Environment Committee on Nov. 23rd, 2006

[Luc Bertrand]

That's correct to the extent that we are not at all expecting the government to intervene in the operations of the market and the development of the market. However, we cannot launch a market without the framework. So it depends on where you position your question. But once the government has established the rules, the framework, then let the marketplace do its job. In that respect, the government is right. We do not expect the government to intervene to establish a price cap or to dictate a policy.

Actually, the experience so far is that the greatest clarity at the outset in terms of the regulatory framework we're seeking.... And I think it is good to go to the full extent to exhaustively prepare that aspect, so that once the framework is established, the rules are understood--preferably of an international standard--then the government should just step back and let the marketplace do its job. I think you'll see reductions at a pretty rapid pace.

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

Let me understand, first of all, how difficult those rules are to come by. Do we have case examples of what's required for the government to set up? Secondly, how important is it that the government actually has a climate change Kyoto plan--as an example, a large final emitters cap, or hard reductions for companies? Is stimulating your market not critical as well, in terms of the encouragement of your market?

Just to clarify, it is not simply laying down some rules in a document, and then hands off and your market will thrive.

[Luc Bertrand]

No. Admittedly, a regulatory framework is in constant movement. There's no doubt that if the framework does not include specific reduction targets, with good penalties.... I think the U.K. program is 40 euros for the first phase and 100 euros for the second phase, per tonne. These are serious numbers if you don't meet your targets. What it has done is to focus large emitters in trying to find novel solutions, or to understand the market and be proactive.

The involvement of the federal government, yes, is to establish those quotas, establish the regime, and make sure there's a verification and an audit process that is of the highest quality. The private sector has all the tools to do that. We have high expertise in this country when it comes to audit functions and making sure that things are done according to the spirit of the regulatory request.

In the Montreal Exchange and the Toronto Stock Exchange and other marketplaces in Canada, we have proven that we can self-regulate our businesses very well.

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

On that point you raised about England, speaking with the British delegation in Nairobi and Bonn, the experience of bringing in significant penalties, or the threat of significant penalties, was decried by many. There would be a dramatic loss of jobs; GDP would crash.

What, to your knowledge, has been the experience of the British economy under those strict rules and regimes?

[Luc Bertrand]

Maybe Andrei can help me on this one. My understanding is that it has been very favourable.

[Andrei Marcu]

There are different schemes. One of them is the U.K. emission trading scheme. This is actually a scheme that was designed by a joint government-business group, the U.K. emission trading group, led by Sir Charles Nicholson from the BP.

That is the precursor to the EU emission trading scheme, which is now in full swing. It really covers all of Europe. The penalty indeed is 40 euros to 2008, and 100 euros to 2012. It is fully recognized that this is a pure regulatory market. It only exists because the government has made a decision that there will be scarcity in GHG emissions.

You cannot have a market without having the credibility of the penalty. Nobody I know has paid penalties in the first year of the emission trading scheme; I can't recall that anybody has done so. Some people may have been a little late in filing papers, but I don't remember anybody being out of compliance.

The record of compliance, both in the sulphur dioxide market and the EU ETS market, is extremely high, much higher than in any other regulatory regime.

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

But importantly, the effect of the pretty severe types of regulations and penalties upon the British economy has been seen as favourable now by the business groups. Or is it still vilified?

[Andrei Marcu]

Mr. Cullen, I will say the following. The centre of trading in the EU and around the world--and many people don't like to hear this--is in the U.K.

The people who have been the biggest promoters of this have been U.K. businesses. To my knowledge, it is not an issue of whether we have emission trading or nothing. Emissions trading is seen as a better solution than others. If you ask industry whether it would rather have a carbon tax or emission trading scheme, they will flat out answer that they want the emission trading. If you ask them whether they would like this thing to go away, the answer would be yes, they would like this to go away.

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

Unfortunately, that might not be one of the options available to us, despite our experience.

[Andrei Marcu]

And we recognize that.

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

Mr. Myers, how critical do you see the issue of climate change being, reflecting on reports by Mr. Stern and others and the comment Mr. Drexhage made about Kyoto being more predominantly an economic or financial agreement than an environmental one? How critical is this issue, and how critical is it that it's addressed?

[Dr. Jayson Myers]

It is critical. I would certainly leave it up to the environmental experts to talk about the impact on the environment.

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

I mean more the impact on business.

[Dr. Jayson Myers]

The impact on business too. To the extent that we can direct investment into this technological progress that we're making, that's where the business opportunity comes from, and I think that's where the future growth opportunities are. The key issue that I hope everybody can agree on is how to do that in the most productive way possible moving forward.

On your questions about U.K. industry, I think to the extent that U.K. industry has been able to meet the targets that have been set within the market, the market provides the flexibility. It provides the investment signals for that type of investment. And I think that's exactly the same thing that we have to establish here: what targets are reasonable, achievable, and what sort of mechanism is the best to achieve that.

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

There's a constant running debate about whether the Kyoto 2012 target is possible or not, which seems to have delayed action and delayed certainty in terms of those investments. It takes the attention and energy away from what is needed, which is the implementation of the regime that Mr. Bertrand and others have talked about, or the government's coming up with the fiscal measures needed by the companies you represent.

The reason I'm asking this is that I'm looking at the press reports and releases from earlier that talk about a $20 billion or 20% of GDP loss if we were to meet Kyoto targets, and it seems, in a sense--and I am saying this with due respect--a bit irresponsible, because then we dive back into the debate of a yes or no as to whether we achieve 2012, when really the focus must be to at least attempt. I don't know if a sincere attempt has been made yet by the main actors.

[Dr. Jayson Myers]

The media coverage today was simply on this report. The point I was making was that the only way we are going to achieve a real emission reduction in Canada is to speed up this rate of technological progress. The only other alternatives are to buy emission credits internationally or reduce economic activity. Those are the only two alternatives.

I agree with you totally. Let's focus on what we should be doing to achieve real emission reduction targets. This has not been done effectively. This is not where Environment Canada has been focused. And I totally agree that the focus and all of the debate, discussion, and rancour around the target has led us into not only ignoring real action, but to counterproductive--

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

Can a point be made, though, as our signature is now sitting on this document, an international binding treaty, that we should simply, under bills like Bill C-288, say we're going to try, that this is the target that has been set and we must try to achieve this target--otherwise, face penalties, which will cost more?

Disparaging whether the 2012 targets are achievable, or what the cost will be, the effort must be made.

[Dr. Jayson Myers]

I totally agree, but I thought we were talking about whether the targets were achievable. Clearly, the effort must be made. My argument is let's focus on making that effort.

I do want to raise one issue. This is in response to Mr. Godfrey, but directly to your point as well. We have to be very clear about the extent and the magnitude of this effort that we are trying to undertake. If I could refer you to the chart on page 3 of my outline, right now the biggest areas where we can make progress are the priorities that Mr. Drexhage outlined in terms of focusing attention on carbon sequestration and the development of lower fossil-fuel alternative energy sources and making those key priorities for investment.

Let's be very clear about this. If you were able to sequestrate 20% of the greenhouse gas emissions from the oil and gas sector and if you were able to replace our electricity by 20% and keep manufacturing investing in new technology at a rate of 20% and replace all the cars on the road over the next five years, 20% of those cars, as a nation we would still be over 15% short of the Kyoto target. This is a tremendous undertaking that is not likely to take place within the Kyoto timeframe.

Are we arguing that we should forget it? No, absolutely not, but we should focus on how we can make real progress in the types of technological areas that are necessary to reduce greenhouse gases and to accelerate the emission intensity reductions. But let's be very clear about the magnitude of what we're undertaking.

[The Vice-Chair, Liberal, Mario Silva]

Thank you very much, Mr. Myers.

Before I take the next question I want to thank all of you for your presence here. We'll end the meeting at 11 o'clock.

Mr. Warawa.

[Mark Warawa, Conservative, Langley, BC]

Unfortunately, because you refused to take the chair we are running a little bit late, Mr. Chair.

I also thank the witnesses for being here. I wish I had an opportunity to ask you some questions, but because our agenda has one last item, and that was motions, I'm going to move right to that.

[The Vice-Chair, Liberal, Mario Silva]

Sorry, Mr. Warawa, I have to interrupt you.

[Mark Warawa, Conservative, Langley, BC]

I move the Standing Committee on Environment and Sustainable Development invite the Honourable Stéphane Dion to appear before the committee by Wednesday, November 29, 2006, as a witness for the discussion of Bill C-288.

Secondly, I move that the Standing Committee on Environment and Sustainable Development invite the Honourable David Anderson to appear before the committee by Wednesday, November 29, 2006, as a witness for the discussion of Bill C-288.

I so move.

[The Vice-Chair, Liberal, Mario Silva]

I was trying to let you know that we will not entertain motions as long as we have speakers, in fact the witnesses, so we can't entertain motions. But because it's 11 o'clock, I'd also like to adjourn the meeting.

The meeting is adjourned.