Eric Lui's Blog

Sunday, October 4, 2009

newspaper article:
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Unit 1 – Performance Task; Analyzing a News Story form an Economic Perspective

The article, “New climate plan would favour oil sands,” speaks of a topic which in the last decade has become a major issue: the greenhouse gas emissions produced by major industries in Canada. Ottawa plans to control this by capping gas emissions, but the caps are less strict on oil and gas companies, which are the primary polluters in Alberta and Saskatchewan. As environment Minister Jim Prentice explains, Ottawa’s cap-and-trade plan lets the government set a limit on carbon emissions by major polluting industries. Industries under the cap are then allowed to sell emission permits to companies which exceed the limit, thereby rewarding companies who are more efficient and green. However, this plan will prove very costly to all provinces and territories other than Alberta and Saskatchewan, especially Ontario and Quebec. Ontario’s economy, with it’s numerous heavy industries, is greatly at risk, as is the economy of Quebec. Ontario and Quebec argue that they have proposed their own cap-and-trade legislation which will reduce emissions without placing them at a competitive disadvantage to other provinces.

Four of Canada’s ten key economic questions are addressed in the article. They are political stability, economic growth, equitable distribution of income, and environmental stewardship. Political stability is important to developing the economy of a country because it allows long-term planning which encourages investment, and in many cases political uncertainty negatively affects the economy. The cap-and-trade plan’s unpopularity in central Canada creates political, since the federal Conservatives already have a weak minority government. As Talaga and Woods note, “It could also be a liability for the Conservatives as the country creeps toward a possible federal election this fall. The increasing likelihood of a trip to the polls has convinced some that the federal Tories will eventually back away from a cap-and-trade system based on a preferential treatment.”(Tagala and Woods, A08) Since, the cap-and-trade plan will benefit only the two provinces, while the other eight provinces and three territories are outraged, the conservatives most likely will stay away from the cap-and-trade system if a fall election is going to occur. The political uncertainty here will definitely weaken the political stability of Canada because the decision will be based on what the Conservatives must do to remain in power, not what will be best for the country. Economic growth is the increase in total output because of an increase in total input. Will the cap-and-trade plan increase the total output of Canada? Most likely not. Tagala and Woods feel that the plan “could jeopardize the economies of eight provinces and three territories for the sake of continued growth in Alberta and Saskatchewan,” (Tagala and Woods, A08). It is safe to say that there is definitely no economic growth for any of the provinces or territories except for Alberta and Saskatchewan. Also, since energy is a very inelastic good and demand for it is always high, the plan to shut down many energy-creating industries all over Canada except for the heavily polluting oil sands makes one wonder how the lost energy will be replaced. The overall output of Canada in terms of oil and gas will most likely increase, meaning there will be economic growth, but a lot more of the oil and gas will have to be sent across Canada from the prairies because of the plan to shut down many inefficient and polluting power facilities, decreasing the supply and increasing cost all across Canada except in Alberta and Saskatchewan. Equitable distribution of income means that the total national output is divided in a more even way. Yet, “The federal government would put Ontario’s economy at risk by moving on climate change in a way that hampers [Ontario’s] ability to grow [it’s] economy and gives preferential treatment to those that produce oil and gas.”(Tagala and Woods, A08) Ontario’s economy suffers, but so do the economies of seven other provinces and three territories. Seeing that only two provinces actually gain anything from the new system, it is hardly equal distribution of national output. Finally, environmental stewardship is economic activity which is carried out without damaging the environment. The intent of the cap-and-trade system “is to encourage efficiency and conservation by rewarding industries that get below the cap and adding costs to high polluters.”(Tagala and Woods, A08) Creating more earth-friendly ways of producing energy is the goal, which means that Canada is attempting to be environmentally friendly with its economic activities. On the other hand, oil sands cause some of the greatest pollution in Canada, yet it is the one industry, which is able to evade this cap-and-trade system.

Work Cited
Talaga, Tanya and Woods, Allan. “New climate plan would favour oil sands.” Toronto Star. 5 Sept. 2009: Canadian Points of View Reference Centre. EBSCO. Web. 4 Oct. 2009.

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