General Description
In December 1997, more than 160 nations met in Kyoto, Japan, to negotiate binding limitations on greenhouse gases for the developed nations, in line with the objectives of the United Nations' Framework Convention on Climate Change of 1992. The outcome of the meeting was the Kyoto Protocol, under which 39 developed nations agreed to reduce their greenhouse gas emissions relative to the levels emitted in 1990.
At Kyoto, Canada agreed in principle to reduce its greenhouse gas emissions six per cent from 1990 levels by the period 2008-2012. In real terms, this would require at least a 25 per cent reduction from current projected emission levels for the period. It would also involve significant reductions in energy use by Canadians, with direct effects on living standards, lifestyle and job-sensitive economic activity, as well as our ability to compete internationally.
The Prime Minister has said he will ask Parliament to vote on the ratification of the Protocol by the end of 2002.
International Disparity
Not all countries in the Protocol have made the same commitments Canada has. The European Union wants internal flexibility to recognize the special circumstances of some of its members. Australia will actually increase its emissions over 1990 levels because of its concerns about its economic future. Australia has yet to ratify the Protocol and has indicated that it is unlikely it will do so.
Of greatest concern, in a highly competitive global trading environment, is that developing countries such as China, India, Mexico, South Korea and Brazil, and 130 others, do not have any reduction commitments under the First Commitment Period (to 2012) of the Protocol. While many of these countries have ratified the Protocol and may take on targets after 2012, these countries also contribute to the immediate climate change problem. Mexico is the only Organization for Economic Co-operation and Development country that does not have any stated emissions reduction commitments and is also part of the North American Free Trade Agreement.
The United States has announced that it will not ratify the Protocol and has decided to follow its own strategy to climate change. The U.S. emits approximately 25 per cent of the world's greenhouse gases.
If Canada ratifies the Kyoto Protocol, any greenhouse gas emissions created by residents or businesses in this country that exceed Kyoto's aggressive target will have to be paid for by purchasing "emissions credits" from other countries. These credits are essentially transfers of money out of Canada to other jurisdictions - many of whom will have excess emissions capacity to sell since they have no targets to meet. This transfer of wealth could instead by spent in Canada, developing technologies that fight greenhouse gases and that can be sold around the world.
Economic Impact
Canada faces an overall reduction task of between 25 -30 per cent of current emissions in order to meet its target of reduced emissions by 2012. The price of energy (especially for coal and oil) may rise to induce conservation, energy efficiency, fuel switching, and the development and deployment of new technologies and energy forms. The price of manufactured goods may also increase due to higher production costs - a combination of higher energy prices and the cost of making production more environmentally friendly.
Under a Kyoto policy environment, there is expected to be growth in small sectors of the economy, such as environmental technologies. However, very few experts expect this growth to offset the losses to larger parts of the economy for many years into the future.
Jobs Documents prepared by government officials in September 2002 for the federal cabinet show losses of up to 200,000 jobs if the Kyoto Protocol is implemented. The same documents show these job losses will come as a direct result of $16.5 billion in lost economic growth for the Canadian economy.
Canadian Households Canada is a large and cold country. All Canadians will be affected since residential energy use (heating, electricity) and transportation are major sources of emissions. For example, transportation produces 30 per cent of Canadian greenhouse gas emissions. Consumers will need to reduce energy (buy energy efficient appliances, turn down the heat), and alter their transportation use (making fewer trips, shorter trips, and using more public transportation).
Rising Price of Energy To achieve its Kyoto emissions targets, Canada is expected to have to reduce the use of fossil fuels. This reduction in supply will result in an increase in price of fossil fuel-based energy: gasoline, natural gas, heating oil and electricity. Some estimates indicate a 30-cent per litre increase in gasoline prices is possible. Due to increasing integration of electricity grids across provincial boundaries, even regions of the country that receive the majority of their electricity from hydro-electric sources will likely face increases in costs as demand for reduced-emission electricity rises across the country.
Trade Although classified as developing nations, many of the countries exempted from targets in the First Commitment Period of the Kyoto Protocol have advanced industrial capabilities and compete directly with Canada in the manufacturing, resource, energy and other sectors. Countries such as Brazil, Mexico, China and India have a sophisticated infrastructure capable of producing many of the goods and raw materials Canada now successfully exports. That these nations have no stated emissions targets places them at an obvious advantage - in terms of industrial output, use of energy, and freedom from regulation - relative to Canada.
In addition, the United States, Canada's largest trading partner, will not ratify the Protocol. The implications for Canada of an economically powerful neighbour with far fewer costly regulations and expensive restrictions on industrial activity are potentially disastrous. Since Mexico also does not have any emissions targets, Canada is at a distinct disadvantage compared to its NAFTA partners.
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