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37th PARLIAMENT, 2nd SESSION

Standing Committee on Agriculture and Agri-Food

EVIDENCE

CONTENTS

Tuesday, December 3, 2002

0905

The Chair (Mr. Charles Hubbard (Miramichi, Lib.))

Ms. Norine Smith (Assistant Deputy Minister, Department of the Environment)

Dr. Gordon Dorrell (Acting Assistant Deputy Minister, Department of Agriculture and Agri-Food)

Ms. Norine Smith

0910

The Chair

Dr. Gordon Dorrell

0915

0920

The Chair

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance)

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

0925

Mr. David Anderson

Ms. Norine Smith

Mr. David Anderson

Ms. Michele Brenning (Director, Environment Bureau, Department of Agriculture and Agri-Food)

Mr. David Anderson

Ms. Norine Smith

0930

Mr. David Anderson

Ms. Norine Smith

The Chair

Ms. Norine Smith

The Chair

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ)

Ms. Norine Smith

Mr. Louis Plamondon

Ms. Norine Smith

Mr. Louis Plamondon

Ms. Norine Smith

Mr. Tony Taylor (Director, Transportation Energy, Department of Natural Resources)

0935

The Chair

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.)

Ms. Norine Smith

Mr. Murray Calder

Ms. Norine Smith

Mr. Murray Calder

Ms. Norine Smith

0940

Mr. Murray Calder

Ms. Norine Smith

Ms. Michele Brenning

Mr. Murray Calder

Ms. Norine Smith

The Chair

Mr. Dick Proctor (Palliser, NDP)

Dr. Gordon Dorrell

0945

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Ms. Norine Smith

The Chair

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.)

0950

Dr. Gordon Dorrell

Ms. Michele Brenning

Mrs. Rose-Marie Ur

Mr. Tony Taylor

Mrs. Rose-Marie Ur

Mr. Tony Taylor

Mrs. Rose-Marie Ur

Mr. Tony Taylor

0955

Mrs. Rose-Marie Ur

Mr. Tony Taylor

Mrs. Rose-Marie Ur

Mr. Tony Taylor

The Chair

Mr. Rick Borotsik (Brandon—Souris, PC)

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Wayne Lindwall (National Program Leader, Environmental Health, Department of Agriculture and Agri-Food)

Mr. Rick Borotsik

1000

Mr. Wayne Lindwall

Mr. Rick Borotsik

Mr. Wayne Lindwall

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

1005

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

Dr. Gordon Dorrell

The Chair

Mr. Mark Eyking (Sydney—Victoria, Lib.)

Ms. Norine Smith

1010

Mr. Mark Eyking

Ms. Michele Brenning

The Chair

Mr. Mark Eyking

The Chair

Ms. Norine Smith

The Chair

Ms. Michele Brenning

The Chair

Ms. Norine Smith

1015

The Chair

Mr. David Chatters (Athabasca, Canadian Alliance)

Ms. Norine Smith

1020

Mr. David Chatters

Ms. Norine Smith

Mr. David Chatters

Ms. Norine Smith

Mr. David Chatters

The Chair

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)

Ms. Michele Brenning

Mr. Bob Speller

Ms. Michele Brenning

Mr. Bob Speller

Ms. Norine Smith

1025

Mr. Bob Speller

Ms. Norine Smith

Mr. Bob Speller

Ms. Norine Smith

Mr. Bob Speller

The Chair

Mr. Bob Speller

The Chair

Mr. Dick Proctor

Ms. Norine Smith

Mr. Dick Proctor

Ms. Norine Smith

1030

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

Mr. Tony Taylor

Mr. Dick Proctor

The Chair

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.)

1035

Mr. Tony Taylor

Mr. Larry McCormick

The Chair

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

1040

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

The Chair

Mrs. Rose-Marie Ur

1045

Ms. Norine Smith

Mrs. Rose-Marie Ur

Ms. Norine Smith

Mrs. Rose-Marie Ur

Ms. Norine Smith

Mrs. Rose-Marie Ur

Ms. Norine Smith

Mrs. Rose-Marie Ur

Ms. Norine Smith

Mrs. Rose-Marie Ur

Ms. Norine Smith

The Chair

Mr. Rick Borotsik

Dr. Gordon Dorrell

Mr. Rick Borotsik

1050

Dr. Gordon Dorrell

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

Ms. Norine Smith

Mr. Rick Borotsik

The Chair

Mrs. Rose-Marie Ur

1055

Ms. Michele Brenning

Mrs. Rose-Marie Ur

Ms. Michele Brenning

Mrs. Rose-Marie Ur

Mr. Wayne Lindwall

Mrs. Rose-Marie Ur

Mr. Wayne Lindwall

Mrs. Rose-Marie Ur

The Chair

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

Dr. Gordon Dorrell

Mr. David Anderson

The Chair

CANADA

Standing Committee on Agriculture and Agri-Food

NUMBER 007

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, December 3, 2002

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Mr. Charles Hubbard (Miramichi, Lib.)): Pursuant to Standing Order 108(2), our committee this morning is furthering its study of the impact of the Kyoto Protocol on the agricultural sector.

Today we have witnesses from the Department of the Environment and also from Agriculture and Agri-Food Canada. We welcome Norine Smith, the assistant deputy minister of policy and communications from Environment Canada, and Dr. Gordon Dorrell, the acting assistant deputy minister of the research branch of Agriculture and Agri-Food Canada.

They each have colleagues at the table. I'm not sure what is the order of presentation here, but, Ms. Smith, your name is first on the list. We'd like to make sure we keep our presentations to about ten minutes each, and from that we'll be able to begin our rounds of questioning.

Ms. Smith, would you be first? Do we have agreement on that?

Ms. Norine Smith (Assistant Deputy Minister, Department of the Environment): Thank you, Chair. Perhaps I would begin by introducing a colleague from Natural Resources Canada, Tony Taylor, who is the director of transportation.

Dr. Gordon Dorrell (Acting Assistant Deputy Minister, Department of Agriculture and Agri-Food): Mr. Chair, this is Michele Brenning, the chief of the environment bureau in Agriculture Canada.

Ms. Norine Smith: I have a short presentation, which I believe has been distributed. I will be focusing on the Kyoto Protocol and the climate change plan for Canada, which is my area of expertise. I don't purport to be an agricultural expert by any stretch.

My short presentation basically deals with the climate change plan that was released by the government on November 21. The plan provides for a three-step approach to reducing greenhouse gases and operates across all the sectors of the economy. It makes an effort to respond to the concerns that have been expressed by the provinces and the 12 principles they presented to Ministers Anderson and Dhaliwal at the last federal-provincial-territorial meeting of energy and environment ministers. It sets out five key instruments for addressing greenhouse gases and a range of specific actions that the government is proposing to take, and it provides cost estimates on the overall economic impact based on a reference case, which is not exactly the plan but is a modelling case similar to the plan.

Canada's Kyoto target is to bring our emissions down to 6% below our 1990 levels. That's estimated to mean that we need to reduce our emissions by 240 megatonnes.

Canada was quite a significant player in the negotiations on the protocol, both in Kyoto itself and in the number of negotiating sessions that followed and that led to the implementation details of the protocol, which were set out in meetings in Bonn and Marrakesh.

The plan is put together in a way that tries to balance the challenges of achieving our targets while also positioning the country to pursue the opportunities. It looks for a strong Canadian presence in new markets, an economy that's using leading-edge technologies, and one that focuses on the co-benefits of taking climate change action around clean air and water, liveable cities, and healthy people.

There are a number of guiding principles set out in the plan: it should be made in Canada and be based on collaboration, partnership, and respect for jurisdiction; it should reflect a reasonable sharing of benefits and burdens requiring responsible investment by all; and it must be transparent. We should proceed step by step. The plan is clear that the objective is to keep it evergreen; in other words, it would be constantly evolving as we learn from experience as new opportunities emerge. It should minimize mitigation costs and maximize benefits, promote innovation, and limit uncertainties and risks.

The next slide shows the three-step approach and the reductions toward the 240 megatonnes that are estimated to come from each of the steps.

The following slide describes the five key instruments. There are two that I will focus on: first, in the area of the large industrial emitters, the commitment to a covenants-based approach, working sector by sector to identify a reasonable target for each industrial sector, and to supplement that through the flexibility provided from emissions trading; access to offsets, such as agriculture and forestry sinks; and access to the international permit market. The covenants would be backed by regulatory or financial backstops.

The other one I would particularly focus on, which is also a new addition to the instruments, such as the covenants and trading would be, is the partnership fund. The proposal is to have a fund that would provide an opportunity for provincial and territorial governments and the private sector to bring forward initiatives where they would like to receive cost-sharing from the Government of Canada.

The next slide summarizes the key areas for action. The key thing to note is that the plan covers the entire economy.

The following three slides describe the actions that would be taken under each of the three steps, the first being actions under way through the $1.6 billion that has been invested through Action Plan 2000 and budget 2001 initiatives, as well as some initiatives from earlier budgets.

The 80 megatonnes that are estimated to come from actions under way includes an estimated 30 megatonnes of sinks credits from the sound agriculture and forestry management practices that are already in place.

In step two, new actions that are identified in the climate change plan for Canada are in three priority areas. One is the targeted measures that are required to support individual action by Canadians. A lot of emphasis is on actions in the transportation and building sector in particular.

The second major area is the comprehensive approach for industrial emitters that I mentioned earlier with respect to covenants, emissions trading and offsets, and the international permit market.

The final key area would be government participation in the international market itself.

In step three--the remainder--the plan does not set out the specifics of how the remainder would be found but notes a number of areas that are not included in the plan where we think there is considerable opportunity for finding the remaining 60 megatonnes of reductions.

In the last two slides--turning to the cost of taking action--as I mentioned, the modelling work that has been done is on what we refer to as a reference case. It is a scenario similar to that set out in the plan, but it is not exactly the plan. Under the most likely scenario, the macroeconomic modelling has suggested that the cost of taking climate change action would be a reduction in gross domestic product of 0.4% off a base growth level of 18%. So it's somewhere around 17.5% or 17.6% growth over the next eight years under the plan.

Employment would increase by 1.26 million jobs, instead of the 1.32 million jobs estimated in the base case. There would be no impact on personal disposable income. Because of increased energy efficiency, there would be lower energy bills and there would be relatively modest impacts, if any at all, on energy prices themselves.

Finally, by way of a bridging slide to the presentation from my colleagues from agriculture, this pie chart shows you the proportion of total Canadian emissions that come from the agricultural sector. It's 10% of the total estimated emissions in 2010.

Thank you.

¿ (0910)

The Chair: Thank you, and just while we're moving on to the next presentation and towards questions, we've heard a generality here on Kyoto, but I had hoped that your department would have been more specific in its presentation. We're looking at agriculture and that so-called 10%, and I would hope, in your thinking, you're going to be prepared to answer questions specific to agriculture and to our rural economies.

We'll wait now to hear the department, of course, and I hope they're going to refer specifically to agriculture, which our committee is looking at. I know there are a lot of factors there, but the 80 megatonnes are probably the main focus for us this morning.

So, Dr. Dorrell...

Dr. Gordon Dorrell: Thank you, Mr. Chairman.

Let me preface my remarks by saying that the history of Agriculture and Agri-Food Canada has been very tightly intertwined with climate, adaptation to environmental vagaries, and so forth. Our experimental farms were initially established to try to determine where crops and animals could be produced in Canada with its incredibly diverse climate, and much of our history since that point has been dealing with environment.

The agricultural policy framework developed by the federal, provincial, and territorial ministers has environment as one of its key elements. It interacts very closely with science and risk management in response to today's needs of the farmer. This framework is going to stand us, I believe, in good stead as we move forward.

Specifically relating to environment, the framework deals with the risk of increased pest infestations with climate change, it deals with mitigating the gas component of nutrients and organic matter, it hopefully enhances our work in biodiversity, and in general terms it deals with enhancing farming practices and their ability to deal with climate change. There's a strong science component that will permit us to deal with both mitigation and adaptation.

Agriculture has several ways that it can deal with greenhouse gases. In the fourth slide you'll see “reduce, remove and replace”. For years we have been working for economic and environmental reasons to reduce greenhouse gases through changes in tillage. Zero tillage, minimum tillage, has had a dramatic effect on greenhouse gases, and also the change away from standard summer fallow situations.

We can reduce, through better management of livestock, both feeding and waste management. We can remove greenhouse gases, primarily carbon, through better use of both soil and forest sinks. The replacement component we envision as alternative fuels, whether they be biodiesel-diesel, ethanol, and certainly better and more efficient use of fertilizer to reduce the nitrous oxide emissions. Over the years I think producers in Canada have shown a considerable ability and desire to use innovation and to adapt to change, either for environmental or economic reasons, or for both reasons.

Slide 6 indicates the source of the greenhouse gas emissions that we're having to deal with. The major ones relate to manure management and fermentation in the gut of livestock--primarily livestock. You'll see fertilizer would be the third largest producer of greenhouse gas emissions. You'll also note on the slide that nitrous oxide by far is the major issue we're dealing with, and that comes primarily from fertilizers and some forms of fermentation.

The next slide, about the commitment period, requires a little bit of discussion. The red line, which is going up, is considering business as usual: no mitigation, no changes, and not considering sinks. This would be the contribution to greenhouse gases from agriculture--an increasing contribution.

The green line is when you include sinks. So you almost get to a situation where agriculture is neutral when the impact of carbon cycling through soil is considered.

The next one would be the solid line at 55. That is the target area for agriculture. That's where agriculture would be if it was doing its share of reduction.

The two dotted lines, which form a wedge, indicate the contribution agriculture could make to reducing carbon by various incentive programs: incentives to increase the amount of reduced tillage, reductions in some inputs. There is a considerable buffer there where agriculture can actually contribute more than its share in reduction.

¿ (0915)

Slide 7 indicates that action has been taken. The work that people like Dr. Lindwall—who is sitting behind me—have done in the international negotiations to get agricultural sinks in place has been very important. The department and other federal departments have been very active in developing monitoring tools and processes to actually verify these changes.

As for the next steps, Ms. Smith indicated the emission trading system. Federal departments and universities are in the process of developing new technology, including more efficient production of biofuels.

You've heard some comments on the macro models and the potential impacts of greenhouse gases on the agricultural sector. I don't think I will go over this in any more detail, other than to say that a number of practices have been put into place in the past for slightly different reasons. I mentioned minimum tillage. The benefits there were of course reduced water consumption, conservation of water, reduced use of fossil fuels in fewer passes over the field by implements, and so forth. We expect to see the benefits of perhaps enhanced fertilizer management through less nitrous oxide being evolved—in other words, we also expect to see lower cost.

Agriculture, as you've heard, contributes approximately 10% of Canada's emissions. I've just indicated that when sinks are included agriculture has the potential to more than offset its contribution and actually contribute to the reduction of Canada's overall total.

The sinks we talk about are mostly soils. We have the most confidence in the data from soils. However, forests in Canada have a tremendous untapped potential, which is being investigated at the present time. As I mentioned, we have some opportunities to improve efficiencies in fertilizer and certainly in livestock production and better nutrient management.

In finishing, Mr. Chairman, we feel that the agriculture policy framework is critical in managing our natural resources. It is going to permit us to deal with several of the elements of climate change. It is going to involve new ways of managing business risk, and innovation will be a key point, of course. This is going to be a rather critical platform for both industry and governments to work together in dealing with this problem we're facing.

Thank you, Mr. Chairman.

¿ (0920)

The Chair: Thank you, Dr. Dorrell.

David, are you going to lead off then?

Mr. David Anderson (Cypress Hills—Grasslands, Canadian Alliance): We're apparently almost at the point where we're going to ratify this treaty. Yesterday I heard Mr. Caccia, I think it was, saying in the House that we have spent thousands of hours of debate and discussion with industry and business and were resolving a lot of these issues.

So I'm just going to ask you a fairly straightforward question: what is the dollar-per-acre range that producers are going to be paid for emissions credits?

Dr. Gordon Dorrell: I'm not sure of the range, but $10 has been quoted fairly widely. It goes up from there, I guess.

Mr. David Anderson: Okay, so we are speculating it may be in the $10 range.

I did a little bit of work. If fuel prices go up 20¢ per litre and fertilizer goes up 10% because of Kyoto, it is going to completely wipe out that $10 an acre for the farmers.

I'm just wondering what farmers have to gain at the farm gate from Kyoto.

Dr. Gordon Dorrell: I'm not sure, Mr. Chairman, that the numbers relating to fuel prices and fertilizer are all that firm. The macro studies that I've seen indicate there could be some increases, but not perhaps of that magnitude.

My other point is that farmers have adapted to fluctuations, for example, in fertilizer prices and fuel by changing practices. I would expect science and innovation to continue to make inroads in the more efficient use of different fertilizers, the timing of fertilizers, so that they're used by the plant more effectively. So I can't really give you a clear answer on that one.

¿ (0925)

Mr. David Anderson: I'm sure you're tired of covering this government's shortcomings, too, but the reality is that farmers have already changed their farming practices. For the most part, a lot of them are beginning to use GPS and those kinds of things. Their management systems have already changed. The changes they've made are already included in the 40 tonnes in that first stage. Where are farmers going to benefit in the future from this?

You talked about macro studies that you've seen, but I'd like to point out that the only study we could find was a U.S. study that basically said that they expect the Kyoto Protocol could increase farm production expenses by $10 billion to $20 billion annually, which is about 30%, and depress annual farm income by 24% to 48%. Their conclusion was, in short, that the Kyoto Protocol represents the single biggest public policy threat to the agricultural community today. That's the only study, after six years, that we could find that had been done on this.

At the farm gate, where is that difference going to be for the farmers when they've already made those changes? I think they're going to be punished, not rewarded, for this.

Ms. Norine Smith: Perhaps I could talk a little about the modelling work that has been done for the economy as a whole and then about what the results were for the agricultural sector.

There is a group called the federal-provincial-territorial analysis and modelling group that has been working for at least four years, if not actually longer than that. It has been taking the best macroeconomic models in the country that are held by private sector modellers and it has been updating them or expanding them in order to make them well-suited to assessing the economic impact of climate change plans.

Mr. David Anderson: Can I interrupt you on this. In your modelling you've taken the most positive examples that you can find and put them together to make the most positive picture so that you can present that for the government. The models we've seen present a wide range of possibilities with Kyoto, and the government has consistently picked the most positive ones, so I don't want to spend a lot of my time today in terms of questioning on that.

I'd like to ask this. Who's going to administer the sequestration program? How are you going to structure it, and how are you going to implement that? Also, the federal government has said they want to claim the credits. The provinces have lined up to claim the credits. What's the assurance that the farmers are actually going to get some of this?

Ms. Michele Brenning (Director, Environment Bureau, Department of Agriculture and Agri-Food): There's a fair bit of work that has to happen between now and 2008, and one of the things we realize is that there is a need to work very closely with the sector in developing the emissions trading system, as well as in looking at some of the options around the administration of the carbon sequestration program. We've started to initiate some very broad discussions with industry. I think those discussions are going to continue and get more intense once the decision is made about Kyoto.

Mr. David Anderson: If we phase those around a 20% to 30% increase in cost to farmers, again, I want to come back to that question of the $10. You're going to have to be paying $20 to $30 an acre just to balance off the expenses the farmers are going to incur because of Kyoto. Where are you going with that?

Ms. Norine Smith: Perhaps I could start by saying that the results from the analysis that has been done are not consistent with the study you're reporting from the U.S. The modelling work suggests that there would be very little increase in energy prices, so that's not going to be a major factor facing farmers. In fact, the major impact that is felt on the agricultural sector is not as a result of Canada's climate change action, but it is more as a result of what happens in other countries in the world. So it's almost as if, regardless of Canada's decision with respect to ratification of the protocol, the impacts on the agricultural sector might be felt in any event.

One of the things that's not reflected in the reference case are some of the initiatives within the climate change plan for Canada, for example, the target of 35% of the gasoline being E10, which creates new opportunities for farmers.

¿ (0930)

Mr. David Anderson: Can I ask you a question about that? We have a little bit of time.

Ethanol right now is not commercially viable standing on its own. The fossil fuel industry is the one that's being targeted for the most part by this because their prices are going to go up. Either they're going to have to buy emission credits or they're going to have to completely change their technology. Can you tell me why you think fuel prices won't increase when the industry has to change its technology, or buy credits, or develop a new technology that right now is not commercially viable? How will our energy prices stay the same with that kind of scenario?

Ms. Norine Smith: The assumption on energy price changes was an assumption that was developed in very close collaboration with the industry itself and reflects their recommendation as to how they think the whole system would operate.

The Chair: David, I'm sorry, but we'll get back again.

Before I move to Louis, though, we've entered into a little bit of information here on the $10 per acre quoted by the questioner. Can somebody clarify where this came from? It's a new concept. I haven't heard where someone is going to put $10 an acre into the system.

Ms. Smith.

Ms. Norine Smith: Michele might have something to add, but I'll talk about $10 per tonne, not $10 per acre.

The Chair: Yes, that's the point I wanted clarified, because we don't want somebody thinking that across the country there's going to be $10 an acre that someone is going to put in.

Louis.

[Translation]

Mr. Louis Plamondon (Bas-Richelieu—Nicolet—Bécancour, BQ): Based upon the studies you have available to you dealing with the effects on the various regions, could you tell me which part of Canada is affected the most?

People have gone so far as to say that certain regions will have net gains whereas others will have net losses. Is there a study or some indicators that would tell us which regions will be affected the most, be it positively or negatively?

[English]

Ms. Norine Smith: On the very last page of the climate change plan for Canada there's an annex that reports on the modelling results. The very last page has a chart, chart 9, that shows the results under four different scenarios by province. The range across provinces under the most likely scenario is from plus 0.2% to minus 0.5%, so there's a range of about 0.7% of GDP, and the province that is most affected is British Columbia.

[Translation]

Mr. Louis Plamondon: And which one would be affected the most?

[English]

Ms. Norine Smith: Ontario.

[Translation]

Mr. Louis Plamondon: I would like you to talk to me a bit more about ethanol. There are a great number of contradictory studies on this issue. It has been said of this substance that it was environment-friendly. However, some people are now saying that its use may not be as advantageous as previously believed. The effects on agriculture would not be those we had hoped for. In brief, do you have studies or precise opinions on the use of ethanol?

[English]

Ms. Norine Smith: There has been a fair bit of work on the subject of the overall environmental benefits from ethanol, the overall energy benefits from ethanol, and the climate change contributions from ethanol, and in all cases the conclusion is that there are net benefits from the greater development of ethanol in Canada.

I don't know, Tony, whether you want to get into some of the details on that. Tony is more of an ethanol expert than me.

Mr. Tony Taylor (Director, Transportation Energy, Department of Natural Resources): I think that's true. I'm interested in your comment that there is some evidence the environmental benefits aren't as strong as was thought. We have found situations in past times where environmental claims for ethanol have been a bit oversold, particularly in the United States, and we've done some work in Canada to make sure that this is not the case in the way we develop ethanol here. I think at the moment we're pretty comfortable with the types of benefits and the value of using ethanol as a gasoline-blending peat stock.

¿ (0935)

The Chair: Thank you, Louis.

Murray.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thanks very much, Mr. Chair.

I would imagine that everybody has done the study as to what agriculture takes out of the air in terms of greenhouse gases in its daily production as it operates. Could you explain to me how you're going to establish the emissions trading system?

Ms. Norine Smith: That will be something that will be a subject of further discussion with the large industrial emitters, who are the companies that would be participating in the market. There are a variety of ways in which it could be done.

In essence, the key thing is establishing the currency, if I can call it that, which is the permits that would be traded. The definition of the currency will depend very much on the outcome of the discussions with industry about the nature of the covenants that would be pursued. But once you have a currency that is tradeable, then actually the market itself may or may not need a government per se to create it. Markets tend to exist on their own.

What is required more from the point of view of climate change policy is the creation of the permits and the establishment of the goals, targets, obligations, and means for the accountability to achieve those goals.

Mr. Murray Calder: Then once we've established the emissions trading system and the credits, you would probably go and take a look at, for instance, a 3,000-acre grain farm out west. You would probably establish a system as to how many units of emission they put into the air in the process of production on that farm, and then you would probably assess how many units of emissions are taken out of the air by the crop production that's there. What I'm wondering at that point in time is, who is going to have the ability to take and sell those credits?

Ms. Norine Smith: The proposal in the climate change plan is, as with every other sector of the economy, that the business-as-usual emissions reductions--in this case, it's an emissions absorption, if I can put it that way—

Mr. Murray Calder: That's right.

Ms. Norine Smith: The business-as-usual emissions absorptions are, I'll call it, embedded in the plan. Just as they offer every other sector of the economy, they're embedded in the business-as-usual scenario and reduce the emissions reductions that all parts of the economy require in order to close the remaining gap. But incremental reductions or incremental absorptions would be owned by whoever has made the investment and owns the land and whatever arrangement is made between those two parties.

Mr. Murray Calder: My bottom line right now is that I see the agriculture industry absorbing more than it emits. That's the bottom line. What I'm very interested in, then, is, how do you get that money--because the farmer is definitely going to take a credit for that--into the farmer's bank account?

Ms. Norine Smith: The estimated amount that agricultural soils absorb under business as usual is in the order of 10 megatonnes.

Michele or Gordon might be able to comment on expectations of the potential for going further. Certainly under the Kyoto Protocol there are no restrictions on Canada as to more tonnage that we might be able to achieve in that goal that way.

As Michele noted, the way in which the money for the incremental sinks credits would get into the hands of farmers will depend on the design of the credit offsets system. But the basic concept is for the farm owner, or whoever has invested on the farm in order to get the incremental emissions reductions, to be able to sell those sinks into the emissions trading system.

¿ (0940)

Mr. Murray Calder: Doesn't the climate change plan for Canada say that we're not going to get credit for those 10 megatonnes?

Ms. Norine Smith: No, it makes a distinction between business-as-usual sinks and incremental sinks. For the business-as-usual sinks, I think of it as accruing to the plan as a whole. They go toward reducing the overall gap that needs to be filled and lowering the need for reductions on all sectors of the economy. Incremental sinks would accrue to the climate.

Ms. Michele Brenning: Perhaps we could return to the slide that Dr. Dorrell presented. I think one of your questions had to do with how many more sinks there could be. Some of the modelling we've done, which is in fact fairly moderate modelling, shows that we could actually have up to an additional 20 megatonnes within that first commitment period.

Mr. Murray Calder: Is that slide 6?

Ms. Michele Brenning: Yes.

Mr. Murray Calder: On that 10 megatonnes, why would it not be eligible for those credits?

Ms. Norine Smith: Again, I would emphasize the comparability of treatment of that concept with the business-as-usual emissions reductions that are being made in every other sector of the economy. For example, the gap analysis, the 240-megatonne gap I mentioned, reflects assumptions about some 120 megatonnes of emissions reductions that come from all other sectors of the economy just from continuing to do the things they normally do. So if we were to allocate to each sector or firm their business-as-usual emissions reductions, Canada's total gap would be 360 megatonnes, not 240. What's being proposed is treatment that's comparable to what's being proposed for every other sector in the economy.

The Chair: Thank you.

Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Thank you, Mr. Chair.

Thanks for an interesting presentation.

Staying with the line of questioning that Murray has been on, in your remarks, Dr. Dorrell, you said “agriculture can actually contribute more than its share” in greenhouse gas reductions. My question is, can it therefore receive more than its share of financial benefits?

We often hear at this committee that farmers are price takers, not price setters. The business-as-usual approach would suggest that the agricultural producer will not be a net beneficiary. Maybe you can talk about some modelling and how agricultural producers can benefit.

Dr. Gordon Dorrell: Mr. Proctor, like you, I share the desire that the people who would help solve the problem would benefit from it. As you're aware, the changes in agricultural practices, primarily tillage, have already made a big difference to the storage of carbon. I believe, Mr. Calder, that was what you were referring to. We've done good things to date. Through international negotiations, we're probably not going to benefit from all those good things we've done. But we did them for different reasons: for good environmental reasons and for improved production, efficiency, and so forth.

I see two things happening: farmers benefiting at some point from emissions trading and from changes in technology that will mitigate emissions of gases and perhaps enhance uptake and at the same time enhance productivity, such as--let's dream--grasses that can actually fix nitrogen. I think someday we'll have that. That would make a huge difference, whether we had greenhouse gas issues or not. That would be an efficiency issue. I'm optimistic that producers will win on both sides eventually.

¿ (0945)

Mr. Dick Proctor: Mr. Taylor, on ethanol, ethanol can be produced from wheat, corn, or wood, I guess, and sometimes we hear debates about whether corn is better than wheat or straw. What can you tell us about that?

Mr. Tony Taylor: That's an interesting question, Mr. Proctor. It depends a bit on what you mean by “better”, because we've looked at all feedstocks, and I think we find that there are advantages--they may be different advantages--to different ways to bring together particularly agricultural but also forest feedstocks and make fuel out of them.

Mr. Dick Proctor: Okay, then tell me about the benefits of wheat, or wheat and straw, because they've just announced in Saskatchewan that they're building their first ethanol plant in Belle Plaine, in the riding.

Mr. Tony Taylor: Yes, and that's based on wheat.

Mr. Dick Proctor: Yes.

Mr. Tony Taylor: It would appear to be a very attractive use of the wheat they have in that area to make ethanol, regardless of what the use of the ethanol is. With the prices they can get for ethanol today and with the assistance that the provincial and federal tax structures provide, and also some assistance, I understand, from the Saskatchewan government, that could be a very attractive plant and represent good markets for the wheat in the region.

Mr. Dick Proctor: There are also some by-products, if you will, in terms of mash for cattle and being able to sequester the carbon dioxide that comes from the production.

Is that correct as well?

Mr. Tony Taylor: Absolutely. A very important part of using feed and food commodities for fuel is the economic necessity to retain the value of the food, of course, and put it to use in the economy. It's something that, in the past, hasn't been done as efficiently as it might have been.

In fact, the ethanol plant in Lanigan, Saskatchewan, was kind of a path-breaking model for Canada in ensuring that the siting of the plant took advantage of local markets to feed to livestock. To try to harness world-scale production, very large ethanol plants, which you need for the economics to be good, to try then to make the best use of the feed product as well means of course that you have to find broader markets than just local markets for that feed supplement. It means you have to worry about how to prepare it and how to transport it, and things like that. You know these things well.

A fair bit of engineering has gone into the new plant in Saskatchewan and economic design to make sure they can do that and get the best value of the feed notwithstanding the portion of it that would go into fuel.

Mr. Dick Proctor: Roughly how many ethanol plants do we have in Canada?

Mr. Tony Taylor: We have five plants right now, three of them in the west and two of them in Ontario.

Mr. Dick Proctor: And the Americans, are they building 34 ethanol plants, or do they already have 34 ethanol plants, or would you know? A figure of 34 plants is one I've read.

Mr. Tony Taylor: That's the number they're building a year.

Mr. Dick Proctor: Okay.

Ms. Norine Smith: The note I have here says 70 plants.

Mr. Dick Proctor: There's 70 plants? Okay, thanks.

The Chair: Thank you, Dick.

Rose-Marie.

Mrs. Rose-Marie Ur (Lambton—Kent—Middlesex, Lib.): This is a very interesting morning.

Dr. Dorrell, you said this morning that farmers have adapted; they've changed their practices and all the rest. So I'm glad you recognize how much farmers have done, but they've done it at great cost. I don't know how much they will be recognized as to all the work and effort they've put into it. They've gone from a plus to a minus in carbon dioxide, and to not get any credit for that and just start off at...

This has been ongoing since 1990, and all of a sudden now we're going to start from base one and they get no credit for doing all this work. You say, well, it was for their own benefit. Well, it was for the benefit of everyone.

Kyoto does not just benefit the consumer; it also benefits the farmer. So I find it rather difficult to understand why we as government aren't looking at being a little bit more serious as to what the farmers have done in the past, recognizing that rather than just starting off carte blanche and not giving them credit where credit should be due.

We're always asked to come to the plate, and there comes a time when farmers cannot give any more. They've given all they can, and in what I heard this morning from your department, I'm not overly confident that we're going to recognize what they have done.

¿ (0950)

Dr. Gordon Dorrell: I'll make a brief comment and ask one of my colleagues to clarify further.

I'm not sure this was Canada's doing. I think this was a result of international negotiations to establish the commitment period when people would be judged for what they were doing.

Clearly, Canadian farmers were moving forward in a very responsible and aggressive fashion. That was the right thing to do. I share some of your concerns about not being able to capture those benefits.

Michele, would you like to comment?

Ms. Michele Brenning: Yes.

I'll add that the 10 megatonnes that everybody's talking about, the business-as-usual sinks, is the amount we thought we could get from past practices, programs that are already in place. For example, Minister Goodale announced last summer, as part of the drought package, a Greencover Canada program. In that program we're going to be paying for seeding costs. As a result of converting that land, we'll end up with additional carbon sinks. So the federal government is paying to help sequester some additional carbon through a program.

What we're looking at, though, is that there are additional sinks over and above the 10 that could be gained, up to, we think, between 5 and 20, depending on what might come out of a domestic emissions trading system or other kinds of incentive programs. Those sinks would be eligible for payment to the farmers through a domestic emissions trading system.

The ones that have already been gained are often gained as a result of either a program that might have been put in place or because there was an economic benefit to the farmers, such as adopting no till.

Mrs. Rose-Marie Ur: Mr. Taylor, you're the expert on ethanol at the table. I find it interesting that one of the opposition members asked you about ethanol and its benefits, if there was a benefit for ethanol, and you thought so. I would hope it would be a little bit more strongly exhibited that, yes, there is, not you think so, if you're our expert in the environment on ethanol.

And you said there were five plants in Canada. What are those five plants? In Ontario I know it's corn. What are the other plants? Are they cellulose? Are they corn? Wood chips? What is ethanol produced from?

Mr. Tony Taylor: First let me apologize for appearing to suggest I wasn't sure about the benefits. In fact, I was questioning which of the many benefits Mr. Proctor was in fact referring to.

Mrs. Rose-Marie Ur: That's good to hear.

Mr. Tony Taylor: There are environmental benefits, there are economic benefits, there are regional benefits. We endorse ethanol, as is clear, as a strong contributor to the climate change goals of the country as well.

Mrs. Rose-Marie Ur: But this story has been ongoing since I came here in 1993, and my predecessor... I've been a strong supporter of ethanol for environmental reasons, and it's been a long time coming to the forefront that we are really pushing for the use of ethanol.

But getting back to those plants in Saskatchewan, what is the ethanol made out of?

Mr. Tony Taylor: The western Canadian plants are based on wheat; the plants in Ontario are based on corn. Most of the ethanol in the U.S. is now made with corn. The technology of making it with corn is probably better understood and more researched now in terms of the fuel product. But there's a lot of work going on as well in making it from wheat.

Our department is most interested in the new technologies for making it from things like straw and, as mentioned, forest products like wood waste. There are several reasons for that. One is that the greenhouse gas benefits of that technology could be quite a bit greater than the greenhouse gas benefits from the agricultural food commodities.

¿ (0955)

Mrs. Rose-Marie Ur: Do you have any data on that that you could share with the committee?

Mr. Tony Taylor: Yes, we do. We could give you the results of quite a bit of analysis we've done on that, bearing in mind it's a bit speculative because there has never been a plant actually built and commercially operated on straw or cellulose feed stocks. We have of course in Ottawa here the world's first pilot plant operating on straw. We have already some good data from this that gives us a lot of confidence in our estimates, which, by the way, indicate that this technology has roughly twice as much in terms of greenhouse gas benefits as the technology that makes it from agricultural commodities.

Mrs. Rose-Marie Ur: I understand, though, that technology is maybe 10 years down the road to being of real benefit. Is that true?

Mr. Tony Taylor: I hope not. The investments in the pilot plant in Ottawa are certainly telling a different story. They're telling a story that this technology, particularly the one we've invested in here, should come to market in a few years, maybe even in a couple of years. There don't appear to be any serious barriers to its commercialization. As I understand it, we're now down to an issue of the productivity, the performance of the enzymes in particular, and not whether we can make it, but what it is really going to cost.

The Chair: Thanks, Rose-Marie.

Rick.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

I agree that this has been fascinating and is probably going to require additional information and meetings.

A lot of what has been talked about with regard to agriculture is the fact that agriculture would be given the opportunity to take the credits for the carbon sinks. I see on your graph, Dr. Dorrell, that business as usual without the sinks is a straight line going up. One of the stumbling blocks right now is that the federal government is not quite prepared to give the credits for those sinks to the provinces. In fact, that's one of the three points that has not been agreed to. If the federal government in its wisdom decides to keep that credit for itself, can agriculture actually achieve the necessary goals without the credits for the sinks?

Dr. Gordon Dorrell: The table we're looking at here is really a physical-biological phenomenon. It's the sequestration of carbon regardless of who gets credits for it.

Mr. Rick Borotsik: I appreciate that, but if the credit is kept at the federal level and not passed on to the agricultural industry or the provinces, if at some point in time the feds say that is going to be theirs, can agriculture in fact achieve the goals that would be set for its reduction of the... Does it have any room for those reductions?

Dr. Gordon Dorrell: If you look at the dotted wedge at the bottom--

Mr. Rick Borotsik: Five to twenty megatonnes, I see that.

Dr. Gordon Dorrell: That's right. It says “with incentives”. So there would have to be some sort of incentive to encourage the farmer to—

Mr. Rick Borotsik: And if there aren't those incentives, then this whole model is thrown out.

Dr. Gordon Dorrell: Without incentives there would likely be a potential gap, although it comes close.

Mr. Rick Borotsik: We've heard some comments, and I'm a little confused. I believed it was $10 an acre. Then we find out that it's $10 a tonne. How many tonnes can be sequestered in an acre of land? Do we know? Is it half a tonne, a full tonne, two tonnes?

Dr. Gordon Dorrell: I'd like to ask my colleague sitting at the back, who's an expert on this, to approach the table.

Mr. Wayne Lindwall (National Program Leader, Environmental Health, Department of Agriculture and Agri-Food): The scientific estimates are about 0.3 to 0.4 tonnes of carbon per hectare annually.That is the most conservative estimate by our scientists. That's carbons, so you have to multiply that by 3.67 for CO₂. Over the commitment period, 10 megatonnes are quite reasonable for CO₂. Obviously, it'll be measured over a five-year period from 2008-2012. We can't measure carbon change accurately on a one-year basis, so it would have to be over that five-year period. So we're talking about, typically, 0.3 to 0.4 tonnes of carbon per hectare per year--

Mr. Rick Borotsik: Which is how much per acre?

À (1000)

Mr. Wayne Lindwall: Close to a tonne an acre.

Mr. Rick Borotsik: So it is close to $10 an acre, then, where we were heading with that one.

Mr. Wayne Lindwall: That number of $10 appears in the literature extensively, but it would be speculation to say that's the firm number now. You hear anywhere from $5 to $40, but $10 is often used for calculations.

We've been measuring carbon in soils, Mr. Chairman, for over 100 years, and we're pretty good at it. I think that's why we were successful in demonstrating to the international community that in fact we could document the carbon stock changes on agricultural land.

Mr. Rick Borotsik: When I first came to this place I was a terribly optimistic individual. I've sort of lost a lot of my optimism and have perhaps become a bit more cynical in this place.

Ms. Smith, I look at the most likely scenario of a 0.4% reduction in GDP. Obviously, your modellers have been working at this for a long, long time. You've told me that. There must be best-case scenarios and worst-case scenarios. Where does that 0.4% reduction in GDP fall in that line of best or worst case? Is that the best-case scenario?

Ms. Norine Smith: It is the best of the four scenarios that were modelled.

I'll explain the two—

Mr. Rick Borotsik: Can we get the information on the worst-case scenarios as well?

Ms. Norine Smith: Yes. All four scenarios are provided in the annex to the plan.

The two key assumptions that are normally discussed in the distinction between the scenarios is the price of a tonne of CO₂ and how government programming is financed. The assumption under the most likely scenario is that the price of a tonne of CO₂ is in the $10 range. CO₂ is currently trading somewhere around the $5 to $6 range. There's quite a spread because it's quite a thin market, but that's the average. We had undertaken a fair bit of research into price projections. There's a study, which we could share with the committee, that was undertaken by an American carbon broker, and that was the one that led to the conclusion that $10 a tonne was the most likely.

Mr. Rick Borotsik: This is the best-case scenario you've identified, with 1.26 million jobs and the 0.4% of GDP.

Ms. Norine Smith: The only other one that was done on price has an assumption of $50 a tonne, and the two assumptions on financing were that it would be financed through an increase in taxes, which is another relatively high-cost case, versus the assumption in the most likely one—

Mr. Rick Borotsik: This is where my cynicism comes in, because it could quite well be financed with taxes as opposed to having this—

Ms. Norine Smith: Through government budgetary surpluses.

Mr. Rick Borotsik: In agriculture, particularly what we're talking about now, Dr. Dorrell, you again have painted a fairly optimistic picture that we can adapt. I believe very strongly that a lot of the people in the industry have now gone to zero till and minimal till. I believe the majority, because of the cost of production, have gone to an efficiency-based fertilizer system. I believe they have taken, since 1990, a lot of these efficiencies and already put them into practice.

In saying that, there are other industries that are going to be affected by Kyoto. We've seen that 25%, I believe, comes from transportation. Agriculture is dependent upon transportation. I think it's 16% with respect to oil and gas, and agriculture is dependent on oil and gas.

Do you not believe the costs will go up and will not stay constant? I've heard from both you and Ms. Smith that there should not be an increase in fuel costs and fertilizer costs, yet the transportation, fuel, and fertilizer industries are going to be impacted by Kyoto and are going to have additional costs placed on them. Why do you feel those costs aren't going to be put back to the producer?

Dr. Gordon Dorrell: You're absolutely right. A lot of the larger producers have adopted new technologies, and those are in place. There are still a number of producers that haven't adopted all—

Mr. Rick Borotsik: Do we know how much land is now tilled at zero till or minimal till?

Dr. Gordon Dorrell: It has increased 300% over the last 10 or 15 years.

Mr. Rick Borotsik: Okay, but of the total acreage? I heard, and maybe it's not right, that between 60% and 70% is probably now into zero till to minimal till.

Dr. Gordon Dorrell: I would say it's about 45%, but let's say it's a large number.

À (1005)

Mr. Rick Borotsik: Some land, because of its consistency, can't go to a zero till?

Dr. Gordon Dorrell: That's right.

Mr. Rick Borotsik: So maybe we're at that maximum?

Dr. Gordon Dorrell: Some land, too, could well be taken out of production with green cover programs, for example, and that would be sequestering carbon. Those would be those poor, marginal lands, perhaps, that are in fallow now, in rotation.

Mr. Rick Borotsik: On the costs associated back to producers--transportation, fuel costs, and fertilizer costs--do you not think that's going to go back to the producer?

Dr. Gordon Dorrell: From what I remember of farming, yes, most of it goes back to the producer as an input cost. What I am hoping is that technology will offer improvements, whether it's in efficiency of tractors, or you indicated--or at least as I interpreted it--that farmers have maxed out on their efficient use of fertilizer, but I would say they have some distance to go yet in terms of using the appropriate amount at the appropriate time.

We can argue that these are marginal gains and that there's still a cost. I would not disagree with you.

The Chair: Thank you, Rick. We will come back.

Mark, are you ready.

Mr. Mark Eyking (Sydney—Victoria, Lib.): Yes. Thank you, Mr. Chairman.

I'm going to be more general in my questions.

Many times we get into international agreements, and Canada just kind of sticks its neck out and we become proactive and the good Boy Scouts.

The last time we had a big agreement about subsidies we took the lead, and a lot of our farmers took the fall, where the subsidies were not reduced in Europe and in the United States. I know that's a different issue, but we're kind of coming out in front here with Kyoto, and I think it's a good thing, in a way, but that's why sometimes farmers are a little skeptical about this thing. They're wondering, are we going take the lead here and all of a sudden we're going to have the same scenario, where Europe and the States are not going to do it and we're going to be left holding the bag and being less competitive?

So my question would be more toward, if we go down this road and we have more environmentally friendly products, is that going to be an advantage on the world market, maybe, towards selling to places like Europe compared to places like the States that are not?

The other thing is our relationship, as farmers, with our urban cousins. If we are net contributors to reducing CO₂, shouldn't we be doing a little negotiating with our urban cousins? Before, we would always say, we produce the food and we're good guys out there. Many times we didn't get recognized, but this time around, maybe we're in a negotiating position as farmers to say, look, we're reducing CO₂ compared to SUVs used in downtown Toronto; we're helping you guys out.

I know that's going out on a limb, but maybe, Dr. Dorrell, you can comment on that.

Ms. Norine Smith: I might not comment on SUVs. I'll leave that to my minister, but perhaps I could step back a bit from that question to first note that the agricultural sector is not being asked to meet a specific emissions reduction target or a specific emissions absorption target.

There are some sectors of the economy where we will be going through the exercise, through the covenant negotiations, to come up with that sort of a specific sectoral goal, but that's not the approach that's being proposed for the agricultural sector.

So the way in which the agricultural sector would be affected by a climate change action would be through the incentives that would be provided through some of the programming such as Michele has described, through the market opportunities that might be created through things such as the move into ethanol and other bioproducts--we probably should have brought along a colleague from Industry Canada who could perhaps speak more eloquently than we can about bioproducts--and by the feedback loops through the economy such as through the impact on fertilizer prices or energy prices.

I would say again that perhaps the biggest thing that would be affecting farmers from the point of view of energy prices is the price of gasoline and diesel, and the energy sector and the refiners in particular were adamant in their work with us in the modelling that there would be no impact on the consumer price of fuels because they said they were price takers, not price makers, and that they couldn't drive the price up and that Canadian gasoline prices and home heating prices would not increase.

À (1010)

Mr. Mark Eyking: Excuse me. Maybe you misunderstood my question. I was trying to bring it out here. Do we have an ace in our pocket as farmers because we are reducing CO₂s with our plants? Should we use that as a tool?

If you were a farmer, would you look at this as not what it's going to cost you, but what do I have in my hand to go to the urban public and say, “Look, this is what we're offering you besides food: we're reducing greenhouse emissions”?

Ms. Michele Brenning: This is one of the reasons why, Mr. Chair, when we tried to start the presentation we talked about the agriculture policy framework, because as a number of the members of this committee have probably seen in some of the department's presentations on the APF, one of the things we're trying to do with this is take advantage of what we do domestically, internationally, and as well for our domestic consumers.

This is because some of the actions that will be taken for climate changes are some of the things we're looking at in the context of the agriculture policy framework. For example, we're looking at implementing best management practices and having programs in place under the agriculture policy framework to implement best management practices, such as environmental farm plans and a number of those kinds of programs that we're looking at putting in place for the agriculture policy framework. The ultimate objective is to take what we do domestically and then market that internationally.

So whatever we do on climate change is then going to result in the kinds of benefits that we want to get from the agriculture policy framework and the kinds of things we want to see happen to raise consumer confidence that our food is produced in the safest and most environmentally friendly way for both people at home and for our markets abroad.

The Chair: Thank you, Michele.

Mark, you're looking for a degree of comfort that a farmer who has 1,000 acres of green is going to get something from the government—

Mr. Mark Eyking: Mr. Chair, there's always a cloud and there's a silver lining. I think as farmers we might be in the driver's seat for once.

The Chair: But are we asking that farmers will get a pay from the government or from a central agency, in dollars, as a result of their good practices? Is that on the table? Michele?

Ms. Norine Smith: What is—

The Chair: Norine's going to answer, but Michele seems to have the answers and she put this dollar thing out. Can a farmer expect to get a payout from some central agency as a result of their practices towards this contribution of eliminating... Who's going to answer?

Ms. Michele Brenning: I think I'll just clarify that we're talking about trying to increase the economic prosperity of the sector through our agriculture policy framework and that climate change is part of that agriculture policy framework. So if there are economic benefits that come, it's from the integrated action that we're putting in place, the five pillars of the framework, including the business risk management, environment, renewal, food safety, and science.

The Chair: But to answer directly, a farmer takes and measures his bottom line on the basis of costs and what he has coming back to his wallet.

You're talking about an APF, and the APF, from what we understand as a committee, is an amount of money that's projected for the next number of years as a fixed sum. But are you saying this morning that whatever happens is within that same dollar value, or are you saying that somehow more money is going to come back to the agricultural communities and to farmers as a result of their contribution to this Kyoto Protocol? Yes or no? Has this been considered? I'm surprised at the looks that indicate no one has an answer.

Ms. Norine Smith: I don't think it is that no one has an answer. We're just trying to decide who is going to speak.

There will be continuation and expansion of the various incentive and information programs that already exist. They will be enhanced, as is described in the climate change plan. Budgetary decisions in support of the plan have not yet been made, so it's hard to be specific around that particular aspect of the answer.

The other way in which farmers could see increased revenues coming across the farm gate is through the offset market for incremental sinks and through an expanded market for their products, and even better, for their waste products once the cellulosic technology for ethanol production reaches its next stage and into commercialization.

I think those are the three main ways.

À (1015)

The Chair: Your answers are disturbing, but I'll let Mr. Chatters continue.

Mr. David Chatters (Athabasca, Canadian Alliance): Thank you, Mr. Chairman.

Just from listening, my conclusion would be that in order to get the benefit for the farmer, the best thing to do would be to go back home in the spring, plow my farm from fence to fence, intensely cultivate it, and use as much fertilizer as possible until you get your protocols in place, so that I can have the maximum improvement when you begin to measure it. That hardly seems an incentive that's in line with the Kyoto Protocol. But that's just an observation.

My concern with this whole issue is that we're given these scenarios. We're given the plan with a lot of warm, fuzzy stuff in it and very little fact. Like Rick, I have become somewhat of a skeptic over the years, especially considering that this is the government that gave us an $85-million long-gun registry that's now costing $1 billion and showing no improvement. It makes me skeptical.

I really would like to know when the government, the various departments involved in this initiative, is going to make available the real information on the modelling and how they came to the conclusions they're coming to.

Quite frankly, this whole idea that somehow the industry and the department got together and decided there would be no change in the price of gasoline and diesel fuel is not particularly credible if you're going to--as we've heard time and time again in the House--reduce the use of fossil fuels to the degree we're going to improve air quality across the country without increasing the cost of gasoline. Quite frankly, I have to see the science. I have to see how you came to that conclusion.

Even going back further than that, considering that the history of the Great Plains of North America has been one of dry and moist periods, and will be forevermore, I really would like to have a look at the meteorological science that came to the conclusion that higher levels of CO₂ in the atmosphere is driving the drought that we're currently experiencing in the prairies and is not part of a natural cycle.

I didn't see that in the report of the IPCC group. There was some reference to it in the political summary that seems to be gaining more credibility all the time, but why can't we actually have a look at the science, the methodology you're using in your modelling and the science you're using to come to conclusions?

We need to have that if you're ever going to be credible with the public, and that information has to be reviewed by those who are less sold on the idea, if you will, to see how credible they are.

Ms. Norine Smith: Working backwards through that question, the meteorologists and the climate change scientists from Environment Canada would be pleased to come and speak with this committee about their work, if that would be your wish.

With respect to the assumptions about oil and gas prices, I guess to a certain extent we can't have it both ways. The oil and gas industry is concerned about the impact on them because they are foreseeing increased costs that they're not going to be able to pass on; therefore they're concerned about the impact on their sector of the economy.

If they were able to pass it on, then they would have less concern about the impact in their sector. Their assumption is they can't pass on the costs, and that's the assumption that's reflected in the modelling results, that is, to the benefit of the rest of the economy.

À (1020)

Mr. David Chatters: It's not very credible

Ms. Norine Smith: If they can pass on the cost, then the oil and gas sector won't be hurt the way they are claiming they would be.

Mr. David Chatters: From the very beginning of this, the drive of the energy industry has been to find a way to pass the cost on to the consumer. The goal of the government is seen to be somehow to assure the industry that they'll be able to pass those costs on. Then you come to the agriculture committee and say that the price of gasoline and diesel fuel won't be impacted. There will be little change.

You can't tell the energy industry one thing and the agriculture industry another and at the same time reduce the use of fossil fuel to the level where you improve air quality. Those things just don't work together.

Ms. Norine Smith: There's nothing in the climate change plan for Canada that in any way is attempting to enter into the market for fossil fuels and affect how that market works. To the contrary, what the modelling work has been trying to do is to reflect what industry is telling us about the way in which their markets work. Their advice to us is they cannot pass on those costs, and that's therefore what has been reflected in the model.

Mr. David Chatters: Thank you, Mr. Chairman.

The Chair: Thank you, David.

Bob, do you have...

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you, Mr. Chair. I want to thank the presenters today.

I have a couple of questions. I want to go back to what you said about the credits. What date are they starting at in terms of acknowledging past practices for agriculture?

Ms. Michele Brenning: The first commitment period starts in 2008. The business-as-usual sinks are the ones that have been occurring now and will continue to occur until 2008, and some of the other assumptions. There are 10 megatonnes that are considered in the business as usual.

Mr. Bob Speller: By starting now, you mean now, today.

Ms. Michele Brenning: Right. We've counted things like the Greencover Canada program in those business-as-usual sinks. If we get more than 10 megatonnes, for example, starting in 2008, then those additional sinks would go for credits for sale into the domestic emissions trading system.

Mr. Bob Speller: I'm wondering why large emitters then are talking about 1990 in terms of their commitments, and governments are now negotiating, sitting down and talking to them, with regard to past practices. Is this not also going to come into agriculture?

Ms. Norine Smith: It is true that the large industrial emitters are focusing on the year 1990 because that's kind of the base year of the protocol. But while the plan is clear that the system that's put in place for large industrial emitters will be one that recognizes past action and that doesn't disadvantage any firm for past action that has been taken, it has yet to be determined how that would be done. There are any number of different ways in which that could be done that may or may not require a reference to a particular year at all, and that's part of the ongoing discussions and negotiations with the large industrial emitters.

But there's one quite big distinction between those sectors of the economy and those firms and all other sectors of the economy in which the agricultural sector is included, which is that it's only the large industrial emitters who will be working toward a specific reduction target with specific accountabilities for achieving that goal that would be backed by regulatory or financial backstop. For all other sectors of the economy there are what I consider to be more notional objectives that would be supported through government programming, through incentives, through information, through any number of other approaches. But certainly at this point in time there's no suggestion of a specific target with a regulatory financial backstop that needs to be met by the agricultural sector, and that's quite a big distinction.

À (1025)

Mr. Bob Speller: Yes, but there are positives and minuses. There are opportunities as well as costs. So what you're saying in essence is if you have costs, then we'll go back to whenever, 1990, but if you have opportunities, we're going to delay and wait until what, 2008? Or are we taking those opportunities now?

Ms. Norine Smith: I think it's more that the costs that might be faced by the agricultural sector would be supported through incentives and other government programming in order to encourage the kinds of practices, such as low till, no till, or less use of fertilizer, that are helping to reduce overall farm costs at the same time. The opportunities are things such as the opportunity to sell incremental sinks credits to the large industrial emitters, to emerging new markets such as biofuels and ethanol.

Mr. Bob Speller: I'm wondering about the biofuels side, because I was actually surprised that there wasn't very much emphasis in the action plan with regard to biofuels. In terms of the commitments being made, I understand what they are, but there was no information as to how we might roll those out. Is that because it's a budgetary decision, or when is the meat coming particularly in terms of ethanol but also the numerous biofuels ideas there are across the country? I'm surprised they're not putting enough emphasis on those areas and, again, the opportunities that exist for the farming community in that area.

Ms. Norine Smith: I think that's more a reflection of the limitations of a reasonable-sized document than a reflection of the priority that's placed by the government on that aspect of the plan.

The move in the plan from a goal of achieving about--I think it was--25% of the gasoline stream being E10 to 35% of the gasoline stream being E10 was an aspect of the plan on which some considerable emphasis is being placed. There are two provinces, as I'm sure you're even more aware than I, that are quite interested in this and are themselves moving toward provincial mandates and are encouraging the government to have a national mandate.

Tony's minister, Minister Dhaliwal, is engaged in active discussions with his energy colleagues across the country about a national mandate on ethanol in a scenario where the government's been putting a fair bit of research money into the Iogen plant here in Ottawa for the cellulose technology. So there is a lot of emphasis on it, and again I think Industry Canada is also very keen on that.

Mr. Bob Speller: I understand that. It would seem to me—

The Chair: Bob, I'm going to have to come back to you after.

Mr. Bob Speller: —if we're going to take opportunities there, we're going to need to invest a heck of a lot more money or we'll be importing the stuff.

The Chair: We'll come back to you. We have several others who want to speak.

Dick, and then Larry.

Mr. Dick Proctor: Thanks again, Mr. Chair.

Ms. Smith, did you say in answer to Mr. Chatters' question that there was some concern in the oil and gas industry that they wouldn't be able to pass on higher costs? If I heard it correctly, could you expand on what you mean by that?

Ms. Norine Smith: That is the assumption they have asked us to reflect in the modelling work, yes.

Mr. Dick Proctor: I think consumers always feel that the oil and gas industry has had tremendous ability to pass on costs, sometimes hourly. So why in this scenario wouldn't they be able to pass on their costs?

Ms. Norine Smith: I would have to get back to you with the details. I'm sorry, I don't know the details of their assumptions.

À (1030)

Mr. Dick Proctor: Mr. Taylor, in response to Rose-Marie's question, you were talking about this pilot project. Were you talking about Iogen in Ottawa?

Mr. Tony Taylor: Yes.

Mr. Dick Proctor: You were optimistic and thought it was just a short couple of years. I remember in 1999 when Iogen was having a meeting with farmers in Saskatchewan to talk about a plant that was going to come on stream within a matter of months. My staff followed it because the riding I represent was one that had a couple of potential sites. It kept getting pushed back and pushed back. The fellow who was out meeting with the farmers eventually left the organization. So can you bring me up to date on why you think Iogen might be nearly ready to have a commercial operation? What's happened in the last four years that we're optimistic about this plant again?

Mr. Tony Taylor: I think that's a good question. My staff followed those early promises, just as yours did. We were surprised by them. Our research had indicated that there were a lot of problems to be addressed putting the concept into practice. That's one of the reasons the Government of Canada was so interested in trying to work with this company on a pilot plant, a big pilot plant, which the one in Ottawa is. It wasn't until you got out of the small-scale “feeding a bit of straw into a beaker” operation to putting bales of straw down the chute and seeing what happened that you understood how difficult it really was to cultivate a happy environment for these little bugs, or whatever they are, that actually make it work. This is a biological process. It's not like some of the more traditional chemical processes where you have a pretty good basis for knowing what's going to happen. These things have to live and they have to be allowed to do their work. It was tough.

We were saying in 1999 that we were ten years away. Actually, we've gotten more comfortable in the last few years, not less comfortable. We really now do believe we'll see a plant before 2009. But a few years ago we weren't so sure. That's because there has been good work done in Ottawa with this plant. From their point of view, we understand there have been some disappointments. They have been initially in difficulty with the enzymes they developed, we understand. They have gone back to the drawing board in some cases.

I don't want to digress, but one of the reasons this company is in a very good position to make such a thing work is it's also an enzyme company, as you may know. They do a lot of business around the world, so they know what has to be done to make this stuff function properly. That's one of the reasons we're comfortable that this group, more than any other in Canada, or maybe in the world right now, is in the best position to bring in the bacon in a couple of years.

Mr. Dick Proctor: To conclude then, your department always took the longer view of this, and maybe the fact that Iogen was out talking to farmers in 1999 was very premature from a business point of view, from a commercial point of view.

Mr. Tony Taylor: We're just public servants, so we don't like to second guess industry too much, but we thought they were optimistic. We thought it was surprising that they would be able to deliver that.

Mr. Dick Proctor: That fast.

Thank you.

The Chair: Thanks, Dick.

Larry.

Mr. Larry McCormick (Hastings—Frontenac—Lennox and Addington, Lib.): Thank you very much, Mr. Chair, and thank you to the witnesses for being here.

I'm sure it's going to be an ongoing discussion for many years, and we do have to start down that road. We have the support of the Canadians to begin with.

When I hear--and I've heard it across this country too much because I've been working with farmers and rural Canadians, and we talk about oil companies. Anytime any one oil firm says they can't pass on the cost, that's not acceptable, and I don't believe any Canadian can buy that. Again, I happen to follow the price of crude once or twice a day. I've never seen yet when they couldn't pass on the price and I'm sure I never will. It could be because I want to get another 75 years to go. When any one of those five oil companies that are larger than the country of Canada... then for us to ever accept that statement in any form is totally not acceptable.

Mr. Chair, I'll just talk for a moment on ethanol. We have all these plants going up in the States. Of course, we won't talk about individuals. With the Seaway Valley Farmers Energy Co-operative here we were all at the ground turning five or six years ago. But what's the tax difference? I've heard people tell me lately, no, they're not going to build an ethanol plant in Canada even though one's been announced because they can't afford to do that. The companies are going to put their money in the U.S.

How much of a tax advantage do the United States producers have over Canada, as far as the ethanol goes? I'd like to clarify that if I could, Mr. Taylor.

À (1035)

Mr. Tony Taylor: It's quite a mixed bag in the U.S. right now. There are states where, combined with the federal incentives at work in that state and certain kinds of producer incentives as well as crop incentives the system can take advantage of, the subsidies in terms of our dollars and our litres are as much as 40¢. That's what it costs to make a litre of ethanol in Chatham, 40¢. Really, the subsidies in some U.S. states are twice the cost. It's pretty good.

We don't have anything like that in Canada, although we do, as you know, have the 10¢ federal excise tax exemption. In Ontario here there's another 14.7¢ per litre the Ontario government provides through the retail fuel tax, so that's more than halfway there, that's 24.7¢. In Manitoba it's a fair bit better than that. It is, I think, up to 35¢ through the way they administer provincial tax relief.

Ms. Smith mentioned this when she talked about our minister talking to his provincial colleagues. There was a fair understanding among energy ministers that the role provincial incentives would play to the activity they might see in their jurisdictions was very important. They're all in some stage of looking seriously at that to see what kind of incentive might be appropriate for them.

Mr. Larry McCormick: Thank you.

I'm sure, Mr. Chair, that the federal government at the cabinet table is looking this way. If we're going to be proactive and do what we should for Canadians, I'm sure we will look at that.

As this came out in the press the other day, the fact that the large corporations will receive recognition dating back to 1990.... Again, my phones did ring from across the prairies and from the foothills, including my own riding. The fact from the farmers and the people in rural Canada.... Under this agricultural policy framework, we're starting to have the farmers involved and engaged and gaining support, and then this breaks, that we are going to give all these benefits to the large industries. A lot of these people have studied this. It's just not acceptable, and I don't think it's going to be acceptable.

Again, we're going against where we should be to get the cooperation of people living in rural Canada, particularly the people living in rural Canada who have had the greatest obstacles just because of U.S. subsidies--besides the weather, of course. Now with the ethanol, just one simple part of it, one facet of it.... Again, the United States is offering these huge subsidies, and then we're turning around and saying we're going to give a lot more recognition, a lot more credit, and a lot more money to the Incos and whatever.

I'm not against any of the large companies, but what about our producers? I don't think we're offering them recognition. I don't think we're offering them a fair opportunity to be part of this.

Thank you, Mr. Chair.

The Chair: We'll go to the Alliance.

Mr. David Anderson: Thank you, Mr. Chairman.

Dr. Dorrell, you're the head of the research department for a major government institution. Do you believe that Kyoto will not cause the price of energy to rise at the farm-gate level?

Dr. Gordon Dorrell: Well, I would refer back to the modelling that's been done. I think we've heard that explained today.

Mr. David Anderson: Thank you.

Second, with regard to Kyoto, how big a component in APF is land set-aside? Do you have a target number of acres you believe need to be set aside in agricultural areas in order to achieve our Kyoto targets?

Dr. Gordon Dorrell: Are you talking about set-aside or are you talking about green cover?

Mr. David Anderson: I'm particularly interested in set-aside. You can talk about green cover as well.

À (1040)

Dr. Gordon Dorrell: We don't have the exact acreage. This will come with the program, of course, and with who will participate in it. Michele indicates that it would probably be less than a megatonne contribution.

Mr. David Anderson: A megatonne. So that's a million acres?

Dr. Gordon Dorrell: No... well, it depends on the type of green cover you have.

Mr. David Anderson: Thank you.

If I've heard correctly this morning, for me as a producer it would be in my best interest to go home, plow up as much of my farm as possible until the year 2008, and then step into whatever programs you have in terms of putting it into green cover or actually just into a no-till situation. Farmers are looking at this and they're saying, I need to do something for my bottom line. Is that where this is taking them?

Dr. Gordon Dorrell: I don't think so. Right from the beginning we've heard this comment. Farmers went into the practices they're using today for very good reasons. They went into zero-till, as you well know, to reduce erosion and to manage moisture better. I really can't imagine farmers stepping back from those very sound practices.

Mr. David Anderson: You had suggested that farmers have already contributed 10 metric tonnes with those great farming practices you just mentioned. Now, you're expecting that they'll find another ten to twenty megatonnes somewhere along the line by changing their farming practices again. But looking at your figures, we see that 60% of what's being contributed is through animals. Can you explain, are the dirt farmers going to end up having to do four times as much to achieve those targets, or what do you expect to happen with the animals when we're trying to develop a livestock industry and not destroy it?

Dr. Gordon Dorrell: This is one of the reasons we're spending a lot of money on research. If we can modify the fermentation process in the rumen of feeder steers, this would have a benefit. There's a considerable amount of work going on to see if we can't make the gut more efficient in livestock.

Mr. David Anderson: A GMO cow is what you need, is that right?

Voices: Oh, oh!

Dr. Gordon Dorrell: We're also spending a considerable amount of money trying to manage manure in a more efficient and greenhouse-gas-responsible way, and we are making progress. So no, I don't think the—

Mr. David Anderson: But what's going to have to happen to double what farmers have already done? I'm a producer. I know they've changed their basic way of farming. There's been a major change in the way the farming operation is done to achieve what we've gotten so far. How can you double that again? Simply, you're talking about fertilizer management, soil nutrient management, and now changing the rumen in cattle. Do those sound like the three main ways you're going to reach another 20 megatonnes?

Dr. Gordon Dorrell: The graph, their modelling, shows that it's “up to”. We're talking about a fairly large sleeve.

The Chair: Rose-Marie.

Mrs. Rose-Marie Ur: I have had a bit of a problem listening to what has been presented here this morning. Someone said that perhaps for the large industrial emitters the starting date would be 1990. If that indeed is going to be a target date for those individuals... you're presenting before the ag committee, and this should be no surprise that perhaps they should be recognized from that date, not just the large industrial emitters, giving one an advantage over the other. The oil companies are coming here on bended knees, saying they can't absorb any more costs. Well, the farmers have been beyond that, yet the assumption is that they can always assume more cost but the oil companies can't.

I may be from southwestern Ontario, and yes, I'm part of the federal government, but I'm a little tired of whose voice is being listened to here as to our ag sector. If we don't have food, water, and air, it doesn't matter how much oil you're going to have in some sectors, to say the least.

Has there been a cost-benefit analysis done as to the impact of this for farmers?

À (1045)

Ms. Norine Smith: I'm not aware of one.

Mrs. Rose-Marie Ur: That is the problem. Has there been a cost-benefit analysis done for the oil companies?

Ms. Norine Smith: There has been modelling work done for the economy as a whole and on a sector-by-sector basis. But there hasn't been comprehensive cost-benefit work done across a sector. For some specific sectors that are—

Mrs. Rose-Marie Ur: Agriculture being one?

Ms. Norine Smith: No, I don't believe so. There have been competitiveness studies done for about eight or ten other sectors. Agriculture is not one of them, to my recollection.

If I go a wee bit further back in the story of the analytical work, 16 issue tables were created in 1998. They were made up of experts from governments, sectors, and academia and non-governmental groups. There was an agricultural issue table, which did considerable analysis of the opportunities and costs that might be experienced by the agricultural sector.

Mrs. Rose-Marie Ur: Is this material available to the committee?

Ms. Norine Smith: Yes, it can be.

Mrs. Rose-Marie Ur: But all morning we've heard future discussion, broader assumptions, and variety of ways that can be done, and the word “perhaps”. But there has never really been anything definite as to how much it will actually cost agriculture in dollars and cents.

Given that you are before the agriculture committee, I would have hoped we would have had something a little bit more concrete, because what I hear this morning is that we have a long, long way to go, and the deadline is approaching.

Is there any indication when you will have a little bit more meat to your story?

Ms. Norine Smith: On the budgetary side, I guess we officials are waiting for the budget and assuming that the budget will at least clarify the first level of financial commitment to the plan.

With respect to the design of the emissions trading system—the covenant and how offsets will play into it—the plan sets out a schedule indicating that the intent is to have the broad framework more clarified by early spring 2003. I would imagine that would be the point in time when something like the specifics of how early action will be treated would have been decided. It could be a 1990 date, or 1997, 2000, or a 2010 date. Any number of dates could be chosen—or no date at all, if you take an approach based on technology.

Mrs. Rose-Marie Ur: Did the two departments meet at any time to...

Ms. Norine Smith: Yes. In fact this was a very horizontal exercise, where there were probably about five or six departments very much engaged in the design of the plan.

Mrs. Rose-Marie Ur: Thank you, Mr. Chair.

The Chair: Thank you, Rose-Marie.

Rick, do you have something to say?

Mr. Rick Borotsik: Yes, I have two very quick questions for Dr. Dorrell.

Your graph of the BAU with sinks and the BAU without sinks shows a goal of 6% below for agriculture, indicating a gap of the BAU with sinks of 6.5 megatonnes. Is this correct? Is this where agriculture is heading? Is this where you are expecting us to go, to this 6% level identified in the Kyoto Protocol? Is 6.5 megatonnes the goal you are attempting to achieve?

You said we can contribute to the first commitment period and that we know, under the best-case scenario—with all the planets aligned—we are looking at taking it down to just about 42 or 43 megatonnes in agriculture. If this is not the case, is there a value in going below that 6% goal right now for agriculture?

Dr. Gordon Dorrell: I guess we have to be careful on the goal. You heard Ms. Smith mention that specific industries will have mandated targets and associated support around them. Agriculture has a notional target, so that's not an absolute, fixed number.

But as a Canadian, I would hope all sectors can do their best, and if a sector—

Mr. Rick Borotsik: Can you explain that notional target? Are we just sort of hoping we're going to be able to get to agriculture's commitment of the 6.5 megatonnes?

À (1050)

Dr. Gordon Dorrell: Norine, maybe you can explain the difference between the two.

Ms. Norine Smith: For many sectors of the economy, such as transportation, buildings, small and medium-sized businesses in general across all sectors, governments, agriculture, and forestry, a target will not be set out in something such as a covenant that is backstopped by a regulatory or financial backstop of some fashion. Instead, a goal will be set, supported through a range of programs.

So if I can shift out of agriculture into the building sector, for example, there is an expectation about what kinds of emissions reductions could be achieved in the residential and commercial building sectors, through a suite of programming that would include—

Mr. Rick Borotsik: Energy efficiency.

Ms. Norine Smith: —home energy audits, incentives to homeowners to upgrade the energy efficiency of their houses through the work the Office of Energy Efficiency does with clients, and that sort of thing.

Mr. Rick Borotsik: If you don't have those goals, how do you measure the achievement in any way, shape or form? In agriculture, for example, how do you measure that if there are no goals?

Ms. Norine Smith: I'll come at it from two directions. One is through the program experts who design these programs. In many cases, they build on experience they have in the area. In the agricultural area they have a number of years of experience in working with farmers, through the promotion of land management practices. So they have a sense that if you make an effort to promote and expand knowledge about these practices, this proportion of farmers will actually respond and start to put those kinds of practices in place. It's the same across a wide variety of sectors. That's one way of doing it, at a program-by-program, initiative-by-initiative level.

The other way is through our national inventory reporting. Statistics Canada every year produces an accounting of emissions by sector and province. That's required through our obligations to the UNFCC.

Mr. Rick Borotsik: You seem to have pushed a little bit of a hot button when you suggested the oil companies are price takers and not price makers.

Ms. Norine Smith: That's their suggestion.

Mr. Rick Borotsik: Based on what you presented before and the assumptions, if I were in the oil business I would come to you and say, “Hey, listen, we can't pass on any of our costs; therefore you can't demand much more from us than what we've already done”. You seem to have accepted that at the table, and we're saying perhaps you should have been more skeptical, as we are.

Are you prepared to go back and redo some of those assumptions that have been put before you, and suggest perhaps that the oil and gas industry, at 18% of the total problem with emissions, should be impacted more substantially than they think they should be?

Ms. Norine Smith: The next step with the energy sector and all of the other sectors that are part of the large industrial emitters is the negotiation of the covenants. While it's not going back and changing the assumptions in the modelling work per se--that might be done in the end, but it's not something that's planned in the near term--there will be the equivalent of that, if I can put it that way. Because of the extensive and intensive discussions with each energy sector about what they can achieve in reductions, what's reasonable and what's not, there's a fairly significant challenge function.

Mr. Rick Borotsik: I have a last comment, I may, Mr. Chair.

The Chair: I've just checked and you're over six minutes. There are two or three other short ones here we want to get in.

Rose-Marie.

Mrs. Rose-Marie Ur: There's a chart from Environment Canada, which unfortunately is at the office, on CO₂ emissions in agriculture from 1990 to the present time. In 1990 I think it was 30-plus, and the 2002 data showed that we achieved minus .02 CO₂ emissions in agriculture.

Am I right in that, Michele? Do you know the chart I'm referring to?

À (1055)

Ms. Michele Brenning: I think Dr. Lindwall knows about that chart.

Mrs. Rose-Marie Ur: Are my numbers close?

Ms. Michele Brenning: Yes, they are.

Mrs. Rose-Marie Ur: So where do we have to move when we're already in a minus?

Mr. Wayne Lindwall: In terms of CO₂, Canada's agricultural sector is in the negative. But as you saw from the graph Dr. Dorrell presented earlier, our emissions from agriculture, unlike many other sectors, are from methane and nitrous oxide and are continuing to go up because of our growing livestock sector. Again, this is an even more important reason why we have recognition for carbon sinks, because our emissions in the agricultural sector are primarily nitrous oxide and methane, and we're accountable for those.

Mrs. Rose-Marie Ur: We're going to be targeting the animals, as Dave says.

Mr. Wayne Lindwall: We're not targeting the animals; they're part of our emissions. We have to look at the whole sector, and you can see how difficult a situation we would be in without the recognition of the positive things the sector is doing in terms of agricultural soils.

There are also opportunities to improve feed efficiency and fertilizer use efficiency. We still have a way to go there, but I think you can see how important the recognition is for the sinks and the opportunities. Canada's target is 250 megatonnes. Many of the scientists and the modellers would agree that agriculture could possibly get 25 megatonnes of that 240-megatonne target at the end of the day.

Mrs. Rose-Marie Ur: I just wanted that to be on the record re the CO₂.

The Chair: David, do you have a short question there?

Mr. David Anderson: Yes, I do. Dr. Dorrell, Rose-Marie asked this question but you didn't answer it; Ms. Smith did. Has the research branch for the Department of Agriculture and Agri-Food done a major cost-benefit analysis of the costs of Kyoto to agriculture?

Dr. Gordon Dorrell: No.

Mr. David Anderson: Thank you.

The second question concerns the fact that the one thing we have heard today is that soil sink research has been done. Dr. Lindwall has suggested that it's an area where we can measure change. I'm just wondering, what are you going to use as a baseline? Are you going to start at a certain year? Are you going to take an average over the whole Canadian soil system? Why isn't that system being set up and put in place very quickly since it's the one thing you apparently can measure?

Dr. Gordon Dorrell: We have a number of indicator sites where we've been studying carbon cycling for a long time. Those are in place, and those will be continuously monitored. We're expanding our number of sites across the country to get a better distribution of soil types and cultivation practices in those areas. This is going to continue, and we're expanding our other forms of indicators.

Mr. David Anderson: You said you have a hundred years of research. Where has the hundred years of research been done then?

Dr. Gordon Dorrell: We have a number of research sites, specifically on the prairies, that have long-term rotations and long-term carbon cycling studies.

Mr. David Anderson: That isn't enough to get you started on putting the framework in place?

The Chair: Sorry, you're short.

We'd like to thank our witnesses for coming this morning. Hopefully, they've clarified some of the points, although we have some concerns with some too, in fact a number of them.

I had some difficulty in my own mind. I still don't have this straightened out about this so-called $10 an acre because I'm not sure your decimal point is in the right place. Maybe you could let us know later on with that.

With that too, can the agricultural groups assume that with 2,000 acres they're contributing x number of dollars towards this megatonne business and that somehow they'll get a tax credit or a payment as a result of it? It would appear that there are tremendous opportunities here.

The rural people, in terms of both our forest sector and our agricultural green crops and so on, are making a very significant contribution--in fact they've always made one--towards the reduction of these gases. I would hope that somehow, either provincially or federally, they'll be looked upon with favour and that we'll consider the investment they're making in these acreages as being of significance and of benefit to Canada.

Maybe if there is a mistake here, one we somehow made on that $10, whether it's $1.40 or $1.60, we could take that and just make sure, before people like Alex take our word at face value and show our producers out there that, my word, this thousand acres is worth $10,000 under this program. Maybe you can look at that and tell us if I'm making a mistake or if someone else is with that figure, that $10 or $1.60.

So thank you for coming. We appreciated it. I think that as a universe we have to go ahead with Kyoto; we don't have much alternative. By the same token, we as members of this committee have to make sure that our agricultural groups are sufficiently protected as a result of decisions that might be made.

Thank you, and we'll adjourn our meeting.