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Lars Osberg Economics Department Dalhousie University Canadian Economics Association

Have most North Americans already met their Kyoto Obligations? - Trends in the CO 2 content of Expenditure and the role of Income Inequality. Lars Osberg Economics Department Dalhousie University Canadian Economics Association Vancouver, June 6, 2008.

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Lars Osberg Economics Department Dalhousie University Canadian Economics Association

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  1. Have most North Americans already met their Kyoto Obligations?- Trends in the CO2 content of Expenditure and the role of Income Inequality. Lars Osberg Economics Department Dalhousie UniversityCanadian Economics Association Vancouver, June 6, 2008

  2. Who is responsible for rising CO2?Who should pay for reduction in CO2? • Kyoto Protocol • Collective obligation to reduce Canada’s CO2 emissions to 6% below 1990 • USA target =-7% (not ratified) • What is the corresponding obligation of individuals ? • Who has fulfilled that obligation ? • Income Gains concentrated in top 1% • $ real income stagnant for most • GHG intensity per dollar much improved • Most Canadians have met personal Kyoto • But population has grown – Alberta, BC, Ontario • “Provincialization” of Kyoto commitments ??

  3. Delivering on a collective commitment- perceived equity in burden sharing is essential to actual implementation • “We didn’t create this problem – so why should we pay for its solution?” • LDC lament – also true within Canada & US • Complexity of ‘Cap & Trade’ & many Carbon Tax proposals fuel cynicism re: “Tax Grab” • “Double Dividend” or “No Dividend” ? • Carbon Tax + Full refund as Demo-grant • Easy calculation net benefits = majority win! • $30 per ton CO2 ≈ +7 cents litre gasoline • Small relative to recent price increases • Increasing marginal political cost ??

  4. Trends in Average Income by Quintile1989 – 2005 CANSIM V1546479 – V1546483

  5. Real Income Gains - also concentrated in top 20% in USA

  6. Substantial Improvement in GHG intensity per $ expenditure

  7. Stagnant Income + improved CO2 Intensity = Kyoto Attainment for most • Kyoto – a ‘point of production’ accounting system • But exporting a steel plant does not reduce world’s CO2 emissions or assist Global Warming • This paper - assigns households CO2 emissions caused by own spending • Direct consumption of carbon energy + • Indirect consumption embodied in commodities • Production, transportation & distribution • Should include CO2 content of imports, investment, government spending • Proportional to Household Income

  8. Population Increase ≈ + 20% nationally • 1990 – 2006 population growth • Nil to small in Nfld, NS, PEI, NB, Quebec, Man, Sask. • ALL GHG increase due to top end income distribution • Ontario +23%; BC + 30%; Alberta +33% • Income Distribution + Population Growth drives increase in GHG emissions • “Provincialization” of CO2 policy? • BC, Manitoba, Ontario, Quebec, NS have announced provincial targets • Slow growth provinces have far easier Kyoto task • Which collectivity made commitment to reducing GHG emissions?

  9. How to attract public support for efficient policy to reduce CO2 emissions? • Carbon Tax or ‘Cap and Trade’ • Both use decentralized incentives of market • Increase price of Carbon Energy • Both are regressive in Income Distributional Impact

  10. Transparency + EquityRebate Carbon Tax as Demo-grant • Who gets the CO2 scarcity rents? • 2005 – 747 Megatonnes @ $30 per ton implies $22 Billion • ‘Cap & Trade’ • HUGE wealth transfers within corporate sector • Carbon Tax • Revenue available to government to offset regressive impact of price increase • Demo-grant ≈ $680 • Net Benefit for most households • Marginal incentive to conservation preserved

  11. Delivering on a collective commitment- perceived equity in burden sharing is essential to actual implementation • “We didn’t create this problem – so why should we pay for its solution?” • LDC lament – also true within Canada & US • Complexity of ‘Cap & Trade’ & many Carbon Tax proposals fuel cynicism re: “Tax Grab” • “Double Dividend” or “No Dividend” ? • Carbon Tax + Full refund as Demo-grant • Easy calculation net benefits = majority win! • $30 per ton CO2 ≈ +7 cents litre gasoline • Small relative to recent price increases • Increasing marginal political cost ??

  12. Ontario • Ontario: 1990-2005 • mr & mrs80% • income increase = +7.5% • But GHG intensity decrease by 17.8% (.84 -> .69) • decrease of 12% in GHG • per capita GDP = + 24.5% • per capita GDP*GHG = +2.2% • Implication: income dist => +14.2% • GHG * GDP = + 24.7% • population increase = + 23.2% • GDP increase = + 51.9%

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