Thank you, Madam Chair and honourable members of the committee.
My name is Andy Kubrin. I'm a writer, researcher and climate activist based in Calgary. I volunteer with Citizens' Climate Lobby Canada and the Calgary Climate Hub.
Through my work with Citizens' Climate Lobby, I learned about a policy called a “carbon border adjustment mechanism” or CBAM. As you are no doubt aware, it's a new development pioneered by the European Union.
Last June, along with other Citizens' Climate Lobby volunteers, I briefed my member of Parliament, Mr. Shuvaloy Majumdar, on the topic. Later, I wrote an article about the European Union's CBAM in Canada's National Observer.
A CBAM is basically a tariff levied on the embodied carbon in imported products. It has two purposes, to protect domestic producers from unfair competition from cheap carbon-intensive imports and to encourage other countries to implement their own carbon pricing policies.
No one likes taxes, but with proper design, this one can be a tax worth paying. A CBAM can level the playing field of international trade, promoting clean production everywhere. It can also lower emissions, which puts the brakes on global warming.
I won't try to describe all the complexities of CBAMs here—you have expert witnesses who can help you with that—but I will tell you that CBAMs pose a significant challenge to Canadian exporters and to the nation as a whole. Like many challenges, this one comes with an opportunity.
International trade makes up about two-thirds of our GDP. Our top trading partners are the United States, China, the United Kingdom, Japan and Mexico. If you total the trade with our individual European partners, the EU as a whole is our second- or third-largest trading partner, depending on which source you consult.
The EU introduced its CBAM in 2023 and began requiring importers to submit data on the embodied carbon in specific high-emissions products. In 2026, importers will start paying tariffs on the carbon content of these goods. The program will gradually expand until 2030, when it will cover all goods in the EU's emissions trading system.
Other nations are following suit, including our top partners. The United States is considering various policies. The United Kingdom expects to have a CBAM in place by 2027. Australia, Chinese Taipei, China and India are also weighing their options.
These countries are following Europe's lead for a reason. The European and United Kingdom CBAMs, and perhaps others under development elsewhere, provide a rebate for carbon pricing already paid. In this way, a CBAM becomes a virtuous circle, rewarding countries that reduce their emissions while discouraging freeriders. It turns carbon pricing into a competitive advantage.
There are a few ways Canada can take advantage of these developments.
One is to adapt our own carbon pricing system to capture the rebate available under CBAMs. That could mean modifying the output-based allocation currently available under our output-based pricing system. Our exporters would still pay a carbon price, but the revenue would remain in our economy instead of going to other nations.
The other thing we can do is implement our own CBAM. We would, of course, price the greenhouse gases in goods that we import to discourage carbon-intensive production in other countries. Revenues raised under our CBAM would be used to benefit Canadians. This step would protect Canadian industry and encourage other nations to do their fair share in emissions reduction.
These choices entail risk and trade-offs, and I defer to the experts who will advise you on these matters. A changing trade environment presents you with a challenge and Canada with an opportunity. It's a big challenge, but I'm confident your study will identify the best solutions.
Thank you, Madam Chair.