Environment Committee on June 4th, 2013

[Neil Maxwell, Interim Commissioner of the Environment and Sustainable Development, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

It's a pleasure to share our views on the draft federal sustainable development strategy. I'm joined today by Jim McKenzie, a senior colleague in the office.

Under the Federal Sustainable Development Act, I'm required to review the draft strategy and provide comments to the Minister of the Environment by June 14. We are still finalizing our review. Today I am providing our initial findings.

We are strong proponents of the requirement for a federal sustainable development strategy. It responds to concerns we expressed numerous times, as the minister noted, culminating in our 2007 report when we concluded that the existing process was not working. We recommended that the government establish overall federal goals for sustainable development.

We believe the strategy is essential as a means for the government to explain its environmental and sustainable development plan. We have found to date that the strategy addresses environmental issues that are indeed relevant and important to Canadians. A number of improvements are needed, however, for it to achieve its full potential. The strategy needs to be more complete and clear.

The strategy's intent is to build a whole-of-government picture by ensuring that it addresses important challenges and problems. However, we found it to be incomplete in some respects. First, some key initiatives are missing, such as the government's responsible resource development agenda and plans to monitor water, land and biodiversity in the oil sands region.

As well, the strategy does not include an indication of the resources that will be allocated to deliver on the targets and implementation strategies.

For the strategy to be clear, its targets and implementation strategies must also be clear and measurable. They provide the basis for assessing and reporting on the strategy's goals. They are also an important part of good accountability and transparency. In this regard, most of the 34 targets lack sufficient clarity, which will make it difficult to assess progress over the short and long term.

An example is target 2.3, to reduce risk to Canadians and impacts on the environment and human health posed by harmful substances emitted to air. That target specifies neither the extent of this reduction nor timeframe, both critical for assessing progress.

Other targets are sufficiently clear. For instance, target 1.1 aims to reduce Canada's total greenhouse gas emissions by 17% by 2020, relative to 2005 emission levels. Target 4.4 aims to improve the condition of at least one ecological integrity indicator in 20 national parks by 2015.

We found that almost all of the implementation strategies are directly linked to their respective targets. However, much more needs to be done to make them clear and measurable. We also found that the large number of implementation strategies—over 200—makes it difficult to determine which ones are most critical. For example, one target has 50 implementation strategies. Highlighting the most important of these would help communicate the government's sustainable development priorities.

I'm pleased to report that there are some key improvements from the previous strategy, which covered 2010 to 2013. For example, a section related to reducing the government's environmental footprint, theme IV, is more strategic and focused. We believe this section provides a useful model for other parts of the strategy. Also, indicators have been introduced, which should be helpful in measuring progress on its goals and targets.

In conclusion, the strategy addresses environmental issues that are relevant and important to Canadians, but because it's not sufficiently complete or clear as yet, its potential for communicating the government's environmental and sustainable development plan is not fully realized. With a number of improvements, some easily achieved, the strategy would become a valuable tool for showing Canadians how the government is addressing the environmental and sustainable development issues we face.

Mr. Chair, your committee can play an important role in that process of improvement. I commend you for the attention you're giving today to this draft strategy. I would urge the committee to also study the report on progress, released in February, on progress on the very first strategy.

The strategy and progress report should be useful to your committee and its members on an ongoing basis, since everything related to the federal environmental and sustainable development activities should be in there. By regularly using these reports, you create an environment where improvements are much more likely to take place.

We hope that our review will prove useful to the development of this strategy.

Mr. Chair, that concludes my opening remarks. We would be happy to answer the committee's questions.

[The Chair, Conservative, Harold Albrecht]

Thank you, Mr. Maxwell.

We'll move now to Mr. David Sawyer, from the International Institute for Sustainable Development.

[David Sawyer, Vice-President, Climate, Energy and Partnerships, International Institute for Sustainable Development]

Thank you, Mr. Chair.

Members of the committee, ladies and gentlemen, it's my pleasure to be here today to reflect on the draft federal SDS. Our CEO, Scott Vaughan, extends his regrets. He's in China working with decision-makers on new programs basically to help China improve its SD management practices.

The International Institute for Sustainable Development has been facilitating the transition to development futures that are more sustainable for about 20 years now. We've been working actively at home from our base in Canada and abroad as a non-partisan thought leader building partnerships and engaging policy-makers in government, business, and civil society.

Currently we're working in about 45 countries. Recently we reviewed 15 global sustainable development strategies. This work basically informs some of our input and thinking today which we share with you.

While IISD has witnessed the rise of sustainable development as a unifying concept, we have also witnessed its calcification under the environment pillar alone, where SD now essentially equals environment. This has raised the risk that SD as a unifying frame could be perhaps passé, with a limited ability to help achieve national development aspirations. But a renewed shift in the SD landscape has recently emerged where there's an increasing recognition that environmental, economic, and social linkages need to be more tightly bundled and thought of in policy development.

In Canada, for example, we are seeing an interesting trend towards revealing the economic value of ecosystem goods and services that is strengthening on-the-ground efforts to manage wetlands, grasslands, and watersheds, helping farming communities, ecosystem users, and conservationists alike. In a sense, we're starting to come full circle where SD as practised is starting to better align with SD as originally conceived under the Brundtland commission over 25 years ago.

The federal government is in good company with the hundred or so countries that have published national sustainable development strategies globally. SD strategies are clearly the vehicle of choice for governments around the world to translate SD policy into practice. In 2012, as I indicated, we reviewed about 32 of these hundred or so global SD strategies to look for lessons learned and to assess the global state of play. Again, our findings are informative and influence our thinking and our presentation here today.

While we found that success hinges on many things—SD is a complex issue—two elements are worth noting within the context of the draft federal SDS. First, an ideal SDS emphasizes good governance and enables implementation, so SD strategies are both governance reform agendas and a north star to signal expectations within and outside government. Successful SD strategies build on elements of good governance, including transparency, accountability, evaluation, and performance reporting. They then commit resources to the SDS agenda in an open and transparent manner, signalling priorities, while implementation road maps make clear the actions that are to come to support the aspirations contained in the SD strategies.

Success hinges on horizontal integration and a dynamic forward-looking view. This is important. I'll pick this up later. There is no doubt that ineffective integration between institutions within and outside government and a myopic focus on environment alone impede SDS success. Integration needs to move beyond the environment pillar, truly enabling horizontal implementation to broaden the SD constituency, both within and outside government. Core central agencies are key to poking and prodding for more horizontal integration and coordination, and for achieving success.

Related is a more forward-looking and strategic view that goes beyond short-term departmental plans and priorities, and addresses long-term uncertainties and risks. Basically, what are we doing? Where are we going? What risks do we need to identify?

With those general observations, I'll now jump more specifically into six recommendations or observations on the draft SDS.

Not surprisingly, we see the federal SDS as currently constructed as a clearinghouse for environment programs. There are long lists in the back of the SDS. There's a need to rethink the singular pillar in the SDS and broaden the focus to more closely align with the balanced view of SDS, the original intent of SD, sustainable development.

While housing the SDS in Environment Canada makes sense, consolidating and centralizing what has been a diffuse function in the past across many departments, it also reinforces the stereotype that SD is an environment issue alone, which we think is a significant risk.

As an environmental clearinghouse, this SDS is less useful as a strategic forward-looking SD document. Our observation is that the draft SDS at best provides a snapshot in time with a limited strategic view and road map for success. A longer term and more integrated view would strengthen this SDS.

We think there's a need to communicate SDS linkages more clearly. Priority areas in the draft SDS have large economic and social consequences and have positive environmental outcomes.

We know, for example, that climate long ago moved from an environmental issue to an economic issue. That explains why we haven't moved on the file. Recently, the head of the IMF concurred in Davos this year and said that climate is the single biggest issue facing economies in the 21st century. This is certainly the case in Canada where the government's sector-based GHG regulations will likely pose costs. These costs are published in the Canada Gazette, part II, and are in the order of $30 billion between now and 2030.

These aren't our estimates. They come right out of the regulatory impact analysis statements. Clearly, these have significant impacts on consumers and households for an environmental outcome. We need to better translate and talk about these linkages and better communicate and articulate the trade-offs of federal policy.

The SDS could be more transparent. There's a deluge of priority indicators and implementation strategies in the back of the document that are confusing to parliamentarians, the public, and certainly to us. There's a need to simplify priority indicators under a few key areas and go deep on those, as well as outline implementation road maps, articulate financial disbursements, and indicate performance reporting in these priority areas.

I have two more quick points.

One is the need to improve financial reporting. It's hard to understand priorities and disbursements in the current document; in fact, it's almost impossible. You have to dig into plans and priorities and other documents to understand what is being allocated to these programs, what the priorities are, and the size of activities. We think improved financial performance reporting would strengthen the document and be more realistic.

Two, there's always a gap in plans between aspirations and actions. We see it in everything we do. Being more realistic and not so aspirational would realign and fix more realistic expectations. We think a more realistic accounting of what we want to do and where we want to go would help.

For these reasons we think some additional effort is required to make the draft FSDS more transparent, more strategic, and perhaps more balanced to reflect the core elements of SD.

Thank you for your time. I would be happy to answer your questions and explore these issues.

[The Chair, Conservative, Harold Albrecht]

Thank you very much, Mr. Sawyer.

We will move next to Sustainable Development Technology Canada. We have Vicky Sharpe, the president and CEO.

Welcome, Vicky.

[Dr. Vicky Sharpe, President and Chief Executive Officer, Sustainable Development Technology Canada]

Thank you very much, Mr. Chair and committee members.

I'm delighted to have an opportunity to speak to you today about a subject which I am very passionate about, and so is the team at SDTC.

I would like to draw your attention to the materials we've handed out. We'll address this from the perspective of an entity that has truly integrated all elements of sustainable development into its decision-making.

We were created by the Government of Canada through an act of Parliament. We essentially build clean technologies. We help to ensure that they make it out to market, for it is only in the marketplace that the environmental returns occur. We have responsibility for two funds; both of them are complementary, and as I said, help to take these technologies and companies to the marketplace.

If you direct your attention to slide 3, you'll see that we've been able to engage different companies and technologies across the entire country. You can see that they are able to contribute to our economy, whether that be in urban locations or rural communities.

There's a different emphasis in clusters of capacity. In British Columbia, you tend to see a focus on different kinds of power generation. There's energy exploration, not surprisingly, in Alberta, and waste management in Quebec. Given Ontario's vast industrial base, we see clean technology solutions for increasing efficiency in the utilization of energy, whether that be for industry, commercial buildings, or the retail sector.

Moving on, and perhaps picking up on Mr. Sawyer's comments, you have to see economic returns from these companies. We have been able to build companies that have shown about $400 million in revenues in 2012 and have created 7,000 jobs.

This is just 22 of the 245 companies that are in our portfolio. We are tracking their results specifically. We actually interview them. These are not made-up numbers. You can see that by 2015 we anticipate over $5 billion in revenues and about 24,000 jobs created, and there will be more to come.

If you look at the environmental impacts under climate change, we are reporting an impact of between 7 and 17 megatonnes by 2015 from the entire portfolio. I'd like to draw your attention to the care we take in how we report these. These numbers are essentially reduced to accommodate risk factors by between 80% and 94%. This is a significant impact, but by indicating a range we're being very careful. It's a powerful indicator of what we need to do to move forward.

If you look at the next slide on clean air, these emissions are really.... The benefits are largely captured in smog areas where there is a density of both urban living and also transportation. We've looked at the impact on the smog airsheds and how the avoided health costs can be measured as a result of implementing these technologies. You can see that for 81 of our portfolio companies in the transportation and power generation sectors, we anticipate about $1.5 billion of avoided health-related costs by 2025.

I will move to an area where in fact SDTC has shown leadership in trying to quantify the impacts on soil and water. Those are very difficult, depending on your watershed, the kind of chemical you're avoiding, or whether it's water conservation. What you're seeing is roughly $60 million in avoided health costs by 2025 that are linked to these.

If we talk about what we're going to do internationally, clearly the markets in Canada are limited and our GHG impacts are global, so we are moving toward trying to increase Canada's share of the global clean tech market. That is going to increase significantly. By 2020, if we double our share of the market—currently it's 1%—we will be able to generate some $60 billion in revenues and 126,000 jobs.

Looking at the examples of companies that can deliver those so it's not just a wish list, you've got some compound annual growth and revenue statistics for some of our companies which show that Canada is building globally competitive companies.

Where we are working in specific sectors, looking at the slide with the heading “Helping to “Green" Oil and Gas”, you will see we have taken two views. One is around improving the efficacy of the extraction of both oil and gas using different kinds of technologies that reduce the use of water and the use of energy. We have a number of examples which have shown that these areas of opportunity are realistic. The other area we look at is pipelining and whether we can make sure we are detecting potential flaws before there are failures and therefore direct the company to effectively manage the safety of the pipelines and fix them as needed. That work is also very successful.

There was some discussion around buildings. The next slide talks about a very broad portfolio we have of energy efficiency technologies, whether it be dimmable fluorescent ballasts, or ice storage for load balancing and energy reduction—a lot of lighting technologies take up about 20% of a commercial building's energy usage—and then control systems as well.

Moving to the transportation sector, which is one of the largest polluters for Canada but also important globally, SDTC has a portfolio that treats the vehicles as a system. We're looking at advanced materials, light-weighting—for every 10 % in weight reduction, there's a 7% reduction in fuel use—and also fuel cells and advanced batteries that can work for hybrid vehicles.

Quickly touching on providing solutions in regulated industries, I think SDTC is a primary example of how we can work with the regulated companies to find solutions which they may adopt so that in time they are able to respond effectively to those regulations, and that they bring about the intended results.

We do this in a wide range of areas, not surprisingly, working extensively with the power utilities, waste management, the oil and gas sector, and looking at clean water regulations. We are a backup, if you like, in enabling to act for the various regulatory policies the government is putting forward.

How do we ensure that we are working across the government? Slide 15 shows you the kinds of things we're doing to ensure there is linkage and continuity. We've partnered with Export Development Canada to ensure that we have a way of reaching out to those global markets by identifying great companies. EDC has provided analysis of the great markets we can tackle and also supports policies and instruments to manage risk for those companies going into the global markets.

We work a lot with NRCan on the green mining initiative, for example. We work a lot with them. We work with Environment Canada on their environmental technology verification initiative. We interface with NRC IRAP to ensure there is continuity in the ecosystem for clean tech development. We fed a number of SDTC companies to the Canadian innovation commercialization program under Public Works to ensure that those companies get an opportunity to be adopted by the government. We work, again not surprisingly, with DFAIT on their clean-tech advisory board to ensure we're putting our best foot forward in international markets. There's significant collaboration across the federal family.

Moving out into the provinces, SDTC has been involved in the design and development of a number of provincial funds. We're working directly on due diligence sharing and shared investments in British Columbia, Alberta, Ontario, Quebec, and Nova Scotia. These provincial partnerships have provided an additional $132 million of provincial money into the SDTC portfolio companies.

Moving out to the international arena, I would add that the fast-track funds that have been put forward by this government, for example to International Finance Corporation, we have been working with them to ensure Canadian company access.

Thank you.

[The Chair, Conservative, Harold Albrecht]

Thank you very much, Ms. Sharpe.

We're going to move now to the five-minute rounds of questioning, beginning with Mr. Sopuck.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Thank you very much. Seeing as we only have five minutes I'll try to keep it short, which is difficult for any politician.

The Commissioner of the Environment and Sustainable Development conducted—and this is from Mr. Maxwell—11 highly critical audits of the previous sustainable development approach between 1997 and 2008. He made the point that at that time the approach to sustainable development across the federal government consisted of individual departmental sustainable development strategies, which made the former sustainable development strategies ineffective and hard to measure.

How has the current federal sustainable development strategy improved on this?

[Neil Maxwell]

As I mentioned, we are very strong supporters of this federal sustainable development strategy. The problem with the old system—and we used the analogy of trying to put together a jigsaw puzzle—was what we had before were lots of pieces, but we never had the picture on the front of the box that tells you how it all fits together. Really, the federal sustainable development strategy is still in its early stages. It's only the second strategy, but we see this as something that has a lot of potential to paint that broad picture of what the government is attempting to do.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

I appreciate that.

Mr. Sawyer, I think committee members, if they listened to your testimony very carefully as I did, would have been quite surprised when you made the comment, which I actually agree with, that sustainable development is disappointing. I don't know if you used the word “disappointing”, but you expressed concern that it was equated only with the environment. To use your words, you said uses of sustainable development had “a myopic focus on environment alone”.

Having read the Brundtland commission report myself, can you define sustainable development, or describe the definition of sustainable development as it came out in the Brundtland commission report and comment on the notion of sustainable development being equated only as an environmental concept?

[David Sawyer]

So you're asking me to go back to grad school. I will pass on a definition from the Brundtland commission, if I may. It's been a while.

SD is a simple concept with a really poor track record in implementation, and there has been a real problem with taking this notion, the general definition of balancing environment, economy, and society, balancing decisions to get sort of positive outcomes in those three spaces, and making clear the trade-offs. We actually do it very well in regulatory analysis. If you look at the RIAS, regulatory impact analysis statements, in the Gazette part I online, there's a very clear outline for what you get for what you spend, and who's impacted and how much. But there then seems to be a gap up to the SDS level where that view, which is ingrained in the bureaucracy, doesn't make it into the high-level declarations around the SDS.

Just to finish, it's balancing environment, economy, society, and decisions, and making clear trade-offs, but I think more importantly, moving to implementation. That's where I think we're really suffering.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

In terms of the definition of sustainable development, the old three-legged stool of social, environmental, and economic, can we accurately say that sustainable development is actually a development concept?

[David Sawyer]

Economic growth, human capital, environmental performance, there are all kinds of labels we can put on the outcomes that flow from that three-legged stool. What I'm saying is the fourth leg, governance, is where we fall down, and perhaps the definition is lacking in a nod to good governance.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

In terms of a notion of a country's development and the creation of wealth, the minister made a point earlier that in spite of Canada's something like 5% growth over the last couple of years, our greenhouse gas emissions have actually gone down. So it is very possible, and the track record is fairly clear that especially in the western industrial free market democracies, the creation of wealth is almost always accompanied by an increase in environmental performance. More wealth equals a better environment.

[David Sawyer]

I think the assertion that our emissions have gone down is not quite right. That's a snapshot in time in 2010, sort of mirroring the cratering of economic performance after the financial crisis of 2008-09. I think even the government's trends report shows increases in emissions.

In terms of natural wealth, I think of it as a bank account: to the extent you're increasing your economic account and converting your natural capital into monetary capital, you're less well off. It's sort of a stocks and flow issue, and your bank account is depleting. Your environmental ATM is going into overdrive. So conserving wetlands, conserving protected areas makes sense intrinsically, and they also reduce downstream costs on others.

[The Chair, Conservative, Harold Albrecht]

Mr. Sopuck, I'm sorry, but your time is up. I know it doesn't seem like five minutes, but it is.

Mr. Choquette.

[François Choquette, NDP, Drummond, QC]

Thank you very much, Mr. Chair.

I thank the witnesses for their statements.

I would like to go back to the answers the Minister of the Environment, Mr. Kent, gave a bit earlier. He told us that there were no more subsidies to the fossil fuel industries. He stated that the perception in that regard was mistaken because the subsidies were in fact being allocated to fight climate change. However, there are indeed income tax credits, such as the Canadian Exploration Expenses and the Canadian Development Expenses, that are comparable to subsidies.

Mr. Commissioner, I would like to ask you the following question. The Commissioner of the Environment and Sustainable Development once said that we had really made a commitment at the G20 to eliminate subsidies. I see that you have the report of the Commissioner of the Environment and Sustainable Development. Did we really eliminate the subsidies? Can we have some further clarification on that? Do you have those clarifications, Mr. Commissioner?

[Neil Maxwell]

Thank you for the question.

My predecessor, Mr. Vaughan, completed a study on financial subsidies. That was included in our report in February. I am not an expert in this area, but we noted a few points of interest during that study, that is to say regarding most of the subsidies.

I apologize, but I am going to answer in English because I don't know the terminology in French regarding these subsidies.

We concluded that the biggest single subsidy at the moment is the accelerated capital cost allowance. That is being phased out, and the minister did mention that. The two largest ones that remain are tax expenditures. Those are, as was mentioned, the Canadian development—I have my copy in French here, so if I'm totally confused, excuse me—tax expenditure and the exploration one.

One of the things we noted in that study is that while we could put a price tag against the accelerated capital cost allowance, Finance isn't in a position to estimate what the tax expenditures actually cost the Canadian taxpayer. Now, we did note that this is a very difficult area. It is very difficult to estimate tax expenditures, but one of the things we noted was that it is an important part of what the government needs to work on, because that is what remains as two key elements of the support.

[François Choquette, NDP, Drummond, QC]

If I understand correctly, you are saying that there are still some tax credits and subsidies for the fossil fuel industry. They are in the process of being eliminated, but they still exist.

[Neil Maxwell]

Yes, we would be very pleased to give you more explanations concerning this study if the committee—

[François Choquette, NDP, Drummond, QC]

You also spoke about the importance of having some clearer points, of having greater transparency and measurable development. One of my colleagues, Mr. Pierre Jacob, tabled a bill which would require that all federal legislation respect the principles of the Federal Sustainable Development Act.

Would something like that constitute a good solution that would allow us to have more measurable sustainable development?

[Neil Maxwell]

Thank you for the question.

I met with Mr. Jacob to discuss his bill. In theory, we support the idea of always taking sustainable development considerations into account when decisions are made. It is a very important aspect of this concept of sustainable development, that is to say

the integrated decision-making.

In principle, we do not support such bills because that is a political question, but

the principle is a very important one.

[François Choquette, NDP, Drummond, QC]

Thank you very much.

Have you made any comparisons? At this time, we have the Federal Sustainable Development Strategy which of course includes the climate change plan. We see that there are different ways of doing things. Some provinces do different things in this regard. For instance, Alberta and British Columbia have a carbon tax. Quebec has a carbon fee and will have a carbon exchange, like California.

Have you done any studies on this? Is there a better approach that could be considered? Between the sector by sector approach and fees, taxes or exchanges, which is the most effective? What is the percentage of positive effects in the provinces as compared to the federal government's sectoral approach? Several scientists have said that the federal approach has little impact.

[The Chair, Conservative, Harold Albrecht]

Mr. Maxwell, I'll give you a few seconds.

[Neil Maxwell]

We have not done such a comparative study on the various approaches to reduce greenhouse gases. However, we will soon be updating an audit carried out a few years ago, according to which we have estimated or

projected how well the government was doing in terms of meeting its 2020 targets on climate change. That will be for our report in 2014.

[The Chair, Conservative, Harold Albrecht]

Thank you, Mr. Choquette.

We'll move now to Mr. Toet, for five minutes.