The economy vs. the environment

February 24, 2009

Its a knock-out

Is it a knock-out for the economy?

Not to suggest this is zero-sum game, in which there is only one winner and one loser, however, given the nature of our economy and over-reliance on fossil fuels, certain economic and political factors will hinder our ability to aggressively pursue stricter environmental policies. A hard reality that will need to be addressed at a time when more people will view environmental policies as a luxury item.

For instance, consider Canada’s much maligned tar sands. Producing significantly more greenhouse gas per barrel of oil, these projects are the target of many domestic and international environmental groups (reviewed recently here). However, the tar sands projects are also a significant, albeit controversial, economic driver in western Canada (international capital investment, job creation and taxation). With consistently negative economic forecasts (The Economist Intelligence Unit has downgraded its forecast for GDP growth in Canada this year to -1.6%), any action that will further impede our economy should be considered very carefully. Carbon surcharges, currently proposed by US Congress could create additional costs of several hundred million dollars to these projects. While the intention of these surcharges is to spread the resulting income into technology development and incentives, the more likely result for the tar sands will be making their extraction more costly, thereby making other sources more attractive. With reduced demand comes reduced credit purchase and less reinvestment into green technologies (net loss Canada).

On a more positive note, the various stimulus plans have yielded some modest opportunities. This week, the Province of Ontario announced its plans to fast-track wind projects, seen as an method of creating more green collar jobs. Unfortunately our federal government didn’t have the show the same foresight, when it decided not to include any “greening” initiatives to its tax credit for homeowners.

Shifting our economies towards sustainability will have a cost. Unfortunately, given our current economic situation, that cost is looking increasingly less appealing. However, in this age of Keynesian Economics, opportunities do exist to move towards sustainability while supporting our flagging economy, through sound public policy.

Ontario’s Green Act announced yesterday comes to mind. The folks at Ogilvy had a great review out first thing this afternoon (check the link for much greater detail):

Among the key features of Bill 150:

  • Creation of a Renewable Energy Facilitation Office
  • Streamlined Approvals Process
  • Feed-In Tariff Program
  • Expedited Connections for Renewable Power Projects
  • Planning Act Exemptions
  • Conservation and Demand Management Directives
  • Smart Grid
  • Generation by Municipal Electric Utilities
  • Renewable Energy Cooperatives

I’m glad to see at least one level of government is spending my stimulus dollars on creating new industries (and new jobs), instead of keeping certain other failed industries alive.

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  • Justin Peters

    You might also want to mention MaRS Tenant Skymeter whose technology to better allocate scarce road space by using the economic principles of supply, demand and clear pricing signals could help change our world.

    Until we change human behaviour, all the policy/technology in the world will not make a big difference. For instance, if the entire American Car fleet were to shift to Hybrids, there would be a mere 5 percent reduction in Greenhouse Gas Emissions from Transportation.

    Humans react to economic signals – as my hero is often quoted as saying; “It’s the Economy Stupid.” I also think that the current economic crisis actually provides the perfect time to start our shift – as Obama is clearly seeing.

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  • http://blog.marsdd.com webgoddesscathy @ MaRS

    Justin – totally with you on this one.

    Support for innovative start-ups was deemed a key way to kick-start the economy (“Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.”) in this article by Thomas Friedman:

    Start Up the Risk-Takers – New York Times

  • http://www.guelphinnovation.com Jim Wadleigh

    Good arguement.
    Yes, extracting, upgrading and burning liquid fuels made from bitumen sands is more energy-intensive than pumping conventinal oil, and yes it makes a mess of the landscape, but compared to coal extraction and burning, by far the worlds largest source of carbon emissions and gound-level pollution, it’s barely on the radar. And getting anything out of the ground (iron, salt, building materials) always makes a mess.
    Maybe we should be promoting the bitumen sands to our customer, the US, as a CLEAN, RELIABLE and SECURE replacement for coal instaed of sheepishly kicking dirt with our hands in our pockets.
    In a country like Canada with a vast surplus of saleable energy, funding the search for alternatives is always going to be a hard sell to those who have to make difficult decisions about policy and spending.
    Fortunately, green energy solutions are not, at this point, much of a short or medium-term threat to the petro sector, which is why they are ACTIVELY INVESTING IN GREEN ENERGY ALTERNATIVES. With thier deep pockets, market position and public sector drivers to reduce carbon emmisions, it strikes me that the petroleum companies are the best green energy investment pool that we have.

Kevin Downing @ MaRS

Kevin currently manages initial client engagements with the MaRS Venture Group. He also administers a federal fund that provides mentorship to start-up companies across Ontario.

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