Madam Speaker, I am pleased to have the opportunity to participate in the debate. This is a great opportunity to respond to the Speech from the Throne. There are a number of really good initiatives in the speech. The Prime Minister in his wisdom has laid out some direction and encouragement, which I think Canadians need to take note of.
In the few minutes available to me, if I may, I will talk about one aspect, which is the environment and the challenge of climate change. We have had quite a summer in Canada. In Alberta and parts of Saskatchewan we have witnessed very severe drought conditions. In southern Manitoba we have had flooding. In southern Ontario we had an extended hot and dry summer. Average Canadians, much like those of us in here, feel there is something wrong about the weather but they are not quite sure of the cause, because respected scientists dispute the cyclical patterns of weather.
There does, however, seem to be mounting evidence that there is an accelerated rate of change which will result in exponential impacts beyond straight line graphs. Heretofore we thought that weather change would go up slightly or in a straight line fashion. In fact, the effects start to heap on the effects and the result is that it ceases to be a straight line graph and we end up having accelerated change in weather patterns, which gives respected scientists and ordinary Canadians alike cause to be concerned.
In Toronto, we had pretty well lousy air for most of the summer. It was hot, sticky and polluted. Hospital admissions were up and puffers sold briskly. That brings me to the subject of Kyoto. A lot of people seem to think that if we sign Kyoto suddenly the air will be clean, the sun will shine and all will be right with the world. Regrettably, however, that is not true.
Kyoto is a treaty that is designed to deal with CO
2
emissions and, while polluting in and of themselves, they are by no means the only contributor to smog. Smog is made up of a lot of things, not only CO
2
. Even if today we were able to magically cleanse the air of CO
2
emissions, we would still have a significant smog problem in Toronto.
The treaty is designed to reduce emissions and therefore reduce the effect of greenhouse gases on the atmosphere. That in turn would reduce the environment in which smog is created, but it would not eliminate smog in and of itself. Unfortunately, even if the treaty were implemented and had an impact, it would not have a huge impact on cities like Toronto. Half of our emissions come from across the U.S. border. Canada's entire emissions constitute only 2% of the world's total. So it is important to remember that even if Kyoto were implemented today, Toronto's air would not be substantially different. So why forge ahead? Why put the treaty in front of Parliament for ratification?
The simple answer is that we are part of the world community. Because we are part of the world community, we cannot carry on doing what we are doing. We cannot continue to send these kinds of CO
2
emissions up into the atmosphere without some major, significant impact upon our environment.
At one level Kyoto is about the environment, but at another it is really about an economic impact and a wealth redistribution. Unfortunately, we have enough alarmists on both sides of the debate to scare us into apocalyptic paralysis. It makes it very difficult to see the truth and to respond in any rational form.
While the environmental impact of such a treaty may be modest, we also have to ask ourselves whether the economic impact will also be modest. The answer seems to be that it depends. That is not a very satisfactory answer at this stage, but it really does depend. It gets very difficult for the government to lay out a plan because it really depends on a whole bunch of variables that are not easily quantifiable.
In some manner, it becomes almost an article of faith. Is one a Kyoto believer or a Kyoto atheist? Personally I am more in the category of agnostic, which I think is probably an atheist without any courage. It appears to depend on the mixture of regulations, incentives and new technologies.
Let me give the House a picture of what Canada is facing and then talk about some of the representations that have been made to me over the course of the summer by very able people and which I hope may set us upon a path of enlightened self-interest.
Kyoto requires Canada to reduce its emissions to 6% below the 1990 levels. That means 240 megatonnes of CO
2
. About 50 megatonnes will be taken care of by current programs and another 24 megatonnes by carbon sinks. That leaves a shortfall of about 165 megatonnes and this is where it gets controversial.
The first controversy is the credit for clean fossil fuel exports such as natural gas. In other words, the argument is that if we export clean fuels, why should we not get the credit for it? I suppose the counter argument, though, is that if we export dirty fuels such as coal then possibly we should be penalized.
What our target will be will depend on the outcome of that debate and those negotiations. The gap between 165 megatonnes and the argument about whether we get credits for these fuel exports is quite substantial. It is the difference between 165 megatonnes and 96 megatonnes.
The second controversy is the pace of economic growth. If the economy leaps ahead, way beyond predictions, then the CO
2
emissions will actually increase and all of our assumptions will be skewered. Similarly, if the economy does not grow at predicted rates, the burden of Kyoto will become even more than it is presently predicted to be.
The third controversy is in the wild and whacky world of trading emissions. The genius of Kyoto is that it forces CO
2
emissions into the bottom line. Every country and every company, one way or another, is going to have to account for the cost of its emissions. Some will be able to research their way out of the problem by actual emissions reductions, but some will have to trade their way out and purchase credits either domestically or internationally. This will lead to some bizarre consequences. Domestically, companies will have to purchase credits from companies that have credits even if that means feeding the competition's bottom line.
Good, we might say. Not always. Without credits, some companies are simply not viable. It actually may end up distorting another market by propping up a company that is otherwise not viable and should have been out of business years ago but survives because it has credits to sell. How much sense does that make?
Internationally, it is even crazier. Our companies or Canada as a nation will have to go on the open market and buy credits from countries like Russia or Mexico, both of which will have credits to sell even though in the case of Russia it is arguably the most environmentally degraded country in the world. We also know about Russia's somewhat casual regard for government integrity and the rule of law. The likelihood is that we will be buying our credits from the Russian mafia to meet our Kyoto requirements. How much of that money do we think will actually go to environmental cleanup or the re-industrialization of Russia? Try to explain that to the ladies in the church basement.
Recently the General Motors representatives were in my office. I thought they had a fairly enlightened approach, but they also had a very realistic approach. As we know GM is a very important company, both internationally and in the economies of Ontario and Canada. GM will be faced with Kyoto. Of course any company immediately asks what this will cost, what the targets will be and how we will achieve those targets.
The setting of the targets will have to be fairly nuanced. If we set it too high, GM may ask itself why it does not build those trucks or cars in the United States and then ship them back to Canada. If the target is too low then it is business as usual and the goal of Kyoto will not be achieved. It becomes a bit of a bean-counter's delight. If the target is x million dollars, GM can do several things: research and application of the research, which is good; retrofit car factories, which sounds good; move to Michigan, which does not sound so good; get government credits and grants, which can be good or bad; buy credits from the Russian mafia, which is not so good; or buy credits from Mexico, which is not so good either. It is reasonable to expect that GM will act in its own self-interest. Unfortunately, that may or may not coincide with Canada's self-interest.
Let me give another example. Suncor is a large company involved in the tar sands. Members may or may not know that Suncor is a large retailer of gasoline in Ontario. It has 16% of the Ontario market. It is also the only retailer in Ontario that ethanolizes its gas. Every litre we buy at a Sunoco station has 10% ethanol in it. For the purposes of emissions that is the equivalent of removing 20,000 cars a day from Ontario's roads. It is very significant and is something to be pursued because transportation is the second largest source of Ontario's emissions after the pollution from the United States is accounted for.
Ethanolizing fuel is a very attractive idea. We should just ask the farmers, who would love to sell more product to Suncor. It is a win-win situation. It does something for the environment, we have happy farmers, and it is a good alternative technology. But here is where it gets tricky. At the present time Sunoco is able to add its voluntary 10% ethanol because of the forgiveness of excise tax. However, if we mandate a level of 5% or 2% or whatever, the price of the product will immediately shoot up because refining capacity and resource capacity will have to be created.
The result would be that Suncor would have to import more corn from places like Iowa and reduce its voluntary commitment down to the mandated level, i.e. from 10% down to 5% or 2%, as the case may be. If the mandated level were to be 5% ethanol, for the purposes of emissions that would be the equivalent of Suncor putting 10,000 cars back on the road. So much for good corporate citizenship. Importing from the U.S. to meet our Kyoto requirements is, I am sure we all agree, quite ironic, and putting 10,000 cars back on the road for the purposes of emissions makes no sense at all.
I have indicated that I am an agnostic because frankly I do not know how the concerns of General Motors and Suncor will be addressed. May I emphasize that in both instances they want to be Kyoto compliant? They are very concerned.
Another example is that of a chemical based industry in my riding. It does about $1 billion a year in business and accounts for about 500 to 700 employees, with 70% of its product exported. That is not insignificant. The company wants to know how the Kyoto guidelines will apply to it. It is heavily into research and development because, frankly, it costs money to shoot the emissions up through the smokestacks. However, it is getting to the point where cost effective research gains are getting to be more and more difficult to come by. The company is worried that it will have to buy emissions credits.
Where will the company get the money to buy emissions credits? Presumably from all areas of the company, including the research budget.
How ironic that research into emissions reductions will be curtailed by the necessity of purchasing credits from the Russian mafia.
That brings me to another problem. All these companies in my riding are branch offices. Canada will be the only country in the western hemisphere to be under Kyoto obligations. It is very difficult to understand how, in the short term at least, that will help with our competitiveness.
My colleagues think that we can be faster, smarter and cleaner. I hope they are right. Unfortunately, corporate Canada's productivity numbers do not support such an optimistic blind faith. I am still an agnostic.
I have another example. Members may or may not be aware that Ontario Hydro is on its way to privatization. It does seem to be something of shall we say a jerky road, but one thing we know as consumers is that as of last month our bills are a great deal higher.
Ontario Hydro basically generates its electricity from four or five sources: hydro, which of course is water and gravity; nuclear; natural gas; coal; and alternative sources. The cheapest form of electricity obviously is hydro but hydro is limited in Ontario so there will not be any more significant capacity brought on stream through hydro.
For the purposes of Kyoto emissions, nuclear power is probably the best alternative because it has no emissions of CO
2
. However, as we well know, there are other problems.
One-third of OPG's capacity is due to fossil fuels and that accounts for 7% of Ontario's emissions. Ontario Hydro is in a very difficult situation because it does need to address the fossil fuels. It cannot really turn to nuclear as a viable alternative. Hydro does not have a greater capacity available to it. Alternative sources, which we all hope for, such as windmills and things of that nature, can address part of the problem but not nearly all of the problem.
Finally, the economic modelling suggests that Canada's economy will be 0.6% smaller in 2012 if Kyoto is adopted. This does not sound like a great deal of money but it translates into $7.2 billion over 10 years. In Ontario's case, its economy will be reduced by 0.4%. Members will have to pardon me but I am from Missouri when it comes to economic modelling.
The finance department projections, for instance, going forward one year, are very suspect, let alone 10 year projections. For instance, the economists that the minister of finance turned to last year to project as to the economic growth in Canada for the year 2002 predicted that Canada's economy would grow between 1.1% and 1.5%.
The numbers are almost in and in fact the economy grew at something in the order of 3.3% to 3.5%.