Bill C-30 (39th Parliament, 1st Session) Committee on Feb. 6th, 2007

[Mathieu Castonguay]

It could well take less than 10 minutes.

Good morning, ladies and gentlemen.

I agree with most of the speeches I've heard this morning. I believe it's absolutely essential to send Canadians a signal by means of a carbon tax, a fuel tax. However, that signal must be proportionate, that is to say that the tax must be determined on the basis of energy efficiency and the life cycle of appliances, equipment and measures put in place. In other words, equipment or measures that have the lowest emissions rate should not be taxed, and those with the highest emissions rate, level or equivalent should be taxed at the highest rate in order to influence choices and inform Canadians of the best measures that should be put in place.

We may not be able to achieve the Kyoto objectives by the scheduled date, but the technologies and measures exist. Some measures are extremely effective in reducing greenhouse gas emissions, but can't be taken because they aren't cost-effective. Geothermics is a very promising example in this regard. It's a highly cost-effective measure, but it may take a little more time to become cost-effective than a natural gas furnace. If a tax were levied to make a natural gas furnace represent the effective cost paid by the consumer, that is the environmental cost and the overall costs of the device, the choice would be easier.

Since the economic factor is decisive in consumer choices, the fact that this tax is proportionate would encourage Canadians to make the most responsible choice in terms of greenhouse gas emissions. Furthermore, this measure would have an impact on the final major emitters, on the economy as a whole, but it's the citizen that will base choices on much more environmentally responsible technologies.

This also enables Canadians to react to climate change. You can't simply ask people to reduce overall greenhouse gas emissions without that having an impact on our choices. Levying a tax on carbon emissions and emissions related to the life cycle of every product and service that Canadians consume is, we think, the most effective way of achieving ambitious reduction objectives.

We must completely rule out measures based on emissions levels and emission intensities. In the case of atmospheric pollutants, it's absolute measures and ceilings that work and make it possible to meet what are considered acceptable pollution levels. The Association québécoise de lutte contre la pollution atmosphérique finds it hard to understand why a measure that is known to be effective in fighting air pollution couldn't be applied to greenhouse gas emissions, whereas this is clearly an issue these days. It is very important to mention that fact.

The message we're being sent is that we should make information available to Canadians so that they can make the best possible choices, by means of a carbon tax. Unfortunately, that's not the direction taken in the bill. We hope you'll base the regulations on energy efficiency in that sense.

Thank you.

[The Chair, Conservative, Laurie Hawn]

Thank you, Mr. Castonguay; I appreciate the fact that you were brief.

We've got another committee following us at 11 with a very large international delegation. We'll try as much as we can to respect that. We'll get another round of questioning, and the chair will try to be very strict on the seven or five minutes, so brief questions and concise answers, please.

We'll start with Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Thanks, Mr. Chair.

Chief Erasmus, I'd like to begin with you and ask you a first quick question. I did hear you say that the AFN was fully supportive of Canada's continuing involvement in the Kyoto Protocol?

[Chief Bill Erasmus]

Yes.

[David McGuinty, Liberal, Ottawa South, ON]

Was the AFN involved in the last several years in helping Canada accede to the Kyoto Protocol? You've been engaged with this for some time?

[Chief Bill Erasmus]

Yes, thank you. I was just getting some advice here.

We made recommendations, but we weren't formally engaged in the discussions.

[David McGuinty, Liberal, Ottawa South, ON]

Okay. Thank you for that.

Could I turn, Mr. Chair, then quickly to Mr. Boyd.

Mr. Boyd, I'm looking forward to seeing your brief, and I'm hoping you can include some consensual economic analysis to justify your conclusion that, if I can interpret what you said, Canada's only go-forward strategy is to adopt a carbon tax. If we were to see here, say, four or five economists, Mr. Boyd, in one room at the same table, would we find a consensus on your views?

[David Boyd]

Mr. McGuinty, I think you'd find approximately the same kind of consensus among economists as to the efficiency of a carbon tax as you find among scientists with respect to the science of climate change. It's widely recognized that a carbon tax is the single most efficient way to address greenhouse gas emissions. And that's a function of the fact that it covers the entire range of fossil-fuel-consuming activities in an economy and allows the market to allocate those emissions reductions at the lowest possible cost.

[David McGuinty, Liberal, Ottawa South, ON]

You went further and said that the top performing, most competitive countries in the OECD, if I understood, all have carbon taxes. Are you telling us that there's a causal connection between the carbon tax presence in those four economies and their competitive position globally?

[David Boyd]

I wouldn't put it that way, Mr. McGuinty. I'd actually say that those countries, which are Switzerland, Sweden, Finland, and Denmark, all of which have carbon taxes and have had carbon taxes for a number of years, have not had their economies harmed by the presence of those carbon taxes. And there is considerable support in the economics literature for the proposition that with a carbon tax, if it's imposed in a revenue-neutral way and the revenues generated by the tax are used to reduce other forms of taxes--payroll taxes, income taxes--you get what's called a “double dividend”; you get environmental benefits as well as economic benefits.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you for that, because I misunderstood. I thought I heard you say that those four economies were successful or more competitive as the result of the presence of a carbon tax. But I've just heard you say that in fact what you really mean is that the fact they have a carbon tax has not affected their competitive position. Is that right?

[David Boyd]

That's right, yes.

[David McGuinty, Liberal, Ottawa South, ON]

If that's the case, how come more nation states have not adopted a carbon tax?

[David Boyd]

I think the fundamental hurdle that has existed to date to adoption of a carbon tax has been the question of political acceptability. Certainly it's a tool that has all of the merits on effectiveness grounds, efficiency grounds, and can be designed to meet equity concerns. But in Canada and the United States in particular there has been a political aversion to the imposition or the creation of new taxes, which all of you are very familiar with based on the more recent experiences with the GST. And I think what's really interesting about this all-party committee on Bill C-30 is that you have an opportunity to make a collective recommendation that recognizes that a carbon tax is what the experts are saying is the best approach to moving forward. That way, no single political party can really be saddled with the public vitriol that may arise through the imposition of a carbon tax.

I also think it's absolutely fundamental to the public acceptance of a carbon tax that it be not a revenue-raising tax but a revenue-neutral tax.

[David McGuinty, Liberal, Ottawa South, ON]

So you're talking about tax shifting, right?

[David Boyd]

That's right.

[David McGuinty, Liberal, Ottawa South, ON]

Am I right in concluding that the cap and trade influence under the U.S. Clean Air Act was the primary driver for the inclusion of a cap and trade system under Kyoto?

[David Boyd]

I'm not sure if that was the primary driver, but certainly of the U.S. cap and trade system under the Clean Air Act dealing with emissions giving rise to acid rain was successful. The program is widely recognized as having achieved its environmental objectives and as having done so at a cost much lower than was projected, certainly by industry and even by government, when the program was put in place. That precedent was certainly one of the bases for the emissions trading under the Kyoto Protocol.

[David McGuinty, Liberal, Ottawa South, ON]

Has there been, for example, any analysis of the countries that have carbon taxes versus the cap and trade system in the U.S. under the U.S. Clean Air Act? Which of the two systems is in fact costing less to achieve greenhouse gas reductions?

[David Boyd]

The U.S. system is not achieving greenhouse gas emissions reductions, so it would be comparing apples and oranges. The U.S. system is producing reductions in sulphur dioxide emissions. Carbon taxes are obviously reducing different pollutants. I think it is important to look at the European experience and the emissions trading system that was put into place across the European Union.

The first point is that these two tools can be used at the same time within a nation, so the European nations that have carbon taxes are also participating in the European cap and trade system--

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Boyd, I'm sorry to interrupt, but my time is up.

Finally, just for the record, the European emissions trading system is a pilot project, is it not?

[David Boyd]

Yes, it is.

[David McGuinty, Liberal, Ottawa South, ON]

How long is it to last in the first phase?

[David Boyd]

The first phase actually expires in 2007. Then another phase starts in 2008 and runs till 2012.

[David McGuinty, Liberal, Ottawa South, ON]

When it was launched, it was a pilot project they were trying to get off the ground in a particular area. Is that correct?