Environment Committee on Nov. 5th, 2009

[David McGuinty, Liberal, Ottawa South, ON]

Can you help Canadians understand how we are to reconcile this carbon differential pricing? We're told there's a North American target, a North American plan. How are we going to reconcile this? How is your sector going to reconcile this?

[Avrim Lazar]

The short answer is I don't know, but there are three elements to it. One, the price of carbon is not driven by an empty market. It's driven by government policy. So depending upon where government policy goes, it can go up or down. If government policy really squeezes and is muscular, then it's going to be high. If government policy allows more abundance, it's going to be lower. And if government policy comes in sooner, it will be lower because there is more room to adjust. If a government policy comes in later, it's going to be higher because people are going to have to adjust more quickly.

We certainly would prefer to see Canada know where it's going and develop a stance, but the bottom line is that the market is not going to be Canada. The market probably won't even be North America. It will probably be global.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Lazar.

Mr. McGuinty, your time has expired.

Mr. Bigras, you have seven minutes.

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

Thank you very much, Mr. Chair. I also want to thank the witnesses for their presentations.

Mr. Lazar, you very clearly stated that your industrial sector had significantly reduced its greenhouse gas emissions. You talked about a 60% reduction since the base year of 1990. Furthermore, last week, the Québec Forest Industry Council appeared before a parliamentary committee in order to set targets. Quebec also pointed out that its forest sector had significantly reduced its greenhouse gas emissions. In the paper mill sector, it was 41%, which is quite substantial.

Your industries still use 1990 as the base year, which is different from the federal government, which wants to use 2006 as the base year.

If the government decides to use 2006 as the base year and you have significantly reduced your greenhouse gas emissions since 1990, would you not consider that an unfair approach? What are you looking for as compensation if the federal government decides to use 2006 as the base year?

[Avrim Lazar]

That is a good question. We have always been clear that we would prefer an implementation date, a base year, that goes back as far as possible because we took action before everyone else. The matter of early actions is key because if the government's policies punish those who took action before the regulations came into force, that sends everyone the message that they should not do anything, that they should just wait for the regulations.

That being said, we could live with 2000. We prefer 1990. It depends on whether inside the regulatory regime there is recognition for early action.

People ask why this is so important. There are two reasons. One is that there's a big fairness issue. If I've caulked all my windows, closed the doors, and done everything that's easy as an early actor, and someone asks me to improve another 20%, I have to buy a new furnace or re-insulate my house. If I've done nothing, I can do all the cheap things. So if you've already acted, and then the regulation comes in without any recognition of that, it costs you more. You are actually financially penalized for your virtue. We don't want that.

Second, there's a public policy reason. I assume, as Canadians, that we want to see as much action done without being forced or paid by government. If all these voluntary actions then turn out to be penalties, what it does is send a signal to people who are behaving responsibly that the result will be disfavour.

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

The government would say to that that it has included recognition of early actions in the plan it recently set out. I think the government recognizes early actions up to a maximum of 15 megatonnes. So, would you estimate that all your efforts since 1990 add up to 15 megatonnes? Do you think that is enough?

[Avrim Lazar]

It appears that this particular approach is being reconsidered, so I'm not going to deal with it. Certainly how cogeneration is treated could provide for us a balance with respect to how early action is treated. If cogeneration is well treated, and biomass neutrality is well treated, there are ways of offsetting the negative impact of having been good citizens early on.

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

I would like to talk about another issue, carbon sinks. We know that Canada has approximately 10% of the world's forest area. I was reading one of your recent presentations from the World Forestry Congress in Argentina. You said that if we strive to keep our forests healthy, they will trap carbon.

I was also reading the revised plan from 2005, which estimated that by 2012, it would be possible to reduce greenhouse gas emissions by 30 megatonnes by making changes to Canada's current farming and forestry practices. That plan was set out in 2005, and 2012 is coming. Are we able to see where we're at? Are we able to assess the carbon uptake of Canada's forest and agricultural system? The thinking was that by 2012, we would be capable of absorbing 30 megatonnes. Do you know where we're at?

[Avrim Lazar]

I'll answer for forestry, and Don McCabe can answer for agriculture.

It is a bit more complicated because of the impact of the pine beetle and the fires. In reality, Canada's forests—I am not talking about those that are not under our management, but in general—are for the first time becoming

net emitters, because the beetle is eating so much and because we've had these huge fires.

We've been working with the environmental community and the scientists at Natural Resources Canada to ask how we can ensure that our forest operations don't contribute to the problem.

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

So, are you saying that the lack of action in recent years has seriously compromised efforts to reduce greenhouse gas emissions? Am I to understand that if we had been more aggressive on climate change, your industry would not be experiencing the natural consequences of global warming? I suppose the same goes for Mr. McCabe.

Mr. McCabe, you said that, and I have a hard time understanding...

[Avrim Lazar]

Let me quickly answer that, because you're putting a conclusion in my mouth. Would we have liked to see the entire Canadian society, including government and business, act more aggressively on climate change? The answer is yes. Can we blame the pine beetle on successive federal and provincial governments' lack of a regulatory plan? No. We have to admit that climate change is global.

I'll leave it now to Mr. McCabe.

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

Mr. McCabe, you just told us that you are not in favour of rigorous regulations because of the potential costs to your industry. So you are willing to adapt to the changes. Yet, does the forest sector's situation not tell us that if we do not take action, it will likely cost money and affect farmland? I am having a hard time understanding here. You say that we need money to adapt, but, at the same time, there is no guarantee that it will produce results. Is it not preferable to act now and change farming practices? Of course, it will require an investment in your sector, but, at least, it will ensure that we are contributing to greenhouse gas reductions, which will enhance the sustainability of Canada's farmland.

[The Chair, Conservative, James Bezan]

Monsieur Bigras, votre temps est écoulé.

Mr. McCabe, if you can give a quick response to the question from Mr. Bigras I'd appreciate it.

[Don McCabe]

Thank you, Mr. Chairman.

If I recollect properly, the 1990 estimate from Environment Canada for agriculture was 7.3 megatonnes of carbon dioxide being emitted. By 2000, agriculture was negative on carbon dioxide emissions. When you factor in methane and nitrous oxide, we've been holding our own since 1990, so that means we have been finding more innovative ways of doing business and producing more product with less input all the time. Back to my line: we mitigate and adapt at the same time.

So I would argue that agriculture has been doing more than its fair share without recognition and without credit for early action from any government at this point. That is wrapped up in the definition of “business as usual” that comes from a bureaucracy.

The issue at hand is that we have been doing our part on climate change. We need investment in research to continue to do our part on climate change, because we will be adapting for the future tomorrow.

[The Chair, Conservative, James Bezan]

Thank you very much.

Ms. Duncan, the floor is yours.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair.

Thank you, gentlemen, for appearing--and madam.

It's nice to see you, Mr. Lazar. We've been at way too many of these tables without results.

I really appreciated both of your testimonies--very helpful.

Mr. McGuinty asked you some questions, Mr. Lazar, about whether or not you've been consulted. You've probably been following the various processes that are going on--for example, the Commission for Environmental Cooperation. I'm sure you've been involved in that from time to time. The agreement that establishes that commission obligates Canada to provide advance notice and consultation on any policy law initiative.

The latest initiative is the U.S.-Canada clean energy dialogue. Under it the Government of Canada also commits to be in direct communication with Canadians--presumably that includes Canadian industry--on any initiatives they might be working on with the U.S. government.

You said that you haven't been involved directly in the development of regulations, although you have had some consultations on policy development. Are you saying you would appreciate it if your industry sector could be directly consulted on any regulatory regime the government is purportedly developing on its climate change initiative?

[Avrim Lazar]

Of course we always want to be consulted--and we have been. The minister and the bureaucrats talk to us; you talk to us. Our views are far from secret. We put them out in the newspapers. We've been on television. We've submitted them to Environment Canada. Our views are pretty clear: we want to see a climate regime in Canada that puts us ahead of the curve, is sufficiently aggressive that we won't be subject to border measures in the U.S., prevents leakage that results in production and jobs going elsewhere while the climate is not being protected, and recognizes cogeneration and our early action. We haven't been shy about any of those things.

At the same time, we understand that the government doesn't do policy entirely in consultation, because there are huge trade-offs. Let's be very honest with ourselves here. The entire global economy right now is dependent upon greenhouse gas emissions. What we're talking about is retooling the whole economy. We're an exporting nation. It isn't a simple task to reduce dependence on greenhouse gases when you're in a trading relationship.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

That's a long answer to a simple question, but thank you.

[Avrim Lazar]

The answer is yes. Any time they want to, we love to talk to them.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

My question specifically is have you been specifically consulted on what they have in mind as the target for your sector and what the regulations might look like for the regime?

[Avrim Lazar]

Yes. The answer's yes.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

So you know what your—

[Avrim Lazar]

No. Being consulted and being told is a different thing.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

So you don't know what the stated target is?

[Avrim Lazar]

We've been many times asked what would work, what would be useful, what would reduce the cost, and we've many times thought, if people ask what the reduction should be, we say 60% after 1990. We've done it. Eighty percent? We can do it, but then you have to look at the actual detail and see whether or not it makes sense.