I hope all of you have read the “Summary for Policymakers”, published last week by the IPCC, which Mr. Villeneuve has spoken about. It certainly provides a profoundly disturbing overview of our current trajectory.
Mr. Villeneuve has also gone through the basic facts about Canada's performance in attempting to reduce greenhouse gas emissions, so I won't repeat what Mr. Villeneuve has said.
In essence, however, the task before us is one of substantial magnitude. Canada's emissions in 1990 were 599 million tonnes. Canada's Kyoto commitment to reduce to 6% below that level by 2012, as Mr. Villeneuve has said, is roughly a 300-million tonne reduction from projected levels. Our greenhouse gas emissions have instead risen by upwards of 27% between 1990 and 2004.
The first major point I want to make to the committee this morning is that we need to recognize that Canada cannot realistically meet our initial Kyoto target of 6% below 1990 levels by 2012.
Under Kyoto, there are basically two ways of meeting our target. Domestic reductions is one; purchasing international credits is the other.
To meet our Kyoto target through domestic reduction in emissions, Canada would need to reduce our emissions by about 7% per year for each of the next five years, reversing a trend of growth of about 2% per year.
To achieve that kind of a target through domestic reductions would require a rate of emissions decline unmatched by any modern nation in the history of the world, except those that have suffered economic collapse, such as Russia and the Ukraine.
The best example we have to emulate is Japan, which in the wake of the OPEC oil crisis became the world's most energy efficient nation. They did not come close to reducing their dependence on fossil fuels by 7% a year.
The second route available to us under Kyoto to fulfil our 1990 commitment of 6% is to purchase large volumes of international credits. While I support the concept of international credits where those Canadian investments would contribute to the development of renewable or zero-emission energy in developing nations, those kinds of credits are simply not available in the short term in anywhere near the volume that Canada would require.
The only credits available at this point in time in large volumes are hot air from countries like Russia and the Ukraine, which have endured economic collapse. Those hot air credits would be a bad investment for Canada, sending billions of dollars abroad for zero environmental benefit.
We need to come to terms with the fact that we will not meet our initial Kyoto target. We have denied, debated, and dithered for too long. But that does not mean turning our back on the Kyoto Protocol. The agreement has provisions for nations that missed their initial targets. Penalties will be applied to reduction targets in subsequent periods.
The Kyoto Protocol needs to be broadened, deepened, and strengthened, and Canada needs to play a constructive role in those international negotiations. But that is a subject for another day.
I want to mention the current government's proposal to use intensity-based targets. Intensity-based targets are inherently a fraudulent approach to climate change. They simply endorse and entrench the status quo, as business is consistently improving the efficiency with which they produce goods and services. The problem with an intensity-based approach is simply that it allows total emissions to continue rising, and total emissions are what we need to keep our eye on.
If you actually consider Canada's record over the past 17 years since 1990, which we all agree is not a good one on climate change, if you look at that through the lens of intensity, then it actually looks pretty good. GDP, which I'll use as a proxy for total economic output, went up 47% in Canada between 1990 and 2004. Canada's greenhouse gas emissions, as you know, rose 27% between 1990 and 2004.
It represents a 43% improvement in emissions intensity, which makes it sound like Canada is doing great and makes it look like the Liberal record on climate change is great. It's obviously not the case, and it underscores the importance of moving to absolute emissions targets immediately and not falling into the trap of intensity-based targets.
The real goal in terms of absolute emissions reductions is to achieve reductions of at least in the order of 80% by the middle of this century, by 2050. That goal should be explicitly placed in Bill C-30, and the majority of my comments from now on will address the question of how Bill C-30 can assist Canada in meeting that goal.
The year 2050 may seem like a long way away, but the only way we can achieve a goal of 80% reduction is if we start laying the foundation now with good policies. When I say good policies, I mean policies that meet three basic tests: effectiveness, efficiency, and equity.
There is abundant evidence that the policies employed by the Canadian government to this point, relying largely on voluntary measures and subsidies, fail the effectiveness test. They have not produced significant reductions in emissions, so we must use stronger approaches, including economic disincentives and regulations, which leads me directly to Bill C-30.
Environmental laws like the Canadian Environmental Protection Act are like the toolbox, and then regulations, programs, fiscal instruments, etc., are the tools that actually do the work. When I read through Bill C-30, I see precious little in terms of new tools for addressing climate change. I'm left scratching my head about what it actually adds to the Canadian Environmental Protection Act, and I'm concerned that, for minimal benefits, the Clean Air Act creates substantial risks. As you know, greenhouse gases are already on the list of toxic substances, also known as schedule 1 of CEPA. This gives the Government of Canada fairly broad powers already to regulate greenhouse gas emissions under part 5 of the act.
The proposed clean air provisions, creating a new part 5.1 of CEPA dealing with air pollutants and greenhouse gases, by and large, simply duplicate the existing provisions of part 5. This not only wastes reams of paper, but in my opinion could pose a threat to the constitutional underpinnings of the Canadian Environmental Protection Act. Most of the changes, therefore, are not only unnecessary but undesirable.
I ask you, as you conduct your review of Bill C-30, to ask yourselves this question: What does this add to the Canadian Environmental Protection Act as it already exists? If the answer is nothing, then strike out the offending clauses.
There is one specific amendment that does need to be made to CEPA to add another critical tool to the toolkit, and that is specifically adding to the list of economic instruments authorized under part 11 of CEPA. The amendment I'm recommending is to authorize the federal government to use environmental taxes, specifically a carbon tax. The majority of experts and economists agree that the most effective and efficient means of addressing the market's failure to internalize greenhouse gas emissions is a carbon tax, a tax on the sale of fossil fuels based on their carbon content.
A tax that starts at a modest rate and increases gradually and predictably over time can establish incentives throughout the entire Canadian economy to reduce carbon dioxide emissions with minimal disruption to the economy. A carbon tax offers an opportunity to shift taxes away from activities that are good for society, like labour and investment, and shift those taxes onto activities that pose risks to society, like carbon dioxide emissions and the use of toxic chemicals.
Supporters of a carbon tax to address global warming are plentiful and span the political spectrum. Here are a handful of quick examples: Al Gore; Alan Greenspan, former chairman of the U.S. Federal Reserve Board; Joseph Stiglitz, Nobel Prize winner and former chief economist at the World Bank; James Rogers, chairman and CEO of Duke Energy; Nicholas Stern, author of the most comprehensive look at the economics of climate change on behalf of the U.K. government. There are some even more surprising proponents of a carbon tax: American Enterprise Institute for Public Policy Research, a right-wing think tank; and last but not least, the Canadian public. A recent survey from Ipsos Reid shows that a majority of Canadians are favourable to a carbon tax, and, somewhat remarkably, Albertans are more favourable than most Canadians.
Carbon taxes offer numerous advantages. I'll list them quickly here, and I'm happy to answer questions about the details. Carbon taxes are comprehensive. They cover the entire economy. They are widely regarded as the most efficient policy approach. They're transparent. They're administratively simple and they're less likely to cause energy price volatility than a cap and trade system. As well, the revenues generated by a carbon tax could be returned to the public in various ways to ensure the tax is not a new tax but is revenue neutral. Finally, carbon taxes have a proven track record of success in Europe. In the brief that I will submit to you later this week, I'll include some specific recommendations for amendments to the Canadian Environmental Protection Act to authorize the use of environmental taxes such as a carbon tax.
The two main objections that are often raised to carbon taxes are their regressive nature, regarding the fact that lower-income households spend a larger proportion of their income on energy. That can be addressed in the way the tax is designed.
The other objection is on grounds of competitiveness. I note that the four top nations in the World Economic Forum's rankings of economic competitiveness this year have carbon taxes, and all of those nations ranked ahead of Canada on the competitiveness scale.
Norway is perhaps the most instructive case from a Canadian perspective, because Norway is a major oil and gas producer. Norway implemented a carbon tax in the early 1990s and has seen its economy grow by roughly the same amount as Canada's, but Norway's greenhouse gas emissions are up only 4%.
Interestingly, the imposition of a carbon tax in Norway contributed to the development of new carbon capture and storage technology, also known as carbon sequestration. Norwegian natural gas producers are capturing carbon dioxide from Wales and the North Sea and re-injecting it into deep saline aquifers at a rate of millions of tonnes annually, saving themselves roughly $150,000 a day in Norwegian carbon taxes.
I'm running out of time, so I want to make several other brief comments. I know that a cap and trade system for large final emitters is under consideration. Although those have been successful in the United States in dealing with acid rain, you need to recognize that the European cap and trade system is a mess, because governments allocated more permits than emissions. So those permits are fast becoming worthless.
One of the world's leading economists in the field of climate policy, Professor William Nordhaus of Yale University, wrote that “cheating will probably be pandemic in an emissions-trading system that involves large sums of money.” That's basically because there are information asymmetries, meaning that industry has knowledge about the availability of technology and the cost of implementing it that government simply does not have access to.
Another vitally important thing that is not really dealt with in Bill C-30 is that Canada needs to invest aggressively in developing low carbon and zero carbon energy technologies.
Concluding on a couple of brief notes, regarding the provisions of Bill C-30 that deal with the Motor Vehicle Fuel Consumption Standards Act, that law has been on the books for 25 years and should come immediately into force.
You should also know that in 2010, even if Canadian motor vehicle manufacturers comply with the current voluntary agreement, Canadian fuel efficiency will still lag behind Europe, Japan, Australia, California, and China—yes, China.
There's also much room for improvement in the last section of Bill C-30, dealing with the Energy Efficiency Act. I would recommend ensuring that Canadian standards meet or beat the highest levels in the Organization for Economic Co-operation and Development, the OECD; that the act be amended to provide for a mandatory review of standards every five years or so; and that there be mandatory elimination of the worst 10% of products in each product class, a precedent that was set with the prohibition of low-efficiency furnaces.
Thank you for your time and attention.
I look forward to your questions, and I would like to speak to you again about air pollution, if that opportunity arises.
