In October 29, 2007, Premier Stelmach announced the creation of an Alberta Secretariat for Action on Homelessness. Its mandate: Develop a strategy to end life on the streets in 10 years. (more…)
How to fix the skilled worker shortage and make Canada a top economy in one step (more…)
Rural Alberta lost its voice when Bill 46 took effect
By Andrew Nikiforuk
Illustration by Robert Carter
The recent fight over Bill 46 (The Alberta Utilities Commission Act) makes an unsettling tale about electricity deregulation in Alberta. (more…)
Labour shortages and lack of affordable housing are two sides of the same coin
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As I write this article the media is full of stories on the alternative lending or subprime market in the United States. One edition of the Wall Street Journal had so many stories on the subprime sector that it looked more like a special mortgage insert. (more…)
Unreality plagues discussions of global warming. Since the late 1980s, world leaders have announced a succession of ever-tightening emission targets attached to ever-receding deadlines with ever-weakening intentions of meeting them.
By Ross McKitrick
Illustration by James O’Brien
At September’s APEC summit, Prime Minister Stephen Harper proposed a 50% emissions cut – but not until 2050, long after his government will have gone. Shortly thereafter, a federal analysis showed that the Conservatives’ “Turning the Corner” plan will be just as ineffectual as the Liberal plans that preceded it (despite being substantially costlier to the economy).
Environmentalists make the unrealistic claim that Canada could drastically reduce carbon emissions at little or no cost, therefore (they conclude) we should embrace deep Kyoto-style targets. If they are right, a low carbon tax would be a sufficient incentive to get us to the target. Yet if you actually suggest a low carbon tax, they object that it would be ineffectual, since firms will only cut emissions under a high carbon tax – effectively conceding that carbon emission reductions are in fact very costly.
Unreality also plagues the discussion of the scientific basis. Large-scale assessment reports like those from the Intergovernmental Panel on Climate Change (IPCC) and the U.S. Climate Change Science Program (CCSP) are routinely invoked as an inerrant authority by people who never actually read them, let alone the literature they are supposed to summarize.
What do these reports tell us? Both conclude that if greenhouse gases drive global warming, there will be a unique signature on the atmosphere in the form of a strong warming trend about 10 miles over the equator, in the so-called tropical troposphere. Only greenhouse gases will do it, and the warming up there will be earlier and stronger than warming at the surface. If carbon emissions really drive climate change, models show the trend should already be well underway.
So it is noteworthy that the IPCC report examined 25 years of data from weather satellites and weather balloons, and found no evidence of a significant warming trend in the tropical troposphere. The average temperature has drifted upwards since 1980, but not beyond the bounds of natural variability. The CCSP noted this too, and pointed out that the models showing the greatest agreement with observations are those that have the lowest amounts of warming.
So let’s pose the big “What if.” What if Al Gore and all those jet-setting celebrity activists are wrong? What if carbon dioxide is not the environmental threat it has been made out to be?
The trouble with the new greenhouse gas policies coming from the federal and Alberta governments is that they only begin to make sense if the alarmists are right. They still don’t make much sense, but if the alarmists are wrong, the policies are truly misguided. I believe we should look for a policy that makes sense no matter who is right.
We have daily data on the mean temperature in the tropical troposphere. Suppose we implement a low carbon tax with the revenue recycled locally. And suppose we calibrate the carbon tax rate to the temperature measure. Call it the T3 tax, for tropical tropospheric temperature. If the mean tropospheric temperature starts going up, the T3 tax would go up, forcing emissions down. If the tropical troposphere does not warm up, the tax won’t go up, nor should it. Alarmists and skeptics alike would expect to get their preferred outcome.
I have spelled out the research behind this proposal in some essays available at ross.mckitrick.googlepages.com. Economists have shown that choosing a carbon price, rather than a cap, minimizes the economic costs of whatever emission reductions are achieved. The T3 tax would build long-term expectations about future climate change into today’s decision-making. Someone building a pulp mill or a power plant would have to get the best information available about climate trends for the next 10 or 20 years, in order to project the carbon price they will face.
This will create a market for accurate climate forecasts, injecting a dose of reality into academic studies. It will also mean that the policy outcome is rooted in reality. Whether the tax forces emissions down or not will ultimately depend on whether greenhouse gases are a problem. We will end up with the right outcome, without having to guess in advance what the right policy is.
Between the Lines is a guest column about current affairs topics that touch on business in the province.
Ross McKitrick is an associate professor of economics at the University of Guelph, where he specializes in environmental economics
Alberta’s hockey teams return to action this month following a busier than usual off-season, highlighted by reclusive drugstore billionaire Daryl Katz’s attempt to purchase the Edmonton Oilers. At first glance the offer sounded like a dream come true for fans.
by Lyle Richardson
Illustration by William Rieser
Katz not only bid $185 million for the team (valued at $161.7 million as reported by Forbes magazine last November) but also promised to help fund a new arena and guaranteed that the Oilers, under his ownership, would spend generously on their roster.
If his offer had been made five years ago, the 33-member ownership of the Oilers, known as the Edmonton Investment Group, might’ve pounced on it. Unfortunately for Katz, the National Hockey League’s economic landscape has changed significantly since 2002, which is why the Investment Group refused to sell.
One of the changes is the NHL’s current collective bargaining agreement (CBA), the centrepiece of which is a salary cap that ties players’ salaries to league revenue fluctuations on a sliding scale. This ensures that at best the players receive no more than 57% of league revenues in a given season. Capped players’ salaries ensure more revenue for owners and is also an attractive selling point for prospective buyers like Katz, thus contributing to the increase in franchise values around the league.
The main reason the Oilers are enticing to a guy like Katz, though – and why the current ownership won’t sell – is the rise in value of the Canadian dollar over the past five years. During the late 1990s and into the first half of this decade the loonie fluctuated between 63 to 70 cents US, crippling for popular teams like the Oilers and Calgary Flames whose revenues were in Canadian dollars but whose players’ salaries were in American greenbacks. The sluggish loonie, not the lack of a salary cap, was the reason for Alberta’s inability to retain their best players or bid competitively for free agents back then.
In the two years since the current CBA was imposed, the value of the Canadian dollar has soared to around 95 cents US, which has had a significant impact on the Calgary and Edmonton franchises. Prior to the season-killing NHL player lockout of 2004-05 the Oilers and Flames were considered struggling, small-market teams, but thanks to the robust Canadian dollar the two currently rank among the top revenue-grossing teams in the league. Cal Nichols, chairman of the Edmonton Investment Group, admitted to a Nashville newspaper in July that the Oilers ranked seventh overall in revenue for the 2006-07 season.
The Oilers and Flames weren’t the only Canadian teams benefiting from the stronger dollar. The six Canadian NHL teams accounted last season for one third of the league’s revenues, no small feat considering the other 24 teams in the league are located in mostly larger American markets. That stronger dollar is why the Oilers and Flames have kept pace with the NHL’s rising salary cap and don’t need a billionaire owner like Katz to do it – so much for the myth of the Oilers and Flames as struggling, small-market teams.
The Oilers ownership group is now making a lot more money than at any previous point in its tenure and with the dollar showing no signs of decline, they’re understandably unwilling to part with what could be a cash cow.
The City of Edmonton’s plans for a new arena, something the Oilers obviously support, is also a factor in the current ownership decision. The seating capacity at Rexall Place is 16,839 and, while the Oilers have little trouble filling the building, their attendance ranks in the middle teens out of 30 NHL teams. A bigger venue, seating more than 18,000 fans and with more corporate suites, could boost the Oilers’ revenues significantly higher.
It’s surprising that Katz didn’t at least try to pursue ownership of a new arena as the Oilers would have then had to negotiate a lease agreement with him and thus give him a potential foothold toward a future purchase. As it stands now it’s more advantageous for the Oilers to negotiate a lease agreement with the city than with a single arena owner.
The current owners were considered heroes by Edmonton hockey fans for purchasing the club nearly 10 years ago and preventing its relocation. It was love of hockey that spurred many of them to buy in, but it’s the potential for revenue growth that’s keeping them, and putting a rich, prospective buyer like Katz on the outside looking in.
Between the Lines is a column on current affairs topics that touch on business in the province. Lyle Richardson
How can Alberta maintain a viable petrochemical industry in a time of declining natural gas production? The government’s made a good first step
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Alberta’s oilsands, the world’s largest engineering project, may be getting rave reviews in the corridors of Ottawa and Washington, D.C., as a secure source of oil for the continent. At home, though, it is rapidly becoming a growing threat to northern water security.
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There is no rental housing crisis. Rather, the rental market is changing to be in proportion with the rest of Alberta’s economy, and we are in a period of adjustment. The disparity between supply and demand will normalize within a short time and the natural ceiling on rents will emerge. That is, if the free market can work itself out without government interference.
By Bob Dhillon
Illustration by David Vogin
A few highly publicized cases of rent increases have led the public to believe that lack of rent control in this province results in exorbitant rent increases and huge profits for landlords. This is completely false. Rent increases of $1,000 a month are the exception, not the norm, and making laws based on the exception leads to very bad policy. Canada Mortgage and Housing Corporation, for example, states that rents in Edmonton increased by 10% last year and projects that they will increase by 20% in 2007. But after five years with no growth in rents, and enormous growth in other industries, these prices are just catching up. Too-low rents keep apartment owners from properly renovating, maintaining and building new apartments.
Implementing rent controls in Alberta, and even limiting rent increases to one per year as the government recently did, is poor policy from which nobody benefits. Some well-intentioned politicians and poverty activists believe that these controls will help create more affordable housing, but the truth is that they would only hurt tenants, landlords and the 100,000 people who are moving to this province each year.
Economics courses often use rent control laws as a textbook example of the problems that arise in trying to artificially reduce prices. The natural consequence is a reduction in supply, followed by shortages.
The opposition parties in Alberta have been arguing that rent controls they advocate would be only temporary. The fact is all rent-control regimes in North America have been put in place as temporary measures. But once in place, they are almost impossible to de-control. The first controls were implemented during the Second World War in New York City. That was 65 years ago, and they are still in place today. Manitoba implemented temporary rent controls in the late 1970s and the province still has complete rent control.
The last time the Alberta government moved to obstruct the market’s natural course, in the late 1970s and the early 1980s, it created a tax subsidy program that caused an overbuilding of apartments just as baby boomers were moving from renting to owning. A whole industry was almost completely destroyed because of a knee-jerk reaction to a period of adjustment in the rental market. This doesn’t mean that the government has no role to play in housing. If it truly wants to help Albertans, the government needs to set up more assisted living for seniors and allocate emergency housing funds to those who are most in need.
My family and I were renters when we first moved to Alberta. I, and countless others, have flourished in this province. My company, Mainstreet Equity Corporation, has transformed over 5,000 homes from poorly managed, poorly maintained properties to modern, renovated, energy-efficient homes. We install hardwood floors, ceramic tiles, new appliances and fixtures, and update the bathrooms of the apartments we purchase. During the past five years, Mainstreet has spent millions on renovations and put 100% of our cash flow back into the economy through wages to our employees, contractors, and suppliers. And how can we afford to do this? Because we can adjust our prices according to the market.
All of these achievements would not have occurred with rent controls in place. The largest residential landlord in Canada, Boardwalk REIT, was created out of Alberta, because this province encouraged flexibility and freedom of pricing. When an investment banker from Ontario lamented to me that all the innovation in the multi-family industry comes from Alberta, and none from Ontario, I had a simple answer for him: There are no price controls in Alberta — it is the land of opportunity.
Between the Lines is a column on current affairs topics that touch on business in the province.
Mark Jaccard is professor of resource and environmental management at Simon Fraser University and the author of Sustainable Fossil Fuels.
