Environment Committee on Nov. 5th, 2009

[The Chair, Conservative, James Bezan]

I'll call this meeting to order.

We're running a bit late with the last committee running a little over time, but we're all set up and ready to roll.

We're going to continue with our study of Bill C-311.

We welcome to the table today a panel from industry. From the Forest Products Association of Canada, we welcome Avrim Lazar, who is the president and CEO. He's joined by Catherine Cobden, who is the vice-president of environment. Also joining us is Don McCabe, who is the chairman of the environment and science committee, vice-president of the Ontario Federation of Agriculture, and also the president of the Soil Conservation Council of Canada.

We welcome both organizations to the table, and we'll kick it off with your presentations.

Mr. Lazar, if you could go first, with a presentation under ten minutes, we'd appreciate it.

[Avrim Lazar, President and Chief Executive Officer, Forest Products Association of Canada]

Sure. Thank you, and good morning, everyone. Thanks for taking the time to chat with us.

Climate change is of enormous concern to Canada's forest industry. As you probably know, we are the world's largest exporting nation in forest products. The impact of the changed climate and also the impact of a changed economic marketplace because of climate change are of deep concern to us.

The changes we have already witnessed in the climate—the lack of cold winters—has had an impact on the forest industry. The pine beetle, which normally would have been killed off because of cold winters, has multiplied and multiplied. Now 25,000 Canadian families have lost their livelihood. They have had to leave their communities because of a lack of wood to feed the industry. We don't think of climate change as a future or an abstract threat; we think of it as an immediate threat to people's capacity to earn a living and feed their families.

As a result of this, we've probably been sensitized to the need to act on climate change a little earlier than some other industries. In our mills we've reduced our use of fossil fuels dramatically. We're at 60% reduction of greenhouse gases compared to the Kyoto base year of 1990. If you do this on an intensity basis, the number is actually a little better; I think it's 62% or 63%. Any way you look at it, we've made a very dramatic turnaround in our greenhouse gas performance.

We've done this by a deep retooling of our industrial processes, switching from fossil fuels to waste-based renewable fuels. What used to go to landfill and come out as methane now is going into the boilers and creating green energy. It's quite a dramatic turnaround.

Our customers have been asking us whether it is possible to produce carbon-neutral products. To do that, we had to go beyond the regulatory world view and look, cradle-to-grave, at our production. We are examining what we're doing in the forest. It's important to realize the impact of forestry on carbon stored in the forest, and of course to be certain that for every tree that is harvested, the carbon stored in that tree is replaced with a growing tree. We've also looked all the way through the value chain to the end-of-life cycle to make certain that our products don't end up in landfills and come back as methane.

We've taken a cradle-to-grave approach, or a cradle-to-recradle, and we've committed to being carbon neutral by 2015 without purchasing offsets from outside, which I think is quite a unique and ambitious target. We'd like to go from 60% renewable fuel to 100%. We think we can do that faster than 2015, but of course with economic circumstances capital renewal has slowed down.

Whereas this started as an environmental issue, it is quickly becoming an economic issue. The forest industry is fundamentally the carbon industry. A tree is carbon in long chains, and you transform a tree into pulp and paper and wood by adding extra energy.

Our competitors in Europe have long since had government policies to support the integration of bioenergy and bioproducts into the forest industry. In the United States, we see very massive subsidies, perhaps less policy-driven than we see in Europe, but nonetheless there are very massive subsidies around the issue of bioenergy. We would like to suggest to the committee that in addition to the need for muscular, aggressive regulation on the reduction of greenhouse gases, we also need a robust policy framework for the production of green energy and a robust investment regime for the production of green energy within the forest industry.

We recently completed a study in partnership with the Department of Natural Resources and the provinces, asking where this green energy is going to go. Interestingly, from a perspective of an environmental footprint, social footprint, a return on capital employed, the future for energy from biomass in the forest is integrating it into the existing industry infrastructure.

So we actually see a path forward, and we're looking for both policies and investments that will support it.

I think I'll stop there and wait for questions.

Thank you.

[The Chair, Conservative, James Bezan]

Thank you, Mr. Lazar.

Mr. McCabe, could you go ahead, please?.

[Don McCabe, Chairman, Environment and Science Committee, Vice-President of the Ontario Federation of Agriculture, and President of Soil Conservation Council of Canada]

Thank you, Mr. Chairman.

My name is Don McCabe. I'm actually a farmer from southwestern Ontario. I have an opportunity here today to bring agriculture's voice to this table. I think it's a very important time for agriculture to be appropriately recognized in these negotiations of policy and moves as we go forward.

I think it's very important that the definition of farmer be looked at in possibly the following manner. Farmers today are more managers of carbon and nitrogen cycles who are producing highest-quality starch, oil, fuel, fibre, and food for worldwide consumers. Therefore, if you're going to start looking how you're going to impact that flow of carbon, there's only one carbon atom on the periodic table, and I happen to be growing green ones. We deal in biological cycles. Those biological cycles are non-source issues.

I am in no position to take on further regulation on a non-point-source pollutant because, as the agriculture sector impacts of any sort of policy would come down, as we've had from initial analysis that we've done once upon a time, we buy it retail, we sell it wholesale, and we pay the trucking both ways. We have no room to move. Therefore, any increased costs for electricity, chemicals, fuel, fertilizer, or lime will be the largest increase that any sector will face.

By the same token, on the other side of the coin, we are very, very much looking for the opportunity to participate in this initiative as a voluntary opportunity for agriculture to establish a new revenue stream in the form of environmental goods and services or offsets.

In Canadian agriculture—according to Environment Canada, the last time I saw the numbers—we're roughly about 8.3% or 8.6% of the issue, according to the national inventory. I round that to 10% for easier figuring. I bring to the committee today the statement that agriculture will be 20% of the solution in the longer term, provided we get the rules right, and we can be higher if the rules are right.

The rules for us mean that mitigation is adaptation. I know this bill is looking at a long-term framework. But for agriculture, mitigation is adaptation. Right now I'm adapting to a beautiful September after a lousy summer that allowed the harvest of soybeans to extend into longer periods. I'm pretty sure I've got some corn that's going to have birthdays out there into May of 2010 for harvest. It's a similar picture that's unfolding across the country. We have grain still standing and oil seeds still standing in the west and issues in the east also. That is the issue of climate change.

I'm willing as a farmer to take on that risk and do that as my job description. What I'm not willing to take on is unneeded and unheeded policy that does not recognize the special needs of agriculture when we can bring you the opportunities to move forward. So as a biological system you have only two tools that we've seen that you can really look at in managing these issues as you move forward. One is to offer up a cap and trade with offsets system that we would be prepared to work with, from a 1990 baseline, and the Soil Conservation Council of Canada was willing to participate at that time. We are very much involved in wanting to have a cap-and-trade system recognized as we move forward.

The issue of a carbon tax is a complete non-starter for the agricultural sector. It's back to the issue that we have no room to move. Therefore, our carbon tax that's been applied within British Columbia has resulted in $10,000 being added to the average bill of a greenhouse operator in B.C. It means all the grain that comes out of the west and heads through that province to the port of Vancouver to reach worldwide markets has had a fuel surcharge placed on it within CN and CP. That's felt by the farmers of the west because CN and CP aren't taking that out of their bottom line. They're passing it back in the form of freight transfers to farmers.

Again, look at the cap-and-trade opportunity, because mitigation is adaptation for farmers. We very much have been a leader in having the recognition of agriculture sinks. This is an initiative that will be further pursued within Copenhagen, and agriculture hopefully will be recognized to be a solution as it leads. Canada needs to make sure our voice is heard, because we're the ones who have done the preliminary work and have the opportunity to further that along.

This brings us to the basic premise of research. It's research that has allowed us to get to this state. It is now research that is going to be necessary for us to be able to continue to lead in this vector. As a primary producer, I am benefiting from research today that was initiated ten years ago. I need to see that research continue now in an enhanced manner for Canada to maintain its leadership position in the agriculture sector.

Again, I come back to repeat one more time: Mitigation in agriculture is adaptation for the longer term. As we move forward here, agriculture will be able to assist. We will be able to assist, provided good policy is in place. I will take the risk of weather. I will take the risk of dealing with mother nature. What I will not stand for is the risk of bad policy that does not recognize the opportunities that I bring to the table.

Thank you. I look forward to your questions.

[The Chair, Conservative, James Bezan]

Thank you very much.

We'll go with our seven-minute round, first to the Liberals. Mr. McGuinty, kick us off, please.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you very much, Mr. Chair.

It's good to see you again, Mr. Lazar. And Mr. McCabe, it's good to see you again as well. Welcome. I don't think we've met before, but maybe we have.

I want to turn to both of you, first off, but I'm asking the same question of every witness who appears on Bill C-311 to start off the round of questioning. Does FPAC or the Canadian Federation of Agriculture have in their possession a Canadian climate change plan that you're working from now in your forest product and agriculture sectors?

You both made repeated calls for a number of elements to be addressed. Do you have in your possession now, 46 or 47 months into Canada's not-so-new government, a plan that you're working from that you are using with your membership, etc.? Do you have a plan? If you do, can you share it with us?

[Don McCabe]

The components of the plan, if it fits your definition of a plan, Mr. McGuinty, would be the issue that agriculture is 10% of the problem and 20% of the solution, and the fact that we are actively working toward wanting a cap-and-trade system to be recognized for Canadian farmers. That would be the plan of the CFA at this point, to have those principles recognized, and enhanced research opportunity to support those principles.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. McCabe, I understand the elements that you want to see addressed in a plan. Does the CFA and its extensive membership have in their possession now a Canadian domestic climate change plan?

[Don McCabe]

Evidently, sir, I am missing the nuances of your words. I would argue that every manager on every farm is going to be looking for their own opportunities to build their own plan at their own scale. Therefore, I would refer to the Soil Conservation Council of Canada working with Agriculture and Agri-Food Canada with software for people to investigate the current issue.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. McCabe, I take it that you do not have in your possession, nor does CFA, a Canadian national plan put forward by the government, particularly in anticipation of Copenhagen. You don't have a plan. Do you have a plan that the government has given you to take to your membership?

[Don McCabe]

Now that your question has become clear, no, sir.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Lazar, do you have a plan? Is FPAC working from a federal domestic climate change plan?

[Avrim Lazar]

We certainly haven't had a plan from any governments over the last while. Frankly, we haven't been waiting for government. We haven't waited for regulation. We've simply gone ahead, figured out what has to be done and are doing it. That's where we're at.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Lazar, while I've got you, what should Canada's target from 1990 levels be for climate change, GHG reductions, post-2012? What should the target be?

[Avrim Lazar]

We're already at 60%, so when we see in the bill that it is 80% a million years from now, it doesn't seem overly ambitious for our industry.

We're not talking for the entire Canadian society or the entire Canadian industrial base. Frankly, I cannot tell the government what the numbers should be for the entire Canadian economy, because I don't represent the economy. I haven't access to that kind of data. I can only tell you that for the forest industry, these sorts of numbers are achievable. I can also tell you that for the forest industry, which is suffering from the impact of climate change, we would like to see numbers that are muscular and ambitious and show real intention.

I would also add that sometimes the actual number is like a flag or a symbol, things that people hang on to. What's really important is whether they actually do it and whether doing it actually has an impact on the climate. Having an ambitious number that leads to leakage, for example, that leads to greenhouse gases coming out of Indonesia's forest industry instead of Canada's forest industry, doesn't actually help anything. So it's not the number that's important; it's the details and the design that are important.

[David McGuinty, Liberal, Ottawa South, ON]

I think that's fair, and I think you've said that repeatedly in your testimony. You said we needed muscular regulations combined with “robust policy frameworks and investment regimes”. Do we have muscular regulations and a robust policy framework and investment regime in the country right now?

[Avrim Lazar]

Not yet.

[David McGuinty, Liberal, Ottawa South, ON]

Okay. Do you know what it's going to look like?

[Avrim Lazar]

No. I assume that would be in the knowledge of parliamentarians.

[David McGuinty, Liberal, Ottawa South, ON]

Shouldn't you know that? Since you represent the FPAC, in terms of where FPAC would be tracking, for example, potential outcomes in Copenhagen and Washington, shouldn't you as the president of FPAC, representing so many billions of dollars of economic activity, have been consulted, have been dealing with the government, had advance notice, been participating, playing a role? Or are you going to be a policy number and design and framework and investment regime taker?

[Avrim Lazar]

To be fair, we have been talking with the government. One of the things we have said to the government is that designing a system that is cognizant of what the U.S. does so as to not create a border risk for us is very important. There are advantages and disadvantages. Canada's industries—and I speak not just for myself here—have been quick to criticize when things have been done without adequate consultation. We've been quick to criticize the fact that neither past governments nor this government have come out with the business certainty we'd like with a plan, so we're less interested in being critical about what's been done than on just getting on and doing it.

[David McGuinty, Liberal, Ottawa South, ON]

Here's a really important question for you, Mr. Lazar, which I'd like to finish up with. In all legislative initiatives in the United States that we have seen, the price of carbon in anticipation of 2020 was supposed to peak or is contemplated at peaking at $30 a tonne. We heard last week from the Pembina Institute, and from TD and others that funded the report, that the government's own plan will be a minimum of $100 a tonne by 2020, and as high as $200 if we follow what is now the ENGO target--not the NDP target but the ENGO target. What is the significance of that price differential for your sector? How are your members going to reconcile that kind of differential in price on carbon?

[Avrim Lazar]

We're planning to sell carbon.

[David McGuinty, Liberal, Ottawa South, ON]

Is that a good thing for you, then, if the price is higher?

[Avrim Lazar]

No, it's not, because it's not good for the general economy, and we have to sell into the general economy.