Implications of Kyoto Ratification for the Mineral Industry

Reading the newspapers, you will know that opposition to ratification on economic grounds always points to the view that action will result in major price increases for energy (to both industry and households) with consequent severe losses of energy production and a loss of competitiveness for energy-intensive producers (i.e., in your kinds of industries). You might think of this as the ?carbon tax? fear, and you should note that many of the initial policy development experiments included variations of this theme. Analysis reported in late 2000 and into early 2002 reported reductions in energy production in the long run of between 10% and 20%. At the upper end of that view, these were the kinds of numbers reported in the Industry Canada study ?leaked? to the Press last week. The consequences of this approach included significantly uneven negative effects for some provinces (e.g., Alberta, but also Saskatchewan and Newfoundland). It had been agreed by the First Ministers of Canada, however, that the policy should not yield those results so development in recent months has focused on eliminating sector and therefore provincial ?sore thumbs?. Although an emissions trading system, which represents this type of approach and directly impacts costs of production, continues to be featured in the new or current policy and is applied to the Minerals Industries among others, it is designed to be implemented in such fashion that the costs are more moderate than before. And because the industries covered by permits are almost all price takers, there is no device for moving an increased price signal forward to ?consumers?. What this does do is even out negative effects among sectors in the economy and for provinces, but at the expense of government financial results.