Bill C-30 (39th Parliament, 1st Session) Committee on Feb. 13th, 2007

[John Drexhage]

First of all, it sends a signal. While we're getting a signal about Canada having difficulty reaching its target, which is a very legitimate point, and Canada will be having a lot of challenges in meeting its target, there are protestations that it's only the target we're not talking about not meeting, but we're bound and determined to meet all other provisions relating to the Kyoto Protocol.

In terms of our credibility, when we're not meeting these deadlines in terms of the initial report, which basically lays out the field, defines the field, and defines the parameters by which Canada will be reporting internationally on how it's reducing its greenhouse gas emissions and how it's meeting or not meeting its commitments—

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

Just to be clear, in terms of laying out the field to say where Canada's at right now and where we plan to go in the short term, we haven't even told this to the international community.

[John Drexhage]

No, and there was a deadline for January 1 for doing that. One of the examples was to what extent are we going to use our managed forests as part of our inventory. There's a real issue on this in a country like Canada. Because our forests are so vast, like Russia's, we have to determine, in terms of our forecast, whether or not Canadian forests would actually represent a net sink or a net source. So we have to tell the secretariat whether that is going to be part of our calculations in terms of our assigned amount.

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

To be clear, when Kyoto was established and set up as a framework, countries and the UN recognized how cross-sectorally difficult this would be. These reporting times—deadlines to have our homework in, if you will—were to ensure that countries were on track.

Now, you said January 1 of this year or the previous. How late are we on reporting the basics of where we are and where we're going?

[John Drexhage]

There were two reports due that we're now tardy on, as I understand it. The first one was the fourth national communication. Every few years, we are to provide a national communication that basically provides an update on our national circumstances, our emissions trajectory, and the measures we're taking to mitigate our greenhouse gas emissions. That was due January 1, 2006, and it's yet to come out.

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

To interrupt you there, those things you just listed seem extremely fundamental. In the absence of those, unless a government were keeping it secret, it would tell the international community, we have no idea where we're going.

[John Drexhage]

I'm just saying that's the formal mechanism by which these sorts of things are communicated. I know that figures have been bandied about. The Prime Minister made a presentation a few days ago about how far out we are from our target. We need to fill that formal obligation of providing the international report; that's what we committed to.

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

This is a question for Mr. Delbeke in a moment. Do we have an inventory of Canada? Do we know where the GHG emissions are coming from right now across all sectors?

[John Drexhage]

Yes, absolutely, we have pretty accurate knowledge of that as of the 2005 emissions.

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

Mr. Delbeke, the European Union as a whole seems to be.... You mentioned 8% is the target, and 1% is how much you're at right now, with some years to go. Yet certain nations within the European Union are well off their targets; I'm thinking of Spain, Portugal, and some of the others. What types of efforts are you seeing from those off-target countries, in terms of meeting their obligations?

[Jos Delbeke]

Basically there are two things we are doing. The first is that in the context of the emissions trading scheme, every member state has to allocate, before the trading period, to each of the installations in their countries a number of allowances, because the allowances are not auctioned on the market; they are given out for free. So a member state that is way off track, such as Spain, is having very tough conditions. They don't have plenty of allowances to give to their companies.

In reverse, member states that have done a lot in the past, for example in transport, or have a target that's much less, due for example to forest availability, have more leeway. They have more allowances that they can give to their companies.

What we look at in the commission is the balance between the two: on the one hand, the availability of allowances, given that the Kyoto target is what it is for each and every single member state; and on the other, sound, competitive economic conditions, so as to avoid the distortions of competition that would creep in--for example, in the context of the liberalization of electricity markets, which we are going through. So we have these two: the economic conditions and how far member states are away from their Kyoto targets.

The national allocation plans, which we are currently going through, are very difficult exercises to handle for that reason. Out of the 27 national allocation plans today, we have done 13.

You may have seen where we were criticized here or there in the press for having been too tough or not tough enough. The two conditions were economic conditions on the one hand, and the availability, or the question as to whether Kyoto was within reach—yes or no.

[The Chair, Conservative, Laurie Hawn]

Short question, and short answer, please.

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

To Mr. Drexhage, are you aware of any market regimes that use intensity-based targets to establish a trading market? Do we not simply have to capitulate to whatever the U.S. comes up with in a couple of years anyway? And is there something we should build into our planning right now to allow flexibility for whatever the U.S. comes up, being that it is such an important trading partner?

[John Drexhage]

I'm not sure if anything is actually in place now. I am very well aware—as probably all of you are as well—of Alberta's intent to submit a regulatory framework that would be an intensity-based or -driven system, so we'll have to see exactly how that comes out.

As far as integration with the American market today is concerned, I think that's a very relevant point. The Canadian market in and of itself, as an isolated market, could only operate for so long; over the years, there would be insufficient liquidity for the Canadian market to be a truly effective, sustainable carbon market. So yes, we do have to be very aware of what the U.S. is developing, but notwithstanding that, if we have certain priorities that we think need to be addressed from a Canadian perspective, then we need to communicate those clearly, quickly, and urgently to our relevant American counterparts.

[The Chair, Conservative, Laurie Hawn]

Mr. Jean for seven minutes, please.

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

Thank you, Mr. Chair.

Thank you to both of the witnesses for coming today and presenting.

I'm wondering, first of all, have the witnesses seen our Bill C-30 legislation? Have you had an opportunity to review it?

[John Drexhage]

Yes, absolutely, and in particular, the statement of intent.

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

Have you any suggestions for changes to the legislation? Have you drafted any, or would you be prepared to provide the committee with any suggested changes?

[John Drexhage]

Yes, we would be very keen to provide changes to the legislation.

One of the ambiguities, if I might say, is that although we were asked to address international aspects related to the Clean Air Act, the act is very specifically focused on domestic legislation, which made it difficult to figure out exactly how it would be integrated. But I'd be very open to doing so.

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

Please do.

Mr. Delbeke, did you hear my question?

[Jos Delbeke]

Yes, I did, and I have to admit that I'm not sufficiently familiar with it to answer your question right now, but I'm more than ready to do so on one of our next occasions.

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

I'm wondering if the clerk could send a copy of our legislation to you, and if you had the time to provide an answer, it would be greatly appreciated.

Keeping in mind that Canada is a little bit different from the European Union.... We have, of course, a much colder climate than many areas in Europe, and we drive about 30% farther than people in Europe, on average, just because of our huge country. Also, of course, we're a primary production country and heavily reliant on primary products economically. What do you see in the European Union, Mr. Delbeke, that could apply to us and help us? Hindsight is always 20/20 from my perspective, but what do you see we could we do differently from you've done to take advantage of some of the better tools and better regulations and to pick up some low-hanging fruit that would help us meet our targets? Because we're obviously so far away at this stage, at the back of the pack.

So I have three questions: the tools and regulations, and any low-hanging fruit that you could see us grabbing right away, keeping in mind the kind of country Canada is.

[Jos Delbeke]

Perhaps I have three answers to your questions.

First, what we have learned in the EU is that differentiating the targets is a worthwhile exercise. Originally, not everybody in the EU was convinced we had to do that, but if we had not done that, a cost-effective reaching of the Kyoto targets would not have been possible. Differentiating according to the different member states and their energy structures and economic structures is something I would assume is very much present in Canada as well. You have a vast country, and the provinces and their economic structures are very different.

The second element that I think is very important in any set-up, apart from cost-effectiveness, is simplicity. That's why in Europe we have gone for cap and trade—absolute caps, as they are sometimes called. We were a little bit afraid that intensity targets would unnecessarily complicate the system. Though they could provide some flexibility, at the same time, they could create complexities, and we would have less clarity and hence the risk of less certainty on the market.

The third element of low-hanging fruit is certainly available, with a lot of tools and appliances available today. We had a recent discussion on cars, for example. In most cases, we know which cars are more attractive than other cars in the context of climate change and mitigation, so the technologies are mostly there. If we take the first bite of the cherry, the first 10% or 20% of every single measure, we are probably dealing here with low-hanging fruit—and we need the right incentives in place.

These replies are a first shot at your three questions.

Thank you.

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

Thank you very much.

I've been looking at a graph from the International Emissions Trading Association and the World Bank. When I looked at this, I was kind of shocked to find that the sellers of these credits were China, 66%; Brazil, 10%; and India, 3%. What is the EU policy on having any conditions on the world buyers or sellers of these credits?

For instance, there have recently been some questions on human rights or pollutants. For example, I understand China is building one coal-fired plant per week. They have huge production facilities that take very little account of environmental waste. In Brazil, for instance, some people talk about the devastation of the forests.

Are there any conditions on the use of the money or on other things domestically within those countries when the EU considers trading for credits or other trading mechanisms?

[Jos Delbeke]

The EU is strongly committed to a multilateral approach to these things. We have put a great deal of hope on a good functioning CDM executive board.

Whatever comments we have—and I mentioned some of them, like on the HFC, two easy-to-go projects in China—we make them through the Kyoto Protocol institutions through the UN. We think it is at that level that we have to address them.

Having said that, there are questions that we get, but they are questions in terms of massive pollution and in respect of international environmental law. They are basically outside the greenhouse gas emissions that we are discussing here.

When it comes to the CDM credits, a strong emphasis on a good and functioning executive board for the CDM is where we are putting our emphasis.