered cars. They avoid the lithium supply and range
limits of all electric cars as well as the expanse of developing the charging
infrastructure.
CAFE Definition
CAFE
is the sales weighted average fuel economy, expressed in miles per gallon
(mpg), of a manufacturer’s fleet of passenger cars or light trucks, for sale in
Canada, for any given model year. Fuel
economy is defined as the average mileage travelled by an automobile per gallon
of gasoline consumed as measured in accordance with the testing and evaluation
protocol set forth by the federal government.
A CAFE standard would require a car company meet a sales weighted
average fuel economy for all the cars it sells.
Failure to meet the CAFE standard results in punitive fines designed to
confiscate profits made by not meeting CAFE.
CAFE
does not dictate technology. It does not
ban the Hummer. It imposes an obligation
on the automaker to sell enough hybrids to bring the fleet average under the
CAFE limit. Making cars more fuel
efficient can be done with technology such as the hybrid drive. It can also be done by making the cars
lighter.
Carbon tax and transit
Carbon
tax is an effective, but blunt instrument and a demonstrated political
nightmare. Even the best federal
government is going to need help with carbon tax implementation. It is
not going to be accepted the same way at the same pace across the country. Risk sharing partners with boots on the
ground, are required.
Don’t
wait for a national consensus among the provinces. Don’t cater to the lowest common
denominator.
Canada was founded as a
rural country. Cities were an artifact
of the constitution in the beginning.
Now Canada is an urban country.
Carbon tax is a way to change the funding of cities - on their own
terms.
Give
big cities the choice, and opportunity, to share the political risk and glory
as a managing partner. Cities willing to
face the voters proposing a carbon tax dedicated to improving transit
infrastructure should get administrative assistance and federal matching funds
(if their voters go along). If a city politician can sell a carbon tax to
fund transit to their voters, they should get Ottawa’s public financial
support.
A
carbon tax applied to transportation fuel should be designed to impose the
highest costs onto the most wasteful users.
Commercial users of energy for moving passengers or freight already
extend themselves to minimize their fuel costs.
They should get a 110% rebate (an extra for the increased paperwork, and
support for the program).
The Electric Car
Large scale deployment of the electric car will create
a giant new market for electricity. The impact of the
electric car on emissions depends on how the electricity is generated.
The National Research
Council says there were 6.7 million cars in Ontario in 2005. Assuming a charge every other day,
electrifying 1/3 of the fleet (2.2 million) would require enough electricity to
charge 1.1 million cars simultaneously = 1.1 Million cars / 500 cars per MW =
2200 MW (see calculation below).
If you are trying to reduce
emissions, none of the electricity can come from fossil fuelled stations. If you use wind, at 25% capacity factors, you
need 8,800 MW. If you use solar, you
have to charge during the day. If you
use hydraulic, you must develop all sources within reach of the transmission
system (ignoring any current use such as canoeing, cottages, fishing). You must extend the transmission system to
reach many small developments in Northern Ontario.
While it may technically possible to match the
development of renewable electricity with the growth of the electric cat market,
it's not the only option. What happens
if coal claims to serve that market cheaper?
People that drive Hummer’s will think nothing of driving a coal powered
electric car if it is cheaper. In Appalachia,
the economics of the electric car could save the “clean-coal” industry and
finance carbon sequestration.
Or you could build
Darlington B, using Nanticoke to sustain the electric car fleet while the nuke
is under construction.
The Nuclear car
If you want the electric car
to reduce emissions, nuclear power must be considered as an option. The Power Workers Union certainly thinks
so. Their website states:
“Using Ontario’s
low-carbon hydroelectric and nuclear generation to power Made-in-Ontario
zero-emission electric vehicles represents a significant opportunity to reduce
greenhouse emissions while creating high value manufacturing.”
Even at $0.50 / KWh
electricity is competitive with gasoline for transportation energy. The load shape for charging a car overnight
(off-peak) and economics of electricity as vehicular energy (competitive on an
energy basis with gasoline even at extravagant premiums to current market) make
the electric car the potential salvation of the nuclear industry.
If you can finance nuclear
generation solely on the vehicle market, the 8:00am – 6:00pm surplus nuclear
electricity is cost free, carbon free, and will drive all fossil fuel
electricity off the system. Shape demand
with shed able hydrogen production.
Calculation – electric car economics
This is an example, using
one plug-in, all-electric car, not an exhaustive study. Other people should check the numbers (they
are not what I expected – calculators can be hard on your pre-conceptions).
Q: What is the estimated time for full charging with 110V,
220V and fast charging stations?
A: Starting from a depleted
battery, Level 1 charging will take 16 - 18 hours. For Level 2, our most-up-to
date information indicates that the charge time is 7 hours. Level 3 will take
26 minutes to achieve 80% of battery capacity.
Q: How many amps does it take to charge the Nissan LEAF?
A: For the 120V Level 1
charging it is 15 amps and for the 220V Level 2 charging it is 40 amps. Level 3
charging will use 50 ~60 amps but this type of charging will mostly be
available in commercial locations.
Q: how far can I go?
your Nissan LEAF™ is built
to go 160 km (100 miles) on a single charge. How far you’ll go will depend on a
number of variables.
Assuming home (slow)
charging every other day with no special wiring (so 15 amps) and we are talking
small cars, not trucks:
15 amps at 120 volts = 1800
watts. Line losses average 10% so it
requires around 2kW at the generator. A
I megawatt generator could therefore slowly charge 500 cars simultaneously (500
X 2000 = 1,000,000 watts)
Assume a 14 hour charge
(which is more optimistic than the manufacturer) to keep the charging away from
the 8:00am – 6:00pm peak.
1MW x 14 hr = 14 MWh. =
14,000 KWh to charge 500 cars
·
14,000 x 0.087 (retail electricity price in Toronto)
= $1218 / 500 cars = 2.43 per car
·
14,000 x 0.15 (new wind power plus retail mark-up) =
$2180.00 / 500 cars = 4.36 per car
·
14,000 x 0.50 (an arbitrarily high price to test the
economic limits) = 7,000 / 500 cars = $14 per charge
Financial
risk not safety will limit the use of nuclear power
Within any useful application of the term, nuclear
power is safe and good for the environment.
Nuclear power is so risky financially that safety is
moot.
Three Mile Island
In March 1979, Unit 2 at the
Three Mile Island nuclear station suffered a partial core meltdown. It was the most significant accident in the
history of American commercial nuclear power.
The accident taught us several important lessons.
1.
Nuclear power is safe for people. Inadequate regulation, faulty design,
imprudent operations and several coincidences all contributed to causing the
accident. Bottom line - the containment
held. No one was hurt. There was no catastrophic radiation
leak. Damage awards were small.
2.
Nuclear power is extremely dangerous for
investors. John Graham, the Treasurer of
General Public Utilities (owner of TMI) wrote in Journal of Commercial Bank
lending - May 1980, “The discussion of whether to recommend a moratorium on new
nuclear plants in the Report by the President’s Commission on Three Mile Island
is somewhat irrelevant. I do not believe
that there is a board of directors of an electric utility in the country which
would now approve a nuclear plant as a new initiative.”
Why? Overnight, a billion dollars in revenue
producing assets turned into a gigantic, unfunded liability. People were safe. Investors were not.
Ontario
came close to a nuclear financial meltdown.
The first unit at Darlington was started up in 1991. After a month, they did an inspection. To their horror, there were cracks in the
giant rotor. It was a design flaw. All four rotors had to be replaced. More delay - which in a debt intensive
project, means escalating costs.
It got much worse. When they took the fuel bundles out of the
reactor, they had been shaken apart. A
massive pump within the system was putting out a vibration that was destroying
them. The pump was re-designed. The vibration stopped. Had the re-design not cured the problem, it
was possible the entire $15 billion project would have to be written off. (I was an Executive Speechwriter at Ontario
Hydro. I sat in the office of Ontario
Hydro Chair Marc Ellison with Phil Carter, Premier Bob Rae’s personal
representative at Hydro, who told me this story. The test of the new pump was the next day and
they were terrified that they would have to announce the complete write-off of
the Darlington project).
Things
have not gotten better for the nuclear industry
The only nuclear power
reactors currently under construction in the U.S. are at the Alvin W. Vogtle
Electric Generating Plant in Georgia.
They are years behind schedule and billions over budget. Plans to add two nuclear reactors to the V.C.
Summer Nuclear Station in Jenkinsville, South Carolina have been scrapped with
a loss of $9 billion. Westinghouse, the
prime contractor in these projects has filed for bankruptcy. Parent company Toshiba was forced to sell its
chip unit.
Those that think new,
smaller nuclear systems will be more affordable should remember that these are
the same people who have still not come up with a solution for the disposal of
high level spent fuel in fifty years.
Westinghouse bankruptcy -
https://www.reuters.com/article/us-toshiba-accounting-westinghouse-nucle-idUSKBN17Y0CQ
Georgia Power - Vogtle -
http://fortune.com/2018/09/27/vogtle-nuclear-power-plant-construction-deal/
South Carolina -
https://theintercept.com/2019/02/06/south-caroline-green-new-deal-south-carolina-nuclear-energy/
Electricity
Removing the HST on electricity is effectively a corporate tax cut
Electricity is
used mostly by the industrial and commercial sector. Single family homes account for less than one
quarter of electricity use. In those
homes, electricity is a small part of the household budget.
If the government
wants to subsidize business, it would be better for the environment to promote
a straight forward corporate tax cut and not use electricity price as a
disguise.
Bring back Ontario
Hydro
Some people think that crown ownership would facilitate lower
electricity prices. This is both
financially irresponsible (costs don't go away just because you cut the revenue
necessary to cover them) and bad for the environment.
This is pandering to the "social ownership" crowd with no
possible benefit. Under the NDP government
of Bob Rae, Ontario Hydro was run by former Broadbent staffer Marc
Ellison. Their pathetic Demand
Management effort was run by Rae’s friend Norm Simon. They offered coupons for cold-water Cheer and
distributed low power light bulbs that burned out quickly.
That’s what they want to return to!
Social ownership may appeal to the Left Caucus and the public sector
unions, but historically it has resulted in terrible energy policy. Let's not make that mistake again.
Environmentalists, promoters, and politicians have all made a mess of
this issue.
Environmentalists object to pipelines because they don’t want to see
the tar sands developed. If they can
stop pipelines, they think they can stop the tar sands and the resulting pollution. They are wrong. As long as there is enough demand for oil to
support high prices, those prices will finance the development of ever more
marginal sources of oil. The most
immediate impact of blocking pipelines is to enrich the railways. Oil will be moved by train (at greater cost,
with a higher carbon footprint and with a greater possibility of accident).
Oil price more than pipeline capacity limits tar sands
development. Environmentalists just have
to wait. Young people are driving less. Self driving cars will promote fuel
efficiency. Hybrid drive cars, carbon
tax funded transit, CAFE and all electric cars will further reduce oil demand. The American fracking industry has much great
flexibility to respond quickly to price changes than does the Canadian heavy
oil industry.
The pipelines will not be economically viable until oil prices
stabilize above $US 80/bbl. That's not
going to happen for a long time.
Competent environment policies including CAFE and carbon tax financed
public transit expansion will put further downward pressure on oil price. The better the environment policy, the
greater the downward pressure on oil price.
Bottle up the tar sands won’t work
Stopping the Canadian tar sands development does not stop the pollution. As long as demand is great enough to support
a price high enough to develop marginal reserves, blocking the tar sands just
changes the location of the emissions source.
Venezuela has lots of bitumen.
It also has deep water ports that never freeze. A post Maduro government may be more
accommodating to foreign energy investment.
Besides the climate and geography advantages, they may have a more
permissive regulatory and royalty environment than Canada, if they are
competing with Canada for energy development dollars. Do we really want to sacrifice the lead
Canada already has and join a race to the regulatory bottom? Should urban Ontario demand northern Alberta
give up jobs and development with no net environmental benefit just so they can
feel pious?
The
fastest, easiest, most effective way of mitigating the impact of tar sands and
pipelines on the environment is to improve the economic productivity of oil use
in the transportation sector. If oil
prices are depressed and CAFE prevents a price induced surge in recreational
demand, investment in the tar sands will dry up and the problem with pipelines
becomes moot.
Consultation to define acceptable tar sands development
The tar sands are not going to be a major source of economic growth for
a long time and there is nothing government can do about that. For this reason, purchasing the Trans
Mountain Pipeline was a massive error in judgement. The only beneficiaries of this triumph of
politics over economics were the shareholders of Kinder Morgan who got a $4.5
billion windfall. Taxpayers and First
Nations involved in pipelines are guaranteed to lose money.
Eventually, the tars sands are going to be developed. If not now, then after all the rest of the
easy oil has run out. Oil markets have
taken the pressure off tar sands development for the moment. The government should take advantage of this
lull to craft a sensible process for the inevitable future development.
Rather than an arbitrary NO (or uncritical YES) for all tar sands
development, use the price induced pause in development to determine an
acceptable development standard for the tar sands and how to achieve it. Set up a public consultation process,
inviting corporations, environmentalists, aboriginals, unions, and local
landowners. Seek out the broadest
possible consensus on acceptable conditions for the development of the tar
sands.
Have local riding associations in major cities co-operate (invite local
associations from the other parties to participate) to organize meetings – at universities
or community centres. Invite the local
media. Make all documents submitted
available on line. Get all the players
to put a first offer on the table in public.
Get the local community cable to broadcast the whole thing live. Make news feeds available to the other
stations and networks.
By the time the government has done this in ten cities, it will have
been on TV a lot, looking reasonable. It
would not cost much. It would be a tool
for building local organizations. It
would help the government to learn a lot.
Most of it will be pointless theatre, but the process will produce a
couple brilliant nuggets of insight.
These meetings will help to develop the core of a compromise between the
environmentalists, indigenous peoples,
and the industry as well as the pragmatists on each side whose support
would add credibility to the effort and generate broad based support for the
resulting policies.
Cap and Trade
Cap
and Trade, and Carbon Tax are not mutually exclusive choices. Cap and Trade is directed at corporations
where carbon tax affects point of sale decisions such as gasoline. This tax is borne more by individuals and is
therefore opposed by the populists.
Government
sets an upper limit (Cap) on the total amount of permitted emissions. The total allowances are divided among the
emitters. A firm that produces more
emissions than are permitted must either make investments to reduce emissions
or buy credits (Trading in permission to pollute beyond the cap). A carbon credit can be created by a company
reducing emissions below the cap. The
difference between the allowed emissions and the actual emissions becomes a
“carbon credit” that can be sold to a company that must reduce emission but
faces very high costs to do so.
A
fully liquid market in carbon credits is the Holy Grail of energy efficiency
and emissions management.
Carbon
credits become a financial product that can be created by improving energy
efficiency and sold at a profit.
Improvements in energy productivity are funded by institutional
investors driven by profit, not by regulation and subsidy. Huge amounts of investment capital will
develop emissions reductions, least cost first.
Cap and Trade is less regressive than a carbon tax.
Cap
and Trade is a great idea and it should be supported. It is a longer term alternative. A functional cap and trade market can bring
vast amounts of money into improving energy efficiency and doing so at the
lowest cost.
For
this to happen, there will need to be a credible regulator, a market with
stable rules and clearing systems that will allow institutional investors to
have confidence in the legitimacy and liquidity of carbon credits. There has to be a way of certifying credits
so they can be traded in multiple markets.
There has to be enforceable caps. Will the caps be by sector? by
country? Will industry be treated the
same as consumers? What will be eligible
to be an internationally traded credit?
Since
emissions know no borders, there must be an international market. Who runs the central bank of carbon
credits? Who decides (and can make
stick) the levels of the Cap? Is this
ultimately going to the UN?
A
fully liquid global carbon credit market is necessary, but will take years to
develop.
