Natural Resources Committee on April 21st, 2009

[Dr. Alan Meier]

I think the answer is both yes and no. Yes in the sense that there are clear areas where we can greatly reduce energy consumption, and I pointed them out. On the other hand, we have to be honest and understand that on the supply side, when we talk about new energy supplies, there are really only half a dozen kinds of energy supplies. We can tick them off on one hand practically.

On the demand side, to reduce energy consumption, it's an extraordinary complex collection of activities, and each activity has to be addressed individually. Some of them have tremendous savings potential simply with a technical fix. Sometimes we can even bypass some of the obstacles and save energy in ways that we might not expect. For example, we could try to make gas and electric ovens more energy efficient, but then we come around and invent a microwave oven that cooks in a completely different way. So there are completely new kinds of solutions to problems that we haven't even seen, and those will often yield the greatest savings. It's very difficult to figure out how to promote those.

In terms of telling the consumers what to do, yes, there will always be a list of the top 10 or top 20 most important measures, but the fact of the matter is that each household, each store, each factory will have an element of its own uniqueness that we have to take into account in order to save energy and to save money in those places.

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

We've been talking in this committee about examples of communities that have taken radical steps in adopting new forms of energy consumption and sourcing. Can you provide us with any American examples of communities that have done an extraordinary job of integrating their energy systems?

[Dr. Alan Meier]

The city we like to point to is Portland, Oregon. It appears that they have successfully managed energy efficiency, city planning, and land use, while engineering an absolute reduction of carbon emissions over the last ten years or so. That's one example. My own home city of Berkeley, California, has done fairly well too in reducing its total carbon emissions. Is there a unified plan? I would say Portland has done a better job than most in looking at the whole picture. Portland always rises to the top.

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

In Canada, we have a significant portion of our population in cities, but there's still a large portion of our population that's rural. Sometimes we seem to forget that rural folks are also interested in conserving electricity or energy. Most of the solutions are focused on cities. Is there an urban-rural divide here that needs to be addressed? Is it possible for rural communities, smaller communities, to take steps that would make sense from a cost-benefit analysis, resulting in less energy consumption or more savings? Or will that focus always be on urban centres?

[Dr. Alan Meier]

I should hope that the focus does not remain on the urban centres. One example that comes to mind is a small town in Oregon called Hood River, next to the Columbia River, where they decided that they would retrofit nearly all of their homes with insulation and weather stripping. In a small town—I believe this one has 10,000 people—you can undertake programs that you could never succeed with in a large city. In fact, you have some special tools in a small town that you might not have in a city. In the truly rural areas, there may be some other special cases, but to be honest I don't know that much about it.

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

Dr. Meier, I have one last question, maybe the most difficult question of all. When you were talking about how it's harder to measure energy savings because of the very factors at stake, it got me wondering what success looks like in this field. Is success attained only when all of our energy sources are renewable ones? Is it marked by 50%, 30%, or 20% reduction? You state the benchmark. How will we know when we've gotten there--or is this just a problem that we will never completely solve?

[Dr. Alan Meier]

I think you answered your own question. We have to define success according to several different attributes. If the country as a whole has certain kinds of targets, you have to ask how it's doing according to those targets. At the same time, you have to ask how we're doing with respect to our economic viability. Is the path that we're proceeding on economically successful? Are we better off both economically and socially? There will never be a single number or a single way of defining success, but in the long run, we're aiming for a future that's both environmentally and economically sustainable. We always have to be asking ourselves how we're doing. Are we happier now? Are we richer, not just a dollars sense but in a social sense, than we were a few years ago?

[The Chair, Conservative, Leon Benoit]

Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Let me thank the witnesses for coming here today.

Before the meeting started, Dr. Meier, we overheard you saying that you might have worn shorts today. I can tell you that there aren't a lot of days in April in Ottawa when you can wear shorts, unfortunately, so we were all very jealous of that notion. Perhaps with global warming, we're moving more in that direction.

[Some hon. members]

Hear, hear!

[Geoff Regan, Liberal, Halifax West, NS]

That's bad news. Some are saying “hear, hear”. You see, the Conservatives are in favour of global warming, I guess.

I understand, Dr. Meier, first of all, that you specialize in how people use energy, particularly in buildings and transportation. I'd like to know what you think the impact would be of putting a price on carbon through, for instance, a cap-and-trade program. What would the impact be on buildings and transportation?

[Dr. Alan Meier]

First of all, I was wearing shorts until an hour ago. It's about 32 degrees outside, and the air quality is miserable, so maybe that will make you feel better about your situation.

You talked about carbon taxes. I'm not an economist; I can tell you, though, from my experience, that the most destructive thing in moving towards some sort of future is tremendous fluctuation in the prices. We've experienced that in the last couple of years, but you can already see that the carbon tax that's being proposed is going to be small compared to some of these fluctuations we've had. To some extent, until the very end, a lot of our economy was accommodating those higher prices without that much difficulty.

My hunch is that if there was a certainty about the carbon price so that people could plan on it, watch it, and know that it was going to be rolled in and increased incrementally over time, they could build the carbon price into their decisions and investments. You would probably find that they would hardly notice the difference. That's pure speculation, but at the same time, I've seen countries live with high energy prices and low energy prices. The Danes lived with very high energy prices and lived very well, thank you. I don't see it as a big problem as long as it is introduced with certainty.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Foster, would you like to respond to that question about cap and trade and carbon price?

[David Foster]

I agree that providing some level of market certainty is the critical issue that the economy needs to see. It also is true that putting a price on carbon will create at least an initial round of investment revenues that we can use, if we choose them wisely, to jump-start the bringing of certain renewable technologies and efficiency technologies up to the scale that makes them truly viable in a market economy. The benefits of putting a price on carbon eventually will ripple through the economy and come to be understood as a source of job creation.

The one area where I think we need to be extremely careful is in how we mesh the mechanics of the cap-and-trade system with the current models of trade that we have in the world today. Our organization has advocated strongly on behalf of its labour and environmental partners that we need to take advantage of a combination of the mechanisms currently under debate, whether those are allowance allocations, border adjustments, or really effective and enforceable international sectoral agreements, to make sure that we don't set up a system in which there are perverse incentives for energy-intensive industries in industrial countries to shut down and relocate their production to parts of the world that are on a different time schedule or simply choose not to participate in putting a price on carbon.

Alternatively, we need to make sure that we don't put our own energy-intensive industries at a fatal economic disadvantage when it comes time to import or exchange goods in energy-intensive commodity products from or with countries that are operating under different carbon pricing systems. Whether it's allowance allocations, border adjustments, or sectoral agreements, we need to balance that problem out; otherwise, we could create a bad set of results.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Foster and Mr. Regan.

We go now to Mr. Trost for five minutes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair, and let me extend my appreciation to our guests for joining us electronically.

My first question will be to Dr. Meier. It is sort of about the law of unintended consequences.

You've noted that you're an expert on energy efficiency. There's the technological side of it. We all want cars that will run on one gallon of gas forever. We all want fridges, TVs, computers, iPods, you name it--whatever we have in our houses--to run on almost no electricity. But it has been noted that as things get more efficient, and people can have a fridge that's more efficient, all of a sudden you don't need just one fridge. It's every guy's dream: you have one fridge upstairs and the beer fridge in the basement, and lo and behold, you get an energy efficient 42-inch-screen plasma TV. Down in California, Monday night football becomes that much better. Up here, Saturday night hockey becomes that much better.

As we get more energy efficient, people have tended to put more and more appliances in their households. There was a law passed to make more water-efficient toilets--low-flush toilets. People then began to flush twice, or there was a bit of cross-border smuggling in some areas where they had them or didn't. So let me ask this question: As we get more efficient, how do you deal with the law of unintended consequences wherein this efficiency then creates more demand for more energy, and you're back using the same amount? I'm curious as to your comments on that.

[Dr. Alan Meier]

That's an important question, and I suppose I'd look at it in two ways. The first is that when people invest in a cost-effective energy efficiency measure, they actually are wealthier, if you look at the net value or the present value of their energy savings. That's what makes it cost-effective. The savings are greater than their investment, so they're wealthier, and they're going to spend that money one way or the other. Sometimes they're going to spend it on a second refrigerator or on a trip to the Caribbean, or if it's an efficient car, maybe they'll drive farther. In a sense, I actually want to embrace that. They have made an investment in efficiency, and they should, and they should be expected to. It's a perfectly normal thing. They're wealthier now. They should spend that money on certain kinds of services. It's a sign of the success of the efficiency measure.

The problem arises if we have a government or a utility or a community that has said okay, we're going to encourage you to make this efficiency measure, and then we're going to use those energy savings for some purpose. We're counting on them in some way, either to reduce our carbon emissions or to avoid building a power plant or another oil refinery or something like that. Then we have a problem, because the person now is not saving as much energy as expected. And these are your unintended consequences.

We just have to be very careful and make sure that we have taken into account the fact that, basically, people are going to be wealthier with these new conservation measures that are cost-effective. The only possible way to balance that is to say okay, not only are you going to be allowed to invest in this conservation measure, or we're going to encourage you to invest in it, but guess what: the price of energy is going to go up. So you'll be more reluctant to take your more efficient car and drive it farther after you have it, because you want to save money.

There are two parts to that. I think we should embrace the fact that people will spend some of their savings. The problem, though, is in terms of policies and counting on savings.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

I'm glad to hear you say that it's good. It's the story of the industrial revolution: the more efficient use of energy creates more wealth, which creates more use of efficiencies.

You noted in the Juneau example that price determinants were a very strong signal to make people change their behaviour. Is there anything else, other than price, we can do as government regulators, consumers, or whatever? What is it that will drive people to more energy efficiency? Is it education of technical personnel? Is it housing standards? We have a bit of a cold weather climate, and for the record, Juneau is actually pretty warm compared to where I come from in Saskatchewan.

[Dr. Alan Meier]

I know that.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

What else can we do? I drive a truck. A lot of my voters--I have a riding that's about one-third of the population, and most of the geography is rural--drive large vehicles, and they have to, for life. We don't want to raise the gas taxes. We don't want to do that. Other people may. Other than raising taxes and making people in some ways poorer, what else can we do to help people become more energy efficient?

[Dr. Alan Meier]

There are a couple of points that I just want to make about two energy crises that occurred in South America in the last few years. One was in Brazil, where they had a drought, and the country relies 100% on hydro. They had a drought, they realized they were going to run out of electricity, and the President of Brazil said everybody must use 20% less electricity than last year or they would be disconnected. At the same time, they had a tremendous energy conservation campaign and they actually made it a lot of fun. And the amazing thing is that within six weeks, the whole country of Brazil reduced its electricity use by 20% and the consumers actually never saw a price increase. Nobody got disconnected and the economy continued.

That's one example. So it doesn't always have to be a price signal to persuade people to move on. California had the same sort of thing.

Meanwhile, in Chile, they had an oil crisis--and it's still under way--because they were not getting enough natural gas from their neighbours in Argentina. They said they were going to raise the price of fuel, natural gas, and electricity in their country and keep that price very high, but they would use the social support services to refund and make sure that all the poor people are kept whole. They would see a higher price for fuel, but they would see greater subsidies elsewhere, so that the poor people never suffered an absolute loss in support. In those cases you could still drive your pickup and still see the high prices, but because of other reductions in costs elsewhere, you would have no change in your net income.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost. Your time is up. We have other questioners and we've gone well over time.

We will now go to Madam Bonsant for up to five minutes.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Good day, sirs. We're giving the interpreters a good workout. I have a question for Mr. Meier.

The Governor of your home state, Mr. Schwarzenegger, is known as a staunch environmentalist. Does California have a fuel tax?

[Dr. Alan Meier]

Yes, we do, Madame.

[France Bonsant, Bloc, Compton—Stanstead, QC]

Are revenues from this tax invested in programs and R & D with a view to complying with the Kyoto Protocol?