Life in the Rear-view Mirror

Old World versus New World

It's not sufficient to say that North America is the problem, and just leave it at that. Why is it the problem? Why do we consume more electricity and pollute more? Can we learn from the old world societies that have been around for millennia?

For starters, it's clear that North America has been blessed with abundant natural resources. We have almost limitless supplies of fresh water, large forests, vast quantities of coal and minerals, and, last but not least, enormous quantities of petroleum.

However, almost halfway around the world is tiny Japan, with very few natural resources. Yet, it developed a standard of living comparable to Europe and North America. How did they do it? The short answer is through hard work and a frugal lifestyle.

The paucity of natural resources made Japan dependent on imports of energy and raw materials, which made them painfully aware of the need to be frugal. They learned to use these precious resources efficiently, cutting out waste wherever possible.

In fact, Japan generates the lowest level of municipal waste of all OECD countries. On a per capita basis, Canada produces twice as much municipal waste, and the U.S. is just behind Canada. I'm reminded of when my family arrived in Toronto from the old world. Our first impression was, "Oh my god! Torontonians generate a lot of waste!" We soon learned to adapt, unfortunately.

The Japanese have shown us that a good, healthy life does not depend on how much electricity we consume, how many consumer products we buy, and how much stuff we throw out. To them, quality is more important than quantity.

Arguably, Germany and Japan, manufacture the best cars in the world, yet only 590 out of one thousand people own cars in both countries. It seems like a strange coincidence that the number is the same for both. However, in the U.S., the number is much higher (810). Why?

I have traveled in all three countries and the answer is clear to me. The North American rail system pales in comparison with those in Germany and Japan. In the U.S. and Canada, the car is king! It didn't happen by chance, but by design. The auto industry, with the support of the oil industry, persuaded the American Congress that a better rail system was not in the best interests of the country. A grand plan for a nationwide electric rail system was stillborn. Canada followed the American example. Both countries are now paying the price.

That decision was made long ago, but North American governments still encourage its people to drive cars. Mexico actually subsidizes the price of gasoline and the U.S. has the lowest fuel tax of all OECD countries. While Canada's fuel tax is double that of the U.S. (25 vs. 13 cents per litre - these are country averages, with significant variation from state to state and province to province), it's much lower than in other OECD countries.

Japanese pay a fuel tax of about 65 cents per litre and Germans pay 100. The lack of petroleum resources in both Germany and Japan makes it easier for their governments to justify high fuel taxes. And those taxes help maintain excellent public transportation systems that discourage the use of the automobile.

Are North Americans better off than their counterparts in Germany and Japan?

Not when one considers the horrendous traffic and pollution problems that low fuel taxes have created in our cities. The money we save on fuel taxes increases spending in other areas, which generates more municipal waste. North Americans, in general, and Americans, in particular, out consume anybody else in the world. We are a nation of shoppers, and the more stuff we buy, the more we throw out. Unfortunately, our natural wealth and government policy, fully supported by the ruling class, has encouraged a spendthrift culture.

The high cost of energy in Europe and Japan makes sure that it's used wisely and efficiently. Winters are just as cold there as they are in Canada, Alaska and the northern U.S. states. The low cost of heating oil and natural gas in North America allows us to keep our homes during the winter much warmer than those in Europe and Japan. I can vouch for that through personal experience!

Similarly, the cost of electricity has an impact on air-conditioning usage during the summer. In Europe, where electricity rates are high, the use of home air-conditioners is low. In North America, where the cost of power is low, home air-conditioning use is high. Not only that, those homes are maintained at much lower temperatures than in the old world.

If anyone needs more convincing, consider that the cost of electricity is 19 cents per kWh in Germany, the second highest in Europe, and only 10 and 8 in the U.S. and Canada, respectively. This should leave no doubt as to why we consume more power and pollute our environment more than most other countries in the world.

In 2012, the world consumed 100 units of electrical energy, equivalent to burning nine billion tonnes of oil. Forty units were produced from burning coal, 4 from oil, 23 from natural gas, 17 from hydro power, 11 from nuclear, and 5 from other sources like wind and solar. A staggering two thirds of all electricity generated comes from burning fossil fuels! That's why we have high levels of carbon dioxide in the atmosphere and an air quality problem. We have a long way to go if we're serious about cleaning up our environment.

North Americans might say, "We have a low population density relative to Europe and Japan, which boosts our per capita energy consumption because we drive longer distances. Moreover, we have more energy-intensive activities, such as mining and drilling for oil and gas, which unfairly penalize us."

Let's consider these factors. Take Germany, for example, which has the same landmass as Japan but only two thirds of the population. Clearly, one has a population density disadvantage relative to the other, but their per capita energy consumption is the same! Population density appears to have little or no effect. Has Germany compensated for it by imposing a higher fuel tax to discourage driving?

A look at per capita consumption of gasoline indicates that Germany actually uses less than Japan (1.2 vs. 2.8 barrels per person, per year), even though on a population density basis it should be the other way around. With a population density only ten percent that of the U.S., Canada actually uses less gasoline (8.5 vs. 10), not more! Clearly, the more important factor is the fuel tax.

There is a strong inverse correlation between fuel tax and gasoline consumption: the higher the fuel tax, the lower the per capita consumption of gasoline. These comparisons convinced me that fuel taxes do work, while population density appears to have little, or no effect.

However, it's true that extraction of natural resources, which is an energy intensive activity, has an impact on per capita energy consumption. Canada's economy relies much more than that of the U.S. on mining and oil and gas drilling, and this is borne out by the numbers. Canada's per capita energy consumption is almost one third higher than in the U.S.

Nevertheless, there is room for improvement. Too many inefficient processes are supported by cheap fuel prices.

Moreover, while the mining and energy sector is more important to Canada's economy, it's much less important in the highly industrialized American economy. Therefore, it accounts for only a small fraction of U.S. per capita energy consumption, and doesn't justify why American per capita energy consumption is twice that of Germany or Japan.

It appears to me that new world per capita energy consumption is higher than in the old world because we have been blessed with abundant supplies of cheap energy, which promotes a culture of wastefulness. The old world imports energy; and to reduce trade imbalances, governments imposed high fuel taxes. These taxes worked in three ways: they discouraged waste, encouraged energy efficiency, and developed a frugal culture.

If North America cares about clean air, clean water, and uncontaminated food, it has to reduce per capita energy consumption close to those of the old world. Only then, can we hold our head high and point to China, and say, "It's your turn!" That would be a breath of fresh air indeed!

Waiting for government action is like Waiting for Godot. We would be better off taking our own initiatives to develop more frugal lifestyles.