Environment Committee on Nov. 4th, 2024

[Hugues Chenet]

Thank you, Mr. Deltell.

They can calculate their carbon emissions pretty easily. When it comes to being carbon-neutral, these are projections. Ms. McGuire somewhat brought that up. Companies have to look at what they are going to emit over a period of several years, even decades. So it's a projection that depends entirely on the choices the company makes, but also on the choices made by society, both in terms of consumption, our ability to produce and sell goods, for example, and the services people use, which are typically energy.

We're in a situation where we're very dependent on outside factors. So it's very complicated to come up with a precise estimate. It always depends on a list of conditions.

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

However, if a company says today that it is carbon-neutral, what should it do? As you say, it's very difficult to calculate. How can a company proudly claim to be carbon-neutral?

[Hugues Chenet]

The short answer is that it cannot.

The slightly more complicated answer is that a company must determine its carbon budget based on a hypothetical global scenario where emissions and the global carbon budget are distributed in a certain way among countries and companies. Then, it needs to establish a very concrete strategy to determine how it's going to spend that carbon budget over the next few years, what it's going to invest in, the activities it's going to undertake and the activities it's going to stop. Then it has to ask itself how it will optimize its processes and what new technologies it will use or stop using, for example.

At that point, we're heading toward something precise, but that implies that we have scaled up a sensible carbon budget. If all the companies in the world do this but don't agree, we can have only carbon-neutral companies, but reach a four-degree Celsius increase, because the carbon budget won't have been used globally.

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

We have a world-renowned figure here in Canada, Mark Carney, who is currently an adviser to the Prime Minister. He had to backtrack on his claim that the company he ran, or ran with other people, was net zero.

What do you think of these business leaders who say one thing to ease their environmental conscience, but who ultimately don't have one at all?

[The Chair, Liberal, Francis Scarpaleggia]

Please answer quickly, Mr. Chenet.

[Hugues Chenet]

Simply put, I would say that we have to encourage people to voluntarily commit to doing certain things, first of all. Second, in a democracy, it is essential for observers to check whether people are living up to their commitments.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Mrs. Chatel, you have the floor.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I'd like to begin by welcoming all the witnesses and thanking them for being here with us today.

Mr. Chenet, I'd like to hear your opinion on the global race to a green economy or a transition economy. According to Bloomberg, global investments in the economic transition reached a record $1.67 trillion in 2023, up 17% from the previous year. That money is being invested in renewable energy, electrified transportation, hydrogen and carbon capture technologies. We are in an international competition.

Are you seeing the same thing financially? Is there real competition among countries to attract these investments?

[Hugues Chenet]

Thank you, Mrs. Chatel.

Yes, my sense is that the green shift is becoming attractive and that it's working quite well. Financial institutions are talking about the share of green investments in their portfolios rather than the light bulbs in their offices. To some extent, it's a competitive and marketing strategy, which is probably part of the game, and it works quite well. However, it has to be compared with the harmful things that are still financed. That is much harder to shed light on. We can easily have a world full of wind turbines and potentially very clean renewable energy, yet reach a 4°C increase if we continue to use fossil fuels as much as we do. It's just that we'll have a lot more energy available.

[Sophie Chatel, Liberal, Pontiac, QC]

To remain competitive, the Canadian economy must focus on specific policies. First, we need to stay the course on a net-zero economy. I think that's one of the factors. Second, we need to provide opportunities for investment in renewable energy. The government launched green bonds, and carbon pricing is helping us decarbonize the economy.

Do you think we're on the right track to attract that foreign investment?

[The Chair, Liberal, Francis Scarpaleggia]

I would ask you to give a very brief answer, Professor.

[Hugues Chenet]

I'm not an expert on that, but in general, if we want to limit climate change, all of that will be increasingly significant.

We don't really have a choice. We have to throw everything at it, but that doesn't mean that if it fails, we'll be—

[The Chair, Liberal, Francis Scarpaleggia]

I have to stop you there. Thank you.

Ms. Pauzé, you now have the floor.

[Monique Pauzé, Bloc, Repentigny, QC]

Do I have a minute and a half, Mr. Chair?

[The Chair, Liberal, Francis Scarpaleggia]

Yes, that's correct.

[Monique Pauzé, Bloc, Repentigny, QC]

Mr. Chenet, I'd like to ask you some more questions.

Canadian financial institutions have voluntarily committed to net zero. Is it the same elsewhere?

Are there any mechanisms to force these institutions to reach net zero?

[Hugues Chenet]

To my knowledge, all of these commitments are voluntary. I'm not aware of any country where financial institutions would be forced to reach net zero. That may be an option, but as I recall, the institutions are really taking a voluntary approach.

That said, where it can be binding is that, once an institution voluntarily commits to a certain target, its stakeholders can say that it has to meet its commitments. In other words, if it has committed to it, it is going to have to do it.

Ultimately, European legislation could gradually require people to reach the objectives they've committed to.

[Monique Pauzé, Bloc, Repentigny, QC]

Do I have a few seconds left, Mr. Chair?

[The Chair, Liberal, Francis Scarpaleggia]

You have time for a statement or an observation.

[Monique Pauzé, Bloc, Repentigny, QC]

Actually, I would like Mr. Chenet to explain why the banks are underestimating climate-related risks.

[Hugues Chenet]

I think they're underestimating them because they're trying to calculate them over long time frames using specific numbers, which they can't do. It's theoretically impossible.

[The Chair, Liberal, Francis Scarpaleggia]

Ms. Collins, you now have the floor.

[Laurel Collins, NDP, Victoria, BC]

Thanks so much, Mr. Chenet.

I feel like the financial institutions, but also governments, are looking at time horizons that are too short when it comes to the impacts of the climate crisis.

One other thing that concerns me is that we've heard that there is quite a bit of overlap between the boards of these financial organizations or institutions and the boards of the largest fossil fuel companies in Canada.

These oil and gas companies are also under-reporting their emissions drastically. While a number of those companies are also investing in emissions reduction technologies, they're also growing oil and gas and their mining and exploration and increasing their emissions.

Do you think there are ways that we can address the issue of the under-reporting of emissions through some of the climate-aligned financial regulations that we've been talking about?

[Hugues Chenet]

How do I answer this quickly?

In Europe, typically we have seen, for the last 10 years, the expectation that the reporting related to these items, such as carbon emissions, would be more and more precise when under some standards, and now they will be audited.

I think it will become more and more difficult to cheat or to provide wrong numbers, so I guess the question is—

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Mr. Leslie, you have three minutes.