Environment Committee on Oct. 29th, 2009

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Bramley, can we achieve the 25% real reduction in the next decade without international credits?

[Matthew Bramley]

I would never say it's impossible, but our analysis suggests that a feasible scenario does require using international reductions.

[David McGuinty, Liberal, Ottawa South, ON]

Did you say that 20% of our credits would be purchased offshore?

[Matthew Bramley]

In our models, in our scenarios, 20% of the gap between business as usual, which is 47% above the 1990 level in 2020, and going down to minus 25% below would be closed with international reductions.

[David McGuinty, Liberal, Ottawa South, ON]

So you are saying that we can achieve our reductions without international credits.

[Matthew Bramley]

I'm saying that in the scenarios that we regard as feasible, we close one-fifth of the gap with international reductions.

[David McGuinty, Liberal, Ottawa South, ON]

So you're saying we can't achieve our target of 25% without international credits.

[Matthew Bramley]

No. I don't think I would ever call that impossible, but in a feasible scenario, one that we would put forward, we would use international reductions.

[David McGuinty, Liberal, Ottawa South, ON]

In every legislative instrument that's being contemplated in Washington right now, Mr. Bramley, I understand that the contemplated cost of carbon is somewhere between $15 to $30 a tonne by 2020. It's one thing for the government to say it's harmonizing its design features with Washington. It's an entirely different matter to talk about price conformity.

How would we drive...for example, under the government's plan, which you just indicated cannot be met given the basket of measures they have put forward so far. There's no revelation in that; I think that has been obvious for a while. You're also saying that the price of carbon here would range anywhere from $100 to $200 a tonne. How would we be able to do that with that kind of pricing level in Canada when the Americans are contemplating a maximum price of $30 a tonne in the same timeframe?

[Matthew Bramley]

A number of studies have been done on the potential impacts on competitiveness of different carbon prices in different countries. Generally what the studies show is that because of the kinds of economies we're talking about.... Canada's economy is overwhelmingly a service economy, and much of the manufacturing sector is not particularly carbon intensive. The studies tend to find that the competitiveness effects are a lot smaller than are often made out, and this was borne out by our study. In the main numbers I've been presenting, we made the conservative assumption that Canada would have a carbon price considerably higher than the carbon price in the rest of the OECD, including the U.S.

[The Chair, Conservative, James Bezan]

Thank you. The time has expired.

Monsieur Bigras, sept minutes.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

Thank you very much, Mr. Chair.

First of all, I would like to welcome the witnesses, all of whom we recognize for their expertise.

Mr. Bramley, I thank you for your study which you presented this morning, because it enlightened parliamentarians on the economic impact of respecting the scientific evidence.

Until now, the government was expected to ensure a 25% reduction compared to 1990 between now and 2020. That would have spelled economic chaos in Canada: substantial job losses, a decline in the economy. It's as if we found the Canadian economy horribly weakened overnight.

Today we see—you'll tell me if I'm wrong—that between the government's scenario and the scientists', there's not as big an impact as we would have thought.

How is it that having ambitious goals doesn't considerably weaken our economy and the opposite happens? Why is it that substantial reductions don't lead to economic chaos as some people try to have us believe?

[Matthew Bramley]

There are several parts to the answer.

First, there are technologies available to significantly reduce emissions. We are familiar with renewable energy. For example, according to our scenarios, wind energy is projected to account 18% of the electricity produced in Canada in 2020. We have many possibilities in energy efficiency, and also in carbon capture. We therefore don't need to come up with new technologies; we already have solutions.

Second, yes, our scenarios call for carbon pricing. That would create a high price for emissions. It would also generate revenue that could be recycled into the economy to be reinvested in solutions and deal with problems that might arise, such as competitiveness problems in some specific sectors.

That is the answer I gave earlier; after all, the Canadian economy is primarily a service-based economy, and large parts of the manufacturing sector are not particularly big sources of greenhouse gases.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

When I read your report, I noted that by auctioning credits, the government could—unless I'm mistaken—bring in almost $72 billion a year, which you say could be reinvested in the economy. That would probably mean, according to your analysis, that the Canadian economy would be more competitive. When we talk about innovation, development and competitiveness, in the end, we're talking about job creation. Is that what I am to understand?

I was looking at the figures from the Canadian Wind Energy Association. You're talking 18% by 2020; the industry says 20%. In terms of electricity sales, the word is $78 billion dollars—of new money into the Canadian economy. That's probably an important factor.

I'd like to come back to the impact on each province. When I look at your table, I see that Alberta still has the highest year-over-year growth in GDP: 3.3%. Quebec, meanwhile, has the lowest annual growth in GDP in Canada; we're talking growth of 1.3%.

What guarantee does Alberta have that the commitments will be met, which is recommended by the Intergovernmental Panel on Climate Change? What assurance is there that the Alberta economy will still remain strong? According to your scenario, you take into account carbon sequestration and capture. How will Alberta be able to maintain its economic growth?

[Matthew Bramley]

Basically, when we talk about the impact on Alberta, the fate of the tar sands is key. When we impose the price on emissions—which ranges from $100 to $200 a tonne—according to the forecasts in the economic model, the industry says yes by limiting its growth. We would therefore always have strong growth in the tar sands industry, but slower than if the status quo were maintained. And the industry would also invest in carbon capture.

These two factors—growth, yes, but a bit more reasonable, and massive investment in carbon capture—mean that we actually have a slowdown in the Alberta economy. However, there is growth of 38% between 2010 and 2020 which, as you pointed out, would be the strongest growth of all the provinces.

[Bernard Bigras, Bloc, Rosemont—La Petite-Patrie, QC]

What strikes me also in your proposals are the comments made by the chief economist with TD Bank, Mr. Drummond. It basically seems to confirm to some extent what Nicholas Stern was saying, that is, that if we don't move quickly to counter climate change and reduce greenhouse gases, the cost will be considerable.

Am I to understand that if we don't comply with the two-degree rule, we'll lose? Applying the two-degree rule could actually cause us to lose some growth, but at the same time, if we don't apply the rule, we risk losing even more in that regard.

What strikes me is that between the government's scenario and the two-degree scenario, there's not a big difference considering the economic impact. Between two scenarios, the consequences of which are more or less the same, would we not be wise to go with the two-degree rule? Because that would enable us, from an environmental standpoint, not only to reduce our greenhouse gas emissions, but also to make sure that we have a forward-looking economy. Is the two-degree rule not a win-win option when all is said and done?

[Matthew Bramley]

It's very important to keep in mind, actually, that the status quo is very costly on a global level. We didn't put a figure on it in our study. However, it would be a huge mistake to limit the discussion to the cost of reducing emissions; we also have to talk about the cost of letting global warming go beyond two degrees.

As you surely know, in the report by economist Nicholas Stern —in 2006—it was suggested that if we don't act on climate change, we will have a permanent loss in GDP worldwide of between 5 and 20%. As far as we're concerned, the choice is fairly obvious.

[The Chair, Conservative, James Bezan]

Thank you very much. Your time is up.

Ms. Duncan, the floor is yours.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair.

Following Monsieur Bigras' comments, I notice that in the testimony of both...is it Dr. Drexhage?

[John Drexhage]

No, it's Mr. Drexhage.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Drexhage and Dr. Bramley, I notice you both pointed out that any delay means it will be more costly to move toward reduction because the price of carbon is going to rise. Monsieur Bigras also pointed out, if we're correct, Dr. Bramley, in the review you've done with the David Suzuki Foundation, that what you have not factored in is the cost of business as usual, what will happen with the climate change impacts.

I've also noticed in your report...and I had a briefing yesterday from the David Suzuki Foundation that was very helpful in my understanding of the background of your report and how you put it together. We were advised that the model does not appear to factor in the greenhouse gas reductions for job creation from energy retrofits and energy efficiency because there was difficulty in calculating them. Would it not perhaps be true that the scenario to tackle climate change in Bill C-311 could potentially provide even more jobs and greater greenhouse gas reduction than your report presents?

[Matthew Bramley]

We weren't able to model all the policies we wanted to. One of the areas where we didn't do all we wanted was in building retrofits. The models are better at modelling regulations and carbon pricing than they are at modelling subsidies and grants. I think we could have gone a bit further on the energy efficiency side than we show in the scenario.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

So it is true that your model shows the potential for job creation, economic benefit, and greenhouse gas reductions from the two scenarios, but does not factor in the costs, which Dr. Stern identifies: the longer we delay in reducing greenhouse gases, the greater the costs.

[Matthew Bramley]

What we do show, if you compare the study with, for example, the preliminary version we published a year before, is that the costs are going up as Canada delays emission reductions to meet a given target. As we were just saying, this study does not factor in the cost of climate change itself, which is going to be devastating worldwide if we don't take very serious action.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I think Mr. Drexhage looks as if he's dying to answer that too. Go ahead.