Category Archives: economy

Flying: Low Price, High Cost

Crossposted from Torontoist.

Reader Jonathan recently let us know about a trip he took to Ottawa and back via (cue dramatic music) Porter Airlines. That’s right, the airline of the infamous island airport.

It’s no secret that we have been less than enthusiastic about airport expansion, of which Porter Air’s operation has become the most prominent example. That being said, it’s worth noting that Jonathan’s review could not have been more glowing:

Wow! Flying is amazing! I think I might be spoiled forever…Just over two hours after I left my office, I was standing in Ottawa. To give that some context, I left work a little early and got to Ottawa before I normally get out of the office. Compare that with a train trip that takes over 4 hours for the trip alone! That two hours even includes 30 mins I had to kill in a nice lounge with free drinks and wifi.

Actually, we fully expect that his account is more or less typical, and we’ve heard similar stories from others. Not only that, but, as he points out, you would expect an experience so clearly superior to the train to cost way more, right? Not so! “The plane is just $41.70 more for a round-trip than the train,” Jonathan writes. “That’s less than $7 for every hour you save.”

So what’s the problem? If this is such a great service which is clearly filling a need (or, you know, at least the Western “I want it!” definition of need), how come so many people are getting so many bees in so many bonnets?

In fact, it comes down to that all-too-loaded word: cost. What we of course should have said is that Porter Air (and air travel in general) has a relatively low price. The cost, on the other hand, is both hidden and high.

These aren’t abstract, touchy-feely costs either. They’re real economic ones that we’ll all end up paying one way or another. The most blatant of these is the cost of climate change, which air travel contributes to much more than train travel, both because of the extra fuel/energy that’s needed to fly a plane, and also because of the high altitude at which those emissions are released. The Stern report (as everyone is hopefully tired of hearing about) pegged the real cost of not acting to reduce the severity of climate change (it’s already too late to stop it completely) at 3.68 trillion pounds. (Trillion! Pounds!) Stern, along with renowned author George Monbiot and the IPCC have also identified that, in order to avoid the worst of what climate change has to offer, we’ll need to make somewhere in the neighbourhood of 80% reductions in emissions below 1990 levels (that’s significant—always pay attention to the base year when people are talking about reductions) by the year 2050 at the latest (Monbiot suggests 2030).

Either we believe the science or we don’t. If we do, then we’ll quickly come to realize that there’s no room for flights of convenience in a world needing an 80% reduction in greenhouse gas emissions. (Note also the related but slightly different health and economic costs tied to air quality in Toronto.)

Does that make Jonathan, or others who fly Porter, bad people? We don’t think so. They’re simply making decisions that make sense for them, based on the information they’re presented with. That’s reasonable—that’s what we all do. And the most significant piece of information they have, in this case, is the artificially low price of the plane ticket, which hides its true, high cost. That’s why the idea of using the tax system to send the right price signals to the market is gaining in popularity. In other words, flying, which has a high cost once the externalities are factored in, should be significantly more expensive than taking the train. (This can be done in concert with reductions on other kinds of taxes, so that it’s revenue neutral and more politically palatable.)

In that scenario, individuals will be able to make informed decisions about whether or not they think flying is really worth it. If they do, then fine, but fewer people will. A level of personal freedom will be preserved, and emissions will also be reduced. Unfortunately, of course, this is one of those things that would have to be implemented provincially or federally. Until then, we’ll have to focus on the things that can be done municipally.

And We’re Back (With A Look At Carbon Credits!)

The last few days I’ve had to focus my blog-related-energy on moving this website to a new host. My email addresses at this domain have stopped working four times in the past three months (I get about 100 emails a day, so it’s frustrating to try and guess what I might have missed), and iPowerWeb, who had been hosting this domain, didn’t even respond to my last email (yes, I was smart enough to send it from another working email address). The switch would have happened over the last 24 hours–hopefully you all survived.

I’m now on Dreamhost, which has some neat business practices I thought you might want to know about. For one, they’re employee owned, which is positive from a social justice perspective. They also have all sorts of open source applications that can be installed automatically (including the software this blog runs on), and open source is something I’m very supportive of.

The other neat thing about Dreamhost is that they’ve purchased carbon credits to offset the emissions created by running their business (including “paper in the office, electricity for our servers, even the gas in our cars that bring us to the office“). You can verify that this site is actually “hosted green” by clicking on the icon at the bottom of the right column of this page.

The basic idea behind carbon credits (aka carbon offsets) is to either pay someone else to reduce their emissions instead of reducing your own (buying credits), or to make money by reducing your carbon emissions more than the average bear (selling credits).

This carbon trading system works best when in conjunction with a “hard cap,” resulting in a “cap and trade” system. That means that each emitter is given a maximum amount of carbon they’re allowed to emit. If they exceed their limit, they’re forced to buy credits from other emitters who have reduced below their limit. The Green Party of Canada proposes setting up a cap and trade system for what’s known as Large Final Emitters (or LFE, for eco-geeks), but you could theoretically apply this system at the individual level as well.

Of course, carbon credits are a bit controversial these days, since for the most part there isn’t yet an easy and transparent way to ensure that buying a credit for one tonne of carbon actually results in one less tonne of carbon being released into the atmosphere. That’s really important because, from a climate change standpoint, the only thing that matters is that the over-all amount of greenhouse gases getting released into the atmosphere goes down (which is also why the “intensity targets” approach of George Bush and Stephen Harper is a hoax).

In other words, the purchase of carbon credits should only be used as a last resort, after a company or individual has done everything they can to reduce their emissions in the first place. For example, instead of buying offsets for your coal-generated electricity, buy your electricity from a clean supplier instead. Instead of buying offsets for your car, get a more efficient car or, you know, stop driving as much.

Dreamhost, as far as I can tell from their website, has taken at least some of those kinds of steps, but probably not as many as they could. But hey, none of us are perfect. For now I’m filing this under “better than nothing.”

ps. Seriously though, the main point of this post is, “if you emailed me in the last two days and haven’t heard back, please try again.”

Our Economic Pyramid Scheme

Some mornings, for no discernible reason, I wake up much earlier than others. That means that I get to hear Metro Morning’s business analyst Michael Hlinka, who throws in his daily two cents on the CBC Radio One morning show at around 6:45am. Yesterday morning was one of those days.

I used to live in Michael Hlinka’s building. He’s extremely friendly and outgoing, and we’ve had several good chats. Both before and after meeting him, I’ve often listened to him and agreed strongly with whatever he had to say. Yesterday morning was not one of those days.

Hlinka was reacting — like everyone else — to the new Statistics Canada census data that was released the day before. To make a long story short, Canada’s population is growing faster than any other country in the G8. Most of the attention in Ontario has been focused on Milton (one of my old stomping grounds), which has grown by 71% in just five years.

Hlinka was ecstatic at this “great” news. You see, he explained, (and I’m paraphrasing here) we used to have this guy named Malthus who thought that population growth was all bad and would eventually cause society to collapse. Now, however, we’re enlightened, and understand that population growth is, without reservation, a good thing, because people create wealth, so more people means more wealth. Also, we’re going to have a large retired population soon, so we need lots of younger people to pay for the care of the older ones. And, ultimately, we need to keep making more and more stuff (he actually used the word “stuff”), because we need more stuff swirling around all the time to keep this whole machine running.

In other words, Hlinka was arguing that we need to encourage infinite population growth in order to support infinite economic growth. It’s becoming increasingly clear to me that the dogma of perpetual economic growth has been given the status of infallible religion by many, and is causing otherwise intelligent individuals to ignore the blatantly obvious.

Let’s start here: surely we can agree that population cannot grow forever. We don’t give this much thought because it doesn’t seem like an immediate problem, but even if we’d argue about how much the Earth’s human population can grow (or if it’s already too high), we have to acknowledge the fact that all ecosystems have a carrying capacity, and that at the end of the day this planet of ours has limits.

From there, we have to agree that economic growth, at least as we know it now, is pretty tightly linked with population growth. That’s why some economists get excited about growing populations. It’s also why Ronald Wright has described our current economy as a pyramid scheme: it only works as long as you’re constantly introducing new inputs of people and resources.

Arguments like Hlinka’s, that people “create wealth,” are fundamentally flawed. In a resource-based economy, people do not “create” wealth, they extract it from the Earth. Or, in other words, they move it from the public realm to the private. In that case, a resulting increase in a country’s GDP is actually a measure of how much natural capital has been used up. That’s like taking $20 out of the bank and claiming that by so doing you had generated $20.

Now sure, this is all just semantics as long as you’ve got another pay cheque on the way. But in the case of the tar sands, for example, currently one of Canada’s largest sources of economic growth, there’s no chance of having that bank account replenished. What we’re calling “wealth creation” in the tar sands is just a one-time massive withdrawal from a savings account that took millennia to accumulate.

But this is a conversation that we as Canadians (and especially politicians) don’t have very often, probably because most of us don’t know where to begin solving the problem. For example, some might (wrongly) approach it from the population end, suggesting we need government-mandated population control. But that presents too many human rights concerns, and is often unworkable. Others would choose to blame immigration, without recognizing that immigrants (a group to which all of us save Aboriginals belong — and, on a long enough timeline, them too) contribute great value to our country and define who we are as a people. (Not to mention the fact that population is a global phenomenon, making any attempt to deal with it by geographic isolationism not only morally questionable, but environmentally and practically ineffective.)

So, as we approach solutions, we need to start by guarding against temptations towards xenophobia or drastic measures. We’re all in the same boat here. Then, we can focus on the good news. For example, it turns out that birth rates stabilize as women’s rights and access to education increase, and as poverty and infant mortality decrease. Surely those are desirable goals anyway. Also, we need to tackle the economic side of the problem. Many economists (including Dr. Peter Victor at the University of York) are developing resilient economic models that don’t depend on the pyramid scheme of growth.

In fact, we already have a model for that: the human body. We only grow until around the age of eighteen, but does that mean we stop developing, learning, or getting better? Let’s start to have a conversation about how we can be more without having more.

Whether we agree on if growth is good or not, the reality is that it can’t continue forever. We’d better deal with that fact, or else it will deal with us. And besides, we already have a word for something that grows forever in an unrestrained way. It’s called cancer.

One morning soon, I hope to wake up to a world where we place a higher value on quality over quantity, and where we measure genuine progress. And please, no more stuff for stuff’s sake.

Mind The Gap

A new report by the Canadian Centre for Policy Alternatives, titled “The Rich And The Rest of Us,” finds that the top 10% of Canadians are getting richer while the vast majority (80%) aren’t moving, and some of the bottom 10% are getting poorer. What’s worse, is that those 80% of Canadians in the middle are working harder (200 hours a year more compared to nine years ago) just to earn the same amount of money, while the 10% at the top are working less.

That’s an unsustainable situation if I’ve ever heard one.

In his new book The Upside Of Down, Thomas Homer-Dixon names the growing gap between the rich and the poor as one of the main threats facing our global society. He also points out how rapidly this problem is developing, explaining that “in 1950, there were about two poor people for every rich person on Earth; today there are about four; in 2025, there will be nearly six.

The good news in the report is that government policy can make a difference. “If they had to rely solely on market earnings,” the report says, “40% of Canadian families would have experienced significant losses in incomes compared to a generation ago — even though they are working more. Canada’s tax and transfer system stopped the freefall of incomes for almost half of the population raising children.” Government can also help with the problem of people who are working more for little to no gain by cracking down on unpaid overtime.

The report concludes with a very interesting statement:

An intractable growing gap between rich and poor, in good times and bad, oblivious to work effort, is akin to the slowly building impact of climate change — a clarion call for action which, ultimately, cannot be ignored.

And, like climate change, we will continue to see rising inequality until we understand our connectivity to each other and to our environment.

Amen.