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Trucks leave the Syncrude oil sands extraction facility near Fort McMurray, Alta., on October 25, 2009. (MARK RALSTON)
Trucks leave the Syncrude oil sands extraction facility near Fort McMurray, Alta., on October 25, 2009. (MARK RALSTON)

John Ibbitson

With eyes open to cost of climate change, <br/>it's time for us to decide Add to ...

All we had were questions. Now we have answers. The answers aren't pretty.

A major bank has paid two environmental organizations to produce a groundbreaking report that, for the first time, calculates the costs of both the Harper government's modest plans to reduce greenhouse-gas emissions and the much more ambitious targets set by the environmental community, nationally and regionally.

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The conclusion: Canada can still meet a 2020 target to reduce greenhouse-gas emissions below 1990 levels while preserving some economic growth through the next decade.

But to meet that target, the federal government must act immediately. The impact of reducing carbon-dioxide emissions will be deeply disruptive to the economy. It will be very expensive. And Alberta, especially, will suffer.

"It will be the biggest fiscal shock in Canadian history," observes TD chief economist Don Drummond. "But the study shows it can be done."

The question is whether Canadians are willing to bear these burdens, in the cause of preventing a potential environmental catastrophe, whether our leaders are willing to pay the political price of acting in the planet's best interests.

But no one now can hide behind bafflegab and rhetoric. The stark truth confronts us. Fighting global warming will cost us. A lot.

The Toronto-Dominion Bank provided funding to the David Suzuki Foundation and environmental research group the Pembina Institute, which in turn brought in the respected economic modelling firm of M.K. Jaccard and Associates, to create a rigorous and unbiased assessment of what Canada will look like in 2020 if (a) it adopts the Harper government's plan to reduce emissions 3 per cent below 1990 levels or (b) adopts the much more ambitious goal of 25 per cent below 1990 levels, which environmentalists and many scientists say is essential to prevent the worst impacts of rising temperatures.

To get there, Canada will have to turn itself into an environmental Elysium, and do it practically overnight. To meet any 2020 target, the report concludes, the federal and provincial governments must immediately impose sweeping and powerful legislation.

A new system that caps and then lowers industrial emissions, forcing industries to purchase credits to offset anything they emit above that cap, would have to be up and running by 2011, which is probably politically impossible.

All new residential construction would have to be 50 per cent more energy efficient than the average new home today. All motor vehicles would have to meet the strict new fuel-efficiency standards that will come into effect in California in 2012. All home appliances would have to be as energy efficient as the most efficient ones today. All homes and offices constructed in British Columbia, Manitoba and Quebec would have to be heated electrically. There would be much else besides.

Even in this extremely energy-frugal world, and in pursuit of the most modest Harper-government targets, there would be an enormous gap between target and actual performance. To close that gap, by 2020 Canada would annually be purchasing somewhere between $2-billion and $6-billion of offshore carbon credits a year, depending on whether the rest of the developed world enacts similar measures.

To meet the environmentalists' goal, the cost would be $8-billion. And in the environmentalists' case that assumes that new methods - which haven't been invented yet - would be capturing and storing much of the carbon generated by energy-producing industries, including new production from the oil sands.

Beyond the cost to government is the impact of these actions on the economy. By 2020, Ottawa would be raking in between $46-billion and $72-billion annually, a staggering sum, from the carbon credits that industry would be paying. (Which is why cap-and-trade is really just a carbon tax by another name.) All that money would be flowing back, however: in income-tax cuts to compensate for rising heating costs; in subsidies to industries most severely affected by higher energy costs; in promoting alternative energy sources, mass transit and high-speed rail; and in purchasing offshore credits.

The Pembina Institute and the David Suzuki Foundation point out that the overall impact on economic growth will be minimal, and employment will actually increase, as the country restructures to become more energy efficient.

"With strong federal and provincial policies, Canada can meet" even the most ambitious targets "and still have a strong, growing economy, a quality of life higher than Canadians enjoy today, and continued steady job creation across the country," they maintain in their analysis of M.K. Jaccard's numbers.

But while there would continue to be overall growth - assuming there isn't another recession - Alberta's gross domestic product would shrink between 7 and 12 per cent below what it would be without these reforms. Saskatchewan and British Columbia would suffer more modest losses.

Industrial production would, in many cases, languish at 2008 levels, and some sectors would require massive subsidies to maintain even that output. And then there is the incalculable: the economic impact as Canada shifts from capital-intensive industries to labour-intensive industries, as it weans itself from fossil-fuel production and manufacturing based on cheap energy.

"The sheer magnitude of the shock means there are lots of moving pieces and some of them move in extreme fashion," observes Mr. Drummond. Over all, things are predicted to work out, but some regions, some industries, some people, could suffer greatly.

And then there are the intangibles, the things no model, no matter how carefully conceived and applied, can predict, especially when "not only has there never been anything of that magnitude, but nothing of that nature," he adds.

The bank, which substantially financed the report in the interests of informed debate, has no position on whether Canada should pursue a strategy to fight global warming.

Canada will be severely affected by a melting polar ice cap, rising oceans and higher temperatures. If the rest of the developed world, and eventually the developing world as well, join in, we might reach the targets the scientific community has warned must be reached to prevent the worst from happening. Better a decade of discomfort, perhaps, than a century of misery.

At least now we can have this debate with open eyes. We now know the costs, if we act today. We know the cost will only increase with every month of delay. The Pembina Institute and the David Suzuki Foundation have had the courage to uncover and to tell us the truth. Now Canadians must decide what to do.

Follow on Twitter: @JohnIbbitson

 

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