The Fraser Institute

The Fraser Institute

April 20, 2007 15:15 ET

The Fraser Institute: Meeting 2012 Kyoto Target Could Cost Every Canadian $3,500 Per Year for Next Several Years

TORONTO, ONTARIO--(CCNMatthews - April 20, 2007) - Reducing Canada's greenhouse gas emissions to meet Kyoto Protocol targets by 2012 could cost each Canadian upwards of $3,500 a year for the next several years, according to research done by The Fraser Institute, an independent research organization with offices across Canada.

The alternative is to purchase foreign emission credits, a move that would transfer $30 billion from Canada to other countries.

"In order to meet the Kyoto targets, Canada will have to make drastic cuts in its emission levels. No matter how we go about it, meeting a target that begins less than a year away is going to incur significant costs," said Nicholas Schneider, a policy analyst with The Fraser Institute and author of Welcome Back, Kyoto, published in the April issue of Fraser Forum, The Fraser Institute's monthly magazine of critical thought.

"One of the questions governments need to consider is, are Canadians willing to pay those costs?"

Schneider notes that research in the U.S. found people are willing to spend $13 to $21 per month to reduce climate change.

"If you convert that to Canadian dollars in 2007, that works out to a range of $200 to $300 per year - far below the $3,500 per person per year that may be required."

Schneider's research looks at Canada's current emission levels, the Kyoto targets, and compares the results achieved by other countries to the targets for Canada. What he finds is that the easy options available to other countries are not available to Canada.

"You can control emissions by lowering a country's population or its GDP. But it's unlikely government would choose these policies since Canada has a policy of increasing population largely through immigration, and Canadians would be averse to falling real incomes," Schneider said.

He predicts policies to reduce greenhouse gas emissions will likely focus on reducing emissions intensity, which can be reduced over time by switching from high-emitting energy sources like coal, to lower-emitting sources like nuclear and renewables, or by increasing the efficiency of existing energy sources. This trend is already occurring in Canada; between 1990 and 2006, GDP per capita and population both increased while emissions per unit of GDP decreased.

But based on current emissions estimates from both the United Nations and Natural Resources Canada, achieving the required reduction in greenhouse gas emissions under the Kyoto Protocol will require emissions intensity to fall roughly 70 per cent below current levels by 2012 in order to offset growth in population and income. This amounts to an average annual percentage reduction in emissions intensity of almost 15 per cent per year, sustained for five years.

Schneider points out that most of the countries that have come close to sustaining an annual reduction rate of 15 per cent consist of several Eastern European countries that experienced economic contraction. The only industrialized country that achieved that target was Luxembourg, mainly by shifting its electrical generation from coal-fired plants to natural gas.

"Canada's electricity production is already more than 70 per cent from low-emissions hydroelectric, nuclear, and natural gas sources, with about 20 per cent from coal. This effectively eliminates any options we have for easy, large-scale emission reductions in a short period of time through fuel switching," Schneider said.

Historically, the best any industrialized country has done at reducing emissions is one to five per cent per year. Schneider's research shows that if Canada can match the highest rate of emissions intensity improvement seen within the majority of industrialized countries - five per cent per year - then we would still be left to accept annual GDP reductions of roughly 10 per cent for the next five to six years in order to meet Kyoto.

Shutting down 10 percent of Canada's $1.1 trillion economy would result in a cost of over $100 billion per year, or roughly $3,500, on average, for every Canadian in terms of forgone economic production or income.

"Any attempt to meet Kyoto through a crash-course plan over the next five years will result in unacceptably high costs, and little benefit in terms of developing a flexible, long-term policy," Schneider said.

"Over the longer term, a more gradual approach to emissions reductions should allow for the development of new technologies and practices to reduce emissions in more cost-effective ways."

Welcome Back, Kyoto was published in the April issue of Fraser Forum, The Fraser Institute's monthly magazine of critical thought. The article is also available at

The Fraser Institute is an independent research and educational organization based in Canada. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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