Presention to Session on Social Equity, Environment and Distribution

Prof. Ross McKitrickDept of Economics

University of Guelph

2-sided equity considerations

• Distribution of benefits of environmental quality

• Distribution of costs of environmental policy

• Conjecture: Another Environmental Kuznets Curve

Another EKC

• Early stages: environmental policy benefits all classes, especially lower-income groups– Equity increases

• Later stages: environmental policy primarily benefits well-off; costs disproportionately fall on lower-income groups– Equity decreases

Equity

Stringency of policy

2 Examples

• Ontario air quality and the Green Energy Act• Medupi Power Plant South Africa

• Both illustrate:– Modern environmentalism is increasingly an

indulgence of wealthy communities who are shielded from the costs of the policies

Ontario Air Quality• Illustrated with Toronto data:

– Data from NAPS stations at • Bay & Wellesley (BW)• Queensway & Hurontario (QH)• Lawrence and Kennedy (LK)

– Monthly averages + 12-month MA

– Pre-1974 data from Ontario MOE

– NAAQS Lowest Desirable Standard

Toronto Air Pollution Trends

Toronto (Downtown) TSP levels (Micrograms/m3)

0

50

100

150

200

250

300

350

400

450

1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998

TSP

(mic

rogr

ams/

m3)

TSP.BW

TSP.avg

Toronto Air Pollution Trends

Toronto (Downtown) Sulphur Dioxide Levels

0

25

50

75

100

125

150

175

200

1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001

SO2

(ppb

)

SO2.BW

SO2.QH

SO2.avg

Toronto Air Pollution Trends

Toronto (Downtown) Ozone Levels (ppb)

0

25

50

75

100

1973 1976 1979 1982 1985 1988 1991 1994 1997 2000

Ozo

ne (p

pb)

O3.BW

O3.LK

O3.avg

Toronto Air Pollution Trends

Toronto (Downtown) NO2 levels (ppb)

0

25

50

75

100

1974 1977 1980 1983 1986 1989 1992 1995 1998 2001

NO2

(ppb

)

NO2.LK

NOX.avg

Green Energy Act 2009

• Context: 4 decades of improvements in air quality• No general compliance problems• Reasonable balance of benefits and costs

• GEA Effects:– At best only trivial changes to already-low pollution levels– Large regressive increases in energy costs – Urban areas shielded from disamenities of Wind Turbine

installations

Impacts of Lambton & Nanticoke on Ontario Air

Impacts of Lambton & Nanticoke on Ontario Air

Impacts of Lambton & Nanticoke on Ontario Air

• DSS/RWDI Reports (2003, 2005)• Total contributions to O3, PM10:

– < 1% of ozone– < 5% of PM10– Emission controls achieve ~75% of what closure would yield

Comparison of Pollution Contributions by OPG in DSS05 and DSS03 Papers

REGION Ozone PM10 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03Ottawa-Carleton RM 20 30 0.00 0.00 0.56 0.57 0.00 0.00 0.13 0.11 0.00 0.00 0.01 0.01Durham RM 0.04 0.08 1.00 0.99 0.01 0.01 0.26 0.20 0.02 0.01 0.02 0.01York RM 0.01 0.04 1.07 1.08 0.01 0.00 0.27 0.21 0.01 0.00 0.02 0.01Toronto MM 20 40 0.03 0.07 1.12 1.12 0.01 0.01 0.30 0.23 0.02 0.01 0.02 0.01Peel RM 0.01 0.04 1.00 1.08 0.00 0.00 0.28 0.21 0.01 0.00 0.02 0.01Hamilton-Wentworth RM 20 40 0.05 0.12 1.65 1.74 0.02 0.01 0.44 0.35 0.01 0.01 0.02 0.02Haldimand-Norfolk RM 1.97 2.94 3.93 3.14 1.03 0.52 1.24 0.84 0.07 0.31 0.03 0.05Waterloo RM 0.01 0.02 1.17 1.34 0.00 0.00 0.31 0.24 0.00 0.00 0.02 0.02Lambton County 0.43 0.89 1.69 2.54 0.28 0.14 0.70 0.45 0.03 0.06 0.02 0.02

REGION DSS05 DSS03 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03 DSS05 DSS03Ottawa-Carleton RM 0.0% 0.0% 1.6% 1.6% 0.0% 0.0% 0.4% 0.3% 0.0% 0.0% 0.0% 0.0%Durham RM 0.2% 0.4% 2.9% 2.8% 0.1% 0.1% 0.7% 0.6% 0.1% 0.1% 0.1% 0.0%York RM 0.1% 0.2% 3.1% 3.1% 0.1% 0.0% 0.8% 0.6% 0.1% 0.0% 0.1% 0.0%Toronto MM 0.2% 0.4% 3.2% 3.2% 0.1% 0.1% 0.9% 0.7% 0.1% 0.1% 0.1% 0.0%Peel RM 0.1% 0.2% 2.9% 3.1% 0.0% 0.0% 0.8% 0.6% 0.1% 0.0% 0.1% 0.0%Hamilton-Wentworth RM 0.3% 0.6% 4.7% 5.0% 0.1% 0.1% 1.3% 1.0% 0.1% 0.1% 0.1% 0.1%Haldimand-Norfolk RM 9.9% 14.7% 11.2% 9.0% 5.2% 2.6% 3.5% 2.4% 0.4% 1.6% 0.1% 0.1%Waterloo RM 0.1% 0.1% 3.3% 3.8% 0.0% 0.0% 0.9% 0.7% 0.0% 0.0% 0.1% 0.1%Lambton County 2.2% 4.5% 4.8% 7.3% 1.4% 0.7% 2.0% 1.3% 0.2% 0.3% 0.1% 0.1%

PM10Gas Replacement

Ozone PM10Average ConcentrationsApprox Avg 1998

Ozone PM10Base Case Emission Controls

Ozone

Gas ReplacementOzone PM10 Ozone PM10 Ozone PM10

Approximate %Contributions from OPG

Base Case Emission Controls

Distribution of Costs of Closure

Distribution of Costs of Closure

Urban vs rural impacts

Example 2: South Africa

• Major air quality issue in many 3rd-world communities arises due lack of electricity

• Indoor coal, peat, dung and wood fires

• Lung disease, cancer, COPD, cataracts, low birth weight etc.

• Regional haze and deforestation

• Solution: electrification

Medupi Power Plant• “South Africa desperately needs more

electricity capacity. Its existing system is already under pressure and in 2008 came close to collapsing. Rolling blackouts had to be imposed, causing massive damage to the productive economy. As a major coal producer, it made sense to go for coal and it Eskom, the power utility, is planning a 4,800-megawatt coal-fired plant at Medupi in the northern Limpopo region.

• Without energy, countries face very limited or no economic growth: factories and businesses cannot function efficiently; hospitals and schools cannot operate fully or safely; basic services that people in rich countries take for granted cannot be offered.”

Medupi Power Plant

• South Africa applied to the World Bank for a loan to help complete construction of the Medupi power plant. The loan was narrowly approved on April 9, 2010, but was opposed on environmental grounds by– 125 western environmental and foreign aid groups– The governments of the US, UK, Denmark and the

Netherlands.

Conclusion

• Calls for ever-tighter environmental policy tend to come from wealthy urban westerners who:

– Are personally shielded from many of the costs of implementation– Derive an emotional “warm glow” from the policy – Express the benefits in terms of slogans and generalities but can provide no

quantitative estimates

• As a result we are on the downward-sloping portion of the Policy-Inequality curve