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Economy

Ottawa should follow Britain and tap the brakes on ‘net zero’

Published

6 months ago

4 minute read

From the Fraser Institute

 

In a recent speech, British Prime Minister Rishi Sunak put a dent in the façade of the global “net zero” greenhouse gas emission agenda—that is, the idea that countries will emit no more greenhouse gases (such as CO2 and methane) into the air than are taken back out and “sequestered” in some form that won’t increase atmospheric heating. The net zero framework has subsumed virtually all energy, environment and natural resource policies in many countries including Canada.

Sunak did not reject net zero, but he clearly took his foot off the gas and started tapping the brake, acknowledging that people are not happy with the way it’s playing out: “We seem to have defaulted to an approach which will impose unacceptable costs on hard-pressed British families. Costs that no one was ever told about, and which may not actually be necessary to deliver the emissions reduction that we need.”

And Sunak extended some timelines in the United Kingdom’s net zero program. His government increased the deadline for ceasing sales of new internal combustion vehicles from 2030 to 2035. And rather than phasing out the sale of all gas boilers by 2035, the U.K. will phase out 80 percent of them by that date. The government will also now not require homeowners and landlords to meet various energy efficiency guidelines. Small changes to a large program, but a pioneering move away from today’s net zero timelines.

Here at home, Canadians also labour under the economic impacts of the Trudeau government’s net zero zeal. Canada’s carbon tax, a key net zero pillar, slated to rise to $170 per tonne by 2030, will put the hurt on Canadian households well in excess of the rebates given out by Ottawa. And a $170-per tonne carbon tax will cause the economy to shrink by about 1.8 per cent, causing a permanent loss of nearly 185,000 jobs and reducing real incomes in every province.

Similarly, according to the Parliamentary Budget Officer, 60 per cent of households in Alberta, Ontario, Saskatchewan and Manitoba—the four provinces where the federal carbon tax applies—will pay more in carbon taxes than they get in rebates. By 2030, 80 per cent of households in Ontario and Alberta will be worse off and 60 per cent will be worse off in Manitoba and Saskatchewan.

Of course, the cost impacts of Canada’s net zero plan will likely expand well beyond the carbon tax, with emission caps on Canada’s oil and gas sector, a net zero goal for Canadian waste management, ambitious (some would say impossible) mandates to electrify transportation in Canada, new “Clean Electricity Regulations” that will raise the cost of electricity, energy-efficient construction standards that can only further increase the already insane costs of housing and commercial property development in Canada, and possible restrictions on agricultural use of fertilizers that could raise Canadian food prices beyond even today’s outrageous levels.

Sunak’s net zero slowdown is not exactly the stuff of Brexit, but it may be a harbinger of things to come for other countries shaking under the weight of their own net zero ambitions. Most importantly, it’s a precedent other governments can invoke to justify adjusting their own destructive net zero programs. The Trudeau government would do well to follow Sunak’s lead and reduce net zero targets, soften timelines, remove regulatory burdens, and generally reform the policy before the full brunt of the economic impact throws more Canadian households into the red.

Author:

Kenneth P. Green
Senior Fellow, Fraser Institute
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Business

Economic progress stalling for Canada and other G7 countries

Published on May 10, 2024

By

From the Fraser Institute

By Jake Fuss

For decades, Canada and other countries in the G7 have been known as the economic powerhouses of the world. They generally have had the biggest economies and the most prosperous countries. But in recent years, poor government policy across the G7 has contributed to slowing economic growth and near-stagnant living standards.

Simply put, the Group of Seven countries—Canada, France, Germany, Italy, Japan, the United Kingdom and the United States—have become complacent. Rather than build off past economic success by employing small governments that are limited and efficient, these countries have largely pursued policies that increase or maintain high taxes on families and businesses, increase regulation and grow government spending.

Canada is a prime example. As multiple levels of government have turned on the spending taps to expand programs or implement new ones, the size of total government has surged ever higher. Unsurprisingly, Canada’s general government spending as a share of GDP has risen from 39.3 per cent in 2007 to 42.2 per cent in 2022.

At the same time, federal and provincial governments have increased taxes on professionals, businessowners and entrepreneurs to the point where the country’s top combined marginal tax rate is now the fifth-highest among OECD countries. New regulations such as Bill C-69, which instituted a complex and burdensome assessment process for major infrastructure projects and Bill C-48, which prohibits producers from shipping oil or natural gas from British Columbia’s northern coast, have also made it difficult to conduct business.

The results of poor government policy in Canada and other G7 countries have not been pretty.

Productivity, which is typically defined as economic output per hour of work, is a crucial determinant of overall economic growth and living standards in a country. Over the most recent 10-year period of available data (2013 to 2022), productivity growth has been meagre at best. Annual productivity growth equaled 0.9 per cent for the G7 on average over this period, which means the average rate of growth during the two previous decades (1.6 per cent) has essentially been chopped in half. For some countries such as Canada, productivity has grown even slower than the paltry G7 average.

Since productivity has grown at a snail’s pace, citizens are now experiencing stalled improvement in living standards. Gross domestic product (GDP) per person, a common indicator of living standards, grew annually (inflation-adjusted) by an anemic 0.7 per cent in Canada from 2013 to 2022 and only slightly better across the G7 at 1.3 per cent. This should raise alarm bells for policymakers.

A skeptic might suggest this is merely a global phenomenon. But other countries have fared much better. Two European countries, Ireland and Estonia, have seen a far more significant improvement than G7 countries in both productivity and per-person GDP.

From 2013 to 2022, Estonia’s annual productivity has grown more than twice as fast (1.9 per cent) as the G7 countries (0.9 per cent). Productivity in Ireland has grown at a rapid annual pace of 5.9 per cent, more than six times faster than the G7.

A similar story occurs when examining improvements in living standards. Estonians enjoyed average per-person GDP growth of 2.8 per cent from 2013 to 2022—more than double the G7. Meanwhile, Ireland’s per-person GDP has surged by 7.9 per cent annually over the 10-year period. To put this in perspective, living standards for the Irish grew 10 times faster than for Canadians.

But this should come as no surprise. Governments in Ireland and Estonia are smaller than the G7 average and impose lower taxes on individuals and businesses. In 2019, general government spending as a percentage of GDP averaged 44.0 per cent for G7 countries. Spending for governments in both Estonia and Ireland were well below this benchmark.

Moreover, the business tax rate averaged 27.2 per cent for G7 countries in 2023 compared to lower rates in Ireland (12.5 per cent) and Estonia (20.0 per cent). For personal income taxes, Estonia’s top marginal tax rate (20.0 per cent) is significantly below the G7 average of 49.7 per cent. Ireland’s top marginal tax rate is below the G7 average as well.

Economic progress has largely stalled for Canada and other G7 countries. The status quo of government policy is simply untenable.

Author:

Jake Fuss
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Economy

‘Gambling With The Grid’: New Data Highlights Achilles’ Heel Of One Of Biden’s Favorite Green Power Sources

Published on May 4, 2024

By

From the Daily Caller News Foundation

By NICK POPE

 

New government data shows that wind power generation fell in 2023 despite the addition of new capacity, a fact that energy sector experts told the Daily Caller News Foundation demonstrates its inherent flaw.

Wind generation fell by about 2.1% in 2023 relative to 2022 generation, despite the 6 gigawatts (GW) of wind power capacity that came online last year, according to data published Tuesday by the U.S. Energy Information Administration (EIA). That wind power output dropped despite new capacity coming online and the availability of government subsidies highlights its intermittency and the problems wind power could pose for grid reliability, energy sector experts told the DCNF.

The decrease in wind generation is the first drop on record with the EIA since the 1990s; the drop was not evenly distributed across all regions of the U.S., and slower wind speeds last year also contributed to the decline, according to EIA. The Biden administration wants to have the American power sector reach carbon neutrality by 2035, a goal that will require a significant shift away from natural gas- and coal-fired power toward wind, solar and other green sources.

A table depicting the decrease of wind power generation in 2023 relative to 2022. (Screenshot via U.S. Energy Information Administration)

“Relying on wind power to meet your peak electricity demands is gambling with the grid,” Isaac Orr, a policy fellow at the Center of the American Experiment who specializes in power grid-related analysis, told the DCNF. “Will the wind blow, or won’t it? This should be a moment where policymakers step back and consider the wisdom of heavily subsidizing intermittent generators and punishing reliable coal and gas plants with onerous regulations.”

Between 2016 and 2022, the wind industry received an estimated $18.6 billion worth of subsidies, about 10% of the total amount of subsidies extended to the energy sector by the U.S. government, according to an August 2023 EIA report. Wind power received more assistance from the government than nuclear power, coal or natural gas over the same period of time.

“This isn’t subsidies per kilowatt hour of generation. It’s raw subsidies. If it were per kilowatt hour of generation, the numbers would be even more extreme,” Paige Lambermont, a research fellow at the Competitive Enterprise Institute, told the DCNF. “This is a massive amount of money. It’s enough to dramatically alter energy investment decisions for the worse. We’re much more heavily subsidizing the sources that don’t provide a significant portion of our electricity than those that do.”

“Policy that just focuses on installed capacity, rather than the reliability of that capacity, fails to understand the real needs of the electrical grid,” Lambermont added. “This recent disparity illustrates that more installed wind capacity does not necessarily correlate with more wind power production. It doesn’t matter how much wind you add to the grid, if the wind isn’t blowing at peak demand time, that capacity will go to waste.”

Wind power’s performance was especially lackluster in the upper midwest, but Texas saw more wind generation in 2023 than it did in 2022, according to EIA. Wind generation in the first half of 2023 was about 14% lower than it was through the first six months of 2022, but generation was higher toward the end of 2023 than it was during the same period in 2022.

In 2023, about 60% of all electricity generated in the U.S. came from fossil fuels, while 10% came from wind power, according to EIA data. Beyond generous subsidies for preferred green energy sources, the Biden administration has also aggressively regulated fossil fuels and American power plants to advance its broad climate agenda.

The Environmental Protection Agency’s (EPA) landmark power plant rules finalized this month will threaten grid reliability if enacted, partially because the regulations are likely to incentivize operators to close plants rather than adopt the costly measures required for compliance, grid experts previously told the DCNF. At the same time that the Biden administration is effectively trying to shift power generation away from fossil fuels, it is also pursuing goals — such as substantially boosting electric vehicle adoption over the next decade and incentivizing construction of energy-intensive computer chip factories — that are driving up projected electricity demand in the future.

“The EIA data proves what we’ve always known about wind power: It is intermittent, unpredictable and unreliable,” David Blackmon, a 40-year veteran of the oil and gas industry who now writes and consults on the energy sector, told the DCNF. “Any power generation source whose output is wholly dependent on equally unpredictable weather conditions should never be presented by power companies and grid managers as safe replacements for abundant, cheap, dispatchable generation fueled with natural gas, coal or nuclear. This is a simple reality that people in charge of our power grids too often forget. Saying that no doubt hurts some people’s feelings, but nature really does not care about our feelings.”

Blackmon also pointed out that, aside from its intermittency, sluggish build-out of the transmission lines and related infrastructure poses a major problem for wind power.

“Wind power is worthless without accompanying transmission, yet the Biden administration continues to pour billions into unreliable wind while ignoring the growing crisis in the transmission sector,” Blackmon told the DCNF.

Another long-term issue that wind power, as well as solar power, faces is the need for a massive expansion in the amount of battery storage available to store and dispatch energy from intermittent sources as market conditions dictate. By some estimates, the U.S. will need about 85 times as much battery storage by 2050 relative to November 2023 in order to fully decarbonize the power grid, according to Alsym Energy, a battery company.

The White House and the Department of Energy did not respond to requests for comment.

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