FLOP28 – Climate proposals would devastate economy

From the Frontier Centre for Public Policy

” Most CO2 comes from natural sources like forest fires, volcanoes and ocean evaporation – not your SUV or natural gas furnace. The human portion of this tiny amount is the equivalent of 6 pennies in a jar of 10,000. “

Politicians, academics, celebrities, self-appointed activists, protesters, and green energy industry lobbyists recently gathered in Dubai at their annual Climate Crisis jamboree (COP28). Their central belief, from their computer models, is that human-generated global warming will lead to a rise in average global temperatures of two degrees Celsius, ‘2 C’ or even more frighteningly, as much as 3 C to 4 C by 2100. They claim that this will cause widespread health, environmental, and economic devastation.

From this hypothesis comes their solution: drastic reductions in so-called greenhouse gas emissions, principally carbon dioxide, ‘CO2’, and rapidly so. To their minds, this would require widespread adoption of their preferred solutions – ending fossil fuels in favour of wind and solar power; pervasive and intensive electrification of the world economy, including the mandated adoption of electric vehicles, ‘EVs’, and batteries, everywhere.

They insist that slashing CO2 levels will not only benefit the world, but also the economy – as these new industries would provide jobs and other benefits.

The hard reality is that CO2, is a life-giving gas that is crucial for photosynthesis and thus the flourishing of all life on Earth. It is a trace gas – making up only .04% of our atmosphere. Most CO2 comes from natural sources like forest fires, volcanoes and ocean evaporation – not your SUV or natural gas furnace. The human portion of this tiny amount is the equivalent of 6 pennies in a jar of 10,000. Very awkwardly, CO2 levels in the atmosphere are uncorrelated with temperatures. It may look so in government computer models, but remember those catastrophically wrong Covid models that gave us devastating lockdowns, failed vaccines and exploding debt and inflation?

Even if we assume that CO2 is “pollution that is warming the planet” their wild proposals’ math doesn’t work out.

Professor Richard Tol of the University of Sussex, United Kingdom, wrote in a special issue of Climate Economics a sobering assessment of the ‘bad deal’ climate crusaders are trying to sell to the world, including Canada. He estimates their proposed climate policies’ costs to be 3.8 to 5.6% of GDP in 2100 compared to benefits of 2.8% to 3.2% of GDP – or excess costs of $900 billion to $1.98 trillion in today’s $90 trillion world economy.

The prohibitively large subsidies required fail the cost benefit test. To summarize: Tol suggests that the whole Green Transition ‘enterprise’ would lose money – in vast amounts. His view is not even the worst assessment of such radical disruptive policies.

Another expert who engages the “CO2 is pollution” bubble and has done the math is Bjorn Lomborg, president of the Copenhagen Consensus think tank and a Hoover Institution Senior Fellow.

He assesses MIT researchers’ studies of the costs of attaining Net Zero (no net GHG emissions) by 2050, in the same journal, Climate Economics, and observes that these Paris policies would cost 8% to 18% of annual GDP by 2050 and 11% to 13% annually by 2100…. Averaged across the century, these promises would create benefits worth $4.5 trillion (in 2023 dollars) annually: “dramatically smaller than the $27 trillion annual cost that Paris promises would incur, as derived from averaging the three cost estimates from the two Climate Change Economics papers through 2100.”

To remove any doubt, these forecast costs would exceed total global annual capital investment of all kinds, and would crowd out everything else, impoverishing all humanity. Expensive, destructive ‘solutions’, for a dubious, unproven catastrophe.

The Dubai COP28 flopped as all others have.

We need to stop the madness.

Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy

Related Topics:#ClimateProposalsWouldDevastateEconomy #COP28 #FrontierCentreForPublicPolicy #IanMadsen FLOP28

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Prime minister’s misleading capital gains video misses the point

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Prime minister’s misleading capital gains video misses the point

Published on May 19, 2024

Todayville

From the Fraser Institute

By Jake Fuss and Alex Whalen

According to a 2021 study published by the Fraser Institute, 38.4 per cent of those who paid capital gains taxes in Canada earned less than $100,000 per year, and 18.3 per cent earned less than $50,000. Yet in his video, Prime Minister Trudeau claims that his capital gains tax hike will affect only the richest “0.13 per cent of Canadians”

This week, Prime Minister Trudeau released a video about his government’s decision to increase capital gains taxes. Unfortunately, he made several misleading claims while failing to acknowledge the harmful effects this tax increase will have on a broad swath of Canadians.

Right now, individuals and businesses who sell capital assets pay taxes on 50 per cent of the gain (based on their full marginal rate). Beginning on June 25, however, the Trudeau government will increase that share to 66.7 per cent for capital gains above $250,000. People with gains above that amount will again pay their full marginal rate, but now on two-thirds of the gain.

In the video, which you can view online, the prime minister claims that this tax increase will affect only the “very richest” people in Canada and will generate significant new revenue—$20 billion, according to him—to pay for social programs. But economic research and data on capital gains taxes reveal a different picture.

For starters, it simply isn’t true that capital gains taxes only affect the wealthy. Many Canadians who incur capital gains taxes, such as small business owners, may only do so once in their lifetimes.

For example, a plumber who makes $90,000 annually may choose to sell his business for $500,000 at retirement. In that year, the plumber’s income is exaggerated because it includes the capital gain rather than only his normal income. In fact, according to a 2021 study published by the Fraser Institute, 38.4 per cent of those who paid capital gains taxes in Canada earned less than $100,000 per year, and 18.3 per cent earned less than $50,000. Yet in his video, Prime Minister Trudeau claims that his capital gains tax hike will affect only the richest “0.13 per cent of Canadians” with an “average income of $1.4 million a year.”

But this is a misleading statement. Why? Because it creates a distorted view of who will pay these capital gains taxes. Many Canadians with modest annual incomes own businesses, second homes or stocks and could end up paying these higher taxes following a onetime sale where the appreciation of their asset equals at least $250,000.

Moreover, economic research finds that capital taxes remain among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. By increasing them the government will deter investment in Canada and chase away capital at a time when we badly need it. Business investment, which is crucial to boost living standards and incomes for Canadians, is collapsing in Canada. This tax hike will make a bad economic situation worse.

Finally, as noted, in the video the prime minister claims that this tax increase will generate “almost $20 billion in new revenue.” But investors do not incur capital gains taxes until they sell an asset and realize a gain. A higher capital gains tax rate gives them an incentive to hold onto their investments, perhaps until the rate is reduced after a change in government. According to economists, this “lock-in” effect can stifle economic activity. The Trudeau government likely bases its “$20 billion” number on an assumption that investors will sell their assets sooner rather than later—perhaps before June 25, to take advantage of the old inclusion rate before it disappears (although because the government has not revealed exactly how the new rate will apply that seems less likely). Of course, if revenue from the tax hike does turn out to be less than anticipated, the government will incur larger budget deficits than planned and plunge us further into debt.

Contrary to Prime Minister Trudeau’s claims, raising capital gains taxes will not improve fairness. It’s bad for investment, the economy and the living standards of Canadians.

Authors:

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Alex Whalen

Associate Director, Atlantic Canada Prosperity, Fraser Institute

Economy

Canadians experiencing second-longest and third steepest decline in living standards in last 40 years

Published on May 17, 2024

Todayville

From the Fraser Institute

From 2019 to 2023, Canadian living standards declined—and as of the end of 2023, the decline had not yet ended, finds a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“Despite claims to the contrary, living standards are declining in Canada,” said Grady Munro, policy analyst at the Fraser Institute and co-author of Changes in Per-Person GDP (Income): 1985 to 2023.

Specifically, from April 2019 to the end of 2023, inflation-adjusted per-person GDP, a broad measure of living standards, declined from $59,905 to $58,111 or by 3.0 per cent. This decline is exceeded only by the decline in 1989 to 1992 (-5.3 per cent) and 2008 to 2009 (-5.2 per cent). In other words, it’s the third-steepest decline in 40 years.

Moreover, the latest decline (which comprises 18 fiscal quarters) is already the second-longest in the last 40 years, surpassed only by the decline from 1989 to 1994 (which lasted 21 quarters). And if not stabilized in 2024, this decline could be the steepest and longest in four decades.

“The severity of the decline in living standards should be a wake-up call for policymakers across Canada to immediately enact fundamental policy reforms to help spur economic growth and productivity,” said Jason Clemens, study co-author and executive vice-president at the Fraser Institute.

Real GDP per person is a broad measure of incomes (and consequently living standards). This paper analyzes changes in quarterly per-person GDP, adjusted for inflation from 1985 through to the end of 2023, the most recent data available at the time of writing.
The study assesses the length (number of quarters) as well the percentage decline and the length of time required to recover the income lost during the decline.
Over the period covered (1985 to 2023), Canada experienced nine periods of decline and recovery in real GDP per person.
Of those nine periods, three (Q2 1989 to Q3 1994, Q3 2008 to Q4 2011, and Q2 2019 to Q2 2022) were most severe when comparing the length and depth of the declines along with number of quarters required for real GDP per person to recover.
The experience following Q2 2019 is unlike any decline and recovery since 1985 because, though per person GDP recovered for one quarter in Q2 2022, it immediately began declining again and by Q4 2023 remains below the level in Q2 2019.
This lack of meaningful recovery suggests that since mid-2019, Canada has experienced one of the longest and deepest declines in real GDP per person since 1985, exceeded only by the decline and recovery from Q2 1989 to Q3 1994.
If per-capita GDP does not recover in 2024, this period may be the longest and largest decline in per-person GDP over the last four decades.