Natural Resources Committee on March 31st, 2009

[Dr. Martin Lee-Gosselin]

It is highly unlikely that the price of oil will remain at around $40 to $50 a barrel for very long. The federal government must make a smooth transition towards our future options. I have no problem supporting the continuation of a project like that, which is of great importance to a city like Trois-Rivières. I am well aware of it, although I do not know the details.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

There is a hydrogen research centre in Vancouver. I have visited it; perhaps you know it too. You mentioned urban transit, among other things. In Vancouver, some buses run on hydrogen fuel cells. I see that as a promising breakthrough.

Mr. Bataille, you said that GHGs were an urban problem, that we needed smart modes of transport and that urban sprawl was a political choice. I quite agree with you. But we cannot deny resistance to change. Urban sprawl is a way of life. Since the 1960s, people have been sold on the small bungalow in the suburbs, with a pool and a happy family. Schools were built all over. How can we reverse that trend?

In Montreal, a lot has been done to get people to live in the city, but people are reluctant to move there. What do we do? You can call the choices political if you like, but we are politicians; so what do we do?

[Dr. Christopher Bataille]

That's a planning question and a policy question. It is generally recognized among urban planners that in a lot of ways we've been going the wrong way in the last 30 to 40 years, in terms of really expensive infrastructure that can't support itself because there's simply not enough tax base per unit of land.

There's going to have to be some form of retrenchment one way or the other. It is very much a matter of smart development. You can create a dense ghetto, or you can create a very dense high-end neighbourhood, or you can find something in between. But the potential is there.

I agree with you. Again, every possible measure has to be pursued to bring our emissions down to our target levels, because most of our trading partners will be looking for something in the order of 80% reductions within a couple of decades.

So we have to pursue every means we can.

[Dr. Atif Kubursi]

Madame Brunelle, I think you have it right here, but there are two dynamics and they seem to be in conflict here. One dynamic is that the most important natural resource is people's brains. It's our knowledge, our creativity, our innovation. And there is no question about it, that as things become tighter, as the price of energy rises, the incentives are to see to what extent these brains can bring about the change.

But the other dynamic, which is also quite dangerous, is the fact that we cannot rely always on technological solutions or be quite optimistic about technology being able to generate the kind of change, in appropriate quantities and in appropriate time.

So it is really the two dynamics. To what extent can we as a government create the atmosphere, the incentive regime, the capacities, the enablement of the universities and our brains and our private sector to come to terms with the requirements, but at the same time to also remain realistic and within these hard budget constraints that would allow us to do these things appropriately and patiently?

[Dr. Christopher Bataille]

Another thing, too, is that you mentioned that since the 1950s and 1960s our cities have been growing. It is going to take us that long, if not longer, to come back down.

So what we need is steady, consistent, fair policy that does not overly penalize any one group. If someone has made an investment that's outside where we want to go, we don't penalize that person. It is just that all marginal investments, all the next investments, are made in smart fashion.

[The Chair, Conservative, Leon Benoit]

You have about 30 seconds.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

These are all very complex problems. We do not have a long term strategic plan. We will be investing massively in infrastructure in order to boost the economy, but will we be investing in infrastructure to save money or to develop energy capacity through integrated appraoches? I find this somewhat concerning. We seem to be rushing off in all directions without really knowing where we are going.

[The Chair, Conservative, Leon Benoit]

Professor Lee-Gosselin.

[Dr. Martin Lee-Gosselin]

Approximately half of the man-made environment that will exist 30 years from now has yet to be built. That means there are opportunities to seize. Our research has found that savings can be generated even by those living in a suburban bungalow. For example, in Quebec City, bicycle use is widespread.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Despite all the hills in Quebec City.

[The Chair, Conservative, Leon Benoit]

Merci.

Mr. Cullen, go ahead. You have up to seven minutes.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Thank you, Chair, and thank you to the witnesses.

To Mr. Bataille, this has been alluded to in all presentations, but I wanted to get your direct answer on this. With all the plans and the putting in place, you talked about pricing things effectively or including the costs, the current externalized costs, into what we do.

How critical is carbon pricing to some of the adjustments you're talking about in terms of the way our cities are designed and laid out and set up?

[Dr. Christopher Bataille]

Absolutely central.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Then if the price of carbon is central, and the pricing mechanism we choose is important, should there be any analysis when government is setting out its spending priorities?

I noted that in the five things you talked to us about, most of them exist outside of federal powers. This committee will be charged with the task of making recommendations to government, directing the government in a certain way or another. On the spending side, that is one mechanism, and also on the price regime that we set up for a tonne of carbon.

Should an analysis or a filter be laid over top of what the government does in terms of spending, in an attempt to achieve greatest efficiency in spending costs per tonne of carbon reduced?

I want to give you an example. I sat on a committee last year, or about 16 to 18 months ago, in which the government was rolling out a significant package on biofuels. It was directed mostly toward corn ethanol. We attempted to move an amendment that said we should use biofuels that are of the greatest impact in terms of GHG reductions per thousand dollars. That amendment was rejected, and you know, I was confused by that.

How critical is it, for what we do into the future, to have that overlay assessment of what the cost per tonne is, of what the efforts of the government are in this?

[Dr. Christopher Bataille]

It's interesting; you say you need a filter and an assessment of action by action. But the most effective filter is an effective carbon price and the private market operating within the bounds of the carbon price. They will allocate funds and investment in the direction in which they see some long-term profit.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So you're imagining a 100% auctioned carbon market?

[Dr. Christopher Bataille]

No, no. The first and most important thing is full coverage. There's been a lot of discussion of covering our large final emitters, but there's been very little discussion of actually covering our entire economy, which includes our urban consumption in our urban systems.

So you first need full coverage. That's missing here in a lot of the discussion that's occurred.

Now, as to how you get there, you can get there through an upstream cap and trade system, high up in the system. You can have downstream cap and trade mixed with things. You can put a direct charge on carbons. There are many ways. But the first thing is that full charge, full coverage in the system. That will do most of your filtration for you.

[The Chair, Conservative, Leon Benoit]

Mr. Joshi.

[Robert Joshi]

I'd like to add to that.

As Chris pointed out, the urban space, though, is a policy choice. The modelling is going to get more detailed. A key point is that you can go so far with a carbon price--cars get very efficient, buildings get very efficient--but this integrated aspect is directly involved in municipal, provincial, and federal policy. The market can't operate fully in it; government has to make choices.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Maybe I'll turn to you on this, Dr. Kubursi. You were talking about the way the economic models work and trying to get the full costs, whether that's understanding the actual impact of government spending or the multiplier effect, which gets thrown around, it seems to me, loosely, and in quite a biased fashion.

Right now the government has an accelerated capital allowance for the tar sands. They say that we can write off, in a more accelerated fashion, for that project. How would your model apply to something like that industrial development if we were to try to include the full costs of what it is to have that type of energy produced in that manner?

[Dr. Atif Kubursi]

This is quite fair. First, the full-cost pricing is quite important. There is market failure when the polluters impose costs on third parties for which they are not responsible. You would get more efficiency if you were to include all the third-party influences where the market fails by building it into a taxation subsidy that would cover the full-cost pricing. You will get more efficient transformations. There is no question about this. There is considerable evidence to suggest this would be appropriate.

What is worrying me is that when the government is seeking multiple objectives, we look at one instrument or one criterion and assume that all other implications are incidental. This is within the context of the things I presented before. Yes, we have to rank things in terms of the carbon emission or carbon reduction, but we also have to look at employment, the socio-economic aspects, and integration of the economy. Several other objectives need to be considered. These should be ranked from top to bottom in terms of every criteria for whatever action you're taking.

In my case, for example, we're talking about the implications of a particular investment. I'm talking about jobs, value-added, wages and salaries, the types of jobs, regional allocation, and the special allocation of these impacts. Some activities might be urban concentrated or would improve the south but completely devour the north.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

We've seen the federal government come out with a stimulus package and use urgency, in the moment, and talk a lot in the form of roads and bridges, that this is what we need first and foremost. However, I don't get any sense of the actual incurred cost of these things beyond just the physical making of the bridge or the physical making of the road.

You talked about urban sprawl, these unmitigated costs we've gone through, through years of planning. We told them to grow as much as they wanted; we made land cheaper and subsidized that sprawl.

When we're doing a major fiscal stimulus package, there's a certain amount of money out the door and an estimate from government as to how many jobs that creates, but in these other costs you spoke about today, I've heard absolutely nothing from the finance minister or others saying, here is the encumbered cost of what it is to spend $3 billion on making a bunch of bridges in Canada, or spending it on road construction through these parts.

As a final comment, I'll ask this. One of the presenters said we should fund plans, not projects, as a way to think about this; that some communities in Canada are thinking about the things you presented today. They have energy plans. They're trying to integrate their energy plans, but there's very little funding associated with it. The government will show up and say if they want to build a bridge, let's build a bridge. Outside of a plan, we want to cut a ribbon; we want something for the evening news.

How do we get around that? How does the government put a filter up high enough that all the funding has to filter through that assessment first?

[Dr. Atif Kubursi]

You've suggested it. What you're talking about here is that there shouldn't be one single framework but there should be a multiple accounting, so you take into account all the implications. For example, a bridge or a road that you say you really need might improve or speed up urban sprawl and the movement into the suburbs, but in fact your objective may be, in terms of energy efficiency, densification.

These issues have to be taken from more than one perspective. They should go through more than one filter. Ultimately, it is up to you, who in a democracy are the people who represent the choice of the people, to put some prioritization. On the basis of this, you could look at all these filters, rank them all, and then give them the weight as to which one supersedes or dominates.

Ultimately you're entitled to make the decision on behalf of the people and you bear the consequences. This is your responsibility, where to put the weight. The economists, the urban planners, the transportation people could give you the consequences of alternatives, but which one should dominate and which one should be considered to be more important.... What we're really arguing here is, don't take one social framework, one accounting framework; take a number of them. But it's the responsibility of the decision-maker to ultimately put some weight on where these things stack.

[The Chair, Conservative, Leon Benoit]

Thank you, Professor. Thank you, Mr. Cullen.

Now to the government side. Mr. Hiebert, and maybe Mr. Anderson if there is time.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair, and thank you all for being here.

I'll start my questions with Dr. Bataille. Going through your report, I have a couple of questions that have come up that I don't fully understand. Perhaps you can help me understand what you're trying to say.

My first question has to do with the price of carbon. When you talk about raising carbon to $200 a tonne, are you talking about a cap and trade system or a carbon tax?