Environment Committee on May 23rd, 2024

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you very much, Mr. Chair.

Greetings to all my colleagues.

Mr. Miller and Mr. Usher, welcome to our parliamentary committee.

Before asking my questions, I'd like to pay tribute to the interpreters, who work very hard and very efficiently, particularly today, with two of the witnesses having many important matters to talk about and doing so very briskly. In short, they spoke quickly. The interpreters nevertheless managed remarkably well and I congratulate them. We should really thank them more often. I've wanted to do so for a long time, so I availed myself of this opportunity today.

My first question will go to Mr. Usher.

Mr. Usher, you talked about greenwashing. I would like to have some information from you.

What is your definition of greenwashing? Can you give us some examples of greenwashing and how it can be used by people to dodge their responsibilities?

[Eric Usher]

It's a very good question.

There's not a precise definition as of today. I think if you take a consumer awareness view of greenwashing, it's essentially selling a product based on something incorrect in what they are selling.

There have been a number of cases brought against companies, brought against investors, some by financial regulators, some by advertising regulators, which have made accusations around mis-selling a product. It has typically been products around how green they are, how net zero they are, as a company or as a bank. Coming back to the transparency issue and also the need for a taxonomy, it's quite hard to have a clear definition of a greenwash unless you can have a definition essentially and transparency of what is sustainable versus what isn't.

I hope that provides a partial answer.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Yes. Obviously, as you said, it's not a very clear situation to address, but the point is that a lot of people are very upset when they see a big meeting in the middle of the desert with a lot of airplanes and especially personal jets going there. People are saying, “They want to save the planet, but they are using personal jets.”

What are your thoughts on that?

[Eric Usher]

That's a good question.

I think it requires companies and company leaders to be able to justify the decisions they make and how they spend their company's resources. I think a lot of company executives are getting some pressure in this area.

At the same time, I think air travel is considered a critical form of transport. In some jurisdictions, like in Europe, you are seeing some countries regulating that short-haul flights should be replaced by trains under a couple of hours of distance. I think, overall, the view is that an industry like the air industry needs to continue and it's going to take longer to decarbonize. It's one of the industries where there's talk of the need for carbon offsets because it's hard to totally switch over, but other industries can move more quickly to provide a balance.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

My personal thought on that is that as long as people will use that kind of travel and that kind of event and they have to make their own choice, the industry will work on that, but this is another issue.

Let me be more positive now. You talked about the “room to innovate”. You said that during your testimony a few minutes ago. Talk to us about the room to innovate. How can companies and big emitters reduce their emissions by innovation? Do you have some examples to provide to us?

[Eric Usher]

We have a booming industry. We have $1.8 trillion U.S. that was invested in the energy transition last year, investing in new business models, new manufacturing, new uses of technologies. This is a booming market. It's a very sizable part of the economy. I think one of the questions for Canada is how much of that market Canadian companies are going to capture.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Do you think that to have fiscal incentives and new technologies to reduce emissions is a good road map to follow?

[Eric Usher]

That's part of the road map. I think, to my comments, a whole-of-government approach is what's required.

Incentives are certainly useful, particularly for new technologies that are not yet proven. However, incentives on their own probably are not sufficient. We need transparency in the market, and we need a regulatory framework that provides certainty and a sense of direction that the private sector can invest against.

One example is Japan. They have issued transition pathways for their main sectors, their main industries. They give for steel, for cement, for agriculture, for buildings a view to the private sector to say, “This is how we believe this industry is going to decarbonize.” That provides signals of certainty that allow investors to invest.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

What about the green energies like hydroelectricity, wind, solar, geothermal and nuclear?

Do you think we should fast-track those projects giving a green light to green energy?

[Eric Usher]

Yes, I think few would question that. Most countries are doing that quite at scale.

I'm not a specialist in the Canadian energy sector. I know there's a lot of hydro, but Canada should be a renewable energy superpower. It's hard to think that Europe has more renewable energy resources than Canada has, but the scale of investment in renewable energy in Europe far outstrips Canada. The U.K., China, India, all of these countries far outstrip Canada on investment.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much.

We'll now go to Madame Chatel.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

That's very interesting, particularly the final comments to the effect that Canada could be a world leader in clean energy.

Mr. Usher and Mr. Miller, welcome, and thank you for your good work at the UN and the OECD on this important study of green finance and transition finance.

Canadian companies are facing a growing competition for sustainable investment. We need a robust climate information architecture in Canada. It should be based on data, disclosure and taxonomy. The last panel said that holding on taxonomy is holding on investment opportunities. Mr. Usher, you mentioned that we're already two years behind Europe on that.

You did mention in your introduction that we have taken some initiatives. The OSFI B-15 climate risk guidance is good. The CSSB aligning with the standard of the ISSB is a good thing, but it's not enough. We should go further.

You mentioned that we risk being left behind in terms of capital attraction in Canada. Mr. Usher, when is our last call to take effective action on disclosure and taxonomy?

[Eric Usher]

That's a challenging question. Each last call means that there's less of the pie left for the economy to capture.

What is clear is that there is quite a large global universe looking to invest in this transition. If Canada can put the systems in place and the transparency, it's more likely to attract those investors. Let me quote Larry Fink. He's the world's largest investor, the head of BlackRock, and if you read his annual letter this year, he's not preaching. He's not doing climate advocacy. His view is that the world is changing. The energy transition is under way, and it's going to be a winner for the shareholders in delivering on that transition.

We see a lot of that from American investors and banks. They're global organizations. Even in specific jurisdictions, the signals might not all be there, but globally they see that the trend is happening. For the Canadian economy, it must get the systems in place, and that will attract investment.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

I'm turning now to Mr. Miller. First, welcome and congratulations on the “OECD Guidance on Transition Finance.” I know you have been a key contributor to this work, and it's very important for a country like Canada, based on oil and gas. Energy and natural resources provide us the opportunity to contribute to or to attract investment in the transition area.

My question relates to your work in another very interesting area. It pertains to your work on the dependence of the financial system on services provided by biodiversity and natural capital.

How can the OECD help our government to technically assess nature-related financial risks?

[Hugh Miller]

On this front, yes, biodiversity and nature-related financial risks—

[Monique Pauzé, Bloc, Repentigny, QC]

Mr. Chair—

[The Chair, Liberal, Francis Scarpaleggia]

I'm sorry. I must interrupt. The sound quality is not good enough, unfortunately, for you to continue. Mr. Miller, we're going to have to go to Mr. Usher.

In the meantime, I know the technical team here is trying to reach you by phone.

[Hugh Miller]

I'm sorry.

[The Chair, Liberal, Francis Scarpaleggia]

Perhaps the team could try to solve the problem with you.

[Lloyd Longfield, Liberal, Guelph, ON]

Could we get that answer in writing, possibly?

[The Chair, Liberal, Francis Scarpaleggia]

That's a good idea. If we could get the answer in writing, that would be very helpful.

Ms. Chatel, do you have a question for Mr. Usher?

[Sophie Chatel, Liberal, Pontiac, QC]

I know the UN is also looking at how to factor in, in the transition finance and the green finance, this issue of biodiversity risk, or loss of biodiversity risk, and natural capital.

Mr. Usher.

[Eric Usher]

Absolutely. I congratulate Canada for being key and the host of the global biodiversity framework that was agreed to last year.

Several of the elements of that framework require or involve actions from the private sector. Part of it is around disclosure. In the meantime, we have a new framework for finance-related nature disclosures. A framework has been launched this year. We have 300 global companies that are doing their first issuance this year. I'm not sure how many are Canadian, but the systems are building for companies to be able to transparently disclose nature-related risks. It's not as developed as climate. It's more complicated than carbon, but quite a bit of progress is being made.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you so much.

Mr. Usher, for Canadians who are listening to us today, can you explain how important transition finance is for a country like Canada?

[Eric Usher]

Yes, it's very important.

To follow on from Hugh's comments, transition planning and understanding the notion of transition finance is where we need definitional work, including a taxonomy. It is quite critical, particularly for resource-intensive economies like Canada's.

It's not so much about what is green; it is about what is greening. Part of the understanding is that many actors in the economy, including those who are quite carbon-intensive today, have to be part of the solution and have to drive carbon out of the system within their business models. To do that, they need transition financing. A critical part of the taxonomy will be defining essentially what transitioning is.