Environment Committee on Nov. 6th, 2018

[Judy Meltzer]

As was noted earlier, there is a lot of consensus around the cost-efficiency and effectiveness of this model, but I take your point that it's important to point to some concrete examples, and there is a lot of evidence for that.

We can look at our own country, at British Columbia. Outside estimates see that the reductions in emissions in the province since its carbon tax was implemented in 2008—I think it's a range of emissions reductions—are between 5% and 15% lower than what you would have had in the absence of this carbon tax. That's one example. There are a lot of other examples from different jurisdictions around the world where we see the effectiveness.

I guess I'd flag the point I made earlier, which is that it's a common mechanism to basically put a price on pollution to change the incentives people have when they make choices. Whether it's to individual consumers, to businesses or to households, it creates a signal and an incentive to make lower-carbon choices. It's as simple as that.

There is one example that I don't think gets flagged as often, but I'll point to it again. This is an old mechanism, but it's a similar tool that was effective in eliminating acid rain. This is going back many decades, but these are kind of the same market tools that allow emissions of pollution, whether it's greenhouse gas pollution or other forms of pollution, to be reduced in a way that doesn't prescribe how and enables low-cost reduction.

We can follow up to provide other examples, but there is a lot of evidence we could point to in order to show the effectiveness. There is a lot of support across stakeholders from a lot of industry and the big banks in Canada. We do have a lot of support. We're still working through some of the details of how; for example, the output-based pricing system is under development. I think we could provide some follow-up examples, if that would be helpful.

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

When you say there's consensus out there that this is the best and most efficient mechanism, could you give us a sense of that consensus within our own country? What does that consensus look like out there from different stakeholders?

[Judy Meltzer]

I'm not speaking about consensus with stakeholders per se. I'm speaking about the economists—including the most recent Nobel Prize-winning economists—the various expert panels that have been put together on sustainable financing, and the World Bank's initiative of the Carbon Leadership Pricing Coalition. We can point to leading economists, other scientists and social scientists around the world who, based on evidence, point to this as an effective lower-cost tool to reduce emissions.

I always mention the caveat that it's not the only tool, and it's important to note that there are a range of complementary measures.

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

I guess that's what I'd like to go to next. If you look at the cost of this tool, would you say that the costs of this would be less than they would be through regulations—trying to achieve our targets through regulations?

[Judy Meltzer]

It is important.... I'd go back to the point that carbon pollution pricing isn't the only tool and there is a strong rationale for complementary measures. That includes regulatory measures in some circumstances, and it could include other types of tools. The government has a range of tools it can use to try to incent emissions reductions, but certainly the reason carbon pollution pricing is being deployed is that it enables emissions reductions at a lower cost, which is a strong rationale for using it, at least for us and for other jurisdictions that have been using it for some time.

Again, I'll go back and point out that one of the reasons carbon pricing is able to create incentives to reduce emissions at a low cost is that it's not prescribing where and how. An example I would give would be about industrial facilities. There may be one facility that may actually have some relatively low-cost options to reduce its emissions, and maybe there is some easy low-hanging fruit to improve processes and improve energy efficiency. There may be another facility where making that same level of reductions would mean a more costly investment.

What a carbon pricing mechanism does—and I'm referring here particularly to the emissions trading system that we're enabling under our system for heavy industry—is allow those emissions to be made where they have the lowest cost, and for those kinds of reductions to be used, it's agnostic as to where and how. It's getting the reductions at the lowest cost. That's an advantage of this tool.

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

That's exactly what I want to get at. Yes, it's important to do all these other things—regulations, investments in innovation, public transit, water and waste water, emission controls and all the rest of it—but of all of those, this is the most cost-effective approach to do it, and really the one that can put you over the top in terms of being able to meet those targets.

[Judy Meltzer]

That's correct. Again, we're still in the process of intensive engagement with a range of stakeholders, including industrial stakeholders, but there is widespread support for a mechanism that doesn't prescribe necessarily where and how those reductions need to take place. I would have to agree with the comment.

[The Chair]

Thanks.

Mr. Warawa, you have six minutes.

[Mark Warawa]

Thank you.

I spent 14 years in local government as a councillor, and if there was a million-dollar project, 20% was allotted for administration. On a million-dollar project, $200,000 would be administrative, and then you would budget and you would not go over budget. You hopefully would be on budget and on time. Administrative costs were very important to include in all projects.

On this project, is it 20%, 25%, 30%? In the accounting, what is the allowance for administrative costs?

[Miodrag Jovanovic]

I can talk about the fuel charge. We don't have a specific estimate. The expectation is that it's not typically seen as a very costly approach from an administrative standpoint.

[Mark Warawa]

I think you said the accounting to support the programs was revenue-neutral. You're saying that the administrative cost is zero: 90% is sent back and 10% is saved for green projects. In your accounting, the administrative cost is zero.

Is that what I'm hearing?

[Miodrag Jovanovic]

I would say that the administrative costs are not considered, or not deducted from the proceeds in determining how much will be returned to the province or—

[Mark Warawa]

Okay, so I am hearing that there is zero allotment for administrative cost in the program, that 90% is being sent back and 10% is being saved. That is what I'm hearing. Is that correct?

[Miodrag Jovanovic]

Nothing is put aside for that purpose.

[Mark Warawa]

That was the point I made. If you have a program that is zero.... In a bureaucracy, whether for local government, provincial government, or federal government, there is a cost associated with running a program and having expert people who advise us and run programs. There is an administrative cost, and to ignore that, I believe, would not be acknowledged as good accounting. The comment that the accounting to support the program is revenue-neutral is not true, I think, in any accounting ledger sheet.

I have a question on its not being controversial and having general support. I had a meeting—many of us did—with Transat A.T. Inc. They had a meeting with the environment minister, and they are a member of the National Airlines Council of Canada. They're saying that since 2005, they've had a reduction in the fuel they've been using to fly all over Canada and around the world, a reduction of 30% through efficiencies. They've done a great job.

Their point is that when this comes into effect on January 1, they will have already achieved the goal. They have the prize. They have reduced fuel consumption by 30%. That's the target for 2030 for Paris. Now that they've achieved this, through billions of dollars in investment, this is going to be added. They're saying, “What better can we do? We've done as much good as we possibly can, and then you're going to be putting this carbon expense onto us, making flight within Canada more expensive. It's not justified.” So they're asking to be exempted from this.

The government has exempted a number of other big emitters. This is an industry that has already done it. Air Canada, Air Transat, WestJet and Jazz Aviation AP together have sent a letter, and they're very opposed. It is controversial. There are industries that have already done the job, and now they're going to be punished. Why?

[Miodrag Jovanovic]

Under the fuel charge, there will be an exemption on aviation fuel for interprovincial and international flights. It's going to apply, though, for flights within a province, and now there's a proposal on the table to also create an exemption for internal flights within territories.

[Mark Warawa]

Will it cause flights within Ontario to be more expensive than from Quebec, inter-province?

[Miodrag Jovanovic]

Quebec has its own regime, so presumably the—

[Mark Warawa]

Will it be more expensive?

[Miodrag Jovanovic]

I don't know, but what I'm saying is that there is a regime in place in Quebec.

[Mark Warawa]

This is all the industries in Canada. Air Canada, Air Transat, Jazz Aviation AP, and WestJet are saying this is going to make life more expensive in Ontario, and they're opposed to it.

Are you aware of that?

[Miodrag Jovanovic]

What I would like to raise as well is that this is also why this approach has been taken—to return revenue to the pockets of Canadians so that they are able to maintain purchasing power. For Canadian businesses, that means they will be able to face a continuously strong demand from their customers.

[The Chair]

You have 20 seconds.

[Mark Warawa]

I live in British Columbia. It was suggested that emissions would have gone up even more. Could you provide the study that supports that? I've heard the opposite—that it had no effect. The fact is that emissions have grown in British Columbia, and the carbon tax has had zero impact, so I'd ask for a copy of the study that you're referencing.

[Judy Meltzer]

Absolutely. The study I'm referencing is one that was undertaken by Nic Rivers, and we'll be happy to provide the reference.