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Monthly Archives: January 2015

Climate Change Front and Centre in Sudbury By-Election

I see that the Conservatives have arrived with a petition against their imaginary version of carbon pricing. I count that as a big success. The Conservatives are scared.
We finally have the solution to climate change at the center of an election in Ontario. Their response is to try to sow confusion.
Paula Peroni argued vehemently that she can’t support a carbon tax until the Liberals satisfy the Conservatives that Liberals won’t spend any more money. Conservatives will trust Liberals when pigs fly!


But Paula’s response is revealing. Climate change is not the issue: Liberal wickedness is the issue. She wants to ignore the elephant in the room and beat a dead horse!


No one is proposing what she is opposing. She was loud in her opposition at the last debate, but she was totally off track. Lets see if she figures out what we are talking about before the Chamber of Commerce debate next week.

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Rex Murphy is Scared

Rex Murphy has a piece in the National Post warning that “warmists” might use low oil prices to introduce a carbon tax. “Can you not, just one time,” he thunders, “allow a little of the benefit to flow down and let those who most need and appreciate some small break have that break? Must their one parade be rained on?”

Rex’s rant shows how little understanding he has of how the carbon tax works when it is packaged with a carbon dividend.

Start with the need to fix a broken price system. If burning carbon causes damage, the people who burn the carbon should pay for the damage. They don’t now. They get a freebee for polluting. They should pay a “corrective tax.” This is elementary economics, Rex, and it is a fundamental part of your moral code. You have heard of liability law and tort law? They are the basis of our legal system. Under our system, if you do harm to anyone, then you have to “make it good”. If you burn carbon you should pay the costs. It is actually a Rex Murphy kind of moral proposition, so you should be in favour of a carbon tax for moral reasons.

If the price of burning carbon covers the damage you will probably burn less carbon. You will do less harm to others. A carbon tax will make you a better man, Rex! I think you grew up Catholic, so that must appeal to you.

But who gets the extra seven cents a litre? You imagine that we sneaky economists want to use it to pay for holidays for the Premier or pensions for MPPs. You haven’t been listening.

We want to give it back to you! To you, Rex. You will be able to buy just as much gas as you bought before, so you can’t possibly be worse off. (Actually, Rex, since you might be up there in the top 10% of the income distribution, your check might not quite pay for all the fuels you burn. The vast majority of Canadians will actually get more than enough to cover the extra costs of fuel.)

Economists have proposed different ways to give the money back. Some want to cut income taxes, others want to cut corporate taxes, some want to use it to buy you better green technology to help save your children from climate disaster, some want to pay down your national debt. All these sensible ideas seem to have confused you pretty badly, Rex, so lets make it simple.

Lets just write a check for everyone. Lets demand that the carbon pricing legislation say the government has to send everyone a check each month equal to their share of the carbon tax collected.

You will spend that carbon tax money, Rex, but you will spend at least some of it on low-carbon goods and services: (some people might even use their check it to buy your book, Rex!) The spending that is directed away from the fuel companies will actually stimulate the economy.

So you see, Rex, you actually want to see a Carbon Fee and Dividend brought in. You didn’t k now it until now, but a carbon tax makes you behave better. Every self-righteous bone in your body is begging for a carbon tax.

Don’t say it out loud, though, because the fanatics at the National Post will stop publishing your rants.

An Economist’s Response to Carbon Tax Criticism

I see somebody called “Rob” on the Northern Life site saying the Green carbon tax will “screw Sudbury.” apparently Rob needs a few lessons in economics.

So let me talk about the carbon tax policy, Rob. I am an economist who has read the economic research studies on the costs of climate change and the impact of the Green carbon tax. If you promise to read them, I will even send you a list of references.

Here is the story. The carbon tax makes you better off in the long run because it helps avoid huge costs. Already the evidence show about 5000 people dying a year as a result of warming. We are killing people, Rob. Dollar impacts are ramping up even more quickly. The carbon tax will mean you are not killing so many people and you won’t have to pay such high insurance costs and your taxes won’t go up so much to replace infrastructure.

Since you probably want short term results, we will give you a “carbon dividend”. Sure is is a bit of a political bribe, but it makes 80% of the people of Canada better off that they were without the carbon tax. Do you want your carbon dividend, Rob?

Then, if you really like economics, you can look up “endogenous technical change.” As we shift to a new technology the rate of innovation goes up and jobs are created. On the other hand, investing public money in the old technologies stifles innovation. Protecting the oil industry is killing high-tech new-economy jobs in Ontario. This isn’t isn’t the fringe view: Look at the business section of the Globe and Mail yesterday. Are you in favour of jobs, Rob?

The fringe view is that carbon taxes cost jobs. And if you still believe carbon taxation will hurt you, you are on the fringe, Rob. I can refer you to a great online book on doing plastic surgery at home.

Sudbury’s Andy Lemay on Geothermal

From Andy Lemay, retired Energy Analyst for INCO:
Dave,
It is a known fact that the deeper you go underground the warmer or hotter it gets. Ask any miner. For example during the winter miners leave the outdoor temperatures of around zero, minus ten, twenty or sometimes minus thirty degrees Celsius to work underground where temperatures could rise to well above zero to even plus 30 degrees Celsius.

Heat from the earth is referred to earth energy or more commonly termed geothermal energy. Geothermal energy is very plentiful, renewable and has the potential to offset the huge quantities of fossil fuels. The mining sector especially Sudbury’s mining cluster is very well positioned to develop this underground energy.

Economically, development geothermal energy can keep hundreds of millions of dollars in the community rather than out to pay for fossil fuels, provides jobs and as just importantly reduce mining energy costs and provide another valuable mining product. Environmentally, geothermal is green and renewable.

Geothermal energy is innovative, clean and, using an often coined phrase, “the way of the future”.


Andy

Oh What Tangled Webs We Weave!

Oh what tangled webs we weave!!

I have been dropped as a speaker for the Mayor’s consultation on economic development on January 22. The reason given, of course, is that having the Green Party candidate participate might seem like a political endorsement. I was invited before even I knew I would run, so logically having me speak cannot be seen as an endorsement, but I guess the organizers don’t think people in Sudbury are logical!

On one level it is flattering – the organizers are really saying my presentation at the Mayor’s event could be so impressive that the other candidates would be seriously disadvantaged. In that case, taking me off the agenda is an endorsement!!!

The alternative might be to invite the other candidates to present their original thinking on promoting Sudbury’s development. But that would even worse. I have spent years studying how to promote the local economy. That is why I was invited and not Glen or Andrew or Suzanne, or even Paula. So not inviting the others is an endorsement!!!

It isn’t a serious problem for me – I save a few days of hard work preparing material for for the event. I miss a chance to contribute as a professional economist to the City’s strategy but I suspect the organizers will ask me to contribute later or in private. That is an endorsement too, isn’t it?

the whole thing is kind of comical when you look at it carefully!

Anyway, the organizers are trying to appear “fair” and “balanced.” That is good, and I respect that. They also know that they are probably losing my contribution just for the sake of appearances. That is not so good. I suspect I won’t do as much work for the private session: they have given me a fairly clear signal that they care more about appearances than content.

Did they make the right decision? Are they being responsible or just a bit chicken? Did they have a real problem or did they create a real problem trying to solve an imaginary one?

I WOULD LIKE TO KNOW WHAT YOU THINK.

Let’s Talk About More Jobs in Sudbury: Laurentian University as an Impact Multiplier

I talked about “Basic” industries in the last post. A basic industry is one that brings in money from outside the community. Impact “multipliers” are based on the idea that every dollar a “basic” industry brings in circulates, so its effect is multiplied.

Big box stores are not basic – they come into a community to take money out. If they replace locally-owned stores they actually reduce the multiplier.

It will be a surprise to many, but Laurentian University is one of Sudbury’s most important basic industries. Half of the students come from outside of the region. If 3,5000 outside students spend a bit more than $20,000 on average each year, the university brings in a minimum. $70 million per year. It also keeps another $70 million from local students in the community.

The University is one of our most important growth industries. Every new program attracts additional students. The architecture school, for example, will eventually add over 450 students and at least $4 1/2 million new dollars each year. The proposed School of Performing and Creative Arts (SCAPA) will eventually add at least 200 students. Other recent spurts of growth have come from the medical school and the growing Bharti School of Engineering.

Laurentian also spins off other jobs: Science North, for example, now provides about 70 full time jobs and about 150 part time jobs. Science North is a “New Economy” industry. It produces information and media products. Media and information are the growing sector of most advanced economies.

There is a lesson here – the citizens who created Laurentian also created an economic engine for the City. As part of its economic strategy the community and the university have to work together to grow new programs and recruit new students. Growing the university is too important to leave to the university administration – It has to be a high priority job for the city’s economic planners.

Growing the University is also one of the key jobs for the City’s MPP. It took a political fight to get a medical school. We will have to fight to make Laurentian the mining research center for the province. The smarter and tougher our MPP the more jobs we get.

Let’s Talk About Jobs in Sudbury

Lets talk about jobs. Here in Sudbury the main growth sector is the mining supply sector. It supplies Vale, other Northern Ontario mining operations, other Canadian operations and – this is crucial – a growing number of companies around the world.

In the theory of regional development, the mining supply sector is `basic’ – it brings in revenue from exports. With a very few exceptions the commercial sector and the public sectors depend on the income brought in by the basic industries. Once you see this, you can see that a job strategy for Sudbury has to include a really good plan for expanding the mining supply sector.

Glenn Thibeault announced his strategy for job creation today. He emphasized the Ring of Fire. Ignore the fact that the development of the Ring of Fire has been fumbled and delayed by the governnent he is joining. It will happen eventually. A Ring of Fire strategy for Sudbury has to focus on getting ready to grab the business generated by the Ring of Fire Not just the Ring, but also the other mines that will follow once the transportation infrastructure is in place.

The trouble is that the provincial government does not care if development goes to Sudbury. The Ontario Chamber of Commerce is pressuring the government because it wants those jobs in Southern Ontario. The government in Queen’s Park is not going to play favorites.

This is a mistake in the grand scheme. Sudbury already has an internationally recognized cluster of supply firms. You win the bame by building on your strengths and building up your brand recognition. Sudbury already has Brand Recognition around the world. A key part of the Provincial mining strategy should be to build the Sudbury mining and supply cluster.

So, why didn’t Glenn promise to fight for the Sudbury mining supply sector? Maybe it is just bad manners to support a particular region when you are travelling with the Premier of the whole province. Maybe he doesn’t understand the local economy very well. Maybe motives don’t matter – the simple fact is that he missed the chance to stake out crucial territory even before the election began.

If Glenn had understood the economics and politics a bit better he would have said “Kathleen, I’d love to stand for the Liberals, but you have to give me one thing: I want a commitment from you that we will make Sudbury the mining capital of the world and the mining supply powerhouse for the Ontario economy.”

He missed his chance. That will make it harder harder to promote jobs in Sudbury. Instead, Glenn will work to channel money to highway 69 and to wasteful projects like Maley Drive. That is the kind of politics that made Rick Bartolucci a very successful local politician and a very poor Minister of Northern Development.

How do you promote the local cluster? Start by recognizing that there can only be one major mining university for the Province. Sudbury is the only long term candidate. So you start moving mining research to Sudbury and phasing out the weak old programs at Queen’s and Toronto. It would be almost free for the Province, but it would have a powerful effect. It might make Queen’s alumni mad, but it would make Ontario richer.

A second key strategy is to fund more mining R&D in Sudbury. Governments prefer short term research projects, but the way you win the game internationally is to create permanent, university-level research positions. You set out to bring the best people in the world to to your home town. The $50 million in provincial and federal funds that Glenn wants to spend on Maley Drive should be spend on productive talent rather than a Highway to Nowhere.

A major research focus should be on cutting the energy costs of mining. Another should be on making use of all the free underground energy mines have to get rid of. If you could divert the waste heat to warming, say 10,000 gas-heated homes, you could cut amount of gas bought from out-of-province by ten-to-twenty million dollars a year. You would divert some spending into the region making the local economy more resilient and generating more jobs in the commercial sector. Then you would need more schools and busses. A mining-based energy strategy could be one of the keys to
Sudbury’s growth. And it could create a new export industry for the city.