NAFTA vulnerable

Posted on March 1, 2008 by Other News Sources

Lawrence Solomon
National Post
March 1, 2008

Barack Obama and Hillary Clinton threaten to tear up NAFTA, arguing – correctly – that high U.S. environmental standards place U.S. workers at a disadvantage in America’s trading relations with Canada and Mexico.

Canadians have good reason to be concerned. The U.S. does have higher environmental standards. Canada is vulnerable in a renegotiation of NAFTA.

“I’ve been very concerned for a couple of years now,” Canadian International Trade Minister David Emerson stated, adding the threat that Canada might play its oil card in an attempt to discourage a renegotiation. “The rhetoric of protectionism has been creeping, it’s been getting more strident, it’s permeating Congress, protectionist groups are flexing their muscle.”

Emerson knows of what he speaks. In his former role, as chairman of the Canadian Pulp and Paper Association, he oversaw one of Canada’s least economic and most polluting industries. Without government subsidies, logging and pulping of many Canadian forests would swiftly end, pleasing Canadian environmentalists, enriching Canadian taxpayers, and thrilling U.S. logging companies, whose market share, and profits, would suddenly soar. U.S. loggers have long battled Canada’s forest export business, which is run principally to keep our forest towns alive – for this reason, government regulations actually require forest companies to keep logging at a loss, in order to maintain jobs for forest workers.

U.S. forest companies are livid at what they rightly see as a mockery of free trade. They want forest companies in Central and Western Canada to depoliticize the industry and trade freely. Their demand is simple: Let all of Canada’s forests run along the lines of the forest industry in the Atlantic provinces, where governments don’t depart entirely from free-market principles. And they are politically powerful, with no reluctance to wield a two-by-four. If the trade regimes between Canada and the United States get renegotiated along environmental lines, the U.S. logging interests will obtain support from environmental groups on both sides of the border, as well as from the U.S. business and political lobbies.

The bitter dispute between the two countries over softwood lumber was not settled by the Softwood Lumber Agreement that they signed in September, 2006 – it continues to this day. In December, 2007, the U.S. renewed litigation, claiming that Canada has been violating the SLA since January of last year, leading to illegal exports amounting to hundreds of millions of board feet between January and June, 2007, alone. Under the SLA, export limits kick in as lumber prices fall. The prices have fallen, but the Canadian government has failed to impose the taxes necessary to restrict exports. With the dramatic downturn in the U.S. housing market, and the likelihood that the forest industry will continue to see low prices, the prospect looms large of a renewal of a bitter and protracted cross-border battle.

In the new round of litigation, in the London Court Of International Arbitration, the Americans again complain of “the Canadian system of timber pricing, which the United States considers to be unfair. … Following investigations by the United States Department of Commerce and the United States International Trade Commission, the United States determined that Canadian softwood lumber imports were being subsidized and were being sold at less than fair value.”

The softwood dispute is now contained within the Softwood Lumber Agreement, where it is likely to become mired in endless rounds of litigation, to the frustration of the American lumber interests. But if a Democrat gets elected president in November, and the new president is forced by circumstances to keep his word and reopen NAFTA, softwood lumber is sure to become part of the negotiations.

Emerson alluded to just such a scenario this week: “The biggest risk is that there will be periodic outbursts of protectionist sentiment. It may be softwood lumber one day, it may be beef another day. The real risk is that you lose the ability to resolve these disputes in a relatively neutral and objective way,” he said.

What he didn’t say is that his forestry industry provides the most fodder for U.S. claims of low Canadian environmental standards. And that the best way to get the Americans off our backs is not to threaten them by playing the oil card, but by cleaning up our own environmental act by letting the free market operate in our forests.

Lawrence Solomon is executive director of Energy Probe and the Urban Renaissance Institute.

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Worst polluters still get breaks

Posted on February 21, 2008 by Other News Sources

Lawrence Solomon
National Post
February 21, 2008

The B.C. government this week introduced what it hails as North America’s first carbon tax, but many will see it mostly as just another hike in the gas tax, and for good reason. The gas tax, rising to 7.24¢ per litre over four years, will do next to nothing apart from increasing the provincial take – Europe with its sky-high gas taxes and ever-increasing auto use demonstrates the ineffectiveness of gas taxes in curbing the car.

Meanwhile, British Columbia has a slew of other tax policies, many of them in the energy-intensive resource sector, that do wonders at influencing B.C.’s carbon dioxide footprint – for the worst!

Take the mining sector, as adept at mining provincial treasuries as hard-rock. Measures such as the B.C. Mining Exploration Tax Credit, flow-through shares, and super-flow-through shares, bolstered by federal programs such as the federal Investment Tax Credit for Exploration are credited with spurring boom times in B.C.’s mining communities – B.C.’s explorations expenditures soared from $30-million in 2001 to $300-million in 2006.

Other provinces likewise give preferential tax treatment to mining, as attested to by local variants such as the Manitoba Mineral Exploration Tax Credit. The upshot is that the more energy-efficient metal recycling industries, which must compete against the primary metals industry, are knee-capped. They end up with a smaller market share and society ends up with increased carbon dioxide emissions.

The pulp and paper industry gets preferential tax treatment, too, arguing quite correctly that without tax breaks or tax holidays, mills would close and forest towns would die. If they did die – as would happen with a tax policy that was even-handed – we would use less virgin paper and more recycled stock. Again, carbon-dioxide emissions would decrease.

Maintaining rural Canada, and rural industries, is a prime thrust of government tax policy, even though these industries have several times the carbon footprint of urban industries, and would be rapidly phased out if not protected from the marketplace. Not surprisingly, the B.C. carbon tax exempts the worst polluters, most of them rural-based, from carbon taxes. These include British Columbia’s most energy-intensive sectors: oil and gas, aluminum, cement and agriculture. Together, exempted industries account for about one-third of the province’s carbon emissions.

Because tax breaks for rural industries aren’t enough to support rural Canada, governments provide outsized supports directly to rural residents too. To ration scarce jobs in uneconomic areas, and keep workers from migrating, the federal government tailors the Employment Insurance system to retain rural workers: It collects payroll deductions from resource workers for but a few weeks before granting them benefits for the rest of the year. To encourage more remote workers, the government provides more benefits still.

Northern residents can claim a residency deduction of up to 20% of net income through their income tax forms, plus travel deductions, including travel for vacations (the federal government permits two vacations per year for each member of the household).

The more directly that governments control a sector, the more likely that it will be a polluter, a greenhouse-gas contributor, and a recipient of tax breaks. Most of Canada’s power is generated by Crown corporations and most of these are largely or wholly untaxed. Most of Canada’s mining lands and forest lands are in government hands. Most of Canada’s roads are run by governments.

Eliminating the tax breaks in these government-run areas would do more to reduce carbon-dioxide emissions than any carbon tax possibly could. A charge on roads, for example, greatly reduces road use and greatly increases public transit use, as evidence from London, Stockholm and other road-tolling jurisdictions attest. Rather than increasing the gas tax by 7.24¢ per litre, B.C. could have replaced it with a European-style road levy that merely charged those who used roads, in proportion to their use. Less carbon tax plus more accountability equals less carbon emissions

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute, and author of The Deniers (forthcoming).

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The pro-carbon tax

Posted on February 20, 2008 by Other News Sources

Lawrence Solomon
National Post
February 20, 2008

Governments are proposing carbon taxes to discourage people and industries from activities that emit carbon dioxide. This is a feeble use of the tax system in fending off the catastrophe that governments see coming. There are other, more powerful ways in which governments could, and should, use the tax system if they truly want to discourage CO2 emissions.

Big city governments concerned about global warming have a special responsibility to act because urbanization holds the greatest potential to curb greenhouse gas emissions. Residents of big cities typically produce about half the emissions that residents elsewhere produce, but even this figure minimizes the potential of cities to curb greenhouse gases.

Residents of New York, for example, generate just 29% of the per-capita emissions that Americans as a whole produce. London does even better in eschewing emissions, besting New York by 20%. Canada’s major metropolis, Toronto, cannot hold a candle to either city, with per-capita emissions 35% above New York’s and 62% above London’s. Yet even Toronto is a paragon of climate-change virtue compared with national economies, registering 60% less than the Canadian average.

Big cities are so efficient because their residents tend to be employed in the low-impact financial, cultural, and intellectual industries, rather than the energy-guzzling primary industries, and they are less car dependent than rural or suburban folk – they tend to have more transportation choices, including walking. Because big cities allow their residents to live, work and study in compact neighbourhoods, travel is not only minimized, it is often eliminated altogether. If cities were more compact still – if Toronto was as compact as New York or New York was as compact as London, the level of greenhouse-gas emissions would quickly decline by levels otherwise seen as impossible. Toronto’s greenhouse-gas emissions would almost halve if it were as efficient as London.

The biggest stumbling block to achieving such efficiencies, especially in Canada, lies in our cities’ tax policies. The chief offender here is the property tax, the source of most city revenues.

The property tax, long disparaged for its economic inefficiency, is also an environmentally reprehensible tax on density. In most cities, downtown land is prized most highly, leading its owners to use it intensively. The more intensively that land is used, the less that infrastructure is needed for water, power, and other utilities, the more that a society can be efficient.

Instead of welcoming the inherent efficiency with which valuable downtown properties are used, cities punish them by taxing them on the basis of their high property values, rather than the actual costs of providing properties with municipal services. The tax on valued property encourages the use of low-value property further and further away, not just away from downtown but also in suburbs and beyond. Even land remote from transportation corridors, by all rights undeserving of development, then gets a spur in low taxes that encourage development where none would otherwise occur.

The way in which the property tax is levied makes things worse. Apartment buildings, which emit fewer greenhouse gases per square foot of living space than do single-family homes, are generally subjected to a much higher property tax than duplexes or single-family homes. This is an entirely unjustified tax that pushes people into living in less energy efficient lifestyles – apartment dwellers not only tend to use fewer city services tied to their dwellings, such as water delivery or garbage pickups, they also are less likely to drive and use roads.

And worse. Businesses pay especially punitive property taxes, encouraging them to relocate outside the city boundary, and then commute into town to provide services to their city customers. After they leave, their staff and suppliers tend to follow them over time, contributing to the well-known hollowing out effect that cities experience. The hollowing out worsens because, when these taxpayers leave the city, the tax load must fall on the city’s remaining taxpayers, increasing their tax burden and encouraging further departures.

To these traditional carbon-enhancing, city-destroying property taxes comes a new hollowing-out tax: Toronto’s new land-transfer tax, which will hit house sellers with levies in excess of $8,000 for modest houses. This tax will not only convince people to avoid buying in the city, it will also convince many not to move to be closer to their work, in both cases adding to the fuel waste that comes of city taxation.

Our cities’ tax policies need not inflict all these wounds. The property tax and the land transfer tax should both be abolished, and replaced with charges that simply charge city residents for the services that they use, in proportion to their use. Businesses will flock back to the city, as will residents, providing the densities that simultaneously raise the city’s efficiency while lowering its carbon intensity.

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute, and author of Toronto Sprawls.

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Extreme competition, but not extreme enough

Posted on February 7, 2008 by Other News Sources

Lawrence Solomon
National Post
February 7, 2008

Since Maggie Thatcher broke up the United Kingdom’s dysfunctional energy monopolies two decades ago, costs plummeted, as did prices for consumers, as a wave of new entrants into the energy business led to a textbook example of the benefits of competition. Today, the typical household has several thousand options in purchasing power that come to it courtesy of six dozen different licensed merchants. Compare that to the choices your local power monopolist provides you.

Then ponder this: The ingrates across the Pond aren’t satisfied with the level of competition that the UK system provides them. When prices drop, as they have on numerous occasions in the largely deregulated UK energy marketplace, consumers are happy. When they rise, as they have recently, consumers cry foul. They do this even though a recent investigation of alleged price-fixing by Ofgem, the industry’s independent regulator, found no evidence of collusion, and even though a commonly recognized contributor to rate hikes are measures taken to combat climate change.

Because of continuing public pressure, a UK House of Commons Select Committee hearing on competition in the energy market will now investigate whether there is enough competition among the big energy suppliers. The committee is unlikely to discover anything to discredit Ofgem’s finding – Ofgem is the gold standard among utility regulators. The most the committee could do, if it finds cause for alarm, is refer the matter to the Competition Commission.

Conspiracy theorists are gladdened by the prospect of hauling industry executives to this parliamentary court. Reasonable people should be saddened to see the world’s most competitive energy marketplace subjected to baseless accusations. Most of all, they should be alarmed to see the independent regulator’s authority undermined, for without a de-politicized and independent regulator to set ground rules fair to all, the energy marketplace would again become dysfunctional.

More on the Select Committee hearing.

Lawrence Solomon is executive director of Toronto-based Energy Probe.

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Spreading sprawl

Posted on February 2, 2008 by Other News Sources

Lawrence Solomon
National Post
February 2, 2008

Canadians are becoming more and more dependent on the automobile, Stats-Can told us last week, citing figures showing that 74% of Canadians are full-time drivers, up from 70% in 1998 and 68% in 1992.

This trend, a natural consequence of suburban sprawl, is only to be expected. Our governments spend billions to promote the use of suburbs.

Take the most recent shot in the arm for sprawl, British Columbia’s $14-billion plan to enable longer, faster commutes; to develop the low-density areas outside Vancouver; to enable the dispersion of Vancouverites to the outlying areas; and to counter the natural incentive we all have to live close to our places of work, study, and play.

“Our new $14-billion Provincial Transit Plan will add 600 frequent buses out-side Metro Vancouver – a 60% increase,” Kevin Falcon, BC’s Minister of Transportation, boasted to the Chilliwack Times this week, explaining the provincial desire that Chilliwack and other communities outside Vancouver grow their populations.

“We will be putting frequent buses along the Trans-Canada Highway to connect Abbotsford and Chilliwack to Langley, Surrey and our rapid transit stations,” Mr. Falcon continued, adding that the government will ultimately provide gold-plated bus and rail service to make it easy for people to leave Vancouver for the suburbs. “By 2030, Skytrain will extend out to Langley, integrating RapidBuses with Rapid Transit in Metro Vancouver.”

B.C.’s announcement follows Ontario’s own mega Move-Ontario-to-the-Suburbs-by-2020 plan, at $17.5-billion the largest transit plan in Canadian history. The plan to transform the Greater Toronto Region, an area bigger than Prince Edward Island, includes 52 rapid transit projects along 902 kilometres of new or improved rapid transit routes designed to boost region-wide travelling. “It will result in 800 million new transit trips per year,” exults the province, while only “taking 300 million car trips off GTA roads.” This net expansion of 500 million vehicular trips a year throughout the Greater Toronto Area promises to be the greatest spur to sprawl in Canadian history.

In the popular conception, the private automobile causes sprawl and public transit is either benign or beneficial as a factor of development. This misreads history, including fairly recent history.

Before the province of Ontario directed the Toronto Transit Commission to service Toronto’s outer suburbs in the early 1950s, the suburbs were largely rural and undeveloped, with densities so uniformly low that they could support but a handful of public transit lines. Only after the province stepped in by creating Metropolitan Toronto as a vehicle for massive infrastructure spending in the suburbs did sprawl on a grand scale unfold. Within a decade, the TTC’s route mileage increased by 75%, almost all of it to accommodate the suburbs and almost all of it uneconomic.

In the process, the TTC – until the advent of Metropolitan government a self-sufficient enterprise that helped make Toronto one of the continent’s most compact cities – became a burden for city taxpayers and an arch agent of sprawl.

Lawrence Solomon is executive director of Energy Probe and the Urban Renaissance Institute.

Posted in Causes, Sprawl | Leave a comment