Environment Committee on Dec. 5th, 2006

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

In 2004 the secretariat was phased out entirely, and this secretariat was meant to do the horizontal management, to do the tracking of departments and spending. What has since gone in its place? What commitments has government made to put in its place?

[Johanne Gélinas]

To our knowledge, nothing has ever replaced the Climate Change Secretariat.

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

Concerning the bill presented to us today, one of the questions that has been raised is who will eventually make the decisions about targets and timelines. As it is right now, there's been some confusion in past jurisdictions as to how this was going to come to fruition.

I know it's difficult for you to comment on policy, but I'm trying to understand whether this bill moves toward the satisfaction of the concerns you raised around accountability. You suggested in your report of 2006, this past year, that accountability was one of the main concerns about ever being effective in reducing our emissions. As I look through this bill, I'm trying to find the places where that is specifically addressed. I don't know whether you have done the same or have given consideration to where that hole might be plugged.

[Johanne Gélinas]

We have not looked at the bill in that respect. We have read the proposed bill, but from an auditor's standpoint, it doesn't really matter what you put in place, as long as it is implemented. I cannot go further than that.

We have to see whether whatever we have—the Clean Air Act, CEPA, or other legislation in Canada—will be properly implemented and achieve the results for which it was designed. I cannot go further. I know you don't like these responses, but I cannot go further than that.

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

No, it's respectful of the jurisdiction. It's a frustration in that we have to wait so many years beyond the fact to understand what was truly done and what wasn't.

Mr. Alvarez, I have a question for you, following on Mr. Godfrey's theme somewhat that your industry has recognized the importance and the threat of climate change. I don't want to make that assumption, but is that fair to say?

[Pierre Alvarez]

Absolutely.

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

Okay.

Is the notion, then, of internalizing the costs of your production—the costs particularly of pollution, in this case, and of greenhouse gas emissions—an accepted standard or belief within the industry now; that those costs need to be internalized?

[Pierre Alvarez]

I think, Mr. Cullen, you would have different companies looking at different ways to do it. If the question is whether industry is prepared to deal with its share, then yes, I think industry is prepared to deal with its share.

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

On the question, then, around the difference between emissions intensity and hard caps, I'm still confused as to why industry wouldn't seek the certainty of a hard cap—a fixed, across-the-board, level playing field for all of the competitors in your association—as opposed to the notion of intensity reductions. If climate change is a serious consideration and there are some, at least, in your industry willing to internalize the costs, why is there a reluctance about a hard cap concerning something we see as a threat both environmentally and, in the Stern report and others, economically? If we've done it before under the Montreal Protocol and other agreements, why is there the resistance to that?

[Pierre Alvarez]

I have a couple of comments. First, recognizing that we are a very global industry, you are going to have to look at what that does to an investment dollar here in Canada versus other parts of the world that are big producers. Secondly, you have to look at the issue of caps in our sector versus other caps in other parts of the economy where the investment dollar is going to flow. But I think, thirdly, the biggest issue, from our point of view, is how quickly can you make some of these changes happen, and what is the net benefit?

A quick way to achieve reductions, and hard reductions, in our sector would be, for example, to do all the upgrading of heavy oil in the United States. That is the most energy-intensive part of our business. It would certainly reduce our emissions here in Canada. On the other hand, if the Chinese or the Americans are doing the upgrading, it does nothing from a global point of view.

These are not simple tactics and they're not simple issues. We have put forward a proposal to this government and previous governments on how to accommodate that.

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

I have a question on the use of different mechanisms. Bill C-288 talks about at least four different mechanisms available to the government to achieve our Kyoto commitments. Does your industry have a position on the notion of using tax policy and the tax system to encourage the types of investments we know your industry has already made, but to encourage them to the level that would bring us more in compliance and more to the other levels of developing countries?

[Pierre Alvarez]

Clearly, when you look at the biggest challenge facing us, it's going to be on new technology development over the medium and long term, from a global perspective. Take Canada and just lump it in with China and everyone else.

From a global perspective, if we don't find new technology that will in the short term manage the carbon dioxide, but in the long term reduce the absolute amounts going into the atmosphere, we're not going to make a difference over time. There is no silver bullet technology at this point in time. So do we see a role for government in that? Absolutely.

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

Specifically around the use of the tax system, the way we apply taxes to business, is this something your industry would encourage?

[Pierre Alvarez]

I think it is something we have to look at. We've seen expansions of the use of depreciation, for example, into the renewable areas. We've supported the wind subsidies for the development of new—

I think you have to be very careful. You need to tread very carefully and know why you're doing it and where you're doing it, but I think, sure, there are elements and cases where it will be appropriate.

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

Ms. Donnelly, you've very provocative statements and an interesting perspective we haven't had yet, around the market—and I know Mr. Bramley might want to take the microphone, as well—but the thing I don't understand is, with the amount of emissions trading going on in the world today, you've talked about a massive oversupply of credits. How has the market simply not completely collapsed down to next to nothing if there's such a massive oversupply?

[Aldyen Donnelly]

The market will collapse down to nothing, which is why a prudent investor is not participating in it.

And let's put the numbers in context. We all read about the value of the EU allowance market and we read about big numbers, but the January 1, 2005, to-date turnover of EU allowances--arm's-length turnover when I net out swaps--as a percentage of the stock of allowances that are in the market is 2.5%.

To put that in context, the EU phase one allowance supply exceeds the physical capacity of the covered facilities to emit by 11%. So before that market opened up, I presumed at least 11% of the supply would be turning over just because it's free. That really big number you keep reading about is 2.5%. It's 2.5% because almost everyone in the marketplace cannot make any sense of this market, because it's not a real market. So all they're doing right now is sitting on their allowances, saying, “I'm not going to play this game until it looks real to me.”

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

It's confusing to me, and I'm wondering if Mr. Bramley might take a microphone to offer a countering view. The positions in Nairobi, from the other countries coming forward on specifically emissions, were painting a drastically different picture, and certainly a much more enthusiastic picture, about the amount of money actually being traded and the freeing up of capital, as Mr. Alvarez has talked about, that was made possible to municipalities, and so on.

I'm wondering, Mr. Bramley, if you might comment on what you've heard.

[Aldyen Donnelly]

Could I just comment? Every time you talk to a European, they're going to be enthusiastic about this, because the only way to stop the European market from crashing is to get Canadian, Japanese, and New Zealand money into it.

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

Yes, but as a principle of an international market system no different from a stock market, and this is what I'm trying to make some comparisons—

[Aldyen Donnelly]

It's very different from a stock market.

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

Yes. Let's allow that.

[The Chair, Conservative, Bob Mills]

Mr. Cullen, we're nearing the end of our time.

Mr. Bramley, if you could, be very brief, please.

[Matthew Bramley, Director, Climate Change, Pembina Institute]

There are different parts of the global carbon market. The EU emissions trading system is one part. I believe that Aldyen Donnelly, in her initial remarks, was referring to the so-called “hot air” credits that in theory are available to be traded under Kyoto.

I might have time to elaborate in a later response to a later question, but on the specific question of the EU market, first of all, the EU market is essentially in a pilot phase currently between 2005 and 2007. Governments in fact didn't have all the data they needed to make allocations of permits or any other equivalently set targets for the first phase, and that led to a price correction when the data became clearer.

Having said that, the price of units that are being traded for the second phase of the EU system, that is to say the Kyoto phase 2008 to 2012, remained quite high. I believe it stayed at or around €20 a tonne. I don't think a market that's trading at €20 a tonne is a market that is fatally oversupplied. Furthermore, the European Commission has been very clear--in fact, this has been reported on in the media recently--that for the second phase it's going to be very tough in requiring countries to allocate fewer permits so that we can be sure the market is actually short and producing real reductions.

[The Chair, Conservative, Bob Mills]

Mr. Bramley, you have testified at the last meeting. Really this was to give a new person an opportunity, so I would ask you not to get into long answers, simply because you have had your time before the committee.

Let us go on, please, to Mr. Warawa.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Mr. Chair. I'll be sharing my time with Mr. Harvey.

Just to provide clarity, Bill C-288 is a private member's bill from Mr. Rodriguez, supported by his party, the Liberal Party, which was the former government for the last 13 years, when they had an opportunity to do something on the environment. The title of Bill C-288 is An Act to ensure Canada meets its global climate change obligations under the Kyoto Protocol. As we go into the bill, what is that Kyoto Protocol? It's again clarified: “the Kyoto Protocol requires that Canada reduce its average annual greenhouse gas emissions during the period 2008-2012 to 6% below their level in 1990”.

We now know we're at 35% above that target. As part of the Kyoto Protocol, the previous government was supposed to report annually. The report that was due January 1, 2006, showed that Canada was on target to hit 47% above, and that it would cost billions of dollars to try to meet those targets. Clearly we were not able to meet those targets. Yet we have Bill C-288 suggesting that we continue to try to meet those targets when the previous government did not.

We now have a new government. We have a report from the environment commissioner, and I appreciate her being here today. She was here earlier when she introduced this report.

I really do appreciate, Commissioner, your challenge to this government and all members of Parliament to work together. That was my last question of you: do you believe we should be working together, particularly in a minority Parliament, because of the issue of the environment? And you did encourage us to work together.

In your report, you said:

At a government-wide level, our audits revealed inadequate leadership, planning, and performance. To date, the approach has lacked foresight and direction and has created confusion and uncertainty for those trying to deal with it. Many of the weaknesses identified in our audits are of the government's own making. It has not been effective in leading and deciding on many of the key areas under its control. Change is needed.

Mr. Chair, the government has made very clear to this Parliament that it was working very hard on a change--a change that would address climate change, a change in government focus that would address pollution levels--and thus we have Bill C-30, the proposed Canada's Clean Air Act. There were five hours of debate yesterday, and it will be debated and dealt with in the legislative committee. But at this committee now we are in the last meeting dealing with Bill C-288. So we have two opposing agendas. We have the government dealing with the environment, getting on with it and providing leadership. On the other hand, we have an opposition member providing a bill that would contradict what the government wants to do.

The question I've asked every witness to this point at the committee is this: do we believe we can meet these targets? Are they random targets, arbitrarily set, or are they scientifically set? Can we meet those targets in Canada? To this point, all but one witness has said no, we cannot domestically meet those targets. The only way we can meet those targets is to send billions of dollars out of Canada.

This government supports keeping that money here, developing technologies right here in Canada in order to be world leaders. That's my position and that's the position of the government, that we need to be clear leaders internationally.

Mr. Chair, I can see right now that I'm going to use my full ten minutes, so my apologies to Mr. Harvey.

We had a quote from Professor Villeneuve from the University of Quebec. He said: “In closing, I'd like to comment on the bill. This bill would have been excellent if it had been introduced in 1998”—indicating that it was not a relevant bill. If the government had acted on the bill when it had a chance, then we may have had a completely different situation from what we're dealing with right now.

Professor Mark Jaccard somewhat agreed, but somewhat disagreed. He said, “When someone said, 'This is a good bill for 1999', I would say, 'No, it still doesn't give you enough timeframe.'”

We have professionals, scientists, saying yes, we all agree that we need to come up with a plan, but what's the best plan? Is Bill C-288 the good plan? It's not based on science; it's based on politics.

Bill C-30 deals with timeframes; it moves from voluntary to mandatory. It provides clear leadership in dealing with the issues of greenhouse gases. This is what I would encourage members to support, and not support Bill C-288. But that is my personal opinion.

My question to the witnesses, and the commissioner, would be deemed a political question, so I'm not going to ask it of you. I'm going to ask this of the witnesses--Ms. Donnelly, Mr. Alvarez, Mr. Hyndman, and the witness from Greenpeace. Do you believe we can meet the Kyoto targets, as recommended or required in Bill C-288, disregarding comments from Mr. Godfrey, who said that we must not be absolutely obsessed with the Kyoto target when we are dealing with Bill C-288.

Bill C-288 requires us to meet those targets. Do you believe we can meet those targets of reducing greenhouse gas emissions by 6% below 1999 levels? Can we do it domestically? Is it a realistic target?