Environment Committee on Oct. 18th, 2018

[The Chair, Mr. John Aldag (Cloverdale—Langley City, Lib.)]

Welcome, everybody, to our second session on our study related to the pan-Canadian framework on climate change with an emphasis on international leadership.

We have two presenters today, two organizations presenting. On video conference we have Mr. Balasubramanian.

We'll start with you. I'll give you 10 minutes to present. We like to go with our video conference presenters first, just because sometimes the technology can be a bit finicky. We'll hear from you and then we'll go to our panel in person.

We welcome both of you. Again, I'll give you 10 minutes.

Then we'll get into our questions. We'll go back and forth, for about six minutes each. I'll let you know when there's one minute left and when your time is up. Normally, for a panel we'll spend an hour, so we'll go through and see where we're at with the questions in an hour. At that point, if there's agreement from the committee, we can move to our closed session, which will be in camera, to discuss some committee business. Then we'll see where the rest of the meeting goes. That's kind of the flow for this afternoon.

With that, let's get started with our first witness by video conference.

If you'd like to start your introductory comments for EcoAdvisors, sir, you have 10 minutes.

[Hari Balasubramanian, Managing Partner, EcoAdvisors]

That's wonderful. Thank you so much.

At EcoAdvisors, we look at the financial opportunities of sustainability and a zero-carbon future. That's the business of what we do. We're a consulting business. It's a great opportunity for us to speak here because we tend to focus our attention globally, so it's nice to be able to do more work and think about this issue domestically.

First of all, I'd like to say that we do commend the country on the pan-Canadian framework, but in order to take leadership on the international stage, we all know that frameworks are only a first step and the details of implementing a framework are where we really need to go. It's a particularly exciting time for climate change generally and for the financial opportunities in particular. In the last eight weeks, I've had the opportunity to attend several meetings and see several reports that have come out, on both the bad and the good.

I'll start with the bad side.

Last Monday, we saw the IPCC's special report, which had a couple of pretty astounding things in it. The first is that the problem is probably worse than we thought. The second is that it's probably going to happen sooner than we thought. The threshold needs to be lower than we thought or we're going to lose critical ecosystems, like coral reefs around the world. Also, a zero-carbon future isn't the only answer or the limit to the answer. We also have to have CDR, or carbon dioxide removal, solutions.

We also learned that coordination needs to be thorough and imminent across sectors, in order to induce the behaviour change for zero-carbon and net-positive-carbon futures.

I'll stop the negative there, but on the positive side, there are a couple of meetings that I want to highlight.

The first was in San Francisco, where Governor Brown held the Global Climate Action Summit. I've been to several of these global meetings before, where commitments are made, like the UNFCCC, where countries come together and the private sector, for example, the Clinton Global Initiative and others, make commitments. However, the GCAS this year was different to me, for a couple of reasons. A combination of sectors came together to make what seemed to be real commitments, with targets, timelines and funding allocated to them, like Governor Brown committing to zero-carbon electrification for California by 2045 and private sector companies coming to zero-carbon future commitments across entire operations, across transportation networks and across supply chains, in real terms by 2030. These aren't companies on the fringe, or sustainable companies or B corps. These are Fortune 100 companies that are leading the world, and these aren't decisions made purely from an environmental perspective. These are decisions made from an operational and financial perspective. I'll get into some examples of our work there in a minute.

The second meeting I'd like to highlight is Michael Bloomberg's One Planet Summit, which happened two weeks ago in New York. It was another collection of people who came together. To me, that meeting was more inspiring because of what they released just before it. Bloomberg was the chair of the task force on climate-related financial disclosures. It's a report that should be read here in Canada. Although, to me, the inspiration there is not necessarily the details of the report, but who was involved and the amount of capital that is interested in this issue of climate-related risk being real financial risk for the future of investment. The scale at which the investors involved are investing is over $100 trillion of assets under management. To me, this is the first time we've moved from a discussion on the policy fringes or the realms of the private sector, as individual operators working from tens of trillions to $100 trillion of assets under management, that is looking at climate as a key financial risk for investment decisions, which will drive behaviour change to a zero-net carbon future.

Of course, we also had the Nobel Prize and the recommendations that Paul Romer and William Nordhaus have made for years. Two key things come out of there for me. One is that mitigation is required, which is going to be cheaper to do today than it is going to be in the future, and that the most efficient pathway is through a carbon-pricing scheme. For me, it's not only the efficiency and expediency of that but the financial opportunity that we can dictate out of that.

We know there are lots of struggles, such as why this conversation is very difficult from a political perspective, from a theoretical perspective and from a timing perspective. It's very hard for societies to think in long-term time frames, so short-term decisions often override them. However, this shift of thinking about investor solutions in the long term and profitability and financial disclosure related to climate in particular, but sustainability more generally, is encouraging for me, to see the future of behaviour change happening.

As I said, we work to demonstrate the financial value of sustainability in a zero-emission future. At a project level, we've been working with clients on project-level decision-making and cost-benefit analysis of sustainable solutions versus non-sustainable—so for example, renewable energy versus non-renewable energy—at a CAPEX stage and an OPEX stage.

We started the company in 2012 when the economics were slightly different although almost cost-equivalent. With our first set of clients, for whom we introduced solar installation ideas for a large-scale solar development for energy needs, the cost comparison was pretty equivalent. What we're finding now is that the cost basis of installation, the CAPEX costs, are getting lower, and solar installations for large industrial applications are becoming more cost-competitive and out-competing traditional fossil fuel-based investment in energy.

We have a classic example of this using the analysis for the initial client we had in 2012. It was cost-neutral. Their board wasn't able to see the value of going solar. A year later, when they were into breaking ground, the price shifted and they came back to us and said they should have gone with the renewable decision because it was costing them 15% more than what it would have cost to go solar.

It's happening not just in projects we work with. We're seeing more and more, in the last several months, industrialists investing in this space as well. We see an industrialist billionaire investing in the largest solar installation in southern Australia to feed a steel mill. He's not doing it because he's interested in saving the world or the environment. He's interested in making economic gain, and it's a financial argument for him to be going in that direction.

We're also seeing more and more disclosures happening. I talked about TCFD and the investor group. That's a major set of global investors, but we're also seeing it on the microscale as well. We get clients who are investors asking us questions about what we should be concerned about with climate and sustainability in terms of financial risk as we look in our private equity portfolios or our venture capital portfolios.

We also get calls every day and every week, more and more, from companies that are coming to us and saying that they had an investors' meeting last week and they're getting questions about carbon disclosure. They don't know what it is. They don't know what to do. Is it going to be a problem in the future? And it is. Those questions are going to come more and more.

What can we do as a country and what can any country do as one country in the world? In terms of this question of leadership, I think there are a couple of things. I think that Canada is well positioned to build economies in different spaces. We as Canadians always talk about how we think we're a natural resources economy, and that's very true. What we're seeing more and more, though, is that you can be in natural resources, and the value of nature standing is starting to out-compete the value of nature being converted.

We're demonstrating that in public jurisdictions around the world—and also with private sector companies—you can invest in the value of standing forests for environmental benefit, which also have an economic benefit, versus the conversion factor into timber.

Another key thing we can learn from is to identify champions of cross-sectors. Rather than having the same people giving the same message and telling the same story, convene other actors in non-traditional sectors to tell the story for us. A good example of this is in Australia. The Carbon Markets Institute is a convening group to get private sector actors together to talk about the value of the price of carbon in Australia.

We often hear in Canada the story about the carbon tax in Australia failing, which is true; the carbon tax doesn't exist anymore. But we hardly hear the story about the ETS system in Australia generating over $2.5 billion in emission reduction strategies being championed and spearheaded by the private sector, and the private sector dominated by companies such as BHP, which is one of the largest mining companies in the world. So non-traditional actors are sending the message that carbon pricing is a solution and a financial opportunity.

I think we can also instigate and enhance the financial sector. Financial disclosure is a great thing on a voluntary basis from investors, but policy is a great way to position that as a mainstream activity. To me, the future of financial disclosure necessarily needs to incorporate sustainability and climate change, water stewardship and other elements in order for it to truly be accounting for the risks of the future, and the investor risks and the financial risks that we all face.

[Technical difficulty—Editor]

[The Chair]

We're having a technical problem. There was one minute left for wrapping up comments. We'll see if our technology support can get our presenter back.

In the meantime, we'll move to Ms. Johnson. Earlier this week, I had the chance to have a meeting with her and to learn about the Canadian Foodgrains Bank, which was a very excellent meeting.

She is joined by Mr. Defor.

I will turn it over to you for 10 minutes.

[Naomi Johnson, Policy Advisor, Canadian Foodgrains Bank]

Thank you for the invitation to speak to the committee about Canada's climate finance commitments. I'd like to bring the other side of the story here today.

Before I make any recommendations, I want to tell you about a woman I met last month in Tanzania, which is in eastern Africa, a farmer named Cecilia Lubeja. Cecilia is the mother of six children. She started farming with her family when she was seven. She is now almost 50, and farming continues to be her primary source of income. With a number of decades of farming experience behind her, Cecilia knows when to expect the rain, what types of seeds to plant, and how to prepare the soil for a good harvest.

The problem is that her knowledge doesn't work anymore. The rain doesn't start when it should. She is consistently faced with extended periods of drought. When the rains do come, they are so strong and sudden that they wash away the topsoil and flood her fields. She also now struggles to control the pests in her fields, pests that she has never before seen in her area.

Cecilia told me that farming has become increasingly difficult, and she has had to rely on clearing land for others in her community, in order to earn enough money to feed her family.

Cecilia is only one of millions of people in developing countries already struggling to deal with significant changes in rainfall, storms and temperature. Farmers depend on the weather, so they are often the ones who are hit the worst.

These farmers and the local organizations that work with them agree that the world needs to reduce the greenhouse gases that are causing the problem, but they tell us that the immediate need is to help them adapt to the changes they are already seeing. Mitigation is important and adaptation is crucial.

Civil society organizations are essential in advancing Canada's adaptation work. In Cecilia's case, Canadian Foodgrains Bank worked with local organizations in Tanzania to train Cecilia in conservation agriculture, a low-input farming method that improves soil conditions and allows crops to thrive in variable climatic conditions.

At Canadian Foodgrains Bank, we envision a world without hunger. A recent report from the United Nations Food and Agriculture Organization has stated that, after years of decline, hunger levels are again on the rise. This is largely due to climate variability and extremes. At Canadian Foodgrains Bank, we are delivering food to people in humanitarian crises, helping smallholder farmers better their livelihoods and improving family nutrition. We are supported by thousands of Canadians, many of whom are farmers, who believe that we as Canadians have much that we can share.

We should be more generous in supporting the 70% of hungry people in the world who are farmers. Donations from the public are matched by the Government of Canada, and for that I say thank you. We draw on what we've learned from our work in developing countries, and what we continue to hear from farmers like Cecilia, to engage in policy dialogue with the Canadian government. It is from this experience, our work in about 40 countries around the world, that I have put together three recommendations for this committee regarding Canada's international climate finance.

First, Canada should contribute its fair share, based on the size of our economy relative to the economy of other donors.

Second, Canada should make sure that half of our contributions help people adapt to the changes already affecting them.

Third, Canada should make sure our adaptation efforts are targeting the poorest and most vulnerable.

On the first point, our fair share, you may be wondering how that's determined. Canada's economy makes up 3.9% of the total economies of donor countries within the OECD, so our fair share is 3.9% of any global commitment. Donors have committed to U.S. $100 billion annually for climate finance by 2020. Based on the 3.9%, Canada's fair share of that is $1.9 billion Canadian per year.

Canada's current commitment of scaling up to $800 million a year by 2020 is a big improvement over our efforts in the past several years, but we're still less than halfway to the $1.9 billion that represents our fair share. While we like to think of ourselves as leaders on climate finance, Canada is actually at the back of the pack, ranking 16th out of 23 donor countries.

My second recommendation is about adaptation. The Paris Agreement states that donors should aim to achieve a balance between adaptation and mitigation. Many countries already allocate 50% or more to adaptation. Canada is improving in this: We've gone from about 16% adaptation in the 2010-12 period up to about 30% for the current period, but there's room for improvement.

I am not saying that mitigation isn't important. The world needs to reduce greenhouse gas emissions, and Canada has a significant role in that. But when you consider that the average Tanzanian emits 1/157th of the CO2 the average Canadian emits, it's clear that Tanzania would do better to focus on adaptation for Cecilia and the rest of the farmers who feed that country rather than on mitigation. Canada has the responsibility and the capacity to support these efforts.

My third recommendation is to focus on the people hardest hit by the impact of climate change, which brings me back to Cecilia in Tanzania. She is a woman, and we know that women are particularly vulnerable to the impact of changing climate. She is a farmer, and we know that food producers in developing countries who rely on the weather for their livelihood are already struggling with changing and unpredictable conditions. She lives in Tanzania, which is considered by the United Nations to be one of the least developed countries.

This group of countries, along with small island developing states, are having the hardest time dealing with climate change. They need to adapt, and they need climate financing in the form of grants to do it. What they don't need is greater debt loads, which is what happens when climate financing comes as loans.

Additionally, Canada currently channels over 80% of its climate finance through multilateral channels. These channels have not been very effective at reaching the poorest and most vulnerable. Multilateral channels are heavily weighted toward mitigation projects and projects in middle-income countries. Multilateral development banks have a poor history of gender-equality programming.

If Canada really wants to reach those on the front lines of climate change, civil society organizations have a better track record. These include Canadian organizations already working closely with those impacted by climate change, and farmers' organizations in developing countries. Such organizations already have expertise in how people can adapt to the changes they are seeing, which ensures Canadian dollars are used most efficiently.

For Cecilia in Tanzania, the only fields she reaped a harvest on last season were the ones for which she applied her training in conservation agriculture. Farmers in her community are seeing the benefits of such practices and learning from Cecilia how to adopt them. Cecilia is grateful to now have food for her family and some to sell as well.

On behalf of Canadian Foodgrains Bank, as well as the Canadian Coalition on Climate Change and Development, of which I am the co-chair, I thank you for this opportunity to join this important discussion.

[The Chair]

Great. Thank you for those opening comments.

We have Mr. Balasubramanian back on the line.

You had one minute left and I don't know if you have some tight closing comments you want to offer, but I am willing to give you that minute before we get into the questioning.

[Hari Balasubramanian]

Thank you.

I was going to end with a line from Schwarzenegger, which is basically, "I don't care if you believe in climate change, but if you believe in money then you should be interested in the price on carbon."

[The Chair]

Great. Thank you.

We'll now get into our rounds of questions.

Before we do, I want to welcome two guests on the Liberal side, Ms. Alaina Lockhart and Mr. Kent Hehr. Welcome to the environment committee.

And on the Conservative side we have Dan Albas. Mr. Albas, welcome to the committee.

For our first round of questions, Mr. Bossio has six minutes.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

It's so difficult being the first one with this panel because I have so many different directions I'd like to take this in. The first one points to what Mr. Balasubramanian talked about, that the price on pollution really can be an economic driver for many countries. We saw in Australia, for example, that when they had their price on pollution, their GHG emissions did drop substantially.

I know you said the change that happened after that was with a $2.5 billion investment. They don't have to be mutually exclusive. They could have kept the price on pollution and continued to see that downward pressure while making the investment that was actually going to reap greater gains for them financially in the long run, and probably accelerate their GHG emission drops at that time.

Would you agree with that?

[Hari Balasubramanian]

Yes, I fully agree with that.

There is an interesting reality today that 45 national jurisdictions and 25 subnational jurisdictions have a price on pollution, whether it's a tax or an emission trading scheme. The most effective at emission reductions are those that have them jointly. Certain jurisdictions are essentially applying that recommendation, to have the joint system in place, which drives emission reductions and also enhances the economy in two fundamentally different ways—the tax and the ETS.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

At the time Australia introduced their price on pollution, they were also one of the fastest-growing economies in the world. I think they had a record of fiftysomething straight quarters of growth, so it didn't impact that aspect of their economy.

A lot of times you say you're not going to see a difference; it's going to take forever to see the difference. But we do see in Australia's case that the difference happened almost immediately, as soon as the price on pollution was introduced.

Is that correct?

[Hari Balasubramanian]

I fully agree. You see that same trajectory in California as well. There are examples in B.C. I think the Australian example is not quite unique.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

That's exactly the same thing we've seen in B.C. They introduced their price on pollution, and the sky didn't fall. Their economy boomed. They had the fastest-growing economy in Canada. Their GHG emissions dropped. Until recently it wasn't having an extraordinary impact on individual residents either. They were benefiting from it.

Would you agree that in this type of situation industry will typically pay at this level, and the wealthiest will contribute as far as how much they and average Canadians are paying at this level, but the payback on it, the dividend on the other side, can be that the average citizen is at a higher level of receipt, the wealthiest Canadians receive this amount, and then the industry is at this level? Average Canadians could benefit. They could see a greater rebate than what they are paying in price on pollution in the first place.

Would you agree with that?

[Hari Balasubramanian]

We see the studies that demonstrate that, in future projections and in modelling the rebate system, and how individual households will be affected differently across the provinces. Interesting studies have been released in the last several weeks that demonstrate that, and I fully agree that's possible.

We're seeing that in other jurisdictions around the world as well. If you look at Scandinavia, the redistribution of the highest emitters to lower-income families shifting practices for emission reductions is having the same net effect.

Yes, you can see individuals benefiting through the system. Ultimately the whole society benefits, because as I mentioned before, investors will be more interested in those companies that are doing the right thing for their own emission reductions and paying the right cost.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

At the end of the day too, investors are looking for consistency, that stability of the pricing mechanism to understand exactly what they need to do to achieve that mechanism and then ultimately to profit from the mechanism in place. Because, let's face it, our leading business minds in many instances are the most creative minds, and if there is a profit to be made, they will find it. Those who are given the opportunity to innovate will innovate the most quickly to take advantage of that profit.

Have you seen that?

[Hari Balasubramanian]

I fully agree. I will give you an example.

One of our clients is BHP, the mining company in Australia. They saw that opportunity during the carbon pricing system in Australia. That's exactly what happened. They saw the market opportunity and the financial opportunity and, as the largest emitter in the country, they became one of the biggest champions for carbon pricing in the country.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you.

Finally, the last question is to the Canadian Foodgrains Bank. I had the great pleasure of meeting the Minister of Agriculture for China yesterday. He was at our research centre where we are doing groundbreaking work with winter wheat and oats that have greater resistance and that are hardier to environmental changes like the ones we are going to experience.

Can you give us a sense of the importance that has, not just in the Canada-China relationship but in general for developing countries?

[Naomi Johnson]

Yes. Absolutely.

I think many of the farmers we talk to need to rely on seeds that are adapted to changing conditions. As I was saying, I was recently in Tanzania as well as Uganda. Many of the farmers there were given these seeds either through government support or through NGOs in the area. These are seeds that shorten the growing season so the plants can grow faster so they are able to harvest in a season of drought.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you so much.

[The Chair]

Thank you.

Mr. Warawa, you're up next.

[Mark Warawa, Langley—Aldergrove, CPC]

Thank you so much.

I want to thank the witnesses for coming. My first comments were going to be a little different, but I want to set the record straight. I'm from British Columbia; it has a carbon tax. The cost of living, affordability, is the biggest struggle in British Columbia. Homelessness is the largest. And emissions have risen, not gone down. Those are the facts.

I have questions for Canadian Foodgrains. I want to begin by thanking them for the incredible work they do.

The climate is changing around the world, and so you're meeting a very important need regarding pollution, and we will be talking about pollution in a minute, but I think you have been providing adaptation and mitigation since 1983. Is that right?

[Naomi Johnson]

That's right.

[Mark Warawa]

You originally had grain coming from Canada, and now those who grow in Canada actually sell the crop in Canada and provide the funding to you, and then you send that funding to another country where they will grow the grain there.

Is that correct?

[Naomi Johnson]

That's correct.

[Mark Warawa]

So the more money we send, the more hungry people we can help. Is it that simple?

[Naomi Johnson]

Yes, it is, very much so.

The majority of our donations come from actual Canadian farmers who are involved in what we call growing projects. Someone will donate the land. Often there are private companies donating seeds and fertilizer, and then together a community harvests this land, sells the grain here in Canada, and then we can actually buy the food as immediately as we need it and support local economies in developing countries.