On Kyoto we are all hypocrites

According to press reports, the federal government’s campaign to harness popular enthusiasm in an all-out national effort to meet our Kyoto targets has so far proved a big fat flop. Bureaucrats are telling cabinet we’re nowhere near achieving our targeted reductions in CO2 emissions -- not even the targets we set for ourselves, as opposed to the ones we signed up for in the Kyoto Protocol. But then the bureaucrats themselves seem to be dragging their heels: A third of the money allocated to the program in 2003 has yet to be spent. All in all, one detects a distinct lack of enthusiasm for the whole project, inside government and out -- that is, for the concrete changes in behaviour that reducing emissions entails, that is, rather than issuing position papers, lecturing the Americans, etc. You could knock me over with a feather. You mean to tell me that the population, immune to the televised entreaties of Rick Mercer, has failed to enlist en masse for the One Tonne Challenge? That attempts to persuade industry to reduce its emissions via voluntary agreements have likewise failed? What a shock. Exhortation rarely succeeds as a means of achieving mass behavioural change, least of all in support of such nebulous objectives as averting global warming. This is especially true when those exhorting others to mend their ways are themselves seen to be contributing in no small part to the problem. It is perhaps not lost on the public that the same federal government that wants them to take fewer trips and sleep in a nightshirt, the better to reduce their energy consumption, is preparing to drop hundreds of millions of dollars on subsidies for the automobile and aerospace sectors, which presumably run on air and water. Not that one wants to pin all the blame on the politicians. It was the public, after all -- the same ones who tell pollsters they support Kyoto in such large numbers -- who screamed blue murder at this spring’s spike in oil prices, which is but a fraction of the increase that will be required to fulfill even the Kyoto targets, let alone the much greater changes that reversing climate change will require (whatever your views of Kyoto, everyone agrees it is just a first step). The Liberal government in Ontario was elected partly on a promise (since broken, but you knew that) to cap electricity prices, rather than allow them to reflect the real cost of production. On Kyoto, as on much else, we are a nation of hypocrites. But even with the best will in the world, exhortation is simply not an effective way to alter consumption habits. Only within the echo chamber of official Ottawa could it have been seriously believed that individual members of the public were primed and ready, each to reduce his or her personal emissions of CO2 by one tonne per year. Indeed, as a method of achieving a desired policy objective, exhortation is only slightly better than the alternative the bureaucrats have proposed: regulation. Voluntarism may be ineffective, but it is not also wasteful in the bargain. Regulation, or “command-and-control” as it is known in the literature, is needlessly costly in at least five ways. One, it does not take into account the differing costs of compliance to individuals and companies in different situations, imposing the same obligations on those from whom it would require little sacrifice as it does on those for whom the burden is very great indeed. Two, it offers no incentive to improve upon whatever standard is required by the regulation. You meet your quota, you stop. Three, it likewise limits consumers to those methods of compliance it occurs to the regulator to sanction. Four, because it is penalty-based, it requires elaborate -- and expensive -- systems of enforcement. And five, it is frequently beset by perverse incentives and unintended consequences. Mandated fuel-economy standards on automobiles, for example, are greatly diluted in effect by their own arithmetic: if a car gets more miles per gallon, it costs less to drive a given distance. The consumer may respond simply by driving more. (A similar principle undermines attempts to promote energy efficiency by subsidy. The subsidized activity may use less energy, but it still amounts to subsidizing energy consumption.) There is a better way, one that is already in use across much of the economy: prices. The government could achieve greater emissions reductions at less cost by relying on systems that build the cost of reducing emissions into the prices of things, whether by taxing them according to their CO2 content, or by letting the market put a price on emissions, via so-called tradeable emissions permits. Unlike command-and-control schemes, these leave it to individual economic actors to figure out their own best ways of reducing their emissions, even to exceed the targets if it pays to do so. Unlike voluntary systems, however, these leave no option but to comply. The federal government, or at least some of those working therein, knows this. Indeed, in its initial position paper it listed a simple tradeable emissions system as one of four options for achieving its Kyoto reductions, together with estimates showing it would have been by far the least costly of the four. Yet for political reasons, it instead pursued a course that relied heavily on so-called “targeted measures” -- subsidies, regulations and exhortation: the very methods it now finds are failing. As I say, you could knock me over with a feather.