Evidence of meeting #108 for Environment and Sustainable Development in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was price.
A recording is available from Parliament.
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
That is the core of the test in the federal benchmark. Every province that has an industrial system has met that test.
NDP
Laurel Collins NDP Victoria, BC
In the federal-backed system.... We know that Suncor pays one-fourteenth of the carbon price. The recent Climate Institute report said that this could be strengthened, especially when it comes to the provincial and territorial large-emitter systems. Closing some of those loopholes could get us deeper emissions reductions.
Is it your understanding as well that deeper emissions...are possible, if we were to have more stringency and close some of those loopholes?
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
I'm going to sound a bit like the minister and quibble with the term “loopholes”.
First of all, Suncor is not subject to the federal system. It's subject primarily to the Alberta system.
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
Their system has been significantly strengthened and achieves essentially what would be accomplished if the federal system was in place.
It's important to understand that output-based pricing systems are specifically designed not to impose the full carbon price on emissions in order to enable emissions-intensive, trade-exposed sectors to continue to compete globally in sectors such as oil and gas, steel, cement and chemicals, where many of their competitors do not pay a carbon price at all.
NDP
Laurel Collins NDP Victoria, BC
Absolutely.
I guess the authors of that Climate Institute report were talking about maintaining the economic viability of these carbon-pricing systems on large emitters while still strengthening them to get deeper emission cuts.
I'm curious. The minister mentioned that there's an analysis happening right now for industrial carbon pricing. Are you currently looking at strengthening or...leading to greater stringency for the federal backstop and for the provincial and territorial systems?
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
When we updated the federal benchmark, the government committed to conduct a review of carbon pricing throughout Canada by 2026. That process has started. We've engaged third parties. We're working with indigenous communities. We're also undertaking some of our own analysis.
The goal there will be to compare pricing systems across Canada, to look at their effectiveness now and also to look at the expected long-term effectiveness of carbon pricing. That will then be used to inform decisions by the government of the day about the future of carbon pricing.
NDP
Laurel Collins NDP Victoria, BC
Thank you.
I noticed you shaking your head when I was asking the minister a question around the emissions cap. I guess I want to ask you the same question. I'm just going to read you a quick headline from The Globe and Mail from December 7: “Canada proposes minimum 20-23% emissions cut from oil and gas sector, industry to pay for additional offsets”.
Can you clarify? The minister said that, no, 20% was not the right number. Why is The Globe and Mail reporting something different?
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
I think the main point the minister was making is that we don't have any regulations out to comment on.
NDP
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
It was a framework, and your reference was to offsets. The framework proposes to have a maximum use of offsets of 10%, not 20%.
NDP
Laurel Collins NDP Victoria, BC
I guess I said that, given that it's at 10%, minus the 30% standard, that gets us to 20%. Isn't that right?
If you have an offset that reduces it by 10% and you're asking them only to meet a target of 30-something per cent, then doesn't that mean that, you know, Canada proposes a minimum 20% to 23% emissions cut from oil and gas sector? Isn't that correct?
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
I'm sorry, no. It's 10% of the compliance obligation. It would be 10% of the 30%. It would be 3%.
Liberal
The Chair Liberal Francis Scarpaleggia
Okay. Thank you.
We'll stop there. That's an interesting question, though. Thank you for that question, Ms. Collins.
We'll go to our second round, the five-minute round.
Mr. Leslie is leading off for five minutes.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
Thank you, Mr. Chair.
I'd like to pick up where my colleague MP Kram finished. I'd like to clarify some of the numbers you said.
In 2005, our reference year, it was 19.... We've had a reduction of 19 megatonnes in the 2022 reporting, down to 708. Is that correct?
From there, you're saying that 30% of that reduction is coming from the carbon taxation policies. However, only 1% of the overall 3% that we've reduced from 2005 levels is the 30%. As Mr. Hermanutz said previously, that is based on the assumption of the projection of $170 per tonne. We're actually at half of that, based on the price of pollution or the carbon tax's being half of that right now.
We are actually at...0.5% of the reduction that we've seen of the 3% is from the carbon tax. Then further, I suppose, if we're going to delineate between the consumer-facing carbon tax, which is apparently, according to the institute here, only 8% to 14% of the output-based pricing.... Of the total of 3% reductions, it is well under 1% that you can actually attribute to the front-facing consumer carbon tax.
Assistant Deputy Minister, Environmental Protection Branch, Department of the Environment
I think you're confusing some numbers. Well, I know you're confusing some numbers.
Associate Deputy Minister, Department of the Environment
Just to.... I'll make the base.
When we're talking about the one-third, we're talking about the combination of the carbon price and the OBPS. Just to go through the individual numbers themselves, if you took our reference case in 2022, we would go—
Associate Deputy Minister, Department of the Environment
—from 674 megatonnes in emissions in 2020 to 641 megatonnes in 2030. In the absence of carbon pricing, we'd be going from 691 megatonnes to 720 megatonnes. When you look at those numbers, the 641 megatonnes versus the 720 megatonnes, that is how we get to 79 megatonnes in reductions. Again, that's both the carbon price and the output-based pricing system.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
I appreciate that.
The purpose of this meeting and the minister's coming here is that this committee asked for the totality of the economic and emissions analysis. We're told that it is EC-PRO and that it exists. I imagine it's on a USB; it doesn't need to be a web interface. I'm sure the committee can come for a tour.
Can you honestly tell me that, if the minister seems okay with it, you are content, in the department, with this information that has been requested and the totality of these documents being a complete analysis as per the text of the three motions?
Associate Deputy Minister, Department of the Environment
I think what we have provided is all the assumptions that go into the model, everything that's assumed in terms of what measures are being put in place or are already in place or are going to be put in place—a comprehensive list of that from the federal and provincial governments. We have included a description of how the modelling is done, and the idea of introducing a carbon tax into the model and then removing it again to determine the actual impact of the carbon price. As we've indicated, within that there's a huge amount of modelling detail that operates. I think what we're trying to say is that we've tried to show all the assumptions that the model makes and how you can make a determination of model price reductions.
Derek, please feel free to add.
Director General, Economic Analysis Directorate, Department of the Environment
No, I think that's right.
What you need for the modelling is the code. You need the custom software and a strong enough computer to run it.
Conservative
Director General, Economic Analysis Directorate, Department of the Environment
They use CGE models, but they don't use the EC-PRO model. That's a model that's specific.
Conservative
Branden Leslie Conservative Portage—Lisgar, MB
Is it proprietary? I recall wanting it to be open by default.
Why could somebody who has all of those conditions necessary not use the software and redo the modelling? Why does it need to be completely contained? Have you brought in anybody else to use the specific model that you use to consider other assumptions? You mentioned that there's basically two models, a with and a without. We have a carbon tax or we don't.
I imagine there are a lot of nuances as to the effectiveness of that carbon tax based on market and economic considerations. I understand there's a whole bunch of variables.
Why can't somebody else go and play with that?