Canada Needs Higher Fuel Prices To Bridge The Gap To Renewables

The Canadian and US governments have generally responded to this instability with interventions designed to restore stable low prices for conventional fossil fuels. Even while ratifying the Kyoto accord (which is designed to reduce CO2 emissions), Ottawa is doing everything it can, including ruling out a carbon tax, and exempting the auto industry, to ensure that the oil and gas and automotive industries are minimally affected. While this may be good short-term politics it is bad economics and lousy environmental policy. And it won?t prevent even steeper price increases in the near future. To avoid a serious energy crisis in coming decades, citizens in the industrial countries should actually be urging their governments to come to international agreement on a persistent, orderly, predictable, and steepening series of oil and natural gas price hikes over the next two decades. The present world energy market obscures the true price of hydrocarbon fuels and inhibits the development of alternatives. This argument comes in two parts. The first is neatly summarized in a 1998 report by the Washington-based International Centre for Technology Assessment on The Real Price of Gas. The purpose of this report was to quantify the numerous external costs associated with the use of fossil-fuelled motor vehicles that are not reflected in US consumer prices. Such hidden costs range from various tax and direct subsidies to the oil industry from governments, through publicly funded infrastructure costs, to the health and environmental costs associated with burning fossil fuels (e.g., breathing ?second-hand exhaust?). These direct and indirect subsidies seriously distort energy markets, burden the economy with rampant inefficiencies, and in the process, are helping to destabilize the world's climate. Depending on the range of subsidies included and the quality of available data, the total unaccounted cost of fossil fuel use in the US was found to lie between $559 billion and $1.7 trillion dollars annually. A fuller social cost accounting for the use of fossil fuel would therefore result in a gasoline price per gallon of between US$ 5.60 and US$ 15.14. In Canadian terms, this would be roughly equivalent to a price per litre of between C$2.20 and C$5.95, or three to eight or nine times recent Vancouver prices (i.e., before the current price surge related to reduced exports from Venezuela and the threat of war in Iraq). In other words, even with the burden of existing taxes, prevailing energy prices do not tell the truth about the costs of using fossil energy. North Americans pay a fraction of the price they would pay for gas in a perfectly functioning market. ~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~ More articles by/about William Rees are available at the Global Public Media website at www.globalpublicmedia.com/people/william_rees . -BA Article found at : http://www.energybulletin.net/newswire.php?id=3372 Original article : http://www.globalpublicmedia.com/articles/263