Thank you very much, Mr. Chair.
Allow me to thank you and the other members of this committee for the opportunity to speak to you today on this critical issue.
I will focus my comments on relevant international aspects, including the lessons Canada might want to consider from the experience of others, particularly the United States and the European Union; how the development of a domestic climate change plan is intimately linked with ongoing discussions on a post-2012 climate change regime; and the implications for Canada of the recently released report of the Intergovernmental Panel on Climate Change.
First of all, allow me to address some of the comments that I would expect from the European Union.
The IISD facilitated two workshops last December to which we invited European and American experts to comment on two compliance elements of the Clean Air Act, namely, emissions trading and a technology investment fund. The messages coming out of these various fora are basically the same. I think the first message that resonates strongly is that in implementing any sort of regulatory framework, start with a relatively simple system that begins gently. This is easier said than done, since an effective framework in Canada needs to have in place a framework that balances international developments with the unique circumstances of Canada as a major energy exporting developed country.
At the workshop IISD facilitated on December 12 and 14 of the past year, the experts included people from Jos Delbeke's shop in the EC, as well as participants from the U.S. EPA and other organizations within the United States.
We specifically reflected on these two compliance elements that have been the subject of much discussion over the last few months as the Clean Air Act has been developed, and as is found in the statement of intent.
The two main compliance mechanisms being discussed—emissions trading and the technology investment fund—represent distinct approaches to climate policy. Trading relies on emissions limits or caps, while allowing the price to be determined by the market. Depending on its design, the technology investment fund, on the other hand, could fix the price while allowing the quantity of near-term emission reductions achieved to vary.
At the workshop we facilitated—where we had some 60 experts from across Canada, North America, and the European Union, with 30 of them participating in each of the workshops—some participants preferred the certain environmental outcome provided by emissions trading, while others preferred a defined price to allay fears that addressing climate change and reducing your greenhouse gas emissions would be too costly an enterprise. I guess you could say there generally were two perspectives, one of them related to quantity certainty, with some participants placing a high priority on a simple and economically efficient trading system that could link with other systems, such as the one being developed in the EU. People who preferred to focus on quantity certainty were concerned that mechanisms such as the technology investment fund would compromise the effectiveness of the trading system and make linkages with other systems more challenging.
On the other hand, the champions of price certainty were more concerned about the cost of compliance, particularly given the issue of capital stock turnover, and wanted a dedicated fund with a price cap as a more effective means of ensuring that action would begin in one way or another. A technology investment fund would feed into the achievement of long-term commitments by stimulating innovation, but it should be designed to minimize impacts on the effectiveness of the emissions trading system.
Both the technology investment fund and an emissions trading system can be mechanisms for compliance, but they perform largely separate roles. However, despite these potentially conflicting priorities, a system could still be envisioned whereby you could have both a technology investment fund and emissions trading.
Many agreed there was a need for some sort of an emissions trading mechanism where companies that over-complied with their targets could sell credits to other obligated companies. There was also some support for another mechanism whereby companies that could not meet their targets internally could contribute to a technology investment fund in return for nontradeable compliance units.
Companies that met their targets could sell excess credits to companies that could not meet their targets, and companies that could not meet their targets could also have the option to purchase these non-tradeable technology investment fund units.
We also addressed the whole issue, as is within the mandate of the Clean Air Act, of local air pollutants. One of the really startling lessons coming out is that as far as long-term targets for local air pollutants are concerned, you don't have anything beyond 2020 in any constituency around the world--and that's found only within the European Union itself, and has itself only been legislated recently as well--so in terms of this work on long-term emission limits and targets for local air pollutants, you could say we're very much on the leading edge in terms of the precedents in developing this.
I think there was an overall conclusion that in any kind of regulatory system that addresses both local air pollutants and greenhouse gases, you look at it from a perspective of asking where the co-benefits are, but to try to regulate local air pollutants as you would greenhouse gas emissions under one system would be extremely problematic. You would need to have--and in fact it would be much more effective to have--separate regulatory systems for greenhouse gas emissions and local air pollutants.
It was thought that there could be some very real potential for cross-border trading with the United States when it came to local air pollutants, and there was strong interest on both sides of the border in pursuing that.
Notwithstanding the previous comments I made regarding the conclusions of these two workshops that we facilitated in Ottawa and Montreal in late December, I would like to continue on in my intervention to state that what we need to do--and urgently--is put in place a regulatory framework for our large industrial emitters that gives clear signals that significant emission reductions in the not-too-distant future will be required, but that also provides the necessary wherewithal to make the transition as smoothly as possible.
I would like to note, notwithstanding the comment I made earlier, that we are not--and I would like to emphasize we are not--operating in a vacuum here, and the more the system we develop here allows for linkages with our major trading partners, the more effective it will likely be. There is a keen interest in many of these countries to develop an effective global carbon market, and Canada needs to seriously consider its role in such an equation. We're well aware of the United States and the European Union, but we are also hearing the same sort of message from countries like Australia, where Prime Minister John Howard recently established a joint government-business task group on emissions trading. Their terms of reference include advising on the nature and design of a workable global emissions trading system in which Australia would be able to participate. Why? Because economic model after economic model convincingly demonstrates that a global carbon trading mechanism will significantly reduce the costs of meeting our ultimate objective of delivering a safe climate system to future generations.
As it was put to me yesterday, in the case of climate change, just as emissions know no borders, so do emission reductions. Of course, we also need to focus on developing mechanisms and technologies here in Canada, but it is not an either-or scenario; in fact, if these technologies were properly designed, Canada could take advantage of the carbon market as a way of launching and commercializing relevant carbon-reduction technologies.
But what of meeting Kyoto, once again? Who knows, at this point? Remember, we are talking about trying to forecast Canada's emission trajectory six years from now, and we mustn't lose sight of the many flexibility provisions in the Kyoto Protocol beyond the so-called market mechanisms. In particular, I am referring to the compliance provisions under the Kyoto Protocol. Under it, the Government of Canada has an opportunity to borrow from its future commitment period and add an interest rate to meet its target of 2008 to 2012. Doing so credibly would mean we could still begin developing a regulatory framework that begins sensibly, with a clear message that significant reductions would be required in the next commitment period--after 2012--and, crucially, a much more comprehensive plan that will address all relevant sectors of Canadian society.
This would include significant support now towards large infrastructure investments in areas such as carbon capture and storage, clean coal, and a clean east-west transmission line across Canada; the rapid acceleration of incentives for alternative energy initiatives, including distributed generation or cogeneration, and combined heat and power; accelerated fuel efficiency standards in the transportation sector; and strong policy signals directed towards energy efficiency and conservation programs.
I am convinced that if we put these elements in place over the next year, we will be pleasantly surprised at the scale of reductions we actually will be able to achieve, and we will demonstrate to the global community that we are a serious player in addressing climate change.
In regard to this latter consideration, it is important that this committee consider that the government made a series of commitments at the last meeting of the ad hoc working group on further commitments for annex 1 parties under the Kyoto Protocol, held in Nairobi, which commits it to undertake and communicate an analysis of the mitigation potential of current and future policies, and identify a possible range of emission reductions and the means available for achieving them. The sooner we have a comprehensive plan and analysis in place here in Canada, the sooner we can play a meaningful role in these critical discussions regarding post-2012 commitments. As I understand it, we have a deadline of February 23 to provide initial submissions, and it would be useful to know what the Canadian government is planning to provide in that respect.
I would also be curious to know the status of two other submissions for which Canada has missed deadlines. Under the Marrakesh accords, Canada, along with all other annex B parties to the Kyoto Protocol, committed to provide an initial report by January 1 of this year. That in essence demonstrates that Canada has the infrastructure in place to participate in the first commitment period, including the ability to measure and track our greenhouse gas emissions. This includes, among other elements, providing a complete inventory of our greenhouse gas emissions, including sources and sinks, a clarification of what will be counted under managed forests, and a description of our national registry. To my knowledge, Canada has yet to even develop any such registry.
Canada has also missed the deadline in submitting its fourth national communication, which provides an update on Canada's national circumstances and progress in reducing its greenhouse gas emissions. This was due January 1 of 2006, which means that the government is more than a year in arrears in meeting this commitment.
These oversights, unintended or otherwise, point to the fact that for too long, and I must emphasize under a number of prime ministers—this didn't just start a year ago, this has been under a number of prime ministers—there has been a serious gap in federal policy-making between domestic and international considerations. I cannot emphasize the extent to which we are suffering in terms of our international reputation and credibility for it.
The very word “Kyoto” has taken on all sorts of connotations, most of which unfortunately have only worked to needlessly politicize the issue of climate change in Canada. In particular, all the attention on our specific targets has resulted in our losing sight of the fact that the Kyoto agreement has critically established, and continues to establish, the international policy architecture for addressing climate change, from methodologies for how we count, verify, and report our emissions, including biological sequestration activities, to developing work programs for adaptation, and establishing the rules for the operation of the many flexibility provisions in the agreement.
I have one final thought, Mr. Chairman, on the implications of the Intergovernmental Panel on Climate Change report out of Paris a few weeks ago. In my view, the most critical conclusion coming out of that report was the indisputable link demonstrated between human activities and the global warming phenomenon. In response to that, the way forward means a carbon-constrained future over the 21st century. Let us be clear: there is no more ambiguity around that. This means that the Canadian economy must adjust to that reality.
More to the point, I would submit that the time is right for a comprehensive national dialogue on Canada's energy priorities and interests. All constituencies in Canada, as far as I'm aware, whether at the federal, provincial, or municipal level, appear committed to becoming “clean energy leaders of the world”. What that actually means, and how we can make it happen for the sake of the environment and the economy, need to be urgently addressed.
In closing, Mr. Chairman, allow me to simply repeat what I already stated before the Standing Committee on the Environment last November: Ultimately, successfully addressing the grave and pressing threat of climate change means an evolution in understanding what national interests truly signify: acting responsibly for the sake of the environment and our children.
The latest polls clearly demonstrate that Canadians are ready and impatient to face the challenge. It is time, I humbly submit, for politicians of all stripes to demonstrate the same resolve in a constructive spirit.
Let us not let the issue of targets get in the way of getting started in a real, productive, and constructive way that benefits our global environment and works to put Canada truly in the lead as a global clean energy leader.
Thank you, Mr. Chairman.