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Policy Brief Merging Environmental Concerns and Economic Growth: Canada and Europe Move towards Kyoto Deadline Researched and written by Andrew Gertge and J. Robertson Mcilwain. Andrew and J. Robertson are MA candidates and graduate research as- sistants at the IES 1 P repared under the supervision of Dr. Kurt Hübner. Kurt Hübner is a Professor of European studies and the director of the Institute for European Studies at UBC. Central to Hübner’s re- search are topics of global and European currency regimes, international regimes of foreign direct investment, and the re- lations between innovation and sustain- ability. His latest research focuses on the economic and socio-political foundations of technical innovations in a transatlantic perspective. Currently he is working on a project on currency competition and currency co-operation, which analyses the relations between the U.S. Dollar, the Euro and the Japanese Yen. Project Sponsor: The Transatlantic Program of the Federal Republic of Germany funded by the Eu- ropean Recovery Program (ERP) of the Federal Ministry of Economics and Tech- nology (BMWI) Canada and Germany as Global Economic Policy Actors ISSUE 8 | MAR 2009 Leaders will meet in Copenha- gen later this year to take stock of the Kyoto Protocol and ne- gotiate a possible post-2012 successor to the climate change framework. Canada and Eu- rope, both signatories to the Kyoto Protocol, will arrive in Copenhagen with very diver- gent degrees of success in re- ducing levels of carbon dioxide. Canada, once a global leader in environmental protection efforts, has lost its way and is unlikely to meet its Kyoto com- mitments.

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Page 1: Merging Economic and Environmental Concerns

Policy Brief

Merging Environmental Concerns and Economic Growth: Canada and Europe Move towards Kyoto DeadlineResearched and written by Andrew Gertge and J. Robertson Mcilwain. Andrew and J. Robertson are MA candidates and graduate research as-sistants at the IES

1

Prepared under the supervision of Dr. Kurt Hübner. Kurt Hübner is a Professor of European studies and

the director of the Institute for European Studies at UBC. Central to Hübner’s re-search are topics of global and European currency regimes, international regimes of foreign direct investment, and the re-lations between innovation and sustain-ability. His latest research focuses on the economic and socio-political foundations of technical innovations in a transatlantic perspective. Currently he is working on a project on currency competition and currency co-operation, which analyses the relations between the U.S. Dollar, the Euro and the Japanese Yen.

Project Sponsor:

The Transatlantic Program of the Federal Republic of Germany funded by the Eu-ropean Recovery Program (ERP) of the Federal Ministry of Economics and Tech-nology (BMWI)

Canada and Germany as Global Economic Policy Actors

ISSUE 8 | MAR 2009

Leaders will meet in Copenha-gen later this year to take stock of the Kyoto Protocol and ne-gotiate a possible post-2012 successor to the climate change framework. Canada and Eu-rope, both signatories to the Kyoto Protocol, will arrive in

Copenhagen with very diver-gent degrees of success in re-ducing levels of carbon dioxide. Canada, once a global leader in environmental protection efforts, has lost its way and is unlikely to meet its Kyoto com-mitments.

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Canada’s track record shows a consistent inability to adopt an emissions reduction policy at the federal level that would be sufficiently binding at the provincial/territorial level to effectively reduce emissions. An of-ficial audit by Canada’s Environment Commissioner, released in Febru-ary 2009, confirmed that the Canadian federal government severely lacks com-pliance measures for its billions of dollars allocated to climate change and other en-vironmental programs. Europe, while not without its own foibles, has enthusiastically included sustainabil-ity as a principle goal and is the international leader in efforts to combat climate change. In 2005, the EU launched the world’s first multi-country CO2 emis-sions trading scheme, which, combined with other programs, has put Europe on the path to become one of the only success stories when Kyoto concludes in 2012.

The current global recession brings to the fore an is-sue that both Canada and Europe have dealt with in recent years—the linkage of environmental protec-tion and economic growth. Environmental protec-tion has traditionally been viewed as incompatible with economic growth, but this has been largely dis-proved in recent years. Canada, especially under the leadership of Stephen Harper and his Conservative government, has had tremendous difficulty decou-pling the two, particularly with regard to the Alberta tar sands. Europe, on the other hand, has attempted to introduce guidelines under the Lisbon Strategy for moving forward in this area. Europe may offer valu-able examples to Canada. Canada also suffers from a lack of federal leadership in climate change actions as well as problems with the implementation of pro-grams it has adopted. Much of Canada’s failure to

form a concise strategy and implement programs is rooted in the dynamic between the federal and pro-vincial governments. Through its model of Members State/EU relations, Europe may offer a blueprint for moving forward.

As one of the first to ratify the Kyoto Proto-col, Canada was once lauded for its central role in raising global awareness of climate change; but it has fallen from grace. Cana-

dian delegations now elicit more exasperation than respect at the annual UN Conference of the Parties (COP). In December 2008, at COP-14 in Poznań, Poland, a group of over 300 environmental NGOs called “The Climate Action Network” awarded Cana-da with the “Colossal Fossil” prize for doing the most to prevent progress during the deliberations. Canada draws such criticism not only because it reneged on its commitment to the Protocol, but also because its own “made in Canada” targets have been patently unable to curb the country’s rising greenhouse gas (GHG) emissions, which in 2006 were 22% over their 1990 levels. Environment Canada touts its cur-rent plan to reduce GHG emissions 20% by 2020 and 50% by 2050 as “one of the toughest regulatory regimes in the world.” The base year for the current policy, though, is 2006, not the 1990 benchmark agreed upon in the Kyoto Protocol and still used by most other Kyoto signatories. The new policy puts Canada on track to reduce emissions by 3% from 1990 levels, eight years after its ratified 6% reduction commitment to the Kyoto Protocol.

Canada’s rise to pre-Kyoto prominence on the global climate change scene began with the passing of the 1987 Montréal Protocol. The Montréal Protocol ef-fectively led to a ban of ozone-depleting Chlorofluo-

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The Country that Would: From Montréal to RioCanada, once a global leader

in environmental protection efforts, has lost its way and is unlikely to meet its Kyoto com-mitments.

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Canada and Germany as Global Economic Policy Actors

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rocarbons (CFCs) in developed countries by 1995 and in the world by 2010. This event undoubtedly occurred during a period of high public awareness of the environment. Extensive media coverage of the Exxon Valdez disaster, the clear-cutting of the rain forests and the greenhouse effect elicited high public concern. The Protocol also promoted environmental issues that had largely been perceived as local and na-tional concerns to the world stage. The following year, the 1988 Toronto Conference on the Changing At-mosphere jump-started important consensus-build-ing within the global scientific community, which led to the inclusion of the United Nations Framework Convention on Climate Change (UNFCC) at the 1992 UN Rio Earth Summit.

The years between the Toronto Conference and the Rio Summit saw a highly engaged Canadian gov-ernment proactively pursuing and implementing a global environmental agenda. The Green Plan and the Efficiency and Alternative Energy Program led to the Energy Efficiency Act of 1992 which gave the federal government the authority to collect data on product energy efficiency, monitor labeling and en-force efficiency standards for energy-using products. At the 1992 Rio Summit, Canada pledged to stabilize GHG emissions at 1990 levels by 2000 and issued a National Action Strategy on Global Warming that same year. In the decade to follow, however, domestic concerns drove a wedge between an external posture of commitment to climate change and an internal ability to fulfill those commitments.

In the 1990s, the federal government’s concern for unity and economic growth began to erode its abil-ity to meet its international climate change commit-ments. Tackling federal debt and public deficits while preparing the economy for the launch of NAFTA and the adjustments thereafter preoccupied the fed-eral government in the early 1990s. Pushing envi-ronmental concerns further to the edge of the table

were seemingly intractable interprovincial rows. The western provinces, particularly Alberta, still harbored rancor from the 1979 National Energy Policy (NEP), which they viewed as a federal attempt to prevent the ascendency of the western provinces to power and gave rise to the “The West Wants In” movement. In the early 1990s, politicians were aware of the post-NEP resentment from the West and were hesitant to press hard for binding environmental legislation for fear of harmful, fractious outcomes. The nearly successful Québec referendum on separation in 1995 inflamed federal-provincial and inter-provincial ten-sions and reduced the likelihood of successful Cana-da-wide emissions-reduction legislation. In a move to appease the Western provinces and aid the economy, the federal government approved significant annual tax breaks to tar sands development in northern Al-berta. This provision was a boon for the economy, but set in place a major obstacle to Canada’s future ability to fulfill its Kyoto obligations.

Canada’s inability to reduce its GHG emissions was not for want of policies. From 1993 to 2002, Joint Ministers Meetings (JMM) occurred frequently to coordinate federal and provincial/territorial environ-ment and energy initiatives. This collaboration pro-duced a wealth of information, assessments, strate-gies and guiding-principle statements. The federal budget incrementally increased its funding to en-courage innovation, renewable energy implementa-tion and public/private partnerships in key sectors of the economy. Action Plan 2000 on Climate Change committed $500 million over five years and increased this amount to $850 million by 2002 to include the Wind Power Production Incentive and to provide emission reductions at the municipal level by way of the Green Municipal Fund. Again, these funds and policies lacked compliance measures and relied on provincial voluntary implementation.

The year 2002 brought a shift in Canada’s approach to

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climate change policy formation. The federal govern-ment scrapped the collaborative JMM negotiations and replaced them with direct, bilateral policy forma-tion with provinces, territories and key industries. The 2002 Climate Change Plan for Canada broke from the “no regrets” voluntarism of the 1990s and placed Canada’s Kyoto target four-square in federal policy. The same year, despite opposition from the western provinces, Canada ratified the Kyoto Protocol. In 2003, the federal budget included a large financial package of $2 billion over five years to implement the Climate Change Plan for Canada. This funding package consisted primarily of incentives for energy-efficiency, renewable energy, sustainable transporta-tion and new alternative fuels. Yet again, the measure lacked binding regulations or restrictions, particu-larly for the energy sector, and was based on the an-ticipated voluntary actions of individuals, companies and provincial governments. What is more, no ad-justments were made to the tax breaks for tar sands development in Alberta, despite rising oil profits.

In 2003, federal politics shuffled. The new pro-Kyo-to leadership of the Liberal Party increased political will and federal funds for climate change legislation. The Conservative Party of Canada emerged following the fusion of the Progressive Conservative Party the Kyoto-sceptic Canadian Alliance. The Canadian Al-liance, created in Alberta and led by Stephen Harper, depicted Kyoto as an economy-killer and criticized basic tenants of climate change science. These chang-es in the political landscape worked to increase the rift between Canada’s external posture of support for Kyoto and its internal inability to reduce emissions.

The new federal government launched a national en-vironmental awareness campaign, the “One Tonne

Challenge”, hosted the first Meeting of the (ratifying) Parties extolling the virtues of the Kyoto Protocol and even criticizing those who failed to ratify it. In 2005, the year Kyoto commitments went into effect, the National Roundtable on Environment and Economy (NRTEE) injected $10 billion over seven years into Canada’s efforts to reach its Kyoto target by 2012. The NRTEE concluded that Canada could reach 40% of its Kyoto emissions reduction goal through improvements in energy efficiency alone and some very encouraging initiatives, such as investments in Research and Development for wind power and the EnerGuide program, were adopted.

The federal government’s strategy of internal bilat-eral negotiations led to Memoranda of Understand-ing (MOU) with Nunavut, Prince Edward Island, Manitoba, Ontario and Newfoundland and Large Final Emitter (LFE) agreements with the automotive and oil and gas industries. These agreements were criticized, however, because they focused on reducing emissions intensity, emissions per unit, and not on overall emissions. As a result, production (and there-fore emissions) were allowed to increase as long as the per-unit emission rate was lowered.

In 2006, the federal government radically altered its posture on climate change. Campaigning for greater provincial sovereignty and ditching Kyoto, the Con-servative Party took advantage of infighting between the Liberal and Bloc Québecois parties to win a mi-nority government. The minority-led federal gov-ernment openly professed defeat vis-à-vis Canada’s Kyoto commitments and opted for “made in Can-ada” strategies. The legislation that followed ignored Canada’s Kyoto commitments and focused on smog reduction and emissions intensity. It led to budget cuts for Agriculture Canada and Natural Resource Canada and scrapped programs like EnerGuide and the One Tonne Challenge.

The Country that Did Not: From the Tar Sands to the Internal Audit

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Fueled by Al Gore’s documentary, An Inconvenient Truth, an exceptionally warm winter, destruction of trees in Vancouver’s Stanley Park and melting ice in Greenland, Canadian public support and media cov-erage of climate change surged in 2007. In response, the minority-led federal government proposed its “Turning the Corner Plan”, setting a new target of a 20% reduction in GHG emissions by 2020 and a 50% reduction by 2050. Opposition parties were not convinced by this proposal, nor were they willing to drop the Kyoto Pro-tocol. They showed rare unity in their call for another NRTEE and a new proposal from the minority-led government. The resulting NRTEE suggested that meet-ing the Kyoto com-mitment was still possible, yet the federal govern-ment answered with a policy nearly identical to its first, sparking lawsuits and making the environment a key issue in the 2008 elections.

The 2008 election results found the federal govern-ment stuck and in need of a new way forward in terms of climate change policy. The “Green Shift”, or nationwide carbon tax, proposed by the Liberal Party made economic and environmental sense, yet proved to be politically unpalatable, especially during the economic downturn. The minority-led government’s response to the economic crisis was so criticized that an exceptionally rare coalition was forged between the opposition parties, forcing parliament to be pro-rogued until late January of this year. The new session has recently begun and the report from the Environ-ment Commission denouncing the lack of verifica-tion and enforcement measures in the current emis-sions reduction plan has swiftly moved to the fore.

For Canada to move forward, effectively reduce its emissions, and regain its position as an international driver for environmental concerns, it will need a uni-fied federal policy with enforceable compliance mea-sures for the provinces and territories. To be a reli-able international negotiator, Canada must, at times, be able to make concessions on national interests

and have the legitimate power to prevent domestic concerns from trumping its treaty com-mitments. To be sure, Canada has its share of particular chal-lenges.

Its constitution moderates the federal government’s ambitions in environmental affairs: natural

resources are under provincial jurisdiction, while in-ternational treaties, issues of security and taxation ré-gimes all fall under federal jurisdiction. Asymmetric endowments of natural resources amongst Canadian provinces has worked to exacerbate tensions in forg-ing environmental policy. The Alberta tar sands area, called such due to the viscous bitumen from which the oil is extracted, is a salient example of such in-dustry dependence. A vast oil reserve roughly the size of Florida, the tar sands produce nearly 1.5 million barrels of oil a day and receive nearly $20 billion in annual investment. Provincial governments heavily reliant on certain industries, under a constitutional framework that grants provinces autonomy with their natural resources, render the convergence of a national policy — certainly one with binding reduc-tions — all the more intractable.

In addition, Canada’s fragmented and fractious par-ty system at the federal level also allowed a climate-science-denying-cum-Kyoto-sceptic political party

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The Country that Might: Obstacles and Op-portunities

...Canada’s fragmented and fractious party system at the federal level also al-lowed a climate-science-denying-cum-Kyoto-sceptic political party to form and maintain a minority government.

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to form and maintain a minority government. Thus, despite clear public support for greater federal level efforts to reduce emissions (84% according to a De-cember 2008 poll) and opposition parties with more ambitious GHG-reduction platforms, the minority government continues to withdraw from the global scene. Along with scrapping the Kyoto targets, the federal government recently pulled the plug on a UN freshwater monitoring program designed and head-quartered in Canada for 30 years.

With such a disconnect between federal policy and public opinion, it will come as no surprise that pro-vincial governments have been actively devising their own initiatives and joining regional agreements. Qué-bec was the first province to impose a carbon tax and British Columbia followed suit with an innovative reve-nue-neutral carbon tax that, in turn, re-duces personal and corporate taxes and provides low-in-come tax credits. Save Alberta, all provinces are either participating in or observing regional GHG emissions reduction schemes. British Columbia Manitoba Qué-bec, and seven US states are members of the Western Climate Initiative (WCI), a regional cap-and-trade emissions reduction scheme. Covering 73% of Can-ada’s economy and 50% of its GHG emissions, the WCI is the largest of the collaborative GHG schemes in North America. In June 2008, Québec and On-tario announced a plan to collaboratively implement an even more stringent cap-and-trade scheme based on 1990 emissions levels, to be launched as soon as 2010. The two provinces comprise two-thirds of Canada’s population and constitute North America’s fourth largest regional economy.

Despite all this progress at the provincial level, a fed-

eral policy is still direly needed. to ensure consistency and enforce compliance. These are two indispens-able roles the federal government must fill. Domesti-cally, strong federal policy will provide the country’s economy with the clear signals needed to capitalize on the benefits of a transitioning economy. Once implemented, the federal policy will have an external impact by renewing the country’s ability to enter into climate treaty discussions with credibility and nego-tiating power. To this end, Canada would do well to examine Europe’s emissions reduction strategies.

As the table below shows, EU members states are having much more success at meeting their stated Kyoto goals. The EU-15 committed to a reduction of 8% below 1990 levels by 2012. Among the stated goals of the

Kyoto signatories, the eight percent reduction is the most ambitious. Through a burden-sharing agree-ment, though, some European countries are commit-ted to greater reductions than others. Germany, for instance, has committed to a 21% reduction, while Portugal is allowed a 27% increase.

The EU is not without trouble, however. Its main in-strument for reducing emissions, the Emissions Trad-ing Scheme (ETS) — a cap-and-trade project based on a carbon market — is not producing the forecast-ed results due to the collapse of the price of emission allowances. In addition, the current global financial crisis presents additional worries about the future of Europe’s leadership in combating climate change.

If Europe hopes to maintain its relative success with

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Europe: : Linking Emissions Reduction with Economic Growth

If Europe hopes to maintain its relative success with regard to combating climate change, the EU must re-enforce its inter-national leadership.

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regard to combating climate change, the EU must re-enforce its international leadership. It must do this in three areas. First, the European Union must continue to lead in international negotiations in order to as-sure that it is in the best possible position in a future low carbon global economy. Second, Europe must use its economic clout to ensure that the industrial transformation that will inevitability take place is on Europe’s terms and try as much as possible to ensure that Europe’s standards are adopted at the global level. Finally, Europe must continue to lead through example. This means more than just proposals— Eu-rope must start producing more results.

Much of Europe’s success at reducing emissions is thanks to the EU’s record of international coordina-

tion and cooperation with regard to environmental protection initiatives. Relatively early on, the EU rec-ognized the transnational nature of environmental degradation and sought to mitigate its effects among member states through European-level legislation based on principles such as the ‘polluter pays’ prin-ciple and the precautionary principle. Since the UN Stockholm Conference of 1972, the EU has been an active member in the international movement to re-duce the negative effects of climate change.

After Stockholm, the EU continued to work to fa-cilitate international cooperation as well as inter-EU coordination. The EU has been a strong backer of the Kyoto Protocols and has used it international stature to persuade other countries to adopt emissions reduc-

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tions.

Within the EU, a burden-sharing agreement was set up to better fulfill the EU-wide commitment to re-duce emissions as part of the Kyoto Protocols. Part of this program includes the ETS, which is the largest carbon-trading market scheme in the world at this time. In the fu-ture, Europe would like to see a global carbon-trading market es-tablished, which would facilitate the most efficient and beneficial market for carbon. A global car-bon market would also reduce the so-called “carbon leakage”, which has recently led the EU to tone down some of it goals. “Carbon leakage” occurs when large-emitting companies and industries relocate to areas without carbon-trading schemes. EU Environment Commissioner Stravos Dimas commented in a recent interview that the EU is cooperating with countries such as Canada to en-sure that future carbon trading systems are compat-ible with the EU-ETS.

The compatibility of international systems is crucial to the creation of larger global carbon markets, which are hoped to supply the most cost- efficient solution to the world’s carbon glut. With this in mind, the International Carbon Action Partnership (ICAP) was created in 2007. The EU was a founding member of ICAP, which is an organization composed of coun-tries and regions that are actively combating climate change through cap-and-trade schemes. Three Ca-nadian provinces (British Columbia, Manitoba and Québec) are also in ICAP under the regional umbrel-la of the Western Climate Initiative (WCI).

Before the EU attempts to sell its model of an ETS to the rest of the world, it will have to work out the kinks. The ETS is a cap-and-trade scheme, which caps the total amount of emissions at a particular level and allows polluters to trade permits to produce CO2 at

a market price. During the first phase of the ETS (2005-2007) , national govern-ments over-allo-cated free allow-ances and the price of carbon collapsed. The EU attempted to correct this problem during

the second phase (2008-2012) by allocating 10% fewer allowances, but as the price of carbon hit a re-cord low in early 2009, more aggressive reforms are needed. The EU has committed to further reductions of member states’ allowances, but some such as Mark Lewis, director of global carbon research at Deutsche Bank, suggest that a reserve price is needed to stop the plummeting cost of carbon credits.

The downward direction of carbon credit prices is not exclusively linked to the overallocation of credits, though. The current financial crisis has reduced pro-duction. As a result, emissions have gone down and many emitters are selling their suddenly overabun-dant allowances in order to raise capital.

The recent global financial crisis has prompted many commentators to speculate on the viability of aggres-sive efforts to combat climate change. They argue that

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Moving Forward During the Downturn

The Global Viability of the EU-ETS

While some are arguing that there will be a loss in competitiveness, other experts ar-gue that the opposite may actually be true. According to the Porter Hypothesis, efforts to combat climate change represent a win-win situation in that the effects of climate change are reduced and innovation is fa-cilitated.

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there are high costs involved in upgrading equipment and processes, and in retraining employees. Still oth-ers argue that these upgrades in tools and training will cost companies competitiveness and send private investment to areas without emissions reduction pro-grams.

While some are arguing that there will be a loss in competitiveness, other experts argue that the oppo-site may actually be true. According to the Porter Hy-pothesis, efforts to combat climate change represent a win-win situation in that the effects of climate change are reduced and innovation is facilitated. Innovation means, of course, competitive advantages.

Loss of a competitive edge at a company or indus-try level will be a troublesome development for those who do not innovate, but innovators will gain com-petitive advantages as a result of lead industry status. The German automotive industry is a prime example of this (see discussion below).

Admittedly, efforts will not be untouched by the eco-nomic downturn, but as the EU and others have reit-erated, this must be seen as an opportunity instead of an excuse to pander to populist political maneuver-ing. Some have opined that private investment will dry up. It may be the case that this will not matter as politicians realize that they can rely less on private in-vestors and use this opportunity, in conjunction with a regulatory framework, to ‘spend their economies’ out of a recession. One way to do this may be R&D subsidies, which would subsequently lead to more in-novation as mentioned above. The meek in the busi-ness world may not see this as an opportunity, but as Commissioner Dimas argues, the medium to long-term advantages associated with the climate change package — that is, investment in energy efficiency and promoting renewable sources — create jobs and produce more competitive industries.

Still, a macroeconomic competitive loss, known as ‘carbon leakage’ in Community parlance, is a wor-ry for the EU. It is hoped that the propagation of carbon-trading schemes would reduce the effects of carbon leakage by presenting heavily polluting indus-tries with an alternative to moving to areas where no emissions reduction plan is in place.

These may all be moot points. Any potential costs associated with upgrading equipment or loss of com-petitive advantage are minor compared to the costs of allowing emissions to continue to rise unabated. If no action is taken, climate change could cost the world between five and twenty percent of the global GDP, while studies have put the cost of combating climate change at around one percent of global GDP.

By taking the lead in efforts to combat climate change, the EU is in a position to benefit. As already noted, the Porter Hypothesis posits that increased in-novation may result from environmental regulation. Moreover, systems such as the ETS may produce their own revenue. In fact, the EU-ETS itself presents the possibility of collecting €30 billion annually from 2012 onwards for the EU budget. Furthermore this figure could rise to €90 billion by 2020. This would cover a substantial portion of the EU-27’s share of global costs to fight climate change, which some re-searchers estimate to be between €24 to €194 billion annually.

Moreover, as Europe attempts to come out in front in the race to develop ecotechnology, they will benefit from first mover or lead industry advantages. That is, they will benefit competitively as their industries enjoy market-share advantages while others attempt to catch up later. When other ‘green’ products later hit the market, those of Europe will already be es-tablished and as a result will enjoy a marketing ad-vantage. Take for example the cases of Denmark and Germany.

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In response to the oil crises of the 1970s, Denmark, at the time completely dependent on energy imports, developed an industry around wind-energy which resulted in that small country being the world’s larg-est exporter of wind-turbines and wind technology today. Indeed Danish windmills, the 3-blade designs that line much of the coast of Northern Europe, are so ubiquitous that they could definitely be considered a global standard. Many turbines go to Denmark’s neighbor to the south, where they are used to pro-duce energy for the many industries that make Ger-many Europe’s economic and green leader.

One of these industries is the automotive industry. German car sales are declining — to a 17-year low in 2008 — and German car companies are trying to revive them with innovative environmentally-con-scious models. In September 2008, Mercedes and Smart announced a pilot plan to place around 100 electric cars on the streets of Berlin in conjunction with the German electric company, RWE. Nigh three months later, Volkswagen announced that they aim to become the world’s largest producer of ‘green cars’ by investing €8 billion in the next few years. Around the same time, Opel announced that it would deploy hydrogen cars to be used by nine companies aroundBerlin in order to demonstrate the everyday useful-ness of the technology.

The German automobile industry is getting a lot of encouragement for these programs from the federal government. The German government has led the push for companies and individuals to pursue more energy-efficient ways of production and consump-tion that will reduce that country’s carbon emissions. Germany has released a plan that links ecological concerns with economic innovation and growth and

has emboldened its citizens to live greener by offering financial initiatives to upgrade their households and autos.

The German government wants to provide subsidies to consumers to purchase greener cars or to install energy-efficient heating systems in their homes. The second German stimulus plan, announced earlier this year, includes a so-called ‘scrapping bonus,’ which would provide car-owners with €2,500 towards the purchase of a new car if they agree to ‘scrap’ their old car (at least nine years old) by the end of 2009. Since more stringent emissions standards have come into force in the past nine years, the idea is that the plan would replace older pollution-spewing autos with newer, cleaner cars. Of course, the ailing German car industry could always use the boost in their sale fig-ures as well.

The relationship between Germany and Brussels in terms of national environmental initiatives and su-pranational coordination is perhaps a useful dynamic to model relations between the federal and provincial governments in Canada. While environmental issues are inherently transnational and perhaps best coordi-nated in Europe at the EU level, individual Member States are encouraged to initiate their own plans. In fact, one of the EU’s guiding principles dictates that action always be taken at the most appropriate level of government. Germany is a good example of the opportunities that the provinces of Canada have to influence the federal government to act.

Germany, along with several other member states, has always been at the forefront of ecological initiatives and their efforts to enact standards more stringent than those of the EU are rarely struck down by Brus-sels. In June 2008, the German parliament passed a law that put the country on track to meeting 30% of the country’s energy needs via renewable sources by 2020. This is 10% more ambitious than the EU goal

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Denmark and Germany Seek ‘Green’ Market Advantages

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of 20% by 2020. Germany already produces more energy than any other country via wind energy. As a result, they are the largest consumer of Danish wind-turbines. Germany also recently became the world’s largest consumer of solar energy technology with 57% of the global share, which will allow the country to produce enough energy to power 6 million homes with the power of the sun by 2012. However, even as a green leader, Germany has skeletons in its closet. A recently published study notes that 10 of the 30 most pollution-causing power plants in Europe are in Germany. Still, the framework within which the EU and its Member States initiate and carry out envi-ronmental conventions may be a useful blueprint for Canada and its provinces to consider.

Take, for example, Canada’s erstwhile economic pow-erhouse, Ontario. Ontario could become Canada’s environmental trendsetter. It could move forward as Germany has done by transforming its outdated manufacturing complex with a reinvigorated en-vironmentally-geared program of industrial trans-formation. Ontario certainly needs new ideas. Like Germany, it has a struggling automotive industry. Unlike Germany, there seems to be no motivation to make radical changes in order to move forward. This year, for the first time, Ontario became a beneficiary of provincial equalization payments instead of a net contributor to the federal pot.

Ontario could act as a catalyst for the other prov-inces, but they will soon realize on their own that the future is not, as 1967’s The Graduate would have one believe, in plastics, but rather in renewable energy, fu-el-efficient cars and well-insulated homes. The main concern for Canada right now is the lack of support from the federal government. The federal govern-ment must introduce intelligible goals for the prov-inces and ensure that those goals are met. Indeed, it is up to the federal government to ensure that Canada maintains its commitments to international treaties.

Canada must realize that economic growth is not in conflict with environmental protection. It must real-ize that the current global recession is not the time to renege on commitments, but an opportunity to cost effectively combat climate change. Europe, while still working out kinks in its own programs, can offer a model to Canada and the world. Perhaps Canada could also use the example of Europe’s supranational ism to compliment the factious intergovernmental-ism that is paralyzing Canada’s environmental initia-tives.

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Please contact the Institute for European Studies for any additional information about this policy brief orthe material referenced herein.

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European Union’s Emission Trading Schem• eInternational Climate Action Partnershi• pPew Center on Global Climate Chang• eStern Revie• w

Resources

Government of Canada ‘Turning the Corner’ Pla• nOverview of Regional GHG Emissions Trading Schemes in North America (pdf• )Pembina Institute: Reports on Canada and the Environmen• t

Europe/International

Canada

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The Institute for European Studies at UBC

The Institute for European Studies at the University of British Columbia offers an academic forum within which students and scholars alike come together to engage in rigorous enquiry into the structures, actors, and institutions that shape contem-porary and historical Europe. Following clear-cut principles of interdisciplinarity and intellectual curiosity, we provide methodologically and theoretically based insights into the processes of Europe.

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Institute for European Studies1855 West MallUniversity of British Columbia - VancouverBritish ColumbiaCanadaV6T 1Z2

Canada and Germany as Global Economic Policy Actors

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www.ies.ubc.ca