Thanks very much.
Well, first of all, let me start with the comments about intensity-based regulation. I don't think that's the big issue. You could do a fine job solving the climate problem based on intensity. The issue is where you set the knob, how tightly you ask intensity to decline. If you ask intensity to decline at one percent per year, then you won't get real reductions in CO2, because the economy will grow faster. If you make it decline more quickly, you could easily achieve the results you want with intensity.
My view is that this is sort of a false debate. I have no problem, personally, with that part of the Clean Air Act at all. I think the big choice is whether we make a system that is really transparent, that talks to the engineers in companies instead of one that talks to the lawyers in companies.
I want to relate an example of what I mean by that. The U.S. Clean Air Act for sulphur is in some ways really simple. The basic rule is that you have a designated set of facilities, and at the end of each year, each of those facilities has to have the right number of permits to match its emissions, and if it doesn't, the plant gets a lock on it.
The way you make a market is that you make it simple and you make the enforcement so strong that nobody ever breaks the rules. So nobody breaks the rules, because the enforcement's very hard. There are very high penalties if you don't comply, so everybody complies. Other than that, it is completely the industry's business how to handle this. They can use whatever technology they want; they can use a futurist market if they want. It's their business. And I think it really is important to stick with that.
The fact is that people in the energy business understand how it works—I hate to say it—better than people in the Canadian government probably do. The government's role is to set the overall objectives. So I'm not at all claiming that the carbon market will happen just by free enterprise. No. Emissions of carbon to the atmosphere, using the atmosphere as a free dumping ground for the material products of our combustion, is an environmental risk, and the parameters of dealing with that risk need to be set by government. But after that, I don't think government should be involved in the details.
The current way we look at regulating is nothing like that. So if you look at the details of the large final emitters scheme, there's going to be enormous complexity at the facility-by-facility level, which is a recipe for a huge number of consultants and lawyers getting a lot of money, and it won't speak to engineers.
Let me tell you one anecdote about how well this works when it works. There were various stages of nitrogen regulation in the U.S.—I spent most of my career in the U.S., so that's what I know best—and there was a stage when you had to put a certain kind of combustor on your power plant called an overfire air combustor. It was a command-and-control regulation that said, “Put this widget on your power plant,” so people said they would put the widget on their power plants. But it didn't say, “Tune the widget up,” because that wasn't anybody's responsibility.
Then we moved from that regulation to a newer set of regulations, where we now have tradeable permits for nitrogen emissions. And suddenly what happens is that people at the head office phone up people in the local power plant outside Pittsburgh, where I used to live, and say, “Can you do something about these nitrogen emissions, because they're costing us a bunch of money?” What well-run businesses know is how to do cost control, because that's what makes good businesses run.
Then it turns out that there are little things you can do that actually cost you zero money--just adjusting this enormous fire you have inside the giant gigawatt coal-fired power plant. It turns out that with no new capital at all, that just by tuning up that fire, you can cut your NOx emissions by a few percent. So a bunch of plants have done that.
The lesson of that story is that you want something that speaks unequivocally clearly to the guy operating the plant. The kinds of regulations we're now discussing, the kinds of regulations that the last government put forward and that this government is now in the middle of discussing, are so complex that there are an enormous number of people who I deal with every day in Calgary in the oil patch who are in the middle of hiring teams of lawyers and senior vice-presidents on environmental compliance and what not to figure out how to manage them. They don't just put a price on carbon. There's talk about how we'll pay for the difference between our target and what we actually emit on a facility basis by buying a technology fund. But of course, actually counting emissions on an industry basis is not easy. There are all sorts of complexities about what is and isn't in your business.
So that's my overall comment on that. You really need to look for simplicity. That's my biggest single comment on that.