1. Have most North Americans already met their Kyoto Obligations? - Trends in the CO 2 content of Expenditure and the role of Income Inequality. Lars Osberg Economics Department Dalhousie University Canadian Economics Association Vancouver, June 6, 2008

2. Who is responsible for rising CO 2 ? Who should pay for reduction in CO 2 ?  Kyoto Protocol Collective obligation to reduce Canada’s CO 2 emissions to 6% below 1990  USA target =-7% (not ratified)  What is the corresponding obligation of individuals ?  Who has fulfilled that obligation ?  Income Gains concentrated in top 1% $ real income stagnant for most  GHG intensity per dollar much improved  Most Canadians have met personal Kyoto But population has grown – Alberta, BC, Ontario “Provincialization” of Kyoto commitments ??

3. Delivering on a collective commitment - perceived equity in burden sharing is essential to actual implementation  “We didn’t create this problem – so why should we pay for its solution?” LDC lament – also true within Canada & US  Complexity of ‘Cap & Trade’ & many Carbon Tax proposals fuel cynicism re: “Tax Grab” “Double Dividend” or “No Dividend” ?  Carbon Tax + Full refund as Demo-grant Easy calculation net benefits = majority win!  $30 per ton CO 2 ≈ +7 cents litre gasoline Small relative to recent price increases  Increasing marginal political cost ??

4. Trends in Average Income by Quintile 1989 – 2005 CANSIM V1546479 – V1546483

6. Real Income Gains - also concentrated in top 20% in USA

7. Substantial Improvement in GHG intensity per $ expenditure

8. Stagnant Income + improved CO 2 Intensity = Kyoto Attainment for most  Kyoto – a ‘point of production’ accounting system  But exporting a steel plant does not reduce world’s CO 2 emissions or assist Global Warming  This paper - assigns households CO 2 emissions caused by own spending  Direct consumption of carbon energy +  Indirect consumption embodied in commodities Production, transportation & distribution Should include CO 2 content of imports, investment, government spending  Proportional to Household Income

10. Income Changes and their implications for GHG - Canada 1992 - 2004 abcdefg income class 1992 income tons CO2 1992 Kyoto Target 2004 income tons CO2 % below /above Kyoto average $000at 0.84(tons) average $000at 0.71 [@6% reduction] bottom 80%33.7528.426.63726.27 -1.4% 80 - 90 percentile8873.969.510171.71 3.2% top 10%160134.4126.3215152.65 20.8% top 1%404339.4319.0684485.64 52.2% top 0.1%11961004.6944.424931770.03 87.4% Top 0.01%34902931.62755.784435994.53 117.5%

11. Population Increase ≈ + 20% nationally  1990 – 2006 population growth Nil to small in Nfld, NS, PEI, NB, Quebec, Man, Sask.  ALL GHG increase due to top end income distribution Ontario +23%; BC + 30%; Alberta +33%  Income Distribution + Population Growth drives increase in GHG emissions  “Provincialization” of CO 2 policy?  BC, Manitoba, Ontario, Quebec, NS have announced provincial targets Slow growth provinces have far easier Kyoto task Which collectivity made commitment to reducing GHG emissions?

13. How to attract public support for efficient policy to reduce CO 2 emissions?  Carbon Tax or ‘Cap and Trade’ Both use decentralized incentives of market  Increase price of Carbon Energy Both are regressive in Income Distributional Impact

14. Transparency + Equity Rebate Carbon Tax as Demo-grant  Who gets the CO 2 scarcity rents?  2005 – 747 Megatonnes @ $30 per ton implies $22 Billion ‘Cap & Trade’  HUGE wealth transfers within corporate sector Carbon Tax  Revenue available to government to offset regressive impact of price increase  Demo-grant ≈ $680  Net Benefit for most households Marginal incentive to conservation preserved

15. Delivering on a collective commitment - perceived equity in burden sharing is essential to actual implementation  “We didn’t create this problem – so why should we pay for its solution?” LDC lament – also true within Canada & US  Complexity of ‘Cap & Trade’ & many Carbon Tax proposals fuel cynicism re: “Tax Grab” “Double Dividend” or “No Dividend” ?  Carbon Tax + Full refund as Demo-grant Easy calculation net benefits = majority win!  $30 per ton CO 2 ≈ +7 cents litre gasoline Small relative to recent price increases  Increasing marginal political cost ??

16. Ontario  Ontario: 1990-2005 mr & mrs80%  income increase = +7.5% But GHG intensity decrease by 17.8% (.84 ->.69)  decrease of 12% in GHG per capita GDP = + 24.5%  per capita GDP*GHG = +2.2%  Implication:income dist => +14.2% GHG * GDP = + 24.7% population increase = + 23.2% GDP increase = + 51.9%