The 'fatal conceit' of Kyoto



The Toronto Star, Apr. 25, 2004



A suppressed report by the federal government {Canada} evaluating the effectiveness of spending $500 million since the year 2000 to reduce emissions of greenhouse gases has shown - surprise! --- that the spending was largely wasted, producing neither a reduction in gas emissions, nor the development of new "cleaner" technologies.

An anonymous source that participated in the mid-term review is quoted in the Star, saying, "We seriously underestimated the difficulty of getting reductions and overestimated the payoff from new technologies."

How did the government manage to blow $500 million of taxpayer money?

It put it into "Action Plan 2000," which committed $210 million to promote technologies that reduced greenhouse gas emissions in industry and transportation; it gave $125 million to cities to encourage them to use the non-existent new technologies. And another $100 million was spent on promoting foreign demand for the non-existent new technologies.

The lack of value Canadians received for their half-a-billion dollars should come as a surprise to ... well, nobody. Governments are notoriously bad at "inspiring" development of new technologies and encouraging their adoption.

The idea that government can inspire the development of new, beneficial technologies is an example of "industrial policy," a type of governmental steering of industrial development thoroughly discredited outside the halls of Ottawa. Industrial policy relies on what the Nobel Prize-winning economist Frederick Hayek called "the fatal conceit," that somehow, government planners have special knowledge that markets, investors, and industry lack.

Examples from abroad are even more spectacular.

For decades, the Japanese Ministry of International Trade and Industry (MITI) was responsible for industrial policy in Japan's high-tech sector. Analyses of MITI's performance showed a dismal failure to usher in new technologies or to create new industrial sectors in electronics, aircraft, aerospace, and biotechnology. Worse yet, MITI was shown to have slowed the free-market development of these sectors when their activities were found to be at odds with planners' desires. In 1953, for instance, MITI tried to block Sony from getting into the transistor business. Fortunately, for those of us who watch television, Sony managed to get MITI to back off.

A third example of the fatal conceit comes from California, a state with environmental policies that many Canadian activists want to emulate.

In 1991, the California Air Resources Board passed a "zero-emission vehicle" mandate calling for 10 per cent of vehicle sales to be "zero-emission" (battery electric) by 2003. At the time, agency planners assured everyone that their initiative would "force" the creation of new technologies, and millions of dollars poured into battery research and subsidies for the few people willing to buy overpriced and underperforming battery-electric cars. Carmakers, forced to plow more than $1 billion into attempts to please the planners, failed to develop a market-ready battery electric car.

As money flows into Kyoto-implementation programs, auditors are finally getting the information they need to show its futility. And it's not just in Canada.

European Union members are having trouble coming up with emission reduction plans in the face of escalating cost estimates, and EU Energy and Transport Commissioner Loyola de Palacio has implied that the EU may have to reconsider its implementation of the protocol altogether.

Meanwhile, countries around the world are pointing out that Kyoto emission targets are simply unattainable. Norway's greenhouse gas emissions are far above their targets. Spain and Germany have expressed reservations about being able to meet their Kyoto targets without economic dislocation. And despite numerous attempts to bribe Russia into signing the Kyoto Protocol,

Russia has called both the science and economics of Kyoto into question.

The $500 million that the government has already wasted is only a taste of things to come unless Prime Minister Paul Martin walks away from Kyoto. Canada has already spent or allocated $3.7 billion on climate change boondoggles of various sorts, and is planning to throw another $1 billion from the sale of Petrocan into the same pit of bad policy.

This is an industrial policy that Canada can do without.



Dr. Kenneth Green directs the Centre for Studies in Risk, Regulation, and Environment at the Fraser Institute. He is the author of Global Warming: Understanding The Debate, a high-school textbook recommended by the U.S. National Science Teachers Association.