Environment Committee on April 23rd, 2026

[The Chair, Liberal, Shannon Miedema]

Good morning, everybody.

Welcome to the meeting number 35 of the Standing Committee on Environment and Sustainable Development.

Before we begin with our witnesses, who are all online for the first hour this morning, I have a little bit of committee business. The committee will not be meeting on Tuesday afternoon next week, because the spring economic statement is being presented in the House. Our meeting is cancelled on Tuesday, which means that we'll likely be doing the freshwater work on Thursday.

We're still working to get confirmation from the MPO with Dawn Farrell's appearance. The clerk has been shuffling it around. We should get it all sorted out for the following week, but that is still to be determined. We'll send that by email, when we actually have it done.

I need approval for four expenses for studies.

The first one is regarding the study on Canada's strategy to protect nature. The amount is $750.

All in favour?

[Some hon. members]

Agreed.

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

Why is it higher than normal?

[The Clerk of the Committee, Leif-Erik Aune]

I asked for an extra headset just in case we have a remote witness.

[The Chair, Liberal, Shannon Miedema]

The second one is the study on the Major Projects Office mandate regarding priorities and operations. Again, it's $750.

All in favour?

[Some hon. members]

Agreed.

[The Chair, Liberal, Shannon Miedema]

The third is the study on the net-zero advisory body. It's $1,000 for the two past members to appear.

All in favour?

[Some hon. members]

Agreed.

[The Chair, Liberal, Shannon Miedema]

Finally, we have a study on the plans and priorities of the Parks Canada Agency. It's $750.

All in favour?

[Some hon. members]

Agreed.

[The Chair, Liberal, Shannon Miedema]

That's great.

From Université du Québec à Montréal, we have Mark Purdon, associate professor.

From the Coalition of Concerned Manufacturers & Businesses Canada, we have Catherine Swift, president.

From the International Institute for Sustainable Development, we have Aaron Cosbey, senior associate; and Steven Haig, policy adviser.

Thank you so much for joining us online this morning. Each organization will have five minutes to provide opening statements. We'll then move to questions by committee members.

We will begin with Mr. Purdon for five minutes.

The floor is yours.

[Mark Purdon, Associate Professor, Université du Québec à Montréal, As an Individual]

Thank you, Madam Chair.

Thank you, Madam Chair and members of the committee, for the opportunity to appear today virtually.

My name is Mark Purdon. I'm associate professor at école des sciences de la gestion at UQAM here in Montreal where I've held the chair in decarbonization. I'm a political scientist who has studied carbon markets for over two decades and have closely observed the Quebec cap-and-trade system since its inception, as well as international climate financing carbon markets under the Paris Agreement and Kyoto protocol. I'll mention that I'm currently co-editing a book under contract with the University of Toronto Press on Canadian carbon federalism, which includes chapters from academics from coast to coast to coast, including on indigenous peoples and carbon federalism.

In January, I submitted comments to the minister on the discussion paper “Driving Effective Carbon Markets in Canada”, and I welcome the chance to speak to those views today.

My main message is this: Canada's federal industrial carbon pricing system should evolve towards a cap-and-trade system based on absolute emissions accounting. The Quebec model, linked with California's, should serve as a reference point for that evolution. Absolute accounting offers greater environmental integrity, superior transparency and better alignment with the global carbon coalition now forming around the European Union's emissions trading system. I will highlight three reasons.

The first is transparency. Canada's output-based pricing system has serious transparency problems. Confidential facility-specific performance standards, complex credit calculations and opaque effective prices make it very difficult to know what industry is actually paying. The federal headline carbon price is $95 per tonne of CO2 equivalent, but the Canadian Climate Institute has estimated in some of their research that large emitters pay approximately $10 per tonne on average, so one-eighth of the headline price. In Quebec's cap-and-trade system, the last auction cleared around $40 per tonne, and that price is publicly available and applies uniformly across covered emitters. While there are concerns about free allocation in the Quebec system, their share is slated to decline, and both California and Quebec are now working to address the issue of overallocation.

The transparency issues are not minor technical ones. They make it difficult for Canada to compare stringency across different provinces, which each have their variations on their own output-based pricing system. Therefore, it's difficult to evaluate the equivalency with Quebec or to demonstrate compliance with emerging international requirements, such as the EU's carbon border adjustment mechanism, which just came into force earlier this year.

The second issue is environmental integrity and market stability. An absolute emissions cap drives a better environmental guarantee than the output-based pricing system. When the EU ETS faced suppressed prices during its first decades, where prices were really too low, Europe introduced its market stability reserve in about 2018, which is a rules-based supply valve that adjusts auction values automatically. Canada's current OBPS proposal relies instead on a number of policy and regulatory tweaks and interventions. While I believe these will be implemented with good faith, they are slower to react and are more exposed to political interference.

A cap-and-trade system with a market stability mechanism would provide the stable, long-term investment signal that Canadian industry and Canadian clean tech need.

The third issue is international alignment. According to the International Carbon Action Partnership, almost every carbon pricing system that has emerged in recent years—including in China, Indonesia, Brazil and Turkey—is based on absolute cap-and-trade systems. Canada's output-based system is increasingly an outlier. Cap-and-trade systems are inherently more compatible with article 6 of the Paris Agreement and better prepared for the carbon border adjustment compliance being implemented by the EU. Why? It's because the prices are transparent and auditable.

Alignment also matters for cost. The International Monetary Fund has estimated that a uniform global carbon price of approximately $73 Canadian—$90 in 2025 dollars—would be the price that we need globally to achieve 2030 Paris objectives. If Canada pursues only domestic measures, we're going to need much higher carbon prices, so this type of cap-and-trade system would allow us to better engage with these international mechanisms to help us distribute the costs of climate action.

Thank you.

[The Chair, Liberal, Shannon Miedema]

Thank you very much.

We will now go to Ms. Swift for five minutes.

[Catherine Swift, President, Coalition of Concerned Manufacturers and Businesses of Canada]

The Canadian manufacturing sector has been shrinking for some time. Since 2018, manufacturing as a percentage of GDP in Canada declined by 5%, while the comparable U.S. number increased by 10%. This is important because the manufacturing sector in any country is a key source of innovation, productivity and well-paid employment.

The manufacturing sector and the energy sector are closely linked, especially in Canada. Many manufacturing companies in eastern Canada are heavily dependent on the oil and gas sector for their success. Too many Canadians believe that if punitive policies are imposed on the oil and gas sector, that's Alberta's and Saskatchewan's problem, when in reality it significantly affects the welfare of the entire country. Manufacturing used to represent 20% of Canada's economy whereas it now sits at just under 10%.

The industrial carbon tax is very problematic for manufacturing businesses, and small and medium-sized businesses in general, for a number of reasons. High taxes are a key reason businesses are leaving Canada, mostly for the U.S. Adding another tax to the mix can hardly help our competitive position, notably with our largest—by far—trading partner.

Other countries, of course, do not impose such taxes.

As the tax will be levied on the oil and gas sector, among others, it will increase energy prices, which are already much too high. Manufacturers are big consumers of electricity and energy in general. They were made much more uncompetitive by these foolish failed so-called green policies. The industrial carbon tax will fall heavily on the manufacturing sector, as well as on energy—the two most productive sectors of the Canadian economy. We know that we have a serious productivity problem, so imposing an onerous industrial carbon tax on the two sectors that are most contributing to our productivity is just foolish. That affects, of course, our standard of living.

As well as feeding inflation for businesses and consumers, the industrial carbon tax adds another layer of red tape and complexity to businesses, which means additional business costs that will be passed on to consumers.

The fact that carbon credit prices have plummeted is an indication that the carbon trading market is not functioning well.

This tax is also hidden, making it more difficult to estimate its impact and gauge its effectiveness. The tax is just another reason why businesses and investment are fleeing Canada for more competitive jurisdictions. Government policy that claims to want to attract investment back into Canada, yet imposes taxes like the industrial carbon tax, is basically like trying to suck and blow at the same time.

PM Carney recently said that the so-called decarbonized carbon—which is kind of like water that isn't wet—will be in great demand around the world, so all of these very costly investments in decarbonization will be worthwhile. This is absolutely not true. Other countries want our oil and gas now, as is, and mostly couldn't care less about decarbonization. In fact, all of the costs imposed on business by this tax, plus the immensely expensive carbon capture and storage projects planned, will more likely price Canadian businesses out of the market than confer any kind of price advantage.

Canada missed a huge opportunity to provide Canadians and the world with affordable, dependable, responsibly produced energy by foolish Liberal policies of the last decade, such as the industrial carbon tax, which knee-capped our most valuable single economic sector: oil and gas. This was a major contributor to the decline in the Canadian standard of living for the last 11 years and to the fact that Canada currently ranks at the bottom of international economic comparisons.

I'd like to close with something I heard just a few days ago from one of our board members of the CCMBC. She recently opened a U.S. location for her very successful medium-sized manufacturing business. She raves about how the U.S. environment for her business is terrific compared to the environment in Canada. She happened to meet a U.S. congressman recently. It wasn't even in a business context, but she was so pleased that he was genuinely interested in her business, asked a bunch of really good and relevant questions, and was very positive about government policy that was helping her hire more people. Her comment was, “If only Canadian government politicians could be so engaged and interested”.

This Liberal government doesn't seem at all concerned about truly consulting small and medium-sized firms. If it was, it wouldn't be pursuing policies as detrimental as the industrial carbon tax.

This industrial carbon tax, along with other punitive policies, means that Canadian businesses and workers suffer by losing jobs, going out of business or moving out of Canada, which many are doing. Uncompetitive conditions in the Canadian economy drove many manufacturers out of Canada long before Trump and his tariffs came along. Once a country loses its manufacturing sector, it doesn't get it back for a very long time, if ever.

Thank you.

[The Chair, Liberal, Shannon Miedema]

Thank you, Ms. Swift, for your statement.

We will now move to Mr. Cosbey or Mr. Haig for five minutes.

[Aaron Cosbey, Senior Associate, International Institute for Sustainable Development]

Thanks very much, Madam Chair. I'm honoured by the opportunity to appear before you today.

I'm a senior associate with the International Institute for Sustainable Development. I'm an economist with 35 years of experience. I'll be co-presenting with my colleague, Steven Haig, who's a policy adviser with IISD's energy program. IISD is a globally recognized think tank headquartered in Winnipeg, with over 300 experts working around the world to advance sustainable development.

This is a critical juncture for Canada's industrial carbon pricing regime. The federal government has an ongoing review of the regime's adequacy and equivalency provisions for provinces and territories. The recent federal Alberta MOU commits Alberta to an expeditious and significant strengthening of its industrial carbon pricing regime. Meanwhile, major climate policies in Canada have been abandoned or weakened, with assurances that a strengthened industrial carbon price will be able to pick up the slack.

With this in mind, we’ve distilled five messages from our extensive research on industrial carbon pricing in Canada.

Number one, industrial carbon pricing works. As an economist, I know that my professional colleagues don’t agree on much, but there is widespread agreement that a carbon price is the most efficient way to achieve industrial decarbonization. Canada’s large-emitter trading systems are a model. They give carrots to firms that innovate and sticks to those that lag, and they maintain high incentives to act while protecting against competitiveness impacts and carbon leakage. CCI analysis shows them to be Canada’s most effective climate policy tool by far.

Importantly, industrial carbon pricing is not just climate policy. Decarbonizing Canadian industry is essential to maintaining competitiveness in global markets that increasingly care about low-carbon production.

[Steven Haig, Policy Advisor, International Institute for Sustainable Development]

Number two, the current regime is in trouble. In IISD’s submission to the federal consultation on carbon pricing, we detailed 10 ways in which the current regime urgently needs to be improved. Notably, these include requiring minimum effective prices, that is, prices for credits in secondary markets in provincial and territorial regimes. Recent prices in Alberta, for example, have ranged between $30 and $40 per tonne, a roughly 60% discount on the headline price. Weak effective prices diminish the incentives that the regime is supposed to provide and undermine the certainty needed for long-term low-carbon investments.

Number three, Canada needs a strong and rising post-2030 carbon price. Without an updated trajectory, the industrial carbon price will start to decline in real terms in just four years. This is a critical challenge for an instrument that is supposed to motivate multidecadal low-carbon investments. Modelling commissioned by IISD shows that a strong effective industrial carbon price reaching $380 per tonne in 2040 could reduce Canada’s emissions by over 100 megatonnes in 2040 relative to a status quo scenario. That’s equivalent to avoiding a year of emissions from almost all road transportation in Canada, while preventing over $30 billion in estimated climate-related damages, all with manageable economic impacts.

[Aaron Cosbey]

Number four, different sectors need different stringency. Under the federal OBPS, firms pay only for emissions above standards that are tailored to the individual sector. This lowers the total costs, and it prevents carbon leakage and loss of competitiveness, but research from the Commission on Carbon Competitiveness has shown that industrial sectors in Canada face very different vulnerabilities.

The current regime doesn’t differentiate enough and, moreover, it applies an across-the-board annual tightening of 2% regardless of vulnerability. Modelling conducted for IISD shows that applying a more stringent tightening rate to less vulnerable sectors would have a huge impact. In a scenario with high carbon prices, it could achieve the same environmental outcome by 2040 while generating 12,000 more full-time equivalent jobs, $2.6 billon more in GDP and just over $1 billion more in net exports.

Number five, the industrial carbon price can’t do it all by itself. As essential as the industrial carbon price is for Canadian competitiveness and for achieving our climate commitments, it is not a silver bullet. Steel mills are not going to invest in decarbonization, for example, if policies aren’t in place that assure them they will be able to have future supplies of clean electricity and hydrogen.

Carbon price modelling commissioned by IISD shows that the cost of low-carbon technologies is one of the most influential factors in the model, which highlights a clear role for green industrial policy in Canada. Moreover, Canada’s industrial carbon pricing barely makes a dent in the 60% of national emissions that are not from heavy industry, bypassing significant sectors like transport, agriculture and buildings.

[Steven Haig]

In conclusion, Canada’s industrial carbon pricing regime stands at a critical juncture. With improvement, strengthening and extension alongside a supportive policy mix, it will be able to play an outsized role in helping Canada meet its climate targets while ensuring the competitiveness of our industries in a decarbonizing world. The time to act is now.

Thank you.

[The Chair, Liberal, Shannon Miedema]

Thank you to you all for your testimony.

We will now turn to Mr. Bexte for six minutes of questions.

[David Bexte, Conservative, Bow River, AB]

Thank you, Chair.

Thank you, witnesses, for being here today. I appreciate your presence and your participation.

Ms. Swift, you warn that current policies are contributing to an exodus of investment and an erosion of capacity in Canada. What evidence are you seeing of that today, and is it accelerating?

[Catherine Swift]

We've been seeing quite a bit for quite a while. It isn't just recent, as I mentioned in my formal remarks. It's been going on since long before Trump. Everything's blamed on Trump these days, as we know, but the facts show otherwise. Much of this was happening long prior to the tariff situation. It's a combination of factors like tax and the red tape regime. We represent mostly small and medium-sized businesses, and it falls so heavily on them. We really need a significant reform of our whole red tape situation.

When you ask about what indicates it, StatsCan data itself shows businesses leaving Canada. I'll give you an example. Our board of governors, which is about a dozen people, most of whom are manufacturers, had no U.S. facility 10 years ago. Now half of them do, and the other half are looking to do that.

I have both anecdotal evidence and formal statistical evidence that this is happening. We've also seen some recent data on how our talented young people are also leaving.

I think it's a combination of stories that we hear from businesses and formal data such as StatsCan data.

[David Bexte, Conservative, Bow River, AB]

Thank you. We've seen data that the top 1% earners are leaving the country and taking their intelligence and their entrepreneurship with them, as well as their wealth and resources.

You said that you're mostly small and medium businesses. What are your thoughts on the federal government's discussion of reducing the threshold to 10,000 tonnes of emissions per year versus the 100,000? How much of an impact is that going to have on the Canadian economy?

[Catherine Swift]

It's going to have a big impact, of course.

People only think about the cost of these kinds of taxes, but a lot of it is the regulatory load that it puts on as well, which is also a cost. It's not measured properly. Some of the other presenters here have mentioned the same thing. I think we would agree that we don't have very good measurement of the impact of these policies.

Environment Canada used to, years ago, have an economic model—and I'm an economist, too—that gauged the impact of policies such as the industrial carbon tax. It was Trudeau who got rid of it. That was just foolish, because a lot of our problem is that we don't even know the impact. We can sort of see it, but if we could measure it better, we'd have a much better idea. The current regime is not good at that.

[David Bexte, Conservative, Bow River, AB]

Thank you.

The Canadian Taxpayers Federation and others have pointed to evidence that the carbon pricing trickles down through the system. What do you see as the household impact?