COVER

THE COST OF GOING GREEN

ACTIVISTS SAY MORE ACTION IS NEEDED AS ENVIRONMENTAL CONCERNS MOUNT

JOHN DALY April 30 1990
COVER

THE COST OF GOING GREEN

ACTIVISTS SAY MORE ACTION IS NEEDED AS ENVIRONMENTAL CONCERNS MOUNT

JOHN DALY April 30 1990

As an estimated 500 million people in 140 countries participated in Earth Day events last weekend, a tiny conference in Yellowknife, N.W.T., underscored just how pervasive the danger to the planet has become. Delegates from eight countries with Arctic territory were told that chemical contaminants generated by industrial development far to the south—PCBs and dioxins—had been carried north by wind, rivers and ocean currents and had contaminated polar bears, whales and even the breast milk of Inuit women. And ultimately, the only answer to the problems of the North may be the one that featured prominently in Earth Day Sunday messages: industrial growth must be controlled and managed to sustain the environment. Many executives who are reducing pollution from their own companies support the concept of sustainable development, but even they question whether Canadians are willing to eliminate jobs or make other painful sacrifices to control pollution.

Threats: Fuelled by nightmarish environmental disasters and the growing knowledge about threats from toxic industrial waste, concern about the destruction of the environment has soared around the world over the past two years. Many corporations that have been confronted with the painful prospect of tougher government regulations and embarrassing protests from their own shareholders have already spent millions of dollars to reduce pollution and waste. They are also seeking to win favor with the public and regulators by naming vice-presidents to deal with environmental issues, introducing so-called green products and touting their new commitment to nonpolluting, sustainable economic development. But while environmental activists have lauded some of those initiatives, they say that the vast majority of corporations will not sacrifice growth or profits for the environment unless they are forced to by government regulation and consumer buying power. And the federal government has yet to produce an overall policy for the environment or to provide any firm indication of how much it will cost Canada to tackle such top issues as acid rain, Arctic pollution, toxic chemicals and polluted rivers and lakes.

Spirit: Those daunting prospects did little to stifle the spirit of Earth Day festivities taking place around the globe (page 54). And last week, amid the hoopla leading up to Earth Day, a sudden stream of government and corporate environmental promises and initiatives injected new glimmers of real hope that safe, sustainable economic growth may be possible. In Washington, General Motors chairman Roger Smith said that his company would soon introduce an electric car for personal use, thereby helping to cut carbon monoxide pollution from vehicle exhaust. Oak Brook, Ill.-based McDonald’s Corp. announced that it will spend $120 million a year to buy recycled plastic building materials for seats, floors and tabletops when building or remodelling its U.S. restaurants. In Ottawa, Canada’s environment minister, Lucien Bouchard, tabled a long-promised set of new regulations limiting discharges into rivers, lakes and oceans from Canada’s pulp-and-paper plants. Meanwhile, Statistics Canada officials announced that they would soon devise statistics to measure the nation’s environmental health.

Passion: Despite the apparent passion with which many business leaders have embraced environmental causes, environmentalists say that the businessmen’s resolve may fade once they realize the full cost to their companies of sustainable development. Indeed, even business leaders such as Dow Chemical Canada Inc. chairman David Buzzelli—he claims that Dow has realized unexpected efficiency gains and improved sales from environmental investments—concede that the financial returns on ecological investments rarely cover their cost. As a result, some executives predict that companies will quickly jump off the green bandwagon if concern about the environment wanes, or if an economic slowdown forces Canadians to choose between pollution and jobs.

And as the joy and promise of Earth Day fades around the world, the ecological resolve of consumers as well as corporations will be tested. The Ottawa-based economic forecasting firm Informetrica Ltd. said that just meeting already existing environment regulations in Canada could cost $70.2 billion or more over the next 10 years. And although that spending could create 120,000 jobs in the environmental sector, much of the cost of the cleanup would be passed on in the form of higher taxes and consumer prices.

As well, environmentalists argue that consumers, despite polls showing massive support for a cleaner environment, still have to reduce and alter their consumption habits dramatically in order to slow or reverse ecological damage. The activists also say that many green labels are little more than promotion tools for products, from batteries to plastic bags, that may or may not be environmentally safe (page 52). Said Julia Langer, executive director of the Ottawa-based Canadian chapter of the Friends of the Earth: “Overconsumption got us into this mess. Switching brands is not going to solve it.”

Dialogue: Despite a growing dialogue among government officials, activists and business executives, it is clear that they still have very divergent views of what sustainable development is and what steps will be needed to achieve it. The 1987 report of the United Nations World Commission on Environment and Development, led by Norway’s current Prime Minister Gro Harlem Bruntland, used the phrase to describe economic growth that meets existing needs while conserving the world’s stock of trees, minerals, fossil fuels and other resources for future generations.

To achieve the goals set out by Bruntland, many environmentalists argue, Canada and other industrialized nations will have to radically restructure their economies. Michael Manolson, executive director of Greenpeace Canada, says that businesses and governments must fundamentally alter their decision-making processes to take into account the potential environmental costs and benefits of any course of action, not just make minor adjustments to their current way of operating. But Finn Hovland, a senior vice-president with Mississauga, Ont.-based Du Pont Canada Inc., says that there will always be trade-offs. Said Hovland: “You can’t have an absolutely pristine environment at the total expense of jobs.”

In an attempt to encourage the activists and the business leaders to agree on common approaches to sustainable development, the federal government last year created the National Round Table on the Environment and the Economy, made up of 25 representatives from business, universities, environmental groups and three cabinet ministers—Bouchard, Finance Minister Michael Wilson and Industry, Science and Technology Minister Harvie Andre. But Manolson insists that the body is heavily stacked in favor of business, and Greenpeace declined to participate.

Debate: Across Canada, where one of the highest standards of living in the world is supported by a vast and ecologically damaging resource sector, the debate over the trade-off between growth and the environment is already far more than academic—the industrial future of the country depends on the outcome.

In Western and Northern Canada alone, plans to build $14 billion worth of resource-based megaprojects, which would create more than 10,000 jobs, are held up in government environmental reviews and protests by citizens’ groups. As a result, some of the projects—including the largest pulp mill in the world, a proposed $ 1.3-billion Japanese-financed mill on the pristine Athabasca River in northern Alberta—may be delayed for years or may not go ahead at all.

In Ontario, the nation’s rich industrial heart, Ontario Hydro officials warn that electrical blackouts will occur if the huge utility is not allowed to proceed with the construction of 10 nuclear reactors. Ontario has always been dependent on abundant supplies of cheap energy to keep its industry competitive with that in the United States, but the plants face stiff environmental hearings. Said Ontario Hydro vice-president of corporate planning Alan Holt: “It is affecting our ability to supply our load.”

But nowhere is the sustainable-development debate hotter than in Quebec, where lawsuits launched by Cree Indians and environmentalists are delaying construction of Hydro-Québec’s $9.3-billion second phase of the province’s massive $50-billion James Bay hydroelectric power project. As well, a major political confrontation is brewing between Ottawa and Quebec over Phase 2, which is scheduled for completion in 1994. The entire project, when completed, will dam and divert four major rivers entering James Bay, flooding 2,100 square miles of Cree land to produce power mainly for export.

Senior federal and provincial officials have been attempting for months to negotiate the scope and duration of public hearings into the environmental impacts of James Bay—the first such review of the project because of the James Bay and Northern Agreement, signed by the Cree Indians in 1975. The deal was the largest land-claims settlement in history, and could ultimately cost the federal and provincial governments about $2 billion. But the current talks recently broke down over Quebec’s insistence that the timetable of the environmental review must fit the construction schedule of the project. Federal officials charge that this is legally and politically unacceptable, so the two parties could not agree on a joint review. Meanwhile, several key court decisions have forced Ottawa to confront the possibility of further legal challenges by environmentalists. As a result, Ottawa has accelerated its push for new legislation that will preserve cabinet discretion on environmental assessment reviews (page 56).

Initial reports indicated that Bouchard favored an ambitious five-year strategy that was to include stiff new environmental taxes, including a clean-air tax on fossil-fuel products to discourage the burning of coal, oil, natural gas and gasoline. The buildup of carbon dioxide in the earth’s atmosphere is partly responsible for the greenhouse effect. And instead of rigid environmental laws, Bouchard released only a Framework for Discussion on the Environment last month and called for public hearings.

Prices: But any cleanup will be expensive. Based on a study he conducted last year, Carl Sonnen, vice-president of Informetrica, calculated that already existing federal and provincial environmental standards will cost Canadians at least $70.2 billion in new investment financed through higher taxes and consumer prices at the turn of the century. And even at $70.2 billion, Sonnen did not include the cost of any new federal fossil-fuel tax or efforts to reduce agricultural pollution. Said Sonnen: “We should be asking whether families are prepared to pay an average of $1,500 more a year, each year, for cleaner air and cleaner water.”

Pressure: Still, while the federal government hesitates and pollution mounts, a combination of public pressure and the prospect of further regulation has already prompted many industries to spend substantial sums to reduce waste and pollution. In fact, even before Bouchard unveiled his new regulations last week, Canada’s 145 pulp-and-paper companies had already planned to spend $1.2 billion over the next three years to clean up their waste discharges.

And last week, Canadian Pulp and Paper Association director of public affairs Louis Fortier said that companies will have to invest $5 billion over the next four years to comply with Bouchard’s new plan. Indeed, if there is one sector that clearly illustrates the economic trade-offs involved in sustainable development, it is the forest-products industry. Environmentalists say that it also contributes to water pollution and global warming by consuming massive stands of trees that, if left standing, would absorb carbon dioxide and emit oxygen.

And last month, the continuing confrontation between environmentalists and corporate leaders was underscored at MacMillan Bloedel Ltd.’s annual meeting in Vancouver. As company chairman Adam Zimmerman shuffled impatiently at the podium in a hotel ballroom, one shareholder compared the company to an axe murderer who has left the earth cut and bleeding. That was a reference to MacMillan Bloedel’s controversial plan to harvest trees— many of which are several hundred years old— in the Carmanah Valley on the west side of Vancouver Island.

Motion: On April 10, at the annual meeting in Toronto of MacMillan Bloedel’s parent company, Noranda Forests Inc., of which Zimmerman is also chairman, the international environmental group Greenpeace used its one voting share in the company to introduce a motion that would have compelled Noranda to eliminate all its discharges of organochlorines. But the motion died because it was not seconded. Zimmerman went on to defend his company, saying that Noranda, which earned a profit of $189 million on revenues of $4.9 billion last year, plans to spend $400 million over the next four years to reduce organochlorine discharges.

But Zimmerman has also repeatedly warned that there are limits to how much forest companies can spend on the environment, claiming that a total organochlorine ban could cause significant shutdowns in parts of the Canadian pulp-and-paper industry. He also maintains that the dangers posed by the industry have been grossly exaggerated. Said Zimmerman: “It has yet to be shown that the minute traces of dioxin found in forest products have any effect on anybody or anything, anywhere.”

Costs: If environmentalists force executives to make further concessions, consumers will have to shoulder the brunt of the costs. Indeed, Ronald Bright, director of environmental and vehicle safety for Ford Motor Co. of Canada Ltd., estimates that the average North American-built automobile now contains more than $1,000 worth of pollution-control equipment. And automakers say that the cost of reducing carbon-based emissions by even a further percentage point will push vehicle prices up dramatically.

In total, according to U.S. administration estimates, the U.S. Clean Air Act is expected to cost U.S. industry $250 billion over the next decade as firms conform to new standards imposed on factories, cars and coal-burning power plants that contribute to acid rain. But there are indications that industry intends to fight the legislation, which is now being debated by the House of Representatives. There also are indications in Canada that industry will fight back to protect its profits. The nation’s natural-gas pipeline monopoly, TransCanada Pipelines Ltd., announced last week that it will challenge last month’s order by Energy Minister Jake Epp that the company file a mandatory environmental assessment of a proposed 1,600-km, $2.6-billion expansion of its pipelines and that it submit to environmental screening on pipeline and gas-export applications.

But as the environmental movement gains momentum, Canadian industry and consumers will also be under siege on a global basis from developing countries, which desperately need economic growth. Official estimates indicate that the current world population of 5.2 billion is expected to double by the year 2050—with the largest increase in the developing countries. More and more, developing countries are demanding that rich nations fund the global effort at containing threats to the environment.

The costs of those global energy-conservation measures—quite apart from dealing with continental issues such as acid rain and Great Lakes pollution—could be extremely high. Donald Dewees, a professor of law and environmental economics at the University of Toronto, said that Canada will have to approximately double energy prices if it hopes to reduce carbon emissions from burning fossil fuels by 20 per cent by 2005, as it promised last year in Toronto at an international conference on global warming.

Garbage: So far, Canadian businesses and, consumers have shown only limited willingness to make major sacrifices. Indeed, as Bouchard’s green paper noted, on a per capita basis Canadians are the world’s most profligate users of energy, the largest producers of garbage and the fourth-largest emitters of carbon dioxide. And even if the spirit of Earth Day lingers, it is clear that it will only be a positive blip on a dark horizon unless industry, consumers and governments make the hard decisions for the 1990s—and the next generations.