Prof. Ignatieff is proposing that the government get MORE involved in the production and sale of food in Canada, to help farmers, help Canadians eat healthier, and improve exports…

Wait, one of the reasons why many Canadian agricultural products aren’t exported is because of the supply management systems that make Canadian dairy, poultry and eggs uncompetitive on the world market.

And past government “help” for farmers has meant higher prices for Canadian consumers – so I want no part of this.

And Kevin Libin showed months ago in the National Post that local produce often has a higher GHG footprint than food from distant locales simply because growing some produce in Canada is inefficient.

Mr. Ignatieff – get out of the way and let the free market do the job it does best.

I do not often agree with Jeffrey Simpson, but he is bang on with his polemic against supply management and how Canada is being shut out of international free trade negotiations by our fanatical defense of poultry, egg and dairy farm protection.

As I have always said, supply management simply protects Canadians from lower prices.  It is time for Ottawa to banish this from the land.  New Zealand and Australia have shown the way to greater prosperity for these industries by allowing them to compete on the world stage.

Don Braid, a columnist in the Calgary Herald, writes from a position of minimal knowledge about a complex subject and thinks that we should listen to him (and the NDP who raised this question in the Alberta legislature).

He thinks the government of Alberta should prohibit the use of in-situ combustion (i.e. injecting air into oil reservoirs and igniting is so the heat of combustion helps reduce the viscosity of the oil, and the combustion gases will help push the oil towards the production wells) because it sounds like a PR nightmare on par with the 1950′s era dream of using nuclear bombs for the same purpose.

First of all – lots of crazy ideas about nuclear bombs were dreamed up in the 1950′s.  Read Dyson’s book on the Orion Project for evidence of that…

But on the subject of in-situ combustion, if Don Braid had asked people with knowledge in the field, he would have learned that in-situ combustion has been used commercially around the world since the mid-1960s, including in Alberta.  Has there been any safety problems?  It would be lying to say no.  But the risks are understood.  And turning off the fire is easy – turn off the air supply – it’s not like you can light an underground oil reservoir and it just burns for five years (as Braid insinuates).  If you stop supplying the air, it stops burning.

Braid might be surprised to know that there are in-situ combustion projects (including toe-to-heel) already operating in Alberta.   He might also be surprised to learn that there are projects to gasify (partially combust) coal underground to make gas to run a power plant. Including one proposed in Alberta that has received Government money.  Some of this technology dates to the middle of the 19th century.

So I would recommend that Braid do more research before spouting off about a subject he clearly knows little about.

On the other hand, since Braid (and others) are clearly terrified of this technology, those companies involved with it need to do a better job of selling it to the public and explaining the risks and how they are managing them.

Mother Earth may be about to show us how insignificant we are.  The recent eruption of the Eyjafjallajökull volcano in Iceland has shutdown air travel in northwestern Europe.  News reports indicate air travel may be curtailed for a couple days.   But the geologic history is interesting:

The eruptive phase started on 19 and 20 December 1821 by a series of explosive eruptions continuing during the next days. The sources talk about heavy ash fall in the area around the volcano especially to the south and west.   After that event the eruption continued on a more subdued level until June 1822.

From the end of June till the beginning of August 1822, another series of explosive eruptions followed. The eruption columns were shot to considerable heights, with ashfall both in the far north of the country, inEyjafjörður, and in the southwest, on the peninsula of Seltjarnarnes near Reykjavík.

The period from August to December 1822 seemed quieter, but farmers attributed the death of cattle and sheep in the Eyjafjörður area to poisoning from this eruption, which modern analysis identifies as fluoride poisoning. Some small glacier runs occurred in the river Holtsá. A bigger one flooded the plains near the river Markarfljót. The sources don’t indicate the exact date.

In 1823, some men went hiking up on Eyjafjallajökull to inspect the craters. They discovered a fissure vent near the summit caldera a bit to the west of Guðnasteinn.

In the spring of 1823, the nearby volcano Katla under the glacier Mýrdalsjökull erupted and at the same time steam columns were seen on the summit of Eyjafjallajökull.

What would the consequences for Britain, Norway, France, Germany and Denmark be if the eruptions continue for two years?   I dare say that would be economically very bad.

One of my readers has asked a question about climate risk.  Recently, statements have been made in various publications, ranging from Scientific American, Discover and The Economist positing that:

Action on climate is justified, not because the science is certain, but precisely because it is not.

This is a combination of the precautionary principle and the logic of buying insurance.

The fundamental problem with applying this to the climate change issue is that the likely magnitude of the problem is not very large (if it exists at all), and the costs to mitigate the supposed source is ridiculously high.

One buys fire insurance for your house because that while the risk of fire is small, the consequences are catastrophic.  But you do it because the cost of insurance is low.  If the cost of fire insurance was, say 10% of the replacement cost of the house on an annual basis, you wouldn’t buy it.  You’d bet that you wouldn’t have a fire.

With regard to the climate, while the IPCC has claimed very wide ranges of potential temperature increases, 1.4°C to 6.4°C, the probabilities lean much more to the bottom end of the range.  This must be particularly considered as the data of the last 12 years indicates a leveling off of global temperatures, even with increasing CO2 concentrations.

The question of whether such risks are catastrophic must be compared to past temperature changes and the impact on the civilization and ecosystems.  As there is significant evidence that the Roman and Medieval Warm Periods were warmer than today and the consequences for civilization was good, I would posit that attempting major changes to our economic structure in the name of “maybe things are going to go bad” seems awfully foolish.

Second, the cost of the such mitigations efforts must be compared to the risk.  Capture of CO2 costs >$100/tonne.  For Canada alone, this would be >$100 Billion just to reduce emissions by 17% from 2006 levels to by 2020.   This will result in us being 7% poorer than if we do nothing.  Are we willing to pay that much for that little change in emissions.  Atmospheric concentrations will still be rising…  To begin to reduce atmospheric CO2 and actually “stop” the suspected warming will cost a lot more.

Plus there is the question of whether it is even possible.  Replacing fossil fuels with wind and solar isn’t going to work unless there is a major improvement in PV cell technology and cost.  Nuclear could do some of the work, but environmentalists don’t like that and the regulatory structure makes it expensive – and the projects take too long.   Replacing 100 years of infrastructure isn’t going to happen in 40 years while still growing the economy.  This is why I used the cost of carbon capture as the yardstick – only it will be able to happen fast enough…

We must also look at whether adaptation is the better path.  People have adapted to climate change before – just not with the population we have.  But they also didn’t have the advantages of modern technology or free market forces that will create incentives and opportunities.

The “act now” crowd are responding to a statistically small risk with an exaggerated consequence – much like a lot of the health insurance programs in the United States – they cost too much for what they really do.

The real problem with the proposals to “act now” are that this action is to be arranged and operated by inefficient and corrupt government and supranational agencies, like the UN.   Adaptation will happen at the level of the individual, village, city, and nation, with entrepreneurs figuring out how to turn challenges into opportunities and profit.

So say no to “act now” and prepare to adapt if things do change.

OK – so we have had another major condo fire in Calgary, and I once again find myself frustrated by the news focus on the “poor residents” who didn’t have insurance against fire…

Excuse me, if they can afford to buy the condo, they can afford insurance.  It’s cheap.  But don’t expect me to feel sorry for them.

Recently, I’ve stumbled onto a few bad science columns and articles in major science publications, Discover and Scientific American.

To start, Lawrence Krauss, a respectable physicist, starts delving into ocean chemistry and climate when he brings forth the notion that increasing CO2 levels in the atmosphere will decrease the pH of the ocean, making it acidic and preventing the formation of calcium carbonate shells in shelled animals and coral reefs.  The problem is, that isn’t good science.  That is taking a simple concept (i.e. dissolving CO2 in water makes carbonic acid) and applying it to the very large and very complex chemical system that is the ocean.  It has been shown that increasing acid species (like CO2) in the ocean cannot drive the pH very far because the CO2 in the water will react with minerals in the sea floor, forming salts – in fact, on page 17 of the same issue of Scientific American is a short article on storing CO2 by reacting it with the basalt underlying the ocean…   Ian Plimer has explained the ocean chemistry issue very clearly previously, showing the Dr. Krauss is misleading the public in his column.  Further, recent studies have shown that increasing CO2 in the oceans actually increases shell development in some species…  A good question for Dr. Krauss would be “How did the oceans stay alkaline during the Jurassic-Cretaceous period when atmospheric CO2 levels were 5 times the current value?”

In Discover, they have interviews with Judith Curry and Michael Mann about the impact and importance of ClimateGate.  Judith Curry makes a very eye-opening statement to a question:

Q. Are you saying that the scientific community, through the IPCC, is asking the world to restructure its entire mode of producing and consuming energy and yet hasn’t done a scientific uncertainty analysis?

A. Yes.

Egads – why the hell should we act if we don’t know whether the uncertainty overwhelms the supposed effect?

Michael Mann tells us:

We’ve reached a point now … where we’ve got climate scientists, who understand the physics of climate and how that translates to uncertainties, working hand in hand with economists who will run the projected impacts through a cost-benefit analysis.  The way it plays out is that the small probability of extremely bad things happening incurs huge potential costs, and you want to hedge against those potential catastrophic costs.  So when you taken uncertainty into account, it actually leads to the decision that we should taken action more quickly.

Of course, Dr. Mann makes us rely on faith that (1) climate scientists really do understand the climate, and (2) that economists are hard scientists who can accurately predict the future.  Considering how well economists and their ilk did over the past 5 years, I would have to question that one…

And I won’t waste my time with Jeffrey Sachs monologue, which sounds like a desperate plea to act while at the same time avoiding any comment on the fact that the science is clearly unsettled.

Last night, 60 Minutes reported on Bloom Energy and their BloomBox technology.  You can read a transcript of the story here.   Bloom appears to have developed a reasonably priced fuel cell technology.

My thought on this was that if they can sell me one for cheap (like less than the $3000 quoted in the story) to power my house using natural gas, it might pay for itself in a reasonable amount of time.  It would be even better if the power company would let me sell electricity back to the grid – because a fuel cell operating in the 90+% efficiency range would allow a BloomBox owner to generate electricity for about half the price of a combined cycle natural gas fired power plant.  I won’t hold my breath for that one though – this being Canada where government regulation never saw a novel idea they couldn’t kill to protect the status quo…

My first thought on seeing this story though was “OMG, it’s a Shipstone!” from the Robert Heinlein novel, Friday (buy here).  Now it’s not quite as magical as a shipstone, but it is interesting how science fiction turns out not to be so fictional after all…

Last week, the Parliamentary Budget Office published a Fiscal Sustainability report, that lays out the reality that anyone with a little knowledge of math has known for a long time.  The problem is that there are many in Ottawa and the media who think that Kevin Page’s preferred solution, higher taxes, is the right one.  And they would be wrong.

(OK, Page did say in the report that government had to either raise taxes or cut spending, but then states that recent tax cuts (corporate, GST) were irresponsible and unsustainable.  Seems clear to me what side of the fiscal tent he sits on…)

Recent events around the world, particularly in Greece, show us that high taxes and high government spending are unsustainable.  The Wall Street Journal said it best:

The central contradiction in modern liberal politics is that Otto von Bismarck’s entitlement state for cradle to grave financial security is no longer affordable. The model has reached the limit of its ability to tax private income and still allow enough economic growth to finance its transfer payments.

Whether it be Greece, the rest of the EU, the United States or Canada, we cannot afford the growing size of government.  Even Keynes, who believed government should grow during recessions, believed that government should never consume more than 25% of the economy.  Today we are well above that, and much of Europe is above 50%.

It disappoints me that commentaries like this get written, decrying the lack of policy vision in Canada, then demanding more government to solve the problems.   I agree there has been a dearth of good policy (or new policy) coming from Ottawa – but I would ask that our leaders look towards a country that had the most success avoiding the recent economic downturn and has seen both sustained economic growth for 20 years, while not just balancing the books but paying off debt:   Australia.

Australia is the least regulated economy in the OECD, has the lowest government debt, and has the most open and free trade.  While the current Rudd government makes noises about reversing many of the good policies of the Howard era, we should ignore that and move in the direction of less government, less regulation, lower taxes and freer trade.  And that means we need to cut government spending at all levels and let the free market do more.   It is for this reason that I vehemently oppose any proposals to expand government (such as Iggy’s recent call for government run daycare and preschool).  We don’t need it.  We never will.  And we can’t afford it.

I do commend the Globe editors – this editorial is very good.  It calls out the government to make hard choices.  But it lets them off the hook until “current agreements expire in 2014″.  The longer we wait the worse this gets…

The federal Finance Minister, Jim Flaherty, today released revised rules for mortgages to try to avert a housing bubble.  His mechanism is to make it more difficult for people to buy houses without taking more equity and to make it so that borrowers need to meet a higher bar of being able to pay back the house (5 year fixed rate vs. a shorter term or variable rate).

Here is the problem – this is a band-aid solution to the housing problem that doesn’t address the fundamental problems:

• We have too much debt
• Debt is too easy to acquire
• Interest rates are too low, making debt appear less risky (it is only truly less risky if it is very short-term debt)

A simpler solution is for the Bank of Canada, and central banks everywhere, to consider changing the measures that are used to guide the setting of interest rates.  Today, there are three criteria that the BoC is using to set interest rates:

1. Inflation (CPI)
2. Economic Growth
3. The value of the Loonie

The problem with these is that the Inflation rate has been compromised by politics.  They removed “volatile” prices like food and energy, which means that the remaining prices are more greatly affected by things that are deflationary, such as electronics.   Economic growth is likewise a dangerous measure, especially if that growth is being built with a large current account deficit or increase in debt levels.  And the third is simple ridiculous.  Maintaining a low Canadian dollar protected Canadian business from having to spend money on improving efficiency and productivity – but we should have known we could not rely on that forever.  Also, the value of currencies is likely to shift significantly over the next few years as Europe, Japan and America deal with their giant fiscal problems and China grows into the largest economy on Earth.

A better method for setting interest rates would be for the central banks to use the same kinds of measures that the free market would (i.e. if we didn’t have central banks) – RISK.  If there is a rising level of debt, there is a rising level of default risk.  Lenders (i.e. bondholders) would demand a higher interest rate to counter the risk profile.  Central banks should do the same.  If the level of private and public debt is rising to quickly, interest rates should be increased to slow or cease said growth.  The painful part may be that we are so far gone that economic contraction may be necessary to unwind the debt.  Imagine for a moment that we didn’t have CMHC (or Fannie Mae or Freddie Mac in the US) insurance for mortgages – would banks be rushing to offer mortgages with zero down and low interest rates?  I don’t think so.  The risk profile for banks would be very different and the housing market would likewise be very different.

Therefore, the Bank of Canada and the Minister of Finance should sit down and decide what a reasonable debt level is for Canada – preferably by asking the banks what they would be comfortable with if they had to lend with no insurance policies from government.   Then raise interest rates until debt levels fall.