Bill C-377 (Historical)

Climate Change Accountability Act

An Act to ensure Canada assumes its responsibilities in preventing dangerous climate change

The purpose of this enactment is to ensure that
Canada meets its global climate change obligations
under the United Nations Framework Convention
on Climate Change by committing to a long-term
target to reduce Canadian greenhouse gas emissions
to a level that is 80% below the 1990 level by
the year 2050, and by establishing interim targets for the
period 2015 to 2045. It creates an obligation on
the Commissioner of the Environment and Sustainable
Development to review proposed measures to meet the
targets and submit a report to Parliament.
It also sets out the duties of the National Round Table on the Environment and the Economy.

[Mark Warawa, Conservative, Langley, BC]

That may be an option for the future, if we don't complete Bill C-377 today.

[Mark Warawa, Conservative, Langley, BC]

Chair, what I was sharing was that Bill C-377 is missing important solutions, technologies, and mechanisms to help industry reduce its carbon footprint. We're seeing that in the Turning the Corner plan; we're seeing tangible mechanisms that will help industry. And it's missing in there. I strongly believe that we need to focus on them and maybe even spend some meetings looking at solutions instead of having rhetoric and silly games.

Now, the sectors have to have minimum thresholds. Again, that's missing in clause 10 of Bill C-377. You have to have thresholds. Some sectors have very large facilities, often including many small facilities that contribute little to a sector's overall emissions. Other sectors have only a few, but large, facilities.

[Mark Warawa, Conservative, Langley, BC]

Thank you.

So new facilities, which are those whose first year of operation is 2004 or later, would be granted a three-year commissioning period before they would face an emission intensity reduction target.

After the third year--and this is all missing in Bill C-377, clause 10--new facilities would be required to improve their emission intensity by 2% each year. A cleaner fuel standard would be applied, therefore setting the targets as they were using the designated fuel. A flexible approach would be taken in special cases where the equipment or technology used in a new plant facilitates carbon capture and storage or otherwise offers a significant potential for emission reductions.

It is so important that we have the technology of carbon capture and storage as a technology that Canada encourages, promotes, and helps fund, because the global community, our international partners, people, the major emitters that have to reduce their greenhouse gas emissions, everybody needs to be able to be given those tools to stop climate change, to fight climate change. One of those tools is carbon capture and storage.

The world community is hoping carbon capture and storage will account for about 25%. So it's important that this be developed in Canada. We already are the world leaders.

The carbon capture and storage project in Weyburn, Saskatchewan, has now moved on to a phase from proving that it is very effective, very successful in storing carbon dioxide, and also by pumping it into the ground with water to enhance oil recovery from old oil fields that were no longer producing.

But we've also, in our funding of $9 billion of environmental programs--$9 billion, it's a huge investment, and it's a historically high investment in Canada, it's huge, because this government is serious about seeing greenhouse gas emissions reduced in Canada and globally. That's why we're investing in this technology of carbon capture and storage.

We have moved to that phase of commercialization. Between now and 2009, there's a phase of commercialization research. So it's very important that we fund that. We have.

When people do something that is good for the environment, I want to acknowledge that. In the past I have been quite disappointed by the Liberals and their lack of action on the environment, but when they do something good, I want to give them credit. They did support our budget, which included that $9 billion for environmental programs, and I want to thank them. I want to thank them for supporting our Turning the Corner plan.

On the other hand, I was disappointed by the Bloc. They voted against $9 billion for environmental programs. They voted against carbon capture and storage research and development. Of course, not surprisingly, the NDP did not support that either.

We need to have that technology, and Canada is moving forward for both new and existing facilities. Fixed-process emissions, which are emissions tied to production and for which there is no alternative reduction technology, would require a 0% target in the reductions. In other words, there is no way with current technology for these types of emissions to be reduced except for shutting down production.

So we're looking at the situation in a very practical way. Are we seeing that in Bill C-377? No, we're not. Bill C-377 is missing substance that would actually initiate reductions in greenhouse gas emissions. This is what we have been telling Canadians we're here for.

We're here in the Standing Committee on Environment and Sustainable Development to work together cooperatively to see tangible results. Bill C-377 is not accomplishing that; the Turning the Corner plan is.

We need to see Bill C-377 dramatically rewritten. I think it was the Bloc that suggested that Bill C-377 be totally rewritten. Now they have introduced a number of amendments, as did the Liberal members, as did the NDP. They basically rewrote Bill C-377.

But we need to accept further amendments, and as I said before, we need to seriously change clause 10, because the way we have clause 10 written now in Bill C-377, it's missing the ingredients to see absolute reductions in greenhouse gas emissions. And that's what Canadians sent us here for, to work hard together to see absolute reductions.

We're already seeing results through our Turning the Corner plan, because it includes what Bill C-377 does not. It needs to include compliance mechanisms like those we see in the Turning the Corner plan. In order to provide flexibility and to minimize the economic impacts of the regulations, firms could comply with the regulations either by reducing their own emissions through abatement actions or by making use of one of the framework's compliant mechanisms, for example, the technology fund.

Now, Bill C-377 does mention a transition fund dealing with businesses that would be put out of business. A technology fund is quite different. Firms would be able to obtain credits for compliance purposes by contributing to a technology fund. The fund would be a means to provide the development, deployment, and diffusion of technologies that reduce emissions of greenhouse gases across industry. A third party entity at arm's length from government would be created to administer the fund. A key principle is that there would be no inter-regional transfer of wealth. It's a very important point.

Are we seeing any of those details in Bill C-377, clause 10? No, we're not. It's very concerning that we have Bill C-377, clause 10, which is not providing mechanisms that will actually see reductions in greenhouse gas emissions. It's not providing mechanisms, like a technology fund, to help industry, and those are definitely needed.

Under the Turning the Corner plan, contributions to the development and infrastructure component of a technology fund aimed at investments with a high likelihood of yielding greenhouse gas emission reductions in the near term would be limited to 70% in 2010. That's less than two years away, and industry is aware of this happening. That is why we're already seeing tangible and concrete action through our mandatory reductions of greenhouse gas emissions to a level of 20% by 2020.

I might add that this is the toughest target in Canadian history, and it's one of the toughest in the world.

The contributions to the technology fund--which are missing from Bill C-377--as I said, would be limited to 70% in 2010, but falling to 65% by 2011, 60% by 2012, 55% by 2013, 50% by 2014, 40% by 2015, only 10% by 2016, and again 10% in 2017. So you see a definite pattern. This gives direction, Chair, to industry that they can use the technology fund, but only for a certain period of time. You have to phase out of it.

Now, do we see that in Bill C-377? No. The fund they have is a transition fund for industry that is being put out of business. That's not good for Canadians, and it's not good for the environment. Industry needs to be successful at cleaning up the environment, and it needs to be able to continue to provide good green jobs to Canadians if we're going to be able to tackle climate change and show how we do it,and take that strong leadership here in Canada, and demonstrate to the rest of the world that it can be done here.

An example of that concerns the amount of carbon dioxide that you create when you make aluminum. In Canada, one tonne of aluminum creates four tonnes of carbon dioxide--in China, it's seven--and through technology we're cleaning it, and it will become even less than four tonnes. So Canada will be one of the cleanest, environmentally friendliest producers of aluminum, when we already are and we'll continue to improve that. So that technology fund helps build Canadian technology--technologies, again, like carbon capture and storage.

No further contributions would be accepted to the technology fund after 2017. The research and development component, which would focus on projects aimed at supporting the creation of transformative technologies, would be limited to five megatonnes each year, also ending in 2017.

From 2010 to 2012, the contribution rate for the fund would be 15 tonnes for carbon dioxide equivalent, and that is the rate that's set based on carbon dioxide, and that's why it's called the carbon dioxide equivalent. Methane is 21 times more damaging than carbon dioxide, and that's why you use the base of a carbon dioxide equivalent.

In 2013, the combination rate for a tonne of carbon would be $20. Thereafter, the rate would escalate yearly at a rate of growth of nominal GDP to 2017.

We've already seen action happening on the environment that we will not see with Bill C-377. Again, we've heard from every witness group that Bill C-377 does not have the components to evoke action, while we are already seeing action happening on the environment through Canada's Turning the Corner plan, which is moving from a voluntary program, which was used by the Liberals, to now a mandatory regulatory program using CEPA 1999. And we've had our notice of intent to regulate, so the regulations are already in that process, which has now spurred a carbon market, the Montreal Climate Exchange.

So they're already seeing very definite positive results. It is puzzling that from the support we received from the Liberals for our Turning the Corner plan to move forward—and them all over the place.... I'm hoping they're encouraged by the good work that they are seeing happening already in Canada from the Turning the Corner plan. We definitely are, and I know Canadians are.

One of the other compliance mechanisms that we have in the Turning the Corner plan that we don't have in Bill C-377 under clause 10--and I really believe it needs to be in there--is the inter-firm trading. Firms whose actual emission intensity in a given year is below their target would receive tradable credits equal to the difference between their target and their actual emission intensity multiplied by their production in that year. These credits could be banked for future use or sold to other parties, including other regulated firms.

Another mechanism is the offset system. You need to have these compliance mechanisms, and Bill C-377 is missing that. I would be very open to seeing Mr. Cullen accept these as amendments to Bill C-377. In the offset system, offsets are projects that result in incremental real verified domestic reductions or removals of greenhouse gas emissions in activities that are not covered by the federal greenhouse gas regulations. These projects would generate credits that firms could use for compliance purposes.

Then there are CDMs, clean development mechanisms, through the UN. Firms could use certain credits from the Kyoto Protocol's clean development mechanisms. Access to these credits for compliance purposes would be limited to 10% of each firm's total target.

CDMs are one of the many tools that are important to industry, and this is what is being used internationally to help industry reduce its greenhouse gas emissions and their effect on the climate. CDMs are not in Bill C-377, clause 10. They are supposed to be listing mechanisms that would actually see reductions to greenhouse gas emissions. They are not in Bill C-377, clause 10, but they are in Canada's Turning the Corner plan.

As we go through this, it becomes very clear that Bill C-377 is not going to reduce greenhouse gas emissions. It still needs a lot of work before we proceed.

Another compliance mechanism that's missing in Bill C-377 that should be there is a one-time credit for early action. Firms that took verified action between 1992 and 2006 to reduce their greenhouse gas emissions would be eligible to apply for a share of a one-time credit for early action. A maximum of 15 megatonnes worth of credits would be allocated, with no more than five megatonnes to be used in any one year. Firms would be required to submit evidence of changes in processes or facility improvements they've undertaken that resulted in verifiable incremental greenhouse gas emission reductions.

The maximum allocation for emission reductions would be one credit for each tonne of carbon dioxide equivalent reduction. If the total tonnage of emission reductions applied for were to exceed 15 megatonnes, the credits would be distributed to individual firms in proportion to their contribution to the total emission reduction achieved. So it's a good recognition of good corporate citizens that were doing their part already in Canada to reduce greenhouse gas emissions. Is it fair? I believe so.

The government's plan has already been enacted, is already at work, and is already happening. We're seeing actual positive results, real results, in Canada's Turning the Corner plan, which includes credit for early action. Why would that not be in Bill C-377, clause 10? I'm not sure, but it should be. Credits for early action should be given. So that's another suggestion for Mr. Cullen, and maybe he will accept that as an amendment--to see credits for early action. Businesses that have invested in cleaner technology for the benefit of the environment are good corporate citizens.

On the example he used about aluminum, there are cheaper ways of making aluminum. You can make aluminum using dirty coal-fired generating plants. To make aluminum takes a lot of electricity. If you use coal-fired plants to make aluminum, you're using an old technology and you're going to be producing a lot of carbon dioxide and pollutants. It is a very popular metal and is used worldwide. The demand for aluminum is continuing to grow, because the more aluminum you use in making vehicles, the lighter the vehicle becomes, and the less energy is used to move a vehicle down the road. That's why our North American auto manufacturers are using a lot more aluminum.

Canada is using a cleaner technology that produces only four tonnes of carbon dioxide for one tonne of aluminum. It's a cleaner technology than what is being used in China, where they produce seven tonnes of carbon dioxide for one tonne of aluminum. So should those Canadian companies that have invested in cleaner technology that benefits Canada--and it's more expensive to build it that way--get a credit for that early action? I think they should. That's why we have that.

Why would that be missing in BillC-377? As I said, I believe strongly it shouldn't be missing. Bill C-377 is unfair by not having that. It needs to be in there.

An application for the industrial regulatory framework is expected to result in significant absolute reductions of greenhouse gas emissions from the 2006 levels. I'm not optimistic at all that this would happen with Bill C-377. That's why I'm so concerned about Bill C-377. The Turning the Corner plan would put Canada on the path to meeting its national emission reduction targets--20% absolute reductions by 2020--and that's good news.

We were at the international COP 13 meeting in Bali. We had the witnesses come back to this committee, and they shared with this committee that Canada had gone through a cycle of being embarrassed because they weren't getting things done. That's what concerns me about Bill C-377, clause 10. It would not accomplish a reduction in greenhouse gas emissions. Bill C-377 is a bill that would embarrass Canada.

Canadians are tired of being embarrassed by inaction by the previous government. They want action. They have action now. We're already seeing positive results from the Turning the Corner plan. Why would we want to go back and have Bill C-377 slow the process down, not get any results in reducing greenhouse gas emissions, and again embarrass Canada? We don't want that, and I believe Canadians don't want that either. They want action, and they're getting that under this government.

Following the release of the framework in April of last year, the government consulted extensively with the provinces and territories as well as with ENGOs, aboriginal peoples, industry, and other stakeholders on key policy and regulatory development issues and the framework that remains to be elaborated on.

The federal, provincial, and territorial governments have initiated a cooperative process to work through the regulatory issues, through the environmental protection and planning committee of the Canadian Council of Ministers of the Environment. Some provinces have indicated an interest in negotiating equivalency agreements with the federal government. We're working with every single province and territory in Canada to see absolute reductions in greenhouse gas emissions.

We heard, and there is mention in Bill C-377, clause 10, of cooperation or agreements with provinces, territories, or other governments, but there are no details--no consultation, no mention of ENGOs, no mention of aboriginal government. That's another example of not even coming close to the mark of what kind of consultation needs to happen.

The federal government is responsible for setting targets that are realistic and concrete, and for setting them within a regulatory framework that will end up with results. We see that in the Turning the Corner plan. We do not see that in Bill C-377.

It also involves the federal government providing partnership with the provinces. We've set standards that are minimum standards. If the provinces want to exceed them, then we encourage that. We are helping fund that. Almost $600 million, I believe, was provided to the Province of Ontario to close down some coal-fired plants. I'm not quite sure what the Province of Ontario has done with that dollar amount, but that's what it was for, to help them close down the coal-fired plants.

That needs to happen, because that's the old technology. The new technology is reducing greenhouse gas emissions. That's where the Government of Canada is going. We're providing leadership. We're providing regulations. We're providing targets that are realistic.

At the same time, we're helping the economy and helping the environment. We're providing the funding. We then want a partnership. We want to work with the provinces in equivalency agreements and in friendly ways to see absolute reductions in greenhouse gas emissions. And we're very happy with the progress we've made working with the provinces.

Following the release of the framework last year, the government, as I said, consulted. The federal, provincial, and territorial governments initiated a cooperative process to work through the regulatory issues. The consultations focused on coverage.

Should small facilities be excluded from the regulation in order to minimize the administrative burden, and if so, on what basis? I believe that we need to show consideration for the smaller facilities. You have to take a different approach with a large facility than you take with a small facility. Each is producing greenhouse has emissions, but the business case for an older facility or a small facility is different from that for a facility that is just being built using a cleaner technology. So that has to be considered. It was part of the consultation process with the provinces.

We don't see that in Bill C-377, clause 10. I believe that it needs to be in there. I hope Mr. Cullen is listening, because I'm hoping this is another part he would be willing to see added to clause 10 of Bill C-377.

Also, the consultation included discussions about targets. For example, how should the greenhouse gas targets be applied in different sectors? Each province has different sectors, different focuses of industry. Should certain sectors face special circumstances that would require a different application of the framework?

There was discussion on finalization of the definition of fixed-process emissions in each sector and on targets for treating major expansions and transformations. Do they have carbon capture storage built into them? How will a cleaner fuel standard be incorporated into the target for new facilities in each sector? It is very important that we burn a cleaner fuel, that we recycle the fuel, the energy that we already have above the earth.

The problem with climate change is that we are taking the energy that is below the earth above the earth and burning it and adding this new carbon dioxide to the atmosphere. We need to stabilize that. We need to recycle the carbon dioxide, the carbon we already see above the earth, to stabilize and stop a warming climate.

We need to have targets with the provinces--and that's part of the consultation--for incorporating the cleaner fuel standards. How would the regulations apply an appropriate incentive for cogeneration, a wonderful technology that needs participation from the provinces and the federal government? That's already happening. A wonderful example of that is landfills.

Chair, you've often encouraged the committee to talk about actual practical things we can do to see greenhouse gas emissions.... What we need to have in Bill C-377, in clause 10, is an opportunity to focus on solutions. One of those solutions is cogeneration, or gasification of garbage. Instead of using a landfill to bury it, you gasify it, and from that gasification you separate out the gases and chemicals and use them instead of burying them in the ground. That's good technology.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I have a point of order for my colleague from the Conservatives—not to interrupt the flow of his filibuster. I just realized that he's reading from a document, and I think it's in order that when members of the committee don't actually present their own or original thoughts, but read from documents....

I have documents in front of me from the witnesses to whom he's referring who support Bill C-377, and I will submit those documents showing witness after witness saying this is the right direction to go in, from Nobel Prize laureates to economists, who are saying this is a good bill.

He is reading from a document. I would request that he submit that document for the committee's perusal.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

Mr. Chairman, since the beginning, I have been rather disappointed with the governing party's attitude with regard to Bill C-377. I must conclude that the governing party—and I will not name its members—is acting in bad faith. They keep filibustering in order to torpedo Bill C-377 and this is totally unacceptable.

If the member believes that his privileges have been breached, look into the matter and take it under advisement. Nothing prevents us from continuing to consider the bill as it is. I find Mr. Watson's demand to move to other business, namely Bill C-474 , completely ridiculous since the point of privilege does not deal with the bill but rather the rights of the member.

Mr. Chairman, I ask you to take this point of privilege under advisement. For the time being, we must continue with our consideration of Bill C-377. I am very disappointed in this government and the way it behaves. We are here to work for the public good and the government is having us lose precious time. This wastes taxpayers' money and I do not believe the people of Quebec and Canada expect us, as parliamentarians, to behave in such a fashion. So I ask the government to get a grip and to work constructively in order to make Bill C-377 acceptable to both the government and the opposition.

[Mark Warawa, Conservative, Langley, BC]

Chair, I want to thank you and to apologize to the committee for not providing that motion in both official languages. I should have and I didn't, and I apologize for that.

It was in the spirit of enthusiasm. Mr. Cullen had asked for some amendments, and I believed that request was genuine, just as when Mr. Layton had asked that the plan in Bill C-377 be costed, and as Matthew Bramley asked that it be costed. I thought there was a genuine effort or recommendation from the NDP that we have an opportunity to improve Bill C-377.

Bill C-377, unfortunately, as I have shared before, is—

[Mark Warawa, Conservative, Langley, BC]

So “shall” would be changed to “may, at his or her discretion”.

Then paragraph 10(1)(a) says, “The measures taken by the Government of Canada to ensure that its commitment under section 5 and the targets set out in the target plan are being met, including”, and then this is what would replace “measures taken in respect of”: after the word “including”, it would read, “the targets in the Government of Canada's Turning the Corner plan and measures taken in respect of”.

Under subparagraph 10(1)(a)(i) would be “the framework announced on March 10, 2008”. That would become the new subparagraph 10(1)(a)(i), and the other subparagraphs, (i) to (iv), would now become subparagraphs (ii) to (v). So it would be inserting a new subparagraph 10(1)(a)(i).

This will address a number of the concerns I raised yesterday dealing with the vagueness, the emptiness of Bill C-377. We heard from the witnesses that Bill C-377 was void of policy, void of anything that would see action happen. I'd be glad to share more details.

Do I have permission to continue speaking?

[Mark Warawa, Conservative, Langley, BC]

Chair, I've read clause 10 again and again. Mr. Cullen had requested that we make some amendments. I think we've made it very clear that I have great difficulty with Bill C-377 as it's written and as it's been amended to this point. I don't believe the concerns that have been raised by the witnesses have been addressed to this point; therefore, in the spirit of goodwill, I would like to move a subamendment.

Clause 10 begins under—

The Environment

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Speaker, Conservative MPs on the environment committee simply do not want to work. They prefer filibusters and sabotage.

The Conservatives are currently holding the only comprehensive post-Kyoto legislation hostage. Bill C-377 would finally put Canada back on track in the fight against dangerous climate change.

Will the environment minister tell his MPs to stop the delay and deny tactics? Why is there so little energy to tackle climate change and why is there so much energy for the monkey wrench gang over there?

[Luc Harvey, Conservative, Louis-Hébert, QC]

I don't need to catch my breath, as I've only just begun speaking. We're talking about clause 10 of Bill C-377. Let me explain how this bill, specifically clause 10, is problematic in certain respects.

The April 2007 Regulatory Framework for Air Emissions laid out the broad design of the regulations for industrial emissions of both greenhouse gases and air pollutants.

This document sets out the final regulatory framework for industrial greenhouse gas emissions. It includes both an elaboration and a strengthening of the April 2007 regulatory framework. The federal government still intends to work to reach equivalency agreements with any interested provinces that set enforceable provincial emission standards that are at least as stringent as the federal standards. The final regulatory framework will contribute significantly to the commitment in the 2007 Speech from the Throne to implement a national strategy to reduce Canada's total greenhouse gas emissions by 20% below 2006 levels by 2020. The final regulatory framework strengthens the April 2007 regulatory framework in three key respects: All oil sands upgraders and in-situ plants that come into operation in 2012 or after will be required to meet a stringent target based on the use of carbon capture and storage by 2018. All coal-fired electricity plants that come into operation in 2012 or after will be required to meet a stringent target based on the use of carbon capture and storage by 2018. The federal government will establish a clean electricity task force to work with provinces and industry to meet an additional 25 Mt reduction goal from the electricity sector by 2020.

Let's move on to targets.

All covered industrial sectors will be required to reduce their emissions intensity from 2006 levels by 18% by 2010, with 2% continuous improvement every year after that. The target will be applied at the facility, sector or corporate level, as determined after consultations with each sector. Minimum thresholds will be set in five sectors to avoid imposing unreasonable administrative costs on small facilities. Fixed process emissions will receive a 0% target. The definition of fixed process emissions will be based on technical feasibility. To provide incentives to adopt the best available technologies for newer facilities, whose first year of operation is 2004 or later, a target based on a cleaner fuel standard will be applied. There will be an incentive until 2018 for facilities to be built carbon-capture ready. A special incentive will be provided through the target structure for high-efficiency co-generation.

Elaboration of April 2007 regulatory framework: compliance mechanisms

Canada's domestic offset system: The offset system will issue credits for incremental real, verified domestic reductions or removals of greenhouse gas emissions in activities outside the regulations. Offset credits may be used by regulated firms for compliance with their targets. The offset system will be administered in a cost-effective manner and will promote projects in as many sectors and for as many project types as practical.

Firms may use credits from the Kyoto Protocol's Clean Development Mechanism (with the exception of credits for forest sink projects) for up to 10% of their regulatory obligation.

Credit for Early Action Program:

Firms that took verified early action to reduce emissions will be eligible for a total one-time allocation of 15 Mt in credits. These credits will be bankable and tradable, and will be allocated based on clear criteria and a simple, transparent process.

Technology Fund:

Subject to the conditions set out in the April 2007 regulatory framework, firms will be able to make contributions to a technology fund as a means of complying with the regulations.

The technology fund will take a portfolio approach to investing in a range of technology deployment and development projects; the technology fund will own the emission reductions resulting from its investment, based on the cost of the project.

Subject to equivalent conditions as apply to the technology fund, firms will be able to invest directly in pre-certified investment projects, drawing from a menu of projects established by the federal government.

In order to ensure that carbon capture and storage is in widespread use by 2018, firms in sectors that can make use of this technology may be credited for investments in pre-certified carbon-capture-and-storage projects up to 100% of their regulatory obligation through 2017.

Emission reductions

The regulatory framework is expected to achieve approximately 165 Mt in direct and indirect emission reductions from the industrial sector by 2020; that is about a 37% reduction from projected levels or a 21% reduction below 2006 levels. This does not include the additional 25 Mt targeted reductions from the electricity sector.

Next steps

The regulatory framework for industrial greenhouse gas emissions will now be translated into regulatory language. Draft regulations are expected to be published in the Canada Gazette, Part I for public comment in fall 2008. Final regulations are expected to be approved and published in the Canada Gazette, Part II in fall 2009. The greenhouse gas provisions of the regulations are to come into force, as planned, on January 1, 2010. Air pollutant elements will be added to the draft regulations once the regulatory framework for air pollutants has been finalized in spring 2008.

On April 26, 2007, the Government of Canada released Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution. This plan set out an ambitious agenda to improve the environment and the health of Canadians through a series of concrete, innovative measures to reduce emissions of greenhouse gases and air pollutants. Rather than relying solely on the voluntary measures used in the past, for the first time, the government is introducing mandatory and enforceable actions across a broad range of sectors. In addition, the government committed to reducing Canada's total emissions of greenhouse gases, relative to 2006 levels, by 20% by 2020 and by 60% to 70% by 2050. The Turning the Corner action plan has several components, including:

a regulatory framework for industrial emissions of greenhouse gases and air pollutants;

the development of a mandatory fuel-efficiency standard for automobiles, beginning with the 2011 model year, as well as action to reduce emissions from the rail, marine, and aviation sectors, and from on-road and off-road vehicles and engines; the implementation of new energy performance standards to strengthen existing energy-efficiency standards for a number of products that consume electricity, including light bulbs, in order to reduce emissions from the use of consumer and commercial products; and the development of measures to improve indoor air quality. Since the release of the Turning the Corner action plan, the Government of Canada has made significant progress in all of these areas. The April 2007 regulatory framework, entitled Regulatory Framework for Air Emissions, laid out the broad design of the regulations for industrial emissions of both greenhouse gases and air pollutants. This document provides a detailed description of the final regulatory framework for industrial greenhouse gas emissions. The framework for industrial emissions of air pollutants will be finalized in spring 2008. Section 2 summarizes the broad regulatory framework for industrial greenhouse gas emissions as set out in April 2007 in the Regulatory Framework for Air Emissions. In Section 3, a brief overview of the consultations undertaken is provided. In Sections 4 and 5, the final greenhouse gas regulatory framework is elaborated, first with respect to the application of the target, and secondly, with respect to the design of the compliance mechanisms. Section 6 reiterates the government's intention to move from an emission-intensity based system to a fixed emission cap system in the future. In Section 7, a summary of the estimated economic impacts of the regulations on industrial greenhouse gases is given. Section 8 outlines the steps in finalizing the regulations.

The regulatory framework for industrial greenhouse gas emissions proposed that the following sectors would be covered by the regulations: electricity generation produced by combustion; oil and gas (including oil sands, upstream oil and gas, natural gas pipelines, and petroleum refining); pulp and paper; iron and steel; smelting and refining (including base metals smelting, aluminum and alumina, and ilmenite (titanium) smelting; cement; lime; potash; and chemicals and fertilizer.

The targets for greenhouse gas emissions will set reductions in emission intensity from 2006 levels that will come into force in 2010. The government has committed to review the regulations every five years in order to assess progress in reaching the government's medium- and long-term emission reduction objectives. The first such review would take place in 2012 and would entail an assessment of the effectiveness of measures taken to reduce greenhouse gas emissions and of advances in industrial technology in order to determine the potential for further emission reductions.

The framework for industrial greenhouse gas emissions has two key components: (1) stringent, mandatory short-term emission-intensity reduction targets, relative to 2006 emissions; and (2) compliance mechanisms that provide firms with flexibility in how they meet their targets. Each of these components will be addressed in turn.

The April 2007 framework set an initial required reduction of 18% from 2006 emission-intensity levels in 2010 for existing facilities. Every year thereafter, a 2% continuous improvement in emission intensity would be required. By 2015, therefore, an emission-intensity reduction of 26% from 2006 levels would be required, with a further reduction to 33% by 2010. The emission-intensity approach ties the emission reduction targets to production. This allows emission reductions to be achieved while accommodating economic growth. New facilities, which are those whose first year of operation is 2004 or later, would be granted a three-year commissioning period before they would face an emission-intensity reduction target. After the third year, new facilities would be required to improve their emission intensity each year by 2%. A cleaner fuel standard would be applied, thereby setting the target as if they were using the designated fuel. A flexible approach would be taken in special cases where the equipment or technology used in a new plant facilitates carbon capture and storage or otherwise offers a significant and imminent potential for emission reductions. The purpose of this policy is to provide an incentive for new facilities to choose cleaner fuels or to invest in the technology needed for carbon capture and storage in other less emission-intensive technologies. For both existing and new facilities, fixed process emissions, which are emissions tied to production and for which there is no alternative reduction technology, would receive a 0% target in the regulations. In other words, for these types of emissions, there is no way, with current technology, for them to be reduced except by shutting down production. In order to provide flexibility and to minimize the economic impact of the regulations, firms could comply with the regulations either by reducing their own emissions through abatement actions or by making use of one of the framework's compliance mechanisms, detailed below.

Technology fund:Firms could obtain credits for compliance purposes by contributing to a technology fund. The fund would be a means to promote the development, deployment, and diffusion of technologies that reduce emissions of greenhouse gases across industry. A third-party entity, at arm's length from government, would be created to administer the fund. A key principle is that there would be no inter-regional transfer of wealth. Contributions to the deployment-and-infrastructure component of the fund, aimed at investments with a high likelihood of yielding greenhouse gas emission reductions in the near term, would be limited to 70% of the target in 2010, falling to 65% in 2011, 60% in 2012, 55% in 2013, 50% in 2014, 40% in 2015,10% in 2016 and 10% in 2017. No further contributions would be accepted after 2017. The research and development component, which would focus on projects aimed at supporting the creation of transformative technologies, would be limited to 5 Mt each year, also ending after 2017. From 2010 to 2012, the contribution rate for the fund would be $15 per tonne of carbon dioxide equivalent. in 2013, the contribution rate would be $20 per tonne. Thereafter, the rate would escalate yearly at the rate of growth of nominal GDP to 2017.

[...] Firms whose actual emission intensity in a given year is below their target would receive tradable credits equal to the difference between their target and their actual emission intensity, multiplied by their production in that year. These credits could be banked for future use or sold to other parties, including other regulated firms.

Offset System: Offsets are projects that result in incremental real, verified domestic reductions or removals of greenhouse gas emissions in activities that are not covered by the federal greenhouse gas regulations. These projects would generate credits that firms could use for compliance purposes. [...] Firms could use certain credits from the Kyoto Protocol's Clean Development Mechanism. Access to these credits for compliance purposes would be limited to 10% of each firm's total target. [...] Firms that took verified action between 1992 and 2006 to reduce their greenhouse gas emissions would be eligible to apply for a share of a one-time credit for early action. A maximum of 15 Mt worth of credits would be allocated, with no more than 5 Mt to be used in any on year. Firms would be required to submit evidence of changes in processes or facility improvements they had undertaken that resulted in verifiable, incremental greenhouse gas emission reductions. The maximum allocation for emission reductions would be one credit for each tonne of carbon dioxide equivalent reduction. If the total tonnage of emission reductions applied for were to exceed 15 Mt, the credits would be distributed to individual firms in proportion to their contribution to the total emission reduction achieved.

Application of the industrial regulatory framework is expected to result in significant absolute reductions in greenhouse gas emissions from 2006 levels. This would put Canada on the path to meeting its national emission reduction target of 20% below 2006 levels by 2020. Under the April 2007 analysis, the economic costs of regulating industrial emissions of both greenhouse gases and air pollutants were estimated not to exceed 0.5% of GDP in any given year up to 2020. At the same time, the environmental and health benefits were estimated to exceed $6 billion per year in 2015. Following the release of the framework in April, 2007, the government consulted extensively with provinces and territories, as well as with non-governmental organizations, Aboriginal peoples, industry, and other stakeholders, on key policy and regulatory development issues in the framework that remained to be elaborated. The federal, provincial, and territorial governments have initiated a cooperative process to work through the regulatory issues, through the Environmental Protection and Planning Committee of the Canadian Council of Ministers of the Environment. Some provinces have indicated an interest in negotiating equivalency agreements with the federal government. The consultations focused on the following issues: Coverage Whether small facilities should be excluded from the regulations in order to minimize administrative burden, and if so, on what basis? Targets How the greenhouse gas target should be applied in different sectors? Whether certain sectors face special circumstances that would require a different application of the framework? Finalization of the definition of fixed process emissions in each sector. How to treat major expansions and transformations? How to incorporate a cleaner fuel standard in the target for new facilities in each sector? How the regulations could provide an appropriate incentive for co-generation?

With regard to the Technology Fund, the consultations focused on the structure of the fund; the eligibility of pre-certified investments in specific projects; emission reductions resulting from fund investments; and the ownership of emission reduction that result from fund investments.

Facility-specific: Each facility within a sector receives an individual target of an 18% reduction from its own 2006 emission intensity. This approach is applied in sectors where factors beyond the control of a facility operator affect emissions. For example, terrain characteristics, elevation, configuration, and diameter of pipe all have an impact on emissions from natural gas pipeline facilities, yet these are features that cannot be altered by existing pipeline facilities. Facility-specific targets are also used in sectors with complex and diverse facility structures. Facility-specific targets will be applied in the following sectors: iron ore pelletizing, potash, base metal smelting, chemicals, fertilizers, iron and steel, ilmenite (titanium), oil sands, petroleum refining, natural gas pipelines, and upstream oil and gas. Sector-wide: All facilities within a sector face the same target, which is an 18% reduction from the sector's average 2006 emission intensity. This approach is applied in sectors where facility structures are more homogeneous in structure across the whole sector and less complex. It will be applied in the lime, pulp and paper, aluminum and alumina, and cement sectors. Corporate-specific: Each company within a sector receives a target of an 18% reduction from the average 2006 emission intensity of its entire fleet of facilities. This approach will be used in the electricity sector, as it provides a strong incentive for investment in new non- and low-emitting power generation since the entire fleet of facilities will include all types of electricity generation. With this approach, electricity companies can reduce their emission intensity by replacing high-emission intensity facilities (for example, coal and other fossil fuels) with non-emitting or lower-emission intensity facilities (for example, wind and other renewable energy, hydro, nuclear).

4.2 Minimum thresholds

Some sectors have a large number of facilities, often including many small facilities that contribute little to the sector's overall emissions. Other sectors have only a few, but large, facilities. It may make sense to exclude very small facilities from coverage by the regulations. The approach taken balances threshold levels to ensure: (1) that the loss in emission reductions will be minimized; (2) that the regulatory burden on both industry and government will be minimized; (3) that similar facilities within a sector will face similar regulatory treatment; and (4) that facilities with similar levels of emissions in different sectors will face similar regulatory treatment. Minimum thresholds will be established for facilities in the chemical, nitrogen-based fertilizer, natural gas pipeline, upstream oil and gas, and electricity sectors.m oil and gas, and electricity sectors.

The upstream oil and gas sector comprises a very large number of facilities with a wide variety in size. The proposed threshold is much more stringent than what is currently used by the Government of Alberta in its July 2007 regulations for emissions in this sector. The government is committed to achieving a common threshold and common reporting regime in Alberta. It will continue discussion with the Government of Alberta on these issues, seeking a common practical approach to emissions coverage, including the phasing of thresholds and the identification of additional measures that could be implemented to address emissions in the rest of the sector. The federal government will also engage in discussions with the Governments of Saskatchewan and British Columbia. These discussions will be informed by the additional information to be provided to the government in response to its December 8, 2007, Section 71 Notice.

In all other sectors, all facilities will be covered by the regulations. 4.3 Fixed process emissions The April 2007 framework stated that fixed process emissions would receive a 0% target in the regulations, and included a general definition of fixed process emissions. After sectoral analysis and consultation with industry, the definition of fixed process emission has been made more precise. Fixed process emission are those emissions that are:

from chemical processes that produce carbon dioxide emissions and are fixed to production; and created in a process where: carbon that is chemically bound in the raw materials is removed from these materials to produce a carbon-free product (that is, less than 1% carbon by mass); carbon is used to remove an undesired component from the raw material and where the raw material is not substitutable; or unintentional oxidation of hydrocarbon feedstocks results from the catalytic conversion of these feedstocks into products; or carbon dioxide entrained in ethane gas feedstock is removed and released to the atmosphere in order to process the feedstock. Fixed process emissions do not include the result of: combustion, where combustion is the exothermic reaction of a fuel with gaseous oxygen; or a process that is for the purpose of reducing emissions of air pollutants from the facility; or the release of formation carbon dioxide from the processing of crude oil or natural gas.

How is a new facility defined?

In the April 2007 framework, new facilities were defined as those whose first year of operation was 2004 or later, but the framework did not specify how major expansions or transformations of existing plants would be treated. New facilities will include facilities that came into operation in 2004 or later and include greenfield facilities, major expansions and major transformations: Greenfield facilities are those built where no facility existed before. Major expansions are defined as a 25% increase in the physical capacity of an existing facility. Major transformations are those in which there have been significant changes to process (further details will be provided in the regulations). Only the expanded or transformed portion of the facility would be treated as new, unless the integrated nature of the facility requires that the entire facility be treated as new. Re-opened facilities would be treated as existing facilities, unless they met one or more of the above conditions.

The application of a cleaner fuel standard will be achieved as follows:

A sector-specific approach will be used to specify a cleaner fuel standard for the determination of targets for new facilities. In sectors where fuel choice is an important factor in a facility's emission intensity, an explicit cleaner fuel standard is needed to ensure that the emission intensity of the sector continues to decrease over time. This approach will apply to the potash, natural gas pipeline, upstream oil and gas, oil sands and electricity sectors. A fuel-specific cleaner fuel standard will apply to the electricity sector which will be equivalent to the emission-intensity performance of: “supercritical” technology for coal-fired generation; “natural gas combined cycle” technology for gas-fired generation; and “oil-fired gas turbine” technology for oil-fired generation.

In the other sectors, the cleaner fuel standard will be based on natural gas. In the case of oil sands, the cleaner fuel standard will be [...]

Mr. Chairman, would the committee be amenable to adopting an adjournment motion?

[Luc Harvey, Conservative, Louis-Hébert, QC]

Excuse me, Mr. Chairman.

I have a question for the NDP member. The Leader of the NDP, Mr. Layton, tabled Bill C-377, but everyone acknowledges that a cost study and a feasibility study should be carried out in connection with this bill.

[Luc Harvey, Conservative, Louis-Hébert, QC]

Mr. Martin, when Bill C-377 was tabled, Mr. Layton indicated that there should be...

[Mark Warawa, Conservative, Langley, BC]

Thank you.

Mr. Chair, again, the problem with Bill C-377 is that it's void of substance, and it's quite shocking that members would support a bill that is void. Yet you have a plan, the Turning the Corner plan, which is a good plan that actually has the details, and we're actually seeing improvements already.

We need to have fixed sectoral emission caps, and that's what the Turning the Corner plan has, which Bill C-377 does not. The emission trading targets for a given pollutant will specify a maximum level for the pollutant that can be emitted for each sector every year, and that's missing from Bill C-377.

You also need to have benchmarking. In the notice of intent, the government made a commitment to develop emission targets that are at least as rigorous as those in the U.S. or other environmental performance-leading countries. To achieve this end, a benchmarking exercise was undertaken. The exercise began by researching existing regulatory regimes' environmental performance, technology, and operating practices, and the most stringent provincial operating system permits in Canada, Canadian jurisdictions, and other countries such as the United States, Finland, Sweden, and Germany. It also included taking into consideration the factors underlying those regulatory regimes, such as the size and composition of the sectors, the concentration of the facilities across the jurisdiction, and the availability and quality of feedstocks and other raw materials.

From this exercise, environmentally leading requirements were benchmarked by sector and by pollutant. Concurrently, information was gathered on Canadian sectors in which regulatory limits exist in other regulations, for example, the pulp and paper and electricity sectors. Actual Canadian regulatory limits and performance were compared with the regulated limits from the leading jurisdictions. In some sectors, regulatory limits are typically set through provincial certificates of approval or operating permits or licences for individual facilities--for example, petroleum refineries or chemical production facilities--which can have processes and/or products that vary significantly from one facility to another,

In these sectors, the actual emission performance of Canadian facilities was compared with the reported or required performance in different jurisdictions, both in Canada and internationally. This involved deriving the emission intensity values and comparing the performance of similar Canadian and foreign facilities. For other sectors--for example, aluminum smelting in iron and steel-- emission performances both in Canada and abroad, as well as regulatory limits in other jurisdictions, were reviewed. In other cases such as conventional upstream oil and gas, the approach was to benchmark against other facilities in the sector as a whole.

Finally, for the oil sands sector, which is unique to Canada, there are no comparable regulated sectoral emission limits in other countries that would enable a comparison with other jurisdictions. In this case, sectoral targets were established using a multi-step approach. This included an evaluation of performance for similar activities, equipment, and processes at similar sources of emissions in other jurisdictions--such as heavy oil refineries--examination of the potential for reductions using selected emission control technologies, and a comparison of emission intensity performance of individual oil sands facilities within Canada.

In some sectors, analyses carried out in recent years were also taken into account when carrying out the benchmarking exercise. Work done jointly by government and industry was already under way to determine how to adapt benchmarked standards to Canadian circumstances in the pulp and paper sector through the Pulp and Paper Air Quality Forum, in the refining sector through the Canadian Council of Ministers of the Environment national framework for petroleum refinery emission reductions, and in the base metal smelting sector through the base metal smelting pollution prevention plan.

The objective of the Pulp and Paper Air Quality Forum was to design a 10-year overall multi-faceted air emissions management regime for the pulp and paper industry that would include short-term air pollutant targets at a level that would ensure consistent requirements for all facilities. These proposed air pollutant targets were derived from benchmarking analyses that compared world-leading international industry performance and the most stringent provincial limits.

The approach of the Pulp and Paper Air Quality Forum ensures that a consistent level of achievable control technology exists among similar facilities and is in application elsewhere, and that the overall economic impact of achieving these limits remains realistic. It also facilitates the establishment of equivalency agreements with the provinces and territories, which is very important.

The complexity of the existing regulatory system for petroleum refineries makes it difficult to define a single regulatory emission standard within Canada and other jurisdictions. For this sector, the approach used to determine the cap on emissions was based on the methodology developed through the CCME refinery framework established on May 25, 2005. This framework established an approach to setting facility-level annual caps for a range of air pollutants based on benchmarking Canadian emission performance to comparable performance in the United States. Benchmarking was updated to reflect changes to the U.S. requirements.

A notice requiring the preparation for pollution prevention plans for the base metal smelters and refineries and zinc plants was published in the Canada Gazette, Part I, on April 29, 2006. This notice was the result of extensive work involving stakeholder consultations, and five years of analyses of existing standards, performance, and sulphur capture efficiency of smelters around the world. The targets identified for consideration in the pollution prevention plans would be the basis for air pollutant caps for the base metal smelting sector.

In some sectors, regulatory limits or emission performance levels from leading jurisdictions were adapted to take into account characteristics specific to those sectors in Canada. Characteristics taken into account varied from sector to sector and included the financial situation of the sector, potential impacts on the economy, and the quality of the feedstocks and other raw materials relative to the benchmarked jurisdiction.

The technical feasibility of meeting the most rigorous limits was also considered in establishing emission reduction target options. In some sectors, technically feasible options were evaluated to determine expected reductions in emissions and their costs in dollars per tonne. National emission caps were established by adding together the sectoral emission caps for each pollutant of concern, taking into account an allocation for growth of each sector by 2015.

Is there any mention of this analysis within Bill C-377? No, there's not. There needs to be. There is with Canada's Turning the Corner plan, which is already having a positive effect on the environment, but in Bill C-377 it is missing. It needs to be there but is not.

Under the Turning the Corner plan, there would be a domestic cap and trade emissions trading system for SOx and NOx. The method for allocating credits under the system, including the method by which new facilities would be accommodated within the overall cap, would be determined during the regulatory development process.

There would be separate credits and compliance assessments for SOx emissions and for NOx emissions. Firms would be required to submit credits each year equal to the emissions from their facilities for that year. If a firm is in an area where the quality of the air does not meet national air quality objectives that have been set in advance by the government, restrictions would be placed on the use of credits from outside that area. The feasibility of the use of offsets, in combination with the cap and trade emissions trading system for SOx and NOx, would also be assessed.

The United States and Canada share cross-border airsheds and therefore have a shared responsibility for and interest in reducing air pollutants for all sources that contribute to air pollution. Is there any mention of protecting the air quality of Canadians within Bill C-377? No, there's not. Should there be? I believe there should be. There is in the Turning the Corner plan.

Addressing air pollution on only one side of the border does not make environmental or economic sense. The Canada-U.S. Air Quality Agreement was signed in 1991 to address transboundary acid rain. An annex to the agreement was added in the year 2000 to address ground-level ozone, a key component of smog. Under the agreement, Canada and the U.S. must reduce domestic emissions that flow into the other country and contribute to acid rain or ozone.

Canada and the U.S. recently agreed to start negotiations for an annex to the agreement to reduce transboundary flow of particulate matter. This is very important; recent scientific analysis has shown that joint strategies are needed to address these pollutants. The annex will result in reductions of particulate matter as well as of many of the chemicals that contribute to other air quality issues of concern, such as the acid rain, regional haze, and visibility in the communities along the Canada-U.S. border. Serious action by Canada to reduce its own emissions will make it easier to work jointly with the U.S. to reduce overall emissions.

As part of its ongoing work with the U.S. to address transboundary air pollution, the government will expedite discussions with the U.S. on a cross-border SOx and NOx emissions trading system. Having caps in Canada and in the U.S. of similar stringency would facilitate the development of cross-border trade. Such trading would provide additional flexibility for regulated sources by allowing the most cost-effective emission reduction to be made. A joint Canada-U.S. study published in July 2005 demonstrated the feasibility of cross-border trading of SOx and NOx for the electricity sector.

It is important, Chair, that we have this detail in a bill that's going to be taking Canada post-Kyoto and would be even now taking action on the environment. But Bill C-377 is dealing primarily with post-Kyoto, with no substance, no plans, no details, nothing. It has targets that were set internationally—and we agree with setting international targets—and then each country has unique circumstances. We heard from Mr. Bramley that no details specific to Canada were made, no costing, and he said we need to cost, as did Mr. Layton.

On Bill C-377, again we have another example of the importance of air quality. We have it in the Turning the Corner plan. We end up with cleaner air for Canadians to breathe and we reduce greenhouse gas emissions. We have that now with Canada's Turning the Corner plan--details of how to do it, details about the Canada-U.S. Air Quality Agreement, details of focusing on SOx and NOx and particulate matter, and creating this annex with that Canada-U.S. Air Quality Agreement. We don't have any of that in Bill C-377.

CEPA 1999 has a number of compliance and penalty provisions. Failure by regulated entities to meet any of the requirements set out by CEPA 1999, or the regulations made under it, is an offence.

Enforcement officers verify compliance with the act and its regulations. If a violation is confirmed, action is taken using one or more of the enforcement tools provided under CEPA 1999, such as warnings, directions, tickets, and orders of various types, including environmental protection compliance orders, injunction, or prosecution.

Action taken in response to any failure to comply with regulatory requirements will be predicted and will correspond to the seriousness of the non-compliance. When prosecution is undertaken, such offences may be prosecuted by either summary conviction or indictment. CEPA 1999 includes maximum fines of up to a million dollars a day for each day an offence continues, imprisonment for up to three years, or both. Corporate directors and their officers have a specific duty to take responsible care to ensure that corporations comply with the act, its regulations, and any orders of establishments issued by enforcement officers.

As the members are well aware, enforcement is an important part of the government's plan. Did the NDP support that? No. They voted against enforcement. How about the Bloc? They must have supported it. No, they did not support enforcement of Canada's environmental laws. Now, did the Liberals? Yes, they did.

Thank you very much to my members opposite.

We have to have enforcement. It's like not having police officers enforcing the traffic laws of Canada. People would be speeding if there was never anybody enforcing the speed limits. Canada would be a much less safe place if we didn't have our police officers protecting and keeping Canada safe.

It's the same thing with the environment. You have good environmental laws, which we have with the Turning the Corner plan, and you have them enforced. What's being proposed by the NDP is a bad bill that is vague, with no details of how they're going to achieve anything, so it's not achievable. It will create jurisdictional problems and court challenges, constitutional challenges, with no enforcement options and no enforcement officers. It's no wonder the NDP will never have a real bill that will actually see positive results for the environment.

The air quality has to be part of the objectives of any good bill for the health of Canadians and for the coming generations. Health risks to Canadians from air pollution are associated with direct exposure to ambient levels of particulate matter and ozone, the main components of smog. The relationships between actual emissions, the levels of smog, and their effects on human health are complex. However, health science indicates that even at very low levels, air pollutants affect human health. They also have negative impacts on the environment, on human health, and on environmental health.

The government will set air quality objectives for particulate matter and ozone that will specify a target concentration for ambient air based on an assessment of the health and environmental effects associated with exposure to these air pollutants in Canada. A decision on air quality objectives will be made after an analysis of benefits and risks over a range of concentrations in the air we breathe.

Chair, we need to provide an analysis in modelling to determine the health and environmental benefits and the economic impacts of proposed regulations to reduce industrial air emissions. We need to directly address questions of central importance to Canadians. How will actions improve the health of Canadians and the health of the environment?

Does Bill C-377 address that? No.

How will these actions affect Canadians and the Canadian economy? No, C-377 doesn't address that.

Does the Turning the Corner plan? Absolutely. The impacts of the Turning the Corner plan were systematically traced through several models. All parts of the analysis started with an estimate of what would happen in the absence of the proposed regulations, the business as usual case. The proposed regulatory system and emission targets were then introduced in the model and assessed in terms of established reductions in emissions and changes in economic activity. Reductions in emissions are also translated generally into improvements in key air quality parameters. These improvements, in turn, have associated health and environmental benefits.

The modelling work to date has been complex but provides reasonable, albeit preliminary, general results. Work to generate more refined estimates of the impacts is ongoing.

The economic impacts reflect an integrated assessment of the industrial greenhouse gas and air pollutant regulations. On the benefit side, the modelled impacts reflect improvements in air quality resulting from reduced air pollutant emissions only. It is clearly recognized, however, that climate change has long-ranging global economic, environmental, and social impacts with significant associated costs. These costs are not included in this analysis but are an important consideration in the assessment of the cost-benefit impacts of the regulations.

What happens to air pollutants released to the atmosphere from human-related activities as well as natural emissions, as simulated by Environment Canada's regional air quality modelling system? It describes the physical process such as transport, mixing, the deposition of the air pollutants, and the chemical transformations that air pollutants undergo in the atmosphere. The model provides the concentrations and geographic distributions of primary air pollutants, those directly emitted to the atmosphere, and of secondary air pollutants, those formed chemically in the atmosphere from reactions involving the primary pollutants to which humans and the ecosystems are exposed. The effects on human health and the environment from exposure to these air pollutants are then estimated by impact models. The results are based on these models.

If one goes to Environment Canada's web page, one will see a figure that provides an indication of the reductions of NOx emissions that are expected from the proposed regulatory system and targets, assuming they're all in place by 2015. Reductions in emissions are expected in the major urban centres and throughout the western provinces. That's good news.

The predicted improvements in air quality resulting from the proposed reductions in air pollutant emissions are also illustrated as percentage reductions in annual levels of particulate matter and in summertime ozone levels, again assuming the regulations are implemented by the year 2015. Improvements in ozone levels are shown only for the summer, as the formation of ozone increases with the amount of sunlight; as a result, ozone is not an issue in the winter months.

In addition, in order to highlight the impact of the proposed regulations on Canadian quality, transboundary emissions of air pollutants from the U.S. were assumed to be constant in the model. If one looks at figure G.2, preliminary results indicate that full implementation of the industrial regulations would decrease ozone levels by approximately 5% to 15% in large portions of Alberta, Saskatchewan, and Manitoba; in localized areas in British Columbia, Ontario, Quebec, and the Maritimes; and by 1% to 5% in the rest of the country. Decreases in levels of ozone are also seen in neighbouring U.S. states.

In figure G.3, the preliminary results predict annual reductions in PM_2.5 of between 5% and 50% across a large portion of the country, with large reductions of 15% to 50% in PM_2.5 across the prairie provinces and reductions of 5% to 15% for southern Ontario.

Improvements in both ozone and PM_2.5 levels are largest in western Canada, where marked reductions in emissions would result from the proposed regulations. Improvements in eastern Canada--although smaller in magnitude, due to the large influence of long-range transport of air pollutants--provide benefits for the large populated areas that are more than often affected by smog events.

In addition to improvements in ambient levels of both PM_2.5 and ozone, figure G.4 shows that reductions in acid deposition are predicted primarily in areas where there are significant reductions in NOx and SOx emissions. This will result in a reduction in the size of the area receiving acid deposition levels that are in excess of what the environment--such as lakes or soils--can withstand without being adversely affected.

Health Canada's air quality benefits assessment was used to estimate the human health benefits expected from changes in Canada's ambient air quality due to the proposed regulatory actions. It uses information on air quality, health effects of air pollutants, and the value of avoiding specific effects to calculate both the number of effects and approximate value of these to Canadians.

Substantial health benefits are predicted from the proposed regulations, since it is established that they will achieve reductions in summertime ozone levels of about 3% and a decrease in particulate matter of about 8% in the year 2015. These two air pollutants are the major components of smog.

The total health benefits in the year 2015 from the reduced risk of death and illness associated with these air quality improvements are established to be $6.4 billion. That's huge. The health benefits include reductions in premature mortality and various types of health effects. Most of the benefits are associated with the reduced risk of premature death because of the large value placed on reduced mortality.

Reductions in particulate matter account for the greatest share of the benefits because of the much greater effects on human health of long-term exposure to particulate matter relative to ozone. The total health impact is probably underestimated, because only two air pollutants are considered and only some health outcomes could be quantified because of the lack of information on all the outcomes.

Reductions in the emissions of harmful air pollutants and greenhouse gases would have many benefits for society, including improved environmental conditions. That would provide direct benefits to Canadian ecosystems. In addition, reductions can also raise economic productivity for specific sectors and increase the well-being of Canadians.

Some direct estimates were made of the environmental benefits from the proposed regulations. For example, ozone can hamper photosynthesis and increases the vulnerability of plants to pests and other stressors. The proposed regulations are predicted to reduce ozone levels and associated stress to agricultural plants, resulting in an increase in production of $123 million for key agricultural crops in Canada. That too is huge. The total benefits to agriculture could be much higher because the crops modelled only account for roughly 60% of the value of all crops and the impacts of soil acidification were not included.

It's very important that we consider in Bill C-377 the impacts of the environment and the impacts of a bad plan. A good plan will save Canadian lives. Canadians will live longer. It will increase agricultural output. It will save health care costs. That's what we see now with Canada's Turning the Corner plan.

A poorly written plan will not accomplish anything other than a line in the newspaper—as the commissioner said, confetti and then nothing happens, which is Bill C-377. You end up with a continuing environmental problem where Canadians are dying prematurely. So we have a responsibility to provide a healthy environment, and that's what we get with Canada's Turning the Corner plan but we do not get with Bill C-377, a plan that is void of details, a plan that is void of costing, a plan that is void of impact analysis, a plan that is void of constitutional stability. It is a plan that will not accomplish anything to protect the environment or the health of Canadians.

Canada's Turning the Corner plan has estimated costs of environmental damage. It's rated it as a relatively new area of research, and it is complex. Estimating the costs of environmental damage is important. Further work will be taken to estimate and place a value on the broader range of anticipated environmental impacts of the industrial air emission regulations. This work will build on the results of numerous studies that have estimated various costs of air pollution. For example, acidification of the lakes and rivers in eastern and central Canada has been estimated to result in annual economic losses of $500 million—that's annually—from reduced recreational fishing. Acidification depletes fish stocks in Canada's inland commercial fisheries, an industry worth $70 million per year.

It's important that we protect the environment. Bill C-377 ignores this.

The loss of nutrients due to leaching from acid rain affects forest productivity. Some estimates put annual timber losses from reduced forest growth at $197 million, and $89 million from damage to the maple syrup industry in eastern Canada. Acid rain in the most highly polluted areas in eastern Canada accelerates structural corrosion of costly transmission towers, imposing annual repair costs of $1,000 to $2,000 per tower and reducing tower lifespan by almost 30 years. The environment has a direct cost on Canada's infrastructure.

Greenhouse gas reductions by Canada alone will not significantly address global climate change. Nevertheless, Canada needs to do its share to control global greenhouse gas emissions in order to help address both the global effect and the more local threats to key sectors, resources, and the infrastructure associated with climate change. Those threats could include increased drought and temperature, with particularly severe consequences for the north and the west; decreased hydroelectric generation and transportation capacity from reduced water levels in the Great Lakes and elsewhere; and increased frequency of extreme weather events.

I've noted that the benefits associated with improved human and environmental health arising from the proposed regulations, the Turning the Corner plan, are in the order of $6.4 billion annually. What do we get from Bill C-377? Nothing.

So there are huge benefits to Canada and the environment from the direction Canada is heading in with the Turning the Corner plan—$6.4 billion annually. These benefits need to be weighed against the possible economic costs that can be attributed to the regulatory regime, in order to assess the overall impact on the Canadian economy and quality of life. The economic costs of regulation are often difficult to measure, as they depend on the reactions of a number of economic factors beyond the specific sectors directly affected.

In the case of the proposed regulatory package, the Turning the Corner plan, this would require not only the estimation of the direct impacts on production costs arising from industry compliance with emission regulations, but also that the indirect impact of these costs on future investment decisions, demand and supply, and related consequences for other businesses and consumers be tracked. There are many points of uncertainty throughout this chain of action and reactions.

Preliminary analysis performed by Environment Canada indicates that these costs will be small, but not inconsequential, relative to the total GDP. From an aggregate perspective, the annual economic costs of meeting both the regulated greenhouse gas targets and the regulated air pollution targets should not exceed 0.5% of GDP in any given year up to 2020.

The size of the national economic costs anticipated under the regulations, combined with the inherent margin of error that must be applied to microeconomic model results, makes it difficult to assess with any degree of certainty the impacts of the regulatory initiative at a provincial or a sectoral level. However, the following general observations can be made. There will likely be some year-to-year variation in the national and provincial GDP impacts, reflecting changes in industry and industry investments, with the possibility of small positive GDP impacts in the early years as the regulated industries accelerate investments in more energy-efficient, less polluting capital and technologies in response to the regulations.

Provincial economies with a strong oil and gas sector are expected to continue to see large uninterrupted volumes of production and exports of natural gas and oil. Global demand and strong world prices are expected to allow oil and gas producers and gas pipelines to absorb the relatively small incremental costs of production arising from the regulatory package. For major parts of the oil and gas sector, existing analysis also indicates a high potential for meeting much of the required reduction in greenhouse gas emissions through cost-effective options for carbon capture and storage.

Machinery and construction industries, together with sectors such as iron and steel that supply many related inputs, are expected to benefit overall as demand for their products rises because of new capital investment motivated in other sectors under the regulations. Energy utilities, electricity and natural gas, will likely be mildly affected as they'll be able to pass through many cost increases to their customers. Other major sectors such as manufacturing may experience a small rise in the cost of production associated with the pass-through of increased energy prices by the utilities. The extent to which prices will increase depends on a number of variables, including provincial regulatory policies, differences in capital turnover cycles between provinces and electricity generation units, and the take-up of renewable energy initiatives under recent federal and provincial programs.

A noticeable increase in electricity prices is nevertheless possible. This increase could in turn result in some minor downward adjustments across most sectors of the economy over the long term, for example, around 2015 and later.

The proposed industrial regulations present Canadians with concrete action on key environmental challenges and meet their expectations for responsible and effective government measures to secure a cleaner and healthier environment for themselves and their children. I have five children and four grandchildren, and I want them to be able to inherit a clean environment. That's why I am so proud to be part of a government that is actually cleaning up the environment for the coming generation.

The economic costs associated with our Turning the Corner plan, which we see in the plan but not in Bill C-377, are real and manageable. The benefits of our plan are equally real but in many respects incalculable—cleaner communities and natural spaces, healthier children, fewer premature deaths, more sustainable natural resources, and for the first time since signing the Kyoto Protocol, meaningful contributions by Canada to the global effort to control greenhouse gas emissions.

The $6.4 billion a year in health benefits that will accrue under this initiative is significant on its own, yet it represents only a portion of the health and environmental gains that Canadians will receive. The cost-benefit analysis demonstrates that the proposed regulatory package we now have in Canada's Turning the Corner plan presents a responsible path forward. It'll enable Canada to address climate change and air pollution without putting Canada's quality of life and economy at risk.

It is equitable across regions and economic sectors. It respects the polluter-pay principle. It puts in place for the first time in Canada a regulatory policy that can be fine-tuned to meet climate change and air quality objectives as we move forward. Most important, it provides Canadian businesses and citizens with the economic signals required to take into account the environmental consequences of daily decisions— whether it's choosing more environmentally efficient appliances or deciding to construct a new plant that uses renewable energy instead of fossil fuels.

Canadians have long demanded that their government provide the leadership and tools necessary to enable them to better manage climate change and air quality as responsible citizens. Canada's new government is responding to this, and we've moved forward with our comprehensive, realistic, and achievable plan.

Our regulatory framework for air pollutants, including the timeframe for the entry into force of regulations, is well under way. Sector-specific regulations are being developed, leading to publication of the draft regulations in the Canada Gazette, Part I. The regulations will be revised to incorporate the air pollutant provisions a few months later, following normal regulatory procedures.

The government intends to undertake a series of consultations, and it has been doing that. We have none of that in Bill C-377. We need, for this generation and for generations on, to provide leadership.

Mr. Cullen--I wish he were here, but I guess he has stepped out and been replaced--made a comment when the commissioner was here that it was the opposition's focus to try to make the government fail on the environmental file. Fortunately for the Canadian environment, for Canadians, and for the globe, they haven't been successful. We are moving forward. The Turning the Corner plan, by regulation, is forcing the industrial sectors to reduce their greenhouse gas emissions, with the toughest targets in Canadian history.

Bill C-377 will not achieve greenhouse gas emissions because it's a plan that is void of substance. It's a plan that will not withstand constitutional challenge. It does not include enforcement. It's a plan that won't work.

The irony is that the author of the bill, or the sponsor of the bill...well, actually, both the author and sponsor were witnesses here, and both of them said that the bill needs to be costed and we need an impact analysis. We heard that from every witness group. Yet now we're hearing from the NDP representative that they don't want to do that. They want Bill C-377 to move ahead just for reasons of optics.

The time for optics, Chair, is over. Canadians want action. They're getting action. We are reducing greenhouse gas emissions. That's what Canadians want, that's what they're getting, and that's why we will not be supporting Bill C-377.

[Mark Warawa, Conservative, Langley, BC]

So we have to be very careful, and that's why the government will determine which are good and appropriate for Canada.

Is there any mention of the CDMs in Bill C-377? No, it's missing. How much is missing? It seems that everything is missing from Bill C-377, and that's what the witnesses have said. There is nothing there.

Access to CDM mechanisms under the Turning the Corner plan, credits for compliance, will be limited to 10% of each firm's total target.

A number of U.S. states are currently considering implementing regulatory regimes with emissions trading to reduce emissions for greenhouse gases. The Western Regional Climate Action Initiative intends to establish an emissions trading system for greenhouse gas emissions from industry in five western U.S. states. Starting in 2009, the Regional Greenhouse Gas Initiative will implement a regional emissions trading system in nine northeast and mid-Atlantic states that covers carbon dioxide emissions from power plants in the region. Several other greenhouse gas emissions trading initiatives have been proposed at the state and federal levels in the United States.

Canada will actively work with U.S. partners to explore opportunities for linking Canada's emissions trading with regulatory-based emissions trading systems at the regional and state level, and with any that may be established at the federal level. Canada will also actively explore cooperation on emissions trading with Mexico. Bill C-377, again, is silent on all of this.

The government will monitor, under the Turning the Corner plan, the development of an international carbon market. As this market becomes more fully developed and robust, and emissions monitoring, verification, and reporting systems evolve further, the government will consider full linkages that could allow a broader range of international credits to become eligible for compliance with Canada's regulatory system in place. An essential condition is that any international credits used towards compliance with Canadian regulations represent real and verified emission reductions—again, the importance of having a plan that is working, in which you can verify the reductions in greenhouse gases. Do we see that in Bill C-377? No, we don't.

I wish I could share what good there is in Bill C-377, but it's missing all the fundamentals of a plan that will achieve reductions in greenhouse gas emissions. We don't see that, but we do in Canada's Turning the Corner plan, which is already taking action.

There needs to be credit for early action, and that's what we see in the Turning the Corner plan that Canada now has. Firms in a number of sectors have made efforts over the last decade to reduce emissions, and we applaud those. There would be a one-time allocation of credits to those firms covered by the proposed regulations that took verified action to reduce their greenhouse gas emissions between 1992 and 2006. A maximum of 15 megatonnes would be allocated, with no more than 5 megatonnes to be used in any one year.

Firms would be invited to make a one-time application where they would submit evidence of changes in processes or facility improvements they undertook that resulted in incremental greenhouse gas emission reductions in the specified timeframe. There would be eligibility criteria to determine which emission reduction activities would be considered, and evidence of emission reductions would be audited.

Once all applications were received, the reserve would be allocated to all qualifying applicants on a pro rata basis. The maximum allocation for emission reductions would be one credit for one tonne of carbon dioxide equivalent reduction. If the total tonnage of the emission reduction applied for were to exceed the 15 megatonnes, the credits would be distributed to individual firms in proportion to their contribution to the total emission reduction achieved.

So there is recognition for early action. Is it important that we do that? I think so. The government has recognized the importance of recognizing early action. Do we see any mention anywhere in Bill C-377 of giving credit for early action? No, you don't. Why not?

Under the Turning the Corner plan, the availability of different compliance mechanisms will provide industry with the access to emission reduction opportunities it needs to meet the regulatory obligations at a reasonable cost and will support the development of a functioning emissions trading market system. That said, the government recognizes there may be concern about the level of market liquidity in the trading system, both at the start of the system and over time. The government will carefully monitor the evolution of the emissions trading system and other aspects of the compliance mechanisms in order to determine any modifications that might be required. It has to be a system that works, and we're committed to that. And I'm happy, again, that the Liberals supported that plan.

The emission reduction targets for a given air pollutant will specify a maximum level of that pollutant that can be emitted from a given sector in a given year. These targets will represent national reductions from the 2006 emission levels for each pollutant.

Fixed emission caps will be set for the following air pollutants: nitrogen oxides, sulphur oxides, VOCs, and particulate matter. Fixed emission caps for certain other air pollutants from specific sectors, such as benzene from natural gas production and processing, refineries, and iron and steel, and mercury from electricity generation and base metal smelting, will also be set. As more information becomes available and regulatory development is undertaken, the government will consider whether the regulations for specific sectors should include targets for other air pollutants not already identified—for example, benzene from the oil sands.

Do we see any mention of that in Bill C-377? No. One would ask why not. Why is Bill C-377 void of all these important components?

I'll continue. Sectoral emission caps will be set for each air pollutant of concern in a given sector. Whether a cap is set for a specific pollutant in a given sector will depend on whether the pollutant is emitted in significant quantities from facilities in that sector. In some cases, caps will not be proposed for an air pollutant in a sector if the measures to reduce another air pollutant will significantly reduce emissions in the first. How the sectoral caps will be allocated among the facilities will be determined during the process of developing the detailed regulations. The targets will come into effect as early as possible, between 2012 and—

[Mark Warawa, Conservative, Langley, BC]

So with carbon capture and storage, I was sharing with you that as one injects the water and carbon dioxide mix into that geological formation—and Canada has an ideal geological formation in Alberta, up along the Rockies—we would be able to put that carbon back where it came from, below the earth. Carbon capture and storage is a technology that the world is hoping will accomplish about 25% of the problem.

So along with the efficiencies and cleaner fuels, the technology that is showing the biggest promise is carbon capture and storage. It is a great technology in Canada, and it's part of what we're proposing. Are these kinds of details in the plan of Bill C-377? No, they are not; they're missing. Again, there are general targets set, with no substance attached to how these targets are going to be achieved. There's no costing, and there are jurisdictional problems. So what it is important to realize is that Bill C-377, if it were to move forward and be supported by the Liberals and the Bloc—who would be supporting the NDP's bill—is a good bill in principle, but it is missing all the details.

Bill C-377 is missing a fund, yet the fund in the Turning the Corner plan would support critical infrastructure—for example, carbon capture and storage, including a pipeline in Alberta for carbon dioxide transport. We have the plant at Weyburn, Saskatchewan, that pumps the carbon dioxide from North Dakota, 300 kilometres north, and it's very effective. So we need to be able to come up with a pipeline that would be able to move the carbon dioxide. You purify it and condense it. And you have to have a program where we get the dollars where they are needed.

So you should build that technology, and it won't happen just by having Bill C-377. Bill C-377 won't accomplish that, whereas the Turning the Corner plan—what we have in Canada now—will accomplish that and is supporting that.

Now, I want to thank the Liberal members for their support of our Turning the Corner plan. They have supported that, but unfortunately the Bloc hasn't supported it and the NDP has not supported the funding of this great technology.

Our technology fund could also support an east-west electricity grid linking markets from Manitoba to Newfoundland. As a way of meeting part of our regulatory obligations, firms could contribute to the fund at a rate of $15 per tonne of carbon dioxide equivalent from 2010 to 2012, and $20 a tonne in 2013. Thereafter the rate would escalate yearly at the rate of growth of nominal GDP. This rate structure would be reviewed every five years as part of the general review of the regulatory system.

Do we see these details in Bill C-377? No, we don't. They're all missing. Yet in the Turning the Corner plan, it is very clear. Contributions to the deployment and infrastructure component would be limited to 70% of the total regulatory obligation in 2010, falling to 65% in 2011, 60% in 2012, 55% in 2013, 50% in 2014, 40% in 2015, and 10% in 2016 and 2017. The contribution limit would fall to 0% by 2018.

So what we see is a plan that will achieve an absolute reduction in industrial sectors, a plan that will begin to help industry to reduce their greenhouse gas emissions, a plan that they can buy into. But they can't continue to emit greenhouse gases; they have to clean them up. Every year they have to get cleaner, and they need the tools to put money into a technology fund to buy down their carbon. They cannot continue as they are. Eventually, by 2018, it's zero. These are very clear details that provide very clear direction to industry.

To the different industrial sectors now, in May they would provide their targets. They realize there's a carbon market now forming and they realize their targets are fixed. They report their 2006 targets, and their targets are fixed, and then, within a very short period of time, they have to provide absolute reductions. They have to. It's not voluntary; it's mandatory.

Those kinds of details are absent from Bill C-377. With those details being absent from Bill C-377, will Bill C-377 achieve what it says it would like the government to? No, it won't, and that's what we heard from the witnesses.

The Turning the Corner plan gives clear direction to industry, it gives them the tools to reduce their emissions, and it also lets them know it will be done. And there's a rationale that protects the environment and protects the economy and sets these high standards. Bill C-377 is missing all of this, which would then tell us very clearly that it will not achieve anything.

One would even question, what is this bill trying to accomplish if it's not going to accomplish a reduction in greenhouse gas emissions? Going back to what the commissioner said--and I will not reread that at this meeting--you've got to have a plan that is realistic, that is achievable, and that has had social, economic, and environmental assessments. If those are missing, which they are in Bill C-377, the end result is a phony bill that tries to make a party look like they care about the environment, a party that has had every opportunity to vote for the environment, for funding for the environment, that has a legacy of voting against the environment, against the environment, and against the environment.

Even in British Columbia—and I encourage people to come out and visit British Columbia, because I think it's the most beautiful province in Canada—we have the Great Bear Rainforest. It was protected, and the NDP even voted against protecting that very sensitive area and the $30 million that was funded.

So one would ask, what is the real purpose of Bill C-377 when it's not going to accomplish anything?

On the other hand, the government's plan will explore the option of providing credits to individual companies for government pre-certified investments on specific projects. This option would allow a company that invests in a transformative technology that would incrementally reduce future emissions to receive credits from the government for that investment. These credits could be used towards its regulatory obligations. Criteria for such investments would be determined in advance by the government in consultation with the industry and other experts, and that takes time. But it's good.

Imposing a mandatory requirement for investments to be made in specific infrastructure products and a smaller component of the fund limited to an additional five megatonnes per year from 2010 to 2017 would help finance research and development projects aimed at supporting the creation of transformative technologies that are expected to achieve emission reductions in the medium to longer term.

Emissions trading is very important. It'll be an important component, and it is now the government's market-driven approach for reducing greenhouse gas emissions.

What detail do we have about market trading? We have eight words: “market-based mechanisms such as emissions trading or offsets”, with no details. Well, details are needed, and they're missing in Bill C-377.

Well-designed emissions trading systems can reduce overall costs associated with regulatory compliance by allowing firms with a high cost of emission abatement to fund lower-cost emission reduction projects at other firms. In addition, emissions trading systems create an economic incentive for companies to do better than their regulated targets and bring innovation to bear on the challenge of climate change.

The emissions trading system that will be part of the regulatory framework for greenhouse gases will have a number of components. Inter-firm trading, through which regulated firms may buy and sell emission credits among themselves, will be the centre component. A domestic offset system will allow regulated firms to invest in verified emission reductions outside of the regulated system. There will be no limit on firms' access to domestic emissions trading and offsets.

In addition, Canadian firms will have limited access to certain types of credits from the Kyoto Protocol's clean development mechanisms, or CDMs, for compliance with the regulations.

Potential linkages with regulatory-based trading systems in the United States will be actively pursued. In particular, the government will examine the flexibility of linking with such emissions trading systems as the western regional climate action initiative and the regional greenhouse gas initiative, as well as with other systems as they become established. Over time, as national and regional carbon markets become more mature and the market becomes more global in nature, with robust emission reduction verification systems--and you have to have verification systems--Canadian firms will have increased access to international trading markets for purposes of compliance with Canadian regulations. Canadian firms will not, however, be allowed to use hot air credits, which do not represent real emission reductions, for compliance with Canadian regulations.

It's important that you have a verification system. Is that in Bill C-377? No, it's not. It's missing. Will it achieve greenhouse gas emissions? Will it achieve a supportable carbon market? No, it won't. Do we need that? Yes, we do. Does industry need to have a carbon market? Yes. This is missing in Bill C-377, and yet we already have that with the Turning the Corner plan.

Recognizing the opportunity offered by emission trading, Canada's exchanges have been positioning themselves to launch trading when the regulatory framework is finalized. We've already seen now the good news about a carbon market being headquartered out of Montreal. The Government of Canada will not purchase credits or otherwise participate in the carbon market. It will not be happening with the Government of Canada; it will be industry-driven.

The central component of the emissions trading system for greenhouse gases will be a baseline and credit system. For each firm, the baseline will be its emission intensity target. Firms whose actual emission intensity in a given year is below their target will receive tradeable credits equal to the difference between their target and their actual emission intensity, multiplied by their production in that year. These credits could be banked for use in future compliance years or sold to other parties through an emissions trading market established by the private sector.

Is it important that you have those kinds of details? Yes. Are they in Bill C-377? No.

The emissions trading system would also include domestic offset credits. Offsets are emissions reductions that take place outside the domain of the regulated activities. Offsets credits, which regulated firms could use towards their regulatory obligations, would be issued for verified reductions in greenhouse gas emissions that were incremental to what would have happened without the regulatory system or other governmental programs.

An offset credit would represent one tonne of verified greenhouse gas reduction or removal achieved by a given project, measured in carbon dioxide equivalent. The credit would be recognized in the regulations as tradeable and could be used to meet the obligations of the regulated facilities. Offset credits would be issued for those activities where emission reductions could be accurately quantified and verified at a reasonable cost. Examples of possible offset project types include the capture of methane from landfill gas that is then used to generate electricity, energy efficiency projects, and projects that store carbon in agricultural land.

To lower the cost of participation, pre-approved quantification approaches would be provided and the aggregation of small projects would be encouraged. The framework for the offset system would be built on the experience gained in three Canadian pilot initiatives and on project-based crediting systems in other countries.

In addition, considerable work on the development of a framework has taken place in Canada, with the provinces and the private sector playing leading roles. Canada's private sector would play a major role in the offset system, including verifying emission reductions achieved from eligible offset projects and providing infrastructure and services required for the trading of the credits.

The offset system would start prior to the entry into force of the regulations in order to provide adequate time for projects to generate emission reductions. Credits would be issued to those verified emission reductions. These credits could be sold to regulated entities for use for compliance purposes.

Do we see that in Bill C-377, a clarification on an offset system, the mention of an offset system? No, it's not there. Have we heard mention from witnesses? Yes, we have. Is it deliberately missing from this, or is there an omission because the bill is poorly written? I would suggest that the bill was rushed. It was not well thought out and it probably needs to go back and be totally rewritten and reintroduced to Parliament because it's missing so much.

It's also missing mention of CDMs, clean development mechanisms. Generally speaking, an emissions trading system with a broader scope will provide more opportunities for cost-effective emission reductions.

Over the past five years a number of subnational, national, and regional greenhouse gas emissions trading markets have been implemented or proposed for implementation in the near future. The most comprehensive of those is the EU's emissions trading system, which began as a pilot phase in 2005, and it is moving to a more complete system starting in 2008. The experience of the EU trading system has provided valuable insights in developing Canada's regulatory system for greenhouse gases, and the government intends to continue discussions with the EU on what Canada can learn from the EU's experience with emissions trading.

Notwithstanding these developments, the international carbon market is still fragmented and in its infancy. As the global market develops and matures, there will be additional opportunities for Canadian firms to participate in it.

When we were in Berlin, Mr. Cullen, I myself, Mr. Godfrey--and I forget the member from the Bloc--heard clearly that carbon markets need to first develop domestically and mature before you go into international trading, and that's exactly what's happening with our Turning the Corner plan.

The government intends to start modestly by allowing Canadian firms limited access to certain types of credits from the Kyoto Protocol's CDMs for the purpose of meeting their regulatory obligations. The government will determine which types of CDM credits should be eligible for regulatory compliance in Canada.

Mr. Harvey has talked a number of times about Madam Donnelly and her experience in CDMs internationally. We heard that there is a limited number of CDMs, and not all CDMs may be good for the environment.