Evidence of meeting #121 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 taxonomy.
A recording is available from Parliament.
Liberal
The Chair Liberal Francis Scarpaleggia
That's a good answer. It's hard to say more in 15 seconds.
Ms. Taylor Roy, it's your turn now, for three minutes.
Liberal
Leah Taylor Roy Liberal Aurora—Oak Ridges—Richmond Hill, ON
Thank you very much.
Thank you to the witnesses.
I could ask you so many questions. I could sit and listen to you all day, but I have a few pointed questions. We just heard from Mr. Deltell that the issue is about increasing investments in technology. The Conservative Party likes to say that this is the problem, that we're not investing sufficiently in technology and that this will solve our problems.
Could you comment on this? Do you think that investing in technology will, in fact, on its own, meet our net-zero targets?
Perhaps we can start with Mr. Arnold.
Acting Director, Clean Growth, Canadian Climate Institute
Yes, technology will certainly play a role, but policy is a huge foundational piece to driving the incentives toward more innovation, research and deployment, frankly, in those technologies.
Canada has a swath of extremely innovative, small clean-tech companies, but we have a very hard time commercializing because we are a small market. There are very well-targeted policies to help those small technology companies deploy and commercialize, things like the Canada growth fund, for example, to really help keep businesses in Canada.
If you look at the most successful technologies out there in terms of climate change—
Liberal
Leah Taylor Roy Liberal Aurora—Oak Ridges—Richmond Hill, ON
I'm sorry, Mr. Arnold. I don't have much time, so I just want to ask one follow-up question on that.
Do you think that, without carbon pricing or a price on pollution, these investments are going to be attractive to investors in this technology, or do you think that internalizing the externalities is necessary in order to get sufficient investments in actually transitioning to a green economy?
Acting Director, Clean Growth, Canadian Climate Institute
Yes, internalizing the externalities of greenhouse gas emissions is fundamental to solving the problem. There are also a range of other complementary policies that we've talked about, but carbon pricing is and should be the foundation of a credible strong approach on climate policy.
Liberal
Leah Taylor Roy Liberal Aurora—Oak Ridges—Richmond Hill, ON
Thank you very much. I have another question.
When the five major bank CEOs were at committee recently, I asked each of them directly.... They talked about their transition plans and about how they were invested in reaching net-zero targets. I asked if any of them were willing to commit to only financing oil and gas company projects that either reduced or were neutral in terms of adding to greenhouse gases. None of them were willing to commit.
Could you comment on that? Do you think it's possible to reach our net-zero goals if oil and gas companies continue to increase production, and Canadian banks continue to finance this increase in production?
Liberal
The Chair Liberal Francis Scarpaleggia
You have about 15 seconds, so if you could be succinct, that would be great.
Acting Director, Clean Growth, Canadian Climate Institute
Just by arithmetic, no, that is not possible. Oil and gas emissions represent about 25% of Canada's total emissions, and that's just the upstream of scope 1 and 2 emissions, so, no.
Liberal
The Chair Liberal Francis Scarpaleggia
Thank you.
Ms. Pauzé, you have the floor for a minute and a half.
Bloc
Monique Pauzé Bloc Repentigny, QC
So I'll proceed quickly.
Professor Dietsch, you said we needed a credit policy. As we know, the big banks are part of the zero-net-emission banking alliance, but at the same time they continue to make major investments in the oil sector. I don't know about you, but we call this greenwashing. It's not the best way to turn off the fossil fuel tap, especially when you know that bank CEOs sit on oil company boards.
Are you optimistic that Canada will change course?
Professor, University of Victoria, As an Individual
The first thing I have to say is that I'm skeptical about voluntary agreements or alliances that focus on corporate responsibility. There have to be regulations, and within the framework of these regulations, these companies are going to pursue their profits. They're not going to leave profits on the table when they can make profits. We really need to focus on regulation of the financial sector, among other things. If we did that, I'd be more optimistic. Under the current regulatory framework, I'm pessimistic.
Professor, University of Victoria, As an Individual
As I said earlier, I feel we need a paradigm shift. I don't think we have the right paradigm to analyze all this. It's not just Canada. Look around the world. People think that investing in green energy will solve the problem. It's Economics 101 that has a substitution effect. In the financial architecture we have, there is no substitution effect, or at least it's very compromised. It's on this aspect that we need to act.
Liberal
NDP
Laurel Collins NDP Victoria, BC
Thank you, Mr. Chair.
My question is for Mr. Coffin.
In your initial comments, you talked about the peril of labelling climate action as “woke”. I was hoping you could talk a bit more about that. We've seen Conservative politicians label climate action as “woke”.
What risks to the Canadian economy and financial system do we face if we engage in that kind of culture war?
Head of Oil, Gas and Mining, Carbon Tracker Initiative
The first point was to say that the risks of climate change can very much be financial as well as physical. As I outlined, there are transition risks that impact, for example, the oil and gas sector, particularly in Canada.
As global demand falls for oil and gas, particularly for transport fuels, that creates a big problem. By ignoring that transition risk, you're ultimately ignoring the financial headwinds facing that industry and the potential to significantly over-invest in new projects and new production that ultimately fail to deliver a financial return to investors and stakeholders. The use of those fossil fuels continues to take the world beyond climate limits and thus produces a cost through the externality associated with the carbon emissions.
By failing to take account of that, it ultimately fails to take account of the financial risks. Ultimately, that is bad for all. Crucially, it's failing to recognize the systemic nature of climate change and the fact that it will impact all sectors.
Liberal
Conservative
Michael Kram Conservative Regina—Wascana, SK
Thank you, Mr. Chair.
Professor Dietsch, a few minutes ago you said we need “to actively turn the tap off for [oil and gas] financing”. Would it be correct to say this is the whole goal and whole purpose of the taxonomy system of the central bank?
Professor, University of Victoria, As an Individual
This is an important point.
There are two ways central banks think about climate. One is, to what extent does climate impact finance? The other is, to what extent does finance impact climate?
Central banks across the world have come a long way in thinking about how climate impacts finance. They are encouraging commercial banks to look at their exposure to risks. When climate considerations undermine price stability or financial stability, the central banks are on it.
In the other direction, it's not the case. As I laid out earlier, when the financial sector acts in a way that slows down climate mitigation, central banks are not very proactive about that part of the equation. I think that's an important part of the equation.
Professor, University of Victoria, As an Individual
I'm sorry. I did not hear the follow-up.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Was that a yes or a no? Why does the central bank have to do the taxonomy if not to cut off financing to oil and gas companies?
Professor, University of Victoria, As an Individual
It is acting to the extent that it poses a risk to price stability and financial stability, but not further than that. It would be a yes and a no. There's no binary answer to that.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Okay. Let me move on to Mr. Coffin.
Mr. Coffin, you spoke quite negatively earlier about carbon capture and storage. Say you have a public utility with a coal-burning power plant, and that public utility wants to put a carbon capture and storage system at the coal plant so the CO2 doesn't go off into the atmosphere. It goes under the ground.
Why would that be a bad thing? Why would that be something you would not support?