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

[The Chair, Conservative, Laurie Hawn]

Thank you.

Mr. Cullen.

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

Thank you, Mr. Chair.

We've been looking at this for a while, and it's of interest if it leads to a polluter-pays principle. One of the fundamentals for us, particularly with the large final emitters, the large polluters in this country, is that a line item will appear in their accounting. They can account for wages, health benefits, and new investment in technologies, but at this point in our economic structure there's no accounting for pollution. There's a cost, and that cost is meant to be dispersed and the burden borne by society as a whole. That's not necessarily fair.

There's one question that was raised by some of the Conservative members, and I'd appreciate an answer from the Liberal movers. It's on the notion of whether this amendment would encourage and allow the creation of a cap and trade system. It's interesting that it came from the Conservatives because I haven't heard them endorse a cap and trade system yet. In order to have a cap and trade you need to have a cap. That means you need to have an absolute limit to what a company can produce, not an intensity-based limit, because that fluctuates. There's no real way to account for that under a cap and trade system; you need an absolute cap.

If the Conservatives have come on to that stream, I encourage it. So that question needs to be clarified for us.

There are two last things. The purpose of this committee was to bring forward new and substantive ideas to the challenge we face as a country around climate change—new ways to generate investment. It's important to us that companies going over their caps are able to draw down on these funds and make the investments right there domestically. The Conservatives, New Democrats, Liberals, and Bloc have all supported domestic investment. In order to spur that investment and encourage those changes we need to have both a carrot and a stick approach. That has worked for us in the past when making changes to our industrial group.

Finally, I'd like to move a friendly amendment that I think would have a greater and far-reaching impact on this. I'll read it into the record now if that's all right. We would add a portion to proposed paragraph 63.1(2)(h). I'll read it in its entirety and we can make copies available to you. It reads:

where funds are transferred out of the green investment account of a large industrial emitter into a green industrial fund, the mandatory expenditure by the agency of those funds for the purpose of furthering the progress of projects to reduce the greenhouse gas emissions in Canada,

This is the new portion:

a target of 50% of which will go into a building retrofit revolving fund program, the remaining 50% to be invested in the greenhouse gas reduction projects

Then it goes on:

with a minimum of 80% of the funds to be spent on projects in the province or territory in which the large industrial emitter is principally situated.

Then proposed subparagraph 63.1(2)(h)(i) would read:

Funds shall be allocated in a manner that maximizes verifiable GHG emission reductions.

First and foremost, this money goes to the companies that contributed to the fund. There's the two-year window in which they're allowed to draw down. Once that large polluter has decided to not access the funds—which would be a curious choice because it would be their money—a portion of them would go into this revolving fund.

This is a model that has been used successfully in conjunction with municipal and federal governments. The municipal green investment fund was one such version. The nature of the revolving fund is really important because it allows seed money to be created and the money to be generated over and over again and to have huge effects. The green municipal funds have been used time and time again to encourage projects that have helped communities right across this country. I suggest that communities in all of our ridings, even of members sitting around the table, have accessed such a revolving fund.

So the amendment we're moving would unleash a little more of the potential of what Canadians deem possible.

We have all heard petitions from various municipal councillors and just from Canadians working on this, that the access to funding for some of their progressive projects to reduce the burden on taxpayers—for example, on energy costs—is there and has been waiting in a holding pattern for too long. This would allow those projects to go ahead.

So I'd be curious as to how that would be deemed by the mover. If this would be deemed as a friendly amendment, perhaps we could go ahead and make that change.

[The Chair, Conservative, Laurie Hawn]

Mr. Jean is next up.

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

I do have some concerns, and quite frankly, Mr. Cullen, that was not a bad start. But my first concern is in relation to the two-year window. Just having been in this place for three years now, I see how slowly government moves, and I'm wondering about approved projects and other scenarios. Most large final emitters have 25-year forecasts, and that's their business model. They don't allocate funds for some three or four years, depending on the project. They do cost analysis and stuff. So I think the two-year window is certainly too short.

As well, I'm wondering where the Liberals came up with the amount of 80% of the funds to be spent in projects within an area. First of all, why would it be 80%? Why would it not be 100%? Secondly, why would there be a “territorial-provincial” approach instead of a “sector” approach? If they put the money in from the auto sector, why wouldn't it be spent back on the auto sector and give them an opportunity to forecast that over a period of five or six years? So those are my questions in relation to both.

[The Chair, Conservative, Laurie Hawn]

Mr. Godfrey.

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

Let me take those in sequence.

Let me begin with the fact that we accept the NDP's friendly amendment.

Secondly, the question raised by Mr. Cullen about how this would fit in with a cap and trade system is answered to a degree in our amendment L-20, which anticipates the creation of a greenhouse gas emissions trading system. Obviously, by setting a price for the carbon budget, you are in effect putting in place a cap. It is anticipated in L-20 that a company may choose to participate in a carbon emissions scheme so that it reduces the amount of money it would have to invest in the green investment bank. In other words, the first thing it might wish to do is some domestic carbon trading or some domestic offsets. It's only after it has done that that it will move into the position where it might be liable to make some of these investments in the green investment bank.

Regarding the question about the two-year period, it is simply that during that two-year period the company would have to designate how it was proposing to spend the money on its investment. It would not have to have completed the investment or to necessarily have made the investment. It just has to say what it intends to allocate—I think the word is “allocate”—to an approved project.

Mr. Jean asked about the 80%. Quite simply, the criticism has often been raised in various parts of the country that there would be a wholesale transfer of money from one part of the country, by whatever mechanism, to another part. We recognize that that was a valid criticism, and in order to allay that criticism, we would want money reinvested in the province of origin, in anticipation of the argument that one part of the country was financing the rest of the country. That would seem unfair to that part of the country. So we anticipated that.

The final argument was made by the parliamentary secretary, who described this as a “carbon tax” and a “tax grab” and “buying your way out”. I don't understand how the principle of what we're doing here varies in any way from what Premier Stelmach himself has proposed in the province of Alberta.

So every criticism you make of this plan, that Mr. Warawa makes of the plan, could equally be applied to Premier Stelmach. What we're talking about here is not the principle, but the degree. So I would caution him, in his criticism, to take that into consideration.

Thank you, Mr. Chair.

[The Chair, Conservative, Laurie Hawn]

We've had a friendly amendment proposed. We haven't heard whether you have accepted that.

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

That was my first point. I accept the friendly amendment. That was my opening.

[The Chair, Conservative, Laurie Hawn]

I'm sorry. Okay.

Is there further debate?

Mr. Jean.

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

I'm wondering whether or not—Firstly, he didn't actually answer the question as to why “provincial and territorial” instead of “per sector”; that's the first thing. We all share the same shed, the same air. If it's going to be invested, if it's going to be taken from one particular sector that needs to improve its greenhouse gas efficiency, why is it not being reinvested in that instead of reinvested somewhere else? That's the first question. This does not make any logical sense to me, because we all share the same air.

I wonder whether he would consider a friendly amendment for 100% of the funds to stay in the province, if he's not prepared to look at a per sector basis, and whether or not he would look at a four-year period for an allocation instead of a two-year period, because I just do not believe, based upon my experience—and I would assume his, since he's been here longer than I—that government would allocate or do anything within a two-year period. The application process itself will take that long, in my opinion.

So I'd like to hear why per province or territory instead of per sector, and whether he would consider those two amendments.

[The Chair, Conservative, Laurie Hawn]

While Mr. Godfrey's thinking about that, Mr. Cullen has an intervention.

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

There are two things. One is about a company's ability to draw down from that account. For some of these projects, in terms of reducing the amount of greenhouse gas emissions coming out of their site, there are two things. One is, we have long imagined that once the signals are sent, there will be broad sectoral approaches to these things. It's not going to be one company marching out alone while the other ones don't, because they'll all be working under the same rules, particularly if they're applied fairly.

To that point, there have been some, and we've heard from some of these companies already at this committee, who have done much of the legwork already in terms of research as to what's feasible, what types of measures cost what. And they've done much of the engineering. The reason we're comfortable with the two-year window is that in terms of launching those projects, there are feasibility studies, and the engineering beyond a two-year scope is not really required.

To do a feasibility study or an engineering scope on a project—Companies move at rates much quicker than this, and we've heard that. To simply design the project over a two-year concept window—If they're going much beyond that, their shareholders are going to have some questions for them. But that's for them to manage. There are companies that have been doing that without any signals put so far. They have been doing the engineering and designing and talking about things such as sequestration. There have been feasibility projects, and this government has made lots of laudable claims about just that project alone—how applicable sequestration is and what the costs per tonne are. A lot of that work's been done.

In terms of the bank being drawn on by other communities and there being a lag period, we very much imagine that the communities would be coming forward with concepts and projects that are already on their books. There probably isn't a municipality of any size in this country that does not have right now, at least in concept, if not already fleshed out in the development stage, projects they deem to be worthwhile for the environment in terms of greenhouse gas mitigation. We think there'd be an oversubscription to that particular portion.

In terms of companies' responses, the companies will always say the things take longer; they always will. This is not necessarily their responsibility. They're not in the business of reducing greenhouse gas emissions; it's not their job. Making this part of their job is what we think is incumbent upon government.

[The Chair, Conservative, Laurie Hawn]

Monsieur Bigras.

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

Thank you, Mr. Chairman.

I am having a hard time understanding Mr. Jean's arguments. On the one hand, the western provinces, including Alberta, have guaranteed that there will be no transfer of money from one part of the country to the other. This very strong part of the Liberal motion should convince the representatives of some of the westernmost provinces. There is, therefore, a guarantee that these funds will be directly reinvested. Moreover, representatives of some of the large industrial sectors told us, during our hearings on Bill C-30, that the technology does exist, particularly for capturing and sequestration, but it will have to be funded.

This amendment would free up enough capital to provide for a rapid implementation of existing technologies. I trust the industry and large emitters to use their account to bring forward projects that will improve their efficiency in terms of greenhouse gas reduction.

If the large emitters don't come forward with a proposal, it is clear that these amounts will go directly to a fund that could be used to reduce greenhouse gas emissions. First, this proposal guarantees the large emitters the funding that will be available as long as they are proactive. Second, large industrial emitters, particularly in Alberta, will have a guarantee that they can keep the capital, which is required for investment. Third, we have to trust the large industrial sectors when it comes to the projects.

[The Chair, Conservative, Laurie Hawn]

Mr. Godfrey, there was a proposal of a friendly amendment. Could we have your comment?

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

Here's my reaction to the three suggestions made by Mr. Jean.

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

One was a question.

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

A question. All right.

The first point was the provincial versus sectoral approach. Don't forget that what we're talking about is the residual, the amounts that would not have been invested or allocated or applied for within the first two years. Our frank anticipation is that any commercial entity worth its salt would have got its application in to get its money back, so it's not willingly going to surrender the money. So there will not be a large balance in the account.

Secondly, our view was—and again, I think Monsieur Bigras made the point very well in arguing for a territorial approach to the balance of the funds—it makes a lot of sense to avoid the perception that one part of the country is being drained for another.

I think in practical terms if, for whatever set of reasons, a company fails to take up its money, it may well be that another company in the same province in the same line of work will find better use for that money than the original company—which strikes me as something the board of directors of the surrendering company might want to address.

So I don't know that it's a real problem, but we were trying to deal with the perception that we were draining one part for the other.

The second point was, why not 100%? You reversed the argument and said why not 100%? You should remember that, in effect, we have moved somewhat in your direction with the NDP friendly amendment, which says that a target of 50% might be used for retrofitting projects and that retrofitting is not limited to the particular province where the source of the money comes from. So in some ways we have recognized Mr. Jean's point—perhaps not in a way you anticipated or wanted—that there is a way in which the money, should there be any in the account, after a two-year period could go across the country for retrofitting purposes, while still leaving the balance of that money, to the degree of 80%, to be reinvested in the territory.

And then on the final point, which has to do with four years versus two years, I have a couple of points. First of all, the number of large final emitters in this country is not limitless: there are 700 of them. It's not like Europe, where there were 11,000 and we didn't have good data. So we're actually in a fairly controlled universe of 700 entities that produce 50% of greenhouse gas emissions in the country.

Secondly, we think that any company worth its salt does have plans on the books to expedite or hurry along the investments that will reduce greenhouse gases.

I think what we're trying to do here through all of these amendments, particularly this one, is to create a sense of urgency. I would remind Mr. Jean that industrial companies, when they are put up against a real challenge, as in World War II, for example, when there was a shortage of artificial rubber because Malaysia had been captured.... At that time, we mandated a company called Polysar Corporation in Sarnia, Ontario, to develop artificial rubber from zero to 100, and they did it in 18 months.

So when Canadian companies are given that sense of mission and urgency, and the right kinds of financial incentives, as would be understood in the creation of a green investment bank of Canada, we think they are capable of moving beyond a leisurely pace to an urgent pace. We think the situation of climate change and the threat of global warming are such that this is a very good reason to be urgent—and two years will do fine.

[The Chair, Conservative, Laurie Hawn]

Mr. Jean.

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

Mr. Chair, I just have a point.

Would you consider the word “application” instead of “allocation”, because an allocation requires a positive step by bureaucrats to get the job done for an approved project? In this particular case, you're suggesting that the money goes into a fund and that within two years they have to be approved for that project.

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

Can I hold off on that for a—

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

Certainly, but if the industry made an application for it, at least they would be showing good faith and best efforts towards that, instead of, for instance, an “allocation”.

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

There is a sort of sequence of events, which is spelled out in the proposal. Under proposed paragraph 63.1(2)(d) they make a proposal for how they are planning to do their reduction. That proposal is then evaluated by this agency.

This agency is not an arm of government. It is an independent agency, which may be in fact an existing agency. It could be a private sector agency. We do not stipulate the exact nature of the agency, because that's the purpose of the consultations.

What we think is that we can complete the cycle of submission and evaluation within a two-year period. I think—and this is basically the proposition here—that there will be a sense of urgency because money is involved, and that the whole cycle of submission, approval, and allocation can take place within two years.

[The Chair, Conservative, Laurie Hawn]

Is there further debate?

Mr. Warawa.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

It has been an interesting debate today on the Liberals' amendment, but the fact remains that the green investment bank would be a core element of the Liberals' proposed carbon budget, and a tax is a tax.

I just want to read into the record the history of the Liberals' position on a carbon tax. In June 2006, deputy leader—then Liberal leadership candidate—Michael Ignatieff said, “But we also have got to have popular, practical, believable policies that may involve some form of carbon tax.” That was on June 10, 2006.

Then a few months later, in September 2006, Stéphane Dion said—this is quoted from his release of September 5, 2006—on carbon markets versus carbon tax:

A carbon tax is less effective than a carbon market at reducing emissions. Some of my opponents for the Liberal leadership have suggested that a carbon tax would be the most effective measure to curb climate pollution. This is simply bad policy.

Then in February 2007 Mr. Dion “said he opposed the idea of a carbon tax”. That was on February 26, 2007.

On March 1, 2007, Mr. McGuinty is quoted in the Globe and Mail as saying—He took part in the news conference by Friends of the Earth, and he was quoted as praising the proposal. In the Globe and Mail of March 1, 2007, he says that “Every senior economist and expert who's appeared before the committee [that is studying climate change legislation] has spoken very much in favour of a carbon tax approach.” That was in the Globe and Mail of March 1, 2007.

The next day the Liberal leader, Stéphane Dion, was quoted in the Globe and Mail:

'We have a set of possibilities and it's a possibility," he told reporters when asked whether he is considering supporting such a tax.

Then four days later, regarding a carbon tax the Globe and Mail of March 6, 2007, said:

Liberal leader Stephane Dion will not call for a carbon tax when he releases his party's new environmental platform in the coming days. Mr. Dion's [spokesman]...insists the leader has been clear on this issue.

Yet what we have before us today is the mother of all carbon taxes. A tax is a tax. Our government is committed by mandatory regulation across all sectors of industry to reduce greenhouse gas emissions. What's being proposed here is a carbon tax—billions of dollars of tax, collected and yet achieving nothing.

The Liberal record on the environment, Mr. Chairman, after 13 years is 35% above the target. Canadians want action. They want reduced greenhouse gas emissions, and establishing a carbon tax across the industry does not require reductions in greenhouse gas emissions.

It's not the way to go, and we don't support it, Mr. Chair.