ENSU Committee Meeting

STANDING COMMITTEE ON ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

COMITÉ PERMANENT DE L'ENVIRONNEMENT ET DU DÉVELOPPEMENT DURABLE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 4, 1997

• 0907

[English]

The Chairman (Mr. Charles Caccia (Davenport, Lib.)): Good morning. This meeting is called to order.

In resuming our work this morning—and I thank you for your attention and presence—before welcoming our guests I have two brief announcements. One is to remind you of the meeting with the delegation from China, which takes place at 11.30 a.m. in Room 701 in the Promenade Building.

The Clerk of the Committee: No, Mr. Chairman, that should be 12.15, and the members should be there by 12 noon, just before the Chinese arrive.

The Chairman: It's in Room 701 of the Promenade Building at 12 o'clock.

Secondly, this room is taken by us until 11 o'clock. We have barely two hours, and in this two hours we are attempting to hear from two teams. The first one is from the Office of the Auditor General; I would hope we can do it within the hour. Then during the balance of the time, we will hear from the Natural Resources team.

I therefore would welcome you and urge you to limit your questions to five minutes so that we can complete one round within the hour, and then possibly, time permitting, we can still arrange for another round.

From the Auditor General's office we have the Commissioner of Environment and Sustainable Development, Mr. Emmett. With him is Ms. Barrados and Ms. Shillabeer, and then another gentleman—Mr. Jarvis, I believe. Would you like to introduce yourself?

Mr. Bill Jarvis (Director General, Energy Efficiency Branch, Natural Resources Canada): I'm Bill Jarvis from Natural Resources Canada.

The Chairman: Sorry, you are on the other team, so we will not introduce you yet. We'll concentrate now on the Auditor General.

We welcome you to the committee, Mr. Emmett. We are very glad you were able to come and we look forward to your presentation. If you can compress it to within 10 to 15 minutes, that would allow us a good round of questions, if that is all right with you.

• 0910

Mr. Brian Emmett (Commissioner of the Environment and Sustainable Development, Office of the Auditor General): Thank you, Mr. Chairman. We have a very brief opening statement, which has been tabled.

[Translation]

I would like first of all to thank you, Mr. Chairman, for this opportunity to meet with your committee. I understand we are here primarily to talk about our energy efficiency chapter as part of your study on global climate change. I would also welcome any feedback or suggestions that your committee may wish to offer on my climate change work, as well as on any other environmental issues.

With me today I have Maria Barrados, the Assistant Auditor General responsible for the energy efficiency chapter, and Ellen Shillabeer, the responsible auditor for this chapter and our current work on climate change.

Before Maria summarizes the findings of the energy efficiency chapter, I would like to indicate how the policy instrument of improving energy efficiency relates to our broader audit work on environmental issues.

[English]

The energy sector contributes enormously to the Canadian economy: about $50 billion to the gross national product, about 6% of our gross national product. This makes it an important economic sector and one that has a significant impact on the lifestyle and standard of living of Canadians. However, the production and consumption of energy are also a major source of impact on the environment, not only on climate change but on smog, acid rain, radioactive waste, water use for hydroelectricity, and so on. Clearly, energy efficiency is an important issue from a sustainable development point of view, an important issue for my work program.

[Translation]

There could be many environmental benefits to using energy wisely, such as improved air quality, protecting the environment and reducing greenhouse gas emissions.

I view energy efficiency initiatives as a useful policy instrument in Canada's response to a wide range of environmental issues. Of these issues, climate change is currently receiving a lot of attention in Parliament, in the media and among Canadians.

[English]

I would expect energy efficiency initiatives to be prominent amongst the menu of tools Canada might choose to meet its commitment to stabilize greenhouse gas emissions by the year 2000, commonly referred to as Canada's stabilization goal. I will be reporting to the House of Commons on my initial audit of climate change in May 1998, but I'll now turn to Maria Barrados to summarize the findings of the energy efficiency chapter published in October of this year.

Ms. Maria Barrados (Assistant Auditor General, Office of the Auditor General): Mr. Chairman, we examined Natural Resources Canada's energy efficiency initiatives as part of our audit coverage of the department's programs. Its efficiency and alternative energy program was revised in 1991 to support the green plan and the national action strategy on global warming, which was an approach to limiting greenhouse gas emissions. The efficiency and alternative energy program includes initiatives related to energy efficiency, alternative transportation fuels, and renewable energy sources. The department estimated the program as a whole would contribute about 20% to 30% toward meeting Canada's stabilization goal. This goal is articulated in Canada's national action program on climate change, a key element of which is promoting greater energy efficiency in all sectors of the economy.

We focused our audit work on the 16 energy efficiency initiatives that are not related to research and development. NRCan believes energy efficiency has the potential to contribute toward meeting Canada's short-term stabilization goal.

[Translation]

NRCan has been in the business of promoting energy efficiency for over two decades. However, the Department has made a fundamental shift in the way it promotes energy efficiency and the way it exercises federal leadership.

• 0915

In the past, NRCan invested significantly more money in energy efficiency programs through large expenditure grant programs, which were used to convince energy users to become more energy efficient. Today, however, to leverage its limited resources the Department acts as a catalyst by using partnerships to encourage others to use energy more efficiently.

From the extensive range of policy instruments available to encourage energy efficiency, the Department uses a limited number of instruments. It places heavy reliance on voluntary measures and information, and on selective use of regulations. Delivering programs though partnerships can be cost-effective. However, it is important to have the proper accountability framework in place and to demonstrate results.

Modest resources, about $16.5 million in 1995-96, are split among the energy efficiency initiatives. We found that NRCan's current performance information, on both expectations and achievements, was not sufficient to determine the success of its energy efficiency initiatives. While the Department reports an objective for each of its energy efficiency initiatives, these objectives generally do not provide a clear and concrete statement of expected achievements.

[English]

The department does measure its output in terms of its products and services. Our chapter contains an appendix listing many of the major achievements of these initiatives over a four-year period. However, the department has few measures of outcomes in terms of contributions that the energy efficiency initiatives are making to actually reducing energy use and the associated greenhouse gas emissions.

We recognize that measuring long-term outcomes is not an easy task. It can be difficult to link the overall outcome of these 16 energy efficiency initiatives to Canada's stabilization goal. It can also be difficult for the department to attribute outcomes to the individual initiatives. However, we believe more can be done to assess the contribution made by these initiatives in both quantitative and qualitative terms. The department agreed with all our recommendations, and we will follow up on their implementation at a later date.

Mr. Chairman, that concludes our opening statement. We'd be happy to answer your questions.

The Chairman: You're saying, in other words, in very polite terms, it's a disaster area.

Ms. Maria Barrados: Mr. Chairman, I would rephrase that. We don't know, really, what the effects of this program are. You have a number of small initiatives spread across many things, and not a large amount of money, comparatively speaking. They all do useful and interesting things, but to say “What is the overall effect?”, we couldn't determine it.

The Chairman: That's a very diplomatic way of putting it. Thank you very much.

Please conclude.

Mr. Brian Emmett: That's our opening statement, Mr. Chairman. We'd be pleased to answer questions.

The Chairman: Fine. Terrific.

Who's ready to go first? Mr. Gilmour, followed by Mr. Lincoln.

Mr. Bill Gilmour (Nanaimo—Alberni, Ref.): For my own information, were you able to determine where are the optimum areas to gain the efficiency? Are they in the plants? Are they in industry? Are they within individuals, using our vehicles?

I'm trying to get a feel for where the most opportunities are. Is it within individuals or within companies, or is it a combination?

Ms. Maria Barrados: When we looked at these programs the department made a decision to go after all the sectors—to go after companies and to go after individuals. That's probably the wise thing to do. That's the governments approach to this.

What we found in the course of our work—and it was the frustration in doing this—was that we couldn't really say which one was paying off the most. Because if there was a better effort at making these measurements we talk about, then a judgment could be made as to which one of these programs gave the best bang for the buck, and we weren't able to do that.

• 0920

Mr. Bill Gilmour: I guess I'd have to go back to the chairman's comments that it doesn't seem this has been much of a success. Is there going to be success at the end of the road? Where is it going?

Ms. Maria Barrados: I have difficulty saying that these programs are not going to be a success, because when you look at each one of the individual programs—and we've listed them out in the appendix—there are interesting things being done: there is information being provided; there are labels put on appliances; there is data being collected; there's work on R-2000 that is being done.

All these programs have a long history of energy efficiency. It's just that there are so many of them, and they're fairly small. We can't say what kind of success...and how that relates to the overall targets on reducing greenhouse gas emissions.

Mr. Bill Gilmour: Were you able to look at alternative fuels, or sustainable energy sources? Was that part of the mandate?

Ms. Maria Barrados: Not at this time. We focused on these information programs, and not on the alternative fuels and the research.

Mr. Bill Gilmour: Okay. Thank you.

The Chairman: Mr. Lincoln.

Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.): Thank you, Mr. Chairman.

Would you have an idea of how many homes are heated by solar energy in Canada today?

Ms. Maria Barrados: The scope of this audit didn't look at the alternative fuels. We looked more at the information that was being provided. Perhaps the officials from the department can answer that kind of question.

Mr. Clifford Lincoln: Does anybody here know?

Mr. Bill Jarvis: There would be very few homes—maybe a dozen or so—that would be heated by solar energy. More homes would have solar-energy-assisted water heating, which is probably the best application in a residential area for solar energy.

Mr. Clifford Lincoln: Does anybody know how much Canada spends overall in solar energy a year, to install, and in joint projects and community projects?

Mr. Bill Jarvis: Again, Mr. Chairman, that's not in my portfolio, but I would be happy to ensure that the committee is provided with information on that.

The Chairman: [Inaudible—Editor]...of the current year, and they can be identified by our researcher.

Mr. Clifford Lincoln: It's just interesting, because I was reading that India, per capita one of the poorer countries of the world, is spending $400 million on solar energy to fuel 200,000 homes right now. In fact, they have become leaders in solar energy. They're even donating solar panels to Cuba, while we are fiddling around.

I was just wondering how we can in your view stabilize, let alone reduce, if we don't look at alternative energies and fuels as a priority, as a paramount direction. How can we ever hope to do it without looking at the alternatives, and who is going to do this? When do we do this?

Mr. Brian Emmett: From my point of view, Mr. Chairman, that's the sort of policy question that we look to the department to answer when we're examining the record of how well we've done, for example, in meeting the targets we have set for ourselves today. That's the sort of record we will be examining. We will be reporting on those results in May, as you noted earlier. But in terms of how in the future we're going to do it, I think that's something that's for the department to comment on.

The Chairman: Perhaps we should concentrate our questions on the Auditor General's report.

Mr. Clifford Lincoln: I appreciate that.

Could I ask you one last question? In auditing the department, would it be possible for your office to also compare what has been done somewhere else, to give guidelines to the department? Or do you strictly audit what is happening?

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Mr. Brian Emmett: That's a very good question. We frequently compare Canadian experience with experience in other countries where that is relevant. As you are pointing out, that's a relevant consideration with respect to these sorts of technologies.

The Chairman: Thank you. Madam Kraft Sloan.

Mrs. Karen Kraft Sloan (York North, Lib.): Thank you very much, Mr. Chair.

I wanted to go back to paragraph 21 in your brief. It says:

However, the Department has few measures of outcomes in terms of the contribution the energy efficiency initiatives are making to actually reducing energy use and the associated greenhouse gas emissions.

I want to try to understand this very clearly. When you say the department has few measures of outcome, does this mean it's difficult to measure the outcome or it's difficult to establish criteria that would be used in measuring the outcome?

Ms. Maria Barrados: We have a couple of expectations here. The first expectation is that the department states for each one of these initiatives what they expect to achieve. So it's a statement of expectation of achievement. For any of these programs, what does this department expect to do during the course of a year? How much information is to be provided? How many labels are to be done? How much of everything is there to do?

In addition to that, we expect some form of relationship, some kind of story, if you like, explaining what those achievements will contribute to the overall target policy of the department, which is the contribution of the reduction of greenhouse gas emissions. It is true these things can be difficult to do quantitatively, but we expect to see some kind of link, since this set of programs is to be making a major contribution. We would like to get some kind of a sense, an explanation on the part of the department, of what that should be. It gets more difficult to measure these things the further out you go in terms of the distance from the program, particularly when they are reasonably small.

Mrs. Karen Kraft Sloan: So the difficulty here is not in establishing the criteria, it's in the instruments for measurement and in trying to assess direct causal linkages. Am I understanding you correctly?

Ms. Maria Barrados: It's both. In the sense that we are using criteria in terms of an expectation we would expect to see how much of everything is going to be produced. It provides a basis for judging whether they are doing what they are supposed to be doing and whether they are successful. In some of the programs that existed, but in the 16 we expected to see more than we did.

Mrs. Karen Kraft Sloan: Ae there examples within the department where they were actually able to establish criteria of measurement and show the linkage?

Ms. Maria Barrados: Yes.

Mrs. Karen Kraft Sloan: That methodology and practice capacity exists within the department.

Ms. Maria Barrados: Yes, with a qualification. These programs are different. When you talk about measurement in the different programs, it means different things for different activities. If you are talking about a regulation which is where the measurement is they have greater success than you have in some of the communication efforts. That's more difficult. So you have different methodologies you would have to apply.

Mrs. Karen Kraft Sloan: It seems to me if you are going to have an effective implementation strategy, the tools you are using have to be good tools. You have to know you are actually going to get the results you are trying to achieve. I'm wondering if any of the panel of witnesses knows of an international regime or setting where they are using similar sorts of programs and having a bit more luck identifying outcomes. Are there other examples where we could learn something here?

Ms. Maria Barrados: In the course of the audit we looked at some of those things. There are examples of the individual initiatives, so you can find some examples. However, every one would have technical difficulties in making attributions when the activities in the programs are so small. Not only that. We have a large country and we have other players in this domain, so you have energy efficiency on other levels of government. To make an attribution only to the federal government is technically difficult, and it would be technically difficult for others.

• 0930

[Translation]

The Chairman: Mr. Bigras, followed by the chair,

[English]

unless other members wish to jump in for the first round.

[Translation]

Mr. Bernard Bigras (Rosemont, BQ): We have to conclude that the whole situation is a real mess. On the one hand, you are telling us that although the Department reports an objective for each of its energy efficiency initiatives, these objectives generally do not provide a clear and concrete statement of expected achievements. On the other hand, as Ms. Kraft Sloan was saying, the Department has few measures of the outcome of its own initiatives, that is in the context of the reduction of energy consumption and hence of green house gas emissions.

In your conclusions, did you consider creating a committee of experts that would be responsible for following up upon and achieving the stated objectives?

Ms. Maria Barrados: We have not made any specific recommendation to that effect within our consultation. There are numerous other options that could be used to supervise this type of programs. Our recommendations are more based on an effort to improve the definition of expectations and the outcome measures. Regarding the method used for examining these outcomes, there are many approaches that could be used, either through expert committees or reports to Parliament.

Mr. Bernard Bigras: Don't you think that it would be absolutely necessary to ensure a regular follow-up of the situation regarding the achievement of objectives, in order to avoid finding ourselves again in the present situation?

Ms. Maria Barrados: It is quite important to have a follow-up because it is essential to have an indication of the results and of the success of that initiative.

The Chairman: Thank you, Mr. Bigras.

[English]

Mr. Emmett, I find your report very disturbing. What you told us this morning paraphrases in a way items 10.2 and 10.4 in your report number 10 of April 1997. The conclusions you are bringing to our attention, if I can read between the lines, are that Natural Resources Canada is not pulling its weight and is not doing what it could in relation to energy efficiency. We will probe that in more depth with the next witnesses. But in regard to the questions I would like to ask you, there are other departments that could play an important role in the reduction of greenhouse gases: Agriculture; Finance; Transport, very much; and Public Works, in the operations of government.

My first question: On this item of energy efficiency, which is a winner in every respect because it means a convergence of environmental and economic goals and therefore can only be beneficial to our economy, do you intend to explore this issue also with other departments and in particular with the Department of Finance, which has in its legislation subsidies that are perverse in the sense that they run counter to the reduction of carbon dioxide?

May I refer you to the tax expenditure that is listed in the 1992 tax expenditure report of the Department of Finance under petroleum exploration, where you find that accelerated deduction of exploration is costing the taxpayers something like $599 million. This is 1992 dollars. We don't have more recent figures.

• 0935

Second, there is the Department of Finance announcement last February of a subsidy or a tax expenditure to the tar sands by way of special concessions, which are not only a loss in revenue but are also conducive to increasing the production of carbon dioxide.

On these two fronts alone there is a department that is running counter to any policy the Government of Canada might adopt with respect to the reduction of greenhouse gases. So could you perhaps comment on your overall strategy, whether you intend to examine Finance, Agriculture, Public Works, and Transport; and second, whether you intend to examine these perverse subsidies in the Department of Finance?

Mr. Brian Emmett: Thank you. That is a question that in some ways goes to the heart of the reason there is a commissioner today, and it's a recognition that many departments in their policy-setting role shape the playing field on which economic decisions are taken, and in shaping that playing field can distort decision-making in favour of energy conservation, let's say, or away from it.

And certainly when we look at the sustainable development strategies departments are required to submit, we will be looking at two things. We'll be looking at their policy-making, playing-field-shaping activities, and we will be looking at their own in-house efforts to conserve energy, their own housekeeping activities, if you like. We will be doing a review of the completeness of every strategy that's submitted to us, and then we will be doing a more in-depth review of the quality of a subset, probably six, of those strategies. We are currently trying to decide which six those are going to be and communicate that to the departments involved.

But the answer is yes, we're very much interested in those playing-field-shaping activities and consider them absolutely fundamental to understanding sustainable development.

The Chairman: Should the Government of Canada announce a policy before Kyoto, which is not entirely to be ruled out as a possibility, would you see that announcement as an indication on the part of the government that your proposed studies require high priority, and if so, when do you think you would make them known?

Mr. Brian Emmett: We will make our report on the sustainable development strategies available in May of 1998, along with some of the other work we've been talking about. That will include the study of completeness of all the strategies and the study of the quality of about six. And we will be obviously taking into account comments and interest from the committee about which of these six should be a focus for an in-depth look. But those will be available in May 1998, and then in following reports we will work our way through the rest of the sustainable development strategies in depth. So you will have something available in May.

The Chairman: Could you or Ms. Barrados expand on item 19 on page 4 of your presentation this morning, which is a paraphrase of item 10.2 of your document, in chapter number 10. Could you elaborate about what you would actually expect in terms of performance information? What is missing that you would need to know in order to come to make a positive rather than a negative conclusion?

Ms. Maria Barrados: The key question for us when we look at any of these programs is whether these programs are making the contribution claimed for them. And that question was a very difficult question for us to find an answer to. So that's the key. The key is this target that is set overall; it was first 30% and then it became 20% of a reduction in greenhouse gas emissions. Are these programs doing that?

• 0940

As I said earlier, because there are many programs—there are 38 of them and we looked at 16 of them—and if you look at the expenditures, $16.5 million gets distributed across these 16, it becomes very difficult to pinpoint what exactly the contributions are.

Then if we look at the specifics we say, well, what we really do expect at a minimum is that for each one of these a target is set. So how much of this are you going to do during a year? How much of any of these numbers of activities? What would you expect to have done in a year? In setting that target, we would expect the officials in the department to be able to explain what kind of contribution they expect to be making with that. Then you have a sense whether this is about right or this is not enough effort, or you have a sense, as one of the members asked, which one of these is doing the most for you.

When we looked at this set of programs that was missing. There were a couple where they were doing it. There are some examples where there are wishes for what could be accomplished, or a rationale for what could be accomplished. There are a lot of bits and pieces there. We think they could do a lot more in organizing this and then providing the information that's really necessary to be able to assess whether these programs are making the kind of contribution wished or hoped for. We found at the end of this we couldn't make that kind of conclusion and we couldn't advise this committee or Parliament whether these were making the contribution the government expected.

The Chairman: In these 16 programs you examined, the ones you mentioned a moment ago, did you examine the voluntary program, and if you did, what were your conclusions?

Ms. Maria Barrados: The voluntary challenge program was initially included in this portion of the work and then we decided it would be better if that were examined in more detail as part of Brian's work on climate change. That will be included in the work Brian is doing on climate change, so we didn't pursue that.

The Chairman: Do you have any preliminary conclusions on the voluntary challenge program?

Ms. Maria Barrados: At this point I don't think we have much we can say, because it was so new when we were looking at it. It was very early days.

I made the comment that partnership programs can be quite effective. We have another report we tabled at the same time on moving towards managing for results, chapter 11. In that report we have examples where programs with partnerships can work and can produce a good result. In the case of the voluntary challenge program, it was very early for us to do much work in that.

The Chairman: Thank you.

Second round. Mr. Gilmour, please.

Mr. Bill Gilmour: Can you tell us what kind of dollars we're talking about being spent on these initiatives?

Ms. Maria Barrados: The 16 we looked at were $16.5 million. The whole alternatives and energy program, that set of programs, is about $60 million a year.

Mr. Bill Gilmour: I do apologize, because we tend to be coming down on you because of the lack of program success and that's not meant to be the thrust. I think we're just rather disappointed collectively that not more has been achieved for that expenditure. It just seems to be an awful lot of warm and fuzzies out there and they don't appear to be goal oriented.

Ms. Maria Barrados: There may be a lot being achieved by these programs. It's just that as the auditor going in we can't give you any assurance there were achievements. As our job when we went in, we looked to see whether management had set these systems in place, whether the measures are there, whether the proper reports are there. The auditors came back with the reports of a lot of activities. There are a lot of very committed people working very hard in these programs, but we just couldn't find the measures and the results to provide that level of comfort that this set of programs—it has a long history—is making the kind of contribution hoped for.

• 0945

Mr. Bill Gilmour: Thank you.

The Chairman: Thank you, Mr. Gilmour.

[Translation]

Mr. Bigras.

Mr. Bernard Bigras: What I understand from your intervention today is that objectives have been set, but nothing has been done to measure the achievement of these objectives. Do I understand correctly?

Ms. Maria Barrados: Yes, that is indeed the situation. However, an overall objective does exist. Then there are small programs and there is a question about their contribution to this overall objective. There are two sides to this issue.

Mr. Bernard Bigras: I will come back to my first question and try to go further. In your view, what would be the most effective means or tools to measure the achievement of the objectives?

Ms. Maria Barrados: That is a complex question because you must also take into account the type of programs in place. To start with, it is important to be clear on the objectives of the programs that are in place. There are numerous descriptions of the objectives. Secondly, we must have a clear definition of the expectations relating to these programs. Third, we must have some sort of measure to give us an idea of the success of a program and its ability to meet the expectations. Another element that is very important is to establish a relationship between these expectations and the overall objectives.

Mr. Bernard Bigras: Thank you.

The Chairman: Thank you, Mr. Bigras.

[English]

Mr. Lincoln, followed by Mr. Pratt.

Mr. Clifford Lincoln: I really believe that all of us have great hopes that your office will be playing a key role in this whole issue, because you could be the catalyst for bringing about change.

I'm just looking at point number 18 of your notes. To follow up on Mr. Gilmour's and the chairman's remarks, you say in point 18 that “modest resources, about $16.5 million in 1995-96, are split among the 16 energy efficiency initiatives.” That seems like peanuts.

I think Ms. Barrados said there was $60 million all in all. I was wondering—this is what led to my questions before—whether in your coming reports when you focus on energy efficiency and renewable energies you're going to compare other jurisdictions in our line of financial and fiscal capacities to find out what fair proportion of our treasury should be expended in this key sector.

In other words, the thing is very relative, and I suppose we can pull figures out of the air, but there must be some reasonable yardstick to measure what a country as rich as ours can devote to this. And are you going to project on this and say you think we should devote x percent of the GDP to it?

Mr. Brian Emmett: Thank you. What I think we're dealing with here is not whether they're small or large, but whether they're worth while and whether we can answer that question, and I believe what our report says is that we can't. Again, I think that what proportion of GDP we should be spending on energy conservation is a policy judgment. We have a number of tools available to us to achieve policy goals on climate change. This is an important one. As to whether we're giving it enough attention, we can draw on the experience of other countries to give some indication, but at the end of the day it's up to ministers to decide.

Mr. Clifford Lincoln: Okay. But leaving the policy question aside, purely on the basis of dollars and cents and the best investment for the money, wouldn't it be fair to say that the Auditor General and the commissioner of sustainable development.... It would be fair game for your office to look at the most efficient use of our dollars if we had to spend $100 million, $400 million, or more, between tax incentives or relief to the shale oil process or for renewable energies. Surely there must be some measurement yardsticks to say that one will be more efficient in producing jobs, economic benefits, and better environmental quality in the long run than the other.

• 0950

Unless we compare and have independent offices such as yours put out the figures so that Canadians can judge, we'll never know. It'll always be subjective.

Mr. Brian Emmett: Yes, I understand the question, Mr. Chairman. My answer is that we're coming at it in a slightly different way, but I believe we're getting at the same root.

The situation we've put before ourselves is that we have a target, but we're not meeting it. We've deployed a number of instruments in order to meet it. The extent to which the target is going to be overshot was in the newspapers this morning.

The question we're asking ourselves in the commissioner's office, and on which we'll report in May, is why: what's going wrong; why this mismatch? I think that's how we will get at the adequacy of the programs.

As you look forward and ask what we should do, those “should ” questions really are things that, as a commissioner looking at the record, I don't feel particularly qualified to comment on. But as for the efficiency questions, looking back at the record, I do feel we can address those in May.

The Chairman: Thank you. Mr. Pratt, and to conclude, Madam Kraft Sloan.

Mr. David Pratt (Nepean—Carleton, Lib.): Thank you, Mr. Chair.

In going over some of the programs that are listed in the appendix to your report, I'm finding it kind of hard to understand the criticism of the department. The nature of some of these programs, it seems to me at least, is that the results are very hard to quantify one way or another when you're dealing with, let's say, the motor vehicle fuel efficiency program. In that, $500,000 is spent to inform purchasers of new cars, light trucks, and vans about the fuel efficiency of these vehicles and to encourage motor vehicle manufacturers to undertake further improvements in vehicle fuel efficiency.

Looking at it from the standpoint of informing purchasers, how do you measure whether or not you have a completely informed consumer out there in terms of what they're buying? Are they buying a truck because they like the colour or because of fuel efficiency? These things are very difficult to measure, it seems to me, and given the relatively small expenditure in terms of total program expenditures within government these days, I'm just not sure whether the criticism is entirely valid. Can you respond?

Ms. Maria Barrados: I'll do my best here. Our purpose is to determine whether there is value obtained from the expenditures and whether the purpose the government wants to achieve is being achieved. That's what we're trying to do here.

When you see this particular example of $500,000, compared to many government programs, it's a small amount of money, but it's not incidental. You can still do things with $500,000. The question is whether we are getting anything out of this $500,000 that is of value in terms of the overall purpose here, which is to make a contribution to the reduction of greenhouse gas emissions. Perhaps if it isn't, maybe we shouldn't be doing this. That's an important question.

Then the second part of your question was whether we can measure this. In the area of applied social science, we're often not in the same domain that you are when you have things with specific dollars you can add up. But there are certainly ways to measure this. They may not have the amount of certainty you might like, but it's pretty easy to ask people if that was part of their decision. If it was part of their decision, what kind of decision were they making? That kind of work is done all the time in terms of consumer research.

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Now, how much effort you want to put into that I think requires a dose of judgment, because if you have a small program you certainly don't want to spend more money measuring than you do in the program.

Mr. David Pratt: Exactly.

Ms. Maria Barrados: It's a question where on the face of it this looks typical of a lot of these programs. It looks like it has potential. It looks like it can make a contribution. There's activity here, and certainly there's a description of the activity.

But then as the auditor, we say what are you trying to accomplish here, and what should be that overall contribution? I'm not looking for the rigour with this that I might in some other places, but perhaps this could be better used. Perhaps those resources could be better applied to something else. We just don't know. And that's what we're looking for here, because all the little pieces add up.

Mr. David Pratt: But generally I guess the department, in making these decisions to institute these programs and to continue them, is making what we would call probably a judgment call as to perhaps the number of calls they're getting to the department asking for additional information—that sort of thing. They're not just pulling these figures out of thin air in terms of the amount of resources they devote to each particular aspect of the program. Or is that what you're getting?

Ms. Maria Barrados: No. Mr. Chairman, these numbers look like reasonable numbers, and that's why we presented these in this report. I mean, this reflects what is going on here. What we don't know is what contribution these are making to the overall effort that is in place.

Mr. David Pratt: I appreciate that. What I'm trying to get at here I suppose is that the department is making a judgment call with respect to how much in the way of resources it's going to devote to these particular aspects of energy efficiency information.

Ms. Maria Barrados: That's quite correct.

Mr. David Pratt: So it must be doing that on the basis of maybe not perfect objective criteria, but perhaps some feedback it is getting from industry, consumers, etc.

Ms. Maria Barrados: Mr. Chairman, our experience with government programs, particularly programs like this, is that these have been around for a long time. Some of these programs have been around since the 1970s. We did look at these programs to see whether they had their objectives and their purpose lined up with the change in the legislation and orientation of the government—and they do. So that was the audit question.

It is the department's responsibility to decide how to allocate the resources to these programs. Our question was were there the measurements on success in place to inform those judgments. We couldn't find them. That's not to say that people aren't involved in these and don't know what the activities are, but what is actually being accomplished with them.

Similarly, we had some problems of how that would roll up overall in terms of reporting on the results.

Mr. David Pratt: Okay, thank you.

The Chairman: Thank you, Mr. Pratt.

Madam Kraft Sloan, and to conclude, Mr. Jordan.

Mrs. Karen Kraft Sloan: Thank you very much. One of the reasons I don't like to serve on committee with Mr. Lincoln is that he always steals my questions. Anyway, I'll ask a short follow-up.

We have a brief here from the Library of Parliament, and it talks about energy efficiency and so on through NRCan. It says the department avoids making use of taxes, charges, or subsidies. Does anyone have some hard numbers on what we're actually spending on the tar sand subsidies through the tax system, not just this year or next year, but over say the next five years? How would we get that information if we don't have that handy?

The Chairman: Again, Mr. Jarvis, you will make it part of your presentation when you speak next.

Mr. Bill Jarvis: Mr. Chairman, I don't have that information with me, but I can get the department to send the committee the information it has on that.

Mrs. Karen Kraft Sloan: Okay. How far would the projections be?

Mr. Bill Jarvis: I'm not in a position to answer that. I'm not privy to that.

Mrs. Karen Kraft Sloan: Thank you very much.

The Chairman: Thank you. Mr. Jordan—to conclude.

Mr. Joe Jordan (Leeds—Grenville, Lib.): If we look at where as a country we're going, and if we look at the potential or anticipated signs in Kyoto, and the need then to meet not only voluntary objectives but binding objectives, and the potential for a contribution level somewhere between 20% to 30% of the stabilization, I think this area has a lot less direct negative impact than others. I think it needs attention.

• 1000

I agree with Mr. Pratt. Given the mandate shift and the resources allocated, really, volunteer measures and encouragement and information dispersion is probably all we can expect. But if we're looking at where we're going, is it reasonable to assume that perhaps devoting some time and attention to our capacity to evaluate initiatives, both cross-departmentally and across sectors of the economy, might be a reasonable place to put some energies now in light of where we think we might be going in terms of trying to co-ordinate not only what's going on here, but certainly a lot of increased activity in energy efficiency, alternative uses of fuel, and that sort of thing? Is that the piece that's missing, that evaluation loop? Are these things working?

Mr. Brian Emmett: In my first report, Mr. Chairman, I identified the implementation gap, and I identified a major cause of that as being lack of horizontal co-ordination, lack of ability for departments to work together. We continue to work on that, and I'm sure you will see it in our report in May.

The Chairman: Mr. Jordan, is that it?

Mr. Joe Jordan: Yes.

The Chairman: Thank you. Then we'll conclude this portion of our session this morning.

I would like to thank you all—Mr. Emmett, Ms. Barrados, and Ms. Shillabeer—for your presence here this morning. We look forward to seeing you soon, at the latest, in May. We look forward to your report, of course, with great expectation.

Mr. Brian Emmett: Thank you, Mr. Chairman.

The Chairman: Will the Natural Resources people then come forward and lend a hand to Mr. Jarvis, who looks a bit in need of help?

Perhaps, Mr. Jarvis, you might want to introduce your colleagues and make your presentation.

Mr. Bill Jarvis: Mr. Chairman, I have with me Mr. Tim McIntosh of my staff, who is one of our senior analysts; and Mr. Peter Easton, who is responsible for some of the development and description of our policy work.

[Translation]

Mr. Chairman, I am pleased to be here today in order to inform the committee about this set of energy efficiency programs.

I hope the clerk of the committee has distributed a short presentation explaining our efforts to measure the impact of our programs.

[English]

I think, Mr. Chairman, I should be able to get through this presentation in about 10 minutes, but I think I do have some good news in terms of the direction of our understanding and analysis of both energy efficiency in the Canadian economy and the impacts of our program.

Natural Resources Canada takes very seriously its responsibility to understand and be able to report on not only the outputs of its programs but also the impacts of its programs. In order to do that, there are really two key steps: one, we need to understand what is happening in the Canadian economy with respect to energy use, sector by sector, use by use; second, we need to determine what contribution our programs have made to improvements in energy efficiency that we can identify in the economy.

The Auditor General's report was a very useful reminder to us that although we have been investing over the past six years a considerable amount in increasing our understanding of the energy economy and of our programs, we haven't been entirely successful in communicating the contribution of our programs or the work we have done to assess our performance.

The Auditor General pointed out in his report that our programs are based on new approaches, that the idea of seeking out partners to participate in pursuing the objectives of the government, delivering programs and pursuing the objectives of the government through these kinds of partnerships presents a new array of difficulties for evaluators.

• 1005

I'd like to go through the two parts of our information set. Before I do that, though, I'll speak of something else. In terms of the programs, this year and every year we've had tabled in the House a report on activities under the Energy Efficiency Act. It is a fairly comprehensive report on our programs, and I'll say a little more about the direction we're taking on that, largely on the advice of the Auditor General.

First of all are factors that affect energy consumption. Our programs are oriented towards looking for more efficient uses of energy, particularly economically attractive, efficient uses of energy. But understanding how the economy is evolving with respect to energy efficiency turns out to be a relatively complex task, because a number of things affect how much energy is used in the economy.

There's the amount of activity in the economy, which includes growth of population and the growth of the economy overall.

There's the structure of the economy. For instance, if we produce more steel and fewer movies, although the energy may be used very efficiently, we'll see the amount of energy used in the economy going up.

In Canada, where a lot of energy is used for heating, the weather is also an important factor. In order to understand the changes in energy efficiency, we have to have a clear understanding of what the impact of the weather has been.

Finally, after we've sorted out those impacts, we can find out what we call energy intensity, which includes a few more items besides just energy efficiency, but is as close as we can get to the concept of whether we as a country are using energy in the most efficient way possible.

I'm pleased to report to the committee that we've been investing in this concept for about six years and have made enormous progress in the area. In fact Canada is recognized as the world leader in understanding how energy is used in our economy. I have attached in the annex a slide from a recent presentation from International Energy Agency experts, who identify Canada as the clear leader in the understanding of the use of indicators for energy use.

I believe the clerk has circulated a copy of this publication,

[Translation]

which is available in English and in French,

[English]

which reports on our studies of energy use in Canada and disaggregates energy use by sector and by the kind of influence that is affecting total energy use in the Canadian economy.

The next slide in the presentation summarizes the results of this report, and for those of you who have an appetite for it, you can find lots and lots of details in this report.

What we see is that from 1990 to 1995, energy demand in Canada rose by 500 petajoules. On the basis of the activity we look at—that is, the growth in population and the growth of the economy—the implication of that growth has been a somewhat larger increase in energy use in Canada. That is, if all the other factors were eliminated, we would have had growth in energy use of 650 petajoules over that time.

From 1990 to 1995 we also had some structural shifts in the economy, particularly the resurgence, after the recessionary period of 1990 to 1992, of the oil and gas sector and the forestry sector, which are relatively energy-intensive sectors of the economy.

The third factor is weather. In 1995 on average there was more requirement for heating in Canadian homes, offices, and buildings than there was in 1990, as the weather was somewhat colder.

The last bar indicates the offsetting aspect that energy efficiency has brought to these forces that have increased energy use over that time. It points out that the Canadian economy is saved because it has increased the efficiency with which it's used energy by about 300 petajoules.

• 1010

To put that in a more understandable form, that means by 1995, the Canadian economy was saving $4 billion a year every year in energy use, compared to what we would have been spending without energy efficiency gains. And of course those efficiency gains are embedded in the economy; those $4 billion-a-year savings will continue over time.

We believe, and we're reinforced by views from our partners overseas, that we have a very good start on understanding how energy is used in the Canadian economy. We won't stop there. We will continue issuing a report on this every year, because in order to understand our programs, we do need to be able to track what's happening in the Canadian economy.

The second element, how our programs impact on that improvement in energy efficiency, is a more difficult puzzle, but we are devoting a considerable effort to that as well.

We do have—and I think the Auditor General's report points this out—a wealth of information about the outputs and even the impacts of individual programs. Our regulatory impact studies, for instance, are very highly detailed, so that when we bring forward a regulation, we know in considerable detail what we expect and how much that will contribute to energy savings on its own.

Having that information at the program and sub-program levels is not only useful for evaluation, but is really essential for the effective and responsible management of these programs. We use that information regularly as a feedback mechanism to adjust and move our programs to what we perceive to be the areas of greatest opportunity.

In solving the puzzle of how you evaluate programs based on partnerships and based on influencing how other people behave, we have published a study that we believe is a breakthrough study and does represent a step forward in the entire evaluation of this kind of process. It is called Influencing Energy Use in Canada, and I believe it's available to committee members.

This is the basis upon which we hope to link the individual program data to this aggregate, economy-wide information, but as the Auditor General has fairly pointed out, we have not been successful in doing that yet. I would add that if—I should say “when”—we are successful in doing that, we will be the first in the world to be able to accomplish it.

The next page illustrates some of the program-related indicators we have. It's there to give you a flavour of the program-by-program approach we're able to bring forward. What's important to recognize in our new approach to programs—and these are quite different from the programs of the 1980s, where subsidies were used to directly influence individual decisions—is we're trying to create the conditions under which Canadians can make good decisions with respect to energy use.

A lot of that is providing information. As Mr. Pratt pointed out, in our fuel efficiency program, we provide every car dealership in Canada with booklets for their customers detailing the energy efficiency of every car for sale in Canada that year. Having that information is important for consumers to be able to make the right choices.

As for next steps, we're certainly not through the process yet—we have yet to make that linkage—but we are planning to report progress. Particularly in our report to Parliament on the Energy Efficiency Act, we will be turning that more and more towards a report on our development of those linkages between the individual program elements and the aggregate effect on energy use in Canada.

This project has required and continues to require a large amount of resources from our programs. It requires a significant amount of analysis, some surveys of energy use throughout Canada, and a lot of data collection. And that brings us to a trade-off between how much we spend on programs and how much we spend on analysis. That's not an easy trade-off, because we want to use the money for our programs as effectively as possible.

• 1015

In our next report to Parliament we will be reporting some results from this attempt to integrate individual programs, results on the aggregate implications for the economy. We will not be the whole way through the process but we think we will have made considerable progress at that stage. We take advice from the Auditor General and from this committee and others on how we make that split between spending on programs and spending on evaluation.

The first annex I would bring to your attention is a set of estimates for what we might be able to expect from our programs by the year 2000 target, sector by sector. It indicates the basis on which we have allocated our spending and the expectations from those programs. But these are preliminary estimates and await our work to link the programs to the economic variables more closely.

The Chairman: Thank you, Mr. Jarvis. I am sure there are many questions ready for you.

Mr. Casson, would you like to begin?

Mr. Rick Casson (Lethbridge, Ref.): I was wondering if there is any way...or if you have and I have not seen it here.... If we are going to work with the people of Canada on a voluntary basis to reduce energy use and the whole idea of reducing emissions, do you have an analysis of a program for an average household? If we are going to get into all the homes in Canada and get people aware of what their personal contribution can be to energy efficiency and then other problems, is there a rationale for people to use? Then is there a per-house result and a cumulative result of those effects or those actions which they can take?

Mr. Bill Jarvis: Individual homes and individual behaviour patterns tend to be quite different. Nonetheless we do have the basis for some standard approaches we can provide to consumers. A lot of that has been done now through our regulatory program, and 65% of energy use in households is now used through products that come under our Energy Efficiency Act. The basis of that act is to provide in a very clear way—and of course it is a regulatory instrument—what is a minimum standard households should expect from their equipment and appliances.

The Energy Efficiency Act does not include homes—that is, the shell, the heating and cooling and air conditioning aspects of the home—but we have developed over the last six years, with the cooperation of the building industry, electric utilities, and each of the provinces, a building code which sets up, again, a minimum standard that should be expected by people who are purchasing a home. In addition to that, of course, many of you will be familiar with our R-2000 program, which basically says here is the best you can get which is commercially available as a target. We encourage consumers and builders to pursue the R-2000 level rather than just our building code level.

Mr. Rick Casson: But analysis of what an individual family can do with their home or their automobile or whatever to help reduce the use of energy?

Mr. Bill Jarvis: We have some 300 publications, about 200 of which are oriented towards individual consumers to assist them in understanding what opportunities are there for them and how they can take advantage of them. In addition we have just come up with a new Web site on the Internet. It has a variety of assistance for consumers. It leads them to our various publications and has a bit of question and answer, leading them to what they can usefully do to conserve energy in their homes and incidentally save themselves money at the same time.

• 1020

The Chairman: Mr. Lincoln.

Mr. Clifford Lincoln: Mr. Jarvis, first of all, I should mention that my experience of working with some of your people is that what you've done with the programs you've been given has been in many ways exceptional. I'm talking about the district energy programs, what has been done in Charlottetown, in Cornwall, in Chibougamau. It's really fantastic. Also your building energy program, BETA, and the building code.... Certainly your department deserves a lot of praise for what it has done.

What really saddens us on this side is that you mentioned that in energy efficiency we were saving in Canada $4 billion a year, which is a massive amount of money by any standard. Earlier we heard testimony from the Auditor General that all in all, if we add all the programs that are put into alternative energy, $16.5 billion, and all the rest, about $60 million all in all...if we were to redirect the massive amounts of money put into subsidies and incentives to fossil fuel programs, such as direct subsidies to the oil industry, the many hundreds of millions into the shale oil industry, and we were to put them into those programs, can we say if instead of $60 million we were to give $600 million to the energy efficiency program, including renewable energy, that $4 billion could be considerably more?

Mr. Bill Jarvis: It's certainly true additional resources could be used to promote more adoption of energy-efficient technologies, more adoption of renewable energies. In particular at the levels you're talking about, I think we could go beyond what our current target is now, which is the economically attractive opportunities that are in the marketplace, and provide some direct subsidy support to introduce new technologies more quickly, regardless of where the money came from. But that's a decision cabinet would have to make.

Mr. Clifford Lincoln: I realize that, Mr. Jarvis. I'm not asking you for the decision. I'm just trying to have information so we on the political side can push your cause forward.

I was reading recently about India having 200,000 homes fuelled by solar energy. Wind energy is extensively used now. They are going big in solar energy and wind energy, and this is a country without our money and natural resources.

Some scientists tell us if we were to redirect our economic instruments towards energy efficiency and renewable energies without waiting too long, by the year 2005 we could stabilize, and once having stabilized—it's very much like the deficit, it goes on reducing at an accelerated pace—by the year 2010 we could reduce by perhaps by as much as 7%. Does that appear feasible in your eyes? Is it realistic, assuming we gave you the economic resources to carry out these programs?

Mr. Bill Jarvis: Both in the department and through a wide variety of consultation studies we've looked at the potential for changing the energy use of the economy. There's no doubt with more resources you can achieve more and at some level of expenditure you could hit the kinds of targets you've talked about.

There's still a considerable amount of uncertainty in how big an amount of resources it would take to get there. Our estimate is that it would be quite large.

• 1025

One thing is clear: every step you take, the next step gets a little bit harder. It's not a lot harder, but a little bit harder. You get the low-hanging fruit first, as it were, then you have to go up further into the tree to get fruit. At some level of spending, much more could be achieved.

Mr. Clifford Lincoln: One last little question. Mr. Jarvis, admittedly it would require a lot of resources for you to shift from one sector to another, or new resources. But say we were we to stabilize, for argument's sake, by 2005. We're way behind now, to be realistic. We can't stabilize by 2000. That's gone. But say we were we to stabilize at 2005, and then reduce by 7% admittedly by 2010, which some scientists have told us we can do. Would it be true that after we invest resources, using your own figures, we would save $4 billion a year from better energy use today? Wouldn't that mean also that the corollary would be that our economy would benefit by all kinds of spin-offs and reduced costs? On the one side, there's investment. On the other side, there are massively reduced costs, plus also the creation of new jobs, and so forth. Would that be true?

Mr. Bill Jarvis: There's no doubt that if, by one mechanism or another, there was a large stimulus to energy efficiency and renewable energy, there would be some technology development, some jobs associated with the work there, and you would have the kinds of spin-offs you're talking about.

The question is this. You're trading off against some other opportunity for those resources. I'm not equipped now to say what the effect on the whole economy would be.

I can indicate to you that there have been a number of studies of that in Canada. There have been a number of studies of equivalent questions in the United States. The answers are, at best, ambiguous. Some say up, some say down. It's difficult to get a clear answer as to whether the whole economy would be better off.

No doubt, if additional effort was put in and additional money was spent, then the kinds of spin-offs you're talking about would exist.

The Chairman: Mr. Knutson, Mr. Pratt, and Monsieur Bigras.

Mr. Gar Knutson (Elgin—Middlesex—London, Lib.): Thanks very much, Mr. Chairman.

I just wondered whether the officials are monitoring the discussions going on around what targets we're likely to commit ourselves to in Kyoto within the next month or so.

Mr. Bill Jarvis: We're certainly aware that the development of a target in Kyoto will have a significant influence on our programs. We're trying to provide ministers with the technical and background advice they need to make a wise decision.

Mr. Gar Knutson: If we assume for today's meeting that we're going to commit to stabilization at 1990 levels by 2010, which is one of the numbers that's floating around, is it your view that it will represent a very aggressive sort of turnaround, given that we're in an economy now that has produced say 13% more greenhouse gases over the last five years? We're not only going to stop making more greenhouses gases, but we're going to go down to the 1990 levels.

As for the GDP, from my own estimate, I don't think it's unrealistic to assume that it's going to be about 30% higher in 2010 than it was in 1990. That's like a 1% or 2% growth rate a year. That represents a big, big shift. Is that fair?

Mr. Bill Jarvis: Most of the studies that have been done, both inside and outside government, suggest that it would take considerable effort on the part of federal and provincial governments and the community as a whole to achieve that target.

Mr. Gar Knutson: Are you folks going to be one of the leaders in this considerable effort? Is it reasonable to expect that you would be?

• 1030

Mr. Bill Jarvis: It's unlikely the government would pursue that kind of target without a heavy emphasis on energy use, because that will still be one of the keys to do that. As the agency of record on that, I think we'd definitely be involved, and pleased to take new direction on where we should take our programs.

Mr. Gar Knutson: I applaud you for your efforts, as well—like Mr. Lincoln, I don't have anything with which to denigrate it, or anything perjorative to say about your history. However, assuming we buy into stabilization at 1990 levels, which I think is a reasonable assumption for today's discussion, we've got to start talking about this issue in terms of having to do 10 times more, 100 times more—some exponential amount more than we've done over the last few years. The more we applaud ourselves—not that I want to take anything away from what we've done, say in the last few years—at the same time we need to come with a vision that we need to know an awful lot more.

Having said that, I'll ask a specific question. While it's well and good to point out to, say, an Ontario car buyer that “Well, if you buy this car, you get this amount of energy efficiency, and if you buy this car, you get this amount”, at some point it might make sense to the public policy makers in Canada to ask if there are other jurisdictions where they're getting much more significant automobile efficiency, energy efficiency. For example, I never hear, at least from the officials, what they're doing in California, or what they're doing in other parts of the world that Canada might buy into, that we might copy.

I wonder if you would want to comment on some of the things we can do to start to meet those very aggressive targets. What would be first up in your mind? I've put a bunch of questions in there.

Mr. Bill Jarvis: The programs to date have focused on trying to clear the way, get rid of barriers, and influence energy consumers to take decisions that are inherently economic—that have economic benefits in and of themselves. Our view is that you'd have to go significantly beyond that, which means you would have to change the economic basis upon which decisions were made. Governments typically have a number of instruments they can use.

Mr. Gar Knutson: Can you give me one example?

Mr. Bill Jarvis: Well, subsidies would certainly change the relative cost of making new investments for people who are purchasing energy equipment of one form or another. Anything that would change that relative price array would change the entire map. I think it's clear that the whole range of government instruments would have to be looked at, to see where the most prospective areas are. Our analysis suggests there's still a lot that can be done in the commercial sector.

Mr. Gar Knutson: Such as? Give me one idea.

Mr. Bill Jarvis: Well, upgrading the heating systems in commercial buildings across the country—those that are still using oil-fired or inefficient furnaces. There is a considerable amount, our analysis suggests, of opportunity there.

In the residential sector, there is still significant opportunity in upgrading the insulation integrity, heat integrity of homes across the country. Industry is a tougher nut to crack because it tends to be site-specific, and therefore you can't generalize as well, but we think there are still lots of opportunities there in things like heat recovery, or perhaps some co-generation. Transportation, in our view, is the toughest area to make progress in. We have been working in that area for many years and found it very difficult, but that doesn't mean to say there aren't things that can be done.

Mr. Gar Knutson: Do you think we can just regulate a more efficient automobile?

Mr. Bill Jarvis: It is extremely difficult for Canada on its own to influence the technology offerings of automobiles. The Minister of Natural Resources and the Minister of the Environment have written to their counterparts in the United States, the Secretary of Energy and the administrator of the EPA, to ask for a consultative approach to see where we can go in that area. That's been started—a conversation with Environment Canada, the EPA, and DOE and ourselves has been started to see what can be done, because if we can work on a North American platform, we think we can get a lot further a lot more quickly.

• 1035

Mr. Gar Knutson: Should we be looking at what they're doing in California? Do you know what they're doing in California?

Mr. Bill Jarvis: The program in California has focused mostly on air quality emissions, and they've used a very heavy-handed regulatory approach. In some of those areas they've been successful, and in some of them they've been less successful. We keep a very close eye on where they're going with that.

Mr. Gar Knutson: Is there a bright idea that comes from keeping a close eye, and idea that we might adopt?

Mr. Bill Jarvis: There are a number of areas we can look at. Again, recognizing that California has a different set of objectives from the climate change objective—

Mr. Gar Knutson: They often go hand in hand, though. Isn't that...?

Mr. Bill Jarvis: Many of the technology solutions are the same. We have a fairly extensive technology development program, the prize of which is probably the Ballard fuel cell. But it goes well beyond that to the use of different fuels that have no net carbon loading, that have significantly reduced emissions, as well as looking at more efficient components in cars, from low-profile tires to different types of engines, and even things like diesel engines, which can have a significant efficiency gain with direct injection. At the moment, that's at the cost of some urban air quality issues, so we're working with Environment Canada in order to see if we can try to solve both of those at the same time.

The Chairman: Thank you.

Next is Mr. Pratt, followed by Mr. Bigras, Mr. Jordan, the chair, and then Mr. Casson on a second round, followed by Madam Kraft Sloan.

Mr. David Pratt: I'd like to follow along this line of questioning in terms of the policy instruments NRCan has available to it. As Ms. Kraft Sloan mentioned earlier in terms of the briefing document we got from the Library of Parliament, I would like to quote it again:

NRCan uses only a few of the policy instruments available to encourage energy efficiency. It relies heavily on voluntary measures, education programs, partnerships and research, and has drafted only two regulations. It avoids making use of taxes, charges or subsidies.

My question is whether or not NRCan avoids making use of taxes or the tax policy. Does NRCan avoid that because it doesn't think it's appropriate to use the tax system for these purposes, or does it avoid using them because the Department of Finance has said that it doesn't think that is an appropriate use of tax policy?

Let me expand my question a little to give two examples. Like Mr. Lincoln, I guess one of the programs I'm familiar with is the district energy program. I've worked with Michael Wiggin through the Federation of Canadian Municipalities on district energy, and I have had the opportunity to look at some of the information relating to the systems in Chibougamau, Cornwall, Windsor, Charlottetown, etc.

I've been really impressed with what I've seen in terms of the department's work in this area in terms of making the transformation to district energy systems from the heating and cooling systems that exist now. However, it seems there really is no tax incentive to do anything in terms of, let's say, I think it's called the class 43 accelerated capital cost allowance for district energy equipment. This is one example that comes to mind in terms of a possible change in tax policy that could have a very direct result on the number of district energy projects that we see in Canada and, as a result of that, changes in energy consumption and energy efficiency.

The other example that comes to mind is the—

The Chairman: I'm going to have trouble accommodating everybody. Could you come to your question?

• 1040

Mr. David Pratt: I'm going to zero in on this quickly, the whole business of the federal government's tax treatment of parking and how the individual automobile is in fact bonused under our tax system. One of the ideas that has come forward from the Canadian Urban Transit Association, for instance, is that of employer-provided transit passes being considered a tax-free benefit.

Could you respond to that issue as to whether or not NRCan is actively pushing the Department of Finance in this area of tax policy, and whether or not you've received any feedback from them that indicates they're warming to some of these ideas?

The Chairman: Mr. Jarvis, may I ask you, for the sake of time and to accommodate everybody, since we are running out of time, to compress your answers?

Mr. Bill Jarvis: We have made some progress very recently on both class 43, with respect to renewable energy, and improvements in the tax system over the last decade that have made parking a taxable benefit so it levels the playing field for taxation.

We continue to examine all possible policy program options that can contribute to the goals we have, and we try to focus on the ones we think are going to be most prospective at least cost. There's nothing we don't look at. All the things you're talking about we look at, and we have ongoing consultations.

Ultimately it's not up to the department to say we need this or we don't this. That's a decision cabinet makes.

The Chairman: That's a beautiful question for Finance officials, if we can bring them before the committee, Mr. Pratt.

Mr. David Pratt: I was just wondering how actively the department is pushing these issues with Finance, though. That really was the crux of the question.

The Chairman: Right, yes. I appreciate that.

Mr. Bill Jarvis: We take instruction from the minister on where we go with that. It's a policy question.

The Chairman: It might warrant a letter from you to the minister.

[Translation]

The Chairman: Mr. Bigras, followed by Mr. Jordan, Ms. Kraft Sloan and the Chair.

Mr. Bernard Bigras: Firstly, I have read your document and I must admit that you are showcasing a great number of measures today, but I must show a degree of scepticism regarding their effectiveness within our efforts to reduce green house gases.

I have two relatively short questions that are somewhat logically related. I know that my colleague Mr. Casson will not agree with me, but I will go for it.

On the one hand, is it not true that the fundamental problem of Canada, regarding the achievement of our objectives for reducing green house gas emissions, is the present position of our country in the area of energy? For example, some provinces are positioned quite differently in the area of energy and they are presently quite able to achieve the objective of reducing green house gas emissions to 1990 levels. That's my first question.

On the other hand, if it is true that Canada's energy position is a disadvantage for the achievement of our objectives, should we not encourage a conversion? Given that Canada is rich in natural resources, including oil and hydroelectricity, would it not be in our economic interest to pursue some sort of conversion through technological innovations? That would also put us in a good position environmentally.

Last Friday, I met with representatives from CEVEQ, who were showcasing the ecological benefits of the electric car. I was told that in Canada, it is difficult to market this type of product, even though the technology is now mature. In Europe, by contrast, major car manufacturers are selling electric cars. Is it in our interest to encourage such a conversion? From an environmental perspective, it is clear that it will be beneficial. But it could be as well economically, given that Canada is rich in natural resources, not only oil, but hydroelectricity as well, which is ecologically beneficial.

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Mr. Bill Jarvis: It is clear that the solutions to the fundamental problem must come from the development of new technologies. The Department of Natural Resources has a whole series of projects in this area, in partnership with participants such as Hydro Quebec. The development of an electric car is a good example. But to develop new technologies, one must proceed step-by-step. For example, a deciding factor for the success of electrical vehicles in Canada would be the capacity for batteries to operate in low temperatures. The Ford Canada Company has developed a car they are selling in California, but they are not even trying to sell it in Canada for that very reason.

Technological developments can solve these kinds of problems and it is absolutely necessary to continue our research programs if we want to achieve our objectives. Even though we operate in a context where the situation can be quite different in various areas of the country and within our programs, we are seeking to identify the most beneficial projects and the most cost effective ones, wherever they may be. Each region has its own opportunities, projects and assets that we can build on. Our programs do not target some regions in particular, but rather some technologies that can help us achieve our goals.

The Chairman: Thank you Mr. Bigras.

[English]

Next is Mr. Jordan, followed by Madame Kraft Sloan.

Mr. Joe Jordan: I want to thank you for your presentation. You've certainly brought a sense of perspective to the discussion.

I want to touch on what Mr. Lincoln was getting at earlier in terms of reinvesting identified savings back into the process and the cut-off point for benefits. You talked about shifting resources around and the need to take into consideration the opportunity costs of what you're no longer doing against the potential benefits of what we might be doing. Is there a latent demand for technologies and processes internationally? Is it your sense, or NRCan's sense, that this is an emerging market?

When we look at what I think is something that's going to have to take place, in terms of a fundamental shift in our economic base, is it first to the starting line? Is there a large potential international market for these technologies, or is that a very political...?

I notice in one of the overheads here, as indicators, France, and you have “secret” written there. Is that a very politicized market, or is that demand very real? And should that potential be factored in when we try to make the economic argument for the re-profiling of resources?

Mr. Bill Jarvis: I want to make it clear that the slide you're referring to was not my slide. It was a slide we reprinted from the International Energy Agency.

On your key point, the government has identified the area of energy efficiency and environmental technology as a promising area to invest in and should be a market Canadians are well equipped to enter into. In fact the investment that Canada has made in energy efficient technologies over the last 20 years has positioned us very well for doing this.

Let me take one example. Our housing program has developed technologies that are sought after around the world. There are Canadian home builders now who have opportunities to take that most untransferable of assets, a home, and actually market their building techniques and houses in both eastern Europe and Japan, and possibly as far as China and the rest of Asia as well.

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The simple answer to your question is yes, there's lots of potential out there, and Canada is well positioned to move forward on it.

The Chairman: Thank you, Mr. Jordan. Madam Kraft-Sloan, please.

Mrs. Karen Kraft Sloan: I wanted to follow up on a few of the trains of thought that have been weaving their way around the table.

In answer to some of the questions that Mr. Casson brought forward in regard to what's being done with homeowners, I've been working with the Ontario green communities projectand with Environment Canada on a national green communities project. And the Federation of Canadian Municipalities has its 20% club and has to move into a second phase next spring where the community becomes involved. We're looking at test pilots within 10 communities across the country so that they can provide examples and projects for the Federation of Canadian Municipalities.

Also, my brother-in-law in B.C. builds tire homes, which is an interesting way of utilizing a resource that's hard to get rid of. Essentially the walls are built of tires, covered with anything from straw to tin cans to whatever, and then covered in adobe. And the homes are—for someone who loves the southwest style—beautiful homes. They're also completely off-grid.

There are a lot of really neat ideas out there in emerging technology, and for some people this may sound more like science fiction than science fact. In some respects it's not easy to apply some of these concepts because there are so many barriers, whether it's a mindset barrier or a financial barrier.

I've also heard of instances of—

The Chairman: Could you please ask your question?

Mrs. Karen Kraft Sloan: I'm sorry.

You've answered this question in regard to other examiners, but I'm just wondering if you have any other elaborations on how we can make these ideas or movements, as well as the technology, move along, or if there's anything else you can help us with. Implementation is the key.

Mr. Bill Jarvis: There are really two parts to our program. One is the technology development and transfer part where we look at the individual technologies—the crazy ideas or whatever—which will be tomorrow's standard approach to doing things. Our technology group pursues those on a case-by-case basis and helps individual technology developers bring those to market.

The other part of our program is the program that's trying to change the way energy is used in Canada. There, in order to have maximum impact, we're looking for things that have broad general application.

You raised the issue of Ontario green communities and the FCM. We have been working with both those organizations. We've been working with the Ontario green communities project on a pilot project to do home energy labelling, which again is a program of very general application, but it does break down a barrier. It's very difficult for homeowners to recognize the increased value of their home when they increase its energy efficiency. We're going to convert those investments into real value that can then be traded in the marketplace and thereby encourage investment in homes in energy efficiency.

With the FCM we've been working for a number of years to find a vehicle to promote our very successful model of investing in government buildings, our federal buildings initiative. We've been looking for a vehicle to promote that in municipalities across Canada. We have some very good success stories there as well. But these programs are of a general nature. They are about technologies that can give us the most energy savings in a short period of time, while our technology programs look at entrants into the marketplace and try to see if they can be made more generally applicable.

Mrs. Karen Kraft Sloan: It's my understanding that Ontario changed its building code requirements as far as insulation goes. They've reduced the requirement for insulation. You mentioned that home insulation is an important area. I heard that they were planning on doing this. Do you know if they actually did it? And what kind of challenge does that pose for you? How do you work around a province reducing important things like insulation requirements?

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Mr. Bill Jarvis: I'm not sure whether or not it's done. It's incipient; this week or next week, something like that, the changes are intended to come into effect. We built, with financial assistance from the provinces, our energy code for buildings. We await with enthusiasm and eager anticipation the adoption of those codes by provinces.

This move from Ontario moves them away from the code and below that of the code. We're hopeful that the code will provide them a mechanism to recover from that.

Mrs. Karen Kraft Sloan: You talked about this energy code for buildings. Is there some kind of interprovincial working group that works on these issues? Because this is a real problem if the federal government is moving to have certain kinds of standards and then the provinces are reducing these standards.

Mr. Bill Jarvis: The national building code is prepared under a multipartite group under the aegis of the National Research Council. We along with our provincial partners paid them for the development of the energy guidelines for buildings. But building codes are a provincial jurisdiction, and regardless of how much enthusiasm the federal government has for their adoption, at the end of the day this is a decision for provincial government cabinets.

Mrs. Karen Kraft Sloan: Thank you.

The Chairman: Mr. Jarvis, before I recognize Mr. Casson in a second round, I have a few brief questions.

The first question has to do with your report, dated August 1996, entitled Influencing Energy Use in Canada. On page 47 you have figures 33 and 34, which indicate that the number of conversions of motor vehicles to propane has gone down by 30% since 1991, and the number of conversions of motor vehicles to natural gas has also gone down by more than 30%. Can you explain?

Mr. Bill Jarvis: Indeed. We've had over that period of time continuing programs and continuing favourable tax treatment for both propane and natural gas. Some provinces have also provided favourable tax treatment.

The key difficulty here is that the new cars being built, with their emission control technologies and their very sophisticated computer-control fuel mechanisms, don't permit conversion with the old technology we used to be able to use to convert cars to use propane natural gas.

The Chairman: Does this apply only to new cars?

Mr. Bill Jarvis: New cars, I guess, since the on-board diagnostic systems came out—

The Chairman: No, does this measure apply to new cars only?

Mr. Bill Jarvis: No, this is all cars.

The Chairman: Well, then, why are the figures going down? The number of old cars increases every year.

Mr. Bill Jarvis: To our knowledge, that is the biggest impediment, and what has stopped the conversion. It's much more economic to convert a new car that has a long life so that you can amortize the additional capital you spend over the life of a car.

The Chairman: Are you saying that the incentives are still in place?

Mr. Bill Jarvis: The tax incentives are still in place.

The Chairman: And the grants?

Mr. Bill Jarvis: The only grants that were available up until last year were the grants for natural gas vehicles. The program came to an end as of March 31. The minister has asked a number of key industry representatives from natural gas and the alternative transportation fuel industry to provide him advice on what should be done with the funds that were the basis for that program, which were a legacy of the MDIP program of the early 1980s.

The Chairman: Could you supply the members of this committee with an overview of the programs, grants, and tax concessions that have been made available since 1982?

Mr. Bill Jarvis: We'd be delighted to.

The Chairman: Could you then explain figure 3, please, on the construction of R-2000 certified houses, where the number yearly has also gone down by more than 50% since 1993? To what do you attribute that?

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Mr. Bill Jarvis: In 1994-95 the homebuilding industry in Canada went through a very tough recession. We have found in our programs—and in spite of our enthusiastic support—that one of the things that goes in tough economic times is those high-end developments of the highest quality houses, like the R-2000 houses.

The Chairman: So you expect the number to increase.

Mr. Bill Jarvis: We certainly do, and we're working with the Canadian Home Builders' Association. The Home Builders' Association—

The Chairman: That's good enough.

Mr. Jarvis, what percentage of your departmental budget is assigned to you?

Mr. Bill Jarvis: I can't give you an exact figure, but—

The Chairman: Is it more that 1%?

Mr. Bill Jarvis: We're looking at $20 million out of $400 million.

The Chairman: Is that 2%?

Mr. Bill Jarvis: That would be 0.5%.

The Chairman: One-half of one percent.

Mr. Bill Jarvis: I'm sorry, 5%. In addition—

The Chairman: Of the total departmental budget?

Mr. Bill Jarvis: Five percent.

The Chairman: Does that include all the grants and payments, the entire budget of your department?

Mr. Bill Jarvis: I'm just trying to do the math here, Mr. Chairman.

Out of a departmental budget of $400 million, I think $20 million goes to direct energy efficiency programs, and another $35 million goes to research and development in the energy efficiency technologies. We're looking at between 10% and 12% of the entire departmental budget.

The Chairman: Could you tell the members of this committee how far below stabilization we will be by the year 2000 on greenhouse gas emissions, in your calculations?

Mr. Bill Jarvis: I can't say with any certainty, Mr. Chairman. Our last forecast indicated that greenhouse gas emissions would be 8% above 1990 levels, but those numbers are somewhat out of date and we haven't done an updated forecast as yet.

The Chairman: Why not?

Mr. Bill Jarvis: Well, we're working on it. We usually go on a two- to three-year cycle when producing a forecast.

The Chairman: When will you have it available?

Mr. Bill Jarvis: I expect there will be one sometime next year, but I can provide the committee with a better estimate from the people who are in the process of preparing it.

The Chairman: You see, on page 69 of your report of May 1997 you come to a conclusion on carbon dioxide emissions under an electricity scenario. You bring forward some pretty high figures, and I wonder whether these apply only to the electricity scenario.

Mr. Bill Jarvis: I'm not sure which report you're examining. This one? Page 97?

The Chairman: Page 69.

Mr. Bill Jarvis: I'm sorry, page 69.

The Chairman: It's item 7.2, carbon dioxide emissions, under scenario, at the top of the column. There, you talk about them being 28% higher than in 1990, and 27% higher than in 1995. To what do these figures apply—just for electricity?

Mr. Tim McIntosh (Energy Efficiency Branch, Department of Natural Resources): In that scenario, emissions are also attributed to electricity production.

The Chairman: But just to electricity?

Mr. Tim McIntosh: No, to all fuels, including electricity. Normally we don't attribute end-use emissions to electricity.

The Chairman: So what are we to conclude from those two figures?

Mr. Bill Jarvis: When we look at the industrial sector, Mr. Chairman, what we're looking at from our program perspective is saving energy.

If an individual company saves electricity, there will be no savings in emissions from the company because all it's doing is buying the electricity and saving it. But we know that when you trace the electricity back to its source, there are some carbon dioxide emissions coming from the generation of that electricity in many of the regions of Canada.

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The document is saying that if we attribute the greenhouse gas emissions associated with electricity production to the electricity used in industry, we get a different picture of how much the industry might be deemed to be accountable for greenhouse gas emissions and a different picture of what kinds of opportunities there are for industry to save. Many of the industry savings programs are focused on saving electricity, and we want to be able to encourage that and make sure those opportunities are realized.

The Chairman: In your final determination will you be able to clarify this point of where we will be by the year 2000 in your projection on stabilization? In other words, this figure is still a very tentative one and doesn't seem to give a complete picture as to where we are on carbon dioxide emissions in relation to 1990. In other words, your figure of 28% higher than 1990 is a pretty disturbing one, but it may only apply to one specific energy sector. This is what I'm trying to ascertain from you.

Mr. Bill Jarvis: The 27% or 28%, Mr. Chairman, is just the consequences of attributing the emissions associated with electricity generation to the industrial sector.

The Chairman: Just to the industrial sector.

Mr. Bill Jarvis: Yes, it's just a shift between sectors.

The Chairman: That's what I needed to know.

Finally, could you give us, perhaps in writing, your conclusions as to whether or not new car dealers across Canada provide in their brochures that are supplied by the manufacturers the basic information related to fuel efficiency? It is very difficult to find a sentence devoted to fuel efficiency when it comes to the purchase of new cars.

Mr. Bill Jarvis: I'll be happy to provide the committee with a report on that.

The Chairman: It goes back to the application of that $500,000 earlier in our discussion.

Mr. Bill Jarvis: Yes. We certainly put some effort into getting the information out. In many car dealerships you can find our fuel consumption guide, which is a listing of the energy efficiency of all automobiles. But we are working with the auto industry to try to encourage them to bring the energy attributes of the vehicles to the consumer's attention.

The Chairman: Thank you.

Mr. Casson.

Mr. Rick Casson: That was my question.

The Chairman: In that case we'll conclude our hearing.

Mr. Jarvis, we thank you and your colleagues for your participation.

This meeting is adjourned until tomorrow afternoon.