Environment Committee on Nov. 1st, 2018

[William Amos, Liberal, Pontiac, QC]

Thank you for those responses. I have one more quick question and about a minute left.

The Government of Canada is presently doing what it can, for example through the Global Infrastructure Hub, to engage private sector actors in an effort to increase the funding globally for infrastructure investments that will help in either the adaptation aspect or the mitigation aspect, and not just in Canada but elsewhere in the world.

I'll ask our representative Madame Charron from the IDRC to comment on the importance of Canada's leading in that aspect.

[Dominique Charron]

Thank you.

Absolutely, the role of the private sector and of many actors in the private sector in not only funding but in bringing innovations into thinking about a low-carbon future and adaptation is a key element of the adaptation equation, if you will, in the countries in which we work.

One of the challenges we have found, from some of the research we have funded, is that there is an inadequate pipeline of fundable, bankable adaptation projects for investors. In working with the private financing advisory network, which is a network of experts who link entrepreneurs with investors, we have tried to identify what some of the barriers are. The long-term nature of adaptation projects is that they are development-type projects, in which we're looking at things that are going to help people's lives and livelihoods—social benefit kinds of investments. They're riskier, they're longer and they're less less easy to undertake than those in the clean-tech area, where there's a more obvious return.

Helping to position entrepreneurs and countries to attract investment has to do with clear criteria, clear benefits and making a strong business case. Some of the research we have funded has helped strengthen the pipeline for that funding.

[The Chair]

Thank you.

Now I'll move over to Mr. Fast.

[Ed Fast]

Thank you, all of you, for appearing here.

Ms. Abreu, I wish I had time to ask you some questions on ITMOs, but I don't think I'm going to get there. You certainly limited the ability to use ITMOs right now, because Canada presumably is not meeting its Paris targets.

I want to focus my questions on Mr. Ragan.

Chris, in much of the work you do you operate in a theoretical world, and you're coming up with theoretical constructs that you're hoping will work in the real world. Our challenge as politicians is that we operate in a very real world in which human nature is very apparent and in full flux, and we live in a political reality that often collides with some of the objectives a theory might have.

I want to talk about the B.C. carbon tax, because it's being held up as a sort of role model for how tax policy should be crafted. You mentioned that the best carbon tax would be one that sets a price that people pay, on one hand, but in which the money is returned to taxpayers in another way—in other words, revenue neutrality.

B.C.'s carbon tax was a revenue-neutral carbon tax when it started out. Today, it's the highest carbon tax in the country: $35 per megatonne of emissions. It is no longer revenue-neutral. Why? It's because of human nature; political reality set in. You had a new government that saw a source of revenues that could be used for that government's own political priorities, and now we're left with what is essentially a tax grab, and we still see emissions in B.C. going up.

I understand that the economy is growing, but I think we can all agree that the targets in the Paris Agreement are absolute targets, so the emissions we would expect to see would be absolute reductions. It's not happening in British Columbia.

I would ask you to respond. How do we actually address the political realities and the political challenges of trying to keep a carbon tax revenue-neutral, when over the long run it's very difficult to do, given the nature of politicians—those of us around this table?

[Prof. Christopher Ragan]

That's a great question.

I won't spend much time defending theory, but I will say that the Ecofiscal Commission isn't lost in a theoretical world. Our reports are extremely practical and apply to ways to make pollution pricing—not just carbon pricing but pollution pricing—work in today's world in Canada in a very practical way. I think those reports actually do a very good job of it.

The B.C. carbon tax, as you note, sets the highest carbon price in Canada. It was designed to be—and for something like the first eight and a half years was—revenue-neutral. It was collecting roughly $1.2 billion in revenue every year, and $1.2 billion was returned in the form of business and personal income tax rebates, plus some low-income transfers. As you note, it no longer is revenue-neutral.

You're asking an economist to answer a question about how we make political choices. It was a political choice of Gordon Campbell's in 2007-08 to introduce a carbon tax that was revenue-neutral, and it was a political choice by the current government—

[Ed Fast, Conservative, Abbotsford, BC]

John Horgan's.

[Prof. Christopher Ragan]

—to undo its revenue neutrality.

I don't know whether there is a best answer to that. Ultimately, these are political choices.

I also didn't say that the best carbon tax is one that is revenue-neutral, although I think there are great benefits that come from revenue neutrality. It is certainly the case that a carbon price can be very effective, even without increasing the scale of government at all.

Carbon pricing is not about increasing the scale of government. It is about changing prices and changing behaviour. You can certainly return every penny of the revenue to the economy in some form, and you can certainly do it by reducing income taxes or other taxes, and you will get economic benefits from doing so. There are, however, many choices. This is another political choice: whether you want to use the revenue to replace crumbling infrastructure, as in Montreal, where I come from, or whether you use that revenue to reduce income taxes or to pay back debt. There are many choices.

[Ed Fast]

They're political choices, right?

[Prof. Christopher Ragan]

Absolutely they are political choices. We live in a democracy and we want those choices to be made by our elected representatives, and they are tough to make.

[Ed Fast]

I have one more question.

Fifty dollars a tonne is the carbon price that the Trudeau government has imposed.

[Prof. Christopher Ragan]

By 2022....

[Ed Fast]

Nobody is talking about what happens after 2022.

[Prof. Christopher Ragan]

I'd be happy to.

[Ed Fast]

Could you do so, then? At $50 a tonne, I think most economists....

You are an economist. Would you agree with me that $50 a tonne is not going to measurably change human behaviour to get us to the emissions reductions we have agreed to?

[Prof. Christopher Ragan]

That was a carefully constructed sentence, so let me agree and disagree.

It is enough to reduce emissions, but it is probably not enough—and I agree with you here—to get us to the 2030 commitments. There's disagreement among economists about what level that price needs to go to. What I see as being in the ballpark is $100, $125 or $150 per tonne, which, by the way, would still leave a litre of gasoline below its price in 2014.

[Ed Fast]

Would the two of you also agree that $50 won't get you there?

[The Chair]

We're out of time, but that was very interesting.

Mr. Choquette.

[François Choquette, NDP, Drummond, QC]

Thank you, Mr. Chair.

I'd like to thank all of you for being here today.

Ms. Abreu, you mentioned that, in Sweden, Great Britain, Finland and Denmark, there is a legislative process that requires greater accountability and transparency with respect to greenhouse gas emissions. Could you explain how this works and how Canada could become a leader if it were to adopt similar legislation, calling for more transparency and better accountability?

[Catherine Abreu]

Thanks, and my apologies that I can't answer in French. My French is terrible.

Yes, it is the case that there are a number of examples worldwide of how countries keep track of, maintain oversight and ensure accountability for their climate commitments.

The Government of Canada has spent the last couple of months consulting on expert engagement for oversight and accountability for the pan-Canadian framework on clean growth and climate change and in fact a couple of days ago issued a request for proposals for organizations to submit ideas on how that body of experts might be formed and who might host it. If we're going to use that mechanism to keep us on track towards our Paris pledge and make sure that we finally follow through on an international climate commitment, we need to do the things I outlined at the very beginning of my address to you.

One essential element has to be the development of key indicators that help us measure progress over time and report consistently on that progress. It can't just be an exercise in which experts come together and talk about the best ways forward on sustainable transportation. They should be doing that, but they should also be asking how we performed this year in the deployment of public transportation or how we performed this year in funding active transportation.

Key indicators are really essential and the mechanism that this body has for reporting to governments at every scale is also quite critical. In a federated country such as Canada, we need to ensure that this body is delivering its recommendations and its reports to provincial and federal governments and that the federal government then has to respond. That is the process we see play out in the U.K. climate committee, which is really useful.

An added benefit of this is that it helps to remove climate action from the vagaries of election cycles. It creates a mechanism that generates a kind of consistent feedback flow among various levels of government.

Finally, Mr. Fast, if I can just pull your first comments into this, it's true that currently we are not on track to meet our Paris commitment. The surefire way to lock in missing our Paris commitment is to use that fact as a reason to delay action. The only way we're going to get to our Paris pledge is by doing everything we can right now, right away.

Everything looks impossible until it is done. We are currently making up for lost time, and it would be a key element of that expert committee to be keeping track of the progress and making sure that we're doing what we say we're going to do.

[François Choquette, NDP, Drummond, QC]

Excellent.

I have a question about your perception of the federal commitment to help the poorest and most vulnerable countries. You said that this $2.65 billion commitment didn't represent our fair share and that it was currently more of a loan than a subsidy, if I understood correctly. Briefly, what is the proportion between the two?

I'd appreciate a quick answer to give me time to ask a question of Michael Andrade, who is also here. I don't want to forget.

[Catherine Abreu]

On the fair share, Canada's portion of the overall economy of donor countries in the OECD is 3.9%, which means that our fair share is 3.9% of any global commitment on climate finance. There is a current commitment of $100 billion by 2020. Our fair share of that is about $4 billion.

Concerning “grants, not loans”, currently our climate finance comes in both forms, and what I'm saying is that it should come more in grants than in loans, so that we're not putting poor people and countries in more debt by providing them with climate finance.

[François Choquette, NDP, Drummond, QC]

Thank you very much.

Mr. Andrade, is Canada a leader in renewable energy innovation? If not, how could it become one? I'm not up on the figures, but we often hear that Canada is lagging behind in the development of renewable energy, compared to other countries that you gave as examples.

[Michael Andrade]

It's going to be difficult for Canada to be a leader in absolute dollars, just because of the size of our own market as compared with those of countries such as China and the U.S., which are orders of magnitude bigger. They are always going to have a larger domestic market than ours. By definition that's going to mean that we'll have to be an export-led.... This cuts back to my commentary about competition. I would suggest that among the things we are going to need to do in order to become a leader—and we are not now, in absolute size or in technological advancement—will be to focus much more on the commercialization of the ideas we have, so that they can be scaled up into competitive, export-led industries.

[The Chair]

Thank you.

Mr. Bossio.

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

Thank you, Chair.

Thank you so much to our guests. This has been an outstanding conversation so far. I have so many questions and I'm going to dive in.

I'm going to apologize to the rest of you, but many of my questions are going to be focused on Mr. Ragan, because I found some of his comments really interesting.

Mr. Ragan, do you feel that we could reach our Paris accord pledge through regulations alone, with nothing else, no other...?