Environment Committee on Oct. 28th, 2024

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Chair.

Welcome to the witnesses.

The committee has been fortunate to hear from economists from the OECD and Canada as well, all of whom have said that Canada should definitely take action on sustainable finance because it's a matter of international competitiveness. We're seeing foreign capital flowing into countries that have adopted the taxonomy and mandatory disclosure for large businesses.

I would really like us to discuss in greater depth the importance of the announcement that the government made in October, on October 9 to be more precise, on the two major pillars of green finance. There's obviously the taxonomy of green finance, transition finance and mandatory disclosure.

Mr. de Arriba‑Sellier, I'll go to you first. Would you please describe for us the benefits of such a taxonomy in Europe for the economies of those countries and the competitiveness of European companies seeking to attract foreign capital?

[Dr. Nathan de Arriba-Sellier]

Thank you very much.

I think that taxonomies, in both Europe and elsewhere, give companies a sense of the direction public policies are taking. The taxonomies themselves are a support, particularly for public policies. In Europe, other regulations on the disclosure of information, the duty of care and the obligations of banks and so on have been developed based on a taxonomy.

In the case of developing countries such as China and Brazil, which have adopted taxonomies too, we also see monetary policies, credit policies, economic investment policies and fiscal policies that could even support the taxonomy, and that could indeed be conducive to a positive investment dynamic. Ultimately, it could support both the fight against climate change and economic development as well.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

So it would help us meet our global warming targets and would also be a benefit for our economy. It's really beneficial for both our economy and the environment.

That's good. Thank you very much.

[The Chair, Liberal, Francis Scarpaleggia]

You are at three minutes of speaking time.

[Sophie Chatel, Liberal, Pontiac, QC]

In that case, I'd like to ask Mr. Beaulieu a brief—

[The Chair, Liberal, Francis Scarpaleggia]

You have no time left.

[Sophie Chatel, Liberal, Pontiac, QC]

All right.

Thank you all the same.

[The Chair, Liberal, Francis Scarpaleggia]

I'm sorry.

Ms. Pauzé, you have the floor for one and a half minutes. That leaves you enough time for a good question.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you.

Mr. Beaulieu, I'm thinking about voluntary carbon offset credits. Can everything related to voluntary disclosure entail greenwashing risks?

[Julien Beaulieu]

It's interesting that Professor Damodaran discussed that, and he seems to have an answer.

As far as I'm concerned, I think we should be able to buy those offset credits but they should be of high quality. Proper information on what they are would be necessary. No one should be led to believe that buying those credits will resolve the climate crisis or that every business can offset anything.

The problem isn't the fact that credits exist. It's a good thing that they do. They can help ensure that money is invested in reforestation or conservation projects. These credits have a role to play.

However, they pose two problems. In some instances, they're of very poor quality and they're used for all kinds of things that make no sense—

[Monique Pauzé, Bloc, Repentigny, QC]

I'll stop you there. Thank you.

I have a question for Mr. Stewart.

What should we do to ensure that Canadian banks are held accountable for the role they play in fuelling the climate crisis? Can something be done?

[The Chair, Liberal, Francis Scarpaleggia]

A brief answer, please.

[Keith Stewart]

We need to require them to have climate transition plans that are aligned with 1.5°. There are a variety of ways to do that, but that is key, because otherwise, they're going to continue with business as usual. We've seen that since they announced their net-zero commitments in 2021. We haven't seen major changes in how they behave.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Next we have Ms. Collins for a minute and a half.

[Laurel Collins, NDP, Victoria, BC]

Mr. Stewart, earlier this month, it was reported that if Bay Street were a country, it would be the fifth-biggest climate polluter in the world. These are shocking numbers, embarrassing for Canada, given that our banks are investing in fossil fuels at such high rates.

Can you talk a little bit about the economic risks, the risks that you generally see in this news?

[Keith Stewart]

Yes, Canadian banks and pension funds are major investors in fossil fuels.

I think the risk is twofold. There's the risk that involves making climate change worse and the physical impacts that come with that. We've seen that risk when we look at all the destroyed infrastructure from these more extreme storms, etc.

Then there is what we call the transition risk. If we keep making the heavy investments in Canada and abroad with Canadian banks, insurers, etc., in fossil fuels, and the world successfully makes a turn away from fossil fuels—which is, for instance, what the IEA is going to do—even with no new climate policies, we'll see a reduction in the market for fossil fuels and we'll be left with a bunch of white elephants.

We're going to end up paying the cost for that. We're going to end up having to clean up all of the old wells on the public's dime, because the companies will go bankrupt. They're already very good at transferring those costs to us. That's a huge risk to the rest of us as well.

[The Chair, Liberal, Francis Scarpaleggia]

Thanks very much.

We'll now go to Mr. Deltell for three minutes.

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

Thank you very much, Mr. Chair.

Thank you very much to the witnesses for this relevant information.

Mr. Beaulieu, you've spoken at length, and rightly so, about greenwashing. Some people say they have good intentions or project a good image, but that ultimately isn't really true of certain companies and individuals.

I'd like you to tell us about the approach that many companies, organizations and even individuals have adopted in this matter. They take planes, travel, attend conferences around the world, in deserts, and, when they come home, they buy trees or carbon credits to ease their conscience.

I'd like to hear your opinion of greenwashing in those situations.

[Julien Beaulieu]

That's a very interesting question because we increasingly see greenwashing around us. I recently noticed it at a truckers' festival, where all those GHG emissions were offset and people claimed to be eco-friendly. You can be glad they offset their GHG emissions, but, in the end, it was still a major polluting event that shouldn't have been considered eco-friendly or sustainable.

You can introduce very specific measures to restrict both the cases in which people can use these credits and the kinds of allegations that can be made when using the credits. For example, minimum conditions for distributing or using credits can be defined. You can state all the minimum criteria that must be met to be certain that credits are of high quality. You can also restrict the circumstances in which they may be used. For example, should we allow an airline to offer carbon-neutral flights? Perhaps we shouldn't allow that. Perhaps we should permit the use of credits as a good measure by ensuring that we clearly explain that credits don't make flights carbon neutral, that aviation is still a polluting industry and that a transition is necessary. The use of carbon credits should be clearly delineated.

What California has done is very interesting. It has passed legislation requiring all businesses that distribute or use carbon credits or offsets to disclose information on their quality. This then provides the government with information on criteria and quality, and they determine the purposes for which those credits can be used. Canada should do the same thing by amending the Competition Act, for example. Amendments have recently been made to that act and others should follow. We should also make regulations or pass a separate act, as California has done, to determine clearly how those credits are to be used.

I agree that significant risks are involved in the use of carbon credits and offsets. Everyone around this table seems to feel that credits can present quite significant greenwashing risks. We should clearly determine how they are to be used.

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

When the Minister of the Environment appears here, he always says he buys carbon credits right away when he attends a conference outside Canada. Do you think we should encourage virtual participation instead? For example, I attend the COP international meetings virtually. It costs the taxpayers nothing and has no impact on the environment, especially since I drive to Ottawa in an electric car.

Do you think the government should have somewhat stricter rules when it comes to participating in events outside Canada, given how they present us with high-minded principles, but the environmental cost is much higher than if we were to participate virtually?

[The Chair, Liberal, Francis Scarpaleggia]

Please be very quick, Mr. Beaulieu.

[Julien Beaulieu]

I think we should all cut back on flights as much as we can. That is why I am talking to you about governance right now.

[The Chair, Liberal, Francis Scarpaleggia]

That's good.

Mr. van Koeverden, you have three minutes.

[Adam van Koeverden, Liberal, Milton, ON]

Thank you very much, Mr. Chair.

I'd like to start where I finished off with Mr. Beaulieu, if I could.

There has been some confusion on this committee today, I feel, with respect to whether a taxonomy would make it mandatory or obligatory for all companies to adopt environmental, social and governance frameworks, or if they would simply have to be honest and forthcoming about the feasibility of their stated goals, as we've seen them take these on as marketing. Could you clarify that?

Mr. Damodaran implied that the adoption of a taxonomy would make some of these commitments mandatory. Is that the case?

[Julien Beaulieu]

It's not the case. A taxonomy just creates a label.

If you want to issue a green bond, everybody knows what should be in a green bond. If you want to issue a transition bond, everybody knows what's in a transition bond. You might still want to issue a regular bond or a brown bond—call it whatever you like—but at least for these specific criteria, we know what it means. Everybody agrees on the criteria that must be met. This allows us to avoid this “disclosure diarrhea” that Mr. Damodaran mentioned.

This way, we're sure we're all playing by the same rules. We know what the words mean. If some people then want to invest in green, good for them. If some people want to keep traditional investment strategies, well, we won't say, “Good for them”, but they still have the opportunity to do it.

Anyway, it would be provincial regulators regulating these bonds at the end of the day. The taxonomy cannot achieve that in its current framework.