Thank you for inviting me. I'll confess that I have not followed the work of your committee very closely. Since being notified on Thursday or Friday, I've just scanned what you've been doing and tried to think about how I might contribute most to your deliberations.
I want to point out that while I have a lot of training on the technical side of energy systems and the individual technologies involved and so on, I'm sure I don't have the expertise of most of the witnesses you've had before you. My expertise lies in building large energy economy system models of the entire economy; the mix of different supply technologies; how we use energy; the capital stocks in our economy and how they evolve buildings, infrastructure, and equipment; and how that turnover works. From that, I help to develop policy models that help to inform governments, or interest groups for that matter. I've done work for industry, provincial utilities, and environmental organizations, but a lot of my work has been for governments at the federal and provincial levels, and even for international organizations.
What would be the response to different kinds of policies? I think the point that I really want to make here is that it seems to me that a committee like yours will be hearing a fair bit about advocates of different alternatives to our global energy system. Our energy system has been dominated by fossil fuels, the burning of fossil fuels, and the release of emissions—and in particular carbon dioxide—into the atmosphere.
Of course, in the Canadian electrical system, fossil fuels have not been the cheapest alternative in many cases, which is why we are so dominated by hydro power and have substantial nuclear. That being said, I want to emphasize for the committee one issue that I think is important. That is that I often hear from the advocates of alternatives to burning fossil fuels, for all manner of transportation but also for electricity generation, that with just a little bit of help—1¢ a kilowatt hour, or whatever—eventually our costs will decline and we will be able to compete successfully with fossil fuels.
The point I want to make is that there's a very good chance that's not true. As long as we still allow the combustion of fossil fuels without significant charges of value on the atmosphere with respect to greenhouse gases, that is not likely to be the case, certainly in many parts of the world, and certainly in some regions of Canada. The point to remember is that fossil fuels are a very rich energy endowment, and that's not about to change. They do present what we economists call this externality cost risk, which refers to the damages or risk of things like climate change. Therefore, we have to decide as a society if we're willing to pay the costs of getting to zero-emission energy, or, in the case of your committee, to zero-emission electricity for this issue that you're dealing with.
I think while you'll have had people coming before you and have had them excited about alternatives to fossil fuels, my job as an energy system modeller is to keep our eye on the big picture. One question, I would say, you have to ask yourself today, just to give you one example, is that in Alberta today we have—and I don't have the real details of this project; they're in my head, but I looked them up. We have the next major electricity generation project that's slated to occur in Alberta. I believe it's a combined project of TransAlta and EPCOR, but I stand to be corrected. It will be a coal plant without carbon capture and storage. So I want to just emphasize that's really what we're looking at.
I've been doing a lot of research on generation of electricity from fossil fuels. The costs of generating electricity from coal, for example, have fallen substantially in the last two decades. This is coal burning without carbon capture and storage. So while you might have people coming before you excited about the potentially low costs of alternatives in the future, I want to just emphasize over and over again that without a policy response—the values, the atmosphere—it's very unlikely that we'll get the kinds of dramatic shifts that at least the federal government today and the opposition parties are all saying they'd like to see over the next 40 years, for example.
Just to run you through that, there are something like 100 electricity-generating plants on the books today in North America. Those are plants that are being planned to be built, Alberta's plant being one of them. These are 100 coal-generating projects in North American, none of which would have carbon capture and storage.
If I do the analysis in the rough global model that I work out and I assume that North America and Europe, the rich countries of the world, won't put a prohibition on that kind of plant, at least not for the next five to ten years, then I also calculate in about a one- to two-decade delay before we can convince the developing countries—China, India, Indonesia, or wherever—that they need to adopt these kinds of technologies and the policies that would make that happen. When I do that calculation, we come nowhere close to the kinds of reductions by 2050 that even the current federal government and the opposition parties in Canada are claiming they want to see, something like a 50% reduction of emissions.
That leads me to the policy question that I want to emphasize, and I'll close my remarks with that.
As an economist, I can say that any Nobel Prize winner would agree with me that the most economically efficient policy is an economy-wide greenhouse gas tax or carbon tax, with, as I think Bill Marshall mentioned, long-term schedules for how that tax might start out modest but would grow over time.
If you are to have a cap of, say, greenhouse emissions from large final emitters, which we are starting to implement here, that can't have the kinds of flexibility provisions and offsets that would allow you to still build projects such as the one in Alberta.
I've heard talk that—I guess it was Bill Marshall saying it—we have a challenge because of the difference between provincial and federal jurisdiction, and I agree that is a challenge. At the same time, what we've just witnessed is that the federal government has been in the process of implementing this large final industrial emitters policy, which includes electricity generation. So I say we have right there at our hands a tool that could be used to meet the kinds of policy objectives I'm talking about.
In the absence of that, we do have some provinces taking their own steps. An example I would give you is the British Columbia policy that was implemented this year, which had two components to it. One was that 90% of all new electricity would have to fall into this category of clean or green. The other was that any project such as a coal plant might be allowed to go ahead, but it would have to have carbon capture and storage for that to occur.
I'll stop there by simply saying that, in my view, the focus of a committee such as yours, which is mandated to talk about policy, has to be on policies that value the atmosphere and has to emphasize how quickly we need those in place, not at a magnitude that would hammer the economy but at a magnitude that would ensure that incremental investments in electricity are not going to emit greenhouse gases. With that policy alone, you don't even need subsidies after that, in my view, for the different kinds of renewables or even for clean fossil fuel use. If you get that right policy in place, markets can do a lot of wonderful, creative things that you can't even anticipate with subsidy programs.
I'll stop my comments there. I look forward to any discussion we might have. Thank you.