Canada’s difficulty with Kyoto

With the ratification of the Kyoto Protocol, Canada promised to reduce its average greenhouse gas (GHG) emissions between 2008 and 2012 by 6 per cent (or 270 megatons), but living up to these obligations will impose major economic changes for Canadians, says the Fraser Institute.

The government promises that the protocol will give Canada a competitive advantage among developed countries, will make cities more comfortable and will improve the quality of living; however, the costs associated with achieving the proposed target are unknown, says Fraser.

According to several different studies:

A review of sectoral impacts of compliance found that the associated costs would rely significantly on whether Canada can buy "emission credits" on the international market; if they can, compliance cost is estimated at 0.5 per cent of annual GDP (that's $6.47 billion Canadian dollars), if they can't, the cost will jump to 7 per cent.

In 2003, G. Cornelis van Kooten found that the protocol was likely to fail because it has too many loopholes, inadequate governance structures and insufficient compliance provisions.

Mark Jaccard of the Simon Fraser University concluded that if a GHG cap and trade permit system is implemented, final energy prices would increase between 10 and 100 per cent for electricity, 60 per cent for natural gas, and 50 per cent for gasoline, resulting in a reduction of cumulative economic growth of 3 per cent by 2010.

Cornell University's Neha Khanna found that Canada will experience a GDP loss between 9.33 per cent and 14.7 per cent of 2010 baseline.

Even though there is no consensus on the magnitude of the cost of complying with Kyoto, there is a consensus that these efforts will significantly compromise the economy and Canadian's standard of living, says Fraser.

Source: Jeremy Brown and Milagros Palacios, The Kyoto Protocol: Economically Beneficial or Detrimental? Fraser Forum, October 2005; based upon: G. Cornelis van Kooten, Smoke and Mirrors: The Kyoto Protocol and Beyond, Canadian Public Policy, Vol. 29, No. 4, 2003; Mark Jaccard, Canada's Technological and Behavioral Potential, Canadian Journal of Policy Research, Vol. 2, No. 4, Winter 2001; and Neha Khanna, Analyzing the Economic Cost of the Kyoto Protocol, Ecological Economics, vol. 38, no. 1, July 2001.

For Brown text: http://www.fraserinstitute.ca/admin/books/chapterfiles/Oct05ffBrown.pdf#

For van Kooten text: http://economics.ca/cgi/jab?journal=cpp&view=v29n4/CPPv29n4p397.pdf

For Jaccard text: http://www.emrg.sfu.ca/EMRGweb/pubarticles/2001/CanadaKyoto.pdf

For Khanna text: http://www.sciencedirect.com/science/article/B6VDY-43B8J4C-5/2/f84374f73d46773663efce616e0f59a8

For more on Global Warming: http://eteam.ncpa.org/issues/?c=impacts-and-responses

FMF Policy Bulletin/ 22 November 2005