Category Archives: Environment policy

The Culture of Saying No To Everything

Published in the Telegraph-Journal 26th October 2012

We are faced with a number of choices over how power is produced. Fossil fuels are known to have a comprehensive and pervasive impact on the environment, including air pollution and acid rain. At the point of extraction, fossil fuels can have a substantial landscape impact (tar sands, coal mines, shale gas wellhead fields). Of the range of fossil fuels, natural gas has the lowest environmental impact. Fossil fuels are also ready to use.

Wind power has diffuse landscape impacts (wind farms) but questions about the effects of windmill operation have emerged and are now being studied Tidal power has relatively less environmental impact although research has not yet determined the effects of power generation technology on marine life. Solar power has a light environmental footprint but requires substantial land coverage to generate sufficient power. Wind, tidal and solar power sources currently are also more expensive than power generated by fossil fuels, although medium- and long-term research and development is expected to address this shortcoming. Each method of generating power has its shortcomings, critics and opponents.

Generally, no-one wants a source of power generation to occupy their property. In a not-in-my-backyard way, none of these options is acceptable and none of them is desirable. This also means that we have found ways to say no to everything. And it is particularly problematic that we have now said no to nuclear power at a time when we need it most.

In the heated discussions over how coal, tar sands oil and shale gas contribute too much to global warming to justify their use, nuclear power increasingly is being left out of the equation. The operating assumption in some quarters is that the days when nuclear power generation was a prominent component of the national energy portfolio are now long gone.

An obvious reason for this recent loss of confidence in nuclear power is the recent failure of Japan’s Fukushima facilities in 2011 and extends to the impact of earlier system failures at Chernobyl, Browns Ferry and Three Mile Island. Opposition is also in response to the culture of secrecy and inscrutability surrounding nuclear facilities as much as the Fukushima event.

It may be possible to replace power generation from all current sources with renewable energy. But doing so would take longer and cost significantly more than if we were to sustain nuclear power as part of the mix. The goal of replacing coal, oil and gas sources with renewables in the same timeframe to prevent runaway warming may be an almost insuperable one. Achieving this goal while replacing nuclear power may be impossible.

As a consequence of terminating its nuclear program in response to environmentalist demands, Germany will produce an additional 300 million tonnes of carbon dioxide between now and 2020, nearly as much as the European savings resulting from the energy efficiency directive combined. This is despite Germany’s efforts at efficiency improvements and new investment in renewables. A similar situation is emerging in Japan as it switches from low-carbon nuclear power generation to coal and LNG. Other countries are now headed down the same path.

It may be that no options for generating power are good ones. Since Fukushima, the number of those who oppose nuclear power has risen dramatically. But if the world’s nuclear plants that are shut down are not replaced by more nuclear power, the power gap will almost certainly be filled by coal and gas, substantially increasing greenhouse gas emissions.

There is general agreement that the world should dramatically reduce its total energy use. Currently it is unclear whether the conservation objective is to reduce our reliance on fossil fuels or to assist in the elimination of our reliance on nuclear power. In an age that increasingly is characterized by saying no to everything, it is difficult to see how we can simultaneously achieve both objectives.

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Filed under Environment policy, Global warming, Nuclear power

Euro Crises put Contemporary Capitalism at a Crossroads

By Peter Lindfield, published in the Telegraph-Journal 12th June 2012

Contemporary European capitalism has had a relatively short run. It combines generous health and social benefits with shorter working hours than in North America and an emphasis on long vacations and early retirement. With high levels of productivity and income distributions that avoid excessive inequality, the European model of capitalism would appear to be the ideal balance of competitiveness and social stability.

In a post-financial crisis world, the possibility of fiscal meltdown in Greece, Spain, Portugal and Italy has become frighteningly real. We have come to question the sustainability of the European model. But the failure of these economies in conjunction with an extended global recession has cast a long shadow on the future of capitalism itself.

Successive versions of capitalism have been extraordinarily successful for more than two hundred years since the beginning of the Industrial Revolution. The dismal poverty that is still prominent in some parts of the world has been all but banished in much of the West. This is in stark contrast to the catastrophic experience of Marxist and socialist states, especially in the twentieth century. Today there is no agreement on what a viable replacement for the contemporary Anglo-American paradigm would look like.

A more state-centric variant of capitalism exists in China, where industrialization and massive investments in technology have transformed that country in less than thirty years. The Chinese capitalist model features ferocious competition among export firms, and government intervention is widespread and pervasive. Its social safety net is substantially weaker than the typical Anglo-American model.

But rather than viewing China’s model as superior to the Anglo-American paradigm, it is important to remember that Chinese political, economic, and financial institutions are still evolving.

In fact, it is the long global successes of capitalism that have thrown a spotlight on the looming structural flaws of the current economic system.

First, we continue to be faced with a widespread financial crisis on a number of fronts. Ongoing, relentless technological innovation has conspicuously increased economic risks where purely market-based solutions appear to be unable to address the global transformation that is taking place.

Financial systems themselves have inadequate regulations, with too little focus on excessive accumulations of debt. A prominent example is health care, where many countries are struggling with the moral dilemma of how to maintain incentives to produce and consume efficiently without producing unacceptably large disparities in access to care. The current pricing of health care does not encourage a more equitable relationship between equality and efficiency.

Second, Western economies have consistently failed to effectively price public goods such as clean air and water. There is little political will to establish a sufficiently high global price for carbon to motivate firms and individuals to internalize the cost of their environmental activities. There is widespread consensus that economics and the environment are inextricably intertwined, but the failure of Western states to conclude global climate change agreements is indicative of this pricing challenge.

Third, capitalism increasingly is producing unacceptable levels of inequality. At sub-national levels, tax systems have failed to provide a greater measure of redistribution of income without creating unnecessary distortions. The growing gap is partly a byproduct of capitalism’s tendency to aggregate at the national level. But it is clear that in many nations, regional disparities are growing, despite some governments’ reliance on equalization systems. We have yet to find the tools to curtail this vicious circle without stunting national growth.

There is no doubt that conventionally measured economic growth with the central implication of higher consumption cannot be sustained as capitalism’s core objective. The challenges of climate change, health care and financial instability are becoming more prominent, while political institutions remain unable to address them. In a few decades, we may look back on this era as the turning point in the history of capitalism.

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Filed under Environment policy, Government transformation, Health Care, Uncategorized

Is Government Regulation an Obstacle to Competitiveness?

Published in the Telegraph-Journal 27th March 2012

Is government regulation an obstacle to competitiveness? The federal government thinks it is. And it has answered this question in a number of ways. Early in 2011, Prime Minister Stephen Harper launched the Red Tape Reduction Commission and tasked it with working with all federal government departments to reduce unnecessary paperwork that reduce opportunities for growth. He made it clear that the scope and scale of the undertaking would be extensive, noting that “today’s government is expected to bring a healthy skepticism about government to Ottawa, and to ask hard questions about what government can do and cannot do.” The intended beneficiaries of the Commission’s work are entrepreneurs and small business who have lobbied the federal government to ease the paperwork burden that slows growth and job creation.

In one notable case, government regulation was considered to provide an obstacle to investment because regulatory jurisdiction was distributed among the provinces rather than under the federal government regulatory umbrella. Finance Minister Jim Flaherty’s plan to establish a single national securities regulator was recently rejected by the Supreme Court of Canada, which ruled that his proposed legislation was unconstitutional. He had complained that the current system of thirteen provincial and territorial regulators was unwieldy and inefficient, unable to provide consistent oversight for capital markets. Although Mr. Flaherty said he would respect the court’s decision, he continues to work toward the creation of a Canadian securities agency with the assistance of the provinces, noting that broader issues, such as systemic risk, are the jurisdiction of the federal government.

More expansively, the federal government has signaled to the business community, as well as to international investors, that it is “determined to do what it can to create a greater degree of certainty for business and to establish realistic timelines to help make conditions that encourage competitiveness and investment,” according to Environment Minister Peter Kent. To achieve this, the federal government has stated that a modern and rigorous regulatory system characterized by transparency, effectiveness and efficiency is necessary.

Mr. Kent was referring specifically to environmental regulation, which has become a lightning rod of discontent for a number of industries, notably in the natural resources sector. The Prime Minister’s speeches to potential investors in countries such as China and Japan repeatedly feature references to Canada’s willingness to reduce the environmental regulatory burden for investment, particularly in energy projects such as oil and gas pipelines.

One underlying assumption of this line of thinking is that less stringent environmental regulation would produce a competitiveness ecosystem where energy companies would thrive. The accompanying assumption is that the environmental review and assessment process is an unnecessary obstacle to growth, job creation and prosperity.

The evidence to support these assumptions is mixed but research findings provide insights on the so-called Porter hypothesis, which maintains that the appropriately designed prescriptive regulatory framework raises corporate awareness and motivates new process and product innovation, promoting competitiveness. An instructive example of how innovation was encouraged by government regulation is the U.S. automotive industry. The Clean Air Act was passed by the U.S. Congress in 1965, with strident opposition from leading American automotive firms such as General Motors, Chrysler and Ford. In tandem with the Energy Policy and Conservation Act of 1975, government regulatory requirements committed the American auto industry to ever-more stringent emissions standards over time.

Additional federal regulations targeted at the automotive industry focused on new standards for consumer safety, corrosion resistance, bumper protection, crashworthiness and fuel economy. For the consumer, the consequences of industry innovation have contributed to vehicles that today are safer, last longer, are more reliable, possess superior performance, produce fewer emissions and are more fuel efficient.

A stringent but transparent regulatory framework can promote competitiveness. While regulatory waivers may be appropriate under certain circumstances, we do industry and society a disservice by setting the regulatory bar too low.

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Filed under automotive industry, Environment policy, Innovation strategy

Changes to the Fisheries Act Will Have Far Reaching Implications

Published in the Telegraph-Journal 23rd March 2012

The federal government plans to rewrite a critical section of the Fisheries Act to remove references to protecting habitat.  The change in wording appears innocuous enough, from the current “no person shall carry on any work or undertaking that results in the harmful alteration, disruption or destruction of fish habitat” to the proposed “no person shall carry on any work, undertaking or activity, other than fishing, that results in an adverse effect on a fish of economic, cultural or ecological value.”

Even the federal government’s Department of Fisheries and Oceans makes it clear that the protection of habitat is critical to the survival of fish species, stating that “it is important that we protect the habitat that provides fish with clean water, spawning and rearing grounds, an adequate food supply and clear migration routes because habitat requirements typically change for each stage in a fish’s life cycle; from egg to adult. If the various life cycle requirements are not met due to loss of habitat, fish numbers drop, and over time the entire population may even die out.”

Currently, any commercial or industrial projects that would interfere with fish habitat must undergo an environmental assessment to obtain the government’s authorization and must also compensate for loss of habitat. Conservation advocates say that if only fish of economic, ecological or cultural importance will be considered for protection, the change in the Fisheries Act could lead to protracted legal challenges and increased uncertainty as definitions of economic, ecological or cultural importance are proved in the courts.

Such revisions would have dire consequences for the protection of wild Atlantic salmon habitat.  In Eastern Canada, the proposed changes could place at risk a natural resource that is valued at $150 million in annual revenue and has created 3,900 full-time equivalent jobs according to a recent Gardner Pinfold study.  The study estimates that in New Brunswick alone, recreational fisheries for wild Atlantic salmon and related spending contributed more than $50 million to provincial revenue in 2010. Further, wild Atlantic salmon are culturally critical to New Brunswick’s First Nations people, providing them with food and fish for ceremonial purposes.

Department of Fisheries and Oceans Minister Keith Ashfield has not denied that changes to the Fisheries Act were being proposed. He has instead defended the plans stating that “current fisheries policies go well beyond what is required to protect fish and fish habitat”.

Environment Minister Peter Kent goes further to outline the government’s position. Appearing recently as a conference keynote speaker in Vancouver, he repeatedly underscored the importance of efficiency in the government’s efforts to bring Canadian environmental assessment processes up to date.

“The government of Canada is determined to do what it can to create a greater degree of certainty for business, and to establish realistic timelines to help make conditions that encourage competitiveness and investment, and all the jobs that in turn are created by that investment. But all that can only come to pass if we create a modern, predictable and rigorous regulatory system. A system that’s streamlined and transparent, and a system that is effective and efficient,” said Kent.

This is playing out on a large canvas. On the face of it, increasing the efficiency of government regulations is a laudable goal. But questions are emerging over whether far-reaching changes to the federal government’s position on the vital relationship between the economy and the environment should be enacted in Parliament without first making Canadians aware of these proposals and giving them an opportunity to voice their concern. And if the federal government has decided that prescriptive regulations are unnecessary impediments to economic growth and prosperity, it must expect that there will be substantial resistance to diminishing such a critical policy tool. The health of our democracy demands that we court the views of all Canadians, not ignore those with differing points of view.

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Filed under Environment policy, New Brunswick, Social contract

Experts Cannot Settle Shale Gas Issues

Published in the Telegraph-Journal 19th March 2012

Shale gas drilling involves an exotic cocktail of water, sand and up to 600 chemicals used in the fracking fluids, lubricants and drilling muds. These chemicals include xylene, sodium hydroxide, benzene, carbon disulfide and naphthalene. Hydrofracking can have potentially devastating effects on the water table. Environmentalists claim that the drilling process poses substantial risks of gas leakage, explosions, contamination and discharge of radiation. The available methods for containing or mitigating these risks and the effectiveness of those methods may not be adequate to the task. With many gas wells, a substantial amount of contaminated water is at risk of escaping and there are uncertainties over where it will go and how it will be stored.

If any of these risks are accurate, it is not likely that public support for shale gas drilling will be found in New Brunswick.

But it may be that these risks have not been accurately portrayed, that the benefits far exceed the costs and that many of the facts simply are not yet known. Industry insists that hydrofracking is safe and that its risks have been wildly overblown. And government claims that the risks, once indentified, can be managed with the appropriate regulations, monitoring and enforcement mechanisms.

Whom should we believe?

For those who are resolutely committed to opposing fracking, the environment is at risk. But a substantial number of New Brunswickers say they want facts and figures from independent evidence and are seeking reasoned discussions presenting both sides. They are concerned about shale gas but undecided about whether to support its development. And in the absence of discussions focused squarely on the public interest, this undecided group is still attempting to determine who and what to believe.

The public relations problems that surround shale gas drilling in many ways stem from the inability of technical experts to satisfy the public’s need for reassurance and forthrightness. But some of the concerns that revolve around shale gas are not technical ones. Some ask whether the number of jobs created, or the revenues generated will adequately compensate for the additional risks in people’s lives. Those concerned about the practical implications of hydrofracking, even on adjacent properties, will want to know how close proximity to heavily traveled roadways may have a negative effect on the marketability and value of their land. People are concerned about a possible decline in the value of their property and whether the development of a mining physical infrastructure is consistent with traditional New Brunswick values. These are lifestyle issues and clearly outside the scope of the expertise of geologists, economists and mining experts.

There is no doubt that, while the technical aspects of hydrofracking inherently are data driven, there are issues that cannot be addressed by scientific findings. Yet we continue to insist that a superior discussion will inevitably be one that is underpinned by data, statistics and mathematical expertise as though this objectivity will intervene to solve our problems.

The reality poses a stark contrast to this view. In the West, the history of the social contract reinforces a key theme that, once we no longer subscribe to the assumption that we can only become knowledgeable by being exposed to expertise, we can recognize and value the knowledge, wisdom and skills that we have gained, often informally, on our own. This lesson of history is worth remembering; citizens do not need to be highly trained, narrowly specialized and technically qualified to take their place among others in a community of interest. The notion that debates should be driven by data rather than ideology diminishes the alternative to this polarization. Debates can be driven not only by a technocratic understanding of the facts but by informed judgement.

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Filed under Environment policy, Social contract

The World of the New Capitalism

Published in the Telegraph-Journal 16th March 2012

Anatole Kaletsky is the author of a superb and optimistic new book on the future of capitalism entitled “Capitalism 4.0”. Kaletsky possesses impressive credentials for a work of this magnitude. He is editor-at-large of The Times of London and governing board member of the New York-based Institute for New Economic Theory, a nonprofit created after the 2007-2009 crisis to promote and finance academic research in economics outside the orthodoxy of “efficient” markets.

Kaletsky puts the upheavals of 2007-2009 in historical and ideological perspective and describes the emerging features of the new capitalist model by explaining how it will differ from previous versions and suggests how the rise of Capitalism 4.0 could transform politics, finance, international relations and economic thinking in the coming decades. This transformation is taking place not a moment too soon.

The market supremacy model of capitalism which assumed that there could be no constraints on the growth of the economy has suffered setbacks from which it cannot recover. Its adherents took it that if any physical or environmental limits to growth appeared, the market would in short order send the correct price signals to ensure that these obstacles were automatically avoided. This reassuring belief, predicated on the oversimplified assumption that efficient markets would always discover and transmit long-term social preferences, no longer is credible.

“For the thirty years following the Thatcher-Reagan revolutions, business leaders took it as axiomatic that virtually all regulations and government intervention was damaging to their interests and that companies should devote substantial resources to campaigning for a minimalist state. Ruthless industrial restructuring and the single-minded pursuit of shareholder value were not only presented was inevitable but also seen as desirable and efficient,” Kaletsky says.

The economic concepts of rationality and efficiency have thoroughly been discredited and a profound re-evaluation of the relationships between corporate management, governments and the public has begun. Corporations will have to acknowledge wider definitions of their objectives than maximizing their share price, especially in the short term.

What is at stake in this transformation is the future of the social contract in the West. Pulitzer Prize-winning journalist Thomas Friedman recognizes as much in a recent New York Times column in which he discusses the key to the success of current American capitalism that will enable it to thrive in the 21st century. To Friedman, American capitalism has been for more than one hundred years “a healthy, balanced public-private partnership where government provided the institutions, rules, safety nets, education, research and infrastructure to empower the private sector to innovate, invest and take the risks that promote growth and jobs.” The lesson of history, Friedman adds, is that capitalism thrives best when you have this balance.

This balance – Friedman calls it a bargain, while Kaletsky calls it an equilibrium – is what underpins the social contract. This balance is also what is increasingly unstable in our society today. In Canada and the U.S., constructive thinking about how environmental pressures could provide incentives or motivate innovation to change industrial, financial and social patterns of activity has become more conspicuously absent. Businesses from the Capitalism 3.0 era are fighting ideological battles against the principle of environmental activism while environmentalists increasingly are fighting market fundamentalism. The result is that increasingly the public is mired in arguments such as whether shale gas can meet the litmus tests of public safety while industry has turned to arguments of economic necessity. Those arguments – that society needs the jobs, that government needs the revenue to fund social programs, that oil extraction is a national security issue – serve only to further harden views that corporations are demanding severe sacrifice from the public.

For the social contract to survive, environmentalists and last-generation capitalists need to become connected to the balanced policies that ultimately will drive sustainable increases in living standards and create jobs. We need a more robust version of capitalism to achieve this.

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Filed under Economics, Environment policy, Social contract

Tinderbox Issues Ahead for Government

Published in the Telegraph-Journal 24th February 2012

In coming months, the David Alward government will face its first real test when its position on two critical issues are made public. Its decisions on forestry policy and shale gas regulations will provide a tense backdrop to the remainder of its mandate. Because both issues have polarized interest groups and citizens across New Brunswick, public support for the government’s positions is at risk, regardless of what the decisions will be. The fact that these issues will receive the full glare of media attention at roughly the same time that the provincial budget will be released adds pressure to a government that is walking a tightrope of public support.

While forestry may not be a sunset industry, it is in the doldrums.  The industry has been pressing government to make supply concessions that will not please environmentalists. Industry would be happy to increase clear-cutting practices because clear-cutting is the most productive method to harvest lumber. Environmental groups want clear-cutting to be dramatically reduced or banned altogether as well as decreasing the amount of cutting in stream-side buffers, deer habitat and old spruce-fir habitat. Forestry industry detractors argue that an increase in investment in New Brunswick’s forestry industry will pay no dividends in revenues or jobs; they point out that over the last ten years product output from New Brunswick’s forestry industry has more than doubled, but without a corresponding increase in employment.  This productivity increase is largely the consequence of process improvements and technology substitution and has kept mills alive in this province that otherwise would have been closed years ago. Industry’s response has been that, without supportive government policies, what remains of New Brunswick’s forestry industry is in jeopardy, including the thousands of jobs spread across some of the province’s most economically challenged geography.

Both sides have adopted positions that are unyielding if not intractable. The government is faced with a political minefield over solutions to the challenge of balancing environmental concerns with economic factors. The likelihood that disagreements about forest management in New Brunswick will be settled any time soon is remote.

The issues associated with shale gas drilling regulations are complex. The New Brunswick government has ambitiously committed to establishing tough standards on drilling practices; Premier Alward has promised that he wants New Brunswick to have “the strongest shale gas exploration regulations on the continent.” The implications of this commitment potentially are profound. Environmentalists and landowners will want to know what acids, hydroxides and other materials are being pumped into specific wells. Regulations may need to involve the mandatory disclosure of the volume of water needed to drill each well since many experts view this as critical information to evaluate how fracking affects water supplies. Some of the most critical aspects of shale gas regulation will revolve around how the regulations will be monitored and how enforcement will be administered. Regulation, monitoring and enforcement will represent a substantial challenge to government.

Fracking has become a flash point between environmentalists and those who think stopping shale gas development at a time when New Brunswick needs jobs and revenues reflect poorly ranked priorities.

These two tinderbox issues are not the government’s only risk problems. The New Brunswick government’s projected deficit is forecast to be approximately $471 million for 2011-2012, higher than the $448 million that Finance Minister Blaine Higgs estimated in his budget last March. There’s not much good news on the growth side of the ledger, either. Private-sector job growth has slowed dramatically and has come to a halt in industries that are exposed to global competition. Government fiscal austerity measures will mean reductions in public-sector jobs as well.  And the specter of federal government budget cuts looms large on the horizon. The provincial government is faced with what may be the most profound challenges of its mandate.

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Filed under Environment policy, Government transformation, New Brunswick