This could be just election positioning or a minority government trying to stave off parliamentary defeat. In any event, Environment Minister John Baird has certainly set the political tom-toms beating furiously with his contention that meeting the Kyoto targets "next year" would plunge Canada into an extreme recession.

The context here is the government's own clean air bill, which the opposition parties toughened up considerably while in committee, with the intention that it would be the vehicle to meet Canada's Kyoto obligations.

The bill is coming up for a final vote in Parliament any day now, and Baird's argument is that if it is forced through, as currently amended, it would require the federal government to take drastic actions — in particular, an onerous carbon tax approaching $200 a tonne — that would wreck the economy.

The Environment Ministry study (which is unusual in itself because most of these economic forecasts are conducted by the Finance Department) says the economic cost of such a tax would be, among other things, 275,000 jobs lost and electricity bills that would jump 50 per cent.

Environment Minister John Baird appeared Thursday at a Senate environment committee looking at a Liberal bill that requires Ottawa to live up to its Kyoto commitments.(Canadian Press/Fred Chartrand)

To back up the predictions, Baird ran the forecast past a number of prominent economists, among them, Don Drummond, chief economist at TD Bank Financial Group.

Drummond was once a senior economic adviser to former Liberal prime minister Paul Martin and is someone the current Liberal leader, Stéphane Dion, likes to cite in his speeches in favour of taking action against global warming.

Political hardball? No question. But as Drummond told CBC News, "it's all in the timeframe." If you accept the government's contention that to meet the Kyoto deadline of 2012, big cuts — equivalent to almost 30 per cent of our current greenhouse gas emissions — have to begin in 2008, and the only vehicle for those is a tax.

"This would not be the approach I would recommend," Drummond said. But other techniques would take time to implement, "and that's why I grudgingly accepted that if you are going to have that type of timeframe, which is incredibly tight, you are going to have to go with a very blunt [instrument], such as a huge increase in the carbon tax."

That is why he is not in favour of proceeding with the clean air bill as currently amended either, Drummond added. "I do want to see something done with the environment. [But] I think the economic impact would be so dire that environmental policy would be abandoned."

Based on certain assumptions

Baird's analysis, which is set out in detail on the Environment Canada website is, however, based on certain assumptions.

The biggest one is that the federal government would have no flexibility to deal with Kyoto, other than a punitive carbon tax, because Canada is right up against the deadline.

The UN's Kyoto Protocol says that those countries that signed on to the deal, like Canada, have to reach their target emissions over a five-year commitment period from 2008-2012. Canada's commitment was to reduce GHG emissions to 563 megatonnes a year (which is our 1990 levels less six per cent), and this amount is to be averaged out over the commitment period.

Most economists who have studied this issue have suggested the only way to reduce GHG emissions is by either a carbon tax, or a cap and trade system on carbon dioxide emissions (companies would be given a fixed quota and would have to meet it or buy credits from someone else).

A cap and trade mechanism, in fact, was the main recommendation of Drummond and his TD team of economists only last month in their own detailed study of the issue. It is what the Liberals and NDP are proposing, and the Conservatives are not against it.

But Baird says it would take at least three years to devise and implement something like this, and there is no time if the Kyoto deadline is forced on the government. The only instrument at his disposal is carbon tax, which is an especially hateful concept in the West.

But the government's own study does admit that the costs could be much lower with different assumptions. Allowing polluters to buy as many Kyoto credits as they want on the international market would reduce the impact of a carbon tax to more like $25 a tonne. This, of course, would see massive amounts of private investment flow offshore, presumably to developing countries like China or India, to help them lower their emissions.

Baird also seems to be assuming much deeper emission cuts than first meet the eye will have to be undertaken if the Kyoto target is to be met. Canada's current emissions are something like 740 MT a year, according to the most recent data, for 2005. That's a gap of 177 MT over the target. But Baird's analysis suggests Ottawa would have to force through cuts averaging 260 MT a year over the five-year commitment period leading to 2012, and it's not entirely clear where these new numbers come from.

Kyoto and the economists

Most economists today do not see a huge trade-off between environmental protection and economic well-being, provided the changes are made with care.

For example, Britain's respected economic adviser, Sir Nicholas Stern, said the cost of complying with Kyoto and minimizing GHG emissions should take up no more than two per cent of a developed country's GDP. (By contrast, Baird's report predicts a seven per cent drop in Canada's GDP if drastic action has to be undertaken.)

Drummond's TD group also argues that job losses and other problems could be mitigated through the proper polluter-pays policy tools. But the issue is one of timing and the fact that Canada may be a special case.

As Simon Fraser University's Mark Jaccard argues, Canada is almost a perfect storm when it comes to burgeoning GHG emissions (now almost 30 per cent above the Kyoto target): We have a growing population and economy as well as thriving energy and resource sectors, mostly designed for export markets.

Another Kyoto expert and a resource economist who signed off on the Baird study, Jaccard was also an adviser early on to the former Liberal government, and says that a carbon tax and emissions trading system should have been implemented years ago if we were serious about meeting Kyoto.

"As someone who studies capital stock, this is an insane discussion," Jaccard says. To meet Kyoto in the short run, he says, we're talking about forcing the turnover of about 30 per cent of our old cars, housing and inefficient machinery in the space of just a few years.

The bottom line is that there is now, once again, a clear political demarcation between the Stephen Harper Conservatives and all the other opposition parties on Kyoto, the basis perhaps for an electoral showdown.

The business bottom line, though, is that most of Canada's larger firms have been gearing up for some kind of emissions regime. As Drummond's TD group of economists concludes, "any delay or vagueness in policy announcements creates an economic cost in itself."

The cost of further delay can also only lead to much greater emission cuts in the years to come.