Transcript Have most North Americans already met their Kyoto

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 University
Canadian Economics Association
Vancouver, June 6, 2008
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


What is the corresponding obligation of
individuals ?
 Who


has fulfilled that obligation ?
Income Gains concentrated in top 1%


USA target =-7% (not ratified)
$ 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 ??
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?”


Complexity of ‘Cap & Trade’ & many Carbon Tax
proposals fuel cynicism re: “Tax Grab”


LDC lament – also true within Canada & US
“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 ??
Trends in Average Income by Quintile
1989 – 2005
CANSIM V1546479 – V1546483
After Tax Household Income by Quintile
Canada 1989 - 2005
140000
120000
100000
average all
80000
bottom 20%
quintile 2
quintile 3
60000
quintile 4
top 20%
40000
20000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
80.00%
Change in Real Family Income
1992-2004
(Murphy, Roberts and Wolfson:2007)
70.00%
60.00%
50.00%
family % change 1992-2004
40.00%
30.00%
20.00%
10.00%
0.00%
20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95 to top 1
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to 99% %
25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95%
Real Income Gains
- also concentrated in top 20% in USA
Substantial Improvement in GHG
intensity per $ expenditure
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
Chart 1
Income and CO2 emissions for "Mr&Mrs 80%"
Canada - 1990-2005
CANSIM v25731824
1.20
1.00
0.80
0.60
Mr&Mrs80%
Kyoto
0.40
CO2 Mr&Mrs80%
0.20
0.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
01/01/1 01/01/1 01/01/1 01/01/1 01/01/1 01/01/1 01/01/1 01/01/1 01/01/1 01/01/1 01/01/2 01/01/2 01/01/2 01/01/2 01/01/2 01/01/2
990
991
992
993
994
995
996
997
998
999
000
001
002
003
004
005
Mr&Mrs80%
1.00
0.96
0.96
0.95
0.95
0.96
0.95
0.96
0.99
1.02
1.04
1.04
1.04
1.04
1.06
1.09
Kyoto
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
CO2 Mr&Mrs80%
1.00
0.96
0.96
0.95
0.95
0.96
0.94
0.93
0.94
0.94
0.94
0.92
0.91
0.92
0.90
0.89
Income Changes and their implications for
GHG - Canada 1992 - 2004
a
income
class
b
c
d
1992
income
tons
CO2
1992
average
$000
at 0.84
e
f
g
tons
CO2
% below
/above
Kyoto
Kyoto
Target
2004
income
(tons)
average
$000
at 0.71
[@6%
reduction]
bottom
80%
33.75
28.4
26.6
37
26.27
-1.4%
88
73.9
69.5
101
71.71
3.2%
top 10%
160
134.4
126.3
215
152.65
20.8%
top 1%
404
339.4
319.0
684
485.64
52.2%
top 0.1%
1196
1004.6
944.4
2493
1770.03
87.4%
Top
0.01%
3490
2931.6
2755.7
8443
5994.53
117.5%
80 - 90
percentile
Population Increase ≈ + 20% nationally

1990 – 2006 population growth

Nil to small in Nfld, NS, PEI, NB, Quebec, Man, Sask.


Ontario +23%; BC + 30%; Alberta +33%


ALL GHG increase due to top end income distribution
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?
Chart 2
Greenhouse gases, population and inequality trends
Ontario: 1990-2005
1.6000
v429911,v15855724,v25732076
1.4000
1.2000
1.0000
0.8000
0.6000
Kyoto Target
mr and mrs 80% CO2
0.4000
GDP
GHG*GDP
0.2000
GHG*GDPpercapita
0.0000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
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
Transparency + Equity
Rebate Carbon Tax as Demo-grant

Who gets the CO2 scarcity rents?


‘Cap & Trade’


2005 – 747 Megatonnes @ $30 per ton
implies $22 Billion
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
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?”


Complexity of ‘Cap & Trade’ & many Carbon Tax
proposals fuel cynicism re: “Tax Grab”


LDC lament – also true within Canada & US
“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 ??
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%