Even though the shock should be nulled by now, jaws of homeowners across Ontario continue to drop wider and wider every month when their power bills arrive. These exorbitant payments have become monthly expectation since the passing of Ontario’s Green Energy Act in 2009. In my classmate Ansel’s blog post he argues that the Canadian government should capitalize more on the growing green power industry; however, I would argue—with Ontario as evidence—that government subsidization of green energy can do more harm than good.

Per data taken from Ontario Power Generation, solar power costs a stunning 50¢/KWH and wind 13.5¢/KWH compared to 5.6¢/KWH and 3.5¢/KWH for Nuclear and Hydro respectively. These prices directly tie in to shareholder theory in a very complicated way. Although by subsidizing green alternatives, Ontario is benefiting communities by creating new jobs and a cleaner environment, the large size of power bills has resulted in many Ontarians near the poverty line struggling to make ends meet. It also has made Ontario unattractive to new businesses by raising variable costs and has resulted in more night shifts to produce during off-peak hours. Therefore, green power subsidies have become a very polarizing topic in Ontario as supporters argue they are necessary to transition to a cleaner brighter future, but opponents hold that the increased cost to consumers and loss of industry growth and jobs clearly outweigh the benefits. Due to this pushback, the Ontario government recently had to cancel almost four billion dollars in green projects.

The subsidies have promoted a saturation of the power-market as new green energy firms rush to take advantage of the higher power prices. This has resulted in an oversupply of power in Ontario which becomes a very complicated problem. Normally, when the number of suppliers increases, prices drop and firms leave the industry. However, the fixed contracts in the power industry have resulted in too many suppliers and no increase in price to encourage firms to leave the industry. As power cannot be stockpiled, Ontario must sell off the surplus–usually at a loss. A study done by the Fraser Institute found that the GEA is costing Ontario five billion dollars a year but the same environmental results could be achievable by policies that would cost 1/10^th as much.

Although the growth of green power is vital to the continued sustainability of society and the environment, it is crucial that in rushing to go green society does not end up worse off than before. Government interference can often do more harm than good and it is important that the government can recognize an ineffective policy and find better alternatives.

Sources:

Our Coast and Values for LNG’s Pipeline?

https://cna.ca/why-nuclear-energy/affordable/power-rates/

http://www.desmog.ca/2016/10/17/ontario-cancels-nearly-4-billion-clean-energy-projects

https://www.fraserinstitute.org/sites/default/files/environmental-and-economic-consequences-ontarios-green-energy-act.pdf

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In recent months, the international community has been entertained by the drama of the USA’s most recent spectacle. Unfortunately, it has not been a blockbuster movie or sporting event that has created this shock and awe, but their election. Many in the business world have been watching campaign season with particular intrigue as newly introduced laws and regulations will influence both how successful firms are and how they will operate. This is because the macro-environment of a business has a direct impact on how the firm operates and how successful it is. The business world could be particularly impacted in the coming US election where trade agreements have been a hot button topic.

One trade agreement that has been particularly put under the microscope is NAFTA. Politicians have been blaming this free trade agreement for job loss and other economic hardships with Donald Trump going as far as declaring NAFTA “the single worst trade deal ever approved in [the US]” (Politico, 2016) and Democrat Bernie Sanders stating that NAFTA “decimated the state of Michigan” (Detroit News, 2016). However, I agree with the stance asserted in Dustin Walsh’s blog post “Opinion: Candidates wrong on free trade” that the collapse of Michigan’s manufacturing sector was much more complicated and more a result of other changes. Contrary to popular belief, Michigan’s manufacturing sector actually added over 80,000 manufacturing jobs during the first four years of NAFTA. Instead, increasing productivity of firms due to technological gains has a much larger impact and can be associated with over 80% of job losses in developed countries (VOA, 2016).

Removing free trade agreements will not fix economic issues. The removal of free trade agreements directly has an impact on Porter’s Five Forces. Free trade increases rivalry as there are more firms able to compete equally in a specific market. Although removing free trade may help domestic companies develop in the short term by limiting competition, in the long run competition is beneficial to firms as it forces them to differentiate themselves and innovate to gain a competitive edge. Therefore, free trade breeds efficient well-structured firms not dependent on government protection. Furthermore, removing free trade will result in higher prices and more dissent from domestic consumers. It also could result in retaliation from other countries in the form of higher tariffs and eventually trade wars.

In conclusion, candidates are pandering to the discontent of the unemployed and those suffering economic hardship by using free trade agreements as a scapegoat. Instead of blaming these agreements for economic hardships, politicians should hone in on the real causes of economic issues in order to prove their capability to lead the USA.

Sources:

http://www.politico.com/story/2016/09/trump-clinton-come-out-swinging-over-nafta-228712

http://www.detroitnews.com/story/news/politics/2016/03/02/bernie-sanders-trade-policies-decimated-michigan/81247190/

http://www.voanews.com/a/presidential-election-issues-free-trade/3549686.html

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