Published by Senator Grant Mitchell on 16 August 2010
When it comes to talking the economics of climate change, the conventional wisdom, espoused so often and with great certainty, is that climate change action will require a fundamental restructuring of the economy and will cause severe economic damage. This argument is regularly trotted out to frighten people and to discourage initiatives on climate change. And, unfortunately, it seems to work.
But, it is difficult to understand why people seem to accept this argument. Our economy was fundamentally restructured to win WWII and that did not wreck the economy. In fact, it was instrumental in creating a modern, industrialized Canadian economy that has sustained one of the best standards of living in the world for 65 years. For that matter, it required a tremendous amount of investment to jumpstart the industrial revolution.
Time and again, when tackling a major environmental challenge, like acid rain or the ozone layer, we hear arguments about cost and catastrophe only to solve the challenges much faster and more affordably than ever anticipated. In doing so, economies and businesses are often actually saved and new ones can be created. A recent op-ed piece by Stewart Elgie and others makes the compelling argument, that contrary to popular belief, the BC economy has not been hurt by its carbon tax and other climate action measures. Since implementing the tax, BC’s economy and employment, in spite of problems in the forestry and fishing industries, have outperformed the Canadian averages. A comprehensive economic analysis commissioned recently for TD Canada Trust concluded that achieving a reasonable GHG emissions reduction goal by 2020 would have almost no reduction in Canadian GDP growth.
There are two economic arguments that have not registered sufficiently to counter the predominance of the argument that dealing with climate change will cause economic damage: the economic impact of inaction and that there can be great economic opportunities.
The reality of climate change is that failing to take action will result in untold economic hardship. I have often made the point that we will see real economic damage if we keep doing what we are doing. And, climate change damage could be all but infinite.
In Canada we are already experiencing the economic impact of climate change. Fisheries on the East and West coasts are being damaged by changes to marine environment; forest fires fuelled by trees killed by the pine beetle which spreads aggressively in warmer weather are reducing forestry resources; droughts and sudden violent storms are hurting prairie farmers; and the changes in the North are affecting traditional economies as well as economic infrastructure. As the world becomes increasingly serious about climate change, markets for Canadian energy and even other export products could be threatened.
Effects around the world, including; drought, floods, violent storms, rising coastal waters, and diminished water supplies, are wreaking economic havoc right now. Displaced people, water shortages and food shortages due to climate events and impacts will destabilize parts of the world and could lead to wars which would threaten world security and involve, as wars do, inherently significant economic costs. As climate impacts become more prominent, they will bring greater risk to markets because they will bring such uncertainty to them.
The good news is that there are huge opportunities in climate change action. Not only will climate change initiatives not damage the economy, they will stimulate it. I have often wondered why people perceive that a stimulus package that does not include environmental projects, like the government's current one, is seen to be a stimulus to the economy while investments in green projects are not.
One of the most significant features of this opportunity is the creation of green jobs. Green jobs can be particularly good jobs. They are often knowledge, science and research based; they are often manufacturing jobs; and they inherently represent diversification from our traditional fossil fuel energy base. They are, in short, exactly the kind of jobs we want.
The potential for this market and the jobs it drives is huge. There is an estimated market of over $7 trillion annually in green related products. This is equal to one half of the annual GDP of the US. There has been between 7% and 9% growth in global markets for environmental goods and services between 2000 and 2006. Investment in this sector is expected to see average annual growth of between 4.7% and 7.7% over the next 10 years.
We must take advantage of these markets and the jobs and investment they create. The danger is that the train is leaving the station without us on it. Government action and leadership is critical to create some certainty for business, push them with regulation, and support them with incentives and research. Of particular importance with climate change is a government determined to price carbon and to make a clear decision about which way to do it. A wait and see policy means that as the rest of the world reaps the economic benefits and green jobs, Canada is stuck in neutral without the leadership that could take us into the next industrial revolution.