Bill C-30 (39th Parliament, 1st Session) Committee on Feb. 27th, 2007

[John Godfrey, Liberal, Don Valley West, ON]

Thank you very much for that helpful correction.

I'd like to explore, perhaps with Monsieur Bertrand and possibly with Mr. Delbeke, the difference in price, currently, between a tonne of carbon dioxide equivalent on the Chicago exchange, which I think is about $3.50 U.S., and the European price, which I understand is about $20 U.S. a tonne. Could I have an explanation of the difference?

And I have a question as to whether the Chicago credits would meet Canadian standards. There does seem to be quite a price spread here.

[Luc Bertrand]

I think the discrepancy in pricing comes from the fact that one is a voluntary system and the other one has a mandatory framework, which of course is the European. When discussing pricing, it's very important, especially when referring to the futures business, which price point we're looking at. Admittedly, normally and as a rule the near-term price, which would be the cash price, will be lower than the far-out price, the forward price.

We're seeing a forward price in Europe of around 18 euros—I guess the trading range on the forward, 2008 price of carbon has been varying between 15 euros and 20 euros—which I think is an interesting indication of what the market is thinking. The cash price or the price per tonne for near-term months is admittedly a lot lower, for understandable reasons. The market has gone through a major readjustment as a result of some miscalculations, though the market is proving to be very efficient in that respect.

But to compare the price of a voluntary system with that of a mandatory system is like comparing, unfortunately, apples and oranges. They're not the same thing.

[John Godfrey, Liberal, Don Valley West, ON]

Mr. Marcu, I notice, if I may interpret your body language, that when Ms. Donnelly talked about a dollar not spent here as a dollar out of our GDP, if it's spent in some other place, you looked a little startled. Also, when it came time for the discussion of the California model, there was a.... Do you have comments on either of those points?

[Andrei Marcu]

You have to remember, Mr. Godfrey, that I am not a trader by background. I am an electrician, so I come from an industry background. This trading thing is relatively new to me. However, this much I know: we trade globally and we don't make everything in Canada. We are better at doing certain things and we sell them, and we're not as good at other things and we buy them. It's a global system. We cannot be part of the global energy system of trading.

By the way, the price of oil is not set between London and Calgary; it's a global price for oil. I'm a little bit puzzled by that interpretation.

In terms of Governor Schwarzenegger and this California-Massachusetts-Ontario-Canada connection, I remember Governor Schwarzenegger, who is very difficult to miss, sitting with Tony Blair and talking about a California-to-U.K. or -EU linking. I remember that the northeast is all part of RGGI. I remember that there are five governors who announced yesterday that they will have a western governors emission trading cap-and-trade system. So I'm a bit puzzled that we would try to use California and the northeast states as an example.

Let me conclude on one thing: we have never said that emissions trading is the only bullet. It's part of a toolbox, and that toolbox will apply to certain sectors of the economy, while other sectors have better tools. I want to make that very clear. We are very responsible and we understand that very well.

[The Chair, Conservative, Laurie Hawn]

Thank you.

We have time for one more. Mr. Paradis has deferred to Mr. Warawa, so it's Mr. Warawa for five minutes, please.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

This is a question again for Ms. Donnelly. We'll be giving you the last word on this.

You've made it very clear that Canada is in a situation in trading where the EU has a very distinct advantage over Canada. My question, though, is what is available on the market. When Mr. Bramley was here, he said that there were approximately 150 tonnes of CDM credits available. You went on to share that taking out the hot air quota substantially reduces it, by...I think the figure you used was 91 megatonnes. Then you were saying it would be unrealistic to expect that Canada would be able to buy one half of all that's available on the market, when you have other countries that may be looking at this market. Then you said that one half of what is available is also this illegal substance, HCFC-22.

I did some research and found that HFC-23 is a byproduct of HCHC--22, and it's even worse; it's almost 12,000 times as potent as carbon dioxide. And this is what is being proposed: that if we don't buy hot air, we're going to ask Canada to buy half of that, which is unrealistic, and half of it is to buy an illegal substance.

Could you comment on that?

[Aldyen Donnelly]

To get to your point, the credits are issued to the HCFC-22 manufacturers because they're combusting HFC-23, instead of discharging it to the atmosphere. So that's how the credit is derived, but that creates a subsidy for the manufacturer of HFC-22, which is the substance that is considered so damaging. I can write that up to explain it to you.

I went to the UN FCCC site this morning and went through the projects. If we said we're not going to buy freon tonnes, which I would recommend, and we place no other criteria on our purchasing—so we didn't look for Canadian content, we bought from the hog producers, who I'm not comfortable buying from—then, as of today, the maximum potential supply we could pick up on that market as far as I can tell is about 20 million tonnes, or 4 million tonnes a year.

So for us to get more than 5 million tonnes a year out of the marketplace, we'd have to get our little boots on and be working really, really hard to develop a bunch of new projects in the international marketplace. The supply that is not yet already attached to a European or Japanese progress report is not large right now.

[Mark Warawa, Conservative, Langley, BC]

And you still feel that Canada should be negotiating a fairer quota?

[Aldyen Donnelly]

I think in five years' time, people are going to wonder why we thought we would be negotiating international quota assignments at a UN table. That's like saying we're all going to go to a table and agree not to produce any more cars until we agree to an international quota allocation that our competitors agree to.

I think the problem is the structure. I think if we went to the table and said we should all agree to some new product standards, greenhouse gas emission fuel cycle product standards for electricity, natural gas, gasoline, and diesel, and we should sign a treaty around our commitment to jointly implement those product standards, then we could all make a very robust derivatives market out of those commitments, and now we have a fair and free international treaty.

[Mark Warawa, Conservative, Langley, BC]

Thank you.

[The Chair, Conservative, Laurie Hawn]

We thank all the witnesses very much for your time, your input. It was certainly interesting. We didn't all agree, and that's what life is about, coming to compromise. So thanks very much.

This meeting is adjourned.