Conserving for prosperity

You can’t spend your way into prosperity. Economists tell us this all the time. So, can you save your way into prosperity?

You can’t spend your way into prosperity. Economists tell us this all the time. So, can you save your way into prosperity?

The benefits of a conserver society — as far as conserving energy is concerned — are still up for debate. Energy efficiency may be OK for individuals and homeowners, but the business model of spending money up front, in order to consume less energy down the road, had not as yet been proven.

Does it make sense for governments, for instance, to encourage energy efficiency in our buildings and transportation infrastructure? Or is it better for governments to stay out of those decisions, and allow individuals and industries free choice on how they will spend on energy use?

News reports over the weekend of a federal study suggest governments — and therefore taxpayers — receive a pretty nice dividend when policies are used to promote energy efficiency.

It’s a misnomer to call energy conservation “sustainable economy.” Almost all economies are sustainable, if people are willing to pay a premium to be wasteful. Put the credit where it is due: governments that use public policy to reduce the use of gasoline, heating fuels and electricity collect less taxes from these commodities, but they reap much more in revenues from an energy-efficient economy.

Natural Resources ordered a study in May because of concerns in four eastern provinces that energy efficiency may be good for the environment and for individuals, but that conservation reduces government revenue. Perhaps it’s better to encourage profligacy, and collect more gas taxes and higher power bills, the thinking went.

This study shows that thinking is wrong, at least in Quebec, New Brunswick, Nova Scotia and Prince Edward Island.

Says the report: “The analysis shows that the benefits are greater than commonly recognized even by program administrators and proponents, since expanding the assessment beyond traditional benefit/cost tests introduces the impressive impact to the wider economy.”

That’s because of a corollary to the rule about spending yourself into prosperity: all the money in an economy eventually gets spent.

The Alberta Motor Association study estimated average monthly gas bills for a mid-sized car being driven 18,000 km a year at roughly $120 a month. A good portion of that cost is provincial and federal taxes.

It’s not surprising when you mention it after the Natural Resources study, but money not spent on gas gets spent on other things — which governments also tax. The same applies to home heating and electricity bills.

Cut your gasoline bill by 30 per cent (not that hard to do, really), plus heating and power consumption by similar amounts, and Natural Resources found hundreds of millions of dollars in the four eastern provinces to be spent in other areas. There are multipliers economists use to determine how much in every step of production and consumption each dollar of this activity gets taxed. It added up to a rather nice dividend.

Not driving a gas guzzler, insulating and sealing your home, using efficient heating, unplugging things in your house that are sitting there not being used — all of these things result in a 14 per cent increase in GDP between now and 2040. If all four eastern provinces acted together to reduce energy consumption to the mid-range of technology available now, the money spent elsewhere would boost employment 12 per cent, the report says.

The bottom lines by 2040 for the governments involved, in taxing economic activity rather than fuel consumption: $243 million in Quebec; $27 million in Nova Scotia; $9 million in New Brunswick; and $2 million in P.E.I. The feds would get another $312 million in that period of time.

Maybe societies can spend their way to prosperity — if they find ways to spend less on energy.

Greg Neiman is an Advocate editor.

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