Gwyn Morgan is a retired Canadian business leader who has been a director of five global corporations.
Delegates from 190 countries are scheduled to meet in Paris for the annual UN climate-change Conference of the Parties (COP) on Nov. 30. For the 21st time, they will attempt to reach an agreement on reducing global greenhouse-gas emissions. Pre-conference rhetoric is typically apocalyptic and overzealous. The Pope has issued an encyclical calling for urgent action against climate change. International Trade Union Confederation General Secretary Sharan Burrow, possibly inspired by the movie Finding Neverland, has called for expansion of the conference's goal beyond "zero carbon" to "zero poverty." But how 50,000 delegates can agree on anything but the possible existence of Peter Pan remains a mystery. Even with the earnest support of Prime Minister Justin Trudeau and our premiers.
As in most developed economies, Canada's focus is on "carbon pricing," which usually means fuel taxes. But fuel taxes aren't exactly a new thing. The federal government collects more than $6-billion a year in taxes on motor fuel, and the provincial governments collect another $8-billion. These taxes represent about one-third of the price Canadians pay at the pumps. Fuel taxes in the United States are lower than in Canada, but reach as high as 70 per cent in Western Europe and Britain. Altogether, these taxes amount to a "carbon tax" already amounting to hundreds of billions of dollars a year.
Since the Kyoto Accord in 1990, almost all growth in global emissions has come from developing countries. The challenge facing COP 21 is that many of those developing countries, rather than taxing hydrocarbon use, actually subsidize it. An Organization for Economic Co-operation and Development (OECD) report published last year found that fuel subsidies in 40 countries totalled a staggering $548-billion (U.S.). Not surprisingly, those countries are also among the world's fastest-growing carbon emitters, led by China, whose emissions have quadrupled since 1990, and India, where they've tripled. In Venezuela, Saudi Arabia, Iran, Algeria, United Arab Emirates and Indonesia, the countries with the most highly subsidized (i.e., cheapest) fuel prices, annual emissions growth has averaged 250 per cent since 1990. Retail gasoline prices in these six countries average just 31 cents (U.S.) per litre, about a third of Canada's average pump price.
A more sinister aspect is the thriving black market in subsidized fuel that yields enormous illicit profits. Venezuela is a prime example. The local price of gasoline is just two cents a litre. Every day, thousands of trucks, buses, taxis and even motorcycles carry subsidized fuel across the border into Colombia, where pump prices are 35 times higher at 70 cents a litre. That amounts to a huge subsidized-fuel "leakage" that adds hidden emissions not accounted for in global statistics. Likewise in India and several other countries, diversion of subsidized fuels to non-subsidized users yields billions of dollars in what is termed "black money."
What about the eco-activists' allegation that countries such as Canada subsidize its fossil-fuel industry? A recent IMF report alleges that such subsidies total a staggering $5.3-trillion (U.S.) a year and that Canada provides its industry $34-billion a year in "direct subsidies and internalized costs." Wow, who knew? Certainly not the energy industry. A look beyond the headline reveals a bizarre and deliberately misleading calculation. Turns out that the $34-billon includes government failure to collect "externalized costs" of $19.4-billion on oil-based fuels due to such impacts as traffic accidents and carbon emissions. The IMF adds another $7.3-billion a year of "unpriced carbon emissions" from burning natural gas and $4.5-billion for coal. How they arrive at these "unpriced" cost estimates isn't revealed. And even if such contrived leaps of logic had any validity, it's not energy producers who burn the stuff, so it's consumers that would be getting these "subsidies."
The IMF report added another billion of alleged Canadian subsidies for "incentives to encourage fossil-fuel extraction." But those so-called incentives are simply normal tax measures that allow every business to deduct costs, which in the case of the oil and gas industry include exploration and development expenditures, the same way a factory owner is allowed to amortize the cost of his factory. Apparently to the IMF ideologues, failure of governments to tax is equivalent to a subsidy. This preposterous study, prepared as the IMF's key contribution to COP 21, never mentions the actual fuel subsidies cited in the OECD report. With input like that, what are the chances of dealing with real issues, such as the fact that most of the countries attending would rather subsidize carbon than tax it?
Gwyn Morgan