What would be the result of such a framework? TransAlta believes it could achieve the government's proposed target of a 65% reduction in levels of greenhouse gas emissions by 2050. We believe we could achieve similar levels of sulphur dioxide and NOx emission reductions in the same timeframe. These are tremendous levels of reduction, given the growing demand for electricity in the economy.
Do we know exactly today how we can get there? The answer is no, but we trust we can find a way.
An outstanding question is, what will this cost? That will be the key issue in determining one of two outcomes: either (a) an environment in which, with punitive sanctions on emitters, yearly compliance is a struggle and minimum efforts are the norm; or (b) an environment where innovation is encouraged with accelerating reductions, and where big-step changes in emissions are possible.
Depending on the ultimate targets established, TransAlta has estimated that the cost of fossil-fired electricity generation in Canada could rise by several percent. In some jurisdictions these costs will not easily be passed to consumers, and companies could face large financial burdens. In the near term, if compliance requirements are stiff, cashflow and market valuation will become real concerns. It becomes imperative to design a system with the full understanding of its cost implications.
Compliance cost for industry will be a function of two factors: depth of target and the availability of compliance mechanisms. It is our strong advice to this committee that the setting of emissions targets attempts to mirror the fundamental realities of each industrial sector.
Electricity is different. For electricity, it would look like a slow start but big finish. That means a ramp-up, starting with modest and achievable short-term targets, and finding a way to direct capital where it will have the biggest, most sustained effect over time.
Ours is a long-term business, and we are good at finding long-term solutions. We fully understand the environmental urgency. However, we should not let short-horizon, urgent strategies undermine much more substantial longer-term approaches to make the real big gains.
What does this mean in the context of Bill C-30? We believe that the bill should establish the framework for subsequent targets and regulations that focus on measures that are measured in progressive emission reductions. Long-term, large, and sustained reductions must be the key. The challenge is to start now, start sustainably, learn by doing, and use our financial resources in the most effective manner.
In conclusion, the key issue for electricity is one of timing. Our objective is to manage through the near term in a way that allows us to finance fundamental technology change in the long haul, while staying commercial in the marketplace.
Thank you very much.