Runnals, David

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The Economics of Energy and the Environment: Introduction

Case Western Reserve University School of Law

Canada-United States Law JournalVolume 28 | Issue Article 54January 2002The Economics of Energy and the Environment:IntroductionDavid RunnalsFollow this and additional works at: https://scholarlycommons.law.case.edu/cusljPart of the Transnational Law CommonsThis Speech is brought to you for free and open access by the Student Journals at Case Western Reserve University School of Law Scholarly Commons.It has been accepted for inclusion in Canada-United States Law Journal by an authorized administrator of Case Western Reserve University School ofLaw Scholarly Commons.Recommended CitationDavid Runnals, The Economics of Energy and the Environment: Introduction, 28 Can.-U.S. L.J. 485 (2002)Available at: https://scholarlycommons.law.case.edu/cuslj/vol28/iss/54THE ECONOMICS OF ENERGY AND THE ENVIRONMENTIntroduction - David RunnalstWell, good morning, fellow masochists and conscientious churchgoers.'The four of us are all newcomers here; we have not been to this conferencebefore. I just wanted, Henry, to express our thanks to you for inviting ushere and your extraordinary courtesy and the courtesy of your colleagues inmaking us feel welcome. I found this to be a very stimulating two or threedays. I do this sort of stuff for a living, and occasionally I come to meetingsand doze because I have heard it all before, but at this meeting I have heardmany things I have not seen discussed before, and I think that is a real creditto you and the organizers.I should add that I was, sort of, strong-armed into this by Jonathan Fried,one of Henry's colleagues-in-arms at the Department of Finance Canada.Jonathan told me that I had to go; this is a very important conference and avery important organization. Jonathan then said that he was not going to beable to attendSo I thought oh, okay. So I called Henry, and he said, well, you have tocome. We placed you in an extremely prominent position. You are going tobe chairing the wrap-up session. He did not add when it was going to be andwhat time it was going to start. I discovered that when I received theprogram, and so we were making jokes about how large the phone boothwould be that we could meet in this morning. I congratulate you all for beinghere.This panel is going to deal largely with the relationship betweeneconomics and energy, although I am going to ask Steve Charnovitz if hewill say a little bit about the current state of the debate on trade andenvironment, which has come up a couple of times in our discussions, onwhich he really is one of the world's leading experts. However, we are goingto talk mostly about economics of energy and the environment - the "dismalscience" meets the Energizer bunny.As you gathered from the first couple of days, Canada is a treasurer troveof energy resources. David Luff2 and Bob Page3 and others showed graphst President & CEO, International Institute for Sustainable Development, Winnipeg,Manitoba.At the time it was said, it was Sunday morning at 8:30 AM.2 David Luff, The Environmental Implications of the Discovery and Devivery of NewEnergy Resources in the Canada/U.S. Context, 28 CAN.-U.S. L.J. 219 (2002).1Runnals: The Economics of Energy and the Environment: IntroductionPublished by Case Western Reserve University School of Law Scholarly Commons, 2002CANADA-UNITED STATES LAW JOURNALand other estimates of oil and gas reserves, coal reserves, and the largequantities of coal-bed methane, which exists primarily in British Columbiaand Alberta and is, as yet, an unexploited resources. The positive note isthat, for those of us who are in the energy business, the economics ofresource exploitation are going in our direction. The cost of exploration anddrilling for a barrel of oil has actually gone down, as one has moved into thefrontier, which no one expected. The Hibernia Platform, the large offshoreplatform off the shore of Newfoundland, cost something like $5 billion tobuild.4 It was the largest manmade structure in the world at its time. Itssuccessor platform for another field is technologically far less complicated,and cost less than $700 million to build. This is, basically, a majortechnological change in the way in which these fields are operated.When I was a kid, my father was in the oil business, and he always toldme the best way to lose your fortune in the oil business was to get involvedwith the tar sands, which was a "tar baby." We have now advanced to thepoint where tar sands are profitable at about CAN$15 a barrel, so theseresources are now on-stream, they are available, and they are affordable.There are still unexploited hydro reserves, largely in Quebec, but they alsoexist in Manitoba, where my institute is located.We heard from David Manning and David Drinkwater about thedistribution problems in both Canada and the United States. There areunexploited reserves that can be tapped, and as Bob Page pointed out,Alberta and British Columbia have some of the largest reserves of cheap,low-sulfur coal in the world. If you add that together with the post-September the 1 lth energy security concerns in the United States, we lookpretty good, but there is a cautionary tale here, and I take you back to theopening remarks by Frank Loy5 and Alan Nymark.6 I have been doingenvironmental work for most of my life and I have never seen an area that ismore driven by the science. Virtually ever major environmental policydecision over the last 20 years has been driven by science. We are now at thestage where we have a very deep scientific consensus on the reality ofclimate change. We are headed into a carbon-constrained future. WhetherCanada ratifies Kyoto or not, both Canada and the United States will, in theforeseeable future, have to deal with a carbon-constrained future, and this is3 Robert Page, Kyoto and Emissions Trading: Challenges for the NAFTA Family, 28CAN.-U.S. L.J. 47 (2002).4 See Canada Offshore Oil Development, at http://www.eia.doe.gov/emeu/cabs/canaoff.html (Dec. 1998).5 Frank Loy, On A Collision Course? Two Potential Environmental Conflicts Betweenthe U.S. and Canada, 28 CAN.-U.S. L.J. 11 (2002).6 Alan Nymark, Canada-U.S. Environmental Cooperation, 28 CAN.-U.S. L.J. 27 (2002).[Vol. 28:4852Canada-United States Law Journal, Vol. 28 [2002], Iss. , Art. 54https://scholarlycommons.law.case.edu/cuslj/vol28/iss/54Runnals-INTRODUCTIONwhere the economics of energy will change. You may hear from ourpanelists in some way how they think it will change.Yesterday, we looked at many ascending curves for energy use, for CO2production and so on. I would submit to you that those are going to level off;the Shell scenarios that David Jhirad7 was talking about show them levelingoff at sometime in the next 30 or 40 years. At that time, the economics ofenergy will have changed, and I am sure our panelists will address that.I just have two other questions which came to me during what I thoughtwas a very interesting discussion about the deregulation of the electricitysector. I have never understood it before; now I do. One, what happens tothings like the demand-site management and conservation when you separateout generation and distribution? Two, what happens with things like R&Dfor renewable energy and non-carbon energy solutions? There is aninteresting menu of options that people can explore.I will start with Steve Charnovitz, who is an old friend and colleague inthe business of trade and the environment. Steve has to be the most prolificwriter on this subject I have ever seen. For years, he has written articles inlegal journals about the relationship between trade and the environment. 8One day he came along and announced he was going to step down for awhile because he was going to law school. We all thought he already was alawyer. He has had an interesting career. Steve was a legislative assistant inthe House of Representatives, the policy director of the CompetitivenessPolicy Council. He has been involved with the global environment tradestudy, GETS. Two years ago, Steve completed his J.D. from Yale LawSchool, and is now an attorney with Wilmer, Cutler & Pickering inWashington. I do not know when he practices law, because he has stillcontinued to write prolifically on the subject of trade and environment. Steveis going to talk about energy and economics, but I have asked him if he willreflect on the state of both trade and environment and how that relates to thenew WTO round.John Sargent is the head of Canada's effort to develop a domesticemissions trading regime, and I think there is a general consensus that if wedo ratify Kyoto, his work will be an essential part of the implementationstrategy. An economist by trade, John has spent most of his career in publicservice in the Department of Finance. He has served with distinction as a taxexpert, and as Assistant Deputy Minister of Tax Policy.Mike Cleland is currently the Senior Vice President for GovernmentAffairs at the Canadian Electricity Association. I am one of those Canadianswho has lived in the United States for a while and came back in 1988, and I7 David Jhirad, An Energy Policy for the 21st Century, 28 CAN.-U.S. L.J. 315, 328 (2002).8 Charnovitz has written or coauthored at least 30 articles in law reviews, dating back to1993.2002]3Runnals: The Economics of Energy and the Environment: IntroductionPublished by Case Western Reserve University School of Law Scholarly Commons, 2002488- CANADA-UNITED STATES LAW JOURNAL [Vol. 28:485met Mike that year. That was the year I was charged with trying to helpproduce the first binational State of the Great Lakes Environment Report.Mike was on our advisory panel; at that time, he was at with the Departmentof Finance. He was the economist who kept us honest and made sure theGreenies did not make too many unrealistic assumptions about therelationship between economics and the environment. Mike then went on tobecome, essentially, Canada's senior energy official. He was the AssistantDeputy Minister for Energy in Natural Resources Canada, where he wascharged with energy policy during the negotiations over the FrameworkConvention on Climate Change and subsequently the Kyoto Protocol. Hehas been very active in debates about electricity deregulation, fuel choices,and about the whole question of Kyoto ratification.4Canada-United States Law Journal, Vol. 28 [2002], Iss. , Art. 54https://scholarlycommons.law.case.edu/cuslj/vol28/iss/54

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