We can't get to Kyoto from here, and there's no point in pretending that we can

All of the opposition parties in Ottawa say that they support the Kyoto accord, and they insist that any climate change policy must be aimed at achieving the Kyoto targets for greenhouse gas emissions.

But this is simply not going to happen. There is no feasible way we can achieve the Kyoto targets.

Here is a graph of Canada's greenhouse gas emissions (GGE) over the period 1990-2004, taken from the Environment Canada website:

There are several things to note from this graph. Firstly, the rate of growth of GGE has been remarkably stable throughout this period, at around 1.7% a year:  the only time GGE growth slowed appreciably was during the economic slowdown of 2001. A second, related point is that the rate of growth after the 1998 signing the Kyoto accord is pretty much the same as it was before the treaty was signed.

But the big point is just what is involved in getting from where we are to to the Kyoto target in the bottom right-hand corner of the graph. If we extrapolate the trend to 2007 (and I don't see why this wouldn't be a reasonably good estimate), then achieving the Kyoto target would require decreasing emissions by more than 30% of their current levels.

There are two main channels by which we can reduce GGE:

• For a given state of technology, we can cut down on certain activities that generate GGE as a by-product.
• For a given choice of activities, we can adopt technologies that generate fewer GGEs.

There's no reason to choose between these options, of course: we can do both. What distinguishes them is the horizon in which they work. Even if the appropriate technologies are already available - and that's not always the case here - adopting them is a process whose duration is measured in decades. For example, hybrid cars are a proven technology, and some are already on the market. But any realistic policy for replacing conventional cars with hybrids would take decades to implement, and it's hard to imagine achieving much more than marginal progress before 2012. The same argument applies for the other technologies that have been proposed to reduce GGEs. There are many good ideas out there, and some will no doubt be part of a long-term solution - but not in time for the Kyoto deadline.

So any serious attempt to achieve the Kyoto goals would have to be based on using the technology we have now. That can only happen by cutting back on activities that generate GGEs. Which ones, and by how much? The Kyoto target is the equivalent of 563 mt of CO₂ by 2012. In 2004, emissions were the equivalent of 758 mt, making a 'Kyoto gap' of 195 mt. What sort of action would generate savings like that?

Here is a breakdown of the sources of GGEs in 2004:

The scale of the problem is staggering. For example, we know that the fossil fuels industry and its associated fugitive sources are a major source of GGEs. But even if we shut the industry down entirely - a gesture that would have catastrophic implications for the Canadian economy, and important effects worldwide - it wouldn't be enough.

In the short run, we can expect greenhouse gas emissions to be roughly proportional to economic activity. Reducing emissions by 30% in the next 5 years means a reduction of income and employment on a scale commensurate with the Great Depression. No government would inflict such disruption, nor should it.

Update: The price of Kyoto.

Comments

[EclectEcon]

And even if we could, would it matter? Canada's contribution to world-wide GGE is small and getting smaller as proportion of the total due to rapid economic growth in Asia. Anything Canada does without world-wide, enforceable treaties (yeah, sure) will probably not matter.

If that is correct, Canada (and others) will do better to try to address expected ramifications of continued growth in GGE.

[Bill Hutten]

>Reducing emissions by 30% in the next 5 years means a reduction of income
>and employment on a scale commensurate with the Great Depression.

This assumption - that reductions in GHG emissions will cause equivalent point-by-point decreases in GDP/living standards - is nonsense.

[Stephen Gordon]

Why? I'm not going to assert that there's exactly a one-to-one ratio, but the only years in which GGE have decreased were during recessions. And those reductions were nowhere near as big as what we'd need to get to the Kyoto targets.

[Kuri]

Correlation = causation?

[Stephen Gordon]

I'm aware of the distinction between the two concepts. But if you really want to make a case along these lines, you have to come up with some sort of third causal force that explains both economic slowdowns and reductions in GGEs.

[Kuri]

OK, but why does reducing emissions have to be accomplished via a recession? Does industry really lack the ingenuity to meet this challenge? Aren't they supposed to be full of dynamic thinkers and go-getters?

I can think of other adjustments businesses have had to make, claimed they couldn't and then when faced with the sanction of law (anti-terrrorist financing measures were one thing that financial institutions claimed would cripple them), presto they did it! The difference is that there's political will in regard to anti-terrorism but not in regard to the environment. We need political will (i.e. laws) to make it happen.

[Stephen Gordon]

Over the longer term, when there's time to develop and adopt new technologies, firms will be able to continue operating at the same level of activity and reduce GGE at the same time. But we're talking about a huge, short-term reduction, using existing technologies. The only way we can cut GGE is to actually reduce those activities. And we'd have to reduce them a lot.

Sure, if we had the political will to endure a Great Depression-sized recession in order to achieve the Kyoto target, we could achieve it. But I don't believe that to be the case.

[William Newman]

I very nearly agree with Bill Hutten: I'd've said "unrealistic," but I can't disagree very strongly with "nonsense" either.

I agree that it's a whopping problem, and from what I know I'm inclined to be very critical of Kyoto in general, but are you being reasonable when you say that cutting emissions gives a proportional decline in economic activity? It seems like you're ignoring people's expected behavior under incentives, and that way lies goofiness like The Population Bomb or denying that the Laffer Curve can have a maximum anywhere short of 100%, even at 98% marginal rates.

In a blog comment it's not practical to speculate about what concrete mindbogglingly complex policy mix might actually emerge from the real political process. So instead, imagine Mankiw recruits advanced space aliens into his Pigou Club, and they come down in their invincible flying saucers and invincible arrogance and impose simplistic tradeable carbon emission quotas. (That is, Pigouvian tax by creating and auctioning off tradeable carbon emission medallions the way radio spectrum rights or taxi medallions are sometimes auctioned.) If so, wouldn't the usual consequence be that the medallions would flow to activities with high ratios of economic output to carbon emissions, and shutdowns would disproportionately be in activities with low ratios, and thus the economic output reduction be consistently less than 1:1 with the emission reduction?

It's very difficult to predict what the relevant elasticities would be, but approximating them as zero (as seems to be implicit in the claim that the reduction in economic output would be proportional to the reduction in carbon emissions) seems unreasonably pessimistic, so much so that it weakens your argument. You don't need to make the claim that it's a 1:1 ratio in reduction to make the point that Kyoto compliance is unlikely and looks enormously expensive. As long as the reductions are of the same order of magnitude (e.g., 1% reduction of net economic output paying for 2% or 4% or some such reduction in carbon emissions), which seems like a claim that's much easier to justify than 1:1, going from the 2007 situation to managing to hit the Kyoto target and stay beneath it would still be an enormous economic shock followed by an enormous economic drag.

[Stephen Gordon]

I repeat: in the short run, where technology is fixed, the only way to reduce GGE is to reduce economic activity. The policies you're talking about are those designed to encourage the adoption of technologies that reduce GGEs. This is a process that requires a horizon much longer than the Kyoto deadline.

[Mike]

"Reducing emissions by 30% in the next 5 years means a reduction of income and employment on a scale commensurate with the Great Depression. No government would inflict such disruption, nor should it."

Pretty one-dimensional thinking. You completely overlook the fact that new economic forces will be created and businesses will be transformed, not necessarily in the technological sense of which you speak.

Besides, if suffering through a "Great Depression" means that in 10 20 or even 50 years, we'll have a world to live in, some people might choose the short term pain for the long term gain.

[Stephen Gordon]

In the short run - Kyoto's 5-year horizon - we have to operate in the context of existing forces and untransformed businesses. The sort of changes you're talking about require decades and generations to take effect.

[Scott Tribe]

So what's your solution then.. throw up your hands in the air like Harper does and say there's no way we should meet it, nor should we try?

We don't have generations to fix this problem... we need to start fixing it NOW. I'm not prepared to wait til 2050.

[Stephen Gordon]

Facing the fact that Kyoto is an inattainable goal is not the same thing as doing nothing.

[doug newton]

Nothing that Canada is likely to accomplish at home will make any significant difference to the climate of our planet.
We should use any momentum generated by the global warming debate to enact legislation that will actually clean up the air in our cities, encourage energy efficiency, stimulate R&D for alternate energy technologies and make waste management greener and more efficient. All this without ruining our economy because if we do that there will be neither the money nor the political will to continue. All of these goals are worthwhile in themselves without reference to global warming but working earnestly on them will show some progress toward meeting our Kyoto committments and we will at least be less obviously hypocritical about them. We need to have a creditable voice in the international community and strive to take the big SCAM label off of the current Kyoto package.

[Mike]

Stephen,

I'll reiterate, what is your solution then. As Kurl has pointed out, the flaw in your premise is that you are misrepresenting correlation with causation and assuming an inverse relationship that may not exist. There is a reason economics is called the "dismal science"...

Doug Newton,

Merry Christmas, you have just proven the idea of "collective action problem" and reinforced the prisoners dilemma wea re all in. That we might not make a big a splash as the US, does not justify us doing nothing. If every other country like Canada did that, despite it being in our short term self-interest, we could never attain any reductions, no matter what plan.

By your logic it is ok for me to shoplift at the Bay, because me NOT shoplifting make no difference when the pros are ripping them off for $1000s every day...

[Stephen Gordon]

I'll reiterate, what is your solution then.

Carbon taxes and other policy instruments that provide firms and households concrete financial incentives to reduce GGE, accompanied by programs to compensate low-income households for the costs of making the transition. This won't achieve Kyoto, but then again, nothing will.

As Kurl has pointed out, the flaw in your premise is that you are misrepresenting correlation with causation and assuming an inverse relationship that may not exist.

Sure. But you're still going to have to explain why correlation isn't causation here. Is there some third force that is driving both GGE and economic activity?

There is a reason economics is called the "dismal science"

Indeed. But I'm pretty sure that you don't know what it is.

[doug newton]

Mike
Not "altruism is the answer" again.
Anyway that is not quite what I meant.
Maybe I should have said nothing Canada is likely to accomplish "alone" rather than "at home".
It is not just the US but China and India and others that didn't sign up or signed up and did nothing. Also and I know that you might not agree but the present Kyoto accord smells too much like boondoggle to me. Are you familiar with boondoggle Mike? Have you ever worked for a Crown corporation?
Even when I try to think more positively we still need to re-jigg the accord based on some of the experience gained by countries that did try to comply and on the information coming from the latest IPCC report (next week?).
Couldn't we agree though that we actually should get started on at least the items that I suggested for whatever reason?
If so then I am saying that my second concern is that I don't see that we will be able to make a sutained effort towards any ecologically sound objectives with our economy in chaos. Short of "enforcing the will of the collective" that is.

[doug newton]

Stephen
I have enjoyed browsing through the posts on your blog.
Who would have thought an economics blog could be so exciting indeed.
Thanks

[BTreeHugger]

So let me get this straight. You want to shoot down the initiative and offer despair in its place? The whole point here is that we can afford to not hit the target objective because we ARE so insignificant compared to our neighbours-to-the-south.

Now, the average person I talk to already knows it's unlikely that we can meet these criteria. Let's face it, it just isn't news. But the fact of the matter is that we might as well try, and throwing numbers in our faces saying it will cause our societal way-of-life to crumble had better be damn convincing. Unfortunately, yours are not.

Don't take this the wrong way, I'm not saying "stop"; I'm saying prove it. If you cannot then you are just the other side of the same coin you present to us; a naysayer to the yeasayer, both unable to prove their points. If that is the case, which way would you rather go? Which is less risky? Which is the "Canadian" way, which will help us gain the identity we so desperately seem to be seeking as a country? Which is the way that will show the world we're at least willing to try, no matter how small we may seem?

Personally I think the better initiatives are the ones that prepare us for an incoming barrage of people that come to live here over the next 20-50 years, trying to find better quality of life in a place with more natural resources. Even if we don't see tens of thousands of refugees from the supppsed "biblical flooding" caused by the things Kyoto is desperately trying to prevent with incredibly inneffectual goals. If we get a sudden surge of population, in only a couple of generations we may suddenly be a real contender for the title you say we shouldn't even bother trying to avoid.

[A. Giesbrecht]

Here's my take on Kyoto. It is not feasible. Lets say cutting down the emissions might mean not being able to take the bus to work and having to walk or bicycle even in winter (try that at 40 below), turning the thermostat to below 15 degrees at night, not being able to buy fruits and vegetables in winter because they are too expensive (trucks run on gas and diesel remember?) The things we enjoy now, forget it, if they require energy, they have to be cut down or go. There will be no more visiting relatives in another province, we will have to send a sorry note if a parent dies in another province or state, because we cannot attend, the gas will be too high and the plane trip only enjoyed by the wealthy. In order to achieve the impossible goals, we will have to reduce our standard of living and not everyone has thousands of dollars set aside to purchase solar panels, hybrid cars, or whatever energy efficient heating system there is. Besides we do not know whether the heating is from God. If God is causing it through solar flares, then all our efforts would be in vain and if not, I do not want some other part of the planet get rich at our expense.