Photo: (not part of original article) bread lines of the great depression – coming again?
Climate change: Less CO2, less jobs. It’s that simple.
03-16-2009 NIGEL HANNAFORD
If you want to know what an economy that pumps out less carbon dioxide is like, look at Ontario, Quebec and Alberta. Factories closed, growing numbers of jobless, people driving less because they have nowhere to go, government deficits.
As it happens, it’s the U.S. debt crisis that’s done it to us. When the air comes out of the tires of your biggest trading, look out.
However, it’s also what a well-meaning climate-change lobby felt was pain worth risking for the sake of the planet, when it recommended a regimen of emission caps and/or carbon taxes to reduce C02 emissions in Canada.
How do you like it so far?
Not so much, at this desk.
This is not the whole story as it doesn’t include coal and natural gas, but there are some provocative specifics in a recent Statistics Canada document. The Supply and Disposition of Refined Petroleum Products in Canada, was published in November 2008, coincidentally a good month to review because it’s both the latest month for which figures are available and also the month when Canadians watching the American meltdown first noticed they might have a problem of their own. For, it was in November 2008 that retail fell off a cliff – especially car sales – joblessness started to climb, and the federal government was forced to revisit its economic forecasts. No more chat about balanced budgets, and so forth.
So, what do these numbers show?
Well, in Canada as a whole, domestic sales of all refined petroleum products were down five per cent in November 2008, over November 2007.
Refined petroleum products is a statistical category that includes gasoline, diesel, butane, petro-chemical feedstocks, asphalt, av-gas and a number of other things too numerous to detail. It’s not a perfect marker for industrial activity, because some industry runs off nuclear and hydro power, especially in central Canada. However, it’s good enough to indicate a trend: If there is less diesel being used, for example, there are probably less trucks on the road, because there is less reason for them to be there.
So, for Ontario and Quebec, it’s not good news that its fuel use is down slightly more than the national average in November, at 5.5 and 5.6 per cent reductions year over year respectively.
And it is especially not good news for Alberta, which is down more than seven per cent.
Ontario and Quebec are down because their manufacturing industries are in trouble.
But, what’s Alberta’s excuse? In some ways it would be a relief to spot some dramatic decline in a line item, thereby isolating the problem. Unfortunately though, the decline is across the board, suggesting a general slowing of the Alberta economy. Ouch.
All this is good news however, if you are part of the super-active climate-change lobby promoting the idea that human activity is generating so much carbon dioxide that the atmosphere is warming. (With the likely consequence of polar melting, rising sea levels and the widespread distress caused by human dislocation, etc.) A rough and dirty calculation of Canada using 445,000 cubic metres of various refined petroleum products less in November 2008, over 2007, is a reduction in CO2 emissions of 1.6 million tonnes. Annualize that kind of a reduction in fuel use and you’re looking at something like 20 million tonnes less C02 in 2009, if the recession doesn’t turn.
However, don’t cheer too quickly. In 2006, (Environment Canada’s most recent published figures,) Canadian emissions were 721 million tonnes of greenhouse gas equivalent. Take this hard-won 20 million tonnes of CO2 off the total, and it’s still just over 700 million tonnes. Meanwhile Al Gore’s true believers want to take it all the way down to Canada’s Kyoto target of 558.4 Mt.
We have a long way to go, then.
Point: If this is what an economy producing 20 million tonnes less of CO2 looks like, how prosperous will one be that contracts enough to shed a further 141.6 Mt.?
Happily governments of both parties have quietly acknowledged the suicidal nature of CO2 restrictions that actually produce significantly less CO2, (as opposed to simply making business pay carbon levies for the privilege of carrying on business-as-usual.) They have also acknowledged in their budgetary allocations, that so-called green industries are no compensation. One has to manufacture an awful lot of windmills to nudge the gross domestic product.
For that at least we can be thankful. The pity of it all however, is that when the history books of 2109 are published, their writers will express amazement that men ever thought their capacity to initiate climate change was greater than the natural forces that in the last 30,000 years first covered this continent with ice two kilometres thick, saw it recede, and allowed sea levels to fluctuate 100 metres.
If this recession does nothing else, it should bring home to all Canadians the supreme importance of not letting alarmists have their way with the economy.
This is what it would be like.
But, worse.
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mark wagner (13:34:13) : economics 101: when you restrict supply of something, the price goes up.
I hate to say this Mark, but you are wrong. It was Economics 1A, Intro to Microeconomics. (1B was intro to Macro). By the time we got to upper division stuff we were doing linear programming optimization of production and things like “The Economics of Ecology” (Econ 136, I think…) and International Trade & Finance (forgot the number, but loved the class). So your point is one of the most basic things taught in the very first introduction to Economics class. The law of supply and demand.
Everything else you said was pretty much “spot on” with the minor nit that taxes are passed to any and all of the stake holders; wherever they can be shoved. Some comes from lower dividends, some from lower wages available to be paid, some from lower prices paid to suppliers (if possible). Yes, most gets packed into the product as “cost of goods sold”, but there is a theoretical quantity that can come from other stake holders. (I know, a nit. Do I really care if I pay $1 more for a product or got paid $1 less? Or had $1 less dividends to buy it with? In both cases my ability to purchase goods dropped by the same amount, but Economists must be kind of anal about these details… it’s what we do :-}
Tell me, DJ, do you drive? have a washing machine? refrigerator? microwave? central air/heat? carpet? tv? Do you want to do without all these “luxuries” to revert to a ~1900 standard of living?
Oh, and you left out: “Use a computer or a computer network?” 8->) Data centers are hugh energy sinks. We had a 750 kVA transformer for the one I ran…
Ben Lawson (13:58:50) : The current drop in energy consumption is the result of the economic situation, not the cause of it. Might as well say that wearing looser clothes makes you thinner. Your premise is unsupported and completely irrelevant.
Ben, might I refer you to the next part of your posting?
Smokey (11:20:41): You also know that emissions are effectively linked to economic output
The two are linked at the hip. Less energy usage is less economic activity (as you noted in the Smokey comment). The original posters point is quite valid. Want to know what it will look like with this much energy reduction, look at the economy today at that reduced level of energy consumption. A directly proportional to B in both directions.
How you could get the linkage in part 2 and not in part 1 is an interesting study in inconsistency; but I’ve noted before that internal consistency is not among the strong suits of AGW believers…
China has undoubtably been getting a free ride in all this, but that is the natural consequence of “capitalist” manufacturers seeking the lowest cost of production.
No. Not at all. The movement of industry is a derivative effect. That China gets a free ride is a direct consequence of Kyoto treaty wherein it is specified. Everything else is an economic consequence of that decision.
And this:
Carsten Arnholm, Norway (12:17:12) :
http://news.bbc.co.uk/2/hi/science/nature/7929174.stm
is not the BBC I’ve seen lately:
“The much-vaunted European Union’s Emissions Trading Scheme (ETS) has turned out to be an ineffective and costly piece of market fixing, which will not achieve its stated aims.
Carbon offsetting is even worse: transferring money to developing countries to fund projects that probably would have been implemented anyway, and with little real impact on emissions.
The carbon emissions market risks being the next bubble to burst.”
WOW.
“The answer is to use the best available and most cost effective low carbon technology for base load generation (nuclear power), increase the focus on energy efficiency in all sectors of the economy, and encourage R&D on new transport and power generation technologies.
But to start to move in this direction needs policymakers to acknowledge the hard fact that the present unwarranted faith in power from renewables and emphasis on punishing emitters is going nowhere.”
Double WOW.
Amazing what a “freeze your bippy” winter will do to the ol’ attitude 😉
Roger Sowell (15:48:36) : There are indeed some projects that are sufficiently worthy that no discount rate analysis is required, for example, a sewage treatment plant.
While you are correct in broad scope, I would only add that a discount rate analysis would still be valuable to compare different alternatives for achieving the same ends; and for knowing if a project was not very efficient and a search for stronger alternatives ought to be done… (I know, a tiny nit from the back of a flea… but this is about Economics… and that’s what we do. 😎
Allan M R MacRae (04:23:37) : Scientists have found a new threat to the planet: Canadian beer drinkers.
“Clearly the environmental implications of having a frivolous luxury like a beer fridge are not hitting home.”
I’m sorry, but this is just going too far! Someone needs to inform these folks that the American Beer Fridge us usually near The Gun Safe and the only reason the owner is not in TGS is because he’s been in TBF and can’t do the combination anymore ;-). Now take away TBF and there will be an immediate armed revolt from sober red necks! Something to be truly feared! ( I R 1; and nobody is touching either of my magic cabinets 😎
Ontario is considering becoming the first province in Canada to follow Australia’s lead in banning old-fashioned, energy-sucking light bulbs.
Someone needs to inform those folks in Ontario that it’s cold there. All that it will do, to ban incandescent bulbs, it to move the bill from the lighting to the heating side of the ledger… Now in Arizona in August, you’ve got a good argument!
Oh, and a CFB is good for about 10,000 on / off cycles MAX, so those 10 year lifetimes are not for things that get turned on and off a dozen times a day… like, oh, the kitchen or bathroom. And don’t even think of putting one in the fridge. Aside from not putting out full power for about 5 minutes of warm up time, if you break one you get to buy a new fridge due to mercury contamination… Oh, or the oven… And motion sensor driven outside lights are not a good place for them either. Aside from the on / off cycling lifetime problem, that 5 minutes to warm up doesn’t work quite so well as a “scare the burglar with a bright light” solution… And I still haven’t found one that works really well on a dimmer. They are also not so good for baby chick warmer lights nor for photographic enlargers where color matters. And if you break one in a photographic dark room you will get odd fogging on papers and films due to mercury sensitization. Oh, and for studio flood lights they are a bit wrong on the color temperature too. They are also kind of wrong for a whole host of specialty applications like those little flame shaped mini-bulbs, but I think you see the problem.
Have I mentioned lately that markets work far far better at deciding what to make than any central bureau or Authority?… Choice, freedom, marvelous things. Wonder where I can find some.
So Canadians will soon mutate to become a bunch of pale people drinking warm beer under ugly ultra-white light.
But the beer will only be warm in the summer (set it outside other seasons). Bears don’t drink beer do they? 😎
especially the French – why is it that French Army tanks have only one forward gear but five reverse?
Why, to outmaneuver the advancing Germans while maintaining fire on target! Évedent, n’est-ce pas?
Genghis (07:33:45) : Dropping energy prices indicate less demand and consumption, hence less production of CO2. And yet the CO2 numbers continue to climb, doesn’t that falsify the AGW theory?
Yes. In fact a similar observation was made about the CO2 pattern around the Great Depression then WWII …
Roger Sowell (15:32:39) :
E.M.Smith, re petrochemicals:“…much of what we call “petro”chemicals in fact comes from natural gas.”
Technically true, but a bit misleading. Here is what happens.
Don’t see where it was misleading. Incomplete, yes. I tend to be a bit prolix at times so was skipping the chemystery part 😎 Gas goes in, chemicals come out. And a lot of waste heat…
Replacing coal with natural gas is the most economic choice, if (when) the cap-and-traders prevail. […] Such conversions will generate huge traffic in carbon credit trading. In the U.S., we will require substantial LNG imports and enhanced natural gas distribution systems. We are already constrained along the east coast in the winter months. That fact may suggest some investing ideas to you!
Beat you to it! I own some TGP and CHK. Chesapeake as a general ‘bottom fish’ natural gas play (there may be better, I didn’t do an exhaustive search, just bought ‘familiar and good enough’). TGP is Teekay LNG partners. It has an 11% dividend right now and is in an established up trend. They are the only dedicated LNG tanker ticker that I know of. Bought them when it became clear that Russian gas through Ukraine was going to cause the Brits et. al. to make sure to have some part of their supply by sea… I expect it to grow nicely over the years as they add ships. LNG tankers are on decades long leases, so the revenues do not vary with much of anything. Yet the market sells them down to silly levels when the Baltic Dry index says “Sell Shipping!” due to low spot rates for cement & iron ore. One of the few market inefficiencies you can regularly exploit. (But don’t tell anyone!) Oh, and a Canadian natural gas / oil trust with a 22% or so dividend. I expect to be holding this for years to come (or until someone offers an insane price for them at a blow off top!)
FWIW, a new process has let us get gas out of “tight shale” so there is generally a glut in natural gas right now (it’s below $4 / unit where it was $12+ last year) and will be for a little while. It will take a while to soak it up so Nat Gas isn’t a fast trade at this point. More a value buy and long hold. So look for things with fat dividends to make the wait worth while… As coal plants cut over and as nat gas goes to trucking, the prices will rise. Oh, and I’ve got CLNE to leverage the Long Beach Harbor (et.al.) conversion of trucking to CNG. More volatile, but looks bottomed and rising to me. A long term start up style company. That’s the T. Boone Pickins company that does CNG truck conversions and gas stations… Think of it as CARB mandated business…
Hey, just because I think the “kill coal” movement is nuts and CARB is clueless doesn’t mean I can’t make money off of them!
(CARB is California Air Resources Board. Our pollution Green Shirts.)
E.M.Smith,
There is also the methanol -to-olefins process, in which methane (natural gas) is first converted to methanol (see below). Then the methanol is converted to ethylene and propylene. That is a true natural gas-to- petrochemicals conversion. It is not in widespread use due to unfavorable economics. Ethane is a fairly useless byproduct from natural gas processing, so is a low-cost feed to conventional petrochemical plants.
http://www.uop.com/objects/26%20MTO%20process.pdf
EM Smith – what is your take on this?
US Money Supply (M0?) almost doubled from September 2008 to end Feb 2009.
See: http://research.stlouisfed.org/fred2/series/BASE
This was before the $1.2 trillion cash injection of this week.
Best, Allan
More coal and “green” craziness in Australia;
http://www.smh.com.au/environment/global-warming/protesters-force-port-closure-20090321-94xk.html
E.M.Smith (16:07:04): The two are linked at the hip. Less energy usage is less economic activity (as you noted in the Smokey comment). The original posters point is quite valid. Want to know what it will look like with this much energy reduction, look at the economy today at that reduced level of energy consumption. A directly proportional to B in both directions.
How you could get the linkage in part 2 and not in part 1 is an interesting study in inconsistency; but I’ve noted before that internal consistency is not among the strong suits of AGW believers…
So by your logic factories stop production because workers stop driving to them. Also by your remarkable logic if we were to magically double our energy efficiency we would halve our economic activity. Hmmm… Logical fallacies are the hall-mark of [skeptics] attempting to fabricate arguments.
REPLY: Ben, while you are on the subject of “fabricated arguments” you might take note of the fact that Mr. Smith was not referring to “driving”, that is your invention. The base idea is that access to available an inexpensive energy increases opportunity, and thus productivity. Economics 101. – Anthony
Anthony, my comment began with “so by your logic”. It was an example of applying Smith’s logic, not an invention.
I see the actual article’s premise as using consumption of petroleum products as a gauge of our current economies (which of course it does reflect) and a warning that forced reduction in petroleum product usage, presumably driven by CO2 restriction laws, will CAUSE a reduction of our economy in a sort of “starvation” of our economic engines.
If as you say “inexpensive energy increases opportunity, and thus productivity” then why are we mired in this recession when, for example, gas prices are so low?
These are intentionally simplistic concepts that would make great examples in Economics 101. But they would wilt in Economics 201.
REPLY: Equilibrium takes time, be it climate or economics. – Anthony