My name is Richard Paton and I'm the president of the Canadian Chemical Producers' Association. With me is Gordon Lloyd, our vice-president of technical affairs, who I understand seems to very often appear in front of your committee.
Thank you for the opportunity for CCPA to appear in front of the committee to review Bill C-288 on the important issue of climate change.
CCPA is not here to speak for the industry in general, but we will talk a little about the overall issues facing our sector, in particular, and focus on the challenges and experiences of the chemical sector, which is Canada's second largest value-added manufacturer. This will perhaps provide members of the committee with an insight into how industry is trying to deal with this issue.
Our association recognized the concerns about climate change after the Rio de Janeiro convention around 1992, and as a result, we started to report and monitor our emissions of greenhouse gases starting in 1992. In 1995 we also developed a policy on climate change to help our companies address this issue and to reduce emissions. We've been involved in this issue for a long time.
Because we take this issue seriously, we believe governments must develop policy approaches that are sound, realistic, and effective. This will require a significant change in how Canadians live and will require a significant economic intervention as well as provincial coordination.
Since our government agreed to the stabilization target in the mid-1990s, we have yet to see any program to meet this commitment that is either workable or effective at achieving the environmental priorities for Canadians. These programs all had the potential to create grave problems for the economy and, had they been implemented, probably would not have helped achieve environmental priorities either.
We thus have serious concerns about a bill that proposes that the federal government adopt the Kyoto targets without a clear idea of how this could be accomplished and the impact this would have on the Canadian economy or society.
On a note about our association, if our association was given credit for the early action we took as an association since 1992, we would meet the Kyoto targets for our sector. However, no proposed program has recognized this contribution.
As you can see from the charts that I believe you have, the top chart shows that Kyoto called for a 6% reduction in greenhouse gases from 1990 to 2010. On a CO2 equivalent basis, CCPA members will achieve a 56% reduction by 2010.
By 2000, CCPA members had already reduced GHG emissions by 43%. While CCPA members' GHG emissions will have declined 56% by 2010, our output will have increased 26% from 1992. We're creating a high-intensity improvement basis of around 65% improvement.
We've been reducing emissions for over a decade and will continue to make improvements. I think how we have done that is instructive for how you deal with this issue. It's been done gradually. We've been making improvements of about 1% to 1.3% a year in greenhouse gas performance. We've been making those improvements linked to our economic objectives, as well as reducing other pollutants linked to clean air. We've continued to make that kind of progress. These investments were aimed at reducing energy costs, which have economic benefits for companies and a return on investment.
We also had one huge technological breakthrough at DuPont that is limited to one plant and is a “once in a generation” kind of improvement. It illustrates that these can happen, but they happen very rarely.
Our environmental performance is not unusual for large manufacturers. As the third chart illustrates, you'll see a chart that was developed by the Canadian Manufacturers and Exporters association showing general manufacturing progress on greenhouse gases.
I know in our parliamentary day, many parliamentarians were quite surprised to find that manufacturers are generally 7% below the 1990 levels, and large manufacturers as a whole, steel, aluminum, and others, will be 20% below the Kyoto targets by 2003.
There's a lesson to be learned here. The lesson is that capital investment is the key to reducing emission intensity in manufacturing and, in the longer run, the key to absolute emissions. Over a long period of time, investment works to reduce pollutants and greenhouse gases, it works to reduce energy costs, and it helps productivity. This has all been done without regulation and without targets.
Recognition of this fact is a critical foundation to build climate change policy. As you can see from the second chart in your package, also done by the Canadian Manufacturers and Exporters association, there is a very strong link. The chart shows that as the investment goes up the top curve, the emissions intensity performance showed by the bars that go down improves substantially. On average, every billion dollars manufacturers invest in new technology and structures between 1990 and 2003 resulted in a 0.2% annual reduction in their emissions intensity.
Unfortunately, as you can see in this chart, something happened around 2000. Improvements in emissions intensity slowed as manufacturers cut back on capital spending, and this reflects the impact of the high-dollar energy costs and Asian competition, which reduced available capital for investments.
Targets for greenhouse gases can be set if they fit with the performance of our industry and with natural investment cycles. This is a win-win for industry and for the environment, but it takes time to make these technological changes and it takes money.
An important contribution this committee could make to Canadian climate change policy would be to recognize the link between new capital investment and improved environmental performance on greenhouse gases and other pollutants generally. It's extremely important to understand the realities and restraints on how companies invest capital and the technological realities of reducing greenhouse gases.
Why are we concerned about this bill if we've had all that great performance? At this point in time, no one can seriously believe that Canada can meet its Kyoto targets by reducing emissions. It's basically just too late. Potential for action that would meet these Kyoto targets by actual reduction is now long past. It's a long-term problem; it's going to take a longer-term solution. Ensuring that the Kyoto targets are met would require Canada to purchase credits abroad. To look back at the Liberal platform, that's the plan that was basically going to have to happen, at a cost of around $5 billion a year over the Kyoto commitment period of 2008 to 2012.
The math is very simple. According to the previous government's projections, Canada was about 270 million tonnes short of our target in 2005. That number is increasing as the economy grows. The Environment Commissioner used a $20 tonne as a base price for purchasing carbon. You just multiply 270 times $20 and you get $5.7 billion. Maybe we can do better than that; maybe we'll do worse. The number is going to be $4 billion or it's going to be $6 billion, but it's a big number, and we're going to have to deal with that number in order to be talking about meeting the Kyoto targets.
The industry committee's work has noted that the manufacturing sector is in trouble right now. We've seen that with pulp and paper plants closing, which I know many members have commented on in the House. The huge cost of buying foreign credits, even when our performance in the manufacturing area is remarkably good--in fact, it's probably going to be below Kyoto--would have significant impact economically and reduce our ability to attract further investment. It may also reduce our capacity to meet other environmental objectives relating to clean air and water.
I'm sure some of you will debate the economic impact in trying to meet the Kyoto targets. CCPA is not the group proposing this bill. The onus is on the proponents to demonstrate that it will not have serious consequences for the economy and on individual Canadians. As far as I know, no substantial analysis has been done that would give me any comfort that the bill has taken into account these potential consequences. In fact, I've not seen a legitimate and credible analysis by government to date of the potential impact of meeting Kyoto targets. Until that analysis has been completed, our association cannot support this approach or this bill.
My final point is that addressing climate change in a serious way, as is needed, means looking at what can be done realistically in the short, medium, and long term and recognizing that we are committed to this issue in the long term. The government's notice of intent with respect to the clean air bill does set out a framework that could be used to do just that if it's implemented effectively. It recognizes that we need an integrated approach to clean air and climate change, to working with the provinces, and this needs to be an approach that recognizes the critical role of investment and business cycles.
In conclusion, we believe that to make progress there has to be a carefully developed path to achieve reduction targets. We have not seen a workable plan yet. Until it is clear how Canada can meet such targets and at what cost to economic, fiscal, and environmental priorities, we cannot support this bill. After ten years of discussion on Kyoto, I have not yet seen a government do this kind of assessment. Without any target, it's going to be unrealistic and probably counterproductive.
The evidence illustrates that technological change and capital investment are the key drivers to greenhouse gas reductions. This is something that takes time and cannot be legislated into existence by the government. Right now the technology is simply not available to economically capture greenhouse gases, particularly in a short timeframe. There is no program that adequately addresses this fact, and to that end the alternative is to bear the huge cost of purchasing foreign credits that have no environmental benefit for Canada or Canadians in terms of absolute reduction of greenhouse gases.
Thank you very much for your time.