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Economists cool to Doug Ford’s warning of ‘carbon tax recession’

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Ontario Premier Doug Ford is warning that the federal government’s carbon tax risks triggering a recession, but it’s hard to find economists eager to back up his claim.

Ford used a speech to Economic Club of Canada to predict that Prime Minister Justin Trudeau’s carbon pricing plan will hurt the economy . 

“A carbon tax will be a total economic disaster,” Ford told the estimated 1,000 paying guests at the lunchtime event in downtown Toronto on Monday.

“There are already economic warning signs on the horizon,” he said. “I’m here today to ring the warning bell that the risk of a carbon tax recession is very, very real.” 

Ford did not offer any details in the speech about how the carbon pricing scheme would lead to recession. He did not take questions from reporters afterward.

Ontario Premier Doug Ford arrives on stage to speak at the Economic Club of Canada in Toronto on Monday. (Nathan Denette/The Canadian Press)

Asked by CBC News for clarification, Ford’s press secretary pointed to a study by the Conference Board of Canada that suggests a federally imposed carbon tax would shrink the nation’s economy by $3 billion. While that sounds like a big number, it is only a fraction of a per cent of the country’s $2.1 trillion GDP.

“Our analysis suggests the economy will shrink marginally in response to the carbon tax,” the authors said. “While the overall economic impact is small, the distribution is not equal across sectors, with some industries bearing notable costs.” 

The report does not say that the carbon tax will cause a recession. Nor do other economists. 

In its most recent monetary policy report, the Bank of Canada lays out what it sees as the major risks to the economy in 2019. The looming carbon tax is not even mentioned as a factor.

CBC News asked economists from four of Canada’s big banks to weigh in on Ford’s statement on Monday, but none agreed to comment. 

There’s no evidence to substantiate Ford’s claim, says Dale Beugin, executive director of Canada’s Ecofiscal Commission. It’s a group of economists specializing in economic and environmental policy, led by an advisory board that spans the political spectrum, including the former Reform Party leader Preston Manning. 

According to the Ecofiscal Commission’s analysis, the likely economic impacts of carbon pricing will be modest. It forecasts the Canadian economy to grow slightly more slowly than it would have without a carbon tax but to remain “a very, very far step away from a recession,” said Beugin.

“That money being collected is not being burned, it is being sent back into the economy in different ways,” Beugin said Monday in a phone interview with CBC News. He said the federal backstop model would keep the economy buoyant by sending carbon tax revenue back to households to be spent. 

He points to the experience of jurisdictions that have put carbon pricing in place. 

The British Columbia economy kept ticking along after a carbon tax was imposed in 2007 by the government of then-premier Gordon Campbell (who recently led Ford’s financial commission of inquiry into Ontario’s deficit).  The cap-and- trade system did not tank Ontario’s economy after Kathleen Wynne’s Liberal government launched it in 2017. Various carbon pricing schemes did not harm the economies of Quebec, Alberta and California in recent years.

“Sweden is another example where we’ve seen a really high carbon price over time and the economy has continued to grow even as emissions have declined,” said Beugin. 

Last week, a list of 45 senior economists from across the U.S. political spectrum published a statement in the Wall Street Journal endorsing a carbon tax, with all revenue given back to citizens. The list includes former White House economic advisers, treasury secretaries, Federal Reserve chairs and Nobel laureates. 

This will not likely be the last time you hear the phrase “carbon tax recession” from Ford. Two conservative strategists told CBC Toronto they expect the Ontario premier will continue to use this messaging in the coming months, as carbon pricing becomes a key issue in the federal election. 

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Waterloo drone-maker Aeryon Labs bought by U.S. company for $265M

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Waterloo’s Aeryon Labs has been bought by Oregon-based FLIR Systems Inc. for $256 million, or $200 million US.

The acquisition was announced Monday. 

Dave Kroetsch, co-founder and chief technology officer of Aeryon Labs, says not much will change in the foreseeable future.

“The Waterloo operations of Aeryon Labs will actually continue as they did yesterday with manufacturing, engineering and all the functions staying intact in Waterloo and ultimately, we see growing,” he said.

“The business here is very valuable to FLIR and our ability to sell internationally is a key piece of keeping these components of the business here in Canada.”

Aeroyn Labs builds high-performance drones that are sold to a variety of customers including military, police services and commercial businesses. The drones can provide high-resolution images for surveillance and reconnaissance.

The drones already include cameras and thermal technology from FLIR. Jim Cannon, president and CEO of FLIR Systems, said acquiring Aeryon Labs is part of the company’s strategy to move beyond sensors “to the development of complete solutions that save lives and livelihoods.”

‘A piece of a bigger solution’

Kroetsch said this is a good way for the company to grow into something bigger.

“We see the business evolving in much the direction our business has been headed over the last couple of years. And that’s moving beyond the drone as a product in and of itself as a drone as a piece of a bigger solution,” he said.

For example, FLIR bought a drone company that builds smaller drones that look like little helicopters.

“We can imagine integrating those with our drones, perhaps having ours carry their drones and drop them off,” he said.

FLIR also does border security systems, which Kroetsch says could use the drones to allow border agents to look over a hill where there have been issues.

“We see the opportunity there as something that we never could have done on our own but being involved with and part of a larger company that’s already providing these solutions today gives us access not only to these great applications, but also to some fantastic technologies,” he said.

Aeryon Labs has done a lot of work during emergency disasters, including in Philippines after Typhoon Hagupit in 2014, Ecuador after an earthquake in 2016 and the Fort McMurray wildfire in 2016.

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Inuvik infrastructure may not be ready for climate change, says study

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The Arctic is expected to get warmer and wetter by the end of this century and new research says that could mean trouble for infrastructure in Inuvik.

The study from Global Water Futures looked at how climate change could impact Havipak Creek — which crosses the Dempster Highway in Inuvik, N.W.T. — and it predicts some major water changes.

“They were quite distressing,” John Pomeroy, director of Global Water Futures and the study’s lead author, said of the findings.

Researchers used a climate model and a hydrological model to predict future weather and climate patterns in the region. They also looked at data gathered from 1960 to the present. 

If greenhouse gas emissions continue at their current rate — which Pomeroy said they are on track to do — the study projects the region will be 6.1 C warmer by 2099 and precipitation, particularly rain, will increase by almost 40 per cent.

The study also found that the spring flood will be earlier and twice as large, and the permafrost will thaw an additional 25 centimetres. While the soil is expected to be wetter early in the summer, the study said it will be drier in late summer, meaning a higher risk of wildfires.

John Pomeroy is the director of Global Water Futures. (Erin Collins/CBC)

“The model’s painting kind of a different world than we’re living in right now for the Mackenzie Delta region,” Pomeroy said.

He noted these changes are not only expected for Havipak Creek, but also for “many, many creeks along the northern part of the Dempster [Highway].”

Pomeroy said the deeper permafrost thaw and a bigger spring flood could pose challenges for buildings, roads, culverts and crossings in the area that were designed with the 20th century climate in mind.

He said the projected growth of the snowpack and the spring flood are “of grave concern because that’s what washes out the Dempster [Highway] and damages infrastructure in the area.”

Culverts and bridges may have to be adjusted to allow room for greater stream flows, Pomeroy said. And building foundations that are dependent upon the ground staying frozen will have to be reinforced or redesigned.

Pomeroy said the ultimate solution is for humans to reduce greenhouse gas emissions.

“This study is the future we’re heading for, but it’s not the future we necessarily have if we can find a way to reduce those gases,” he said.  

“It’d be far smarter to get those emissions under control than to pay the terrible expenses for infrastructure and endangered safety of humans and destroyed ecosystems.”

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DFO tries to allay fishermen’s fears that protected area would impact livelihood

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The two-lane highway along Nova Scotia’s Eastern Shore is dotted with dozens of signs declaring “No Marine Protected Area Here!”

It’s a sign, literally, of organized opposition to a proposed 2,000-square-kilometre marine protected area.

The Eastern Shore Islands area is the first coastal candidate in Canada with an active inshore commercial fishery, albeit a small one with just 150 lobster fishermen. Still, they are a mainstay of the local economy and leading the opposition.

The fishermen fear a marine protected area, or MPA, would automatically lead to so-called no-take zones, barring industrial activities like harvesting.

The Department of Fisheries and Oceans is moving to put those fears at rest.

“We will not be making a recommendation for there to be a zone of high protection within the MPA,” said Wendy Williams, director of DFO Maritimes Oceans Management.

A “No Marine Protected Area Here!” sign is seen along Nova Scotia’s Eastern Shore. (Robert Short/CBC)

Last week, the department presented the results of a draft risk assessment to an advisory committee established to recommend what should or should not be allowed inside Eastern Shore Islands.

The committee was created after the department declared the unspoiled archipelago of hundreds of islands an area of interest. It is the first step on the road to designation as a marine protected area under the federal Oceans Act.

The risk assessment concluded the lobster fishery would not harm the kelp beds, eel grass and cod nursery the federal government wants to protect.

“The predominant activity that takes place there is the lobster fishery. It’s a low-impact fishery. It only operates two months a year, so we feel it’s not necessary to have a no-take,” Williams said in an interview.

“We talked to the advisory committee about that and what we heard and unanimously around the table is that they felt the same way. So in our design going forward we will not be incorporating a no-take zone.”

Fishermen seek assurances

But fisherman Peter Connors is not declaring victory.

“You have to remember this is deathbed conversion,” he said.

As president of the Eastern Shore Fishermen’s Protective Association, Connors represents the 150 active lobster fishermen in the area.

He does not trust DFO and is seeking some sort of legally binding commitment from federal Fisheries Minister Jonathan Wilkinson honouring Williams’s promise.

As president of the Eastern Shore Fishermen’s Protective Association, Peter Connors represents the 150 active lobster fishermen in the area. (Robert Short/CBC)

“I want to know the mechanism that he’s going to use and just how he intends to secure that for future generations,” said Connors. “I don’t want a trust me proposition and I don’t want a temporary reprieve … just because they are facing a lot of opposition now.”

Connors acknowledged a marine protected area on the Eastern Shore could help “Canada’s brand” from a marketing perspective. The country has committed to protecting 10 per cent of its ocean by 2020.

‘Give and take’

Environmentalists have watched in frustration as opposition to Eastern Shore Islands galvanized over the prospect of no-take zones.

Susanna Fuller, senior projects manager for conservation organization Oceans North, urged DFO to eliminate no-take zones from the discussion last year.

“Since it has been such an issue of contention, we are hoping that this gives the community and the fishermen a sense that they are being heard,” said Fuller.

“For this process to go forward there needs to be some give and take.”

While DFO has decided to allow unrestricted lobster fishing inside Eastern Shore Islands, Williams said no precedent has been set.

“Every MPA is different. If people have their expectations raised in any particular way because of what we’re looking at now for this MPA, they really shouldn’t. Everything is unique and we need to look at it that way,” she said.

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