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

[An hon. member]

Hear, hear.

[The Chair, Conservative, Laurie Hawn]

Thank you, Ms. Donnelly.

Ms. Arroyo, I know your time is short, so you can govern yourself accordingly in terms of when you have to go. Thank you in advance.

Mr. Godfrey, for five minutes, please.

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

I'd like to direct this question to you, Ms. Comeau. Would you care to comment on the last comment by Aldyen Donnelly?

[Vicki Arroyo]

I confess to not understanding the comments with respect to emissions trading in California. Clearly there was just an announcement yesterday of a five-state initiative in that regard, so I think the issue of emissions trading is clearly one Governor Schwarzenegger is moving forward on.

With respect to HCFC-22 and the HCFCs as a result, frankly, those are very powerful greenhouse gas pollutants, and the destruction of them is a very powerful contribution in the near term. Their destruction is just as legitimate and frankly very verifiable reduction from the market perspective, so I don't see why we shouldn't pursue it. It is, in fact, a short-term opportunity, and given the capacity to quantify them and their significant greenhouse gas potential, we should be pursuing that.

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

Mr. Delbeke, or anybody actually, there are 168 countries and three buyers. Is that true?

[Jos Delbeke]

I was also surprised by that statement in the following sense. We see that within the EU, there are lots of buyers and lots of sellers. We should not be overly concentrated on who, as a country, is buying or selling. The point made before on cost effectiveness is that companies can sell and buy and look for the lowest-cost opportunity.

On the numbers for the EU that were quoted, the EU has been reducing its emissions in absolute terms today, and is continuing to do that up to minus 8% by 2012, and up to minus 20% in 2020. The commitment is there and currently our emissions already have been brought down below the emissions that we had before.

If I can just take the opportunity, Chairman, on the HFC-23 project, we in the EU made a strong distinction between, on the one hand, the refurbishing of existing plants in China—which is really worth doing, as these are old plants—and new plants with this type of equipment. We have to have state-of-the-art technology in the new investments, and I think that makes a really different case for refurbishing instead of new plants when it comes to CDM projects.

Thank you.

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

Mr. Marcu.

[Andrei Marcu]

Yes, I would complement what Mr. Delbeke says, that this is governed by all plans. It is a very powerful greenhouse gas, and it is not an illegal substance. It is governed by the Montreal Protocol. It is not an illegal substance, and as such it's not floating out there in the way that seems to be implied.

[A voice]

Under Canadian law—

[Andrei Marcu]

If I may complete this, Mr. Chairman....

If you look at some of the slides I provided you with, you can see that there are a number of governments and companies that are purchasing this. I will also point out to you that as a matter of fact, most of the money coming into the market at this stage.... We're talking about $3 billion from Morgan Stanley, Goldman Sachs. There is a lot of U.S. money coming into this market right now. So there are not three buyers; there's Endesa, RWE, the Government of Spain, the European Carbon Fund, the World Bank.... There is a large number of buyers in this market.

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

Is Mr. Delbeke still there?

Can you give us an estimate, Mr. Delbeke, of about what proportion of the EU's total 2008-2012 Kyoto commitment will be met through the purchase of CDM or JI, roughly?

[Jos Delbeke]

We have to see, of course, what the market is coming to, but we expect that some 80% of the changes are going to happen among European companies within the EU. That's what we currently expect.

[The Chair, Conservative, Laurie Hawn]

We'll go to Mr. Jean for five, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair.

Very quickly, to Mr. Marcu, I understand that some of your members are not unanimous in relation to your position on trading. Is that fair to say--your Canadian members?

[Andrei Marcu]

Mr. Jean, this has been approved and consulted in a unanimous way with the members of the Canadian working group of IETA, which includes Shell Canada, Nexen, TCPL--Trans-Canada PipeLines, Ontario Power, Alcan, Holcim, St. Lawrence Cement, Lafarge.... I can go on and on.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

In particular, Suncor and Ontario Power don't support your position on trading, and others. It's not a unanimous position.

[Andrei Marcu]

I would not agree with that, Mr. Jean.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Ms. Donnelly, I would like to hear more. You were going to talk a little bit about the Montreal Protocol and the emissions that are actually illegal in this country.

[Aldyen Donnelly]

Under the Montreal Protocol, the developed nations agreed to phase out production of freon for refrigerant use by 2010. We put in declining allocations: nobody can make more this year than last year. Canada's imports and manufacture of freon actually stopped in 2002, though they didn't need to stop until 2010.

Today 50% of the freon that's made in the world is made in the United States of America, and the United States, under its commitment to the Kyoto Protocol, has to shut down all of that production capacity by 2010.

For the three years leading up to when the CDM-JI board issued credits to the Asian manufacturers, in fact, the newer, long-term refrigerant substitutes had taken hold in the market, and world freon sales were diving. When the CDM-JI board--and I don't consider this a conspiracy--decided to issue credits to freon swing plant owners in Asia, the swing plant owners were making CFCs and were either going to shut down, make new refrigerants, sustainable ones, or switch over to freon.

You can look up the reports. The largest swing plant owners in Asia, since they started selling CERs, have tripled their profits. They make $2 on CER sales for every $1 they make on freon sales. The U.S. EPA says that greenhouse gas emissions will be three billion higher over the next ten years because of that decision.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I understand perfectly, and your position, quite frankly, is very refreshing.

We've heard about a domestic trading scheme and an international trading scheme. I'm interested in the advantages and disadvantages of a domestic, a continental, and an international trading scheme. From my perspective, and from what I've heard from some witnesses, it seems that a domestic one, although it possibly would not allow for a large enough market, would indeed drive technology and results much quicker here in Canada.

I would like to hear what your position is on all three. By continental, I mean Mexico, the United States, and Canada, which may be large enough for it.

[Aldyen Donnelly]

I agree with that, but, again, in spite of suggestions otherwise, all I'm recommending is that we do exactly what California has signed into law. So if you want my draft or Bill C-30, go pick up Bill AB 32 and change some words.

I'm recommending something that could functionally be a Canada-California-New Mexico-Massachusetts market starting on January 1, 2009. But if we knew we were doing that, we'd all start trading into it yesterday afternoon.

A quota market is a supply management system. It's a quota market when you create a market in which what you trade is quota. You have all of the problems you have with any international quota market. Governments issue quota to whom they want, and you have to decide whether or not you like somebody's quota and don't like somebody else's quota.

If we go to product standards, everybody accounts for their emissions in the nation in which the energy is end-used, and every credit's a real credit. California's going to do it, and all of us who sell into California are going to have to comply with their law anyway. Let's just create a California-Canada-New Mexico-Washington market to start and then take it from there.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Would anybody else like to comment? I'm looking for some advantages and disadvantages on domestic, continental, and international trading schemes.

Mr. Bertrand.

[Luc Bertrand]

It's not a question of the advantages and disadvantages; it is that this is a global market whether we like it or not. If we do not structure a marketplace or allow a marketplace to develop where Canadian emitters are allowed to have a product line that is fungible with what else goes on in the world, we're going to isolate them.

To me, ultimately, the best solution is that we adopt protocols that are as standardized as possible with those of other nations in terms of defining the protocols and defining the nature of these contracts, the nature of the carbon dioxide that we want to reduce.

My concern from a markets perspective is that if we don't move forward, we're going to push the market elsewhere, and everybody loses then. So it's not a question of whether we like it or not; it's what's going to happen that is more the issue, as far as I'm concerned.

[The Chair, Conservative, Laurie Hawn]

Okay. We need to move on.

Mr. Bigras, for five minutes, please.

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

Thank you, Mr. Chair.

I'd like to go back to the European model. When I read the documentation on that model and on the carbon market, I quickly realized that the market was highly fragmented. There are six exchange platforms, as a result of which the exchanges offer very different products. Some exchanges offer cash contracts, others derivative contracts. So we can only observe that the European market is highly fragmented. However, when you talk about fragmentation, you're inevitably talking about increased costs.

What type of model do you believe we should favour in Canada? Would it be a model focusing on greater exchange concentration or a model similar to that adopted in Europe? Despite major European potential, they say the market in Europe is very small. Does this require specialization by exchanges or greater concentration?

I don't know whom to ask my question.