Evidence of meeting #128 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
The six minutes are up, but perhaps you can answer that question during another intervention, Mr. Beaulieu.
Ms. Collins, go ahead.
NDP
Laurel Collins NDP Victoria, BC
Thank you, Mr. Chair, and thanks to all our witnesses for being here today.
In particular, I was appreciating Mr. Stewart's and Mr. de Arriba-Sellier's comments around the inclusion of fossil fuels in the taxonomy and what kind of danger that poses.
This is really maybe for the two of you, starting with you, Mr. Stewart.
The government recently announced its framework for this much-anticipated taxonomy. It definitely left the door open to the inclusion of fossil fuels.
Can you talk a little bit about these dangers? Do you believe, as many others have said, that no taxonomy is better than one that includes fossil fuels?
Senior Energy Strategist, Greenpeace Canada
Yes, the devil is always in the details.
As Mr. Damodaran said, if you get to make up your own definition of what's green, you're going to get a million definitions. With the taxonomy, it's important to remember that this is not like saying that you're not allowed to invest in fossil fuels, ever; it's saying that if you're going to declare that something is green, then we should have a high bar for that. It's pretty clear that there's a strong debate within government and outside government over whether or not to include fossil fuels in that.
The Canadian Association of Petroleum Producers argues that natural gas exports should be qualified as green because you might reduce coal emissions somewhere else. What we're saying is to keep that bar high and have it aligned with the 1.5° science-based opinion. The IEA and the UN have both put out guidelines on how to manifest that. The UN high-level expert group on the net-zero commitments of non-state entities has an Excel sheet that you can download. It's a checklist of things that are compatible and things that are not.
A lot of that work has been done, but there's a political push to get fossil fuels in because fossil fuels are a very powerful force in our politics. If you're going to be science-based, you should keep that out. The government has punted this to a committee, so a lot will depend on the makeup of that committee.
We're looking to that, but I would say that I would rather have no taxonomy than a bad one.
NDP
Laurel Collins NDP Victoria, BC
Thanks so much.
Mr. de Arriba-Sellier, similarly, you talked about how we need to exclude fossil fuels from this taxonomy and some of the dangers we've seen from international examples. Can you speak a little bit more about that?
Director, Erasmus Platform for Sustainable Value Creation, Rotterdam School of Management, Erasmus University, As an Individual
There is a case I know very well, the EU taxonomy. It was supposed to be the early mover, the gold standard of taxonomies, as they said at the time. The inclusion of gas in taxonomy, which has been political, and was necessitated perhaps in the wake of the Russian invasion of Ukraine, led to this taxonomy losing a lot of credibility in the investment community.
It's very important that if you set a taxonomy, you respect a certain number of criteria. The EU taxonomy has some criteria that should be included, and maybe they should be respected a bit more. There is challenge before courts in the EU, for instance, and this taxonomy has set criteria that are science-based, including that there is a “do no significant harm” principle—i.e., any of the activities that are covered by the taxonomy cannot lead to significant harm to environmental objectives like climate change mitigation. Inclusion of fossil fuels will, of course, lead to significant harm to climate-change mitigation, and there's also the precautionary principle.
I'm not sure whether the precautionary principle is a principle under Canadian law. I know that in many jurisdictions and in international law, it's a principle of law. It is an important principle, because there are some things that we can't really foresee. For instance, the effect of methane flaring has been documented for years, but it's come to light relatively recently how devastating it was in terms of CO2 equivalence.
It's important that these three principles—being science-based, doing no significant harm and adhering to the precautionary principle—be respected in a future Canadian taxonomy, if taxonomy varies.
Laurel Collins NDP Victoria, BC
Given the recent research showing increased emissions from gas, especially methane and its detrimental impact on our atmosphere and rising temperatures, can you speak a little bit more about that kind of new research on whether gas will displace coal and whether the claim that this is going to somehow reduce our greenhouse gases is based on science? Why do you think the government is continuing to leave the door open to this?
Director, Erasmus Platform for Sustainable Value Creation, Rotterdam School of Management, Erasmus University, As an Individual
I'm not a climate scientist, so I can't really speak on the science itself. Like you, I've read scientific studies supported in Nature and in Science and supported by the IPCC that indeed show that gas may not be a transition activity in the way that it was considered to be before. Even in the EU taxonomy, you have relatively strict criteria.
To answer your question more directly, I would go back to one of the points made by Professor Damodaran about psychology. If we set a taxonomy, as I think Mr. Beaulieu said, it's a sort of a green label. If we set a green label, everybody would want to have it, especially those who are undertaking greenwashing.
Liberal
The Chair Liberal Francis Scarpaleggia
We unfortunately have to stop you there.
We'll now go to the second round, which will be shortened as a result of the time at our disposal. Each speaker will have three minutes, whereas the Bloc Québécois and NDP members will have a minute and a half each.
I now give the floor to Mr. Kram for three minutes.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Thank you, Mr. Chair.
Thank you to all the witnesses for joining us today.
I'll start with Professor Damodaran.
Professor, in your opening statement, you talked about how our dependence on fossil fuels decreased more from 1975 to 1995 than at any other time because of the adoption of nuclear energy. You also, I believe, used the term the “hypocrisy” of environmental activists in their bias against nuclear energy.
Can you explain why this bias may be there in the first place and what some of the benefits of adopting nuclear energy may be?
Professor, Stern School of Business, New York University, As an Individual
Our dependence decreased because of nuclear energy.
I think part of it is, again, this idea of black and white. If you don't accept shades of grey, you are going to put things on one side of the line or the other. For whatever reason, perhaps because of safety—mostly—nuclear energy ended up on the wrong side of the line. Once you get on the wrong side of the line, there is no way back.
Bloc
Monique Pauzé Bloc Repentigny, QC
I beg your pardon, Mr. Chair, but the subject of our meeting today is sustainable finance. We've already had four meetings on nuclear energy, and we have a report on the subject. I don't understand why we're discussing nuclear energy again.
Liberal
The Chair Liberal Francis Scarpaleggia
Yes, but I think the subject is broad enough that we can include a discussion of nuclear energy.
We will continue. There are two minutes left.
Professor, Stern School of Business, New York University, As an Individual
As I said, in a world of black and white, once you're on the wrong side of the line, there's no way back.
That, I think, is part of my problem. Purists end up putting one type of energy or the other on one side of the line, and we cut off any chance of compromise.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Thank you, Professor.
Professor, do companies that adopt ESG policies see higher rates of return compared to companies that do not?
Professor, Stern School of Business, New York University, As an Individual
No. In fact, the higher rates of return that high-ESG companies have derived has come mostly from big tech companies early in the process, after being classified as good companies in the ESG space.
It has nothing to do with ESG. It's accidental by-product, as I call it.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Would it be the case that if companies that did adopt ESG policies did see higher rates of return, then all of these companies would do it and there would be no need for this committee meeting today? Is that a fair assessment, Professor?
Professor, Stern School of Business, New York University, As an Individual
That's exactly right.
If ESG and sustainability were so good for your bottom line, why the heck would you need it in the first place? They'd do it anyway.
Conservative
Michael Kram Conservative Regina—Wascana, SK
Also, Professor, in your opening statement, you used the example of being asked to pay $40 to reduce your carbon footprint on a commercial airline ticket. What advice would you have for people the next time they're asked to pay that $40 to reduce their carbon footprint the next time they buy a commercial airline ticket?
Professor, Stern School of Business, New York University, As an Individual
You'd be out of your mind to pay it. I would not.
Conservative
Professor, Stern School of Business, New York University, As an Individual
That money might go into planting a tree in Oregon or it might go into somebody's pocket. I think that this is part of the gravy train that I talked about, with all of that money being collected with very little to show for it.