Natural Resources Committee on June 13th, 2023

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

My questions are for ECCC.

I have report number 5 in my hand from the commissioner, and I'm referencing paragraph 5.23 where the commissioner talks about the fact that the department did not model purchasers' behaviours. It goes on to say that it did not model the impact of price changes.

Can you briefly describe to this committee the purchasers' behaviours whether or not on regulations around the emission intensity for vehicles, or perhaps on the retail fuel charge, what modelling goes in with regard to behavioural change? It's all about changing behaviour either for companies or for consumers. Can you briefly describe what that would look like for us?

[John Moffet]

I'll start, and then I'll turn to my colleague Mr. Hermanutz, who's responsible for modelling.

Just to be clear, this is not about carbon pricing.

[Kody Blois, Liberal, Kings—Hants, NS]

No, but I'm going to build my question, I guess, on the purchasing model.

Explain what this does relate to in the commissioner's report, and then I'll segue to carbon pricing.

[John Moffet]

The commissioner's report relates to regulations, which do not regulate consumer behaviour. They regulate the kind of vehicle fleet that each vehicle manufacturer can sell in Canada.

[Kody Blois, Liberal, Kings—Hants, NS]

Mr. Moffet, what I'm hearing from you is that you don't feel the purchaser's behaviour is relevant to this element at all. You don't really necessarily agree with the commissioner's report in that sense then, do you?

[John Moffet]

I didn't say that.

[Kody Blois, Liberal, Kings—Hants, NS]

Okay. What are you saying then?

They're saying it's important, and you're saying this is about the type of stringency on the auto manufacturers. The commissioner is obviously talking about the inadequacy of the department in terms of behavioural impacts on consumers, and you're saying there's no context. Why is that not important?

[John Moffet]

I was trying to describe what these regulations do. These regulations establish limits on the fleet-wide emissions that each manufacturer can provide in Canada and require those to be reduced.

Coming back to one of the themes that you've heard both from the commissioner and from us, the approach to decarbonizing the economy has to include a suite of measures in order to influence producer decisions and consumer decisions. These regulations regulate what gets produced. What gets purchased is influenced by the carbon price.

[Kody Blois, Liberal, Kings—Hants, NS]

Right, but wouldn't the regulations also have a downstream impact on the cost of vehicles as well? Is that what the commissioner is trying to get at in this report in terms of that modelling behaviour?

[John Moffet]

No, I think what the commissioner is getting at is when we do a regulatory impact analysis statement, we attempt to identify the impact of a regulation not only on its intended objective here of reducing emissions but also on costs and benefits. That impact in turn—

[Kody Blois, Liberal, Kings—Hants, NS]

Mr. Moffet, I—

[John Moffet]

Would you like me to answer to your question?

[Kody Blois, Liberal, Kings—Hants, NS]

Well, I only have so much time, so I want to get to the point.

We'll talk about carbon pricing then.

Mr. Hermanutz, you're the one who's involved in the modelling on behaviour. I'm curious, on the retail fuel charge, what type of behavioural data goes into that? What assumptions are built into ECCC's model for the retail fuel price on carbon?

[Derek Hermanutz, Director General, Strategic Policy Branch, Department of the Environment]

Is that in the context of this analysis that you're referring to?

[Kody Blois, Liberal, Kings—Hants, NS]

The commissioner's raising concerns about the department's element to consider the purchasers' behaviours, which of course are consumers. I'm going a little bit broader and trying to understand the department's element of how you model behaviours for consumers whether it's through regulations or through other types of mechanisms of the hundred that are mentioned in this.

What do you take into consideration for household behaviours as they relate to the policies that you're adopting?

[Derek Hermanutz]

There are different types of analyses that we do and different types of models that we use for the different types of analyses.

[Kody Blois, Liberal, Kings—Hants, NS]

I'm a rural member of Parliament. For rural residents, what types of assumptions do you build in with regard to changed behaviour as it relates to the policies that you're developing?

[Derek Hermanutz]

When we publish draft regulations and then the final regulations in a regulatory impact analysis statement, we do a cost-benefit analysis, which is a specific type of economic analysis following the cabinet directive. Often, that analysis will be what we could call a static analysis. It wouldn't necessarily take into account the second-order effects that I think you're referring to.

Within a RIAS, we can also do, with a different type of modelling, distributional analysis. When we use those models to look at the overall climate plan—

[Kody Blois, Liberal, Kings—Hants, NS]

Can I just ask this: Do you see a lived difference between urban and rural Canada vis-à-vis the impact of some of these policies? Is that built into your model, yes or no?

[Derek Hermanutz]

I don't think it's built into our model.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you.

On clean fuel standards.... I'm a member of Parliament from Atlantic Canada. We've been hearing concerns from the four Atlantic premiers. Does the department have a sense of the cost? Obviously, the commissioner criticized the delay. I expect the department had a rationale for why it was trying to work, but do you have a sense of what the cost is going to be? We've heard from the PBO that it's 17¢ a litre. Do you know what that will be for Atlantic Canada?

[Derek Hermanutz]

I don't have that number in my head, but it's in the cost-benefit analysis. I can provide that to you.

[Kody Blois, Liberal, Kings—Hants, NS]

Is the expectation of what the costs will be publicly available by region?

[Derek Hermanutz]

The costs and benefits are, I believe, in the public document.

[Kody Blois, Liberal, Kings—Hants, NS]

Okay.