Environment Committee on Dec. 2nd, 2024

[Sophie Chatel, Liberal, Pontiac, QC]

That's fine. Thank you, Mr. Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Go ahead, Mr. Leslie.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

I think I am over a target here that the current government doesn't really want to talk about.

I'll let the ambassador finish her response.

[Catherine Stewart]

I engage in conversations about reducing emissions in every sector, because we're in a climate crisis, and the world needs to do more across the board. Whether it's the oil and gas sector, the agriculture sector, methane, shipping or aviation, the conversations are happening globally everywhere so that we can do more.

I know that Megan Nichols, who is at the table, could speak a little bit more about the International Maritime Organization in particular.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Go ahead, Ms. Nichols.

[Megan Nichols]

I'm happy to do so.

The International Maritime Organization has been working for a number of years now to identify potential pathways for the international shipping sector to reduce its emissions. It's one of the highest emitters in the transportation sector, and very challenging to decarbonize.

One of the options being discussed at the IMO is a carbon levy, along with the concept of a low-carbon fuel standard. These are live discussions that are happening, and Canada is participating in them.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Obviously, Canada is supportive if it is participating in this.

Has there been any reflection, as part of these conversations, on the economic impact for Canadians who are already struggling?

[Megan Nichols]

All countries that are IMO members participate in the discussions, regardless of their position on this particular concept.

In terms of economic impact, that is indeed part of the assessment among all the different options on the table at the IMO. They are looking at the impact on states, including countries on the path of development.

[Branden Leslie, Conservative, Portage—Lisgar, MB]

Ambassador, as outlined by the parliamentary environment commissioner, the Liberals are failing to meet their emissions target. In fact, they have the worst record in the G7, despite having a punishing carbon tax that is driving up the cost of everything and making us less competitive. The U.S. is ranked above us, but they don't have a carbon tax.

How is it possible they have a better track record than Canada?

[Catherine Stewart]

Thanks for your question.

We have very good relationships with G7 colleagues who want to hear about Canada's experience. They know not everything is easy. It wouldn't be called “ambitious” if it were easy. I think it's important to share our experience and learn from each other.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

[Catherine Stewart]

Canada has a unique situation, being who we are.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

We're going to Ms. Chatel for four minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Chair.

Ms. Stewart, in 2024, global energy investments are expected to hit a record $3 trillion. The direct positive correlation between a company's environmental performance and its attractiveness for these investments has often been demonstrated. A reduction in greenhouse gases by a company is often seen as a positive signal to investors.

Earlier, I heard my Conservative colleagues say that we should no longer be talking about global carbon pricing. I have bad news for them. The world is making it a priority for economic reasons and business opportunities. In March 2024, more than 300 Canadian economists signed an open letter in support of a carbon pricing policy in Canada. They noted that carbon pricing reduces emissions “at a lower cost than other approaches.” Perhaps the Conservatives have no interest in attracting foreign investment to Canada, which would be terrible for our economy.

Tell us about the huge business opportunities that our Canadian companies have with our climate policies.

[Catherine Stewart]

Thank you very much for your question.

It's definitely clear that there are many economic opportunities out there for Canadian companies innovating in clean tech and cleaner solutions. It is true that investors are interested in investing in cleaner solutions, which is one reason that we are leading on the cement and concrete breakthrough. It brings governments and businesses together to work on how they can advance abatement technologies, because there are huge economic opportunities there. By bringing the two together—government and businesses—we can make sure we are promoting the right policies. Carbon pricing has been one of them.

As an example, when we had Heidelberg Materials at a recent event in New York, they underscored the importance of carbon pricing and the predictability it provides for investments that the cement and concrete sector is making.

There are other examples I could provide, but I will leave it there.

[Sophie Chatel, Liberal, Pontiac, QC]

All international organizations, including the United Nations and the Organisation for Economic Co‑operation and Development, are discussing how best to transition to a green economy and attract those investments to their member countries. Does that surprise you?

[Catherine Stewart]

I'm not surprised that there's a lot of work being done to highlight the economic opportunities that exist with greener solutions. I think many companies out there will underscore the opportunities that have been open to them because they've been able to show how they can produce things in a cleaner way. I think Canada also—

[Sophie Chatel, Liberal, Pontiac, QC]

Are you surprised that my Conservative colleagues are trying to prevent people from talking about one of the best policy tools to attract those investments to the economy of tomorrow?

[The Chair, Liberal, Francis Scarpaleggia]

Ms. Stewart, you're lucky, we're out of time. Thank you for being here. We were pleased to connect with you and meet with you virtually.

I'd also like to thank representatives from the department who were with us this morning.

We're going to take a short break before welcoming one of our witnesses by video conference for the second hour.

[The Chair, Liberal, Francis Scarpaleggia]

Welcome, everybody, to our second panel.

We have Mr. Normand Mousseau on the line.

He's a professor at the Institut de l'énergie Trottier and at the Université de Montréal. I can also tell you that the sound tests have been successfully completed.

From the Canadian Climate Institute, we have Dale Beugin, executive vice-president.

Then from the Canadian Taxpayers Federation, we have Devin Drover, Atlantic director and general counsel, who is accompanied by counsel or support staff.

From Environmental Defence Canada, we have Julia Levin, associate director, national climate.

We'll start with Mr. Mousseau for five minutes online.

Mr. Mousseau, go ahead, please.

[Normand Mousseau, Professor, Institut de l'énergie Trottier, Université de Montréal, As an Individual]

Thank you, Mr. Chair and honourable members.

The Commissioner of the Environment and Sustainable Development's reports on Canada's progress in reducing greenhouse gas emissions show that, while real progress has been made in recent years, it won't be enough to achieve the legislated targets for 2030 and 2050.

Moreover, those analyses are consistent with the results of the technical-economic modelling presented in the third edition of our “Canadian Energy Outlook”. That report, published every three years, assesses the impact of existing measures in the context of a reference scenario and compares those results with the changes needed to achieve net-zero emissions by 2050.

The results of our work are as follows.

First, when you look at the clean electricity regulations and the zero-emission vehicle regulations, which are proposed but not yet adopted, our modelling shows that, for the first time, a reference scenario where greenhouse gas emissions are projected to decrease in Canada from 2005 is possible. In fact, instead of the 3% increase that was projected three years ago, we see a 14% reduction in emissions by 2030 from 2005, and a 25% reduction by 2040, again from 2005.

Nevertheless, when we observe the gap between our net-zero scenarios and the reference scenario for 2030, we come to the conclusion that it will, in fact, be impossible to achieve Canada's 2030 targets.

If we really want to achieve net-zero emissions by 2050 and make major changes, we must take longer-term measures now.

Another important aspect must be taken into account. Although federal efforts on zero-emission vehicle regulations overlap with those of the provinces, the bulk of structuring efforts for decarbonization come from the federal government. The provinces are making very little structural effort in this area. Given that energy is a provincial jurisdiction, it will be impossible for Canada to go much further unless the provinces make a real commitment.

Finally, we don't see how the industrial carbon market as it is currently set up could lead to significant emission reductions in the industrial sector. Other regulatory measures will be needed, among other things.

So our advice is similar to that of the Sustainable Development Commissioner.

In our view, one aspect isn't being addressed. Part of the problem that is slowing down implementation of the measures is a lack of cooperation from the provinces, as well as a lack of cooperation among the federal political parties. This forces the federal government to work much harder to develop regulations that will be court-proof, or that could survive changes in government. When we look at what's being done abroad, things work when all the political parties at least agree on the major objectives, which enables decarbonization to move forward.

One aspect that I feel is important and that I'd like to emphasize is that efforts have been made to improve modelling as a result of recommendations made by the Sustainable Development Commissioner in a previous report. Among other things, there's been collaboration among the federal Department of the Environment and the Energy Modelling Hub, an organization managed by the Institut de l'énergie Trottier at Montreal's École Polytechnique, the Institute for Integrated Energy Systems at the University of Victoria, and the School of Social Studies at the University of Calgary. So we are working to better understand the models and improve their quality. Things are moving in that direction.

If we want to speed up the transition, unless the provinces follow suit and commit to real cooperation, the federal government must really work on the environmental side, particularly by tightening important environmental standards. It must also develop sector-specific reduction strategies and a carbon budget, which can be defined in several ways. It can also support large-scale pilot projects to test transformative technologies in heavy transportation, carbon capture and sequestration, and other industrial processes. We think that's the only way we can move forward in this area.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Professor.

We'll go now to Mr. Beugin for five minutes.

[Dale Beugin, Executive Vice President, Canadian Climate Institute]

Thanks very much, members of the committee. Thanks for your time.

I'd like to make four points today.

First, current policies, both provincial and federal, are working. The Climate Institute's independent analysis uses economic modelling to show that absent federal, provincial and territorial climate policies in place since 2015, national emissions would be on track to be 41% higher in 2030 than they otherwise would have been.

Trends in current emissions reinforce those findings. The institute's new early estimates of national emissions show that current emissions are around 7% below 2005 levels. Since 2017, shifts towards lower-carbon sources of energy have reduced annual emissions by 50 megatonnes. Improvements in energy efficiency have reduced emissions by 62 megatonnes. These reductions are greater than increases in emissions from growth in the economy, showing that Canada is decoupling growth of the economy from growth in emissions.

Second, swift policy implementation is a priority, both for competitiveness and for emissions reductions.

Achieving the full potential of policies not yet finalized requires implementing those policies pretty quickly. Policies take time to affect emissions. As the commissioner of the environment and sustainable development noted, slower implementation of planned policies will decrease emissions reductions in 2030.

Implementation also matters for competitiveness. Policy certainty—for example, on the details of investment tax credits—increases investment. It seems likely that at least some elements of the Inflation Reduction Act will be maintained in the United States. Canadian climate policy can help Canada attract investment to drive new sources of economic growth.

Third, ensuring that existing policies are working—especially industrial carbon pricing—is critical.

Climate Institute analysis finds that large-emitter trading systems, otherwise known as industrial carbon pricing, are Canada's most important climate policy, delivering up to half of the emissions reductions expected in 2030 from the main policies in the federal emissions reductions plan. That's about three times the emissions reductions, for example, expected from the consumer carbon tax. Examples of these large-emitting trading systems include Alberta's TIER program, Quebec's cap and trade system and the federal backstop.

When designed well, these trading systems drive both emissions reductions and competitiveness. These systems protect the competitiveness of existing industries while maintaining incentives to reduce emissions. Carbon credits also provide essential revenue for low-carbon projects, such as carbon capture and storage, clean electricity or clean steel, helping them to attract private investment.

These systems will only deliver these benefits if they're working as designed. Our analysis suggests that some credit markets are currently unbalanced in these systems. Excess supply of credits can devalue carbon credits, undermining their ability to help attract private investment and reduce emissions. Insufficiently stringent performance standards are one issue leading to more supply and less demand for carbon credits. Monitoring and updating policies over time can ensure they deliver on emissions and competitiveness benefits.

Fourth, addressing interactions between policies matters for efficacy, for cost effectiveness and for competitiveness.

In some cases, different policies overlap in terms of the emissions they cover. Governments should assess and manage those interactions carefully. Policy interactions mean that additional policies don't necessarily drive the same scale of additional emissions reductions they deliver on their own.

For example, policies such as investment tax credits can enable new low-carbon projects, but at the same time they make it easier to generate credits in those large-emitting trading systems, increasing the supply of credits and decreasing demand, thus depressing the effective price of carbon and the emissions reductions from industrial carbon pricing.

Those policy interactions also risk increasing overall costs, potentially increasing higher-cost emissions reductions but decreasing lower-cost emissions reductions.

Policy interactions can also undermine competitiveness by creating uncertainty about future credit prices. Attracting investment for large low-carbon projects depends not just on current prices for carbon credits but also on expected future prices. Interactions increase the risk that future carbon credits will have lower value.

Governments can address policy interactions either by streamlining policy packages or by explicitly accounting for interactions and adjusting policies to compensate.

To conclude, overall, delivering on emissions reductions in Canada is not a pass/fail test. Current policies are working, but we are short of the target. More stringent and more coherent policy packages with more policy stringency will drive more emissions reductions and more private investment.

Thank you very much.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

We'll go now to Mr. Drover.

[Devin Drover, Atlantic Director and General Counsel, Canadian Taxpayers Federation]

Thank you for the invitation to be here today.

My name is Devin Drover. I'm the general counsel and Atlantic director for the Canadian Taxpayers Federation. I'm here today on behalf of thousands of Canadian taxpayers who want to see the carbon tax scrapped.

This is for three key reasons. First, the carbon tax makes life too expensive. Second, Canadians should not be punished for the necessities of life, like driving to work or getting groceries. Third, the carbon tax is ultimately not working.

First, let's talk about that cost to Canadians.

It's currently $80 per tonne, which adds 18¢ to a litre of gasoline, 21¢ to a litre of diesel and 15¢ to a cubic metre of natural gas. If you look at this, you see that it costs about $13 extra for someone to fill up a minivan, $20 extra to fill up a pickup truck and about $200 extra to fill up a big-rig truck with diesel.

Let's talk about truckers. Nearly everything we need is brought by truck. This is nowhere more true than in my home province of Newfoundland and Labrador, where food is delivered by boat to the island's west coast and then trucked 900 kilometres to the island's east coast, where most of the population is. When you charge a carbon tax of 21¢ per litre on diesel, you are charging more for everything. The Canadian Trucking Alliance says that the federal carbon tax will cost that industry about $2 billion this year.

It's not just about the truckers. Let's talk about farmers, who grow the food the truckers bring. They pay the carbon tax on fuels they use to heat their barns, dry grain and keep livestock alive through the very cold winter. The Parliamentary Budget Officer says that the carbon tax will cost Canadian farmers $1 billion by the year 2030.

I'd like to use this opportunity to briefly thank the members of the Conservative Party, the NDP and the Bloc for voting to exempt farm fuels from the carbon tax. I understand the bill has been gutted by the Senate—the unelected Senate, but that's a matter for another day—and sent back to the House.

Let's talk about home heating. We live in a very cold country, and heating our homes is essential for survival. The government admitted that this is a problem when they exempted—for political gains, one would argue—certain fuels, predominantly benefiting Atlantic Canadians, while across this country, people are still struggling to heat their homes and did not receive any form of exemption. For example, the average Alberta household will pay about $440 extra for home heating this winter. It's no surprise there's a constitutional challenge launched in Alberta to these exemptions.

We wish this government would consider the position of the late leader of the NDP, Jack Layton, who opposed putting a carbon tax on home heating fuels because ultimately it is wrong.

Second, let's talk about affordability. Canadians should not be punished for the basics of life, driving to work and heating their homes. They have, in most cases, no other choice but to do those things, yet about half of Canadians are within $200 of not being able to make the minimum monthly payments on their bills. These people are scraping by. We're hearing from them every day. We're receiving letters and emails from supporters who are being pulled into difficulty by this carbon tax.

We can go back again to the recent PBO report, which shows that the carbon tax will cost the average household about $400 extra this year and more than $900 by the year 2030, and that's with the rebates factored in. Despite what the Prime Minister said in Brazil, I think those families who are in survival mode rightly value feeding their children over paying his carbon tax.

Last, the carbon tax is not working. In British Columbia, the place in Canada where this tax was first brought in, the government promised a 33% reduction in emissions below 2007 levels by 2020. Instead, emissions went up by more than 2%. In 2021, the federal government said it would reduce emissions by 40% to 45% below 2005 levels, and the data have clearly shown that this is not happening. We went up in emissions.

Overall, this carbon tax experiment is a failure. It is causing huge financial pain without the promised environmental gain. It's making life too expensive. Canadians should not be punished for driving to work and heating their homes. Ultimately, it's not working. Therefore, on behalf of thousands of Canadian taxpayers, we are here today to ask the government to scrap this carbon tax.

Thank you.