Environment Committee on Nov. 5th, 2009

[Avrim Lazar]

No. Our view is that if you just have cap and trade, you're missing a huge number of emissions. Let me give you an example from the forest industry. If you just have cap and trade, the only place where you can get to us is in the mills. That means that the emissions from our trucks, from landfill, from our products—all of that—aren't captured. We believe in cap and trade. We also believe in a carbon tax to catch those things that are not point-source.

The next question is, would you applaud a cap and trade and carbon tax system? The answer is yes, if it's done intelligently, if the detail is right. There are cap and trade systems we would find totally unacceptable and there are ones we would find acceptable, and the case is same with the carbon tax. These binary sorts of choices are not so simple.

[The Chair, Conservative, James Bezan]

Under those circumstances, though, which one will have the biggest effect on input costs in your industries? In agriculture...and even in forestry you have a huge cost to harvest the timber. Fuel prices are going to go up, possibly electricity prices, and fertilizer prices for sure, especially on the nitrogen side of the equation. So which one has the largest impact?

[Avrim Lazar]

It depends how you do it. I wish I could give you the answer. You could do a cap and trade with a cap so tight that we could not afford to ship, you could do a carbon tax so high that we could not afford to ship, or you could do some blend of the two that allows economic adaptation.

[The Chair, Conservative, James Bezan]

You guys haven't decided whether it's $50 a tonne or $100 a tonne for the price of carbon. Where is the balancing act? That is one of the questions we have.

[Avrim Lazar]

The size of the carbon tax has to be set by the government. Do we want to be taxed? No. Do we want to be capped? No. Do we want everyone to do something about climate change? Yes.

Then, when you come to the actual details of it, a little switch here or there changes everything so much. People say cap and trade. Okay, but if the base year is 2010, we're not happy. If the base year is 1990, cap away. The actual details matter so much that it is hard to judge. It's like asking whether we think screwdrivers or hammers are better instruments. It depends where and for what.

But we do know that cap and trade, if it just applies to point emissions, puts all the onus on one part of the economy, whereas a carbon tax spreads it out more. It's hard to see how to do it without having some application of both instruments.

[The Chair, Conservative, James Bezan]

Mr. McCabe, you talked about offsets and needing to have the offsets in collaboration with cap and trade. Would those offsets be generated through government sources or would it be in the marketplace, through the trade of carbon?

[Don McCabe]

I believe we can look at Alberta, where the offsets were generated by the private sector in response to a government regulation imposed on certain regulated industries. They went looking for them; the private sector responded.

The Intergovernmental Panel on Climate Change has said in its last studies that if the U.S. price of a carbon dioxide emission were $20 per tonne, agriculture and forestry could put up a total mitigation potential of 21%. If that were to jump to $100 per tonne, which I personally think is quite excessive, you'd be looking at 45%.

This comes right back to the comments made already by my colleague here. We would need to know a heck of a lot of detail to be able to fully answer your direct question. But in concept, for agriculture I want to see a cap and trade system with offsets, because if you're going to regulate the point sources that have been identified already in previous plans of governments in Canada since the introduction of the Kyoto Protocol, I know that agriculture is going to face increases. We're not in a position to do so. We need an offset stream to be able to introduce our voluntary bit. A carbon tax is very simple to administer; it's very easy to collect. But it also further erodes agriculture's opportunities, because we have no place to pass it on.

[The Chair, Conservative, James Bezan]

That's what my next question was going to be. As a primary producer, you have no place to which you can pass it on, because you depend so much on the marketplace to dictate the price of your commodities.

We're heading into Copenhagen. A lot of people are calling Bill C-311 the Copenhagen bill. We've heard some members of the committee talk about the need to harmonize with the United States, but we also heard Mr. Lazar talk about this being a global issue needing a global policy. There has been discussion that countries in the developing world might not need to come to the table right away with the same standards that we in the industrialized world are going to put upon ourselves.

If we do things in Canada, the U.S., and Europe concerning carbon policy and reductions in emissions, and yet places such as China and India do nothing, what is going to happen to food production and to where food comes from in this country, if we aren't on a level playing field with those countries?

[Don McCabe]

Canada is predominantly an exporting nation in food production and everything else. What I cannot bear is further increases in my costs that I cannot offset in another direction. When it comes to what China and India may choose to do on a political front, Copenhagen is going to answer that.

I finished planting soybeans on May 24 and travelled to Copenhagen on May 25 to take part in negotiations with other countries around a conference table on where the sum of this is at. At the end of the day, all farmers in the world are the same: we're managers of carbon and nitrogen. We're looking for clear policy, because when I came back home, my bean plant didn't care whether the carbon dioxide it just sucked up was from my Chevy or from a Shanghai coal mine.

The bottom line is that targets will be set. Canada is in a leadership position to offer technologies and abilities right now. We need to make sure we go there with the best opportunity to show the world what we can do. We can't afford to lose lock-step on this, because primary sectors are losing more and more all the time without a proper policy front.

[The Chair, Conservative, James Bezan]

Thank you.

We have about 12 minutes left. I want to give a round to every party. We have four parties here, so we have three minutes each.

Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Thanks, Mr. Chair, and thank you for opening the door on Copenhagen, although I take exception to some of your assertions; they are so reminiscent of the Republican Party in the United States, Mr. Chair, and in fact they were repeated by the Prime Minister for ten years before he discovered that the science of climate change is rather frightening.

Mr. McCabe and Mr. Lazar, now that we have opened the door on Copenhagen, let me ask you again a couple of pointed questions. What is Canada saying right now about the use of international credits in Copenhagen and in the international round?

Mr. McCabe, you were there. Quickly, can you let us know? What are we saying about the use of international credits?

[Don McCabe]

My understanding today of the use of international credits is that Canada would limit the amount that would be allowed for compliance within a domestic system. At this point in time, I have to agree with the concept of looking internally, because if I were, for example, Shell or TransAlta or somebody else and I can find it first in my own backyard, that's where I have to do it. I'm influenced best in my own backyard.

[David McGuinty, Liberal, Ottawa South, ON]

The Canadian Federation of Agriculture is in favour of not having access to international credits. Is that what you're saying?

[Don McCabe]

You are putting words in my mouth, sir.

What I'm saying is that we need, first of all, for agriculture to be recognized for credit creation in Copenhagen. We're not there yet.

[David McGuinty, Liberal, Ottawa South, ON]

Okay.

Mr. Lazar, can you help us understand? Mr. Woodworth continues to resurrect the ghost of some plan that's disappeared. Perhaps you can help us understand. Under this former plan, which has evaporated, the regulations were promised three years ago and then they were promised this fall. Now they've been delayed indefinitely by the minister, who is announcing that Copenhagen will fail. Can you help us understand what the price of carbon will be? Have you seen any numbers, metrics, analysis, akin to what we saw last week by two NGOs financed by TD Bank? What will the price of energy be under Mr. Woodworth's so-called plan? What effects will it have on the price of electricity and energy, not only for your sector but for Canadians? Have you seen a plan?

[Avrim Lazar]

I think you already asked that question. I'm going to answer the question on international credits instead, because I know you're really interested in that as well. You will remember my last answer to the question, have I seen a plan, which is no.

On international credits, we clearly need access to international credits if we're going to do this globally, because it creates an incentive for developing nations to get on the train of reducing--

[David McGuinty, Liberal, Ottawa South, ON]

Is Canada saying this in Copenhagen?

[Avrim Lazar]

I don't know what Canada is saying in Copenhagen. I'm not in Copenhagen. But there is a huge advantage to the Canadian economy to doing as much as we can domestically. Simply buying foreign credits doesn't retool our economy. If we've learned one thing, it is that the sooner you get on with the business of retooling the economy to be less greenhouse-gas dependent, the better off we all are.

[The Chair, Conservative, James Bezan]

Thank you.

I'm sorry, time has expired.

Mr. Bigras.

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

Mr. Chair, I want to start from a premise put forward by Mr. Warawa, who makes a pretty good case. My comments are mainly aimed at the representatives from the agricultural sector.

Our population is increasing dramatically, as is our consumption, to the point that we have more livestock operations in Canada and an increase in fertilizer use. That is probably why 53% of greenhouse gas emissions in Canada's agricultural sector come from livestock production. So our methods have to change. And we have two tools to do that: regulations and taxation. We could adopt taxation measures.

I know that I am treading on dangerous ground here, but I want to hear your thoughts on environmental conditionality in agriculture, in other words, making support measures in agriculture conditional on good farming practices. For instance, if a farmer opted to use solid manure over liquid manure, it would reduce methane emissions. We could establish measures to deal with manure and promote biomass energy in the agricultural sector.

Would you be in favour of taxation measures that are based on the principle of environmental conditionality with respect to funding for the agricultural sector?

[Don McCabe]

Let me refer to the Province of Ontario, where a green energy act was just introduced that has put feed-in tariff statements in place for various levels, whether biomass, biogas, wind, solar, or hydro power connections. I would stress that's not a form of taxation; I would say it's a form of opportunity where people now know what the rules are and can choose to comply or not to comply.

Taxation is a hammer that should only be used when you need to do mass collection on non-point sources you can't control. That's why I believe B.C. introduced a carbon tax to go after emissions from a great number of motor vehicles, because they were not going to chase down particular point-source initiatives. In Alberta, while they recognized the issue of point-source initiatives, they were able to work with them to produce a system that would allow the opportunity to bring an agricultural return on offset opportunities.

At the end of the day, if you're going to continue down this road of taxation, please make sure you put it into a research arena that's going to allow the work to continue to increase. If it were not for the research initiatives that agriculture has realized, we would not be seeing, for example, the corn production at the yields we now have, or canola production where we're currently at. Research like this will allow us to do much more with much less land, and thus feed the burgeoning population that's going to occur in this country and the world. I forget the exact estimates from the UN, but by 2050 we're going to have a few more billion people on this earth. Therefore, taxation to shut down an industry is not an initiative I'm willing to support.

[The Chair, Conservative, James Bezan]

Thank you.

Your time has expired.

Mr. Hyer, welcome to the committee. I'm glad to see you here.

[Bruce Hyer, NDP, Thunder Bay—Superior North, ON]

Thanks, Mr. Bezan.

I have a very broad question. I only have one question for each of you, and I hope your answers can be short or to the point, and much simpler than the question, because you don't have much time to do it.

My question to each of you is, what is the top thing you would like this and future governments to do? And what's the top thing you don't want them to do? What's the best and worst thing the government can do in the short and long terms to help your industry thrive and grow while controlling greenhouse gases?

[Avrim Lazar]

It would be a robust, far-seeing policy framework for the integration of bio-energy and bioproducts into the existing industry and an investment program to speed that transformation so we can get there before our competitors do.

[Bruce Hyer, NDP, Thunder Bay—Superior North, ON]

What would you prefer the government not do?