Environment Committee on Nov. 5th, 2009

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Anyway, I'd like to credit you for your early action. It's commendable.

I'm also gleaning from your testimony that, similar to the information that I read in a number of reports.... KPMG did a survey some years back of CEOs in major industries, the northeast states air mission management regime did a survey of pollutants, what actually drives the reductions and the shift in investment, and in all cases they've set a regulatory trigger. So am I reading you clearly that you're saying what we need is a clear regime to actually provide the fairness and the cut-off date?

[Avrim Lazar]

We certainly would like to see a regime. Fairness will only happen if it's global. If we have a regime that's made in Canada—and we want one—and our competitors have no controls on them, it can and will be a problem.

We want to see a regime, but the bottom line is, so far, we actually have seen change driven more by markets than by government. We're out there in the marketplace advertising our environmental qualities, and that's part of why we've done it.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. McCabe, thank you very much for your testimony.

We heard from Dr. Sauchyn. I don't know if you're aware of him, but he's a professor at the University of Regina. He was one of the lead authors in the federal government report on adaptation on climate change. There's a big fat chapter on agriculture, clearly indicating concerns already in the agricultural community about the impacts of climate change on your industry and the need to be considering your needs and what your role might be.

There has been an offset program, including for agricultural offsets in Alberta for quite some time. The reports back by a number of the farmers in that program are that they welcome the money. For example, a farmer who's got a 25,000-head feedlot and 800 hectare farm said he was just paid $100,000 for the fact that he did low tillage. But his comment has been that while he welcomes the money, he really questions the value of the market.

What's the feeling in your sector about these agricultural offsets? Do you think they should be in place? Do you think they should go back in time and credit those farmers who actually have done low tillage and so forth for a long time?

You spoke about actions taken already by the agricultural sector. In the federal regime, do you think they should be considering credit for actions already taken by farmers who consider the impact on the environment? What should the starting date be?

[Don McCabe]

The Soil Conservation Council of Canada has on the books a resolution stating that we would be happy to work from a 1990 baseline. The issue of recognizing what pioneers have done, especially in the area of no-till, would reward their actions and also further complement bringing new people on to the system.

With regard to the Alberta system in the aggregate, the Alberta system started mid-2007, roughly July 2007. By the end of 2008 there were 500 million tonnes of offsets created in the province of Alberta. Some 1.5 million of those came from no-till alone.

Using, then, the low price of $6 a tonne for that—and of course these are sealed contracts, so it's rumour, but anywhere from $6 to $15—six times 1.5 million is nine million, but ten is easier to remember. There's $10 million in farmers' pockets who definitely need that when we are also the ones who are facing the pressures of increased fuel cost, increased electricity, increased everything else, because those greenhouse gas emissions that impact those regulated industries will be passed on to this primary sector.

Therefore that offset that we're being recognized for helps offset that expense that we are feeling already in the precluding of other regulations.

[The Chair, Conservative, James Bezan]

I'm sorry, Ms. Duncan, but your time has expired.

Go ahead, Mr. Warawa, for a seven-minute round.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

I thank the witnesses for being here. I've heard most of you before, and it's good to see you back.

Canadians often criticize the previous Liberal government, which was in power for the 13 years from 1993 to 2006, for doing nothing on the environment. We blame them for creating an environmental mess, but, Mr. Lazar, you reminded us that climate change is a global issue and not just a Canadian issue. Thank you for that reminder.

The mountain pine beetle kill occurred not just because the Liberals were not acting on the environment, but also because of a warming climate, a changing climate. On the mountain pine beetle kill, we've heard that it takes a very cold temperature arriving very quickly to kill the mountain pine beetle. I've watched, hoping that we're going to get a very quick, very cold winter.

Last year in British Columbia and Alberta it became very cold very quickly, and it lasted a long time. Did that affect the spread of the mountain pine beetle?

[Avrim Lazar]

We expected it to have a bigger dampening than what we saw. I'm not an entomologist, so I can't claim to be an expert witness on beetle biology, but the explosion of numbers has led to a change in the biology of the beetle. Its capacity to adapt to changing circumstances has actually increased a lot because of the numbers, so this particular plague has not gone away.

The scientists are pretty consistent on three things. Part of the problem with the beetle is fire suppression. If there weren't so much juicy timber there, they wouldn't do as well, but nobody wants to see huge fires.

It is the traditionally very cold weather in the early fall that kills them off, but partly the scientists are consistent in saying that it hasn't behaved the way they expected.

[Mark Warawa, Conservative, Langley, BC]

Thank you. It was a curiosity question.

I'm now going to focus on the direction Canada is heading in addressing climate change.

We began the clean energy dialogue after the administrative changes in the United States with the Obama administration. We've been working aggressively toward a new international agreement to deal with climate change and focusing on Copenhagen. Canada has consistently used the target of a 20% reduction by 2020. We've also said that it is important for all the major emitters to be part of the solution, part of the new agreement. The focus is on making sure that China, the United States, and India--all the major emitters--are part of this new agreement. The United States is committing. There are ongoing negotiations as we prepare for Copenhagen.

My question is on the importance of a North American approach. You've said there will be a new global economy, but as Canada enters the negotiations, to protect the Canadian economy, which is interlinked with the American economy, would it be better for us to take a North American approach, as opposed to adopting a stand-alone approach and accepting European targets?

We had some scientists at our last meeting, including Mr. John Drexhage. I shared with the witnesses that I had just come back from Copenhagen, where we saw $2.50-a-litre gasoline, a tax of 180% on a new vehicle, and electricity prices six times what they were in Canada. The question to Mr. Drexhage was whether this was the direction we should be going and whether we should be accepting that type of lifestyle. His answer to the question asking basically if we have to become another Denmark and Sweden was, “I think to a large degree yes, we do”.

What would that do to our Canadian economy? What would it do to industry if we stood alone, away from the U.S., and accepted Denmark and Sweden targets, with massive increases in taxation? Would that disadvantage Canadian industry? Canadian forestry products are not stand-alone. If the economy is healthy, your industry is healthy. What would it do to the economy in Canada if we broke away from negotiations with the U.S.?

[Avrim Lazar]

That question is almost as long as some of my answers.

The question of should we stand alone, stand global, or stand with the United States is almost a sort of false dichotomy. Of course our policy has to recognize that the United States is our single largest customer, and we're making a big mistake if we do stuff that gives them an excuse to put in protectionist barriers under a climate change cloak. So we have to be mindful of the protectionist threat from the U.S. We also have to be mindful of the fact that it's really a North American marketplace, especially for forest products. So cap-and-trade systems and measures should be coordinated to the extent possible.

We also should not be totally innocent here and realize that most countries are viewing this both as a regulatory and environmental necessity but also as an economic opportunity inside the climate change adjustment. I'll give you an example. Finland, which is a fairly brilliant nation in its own way, is a global leader both in forest products and Nokia telephones. The Finns' approach now is to have a comprehensive forest products bio-energy and bio-products strategy to make themselves one of the global premier producers in that new opportunity. Not only do they have the policy but they also have the funding to do it. All over Europe you see huge amounts of funding for the transformation into green energy and now we're seeing it popping up all over the U.S. Farm Bill.

So yes, we have to be mindful that we're in a North American marketplace and design our system so that it works within that. Yes, we have to be mindful that we're in a global marketplace and put into place either border or other measures to make sure we don't get the leakage, the jobs go elsewhere, and the greenhouse gases come into the atmosphere anyway.

But also yes, I think we should be self-interested as Canadians and ask whether we should actually have a policy to increase our economic advantage in the world's new competition in bio-energy, given that we have huge capacity in bio-energy. We produce enough bio-energy in our mills alone to replace three nuclear reactors. We're huge producers, and we could go way bigger than that. That's going to require a little bit of European thinking, which is a good policy framework, because you don't want to just buy it, and a little bit of American thinking, which is a heavy investment program, combined into a Canadian way of doing it, which is sort of strategic intelligence and very leveraged funding.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Lazar.

We'll go to our five-minute rounds. Mr. Valeriote, you can kick us off.

[Frank Valeriote, Liberal, Guelph, ON]

Thank you, gentlemen, for appearing before us.

Just so that history isn't completely distorted, I want to remind everyone that from 2002 to 2006 Canada was engaged with the United States in a North American energy dialogue, which was immediately killed upon the Conservatives coming into power. Let's not forget that.

Let's not forget the culmination of our efforts over those 13 years to coalesce public and international opinion on the actual occurrence of global warming. Let's not forget Project Green and all the regulations that were passed in 2005 that were completely dismantled by this government upon coming into power.

Having clarified some of that for the record, I'd like to just say this. Mr. Lazar, you were speaking of credits and offsets, and I'm wondering if you have an understanding of this government's current position on the need for international credits and offsets. As I understand it, they feel that targets can be met without engaging in international credits and offsets, contrary to what I believe was said last week by Mr. Suzuki, the Pembina Institute, and the TD Bank. Can you enlighten us on your understanding of engagement in international credits and offsets?

Mr. McCabe or Ms. Cobden, should you wish to offer your opinion, you're certainly welcome to jump in.

[Avrim Lazar]

Last time I heard, it sounded as if they were considering international offsets. I suggest that you put that to the Minister of the Environment rather than to the forest industry.

In terms of the role of international credits, I think it's worth noting that 20% of greenhouse gases come from deforestation. One of the brilliant things people are looking at, going into Copenhagen, is actually having a system whereby areas that would have been deforested or could be reforested get credit from industrialized countries for storing the carbon. Certainly if that's part of the scheme, our experience is that it would be very helpful.

I'll just throw in something extra. There's something we could do in Canada that would have an international impact. About 10% of the global supply of wood and paper comes from illegal logs. Our experience with illegal loggers is that they don't sneak back at night and replant trees, so it is a big contributor to deforestation. It reduces the economics for the responsible players globally. If we had a more robust policy in Canada to trace all fibre back to legal sources, that would also help offset what's happening internationally.

[Frank Valeriote, Liberal, Guelph, ON]

You spoke of the commitment President Obama has made to funding their efforts. I'm wondering if you have made any observations on and comparisons to the adequacy of the funding of this government towards the reduction of global warming.

[Avrim Lazar]

It's hard to compare, because the U.S. funding seems to crop up--they're going to build a bridge out of corn; they have parts of the Farm Bill; then it's going the other way. We're waiting to see.

I think it's fair to say, and I say it with a fair bit of confidence, that in Canada we have not chosen to fund the transformation to green energy as aggressively as other industrialized countries have. The support for transformation to green energy in Europe and the United States remains quite a bit stronger. Given all the difficulties we're having in the forest industry--and we've been quite clear that we don't think government can save us from those difficulties if they're market-driven--better and more intelligently used funding for integrating bio-energy and bio-products into the industry would change the economics.

When you saw a log, chips come out, and those chips can go into making pulp, making energy, or making chemicals. If you actually have bio-refineries that can use those chips in any one of those three ways, the economics become a great deal more stable. But we're not going to get there without funding, because Europe and the United States are competing. In fact, I'd say that we've gone from an age of increasing global competition to an age of increasing international, between-nations competition. In the forest industry and in the bio-energy business, it is actually competition between nations more than between companies because of the size of the interventions of government.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Valeriote. Your time has expired. It goes by fast when you're having fun.

Mr. Woodworth, you're on.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you very much.

Since Mr. Valeriote has started us setting the record straight, I'll begin by setting the record straight on the fact that under the former Liberal government, carbon emissions in Canada went up 35% above the Kyoto targets. While Mr. Valeriote may wish that the Liberals had had one more turn to finally get it right, regrettably, that just didn't happen.

I'd like to also take a page from Mr. McGuinty and begin by asking each of the witnesses if they are aware of the government's plan, “Turning the Corner”, to reduce Canadian emissions by 20% below 2006 levels by 2020. Are you aware of that, Mr. Lazar and Mr. McCabe?

[Avrim Lazar]

Yes, we've seen it.

[Don McCabe]

Yes, I am.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you.

Mr. McCabe, I would like to ask you a little bit about offsets and subsidies. I will begin by asking if you have done any research or are familiar with the proposals for offsets and subsidies being made in the United States that might benefit American agriculture.

[Don McCabe]

I would be aware of the discussions that are ongoing with the Waxman-Markey bill, and that the Western Climate Initiative, which is a coalition of seven western states, has recognized ag offsets within the discussions that are ongoing there. And that pulls British Columbia, Ontario, and Quebec into those discussions, along with Manitoba.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Good. Can you tell me, in your view, what would be the consequences if the offsets and subsidies that are included in the American climate change plan were more generous to American agricultural interests than are the offsets and subsidies that we might end up with in Canada, agriculturally?

[Don McCabe]

I would argue that we are already living that dream, and it's a nightmare on this side of the border because the offset support system that's required for Canada needs to take into credit early action and it needs to recognize what's going on. I've already entered into testimony what the opportunities are being experienced in Alberta, and therefore I'd draw an immediate parallel between the support the American farmer is receiving right now from Washington, D.C. when it comes to general commodity support versus the inadequacy of our current safety net programs here.

I know that's not necessarily the direction you're headed with regard to offsets, but bottom line, I sell in the Chicago Board of Trade. So does every Canadian farmer. Whether they go through Winnipeg, it eventually gets back to Chicago. We cannot afford to continue to ignore the primary sector that feeds everybody.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

To put it another way, would I be correct to say that we can't afford to have an offset or subsidy system that isn't highly harmonized with the American offset and subsidy system, at least when it comes to agriculture?

[Don McCabe]

Allow me to be clear, sir: the Americans may have subsidies, but in Canada it's support. When you support a Canadian farmer, I'm going to turn around and support my local economy and you're going to have it back quicker than you ever saw it go out.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

My impression is that the Canadian agricultural industry is in the same market and competing with the American agricultural industry. Am I right thus far, at least?