Kyoto Accord: Costly Conformity

Those in favor of ratifying the Accord argue that it is in Canada’s favor to be proactive in the arena of environmental responsibility and that the Accord’s implementation will have an economical cost, yet one that can be dealt with. However, cynicism runs deep with those who oppose the plan. Opponents of the Protocol accuse Prime Minister Chretien of “legacy building”, of recklessly hurtling Canada towards a disadvantageous and p

The forecasted costs of implementing the Accord run the gamut from minimal and relatively un-noticeable to ruinous and economically unsustainable. A study conducted for the Liberal government says that under the Kyoto Protocol, the economy will grow by about 16% by 2010, compared to 18% under a “business-as-usual” scenario. Stated otherwise, the economy will produce 1.26 million new jobs with Kyoto compared to 1.32 million with the status quo, by 2010 (1). This study concludes that the economic costs would be negligible and spread over the entire country, affecting all economic sectors relatively equally. The costs of implementing the accord will stem from the government’s need to subsidize and give generous tax breaks to corporations in the hopes of stimulating research and development, and application of environmentally friendly capital resources and business practices. Tax breaks of as much as $1000 are also expected for individuals who renovate homes to lower heating and cooling costs, the government also aims to retrofit 20% of Canada’s houses by 2012 and to make all new homes conform to federal efficiency standards by 2010. These are but some of the major outflows the government will be faced with when implementing the Protocol. Added to that are the social costs of potentially great numbers of structurally un-employed workers as a result of polluting or obsolete corporations going under when faced with the economic pressures of investing in new forms of environmentally friendly capital.

In December 1997, Canada and more than 160 countries met in Kyoto, Japan and agreed to collectively reduce greenhouse gas emissions by objectively verifiable targets. Those targets and the options available to attain them became known as the Kyoto Protocol. In this Accord, each country has to reduce its emissions of GHG’s by between 4.5 to 8% below their emission levels of 1990, by the year 2012. Canada’s target is to reach emission levels of 6% below those of 1990 by the period between 2008 and 2012. Expected to ratify next week, Canada will be the latest country to ratify the Accord, which legally binds its signatories to their respective targets, although to what extent they are legally bound and what penalties exist for those who fail to meet their requirements are some of the details that have yet to be worked out.

What worries Canadians and investors in Canada is that these figures are completely hypothetical. They are based on models using data that may not pan out, as all the rules regarding credit trading and GHG sinks have not been fully approved. The figures stated above and most of The Action Plan 2000 regarding implementation are heavily reliant on Canada’s ability to trade credits internationally and particularly with the United States, which is not a Kyoto signatory. Under the current plan, Canada will not be allowed to earn credits when dealing with its largest trading partner. Under the credit trading plans, only countries with Kyoto targets will be able to trade credits. Canada has worked hard to have this stipulation amended as it would be the major source of its potential to earn credits. The European Union has so far been unreceptive to the idea, claiming that it would dilute the Accord and that it would be too easy for Canada to earn credits by selling some of its “clean” energy to the United States, eventually relieving itself of the responsibility to domestically reduce its GHG emissions.

otentially disastrous situation in the hopes of going out “green”, of attempting to score historical points as a fighter for the environment, as he approaches his announced retirement date. Nevertheless, Canada will ratify the Kyoto Accord next week and will be bound to reduce its emission of greenhouse gases. With the details to be hammered out some time after ratification, many anxiously await the conditions and rules regarding implementation and sustainability.

Reducing the amount of man-ma

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