Why climate change is not on India’s radar

March 7th, 2012 § 0 comments § permalink

I am going to India, amongst the fastest growing economies of the world. Measured by purchasing power parity (how much it takes to buy a uniform set of goods), India’s economy is now the world’s third largest. Isn’t now the time for India to take part in the battle against climate change?

It’s midnight, as Cathay Pacific 695 descends into Delhi. Through the haze its passengers see a brightly lit freeway. Even at this late hour, a constant flow of traffic. The visibility is a distinct improvement over January, when some nights, almost nothing can be seen. I take a taxi from the airport to Hari Nagar, an Ambassador—a uniquely Indian car—its body unchanged from a 1956 Morris Oxford III. Sitting on a flat sofa backseat, I smell fumes from the engine leaking into the interior, a slightly open window lets in Delhi’s smoky air. Indoors after forty five minutes, I wash my face; dark water drips from it, my nostrils are black with soot.

The next morning, I am on the Shatabdi Express from New Delhi to Chandigarh. Indian Railways, even during a budgetary crisis, lavishes service on its first class customers. Six newspapers are on each seat pair: three english dailies, reporting in the the language of the elite; three in hindi, the preferred language of the masses. Hindi newspapers ignore the environment. Their pages focus on politics, corruption, income inequality, and sport. Based a study by the Energy and Resources Institute and Unicef, the Times of India reports how a fourth of children living along Delhi’s Yamuna have over 10 micrograms of lead in their blood (widely considered as the threshold for public intervention). Lead levels in children exposed to the polluted north Delhi riverbank eight times higher than those upstream. The Financial Express reports on bans recommended on mining and quarrying in Goa’s ecologically sensitive areas, and near Kaziranga national park, home of India’s one-horn Rhino. India’s richer elite are marginally concerned with the environment, the poorer, hindi speaking majority are not.

Just a few weeks ago, Yale University’s Environmental Performance Indicators (EPI) for 2012 rated India as having the world’s worst air. Overall, India’s pollution ranked 125 out of 132 countries. Responding to the report, a Department of environment scientist said: “it is a non-issue, we have other pressing problems like poverty.” His comments reflect India’s mood. The poor crave food to survive, India’s growing middle class, crave the material trappings of economic growth.

As the western world got richer its environment improved. The first reductions were in smog (the concentration of fine particulates in air). A visible, constant reminder to how dirty our air is, smog causes emphysema, bronchitis, asthma and lung cancer. Fine particulates are still actively targeted by most developed countries. As its development continued, the western world turned its attention to harmful, but less visible pollutants such as lead. Causing nervous system and kidney damage, lead is particularly damaging to children. Blood levels lower than 10 micrograms impair their cognitive development. Climate change is a more abstract concept. It affects our physical environment, seriously impacts our ecology, causes floods or droughts, but presents no immediate impact on human health. Even within the developed world, strong action on climate change is still lacking.

One day into my trip I realize it is unrealistic to expect India to meaningfully address climate change. The country is blanketed in polluted air, and flooded in polluted water. In the face of severe health impacts the government presents ineffectual action on local pollutants. Expecting India’s government to incur costs for reducing greenhouse gases is to fool ourselves. We must wait for a will to tackle local pollutants, before action on climate change will occur.

This post was first published at the Global Exchange Blog of the Globe and Mail. Here is a link to that version.

Environmentally Friendly and Unaffordable Electric Vehicles

July 22nd, 2011 § 0 comments § permalink

On rebound from an SUV, last week I flirted with the idea of an electric vehicle (EV). It is now time for a reality check. EVs are really expensive. Nissan’s ‘Leading, Environmentally friendly, Affordable, Family car (LEAF)’ starts at $38,395. Nissan is redefining affordability, but I am not buying it. Even if an EV has an impressive range, where will I charge it on the road? Realistically, it can only be an extraordinarily expensive second vehicle — unless somebody else pays for it.

If you live in Ontario or Quebec, this can be arranged. Ontario’s Electric Vehicle Incentive Program pays $5,000 to $8,500 towards the purchase of a new EV. The LEAF gets $8,500 (by the way Nissan, it still isn’t ‘affordable’). When you purchase an EV in Quebec, the refundable tax credit for green vehicles takes $8,000 off your taxes.

These incentives encourage consumer adoption. Until recently, similar incentives were widely used to encourage hybrid vehicle adoption. Programs in B.C., Ontario, Quebec, and PEI provided up to $3,000 for the purchase or lease of a hybrid. The Quebec program is still continuing.

On analyzing these programs, we (two colleagues and I) found them to be not very effective. Approximately two-thirds of consumers buying hybrids during the programs would have bought them anyway. Taxpayers just subsidized their purchases.

Only a third bought hybrids due to the incentives. If they had not been offered the incentives, they would have bought small fuel-efficient cars instead. Consequently, overall fuel savings were small, and our governments spent a lot of money to generate them. The average cost to save a litre of fuel was 47 cents, and was $195 to save a tonne of CO2. At incentives of upwards of $8,000 per EV, we expect Ontario and Quebec to bear much higher costs for gasoline or carbon savings.

In Ontario, in addition to the cash incentive, EV owners also get green license plates allowing unrestricted access to High Occupancy Vehicle (HOV) lanes. Antonio Bento (from Cornell University) and his co-authors study a similar Clean Air Vehicle Stickers program in California. This program provides unrestricted HOV access to a limited number of hybrid vehicles. Even though the number of stickers is relatively small, they find significant congestion effects. Due to California’s program, driving time in HOV lanes rises by 9 per cent in morning peak hours. The authors argue that the combination of high congestion costs and restrictive benefits makes this policy very inefficient in transferring benefits to hybrid owners, approximately five times less efficient than cash incentives.

Whether it is cash incentives funded by all taxpayers, or reduced commute times underwritten by carpoolers, should we subsidize the rich buying EV’s? Is this the best way to promote a large-scale diffusion of the EV technology? Wouldn’t it be a better use of our resources to invest in charging infrastructure?

The inability to charge the EV away from home is probably the biggest impediment to their large scale adoption. Portability of fuel and an extensive network of fuel stations has allowed a proliferation of the internal combustion engine for personal transportation. However, developing such a network is the classic chicken and egg problem. There should be a large enough number of EVs for private companies to set up charging stations. If there aren’t enough charging stations, no one is likely to buy an EV. If our governments are serious about promoting EVs they would focus their investment entirely on providing minimal charging infrastructure. Equipping a few GO transit stations with charging points and hoping that retail stores do the same is not enough.

A shorter version of this post appears in the Globe and Mail’s Economy Lab blog.

» Read the rest of this entry «

The Misperception of Safety in an SUV

July 15th, 2011 § 0 comments § permalink

Sports Utility Vehicles are bigger, taller and heavier than cars. They are designed to rule our roads. Sure, it would be hard to find a parking spot, and I can foresee begging for an increase in my credit limit to fuel the monster, but me and my family would be safer in a Sports Utility Vehicle (SUV). Wouldn’t we?

I need that truck.

In this post at the Globe and Mail’s Economy Lab I argue that a perception of being safe in an SUV is incorrect.

Suggested Reading:

Bradsher K. (2002), “High and Mighty: The Dangerous Rise of the SUV,” Public Affairs, ISBN-10: 1586482033.

Anderson, M. (July 2008), “Safety for Whom? The effects of light trucks on traffic fatalities” Journal of Health Economics, 27($):973-989. doi: 10.1016/j.healeco.2008.01.001

 

Somewhere on the Canada United States Border

June 13th, 2011 § 2 comments § permalink

I am waiting besides an empty Customs and Border Protection counter. In a room behind me, the officer speaks on the phone.

“Sumeet.”

“Yes.” I walk to her.

“What is the name of the conference you are going to?”

“The Association of Environmental and Resource Economists’ Summer Conference.”

She speaks into the phone, “The Association of Environmental and Resource…” She is looking at me.

I too have trouble with the word ‘economist’ sometimes, so I say it again.

She repeats. Listens.

She asks the person on the phone: “Do you know of the association?”

She listens. Hangs up.

“He has not heard of this conference. He does not know the association.”

This was her conversation with Marilyn Voigt’s office, the Resources for the Future (RFF). Marilyn, the association’s business manager, is already at the conference. It seems that the rest of RFF does not share Marilyn’s intimate knowledge of our association.

The bus taking me to Seattle has been waiting for half an hour.

I think about how hard it is to get back home from the border.

Again on the phone, the officer starts describing her concerns to—presumably—a superior. I start searching through my email to find something to convince her. An invitation from aereconference@gmail.com!? Couldn’t the organizers use a university address? This is only going to convince her that I am faking it. I show it anyway.

At least the email begins cheerfully, “Dear Presenter: We are happy to inform you that your paper ….” She reads it and continues speaking into the phone.

“I am going to let him go based on an email invitation. The next time, he should have a formal one.”

The Conservative Environmental Record: Four Ministers and Insignificant Policy.

May 1st, 2011 § 0 comments § permalink

April 7th 2006, Rona Ambrose, the first of four conservative ministers of the environment, declares Canada’s Kyoto commitments unachievable. She is right. After nine years of inaction, emissions have increased significantly. Hers is not a statement of dismay. It might even reflect pride. Her government cuts greenhouse gas (GHG) regulations proposed by the outgoing government. Canadians are disappointed.

Responding to public sentiment, in 2007, John Baird, the second Minister of the Environment, reintroduces a Liberal plan for climate change. Despite weaker objectives than its precursor, John claims climate leadership at home and abroad. The plan is never implemented. Amongst his other achievements, setting aside parts of northern Canada for conservation and his government’s ban on Bisphenol A in baby bottles.

Obama’s election makes US GHG policy likely. In a departure from its roots, the conservative government proposes harmonizing up. Jim Prentice, the third minister of environment, is to persuade Alberta that this is in their benefit; the only way to continue energy exports to the US. Political compulsions prevent US legislation on GHGs.

In May 2010, the US EPA issues a GHG regulation timeline for large industrial sources. In its first stage: coal-fired power plants and refineries. In June 2010, Jim presents Canada’s plan for GHG emissions from coal-fired power plants. These are yet to be implemented. In October 2010, he harmonizes Canada’s vehicle fuel economy and emission standards with the US.

In November 2010, Jim quits to be Vice President of the Canadian Imperial Bank of Commerce. John finds himself the minister again. Peter Kent, the fourth Minister of the Environment, is appointed in January 2011.

In the meanwhile, Rona, John, Jim and their counterparts in Natural Resources spend. They create boutique tax credits and grants to support public transit passes (2006), fuel efficient – conventional, and not so fuel efficient – E85 vehicles (2007), the production and retail of biofuels (2007), energy efficient retrofits of home and business (2007), and “clean energy technologies such as carbon capture and storage” (2009).

The conservative environmental record splits into two periods. Before 2008, they scuttle, reintroduce, or claim credit for work done by the outgoing liberal government. After that, they enact the minimum needed to match US environmental policy. Five years yield no substantive action on climate change, minimum progress in other environmental areas, and minor spending programs with insignificant effects. Can we expect better from a centre-right government of a resource economy in a global recession?

Yes we can.

While centre-right governments in France, Germany, and Italy implement the second stage of European carbon trading, New Zealand’s adopts carbon trading, and coal dependent Australia proposes a carbon tax, our government does everything possible to avoid regulating carbon. If these countries can get serious about the environment, so can we.

Maybe the conservatives need to look outside their ranks for their next Minister of the Environment. I hear Elizabeth May is leading an opinion poll in Saanich-Gulf Islands.

Postscript: This is a post written for the Province newspaper’s Money Section. You can see their version here.

Anything but the One Tonne Challenge: A Case for Transferable Development Rights

April 21st, 2011 § 0 comments § permalink

Once I realized that a comprehensive national carbon policy was not in the near future (see my last blog post) I started looking for alternatives. What else could our government do to help us reduce emissions? Anything but Rick Mercer’s One Tonne Challenge, I thought.

In this post on the Globe and Mail’s Economy Lab, I investigate policies that might encourage us to live in greater density. Read more here.

Suggested Reading:

Glaeser E. L., and M. E. Kahn (May 2010), “The greenenss of cities: Carbon dioxide emissions and urban development,” Journal of Urban Economics, Volume 67, Issue 3, pp 404-418.

McConnell, V, and M. Walls (2009), “U.S. Experience with Transferable Development Rights,” Review of Environmental Economics and Policy, 3(2): 288-303. doi: 10.1093/reep/rep008

Reality Sinks In

April 19th, 2011 § 0 comments § permalink

Okay I get it. Canada will not have a national carbon tax anytime soon. There will be no upstream cap and trade system either.

There is a slim possibility that we might see a federal version of the Western Climate Initiative. This version will include weak and mostly ineffectual incentives to encourage the participation of provinces not already committed. Even this slim possibility depends on two unlikely conditions. First, we need either a Liberal, or NDP, or a Liberal-NDP coalition government to form in the 41st Parliament.  Second, we need all parties other than the conservatives to continue to agree (see Pembina Survey) on the merits of pricing carbon. This would be a much harder once they are in government.

Realistically, irrespective of which government forms in the upcoming parliament, the federal government of Canada is not going to do anything different from what the United States does on climate change. The Environmental Protection Agency will mandate command and control regulations on large sources in the United States. Faced with the threat of border tax adjustments, we will follow.

So reluctantly I accept that incentive based climate policy is not in the near federal future.  There is no way a climate change bill is getting through a republican house of representatives in my lifetime.

A Wish List for Environmental Policy in Canada: A National Carbon Tax

April 7th, 2011 § 0 comments § permalink

The campaign for the 41st Parliament got me thinking about Canadian Environmental Policy. Inspired by Stephen Dion’s ‘green shift,’ the last federal election generated the most vibrant debate on environmental policy ever seen at a national scale. Two spectacular crashes later, that of Stephen Dion and the World Economy, this election campaign will at best, pay marginal attention to environmental issues.

My theme for the first series of posts on this blog: what would I like to see in environmental policy announcements from the major political parties?

The first item on my wish list, a national carbon tax, that is, a tax on the carbon content of fossil fuels. Clearly, I am not easily discouraged by reality.

Most economists know that a carbon tax is the best instrument to address climate change. It is cost-effective, that is, it reduces carbon emissions at the lowest cost. The revenue collected provides the best chance for a government to reduce the burden imposed by the tax on the poor. It is the best policy instrument if we are uncertain of the cost of reducing carbon emissions in the future. This cost depends on unpredictable fuel prices, energy demand, or the growth of energy saving technologies. Finally, it is the simplest climate policy to administer. Institutions to tax fuels are already in place in most countries, including Canada.

A cap and trade system is not too bad either. Eventually, anything that puts a price on carbon emissions is an improvement over our status quo. However, to measure up to a carbon tax, the cap and trade proposals in most policy initiatives, including the Western Climate Initiative (WCI), need a major overhaul.

It is unlikely the costs of building and administering a cap and trade system would ever be lower than that of an equivalent carbon tax. But theoretically, a cap and trade system can be as good as a carbon tax in all other criterion discussed above. If the cap and trade covers as many as the tax, and it allows the banking and borrowing of allowances, it is at least as cost-effective. Simple modifications can render it as good as a carbon tax in case of uncertainty of the future cost of reducing emissions. Finally, if each allocation of permits occurs in an extremely well designed and competitive auction, the government should have as much revenue as under the carbon tax.

However, there are two major problems with all cap and trade proposals in circulation. The first is that they target users of fossil fuels. While this seems sensible as users create emissions, the cost to bring most users into the program is prohibitive. In the first compliance period of the WCI (2012 – 2015) only 40% of British Columbia’s sources are included. Even in the second compliance period, most small producers will not be included due to minimum size provisions. Thus to achieve reductions equivalent to a carbon tax, a much smaller subset of users are targeted. This raises the cost of reducing the same amount of emissions significantly. The second problem is that current cap and trade proposals give away most of their emissions allowances. This is thought of as being a useful way to win political support. The WCI will auction at most 25% of its allowances. Research suggests that at least 50% of allowances be auctioned to prevent creating windfall profits for firms receiving them. By auctioning such few allowances, not only do the programs restrict their ability to help the poor, they are also making firms receiving these allowances richer than before.

Sensible carbon taxes, and cap and trade proposals would target producers upstream in the fossil fuel chain. This would be coal mines, imported and produced petroleum products and natural gas. Even in a economy as large as the USA or Europe this would require regulating only 2000-3000 entities. The administrative costs would be minimal and, directly or indirectly, all consumers of fossil fuels would be included in the system. Further, if a majority of allowances were auctioned in a competitive system, the government would generate revenue that could defray the increased burden of the tax on low income households.

Recommended Readings:

Aldy, J. E., E. Ley, and I. W. H. Parry (July 2008), “A Tax-Based Approach to Slowing Global Climate Change,” Resources for the Future Discussion Paper, RFF DP 08-26. Available online: http://www.rff.org/News/Features/Pages/A-Tax-Based-Approach-to-Slowing-Global-Climate-Change.aspx.
Hall, D. (2007), “By the Numbers: Greenhouse Gas Emissions and the Fossil-Fuel Supply Chain in the United States, in Assessing U.S. Climate Policy Options, edited by R. J. Kopp and W. A. Pizer, Washington D.C.: Resources for the Future.
Olewiler, N. (November 2008), “A Cap and Trade System for Reducing Greenhouse Gas Emissions in BC,” Pacific Institute for Climate Solutions, Victoria, BC. Available online: http://www.pics.uvic.ca/assets/pdf/publications/Cap%20and%20Trade.pdf.
Parry I.W.H. and  Roberton C. Williams III (February 2011), “Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative?” Resources for the Future Discussion Paper, RFF DP 11-02. Available online :http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=21470.
  • About Me

    I am an Associate Professor in Environmental and Resource Economics at the University of British Columbia, Canada.

    Through my research I try to gauge the efficacy of policy designed to help the environment. This research is usually joint with colleagues from the University of British Columbia---the real brains behind it. I recently studied automobile sales in Canadian provinces to determine if tax rebates for hybrid vehicles were cost-effective. Studying appliance sales in the US, I analyzed whether mail-in rebates for energy star appliances helped promote their adoption. I am currently studying whether British Columbia's vehicle retirement program, BC SCRAP-IT is cost-effective and am trying to understand what motivates someone to participate in it.

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