Posted by Canadian Dream on January 29, 2010
Well, Why Your World is About to Get a Whole Lot Smaller, is likely one of the longer titles I’ve seen for a book, but thankful the text is no where as long a the title. Actually Jeff Rubin writing is a very readable style that makes the pages just fly by so I managed to read the full 265 pages of text in just a few days.
Overall the book focuses on one major driver in our lives: the cost of oil. Which when you start to think about it really touches just about everything in your life via one important fact: transportation of goods. So from your apple at lunch to your cheap clothes from China everything today gets touched by the price of oil.
Really cheap stuff from China is only possible by cheap oil since no one in their right mind would transport stuff half way around the world to process it and then ship it back unless there was money to be made doing it. Rubin does his best in this book to point out that is going to end sooner than later by oil prices going through the roof, like in the range of $225/barrel in the next decade or two (current price is around $70 to 80/barrel).
The problem is really two fold with those classic drivers of supply and demand. On the supply side he points out the obvious we are running out of the really easy and cheap oil. Otherwise no one would spend the money to extract oil from the oil sands. And it’s not just happening here but just about everywhere there is oil. Also the new finds are not nearly big enough to offset declining production. Then to top it off demand is going through the roof just about everywhere but especially China and India. But it’s not just there for example a lot of production in the middle east is actually being used internally at highly subsidized rates.
So the interesting implication to all of this will globalization will halt in its tracks and things will revert back to a more local production base. So yes there will be some down sides like no more cheap dollar store toys, but there will also be some positive parts especially with greenhouse gases. To illustrate his point I will quote:
In OECD countries, where consumers pay the full price for a barrel of oil, triple-digit prices will do more to reduce greenhouse gas emissions than a hundred Kyotol Protocals.
Rubin predicts we won’t solve emissions with accords but rather good old fashion trade. To illustrate the point I’ll provide another quote:
The most direct strategy for halting the seemingly endlesss growth in global carbon emissions, is not another round of Kyoto talks calling for voluntary cuts. What we need to do is to impose a carbon cost on emitters at home, then impose the same standards on imports.
So we will likely solve the problem with the US and Europe having either a carbon tax or cap and trade and then putting that same standard on imports. Sudden shipping distance will matter again and local will be cheaper driving a new round of local manufacturing for all countries.
Overall I rather likely the book. It’s very readable, brief and to the point. Also he doesn’t point out the world will end, rather it will just change again. Which when you think about it happens all the time.
Posted by Canadian Dream on December 18, 2009
Well for two weeks we have been under a blast of media coverage on the COP-15 talks in Copenhagen all asking the same question: will there be a new deal international deal on CO2? The answer has been known for months: likely NO.
Why all the media coverage? Everyone keeps hoping someone will cave in and they will get a new deal despite two years of negotiations between these governments. If you can’t sort out the major points like targets and funding in two years what makes you think you can get it done in days? The reality is everyone is ignoring the elephant in the room: Kyoto failed. With out China, India or the US it never stood a chance of making real difference to world for CO2 levels.
Which leaves us to an interesting conclusion. We can’t prevent climate change, that ship has sailed and we have missed the boat. So if you accept for a moment that we can’t prevent some of the effects, you can get over this obsession from people on needing an international deal. The reality is we can do this the old fashion way: via trade. What we need is for the US, Canada, Europe to pass their own CO2 reduction regulation and jack up tariffs on any high CO2 imports. Then if they also tie their technology and development adaptation aid to the country receiving the aid having a regulations in place you will seem most places fall into line. A deal without all the current drama.
The draw back between this method instead of an international deal will be trying to link up any cap and trade systems. Yet the reality is finance people will sort that out. Perhaps each country will have it’s own CO2 currency complete with exchange rates to other systems. If China has a poor verification system perhaps 1 tonne of CO2 reduction there is only worth 0.25 tonnes in a US system. In the end things will work out, but just too late to do any real prevention.
So that’s my thoughts on this whole mess as it goes into its last day. What did you think would happen at Copenhagen? Were you hoping for a deal?
Posted by Canadian Dream on November 13, 2009
The Globe and Mail first reported on this report a while back, but I thought I would bring a few items that it contains to your attention. You see the report was written with a simple goal. If we had to make the governments currently weak targets of CO2 reduction (20% below 2006 levels by 2020) what would you need to do and how would that look across the country in terms of jobs and GDP (It also looked at a deeper target, but I’m ignoring that for now).
The answer was somewhat surprising in the regards any cap and trade system simply won’t be enough to even get to the current modest target even with a carbon price starting at $40/tonne and rising to $100/tonne by 2020. The government would have to do a lot more. How much more? Well here are a few items:
- Oil and gas companies must stoke venting and flaring unless needed for safety reasons.
- New commercial building would need to be at least LEED Gold standard and new homes must be 50% more efficient. All buildings in BC, MB and QB would use electricity for heating (all high hydro power generation locations).
- All new vehicles would need to meet the California standards for emissions and switching to zero emitting by 2040.
- All appliances would have to meet the highest efficiency available by late 2008 and tighten over time.
- All landfills would capture methane for power generation and/or heating.
Now of course the Globe and Mail had to make a splash with their headline saying the West will pay. This is hardly news, actually it is common sense. Who’s economy is the most reliant on coal, oil and gas? Well that would be Alberta and Saskatchewan and BC in third place. Guess who then would pay the most under a cap and trade system? It’s hardly rocket science folks.
Another interesting fact was we would have less jobs by doing nothing. Yes meeting these targets will drop the GDP by a little (1.5% by 2020 for all of Canada), but in exchange more people will be working (+0.5% higher employment across Canada).
Now the really useful item in this report is the estimate payments to each person the government will give you to help offset your rising fuel and power bills (see the first table in the Globe article). On average it will be $109 per person, but the amount per province is very different. In Alberta it’s $501, while in SK it’s $372 while QB is $21. Basically this means your bills would be going up by at least these amounts and in all likelyhood going higher still.
That in a nut shell is the issue with CO2. In the end, anyway it goes it will cost you a lot of money. How much? Well this report gives you an idea. It won’t be a perfect estimate, but at least it’s a number to discuss. No wonder the government is dragging its feet on the issue. But the real killer is this, the longer they wait the more it’s going to cost you. Change is always expensive, rapid change is very expensive.
So what did you think of that report? Are you willing to pay that much to stop climate change?
