Bill C-288 (Historical)

Kyoto Protocol Implementation Act

An Act to ensure Canada meets its global climate change obligations under the Kyoto Protocol

The purpose of this enactment is to ensure that Canada meets its global climate change obligations under the Kyoto Protocol. It requires the Minister of the Environment to establish an annual Climate Change Plan and to make regulations respecting climate change. It also requires the National Round Table on the Environment and the Economy to advise the Minister — to the extent that it is within its purpose — on the effectiveness of the plans, and requires the Commissioner of the Environment and Sustainable Development to submit to the Speaker of the House of Commons a report of the progress in the implementation of the plans.

[Mark Warawa, Conservative, Langley, BC]

Okay, thank you.

You also said today that Pembina is non-partisan and you said that you strongly support Bill C-288. Are you speaking for yourself or for Pembina?

[Mark Warawa, Conservative, Langley, BC]

Okay. Thank you for that. Actually, you're the first one to say yes to the committee. We have had, to this point, a no from everyone I've asked that question to. We've had a couple of “I don't knows”, but you're the first one.... So congratulations.

We actually had comments specifically regarding Bill C-288 from Claude Villeneuve, a professor with the University of Quebec. He said it would have been an excellent bill if it would have been introduced in 1998, and we're in 2006 believing that it's not relevant.

Actually, Mr. Bramley, I'm quite happy that you're here today. I was watching the news late one night and there you were. You made a comment that grabbed my attention and I wrote it down. I found it shocking and I found it dishonest. That's why I'm glad you're here, so that I can ask this question of you.

You said at that time, I believe, that Canada had abandoned the Kyoto Protocol. Is that correct? Did you say that?

[The Chair, Conservative, Bob Mills]

Do you want to carry on, Mr. Warawa, and try to keep to Bill C-288?

[Matthew Bramley, Director, Climate Change, Pembina Institute]

Thank you, Mr. Chairman.

Although this isn't the first time I've had the privilege of addressing the committee, I'll take a moment to introduce myself. I'm the director of the climate change program at the Pembina Institute, which is one of Canada's largest environmental NGOs. The Pembina Institute is a strictly non-partisan, not-for-profit organization focused on sustainable energy solutions. We work with any political or corporate leaders who want to take meaningful action on climate change. We're not afraid to criticize either, when we see a failure of leadership or responsibility.

I've worked full time on Canada's response to the climate change issue for the past seven years, and I believe I've participated in all the key federal and national policy discussions and processes during that period. I've published numerous analytical reports and opinion articles on Canadian climate policy, and I've addressed the issue many times in the media.

I will continue my presentation in English but of course I would be most happy to respond to any questions in French.

There's abundant evidence that climate change is among the biggest threats facing the world, and perhaps the biggest. Tony Blair, to give one example, has called climate change “a challenge so far-reaching in its impact and irreversible in its destructive power, that it alters radically human existence”.

So this is an issue that goes far beyond the environment. We're talking about impacts on billions of people and economic costs that could be catastrophic. Responding adequately to this challenge demands extraordinary leadership and commitment from those who find themselves in positions of responsibility.

The Pembina Institute strongly supports Bill C-288, and I'd like to make three points today to validate that position. The first point is the urgency of implementing policies to begin cutting greenhouse gas emissions and the importance of Kyoto in making that happen. The second is that meeting Canada's Kyoto target is a legal obligation that cannot be treated as optional. The third is that Canada is certainly able to meet its Kyoto target at a reasonable cost if our government acts quickly and recognizes the value of the international Kyoto mechanisms.

First, then, on urgency, this committee has already heard very clearly from leaders of Canada's climate science community that there's an urgent need to cut greenhouse gases. They explain to you that the long time lags in the climate system demand action now to prevent future impacts. Mark Jaccard, one of Canada's most accomplished climate policy experts, told you that strong policies should be implemented immediately, precisely because long-lived capital stock is being replaced continually and we now have to start replacing it with less “greenhouse gas intensive” choices.

That brings me to my point. To start playing a responsible role in preventing climate change, Canada need an ambitious, legally binding, short-term target for reducing its greenhouse gas emissions total so that governments feel obliged to act immediately with strong policies. That's why Kyoto is so important, not because it's perfect or it is more than a first step or necessarily has exactly the right target, but if Canada abandons that target, the pressure will be off. Even if the Kyoto target is replaced by a different short-term target, it will be a voluntary one at the international level because other countries are not going to let Canada reopen negotiations on this, and we know that voluntary does not work.

I will turn to my second point. For nearly two years now Kyoto has been part of international law. Bill C-288 calls for the Government of Canada to do two things: first, to meet the emissions targets set by Kyoto by any combination of regulations or other measures that it chooses; and second, to be transparent about how it intends to do so.

I don't believe that opposition to this bill arises from the transparency provisions. Opposing it because of a belief that Canada cannot or should not meet the target is equivalent to saying that Canada cannot or should not obey international law. I think we need to be very clear about this because Canadians care about Canada being a good international citizen, about keeping our promises and meeting our obligations.

We also need to be mindful of the possibility that another country that is party to the Kyoto Protocol could pursue legal action against Canada on this issue.

Because our Kyoto target is a legal obligation, I believe the time has long passed since we could have a debate about the target as a “take it or leave it” option. Canada had that debate in 2002. It was a very vigorous one, and the government of the day decided to ratify the treaty. My understanding is that the present government has made a decision not to withdraw, so now we need to focus on meeting our legal obligations, not call them into question.

In my view, it is not only inappropriate but also unnecessary to call those obligations into question--and this is my third point--because Canada's Kyoto target is achievable. Achieving it will require the government to move as quickly as possible to implement a comprehensive set of regulations and financial incentives to drive energy efficiency and a switch to clean energy sources, but as you've heard, that will only get us part of the way to the target in the limited time that remains.

Canada will also need to embrace the option of financing cost-effective emission reduction projects in poorer countries. This option must stop being treated as something wasteful or shameful. We need to challenge the assumption that, as the quote goes, “sending billions of dollars abroad is necessarily a bad thing”. Canadians constantly send billions of dollars abroad in exchange for goods or services. Why not for environmental benefits?

Kyoto credits from developing countries come from specific emission reduction projects that have to go through a rigorous, transparent process to show the reductions are genuine. It needs to be clearly understood that reducing greenhouse gas emissions in India, Kenya, or China has precisely the same benefits in preventing climate change in Canada as reducing emissions here, and there are opportunities for Canadian technology providers as well.

Richard Paton was simply wrong when he told this committee that buying credits will neither help our economy nor help our environment.

Jayson Myers claims that the total cost of credits to meet Canada's Kyoto target would be $20 billion, but he's using a price of $20 per tonne, which is considerably higher than current prices.

John Drexhage's estimate, $10 billion plus, is more credible, although I still think it likely underestimates the domestic reductions that could be achieved if sufficient efforts were made with sufficient urgency.

These funds need to be thought of as a type of specially targeted official development assistance. The amounts are modest when they are viewed in that light. To take John Drexhage's figure, $10 billion, to be spent between now and the end of 2012, would make $1.7 billion per year. In 2005, Canada spent $4.5 billion on official development assistance. If we had met the international standard of 0.7% of GDP, Canada would have spent $9.6 billion annually.

Here's another comparison. In 2005-06, the federal government received $33 billion from the GST. That means a cut in the GST of one percentage point is worth about $5 billion per year, three times more expensive than what is being estimated for Kyoto credits. Parliamentarians might wish to consider the relative importance of cutting the GST by one percentage point versus keeping Canada's international promises, providing targeted and much needed assistance to poorer countries, and significantly reducing the emissions that are causing one of the biggest threats facing the world.

There's something else to consider here too. The financial liability that Canada faces as a result of sharp increases in our greenhouse gas emissions should not be borne solely by the government, but shared, where that can reasonably be done, by those whose emissions increased. For instance, one-third of the increase in Canada's greenhouse gas emissions between 1990 and 2004 came from the oil and gas industry. Nancy Hughes Anthony's numbers about emission increases cannot have included oil and gas or electricity. If regulated targets were in place for industrial emitters by 2008, when the Kyoto compliance period starts, those emitters could shoulder some of the costs of acquiring Kyoto credits. And these costs can be small compared to profit margins. The most efficient oil sands producers could reduce their net emissions all the way to zero for less than $1 per barrel of oil if they acquired credits at $12 per tonne, which is the current average price.

Overall, then, we need to view emissions trading as a bridge to enable a company or a government to take responsibility for emissions cost-effectively now, when its optimal opportunity to put in place new technology may be a few years down the road.

I'd like to conclude by reminding you of Kofi Annan's remarks at the UN Climate Change Conference in Nairobi two weeks ago. He said:

While the Kyoto Protocol is a crucial step forward, that step is far too small. And as we consider how to go further still, there remains a frightening lack of leadership.

In other words, Mr. Chairman, meeting Kyoto targets is a minimum and Canada needs to stay the course.

Thank you.

[John Dillon, Vice-President, Regulatory Affairs and General Counsel, Canadian Council of Chief Executives]

Thank you, Mr. Chair. It's a pleasure to be here.

For those of you who may not be aware of it, let me just give you a brief introduction to my organization. The Canadian Council of Chief Executives represents 150 CEOs of Canada's largest companies. They're active in all sectors and regions of the country and are responsible for the vast majority of Canada's private sector investment, exports, and research and development. As such, our members will be affected by climate change and clearly believe they must be part of the solution.

Industry believes climate change is a serious issue that must be addressed. To the extent that there is a debate, it is about the means and the timeframe, not the overall goal of reducing emissions.

Mr. Chair, the record clearly shows that Canadian industry has acted. The major industry sectors are prepared to do more. They have worked and will continue to work with federal and provincial governments to develop targets that are reasonable and achievable. Indeed, industry is not opposed to regulation, as many of our critics have tended to suggest. In fact, most of the key sectors already are regulated with respect to air emissions, through provincial operating permits that usually incorporate the best technology to address emissions.

Let's take a moment to look at the issue in the context of the Kyoto Protocol, since Bill C-288 would compel the government to try to meet that target. We are barely more than one year away from the start of the Kyoto commitment period and our Canadian emissions are still growing. We are not the only country facing this kind of challenge. I'd refer you to pages 2 and 3 of my presentation, which outline how various countries are doing in meeting their targets under the Kyoto Protocol.

Page 2 details the results for the fifteen members of the European Union. While those countries have clearly committed to do more, this chart shows their progress from 1990 to 2004. I would note that in the case of both Germany and the United Kingdom, which have the most impressive results to date, there are issues related to major economic restructuring in both of those countries. Indeed, their governments have had to admit recently that their emissions have actually been going back up in the last year.

With respect to a number of other countries that have commitments under the Kyoto Protocol, on page 3 you can see how Canada is faring relative to a number of those other countries. I think what's interesting to note about all of this is that of course the targets vary widely between countries, both because of the burden-sharing arrangement within the EU and because a number of countries that arguably have a very similar emissions profile to Canada were actually given an increase over 1990, whereas Canada's target was minus 6%. So Canada is clearly not alone in trying to meet this challenge.

That brings me to one of the main difficulties we see with Bill C-288. A real plan to deal with climate change is more than just a target, however ambitious that target may appear. Indeed, the current debate that we've seen in the last few weeks leaves me worried that we will devote far more time to discussing the next ambitious target and not nearly enough time to what we actually intend to do to start slowing the growth of GHG emissions.

On that score, the various plans that we've seen to date rely more on wishful thinking than on any solid analysis of effective long-term policies. Indeed, this was reinforced by the Commissioner of the Environment and Sustainable Development in her recent report. Previous government plans would likely have had to rely on large purchases of foreign credits, at a price tag of as much as $4 billion to $6 billion per year.

The challenge of dealing with this is I think amply illustrated by the numbers I've put on page 4 of my presentation. This outlines the history of the attempts by the federal government to estimate the gap between Canada's Kyoto target, which is of course 1990 minus 6%, and projected emissions for Canada in the year 2010, the mid-period of the Kyoto commitment. In 1998, shortly after the Kyoto Protocol was negotiated, the first estimate by the federal government tagged our gap at 140 million tonnes of greenhouse gases. The most recent estimate, produced in 2005 in Project Green and confirmed again in Canada's Energy Outlook, which was just published by NRCan, puts that more in the range of 265 million to 270 million tonnes, which is almost double.

Obviously, a lot has changed both in terms of how our economy and our society have grown and used energy in that time period, but clearly too, I hope, has our understanding of what it would take to try to close that gap. It is interesting to note the growth in it, along with our growth in emissions.

I would argue that a big part of the problem has been the tendency to treat climate change in isolation from the social and economic reality that surrounds it; that is, the fundamental relationship between greenhouse gas emissions and how, both here in Canada and around the world, we produce and use energy.

That's to some degree illustrated by the chart I've included on page 5 of my presentation, which looks at our consumption of energy from the period 1990 to 2004, which is the latest year for which figures are available. As you will see, our population has obviously grown during that period, and our energy consumption per capita has also grown. What is interesting, of course, is that our economy has grown significantly as well since 1990. We're actually doing reasonably well in terms of reducing the energy intensity of our economy, but not so well in reducing the energy emissions per capita.

It's important to note that many of us in the industrial sector acknowledge, as I said earlier, that regulation is coming and is appropriate. Indeed, my view is that regulations upon industry will come more quickly than most critics have suggested, and once they're in place there will be a very high degree of compliance.

But the question, I think for all of us, is where the rest of the reductions come from in Canada's overall GHG emissions. Governments have been preaching energy conservation for many years, with limited success. The challenge is to figure out how to affect and influence in a positive way the energy-use decisions that millions of individual Canadians make every day.

Chart 6 gives you just a snapshot, by no means comprehensive, of some of the challenges we face in trying to address GHG emissions, in terms of how the population is growing and energy use in households is growing in a way that more than offsets the obvious energy and efficiency improvements of appliances and efficiency within those houses.

Clearly, challenges exist in the transportation sector as well. The average commute time is higher now than it was in 1992, while the proportion of Canadians using public transit has stayed pretty steady across the years, regardless of various government policies to try to change it. Of course, in the case of airlines, we've seen a huge growth in overall travel.

This really is a reality. Even if we were able to define effective consumer policies today, it clearly would take much longer to see their impact and begin to bend the trajectory we currently are on—arguably, much beyond the current timeframe of the Kyoto Protocol.

When it comes to Canadian industry, the question is whether we want to try to force incremental changes at the margin, which will come at a very high cost relative to the emissions reductions, or whether we can have a more far-sighted policy that better integrates climate policy with the technology investment and capital cycle realities of our most energy-intensive industrial sectors.

I want to finish the visual presentation with a chart I borrowed from Jay Myers of the Canadian Manufacturers & Exporters, who I think used it in his presentation last week. He gave you a fuller story on what the manufacturing industry has been able to do in the last few years.

I think what's important about this chart is that it shows very clearly that it's when industry is investing in new technology that emissions improvement really occurs. It is absolutely critical that we start thinking about that issue.

Investment planning and decisions for major technology changes take much longer. We need a fiscal and regulatory framework that encourages investment and the deployment of new technologies that improve environmental and economic performance.

In conclusion, I would like to briefly sketch how we can move forward effectively. This is by no means comprehensive, but these strike me as some of the key issues.

Clearly, we need concrete measures across all segments of society. More fundamentally, we need to build understanding and support for the changes and long-term transformational change that will be necessary. We need an honest dialogue with Canadians about what policies are effective and about what they will support that reinforces and builds on smart consumer choices over time.

We need real cooperation and coordination with the provinces—the important jurisdictions with respect to energy and natural resources, urban planning, and communities. Indeed, they own most of the electricity generation in Canada. Provincial coordination is essential, since industries already are regulated when it comes to air emissions, and in some cases greenhouse gases, through provincial permitting.

When it comes to a sounder framework for addressing industrial emissions, there are three essential elements. We need policies to support cost-effective energy efficiency opportunities; investment in renewables and other low-carbon energy sources; and a strategy to stimulate research, development, and deployment of leading-edge technologies such as biofuels, clean coal, and carbon capture and storage. This is not only essential for Canada, given our energy mix; these technologies can be used around the world in places where energy demand is growing even faster than here in Canada.

We were pleased to see the government's Advantage Canada strategy last week and the recognition that Canadian business pays some of the highest marginal tax rates on new investment among any of our competitors. We think it is essential to have an investment regime that allows firms to turn over capital stock on a timely basis, allows investments in new technology that have an environmental and productivity payoff, and grows leading-edge firms that can compete internationally from a Canadian base.

Lastly, Mr. Chair, we have to devote far more attention to the issue of adaptation, because it appears that global emissions of greenhouse gases are growing quickly, and even with aggressive policies, it will be some years before we can stop that growth, let alone achieve reductions on a global scale. Canada has some unique vulnerabilities to the effects of climate change, but also some important contributions to make in managing the adaptation to climate change.

Thank you, members of the committee. I look forward to your questions.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Mr. Chair.

There's no surprise with the results of the previous two motions and the lack of accountability from the former government. It actually, Mr. Chair, discredits Bill C-288 big time.

On the next motion that's on the schedule, Mr. Chair, the one the chair unfortunately vacated over, in the spirit of cooperation, I'm not going to present that motion. We've heard from the clerk that the 28th, which was what we were proposing in that motion, is filled up with a number of witnesses. Rather than try to reschedule them on the 7th, which probably would not be fair to them, we will try to arrange another day when we can have the minister come to speak to the committee.

Thank you. I will not be presenting that motion.

[Mark Warawa, Conservative, Langley, BC]

Yes, I have a second motion. Rather than take a lot of time, the points have already been made on the importance of accountability.

The motion is to invite the Honourable David Anderson to appear as a witness before the committee by November 28 for the discussion of Bill C-288.

The rationale is that Mr. Anderson was the Minister of the Environment under Prime Minister Jean Chrétien when we signed on to Kyoto, and I believe he has a responsibility to come before this committee. That is why I propose the motion. I think it is very fair and, again, in the spirit of accountability.

Unfortunately the previous motion was not supported. It provides grave concern for me, Mr. Chair, that the members of the committee do not appear to want accountability for poor decisions of the past. Hopefully they will change regarding Mr. Anderson.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

I will simply comment as well before we go to the vote.

I believe the actions of our vice-chair just moments ago, in terms of not even being willing to take his responsibility to sit in the chair at the start of the meeting.... I don't know where this leaves us in terms of precedent for the future. And then in dishing all of our stuff...we cannot even get to our duly filed amendments. That is the whole point of having notice requirements. We filed, and then the chair walked away. I think that is something that deserves a chiding from the House, because he was clearly out of order—I will just finish, I am speaking on the motion—at the time in respect to walking away. The clerk confirms that he was out of order.

The unfortunate thing is that we didn't get all of these motions under way. In particular, on this one, there might have been more extensive discussions.

As was already pointed out by my colleague, Mr. Dion is a past environment minister who proposes to be the leader of the Liberal Party. More importantly, he was the minister over a period of time when there was nothing in terms of proper analysis for the minus-6% Kyoto target. It was under Mr. Dion's watch where we dug the hole, if you will, and there was no concrete action taken during that period of time.

The Canadian public wants to hold governments to account. They did that at the last election. I think they want to hold ministers to account. Mr. Dion is a fine man, but he does need to be brought to this committee to answer and respond for the lack of action that we had over that period of time under his watch.

Again, I can't understand why there would not be an agreement by Liberal members. They tout all that they're doing in Bill C-288 and so on. Mr. Dion may have something very revealing to divulge to us in respect to reasons why he could not...excuses if you will, or maybe some very exceptional kind of rationale that would be helpful to us to understand the current dilemma and mess that we're in, as foisted on us by the Liberal Party, which is now not in office.

I obviously am supportive of this, and I think the Canadian public would want to hold Mr. Dion to account for being the Minister of the Environment at the time when there was no concrete action to meet Kyoto targets.

[Justin Vaive, Procedural Clerk]

Next week, on November 27, we have a scheduled meeting on CEPA. On November 28, we have a full list of witnesses for further consideration on Bill C-288. Mr. Warawa's amendment is to ask Mr. Dion to appear before Wednesday, November 29. We would have to juggle one of the other meetings in order to accommodate Mr. Dion or to add Mr. Dion to one of our current meetings.

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

The other concern I have with these motions is that they don't delay or interfere with the committee's commitment on delivery of Bill C-288 back to the House. I suppose, in a sense, we need to rely on the clerk to be able to establish a calendar that achieves both any inclusion of extra witnesses and arriving back at the commitment that this committee has already committed to.

[Mark Warawa, Conservative, Langley, BC]

Thank you very much, Mr. Chair.

I have three motions that I want to introduce, and I'll do this as quickly as I can.

Unfortunately, at the previous meeting there were some issues. The meeting started quite late. I keep time, and unfortunately we were shut out on opportunities for our round, so we have to try to move these motions. It was quite disappointing. It seemed as though there was a strategy to start the meeting late and end it quickly and early in order to eliminate us from having the opportunity to question the witnesses.

So here we are on the motions, and I thank you for this opportunity. I have three motions.

I'd like to start off with the first motion inviting the Honourable Stéphane Dion to appear before the committee by Wednesday, November 29, of this year as a witness for the discussion on Bill C-288. The reason is—and I'd like to deal with these motions separately—that Stéphane Dion was the last environment minister, and I believe he has a responsibility to address why virtually nothing was done to combat growing greenhouse gas emissions. Bill C-288 states that we now need to meet those Kyoto targets. Well, that former minister needs to answer to Canadians why he didn't do anything.

The next motion I'll be making will be to invite David Anderson. Again, we need to find out why these former environment ministers really did not protect Canadians and did not meet the obligations of Kyoto. We've heard from other witnesses that if Bill C-288 had been introduced in 1998, it would have been relevant, but at this point it's not relevant anymore. It appears to be more mischief and obstruction tactics by the opposition.

We need to hear from these former environment ministers on why they didn't do what they were supposed to. Why did they permit greenhouse gas emissions to go far beyond the Kyoto target? Why did they sign up for Kyoto and then not do anything? I think it would be really helpful as we consider Bill C-288. That's why I moved that first motion to invite Stéphane Dion.

[Mark Warawa, Conservative, Langley, BC]

I move the Standing Committee on Environment and Sustainable Development invite the Honourable Stéphane Dion to appear before the committee by Wednesday, November 29, 2006, as a witness for the discussion of Bill C-288.

Secondly, I move that the Standing Committee on Environment and Sustainable Development invite the Honourable David Anderson to appear before the committee by Wednesday, November 29, 2006, as a witness for the discussion of Bill C-288.

I so move.

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

Can a point be made, though, as our signature is now sitting on this document, an international binding treaty, that we should simply, under bills like Bill C-288, say we're going to try, that this is the target that has been set and we must try to achieve this target--otherwise, face penalties, which will cost more?

Disparaging whether the 2012 targets are achievable, or what the cost will be, the effort must be made.

[John Drexhage, Director, Climate Change and Energy, International Institute for Sustainable Development]

Thank you, Mr. Chair. Allow me to thank you and the other members of this committee for the opportunity to speak on this issue, the Kyoto Protocol and Canada's position and profile within the international climate change community.

First allow me to directly address the question that is the basis of these current inquiries. Can Canada actually meet its Kyoto commitments, as Bill C-288 requires? Well, yes and no. It all depends on the scope of actions this government would be willing to consider. To clarify what I mean actually requires a bit of a history lesson.

Having had the privilege of being a core negotiator at Kyoto, I would like to share with this committee the dynamics of those talks in 1997. The end game of these negotiations at Kyoto revolved around two critical issues: quantitative emission limitation or reduction targets and the use of flexible market mechanisms as a means of delivering on those targets. Those two very initiatives had been defined and identified through recent successes in other environmental issues in which the United States had played a leading role.

Ozone depletion and acid rain.... Under the Montreal Protocol and its consequent amendments, the identification and acceleration of legally established targets for the reduction of ozone-depleting substances proved to be an enormous success, with developed countries first having demonstrated that these targets could easily be met, and then with other countries eventually coming on board, this despite expert economic projections of economic ruin to communities across the U.S. if its government were to agree to strong reductions.

Secondly, the seminal case of sulphur dioxide emissions or acid rain.... While there are many now who claim authorship on the idea, the notion that pollutants could actually be commoditized and traded to mitigate costs came out of the United States in the late eighties and early nineties and again proved to be a huge economic success, with reductions as much as 10% of the original cost. And again, it was the United States and the climate change negotiations that pushed on both issues.

It was at their insistence at the second conference of the parties in 1998 that countries would need to agree to legally binding targets. It was the umbrella group of countries led by the United States, but strongly supported by Canada, Australia, and New Zealand, that insisted on the inclusion of flexible market mechanisms as a means of reaching those targets.

Far from a made-in-the-EU pact, the protocol and its elaboration in the Marrakesh accord actually reflected North American preferences for a target-based approach using market mechanisms as a means to meet those objectives. In other words, Canada agreeing to minus six was predicated on two variables: the U.S. committing to minus seven and Canada enjoying access to the Kyoto mechanisms as a cost-effective means of reaching those targets.

Since then, of course, we are more than aware that those two parameters have significantly changed. The Bush administration made it clear that it had no intention of joining the Kyoto family, and international credits became a hotly contentious issue within Canada, with some powerful industry interests and environmental groups--in my view, unfortunately--both characterizing such international investments as wealth transfers for no real environmental gain.

The debate constantly revolved around whether minus six could ever be reached with these new realities, with the result that concrete actions to begin reducing our emissions constantly made their way to the back burner of the climate policy debate. And everyone here frankly is culpable. The debate raged not only among political parties, but among provincial and federal governments, among industry and environmental groups, and even among departments within the federal government.

The result: close to ten years after Kyoto and we still don't have a coherent plan. So we return to the central issue of this bill: Could Canada actually reach its target even without such a full plan in place at such a late date? Yes, but it would require robust participation in the international carbon market. Does that mean Canada buying so-called hot air from Russia? In my view, no. There is no reason why Canada could not purchase credits through discrete project-based activities that show real reductions and also help support the export of clean Canadian technologies.

Domestic reductions alone, to which this current government has indicated it is committed, would simply not be in place soon enough to make the kinds of reductions that would be required. Most importantly, in my mind, we should not continue to be transfixed by the question of the target. It is needlessly politicizing the debate about what actually can be done and delaying Canada from taking meaningful actions that are required by us and the rest of the globe. That became abundantly clear during the last two weeks in Nairobi.

While there was no meltdown in the negotiations, and in fact we saw good progress in the elaboration of an adaptation work program for vulnerable developing countries, progress on a post-2012 mitigation regime, one that would also see some form of commitment on the part of major emitting developing countries, proved to be most disappointing. Small wonder, if you look at it from the perspective of China, India, Brazil, or South Africa.

The secretariat for the convention and the protocol reported that only six industrialized countries are actually on track in meeting their reduction commitments. At this point, we can hardly say we are showing leadership in reducing emissions required by OECD countries, both in the convention and the protocol.

At the same time, we need to keep in mind that we live in a very different world from the framework convention of 1992, or even the Kyoto Protocol of 1997. While poverty is still all too prevalent in these major developing countries, there is no doubt that they are also quickly becoming major global economic powerhouses. At the level of industry and other commercial enterprises, they are very much our competitive peers. They are developing quickly, perhaps too quickly for their own environmental and social good.

The question is how much leadership we in the developed world can show in reducing our emissions, without compromising our competitive positions to those growing economies. These are all very interesting issues. The problem is that we can hardly afford to wait before we sort out who should act first.

Allow me to provide two more omens that have recently come to light. The Intergovernmental Panel on Climate Change will soon be reporting, in its fourth assessment report, that as a result of global warming, the oceans' acidification rate is taking place at a much faster pace than originally thought. On the other side of the picture, China's emissions are rising much more rapidly than previously forecast. The International Energy Agency is predicting that China will now be the world's largest greenhouse gas emitter by 2009, a full ten years earlier than it had predicted a few years back.

The situation calls for innovative approaches. One of the most significant events at the conference in Nairobi was the presentation by Sir Nicholas Stern at the second round of the informal dialogue on long-term cooperative action to enhance implementation of the convention. It was significant by what he had to say: that the costs of addressing climate change, which critically must include a robust global carbon market, pale in comparison to the human environmental and economic costs of not taking actions. He also pointed out that deforestation continues to play a massive role in the atmospheric greenhouse gas budget, with close to 20% of our annual emissions being the result of these activities. This is an area that needs to be as much a part of the solution as energy. It was significant by the fact of who was saying it: a pre-eminent economist, formerly the chief economist for the World Bank.

If we are to effectively solve the climate change quandary, the solution lies much beyond the world of environmental negotiators. Most importantly, it lies with the world's financial and investment decision-makers, at all levels, from the community banker in Bangladesh, to the finance policy advisor in Ottawa, to the international broker in London. IISD's late and esteemed senior fellow, Konrad von Moltke, who worked tirelessly in the field of trade, investment, and the environment, would regularly say to me that Kyoto is above all an investment, not an environment treaty. I'm only beginning to appreciate the wisdom of this insight.

That means the scope for addressing climate change lies well beyond the parameters of the framework convention of the Kyoto Protocol. These two instruments are very important vehicles in addressing the climate change threat. We need to appreciate that they represent much more than targets. They establish the international policy architecture for addressing climate change.Talking off line with U.S. and Australian state officials, it is also clear that even if their countries hadn't ratified the treaty, Kyoto definitely operated as a catalyst for those countries to address climate change more seriously than they otherwise would have.

These are significant accomplishments that must be noted and appreciated. That said, we should not fall in the trap of regarding them as the be-all and end-all of addressing climate change. Clearly, they are not. They require the support of a wide range of other international forums and strong national actions.

The recently convened G-8 plus five group, which provides a forum for the G-8 to have discussions on climate change with China, India, South Africa, Brazil, and Mexico outside of the formal framework of the climate change negotiations, is a primary example of what I'm talking about.

Of course, there is also the Asia-Pacific partnership on clean development and climate, which this government has indicated it is interested to join. As a complement to the UN bodies, the APP can be a very positive contribution. Its emphasis on a sector approach, with industry at the table with governments, could provide some useful lessons. We would be very keen to work with the government to ensure that Canada's participation works to broaden and deepen actions that promote development in clean, sustainable directions.

In closing, Mr. Chair, Minister Ambrose in her intervention at Nairobi noted that Kyoto has become a source of division within Canada. Sadly, too often that has been true, but I would argue that the fault for that lies less with the treaty itself and more with the atmosphere of acrimony and recrimination that has existed for quite some time among a range of interest groups within Canada.

[Michael Cleland]

I would agree with you at a level, in principle. I would distinguish my answer from anything to do with Bill C-288, for reasons that are obvious in my testimony.

I agree with you. Governments deal with that. Governments look at environmental externalities. It's one of their jobs to make estimates of what the costs of those externalities are and to ensure that they're effectively priced into economic decisions, usually by regulation.

Are we going to have to push harder on that? Absolutely. Will we ever be able to measure what that externality is? No. It's a political judgment as to whether it is as big as a house or as big as a bread box. We know this one's at least as big as a house and we'd better get going.