Environment Committee on Nov. 7th, 2006

[Claude Villeneuve]

I say the same thing.

It's true, the energy sector is absolutely essential. We also have to question the limitation on energy responsibility by province. Very effective interprovincial actions could be taken. For example, in terms of greenhouse gas reductions, it would be much more effective to use wind energy produced in the Gaspé and to shut down the Belledune thermal power station than simply to add it to Quebec's stock.

There are major interprovincial difficulties to be resolved in that area, but until you've conducted a genuine analysis of the energy sector and of the energy sectors in Canada, you won't be able to take the bull by the horns.

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

Thank you very much.

I have a question for Mr. Kovacs. You raised the case of Florida for a moment, which I think has been rather instructive, both for your industry and on the adaptation question.

A number of insurance companies have simply gone out of business or left the state, in terms of insuring certain residential properties, and they've now included some state insurance to cover off some of the higher-risk properties. It's therefore a general public subsidy of a risk taken by a private homeowner, which is an interesting scenario for a Republican governor to undertake.

But allow this. Is there not also a question of where it is that we are building these properties and what risk we are taking in the actual development of our economy? I am thinking of the Lower Mainland in Vancouver and places we know to have a certain climate risk factor to them. It's not terminology that I think we use.

Is your industry doing anything with this on the more progressive side, suggesting to homeowners and businesses—two fronts, two questions here, one to the homeowners in specific terms—that if you build a property in what we consider to be a risky area with respect to climate change, you will be penalized by higher rates? On the business front, to businesses that you believe are susceptible to climate change—the forestry sector and others who don't have a climate change strategy—do you then incorporate some of those influences in the way you set out your terms and policies?

[Paul Kovacs]

I have a three-part answer.

First, the insurance industry is investing heavily in research. Our institute is part of that program. At the University of Western Ontario we have a wind tunnel. We put up a model home, we blow the roof off, we put it on better, we blow it off again. It's quite exciting; it's engineers destroying things but learning from the process.

Some of the application of that is in the new building code. In Florida, the damage to new homes was half the damage to old homes. We hope with the next generation of research that we can take it to a quarter or one-tenth the damage that happened to the older homes.

We're trying to improve the building code. We're trying to give the improvements to the Government of Canada, and we're trying to give them to the American government and others to make part of the code for the next generation of buildings. So one part is research, and the insurance industry is investing in research.

The second part is that insurance practices are reflecting the new knowledge. In areas with higher risk, the price goes up. In areas with lower risk, the price goes down.

To give a Canadian example, the most costly insurance event in Canada was the 1998 ice storm. The insurance response to it was that it was a very bad storm, but there's no real evidence that there are more ice storms; we haven't had one since. There was no change in the cost of insurance because of that storm.

In Florida, the hurricanes were modelled to predict that the damage to the insurance industry could be $6 billion. The new models are saying $60 billion. They were really missing the number with their research, so the cost of insurance for people on the coast has gone up quite dramatically in Florida. Where there is new knowledge, there are big changes in insurance practices.

One of the challenges, as you've described, in the American market is that there has been quite a bit of government interference in it, and while the industry would like to say to business and to homeowners, “If you choose to live in a very risky area, we may choose to sell you our product, but we have to charge a fair price for it”, some governments weren't willing to permit that, and they intervened and didn't allow the price to get to the market level. That led to lack of availability in some markets, etc.

Finally, the industry in most parts of the world is having a very active dialogue with government: “If you want the industry to be the private market in looking after the risk of wildfires, heavy rain, strong winds”—most of the things that are in the Canadian market.... Flood is really the only climate element homeowners can't get insurance for; for most other things they can. “If you want the insurance to stay in those markets, government, have you thought about what role the insurance industry is supposed to play, or not?”

In Canada there's not really an active dialogue going on, as there is in several other countries, about what we want the insurance market to do and what we don't want it to do, and how Canada wants to handle the damage from a flood, which insurance does not cover.

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

I'll just add a question to that. In the government's recent climate change plans, how heavily involved was the insurance industry in guiding some of the principles set out in that plan?

[Paul Kovacs]

Most of the efforts by the government have focused on emissions. The insurance industry is a tiny fraction of one percent of emissions. It doesn't have very much to contribute in a dialogue about emissions.

The industry is on the front lines on adaptation. It's helping Canadians clean up after these storms. The industry has regularly written to the government to talk about adaptation. There just is no dialogue going on about adaptation. The industry would love to talk to the government about adaptation.

[The Chair, Conservative, Bob Mills]

You have about a minute left.

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

Thank you.

I have a question for Mr. Rutherford or Mr. Stone. Is not part of the impetus for a bill like this that it be a contribution to Canada's international reputation and ability to negotiate the second round? As Mr. Villeneuve says, this is a dress rehearsal.

Kyoto, as dour as industry painted it to be, was not actually what is needed. There's something quite a bit more.

Is there not some effort to re-establish Canada's battered image with respect to climate change?

[Claude Villeneuve]

If we go back to the example of a hockey practice, Canada is arriving at a rink where it has agreed to play, but it's six foot four and it only has size five skates. Obviously, for its first practice, it can't be very comfortable with regard to the Kyoto Protocol. However, if Canada doesn't agree to be proactive and show real effort — if it makes any — it won't make itself credible by saying that it doesn't want to play in the league.

Canada's environmental reputation has constantly declined since 1992. Canada is currently taking a very hard hit at the international level because of its performance over the past two years. Even though the last UN conference, which was held in Montreal, showed a glimmer of light, that's been very quickly forgotten. A great deal was made of the result in Montreal, even though it was a very small result.

[The Chair, Conservative, Bob Mills]

Mr. Stone, maybe you can pick up on the next answer very briefly.

Could we go to Mr. Warawa first, please?

[Mark Warawa, Conservative, Langley, BC]

Thank you, Mr. Chair.

I'll be sharing my ten minutes with Mr.Vellacott.

I appreciate the comments from each of the witnesses here today. Dr. Stone and Mr. Rutherford started with the science of climate change. I think we all agree we've moved beyond that. There is a sense of urgency. We are experiencing climate change, and what we're looking for are solutions.

Mr. Rutherford recommended that we have to be efficient and look for efficiencies. He also said that you'll leave it to others to figure out how to do it, but you're challenging us.

What we have today is that the Government of Canada has introduced Bill C-30, our Clean Air Act. It will likely be going to a legislative committee where it will be dealt with. Here in the environment committee we are dealing with Bill C-288, a private member's bill introduced by Mr. Rodriguez.

I find it interesting that Mr. Villeneuve made the comment that Bill C-288 would have been a good bill in 1998, but it's too late. The response to that from the Bloc and the Liberals was laughter. We do have urgency; we are looking for solutions.

On Saturday I was at a town hall meeting. There was a discussion very similar to what we are experiencing here this morning. There was a feeling of urgency within Canadians on climate change and a desire for the Government of Canada to do something immediately, mid-term, and long-term.

My questioning will be directed toward recommended actions we can take that will be effective and efficient.

Mr. Villeneuve talked about the ten tonnes of reduction per person to meet the targets being suggested here. Mr. Villeneuve, could you elaborate on the ten tonnes per person? You said it's impossible to achieve.

[Claude Villeneuve]

Yes. It's very simple. Canadians, in their everyday lives, aren't the cause of emissions of this size in the domestic market. Canadians' day-to-day activities emit between six and 10 tonnes, depending on the province, but the remaining tonnes making up the 20 tonnes that we emit are associated with exports. For example, one tonne of aluminum — in Quebec, we produce five percent of the world's aluminum — adds four tonnes of greenhouse gases to our footprint. Every time we export a tonne of aluminum, we have to offset an equivalent of four tonnes of CO2. The same is true for the oil sands. The oil that is extracted from the oil sands does not remain in Canada. If we want to impose this 10-tonne reduction on Canadians, they'll have to achieve zero tonnes. In actual fact, the burden can't be imposed solely on the public. That's why I was talking about an empty country. “Empty country” means that our position as an exporter is disadvantageous relative to the size of our domestic market, particularly since our main customer, the United States, has no emissions limits and therefore, in terms of competitiveness, can't help us offset by paying for the emissions for which it's responsible here at home.

[The Chair, Conservative, Bob Mills]

Mr. Stone.

[John Stone]

Thank you very much, Mr. Chairman.

I have a couple of points to help with this discussion.

As I said earlier, I was a federal civil servant for a long time. I was actually part of some of the negotiations and policy development. I can remember at least seven years ago having some discussions on the carbon market and the cap in trade. My sense is that we have a very good idea of what we need to do. There are some difficult decisions that have to be made, such as setting particular caps for certain industries or sectors, but we really have a good idea of what we need to do. The U.K. and Europe have moved ahead and actually put a carbon market in place.

Secondly, responding to Mr. Cullen's comment, yes, indeed, Canadian credibility has taken a bit of a bashing recently. It wasn't always the case. But I would put it much more positively. I believe we have the ingenuity in Canada to address this issue and tackle it successfully. Technologically, I think we have many of the technologies we already need. I was at a conference recently in Ottawa, at the Chateau Laurier, where there were a large number of industry types talking about what they were able to achieve and why it was in their interest to achieve it.

I think if you look at the national round table's recent report--

[The Chair, Conservative, Bob Mills]

Excuse me, Mr. Stone....

[Mark Warawa, Conservative, Langley, BC]

Mr. Stone, I'm sorry, I've run out of time.

I'll have to pass it on to Mr. Vellacott to give him adequate time.

Thank you.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

How much do I have left, Mr. Chair?

[The Chair, Conservative, Bob Mills]

You have four and a half minutes.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

The interesting thing that I picked up from a comment you made, Mr. Paton, in terms of the billions of dollars required, was that every $1 billion manufacturers invested in new technologies and structures between 1990 and 2003 resulted in a 0.2% annual reduction. There's a need, obviously, for technology. I think that was the underlying point here.

So I say this kind of tongue-in-cheek here that I assume, then, that the CCPA was not making big moves in terms of converting to income trusts with the need for technology and that kind of stuff. I'll just leave that hanging out there on the record, because I do believe there needs to be capital infused into the technology if we're going to get some major gains in manufacturing, in chemical, in terms of energy, oil, and so on.

I have just a few comments, though, because I want to get to the heart of my question, which is the whole matter of setting targets and getting credible, realistic targets. I'll set you up with a few quotes here, first off by no less an individual than Michael Ignatieff.

He says, “As a practical matter of politics, nobody knows what (Kyoto) is or what it commits us to.” He also said, “Kyoto allows polluting countries like Canada to meet its objectives by buying credits from countries emitting less carbon dioxide. We'll clean up Kazakstan, but we won't clean up downtown Toronto.” And “Despite efforts by the previous Liberal government to curb emissions growth, Canada cannot now meet the Kyoto target of cutting greenhouse gas emissions to 6% below 1990 levels between 2008-2012 without spending billions of dollars buying emissions credits from other countries.”

He goes on to say at another point in the Globe and Mail that Canada is not on track to meet its commitments under the Kyoto Protocol.

I just want to get to something very basic here. As a father of four children, as a grandfather to five, when I make commitments and promises to my children or others within the family configuration, there is an impact in terms of what I say.

So my question is this, and I'll set it up this way. If I were to say to my children or my grandchildren--and that's more difficult to do, because they are at the other end of the country in Saskatoon. If I were to sit those four children down--two of them are married, but there are five grandchildren--and say, “I'm going to spend two hours with you every night, doing what you want to do, a family time kind of thing every night, with each one of you separately....” So we get into this, and it's obvious pretty soon that I'm not able to keep that commitment. I guess, for one, I destroy a trust and credibility. I hurt the relationship, I think, by making those kinds of promises. It's obvious that I can't keep those commitments.

Our party, the Conservative Party, is actually interested in and willing to take action on clean air in terms of greenhouse gas reductions as well.

So my question, in a philosophic sense, is to several of the presenters--Mr. Villeneuve, Mr. Paton, Mr. Rutherford. When we make commitments of the unrealistic sort that we did in Kyoto, what is the net effect in terms of our credibility, our trust relationship with other partners internationally, across the world stage, and so on, when you set those unrealistic targets, as acknowledged by Mr. Ignatieff and others? Those are the kinds of targets that are emphasized in the Kyoto Protocol and also in Mr. Rodriguez's Bill C-288.

What, philosophically, is the impact of making unrealistic commitments like that?

[The Chair, Conservative, Bob Mills]

Can we do a shotgun shoot on the answer, please?

Go ahead, Mr. Villeneuve.

[Claude Villeneuve]

Thank you.

It's the same as when the promise was made to allocate 0.7 percent of gross domestic product to aid for developing countries. The promises that come from wishful thinking at the international level come back very regularly. I refer you to the objectives of the Millennium, the Rio Convention and the Johannesburg Convention.

[The Chair, Conservative, Bob Mills]

Mr. Paton.

[Richard Paton]

I think the fatal flaw in what we've done here is that we set a target that had no basis in any kind of analysis or reality. And I really enjoyed Mr. Villeneuve's insights. His point about the export issue versus domestic issue is a very good example of how we didn't deal very well with this issue.

Basically, as everybody knows, we set a target to look better than the United States--and with no one else's. Since then, we've been trying to build a system to deal with that target. It has resulted in basically ten years of wasted effort. If we had started from figuring out what our economy is like, how we're producing greenhouse gases, what we can do in terms of technology...saying, let's encourage capital investment turnover, let's get consumers involved--because consumers are a big part of this, even though the initial plan back at ratification, as Mr. Mills would know from his hours in the House, totally ignored consumers. It basically said, “It's not your problem. You don't have to worry about it.”

So starting from the very beginning, this process had a problem. We started with a target that did not make any sense for our country and had no link to action. Repeating that in this bill is not going to help.

[The Chair, Conservative, Bob Mills]

Mr. Rutherford or Mr. Stone.

[Ian Rutherford]

I just want to make a general comment. The climate science community was fully behind Canada's participation in the Kyoto Protocol in the beginning when the protocol was set up.

It never saw it as dealing with the climate problem in any substantive way. Canada only contributes 2% of greenhouse gas emissions, so if we met our target it would have made a small contribution to the overall global effort. It was always seen as more of a symbolic issue, in that if Canada cannot do its part, how can we ask other countries in the world, particularly developing countries, and in some sense Canada is a developing country because we have a rapidly developing economy.... How can we talk to them credibly if we don't do that?

Unfortunately, many of the measures that were necessary in order to meet those targets were not put in place, but it's not correct to say that there were no measures for consumers. We did have various programs to convince consumers to reduce their personal emissions of CO₂ by one tonne, which is I guess 10%. So consumers were asked to do 10% of what they should be doing. The country was asked to do 7%, or whatever the overall target was. The manufacturing industry did its part. The chemical industry did its part. Somebody else didn't, so I think it's up to you folks to figure out who didn't and get them to do it.

[The Chair, Conservative, Bob Mills]

Mr. Rodriguez.