INST Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Tuesday, June 10, 2003

Â

1225

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Hon. David Anderson (Minister of the Environment)

Â

1230

Â

1235

Â

1240

The Chair

Mr. David Anderson

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

The Chair

Mr. James Rajotte

The Chair

Mr. James Rajotte

Mr. David Anderson

Mr. James Rajotte

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1245

Mr. David Anderson

Mr. James Rajotte

Mr. David Anderson

The Chair

Mr. David Anderson

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

Mr. David Anderson

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1250

Mr. Larry Bagnell

Mr. David Anderson

Mr. Larry Bagnell

Mr. David Anderson

Mr. Larry Bagnell

Mr. David Anderson

Mr. Larry Bagnell

Mr. David Anderson

Mr. Larry Bagnell

The Chair

Â

1255

Mr. Bernard Bigras (Rosemont—Petite-Patrie, BQ)

Mr. David Anderson

Mr. Bernard Bigras

Mr. David Anderson

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1300

Mr. Bernard Bigras

Mr. David Anderson

The Chair

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)

Mr. David Anderson

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1305

Mr. Brent St. Denis

Mr. David Anderson

·

1310

Mr. Brent St. Denis

The Chair

Mr. Bob Mills (Red Deer, Canadian Alliance)

Mr. David Anderson

Mr. Bob Mills

Mr. David Anderson

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1315

Mr. Bob Mills

Mr. David Anderson

Mr. Bob Mills

Mr. David Anderson

Mr. Bob Mills

The Chair

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)

Mr. David Anderson

·

1320

Mr. Joseph Volpe

Mr. David Anderson

The Chair

·

1325

Mr. Bernard Bigras

Mr. David Anderson

Mr. Bernard Bigras

Mr. David Anderson

Mr. Bernard Bigras

Mr. David Anderson

·

1330

The Chair

Ms. Paddy Torsney (Burlington, Lib.)

Mr. David Anderson

·

1335

Ms. Paddy Torsney

Mr. David Anderson

The Chair

Mr. James Rajotte

Mr. David Anderson

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1340

Mr. James Rajotte

Mr. David Anderson

Mr. James Rajotte

Mr. David Anderson

·

1345

Mr. James Rajotte

Mr. David Anderson

The Chair

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.)

Mr. David Anderson

Mr. Serge Marcil

Mr. David Anderson

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1350

Mr. Serge Marcil

Mr. David Anderson

The Chair

Mr. Bob Mills

·

1355

Mr. David Anderson

Mr. Bob Mills

Mr. David Anderson

The Chair

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CANADA

Standing Committee on Industry, Science and Technology

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NUMBER 053

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, June 10, 2003

[Recorded by Electronic Apparatus]

  (1225)  

[English]

    The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): Pursuant to Standing Order 108(2), we are considering the potential economic impact on Canadian industry of implementing the Kyoto Protocol.

    Appearing today are the Minister of the Environment, the Honourable David Anderson, and from the Department of the Environment, Assistant Deputy Minister Norine Smith.

    Welcome. Thanks for coming. I'm sure you have some opening remarks for a few minutes, and then we'll go to questions.

    Hon. David Anderson (Minister of the Environment): Thank you, Mr. Chair.

    My apologies to all members of the committee for the delay in my attendance. A vote this morning obviously interrupted the cabinet meeting I was attending and delayed it. I simply could not come before now.

    That said, it's a pleasure to be here with you. I'm very appreciative of the opportunity that you've afforded me of coming before you to discuss climate change measures. This is not only the most important environmental challenge facing the world today, but quite likely the most important challenge facing the world over the next century and beyond.

    I'm here to argue that Kyoto represents opportunities as well that we cannot afford to pass up. A few months ago, in the heat of debate over ratification, a lot of people said that Kyoto would impose costs we could not afford. The discussion has changed, as I find when I travel the country these days. People are starting to think about how they can turn our commitment to address climate change and meet our Kyoto target to their advantage. These people see the Kyoto Protocol as the first step in unleashing the power of innovation and new ideas in a good number of areas of industry and technology.

    As a first step, it is designed to get all countries to follow the trail that we have blazed. Obviously, opportunities are there for the country that goes first.

    Kyoto is a first step. It is the first step towards long-term objectives set out by the United Nations Convention on Climate Change, which states that our long-term objective is to stabilize atmospheric concentrations of greenhouse gases to a level that prevents man-made interference with the climate system.

    For Canada, we have not really thought a great deal about this long-term objective. Most of the discussions, Mr. Chairman and members, have been devoted to how we reach the Kyoto target in the first Kyoto period of 2008 to 2012.

    It's certainly true that it takes real and realistic targets and timeframes to get the ball rolling to focus attention and action. That is why the discussions have led to the climate change plan for Canada.

    I would suggest that attention be devoted by members of this committee to where we should be in the year 2050. Where should we be in that year in order to be well on the way of ceasing to harm the climate with our emissions? What should our economy look like in order to provide the standard of living and the quality of community life that Canadians of today, and I hope and I expect Canadians of tomorrow, will be able to expect? How are we going to generate future wealth while, at the same time, dealing with this issue of climate? Those are questions that have seldom been raised in Canada, but they have been raised elsewhere in the world, particularly by the British Prime Minister, Tony Blair.

    I think it is important that we cast an eye to the future as well as focusing on the first Kyoto period. I mentioned Britain, but Iceland has already set for itself the objective of being the first country in the world entirely in a hydrogen economy. It intends to produce hydrogen locally from local resources. Icelanders know that it will take some 40 or 50 years to get to that hydrogen economy, but they're currently investing in the technology and the systems that will take them there.

    I mentioned the U.K. In the United Kingdom, a royal commission has identified what the long-term objective of the United Nations convention might mean for the United Kingdom. By the horizon of 2050, the United Kingdom would need to have reduced its greenhouse gas emission level 60% from its current levels.

    In the speech of February 24 by Prime Minister Blair, he said, “For Britain, we will agree with the royal commission's target of a 60% reduction in emissions by 2050”. That is the British target. These are the long-term targets we have not committed to.

    I might incidentally mention that the speech was before the release of an energy white paper that outlined British energy strategy over the next half century.

    Prime Minister Blair also said that he's working intensively with the European partners to agree to the 60% target for the European Union as a whole. He's seeking a commitment to policies that will demonstrate how this can be achieved. I expect that the Europeans will engage on that path.

  (1230)  

    We have to start thinking along that timeframe in Canada. I think that it is a key missing piece in the national debate that we have had so far.

    To go back to the short term, in 2005, at the Conference of the Parties, or COP-11, international discussion will start on our commitments beyond 2012 for the second Kyoto period. The United Kingdom obviously is in a good position to define its next target, and countries like Iceland will have a clear perspective.

    We in Canada have to start answering questions about our long-term future. What should be the target for the second period? What should it be for the third? What indeed are we aiming toward for our children's children, based on our natural resources and our industrial base?

    The views of this committee would be very valuable and provide a much-needed perspective in helping Canada do its share to stop negatively impacting on the global climate. It certainly would be most helpful to have those views in early and mid-2004, when we prepare for the international discussions in 2005 on our future commitments.

    I have some views of my own. Over the past three decades, we've dealt with many environmental challenges. Time and again, we've learned that if you set clear targets and then give business the flexibility to find the most efficient solutions, people in business can and do generate results well beyond your earliest expectations. Let me give some examples.

    In 1973, the head of Ford Motor Company said that if his company and the industry were forced to install catalytic converters to reduce air pollution, “it will cause Ford to shut down and would result in (1) reduction of gross national product by $17 billion; (2) increased unemployment of 800,000 people; and (3) decreased tax receipts of $5 billion at all levels of government, and some levels of local government would become insolvent.”That's from the head of the Ford Motor Company of the United States.

    Some years later, a leading figure in American industrial life looked back and said that “we are continuously faced by great opportunities, brilliantly disguised as insoluble problems”.

    Lee Iacocca made both those statements. By the time he'd made the second one, he knew that the sky had not fallen and does not fall when you introduce new technologies such as the catalytic converter. The sky was, however, a lot cleaner.

    Over the last few years, I've talked to industry leaders from around the world. I've heard similar things from presidents and CEOs of companies like Shell, British Petroleum, DuPont, and the list could go on.

    In fact, the former chairman of Royal Dutch/Shell, Sir Mark Moody-Stuart, was discussing climate change issues in Canada. He said that “in Canada you're doing this back to front. Business shouldn't be wasting its time on the ratification issue. It should be focussing on what happens after that—how to get the job done.”That was the approach he took. After all, he was and is a very prominent leader of industry. But he knows, and many other such prominent leaders know, that environmental goals present opportunities to improve the bottom line and opportunities for innovation, more efficiency, and more productivity.

    I certainly believe that Canadian industry is capable of that kind of innovation. We've all seen that kind of innovation at work across the country. Addressing climate change is an investment in the future. It has the potential to make our economy stronger, more modern, and more efficient.

    I'd like to come back to Shell. In 2001, Shell Canada reported consolidated earnings of $1 billion on assets of some $7.5 billion and a 21.5% return on average capital employed. The company employs about 3,600 people at its head office in Calgary and operating stations across the country. Shell has had targets in place since 1995 that include meeting the 1990 level of greenhouse gases by 2000 and reducing those emissions by 6% by 2008. The 2000 target has been achieved.

    Canada needs more of that kind of innovation. As we address climate change, we'll see it.

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    The federal budget of 2003 represents a commitment to reflect the increasing strategic importance of climate change innovation to the country. You see this commitment through the $250 million given to top up the sustainable development technology fund to $350 million, and also through the government's commitment to look at programs like the industry portfolio, including Technology Partnerships Canada, the granting councils, and the regional development agencies, to determine how their contribution to Canada's climate change objectives can be improved within existing resource levels.

    The government is mobilizing all its tools to address the national project proposed by the plan and for Canadians to become the most innovative and efficient producers and consumers of energy, and world leaders in the development of new non-polluting technologies.

    Perhaps again we need to look beyond our most recent budget and think about whether this is the time to develop a national science and technology strategy that clearly addresses energy and the environment in a coherent way. Too often in the past in Canada, energy and the environment have been considered separately. I mentioned how the British climate change goals came out of an energy study. Perhaps that is something we should look at.

    In my view, our government's technology strategy does not yet coherently address energy and the environment together, yet they are areas that Canada must address in order to follow a sustainable path. Of course, such an energy- and environment-focused national science and technology strategy would need to be developed in the North American context. The reality is that an economy like Canada's has the most to gain if we position ourselves early in greener markets, and we have the most to lose if we drag our feet in our arrival at the emerging climate-friendly markets that are global in scope.

    We see enormous export opportunities for innovative companies that move into the evolving carbon market. Even with the Bush administration's decision not to ratify the Kyoto Protocol, the U.S. is still investing in innovative technologies such as CO₂ capture and storage, clean coal, and many others.

    Further, U.S. state-level governments are going ahead with their own impressive list of actions too. Both those levels of government want to cooperate with the federal government and other Canadian jurisdictions in these and other opportunities in technology, research, and development.

    I believe Canadians have the know-how and the resolve to tackle the climate change problem and, at the same time, play a lead role in emerging global carbon markets. We will innovate on climate change, just as jurisdictions from Germany to California to Japan are doing now. The question then is, are Canadians ready to bring the Californian commitment, German efficiency, and Japanese innovation to this? I think we are.

    Company after company in Canada is taking action to gain competitive advantage to get ahead of the innovation curve. This trend has been visible for quite some time. Moreover, many companies are positioning themselves for what they see as the coming carbon market as we accelerate from slowing greenhouse gas emission growth to reversing it. Those companies see opportunities, thanks largely to effective emission trading systems, to earn sizeable returns on their investment in reducing greenhouse gas emissions.

    In conclusion, before I turn it over to questions, let me reiterate a request to you. Your committee's contribution toward defining our long-term climate change vision would be a very significant contribution to addressing this issue in Canada and to stimulating public debate.

    We know Canada in 2050 will look very different from Canada today. Our economy may well be three times its current size. This means that if we are to meet our climate change goals, the way we produce and use energy will have to be very different from today's patterns. The programs we're designing for 2008 to 2012 for all sectors--heavy industry, transportation, and buildings, for example--must obviously make sense in meeting our Kyoto target of 2008 to 2012 but must at the same time get us on the trajectory for our objective for 2050.

    We are already seeing companies that are driven by market forces--

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    The Chair: Mr. Anderson, I wonder if you could conclude, because we're not going to have any time for questions.

    Mr. David Anderson: Certainly, Mr. Chairman. I'm quite ready for questions.

    The Chair: Thank you.

    Mr. Rajotte.

    Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you very much, Mr. Chairman. I just want to clarify at the outset that I guess we'll be going to 1:55 p.m. because of the delay in the start of the meeting. Is that correct?

    The Chair: Can we have some extra time?

    Mr. James Rajotte: We started at 12:25, and we were promised an hour and a half. So I think that's justified.

    The Chair: Are you all right with that? Okay.

    Mr. Rajotte.

    Mr. James Rajotte: Thank you for coming in today, Mr. Minister.

    The genesis really for this committee's decision to study Kyoto implementation was a concern, I think, to be fair, of members of all sides about a lack of a detailed implementation plan presented by the government. In fact, some of the criticism about the lack of an implementation plan has come from people like even the former finance minister who, if we watched in the last leadership debate, said, “We didn't have an adequate plan then, and we don't have an adequate plan now”--a fairly serious criticism and charge from one of your former cabinet colleagues.

    To start with, I want to get down to some details. There was $1.7 billion for climate change measures, which was announced as a fund in the 2003 budget. Can you give us a breakdown today of how this $1.7 billion will be spent, the specific measures that it will be spent on, so that parliamentarians and taxpayers can determine whether these funds are spent in a worthwhile manner?

    Mr. David Anderson: Yes, I can certainly give a breakdown, but the normal process within government, as you know, is that once you receive the notional allocation in the budget, you then proceed to work out your spending priorities according to that. That is precisely what the cabinet ad hoc committee on climate change is doing.

    The report, or at least the information on its deliberation, will be released fairly soon. I'm not at liberty at the present time because finalized decisions have not been made in every area, so I can't give dollar-by-dollar announcements. I can give the overall funding previously, in the budgets of 2000 and 2001, and then some breakdown in the budget of 2003.

    For instance, we have the sustainable development technology fund of $250 million, in addition to the $100 million put there in the previous budget, which I mentioned to you. The Canadian Foundation for Climate and Atmospheric Sciences has another $50 million. That leaves, of course, the $1.7 billion of the budget. I would expect announcements on this to come out over the summer as that committee meets and as the details are worked out. I can give you the breakdown previously.

    The problem we face, which you alluded to in the preface to your question, is that we're getting, in some ways, into semantics. I believe the climate change plan document--if we want to call it a document, as a neutral term--had some 64 pages of line-by-line detail. Some of those, as you analyze the budgetary opportunities, given the money we have, will have to be looked at again. Some may be too optimistic in terms of new technology information or things of that nature.

    On the breakdown between short- and long-term technology development, such as things that will not develop climate change reductions in the near future, such as sequestration or clean coal, it takes a long time to build new coal plants with new technology. So that breakdown between the long term and the short term has to be taken out of that $1.7 billion.

    Mr. James Rajotte: We already have all the information that you've stated. I was hoping for some more details. So perhaps I'll ask some specific questions.

    You talked about carbon sequestration. In previous documents your department has released, you talked about a CO₂ pipeline. Will there be funding for a CO₂ pipeline, and if so, how much? Has this been decided upon?

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    Mr. David Anderson: The problem here is that we, as you know, are a free-enterprise government--strongly free enterprise. In the energy sector, I do not believe we should be directing any more than we have to. Therefore, if a company--and we have many fine pipeline companies in Canada, very capable not only in building pipelines but in transporting CO₂, natural gas, or many other products--comes forward with good proposals, we analyze them and then proceed.

    So a good deal of this money will be challenge money. If we start off by creating too many silos, cutting this money into certain segments, we will not have the flexibility we need. Further, we will not have the flexibility to respond to the provinces and territories. A good deal of this money will be challenge money, and that's important because it allows the maximum ingenuity of the private sector and the maximum flexibility of the provinces.

    Mr. James Rajotte: I'm only trying to get at some specifics here.

    On December 4, we heard from the Pembina Institute. We heard from Mark Jaccard. I know you're familiar with him as an economist. They said that you're going to have to incentivize people. If you want the reduction of CO₂ emissions, you're going to have to somehow incentivize people. Mark Jaccard says that you're going to have incentivize consumers to make a choice between public transit and a car.

    Are there going to be tax credits for driving greater fuel efficiency cars? Are there going to be tax credits for retrofitting homes? If so, is it going to be only for the purchase of new homes or new cars? Is it going to be for old cars and the past retrofitting of homes?

    These are the kinds of detail that the committee is looking at getting from you as the minister.

    Mr. David Anderson: Sure. I certainly would be delighted to give them, had I had them all.

    For instance, take a single issue of the kind of financial incentive that you've mentioned. If we do the analysis of a proposal to give a $4,000 rebate to a purchaser of a hybrid vehicle that is more fuel efficient than the standard vehicle of the same size, and it doesn't increase the number of people who purchase them in a substantial number, we would have an ineffective incentive. On the other hand, you mentioned public transit. If we give a bus pass credit on income tax, and it doesn't increase the number of people who use public transit, then you have an ineffective incentive. You're spending money in a manner that does not make an impact on climate change. It may have a very good impact in terms of an object lesson by rewarding people who are involved in socially acceptable behaviour, but it does not create a reduction in emissions.

    This is the type of issue. We're going to have analyze each one of the proposals that come forward from the public transit people, the automobile industry, etc. We're not in the position of telling industry what to do. We do not have a directive type of economy.

    The Chair: I have to move on, but I want to add a question to Mr. Rajotte's ones.

    There are a number of pieces that he's asked about, as far as when we are going to hear about some of them is concerned. You gave some explanation that it could be negative, it could be negative, or it could be negative, if it didn't provide for certain things. When is the government targeting a date for when we're going to be able to get those specifics?

    Mr. David Anderson: We have expected all along, following the budget, to spend the next few months—which is the period we're in now that is coming to an end, I trust—to work over the complex issues of costing, where we can give an opportunity to those who are knowledgeable in the field in the private sector to come forward with proposals.

    This will continue. It will never be over. We will always be fine-tuning, but I would expect that we would see reporting from the cabinet committee this summer.

    The Chair: I must move on, but we'll be back to Mr. Rajotte.

    Mr. Bagnell.

    Mr. Larry Bagnell (Yukon, Lib.): Thank you, Mr. Chair.

    A couple of weeks ago, I visited a Yukon home, perhaps the only one that had an air-to-air heat exchanger. It was substantially saving greenhouse gases in the area. Will there be incentives for people to put those in? We also have another organization looking at putting in a groundwater heat exchanger as well. They're all looking for incentives.

    Mr. David Anderson: Yes. I trust that there will be such incentives, but again, it's a response that's very similar to the previous question. What are the most cost-effective ways of doing so?

    I do know that the honourable member for LaSalle—Émard—I think that in this committee perhaps I could say Paul Martin—has one of the most efficient and intriguing systems that I've ever seen in his basement for a heat exchanger for groundwater.

    The fact is that we do want to get efficiency. We do have strong memories of the 1970s, where a large number of incentive schemes were put in place that did not materially improve the overall situation. We want to make sure this money is well spent. To do that, you have to make sure there's a cost-benefit attached to it.

    Clearly, there are many debates. Clearly, you know that I'm on record as saying that we have to make sure we don't get involved in pet hobby horses when we start using public money allocated specifically for the purpose of climate change. I may have ideas that colleagues may overrule. Similarly, others may have ideas that, again, colleagues overrule. We're trying to work out what appears to be the most cost-efficient approach that we can.

  (1250)  

    Mr. Larry Bagnell: In the last budget, there was money specifically for climate change. It specifically referred to including research in the north, where, of course, there are more dramatic effects of climate change. Do you have any idea as to how the money would be dispersed, or where in the north specifically?

    Mr. David Anderson: Most of the research would be done in the building sense and in the transportation sectors. Buildings would be CMHC plus university research. Transportation sectors will probably be Transport Canada plus private companies. Again, the governments of the territories will be involved as well.

    Mr. Larry Bagnell: Before we were passing it, there were some suggestions during debate that there'd be drastic effects of signing the Kyoto agreement. Have they materialized?

    Mr. David Anderson: There are no drastic effects in a negative sense that I've been able to determine. The current estimates with respect to costs—and most of the debate, if you remember, was focused on the oil and gas industry—have indicated that it's minor and has had no observable effect upon investment.

    True, Kyoto uncertainty is sometimes listed among a number of reasons for investment delay. True, on the tar sands, we've had a number of delays basically due to cost overruns that people have now decided, within the oil patch, are structural changes in the cost structure and not only a blip that will drop in later years. We have a clear indication that the cost overruns in the oil patch are now becoming standard for the industry. Therefore, some new proposals are ruled uneconomic. That was always expected. It was never expected to be anything different from that.

    Mr. Larry Bagnell: Have there been any reductions in greenhouse gasses since we signed Kyoto?

    Mr. David Anderson: In our last measuring year, the reduction was, I think, 1.3%. It is partly due to the measures taken and partly due perhaps to a slight softening of growth, although in that period—and this committee would know that as well as I do—growth was very substantial. We have shown, however, with the federal House-in-order measures, that there is a tremendous opportunity for reductions without any real impact upon services or standard of living.

    Mr. Larry Bagnell: Is any of the money related to climate change being targeted towards adjustment as opposed to prevention? Some of it might be natural climate change, and lots of it is beyond our control with countries that didn't even sign the protocol. Is there money being spent on adjusting Canada for changes that are beyond our control?

    Mr. David Anderson: Yes, there will be a considerable amount of that, particularly in the north. The Province of Quebec, in northern Quebec, has done perhaps the most concerted work on this area.

    As you would be well aware from your experience of the Yukon Territory, there is slumping of roads, slippage due to changes in frost content throughout the year. Building structures that are built on pylons in permafrost, of course, have also had slumping. There have been some quite interesting construction proposals.

    Transportation is another sector. The length of time for the winter roads has now declined, in some areas, quite dramatically. They're again looking at changing technologies so as to make the winter roads more successful for the period when they do have cold weather, and also perhaps extending the season on either end.

    Those are two examples of where we see money will be spent on adaptation.

    Mr. Larry Bagnell: Thank you, Mr. Chair.

    The Chair: Monsieur Bigras.

  (1255)  

[Translation]

    Mr. Bernard Bigras (Rosemont—Petite-Patrie, BQ): Thank you, Mr. Chairman, and thank you, Mr. Anderson, although I am not a regular member of this committee.

    Mr. Anderson, I'd like to return to a future bilateral agreement with Quebec. Last February 25, you said to the Environment and Sustainable Development Committee that you did not have a hundred officials who were able to undertake negotiations and that it was not possible to do everything at the same time.

    On April 29, Deputy Minister Brown with Natural Resources appeared before this committee and said that in the previous week, that is after April 14^th, the federal government had called Quebec to inform it that it was now open to discussion.

    Can you tell us today whether true negotiations have been undertaken with the Government of Quebec to reach a bilateral agreement—not just discussions, of course, but a real negotiation—and I'd like to know what particular approach you intend to give preference to as of now.

    Mr. David Anderson: I had very constructive conversations with the former Minister of the Environment of the Province of Quebec, Mr. André Boisclair. We were on good terms and there was clearly a desire on both sides to have a Canada-Quebec agreement on climate change. I've spoken twice to the new minister, Mr. Mulcair, but I have not yet had any meeting. We talked about other matters, particularly dams in Nouveau-Québec. We did not have a direct discussion about an agreement on climate change. It may be that once he is more comfortable with his new functions and has had more time, possibly one or two months from now, this summer, we hope, we will be able to have a discussion with him that will prove to be fruitful. As I just indicated to our colleague from the Alliance, I want to have federal money as part of the $1.7 billion available for the provinces and the territories. So if Quebec does have a good idea, a more efficient way to reduce greenhouse gases, for example, we are there to provide financial support and to back a provincial program.

    Mr. Bernard Bigras: So, as I understand it, the negotiations have not yet begun after all these months. In spite of the change of government in Quebec, official negotiations have not yet started.

    I have another question. One of the principles and one of the approaches we would like to see the federal government put on the table during these coming negotiations... As a matter of fact, this is also the desire of the industries that have already made efforts in this respect.

    Over the past months, you switched from an automatic mechanism for the granting of funds to negotiated pacts. In principle, the purpose of these negotiated pacts is to provide greater flexibility. They contain a certain number of principles, of course, environmental and economic principles involving minimization of costs, something that I go along with, along with a third principle, namely the principle of equity.

    Let me discuss the example of the Canadian forestry industry, whose representatives I recently met about two or three weeks ago in my office—and I would like to convey their message, if it has not already been done— who expressed their concern about the way in which negotiations are conducted with the industry. What they would like to see is the entrenchment of the principle of equity, so that the wait-and-see approach will involve some penalty and proactive efforts will be rewarded.

    During the upcoming negotiations with the industry, will you be taking into account the historic growth from 1990 to 2000 of absolute and relative emissions?

    Mr. David Anderson: Thank you, Mr. Bigras. First of all, officials are continuing to talk about an agreement. Nothing has been set but as a matter of courtesy, I am waiting until the new Minister of the Environment of Quebec has had time to settle into his new position. Once he is ready to begin discussions at the departmental level, I will be quite happy to do so. There is no delay either on his part or our part. It's simply a matter of waiting for the right moment to begin.

    As far as changes are concerned, no. I've always had the idea of providing funds for challenges, so to speak. The provinces can come and say that they have a particular way of reducing greenhouse gas that they would like to use. Don't forget that there are quite a few possibilities for the reduction of greenhouse gas that are under provincial jurisdiction. We are very much aware of the fact that a cooperative program is required, that has always been our approach. My colleagues will decide how many millions of dollars exactly—or, I hope, hundreds of millions of dollars—will be made available in the fund for the provinces and territories.

·  (1300)  

    Mr. Bernard Bigras: I'm sorry, but you are not answering my question. My question was the following: During the negotiations, will you be taking into account the historic growth from 1990 to 2000 of industries in terms of absolute and relative emissions? That in fact would be giving concrete form to the principle of equity as well as penalizing the wait-and-see approach and rewarding efforts that have already been made.

    Mr. David Anderson: I'm sorry, I answered the preamble to the question instead of answering the question itself. That is the problem when one has a preamble.

    As far as the forestry and pulp and paper sector are concerned, they have been guaranteed that they will undergo no disadvantage because of the fact that they have taken measures to reduce greenhouse gas. Five days ago, I visited a pulp and paper plant in Masson-Angers in Quebec where we celebrated the success of the pulp and paper industry in reducing not only the BOD, Biological Oxygen Demand, by 98 per cent but also in reducing by 70 per cent suspended particles in water and by 99 per cent the presence of furan and dioxins. I also learned that the industry successfully reduced by 35 per cent greenhouse gas emissions while at the same time increasing production by 21 per cent. That is an industry that has made remarkable changes and that demonstrates what can be done.

    I'll be celebrating the success of this industry not only in Masson-Angers but in Ottawa as well. If a particular industry is able to make further progress, then the opportunity must be seized. If another industry is unable to make progress, to reduce greenhouse gas effects, if the costs are too high, then we cannot have the same agreement for each industry. We have to be flexible to maximize opportunities and minimize costs.

[English]

    The Chair: Thank you very much. We'll move on.

    Mr. St. Denis.

    Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Mr. Chair.

    Thank you, Mr. Minister, for being here today.

    I have a couple of questions, starting with a follow-up to one that Mr. Bagnell asked about.

    There were numerous, multitudinous naysayers going into the ratification. In fact, some have turned around. Some of the large petroleum industry players have turned around and said not quite the contrary, but that the impacts of the Kyoto accord will not be that significant for them. It will be pennies per barrel, part of the dollar per barrel. This is based on reports that I've read in the paper.

    Are you aware of any of those comments by some of the larger players? It seems to me that one of them was an investor in the oil sands. It was perhaps British Petroleum, I can't recall. Are you aware of any of the comments by some of the naysayers who have modified or moderated their comments?

    I could go on to another question, but I'm just wondering if you've heard about any of those.

    Mr. David Anderson: Again, I'm a little leery of singling out people who have seen the light and converted to a superior way of thinking about these things, because I don't think it really adds to a successful debate. I try not to point this out too often.

    I will say the majors have all been there, other than Exxon--if I may single one out, let me single out the largest. But BP, Shell, and Total Fina Elf, the three next largest worldwide companies, are all there, and they're all active in Canada, I might add. Total Fina Elf came to Canada just recently to get involved in a billion-dollar investment in tar sands. The other companies that are strictly Canadian--Suncor, Syncrude--are doing great work and they are certainly living up to responsibilities. So I think there's a very positive side of it.

    Yes, there are some companies that were previously somewhat negative. When they discovered the economic analysis was not supporting their negative views, they changed their position. The oil and gas industry has engaged in discussions with the Department of Natural Resources, Mr. Dhaliwal's department, in a very constructive way to determine how they will take part in the large industrial emitters program.

    So I'm really quite cheered up. I think it only illustrates what the head of Shell Oil International said to me, which is that if you focus private sector ingenuity and initiative on dealing with the problem, they will deal with it. But if you focus their attention on whether or not you should ratify, they will find innumerable reasons--because they're ingenious, smart people--to come up with negative comments.

    Now we're focused on a much more positive approach. Now people are discovering it wasn't so bad after all. Now people are discovering that if both Shell and BP can make major increases, both in Canada and internationally, in the value of their shares and in the operations of their companies and still meet targets that are greater than what we have in Canada for the country as a whole, you're having people accept that it's not that bad after all.

    It doesn't mean to say there won't be anomalies, there won't be situations that have to be dealt with by assistance, some way or another. But fundamentally, people have discovered that when we got into analyzing how they could reduce costs, some of the original numbers dramatically shrank.

·  (1305)  

    Mr. Brent St. Denis: Thank you.

    Given that Canada's oil and gas sector are world leaders in technology, it would seem they would be the most well placed to then build upon that when it comes to climate change technology.

    I'll go back to a consumer-related question. There has been some advertising on television, I believe, and I've seen a few ads myself. Ultimately, consumer buy-in at the grassroots level is necessary for this to work.

    Are there jurisdictional issues between the federal government and the provinces? At the end of the day, if there is a program that engages the individual consumer either at his or her house or his or her vehicle, are there any bars that prevent either the province or the federal government from being directly involved with consumers at that level? I think until they actually see either a cheque or some kind of charge somewhere on a bill that's related to greenhouse gases, it really isn't going to sink in. Rubber will hit the road at some point. Where do we fit into that as a federal government?

    Mr. David Anderson: It's a very good point.

    In the overall environment area, I think 60% may be provincial and 40% federal. The line will swing around depending on the aspect of environment you're talking about. Similarly, in this area--and that's why I have stressed so much the importance of provincial and territorial cooperation--we think we can do it better if we don't argue about where the line is, if we simply have joint programs, or at least specific programs geared to the consumer, regardless of which government might be involved, or both.

    So I think we can manage the relationship with the consumer quite effectively, simply because I expect to have full cooperation. If we didn't--the hypothetical “where we didn't”--still, I believe, we would have major opportunities and direct support for consumers. We have, after all, a tax system we can use. We have in addition the ability to communicate directly. There may be some areas that involve municipal or provincial governments that may have some limitations on them, but I just can't think of one offhand, and I'd hesitate to say this would be a major limit. We don't see this as a major limit.

    The reason for that is very clear, and this is a good, important message for politicians. Public support for climate change measures is very strong. The provincial politicians know this just as well as the federal. In addition, there's hardly a member of the public who doesn't wearily pray for better federal-provincial cooperation. After all, they're the taxpayers who have to fund the battle. So I think those two factors will result in strong federal-provincial cooperation.

·  (1310)  

    Mr. Brent St. Denis: Do I have time for a bit more, Mr. Chair?

    The Chair: End of time. I appreciate it, and we'll move on.

    Mr. Mills.

    Mr. Bob Mills (Red Deer, Canadian Alliance): Thank you. And thank you, Mr. Anderson, for appearing.

    I sort of have three questions in one, if I might. You talk about the positive aspects of Kyoto at this point. I guess one of the biggest things is the fact that it's not ratified and not in effect in the world, because, of course, we only have 43% of the emissions represented. Also, in answer to Mr. St. Denis' question, the $15 buy-off of industry probably has to go a long way in convincing them that they may not be quite so opposed.

    But let me follow it through three different areas. First of all, the provinces.

    You have eight provinces asking a great many questions, not necessarily supporting the whole Kyoto process, but the message they're giving out is that the 240 megatonnes, which is the target we have to achieve by 2008-12, has really now become somewhere around 160 or 180 megatonnes, because the federal government is going to claim between 60 and 80 megatonnes for clean energy credits.

    Now, I've been at provincial meetings where the provincial ministers have actually, in front of an industry crowd, said that is going to be the case, even though the EU and Kyoto won't accept those clean energy credits. It appears that the message the provinces have is that you now have lowered your target to 180 megatonnes or thereabouts, so we have the provinces asking questions.

    We have industry saying, okay, you've put a $15 cap on it. If the price of carbon becomes $35, so what? Government's going to pick that up. Of course, that's the taxpayer.

    Then you have industry like the cement-concrete industry, oil and gas manufacturers, saying if you did impose Kyoto in such a short timeframe, they will become uncompetitive; they will not be competitive in the marketplace. Again, how are you going to deal with that ,and how does industry plan around that?

    Thirdly, we have your cabinet colleagues who.... I wonder what your level of influence is when I walk past the Centre Block going to question period and I still see not very many environmentally friendly vehicles there. Of course, I know you sent them a letter and told them they should get on side.

    Also, you have to convince Canadians. Of course, I believe carrots are the way to do that, yet if you have that cap of $15 and it becomes $35 and you have $20 you have to pick up from the taxpayer, that's a carbon tax, no matter what you call it. That will go in reverse in your effort to convince Canadians they should be on side.

    I know that's a big mouthful, but really there are four areas, the provinces, industry, your colleagues, and Canadians.

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

    First of all, with respect to clean energy credits or clean energy export credits, it is still on the agenda for discussion at the conference of parties. It is not knocked off, so it is still there. The next question is whether we get it or we don't.

    The assumption is if we don't get it--which I think is the basis of your question--would we be then reducing the 240-megatonne target? The answer to that is no. We believe we can still meet the 240-megatonne target. Nevertheless, we still think clean energy exports are logically something that the European Union and other countries--

    Mr. Bob Mills: But then we have to give it to Russia.

    Mr. David Anderson: It may well be that they would. What's sauce for the goose is sauce for the gander. It doesn't mean to say the Russians shouldn't get clean energy export values.

·  (1315)  

    Mr. Bob Mills: They're not going to do that.

    Mr. David Anderson: What it does mean is that the people who export gas to the United States from Alberta will get either a higher price or will get a credit, which they can then sell. That's the important thing, particularly when the United States is talking about the importance of energy security. So if we get clean energy exports, we will be--or could be--raising the value of Canadian gas. I won't go into “will be”, but certainly we have a major possibility of doing that.

    On the second aspect, with respect to the $15-a-tonne cap, it's interesting that you think it may well go up to $35. Currently futures are around $10 U.S., so it's somewhat less than $15 Canadian a tonne--slightly--but it depends on what market you're looking at. There are also World Bank futures, where you can get it down around $5 or $7 U.S. a tonne.

    So there is that possibility. We could be stuck with a cost of the difference between the $15 a tonne and the market cost above that if we have to buy those credits. That is true, but it is not a carbon tax, because this is something the federal government pays out. It is not the consumer using less oil from Alberta because we have boosted the cost to the consumer of Alberta oil by putting on a carbon tax. So it's almost the reverse. It's a payout from the government as opposed to a paying in on that oil account.

    With respect to my cabinet colleagues, I'm pleased to report that there are three who are now using the Prius hybrid vehicle. Elinor Caplan has joined the ranks of me and Stephen Owen, and I'm looking forward to further converts to the cause. I might add that other ministers are also using energy-efficient vehicles with E85 ethanol, natural gas, or other fuels. So the situation is not quite as bleak as you have painted it, but I will agree with you entirely that there is room for improvement.

    I might add that I certainly would like to thank Mr. Reynolds of your party for making inquiries when he was acting leader. It didn't actually turn out that he got a different vehicle, but he at least made inquiries about getting an energy-efficient vehicle. So I think the message is sinking in, even though there is more missionary work to be done.

    Mr. Bob Mills: How do we get to Canadians?

    Mr. David Anderson: That's a very good point. One of the problems of the debate so far--because it has been between governments and big industries like oil and gas--is that people tend to feel, well, I, the individual one out of 31 million Canadians, really don't count in this big issue--particularly true, of course, when we correctly describe it as one of the main issues of the century.

    We are trying to get through to them through the one-tonne challenge. We're trying to get through to them through stickers, which will be on all vehicles in terms of energy efficiency, just like the energy star sticker on appliances, which we're mostly familiar with. We will be getting through to them in messages, hopefully, as was suggested by one of the questions, on hydro bills and things like that. So we'll try a variety of messages, including direct advertising.

    The fact is, Canadian consumers are being called upon to make a difference.

    Mr. Bob Mills: Are there any carrots?

    The Chair: Thank you very much, Mr. Mills.

    We'll move on to Mr. Volpe.

    Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Thank you, Mr. Chairman.

    Thank you, Minister. It's always nice to talk with somebody who really believes everything he or she is sharing with the general public. You're obviously very committed to this cause, and I suppose you're an activist in the job, as I tell my constituents who write to me on environmental issues. They couldn't have a better situation than to have a missionary preaching missionary values, so my compliments to you.

    That said, I'm kind of tempted to be my own skeptic, because ever since we accepted the Kyoto Protocol we've turned every other citizen into a skeptic. Obviously we no longer have to worry about global warming if in a country like Canada, seven months after passing the Kyoto Protocol, we've gone up above freezing what, twice? I think yesterday was the first time.

    Oh, chuckle, please. When is the good weather coming?

    I'm concerned about one thing, Mr. Minister, that was alluded to by my colleague opposite, Mr. Mills, and that is the overall application and enforceability of Kyoto if a country like Russia does not sign on. I think the last time you were before this committee and I asked you about that possibility, you indicated that the Russians had until about June in order to sign on or not. Have you any other more precise details today?

    Mr. David Anderson: Joe, I wish I could say they had signed on. The G-8 meeting in Evian will no doubt have some reports flowing from it about Russian approaches. I don't yet have any evaluation of what the Russians said there--where, of course, President Putin was present.

    My expectation is still that there's no change. The fact that it has taken time does not change my expectation that they will sign on. I think it's just as likely as ever. There are major advantages for Russia in signing on, and there are particular advantages for Russia, as Bob has pointed out, with respect to working with us on clean energy exports. So I think they may well sign on, but again, predicting what the Russians will do, with my small knowledge of Russia, is probably unwise.

    If Russia doesn't sign on, of course, the protocol does not come into effect legally as an international document. That said, you just then have to go back and rework things and rework things, because unfortunately the protocol is only an indicator of this fundamental problem we're facing. Climate change is probably the most important issue we will face in this century, and maybe in the next two centuries.

·  (1320)  

    Mr. Joseph Volpe: Putting aside the merits of this particular issue from the perspective of those who believe that is in fact the case and those who are more skeptical, even if the Russians do come in, the very first part of the scenario will be where we'll see countries exchanging credits without essentially any measurable difference in the country that's buying credits.

    Mr. David Anderson: That's a good point. It's called the Russian hot-air credit. You're absolutely right, there is this area of opportunity where something is sold in the system that really will not reduce emissions.

    That said, that little cloud of hot air will quickly be absorbed, because the Russian economy is expanding and is likely to expand fairly fast. The reason hot air exists is because when the Soviet economy collapsed, it left this difference between the level of the economy then and the level of the economy now. As Russian industrial expansion continues we will see that disappear, because the Russians themselves will move back up to the level they were at and hopefully exceed Soviet levels as their industrial output continues and their standard of living increases.

    So I believe this is a very temporary phenomenon. Is it logically consistent? Some could argue that it should not have been in the agreement. That said, we would not have an agreement had it not been put there. There are some aspects of the Kyoto Protocol that I'm completely honest with you in saying I don't think are perfect. There are many aspects we fought hard over and didn't win what we thought should have been there. We weren't just fighting for Canadian advantage; we were fighting for a coherent, more elegant system that would make more sense.

    So I think the Russian hot air is certainly a problem now, but in the medium term, it will not be a problem for many years.

    The Chair: Thank you very much.

    Monsieur Bigras.

·  (1325)  

[Translation]

    Mr. Bernard Bigras: Thank you, Mr. Chairman.

    At the outset, I'd like to say how surprised I am with the statement you made previously. You said that during your first two discussions on environmental matters with your new Quebec counterpart, Mr. Mulcair, the issue of the application of the Kyoto Protocol in Quebec did not come up.

    I can understand that hydroelectric dams, as you mentioned, may be an important subject of concern but I must confess to you that I am rather worried and disturbed. I am worried not only about the federal government but also—and I say it publicly and in all sincerity—because the Government of Quebec did not bring up this important issue, when for the past 10 years this has been a very important demand on the part of Quebec.

    As far as I am concerned, I'll continue to do my work here but I would like to know what the implications of a bilateral agreement with Quebec would be, even though certain people have not taken the trouble to make any demands in this respect over the past two months. Would it possibly mean—even I understand that you are in favour of a sectoral approach—that for the territory of Quebec a 6 per cent reduction goal would be set, with the possibility of achieving this as they see fit? Thus, if they decided to take measures relating to transport—because that is the sector in Quebec where action must be taken— concretely, they would be able to do so.

    That would take into account past efforts, including those during the time of Robert Bourassa—and Mr. Marcil knows what I am talking about—where action plans on climate change in Quebec proved to be successful. We would therefore like to see the federal government come to Quebec to tell us that we are able to achieve our 6 per cent reduction objective as we see fit. Rather than setting sectoral quotas, would it be possible to reach such an agreement allowing for the type of flexibility that has been observed in Europe within the 15 countries of the European Union?

    Mr. David Anderson: Mr. Bigras, I had a rather close relationship with Mr. Boisclair and we had very good discussions concerning the agreement. I do not think that it is up to me, as federal minister, to interfere in a provincial field when I do have a provincial counterpart. I cannot insist on discussing a particular subject at a particular moment.

    We are very much aware of provincial jurisdiction, although your position on the matter is somewhat stronger than mine. The fact remains that I am willing to discuss the matter with him. We have spoken twice on the phone and several subjects were raised. As you know, there are very close links between the Minister of the Environment of the province Quebec and the Canadian one.

    A number of subjects were not put on the table. During our first conversations, we did not set out to discuss everything but I can tell you that two or three seconds were devoted to one subject, another two or three seconds to another subject, and so on.

    Mr. Bernard Bigras: But nothing was said about the application of the Kyoto Agreement in Quebec, or a bilateral agreement.

    Mr. David Anderson: I do not think that it is respectful towards the Province of Quebec, Minister Mulcair and other provincial ministers, to attempt, even before discussions are held, to establish what our aims are and how we intend to achieve them.

    We will have the opportunity to discuss such matters as colleagues on an equal footing. In the meantime, I do not think that it is appropriate to make comments on changes in the provincial or industrial sectors. I hope that I will be in a position to answer this question but only once I have had my discussions with the provincial ministers.

    Mr. Bernard Bigras: Yet the deputy minister of Natural Resources told us on April 29 in the Industry Committee that it would not be possible to set a territorial objective while at the same time allowing the provinces to achieve whatever objectives they may wish to pursue.

    There will of course be agreements. There could also be a bilateral agreement with Quebec but that would mean determining sectoral targets. Unless of course you are telling me the opposite of what the deputy minister of Natural Resources said on April 29.

    Mr. David Anderson: No. It is quite incorrect to say that I am stating the opposite. I said that I did not wish to talk about a possible result of my discussions with Mr. Mulclair before I had a chance to speak with him. It would not be respectful towards the provincial Minister of the Environment of Quebec. I am ready to listen to him and he knows this. I am convinced that he is quite aware of the representations made by the deputy minister of Natural Resources and that he is also quite familiar with the position of the Government of Canada as I set it out to his predecessor, Mr. Boisclair.

·  (1330)  

[English]

    The Chair: Thank you very much.

    Ms. Torsney.

    Ms. Paddy Torsney (Burlington, Lib.): Thank you, Minister.

    Certainly, I'm one of those people who thinks there is a great economic opportunity for Canadian businesses and for Canadian citizens by coming into line with the Kyoto Protocol. I noticed the subject of our study is the potential economic impact of implementing the Kyoto Protocol. Of course, there's probably an economic impact of not implementing the Kyoto Protocol as well.

    Some of the innovations we've seen...and I'm glad you mentioned previous environmental innovations that have not caused great disasters in our economy, that have actually improved our systems. I think about all the reduction in the production of waste, the opportunities for composting, things that people totally objected to in the first round that now have become very common practices for us.

    In terms of individual citizens, I'm wondering where some real opportunities are for them. You mentioned some of the ministers who've gotten fuel-efficient cars, and we've seen some take-up on some of these products. Getting new information so people can make comparisons on cars, for instance, and making that much more of an important selling feature will help.

    Are there other ways we're going to encourage Canadians to do their part, recognizing it's probably not the biggest part of the implementation plan, but certainly getting their support for some of these things? Can you outline some of them? I know there's an advertising campaign and some other stuff, but what else are we doing?

    Mr. David Anderson: First with respect to the amount, the 240 megatonnes, we're expecting a little over 30 megatonnes to come from the one-tonne challenge. It is a substantial proportion, but nevertheless not the major one.

    What we're doing is basically putting information in the hands of the public. In addition, we're going to try to work a little harder at the school and education level to work on consumer attitudes. In fact, I had a discussion late last week with my youth advisory committee on how to work within high schools so that the emphasis upon the driving licence of young people might become less significant than it is now; so that they would continue to use public transit even though they're of the age of driving. We've had some interesting discussions along that line.

    It is not that easy to combat directly some of the consumer advertising that is out there. I don't know what amount of money we may have over the next five years—maybe $25 million to $35 million. I don't know what it will be, because that is not yet decided by the committee, but it'll be in that neighbourhood.

    This doesn't give you a lot of advertising when you start talking about changing attitudes. It's different when you're advertising for an impulse buy, but when you're trying to change attitudes that would affect every decision, the advertising experts tell us you need a more concentrated campaign. So that's an area that I think is important.

    I think it's going to be important too to work on young people. They affect their parents. They question parents' consumer habits. They will be the ones saying critical things, perhaps, of parents. I think they have an influence beyond just the “when they grow up and start spending money” type of impacts.

    We will of course have cooperation from industries. I visited a major supplier in Toronto—I might add there are a number; Home Hardware is one of them, but there are a number of others as well who are working with us—to point out that changing to a modern lawnmower from the older model can make a dramatic difference in emissions. We were mostly discussing, of course, precursors of smog there rather than climate change, but it's the type of thing that can be done.

    What I was really struck by, in line with what I said to you, is that among people who work on the floor in stores like Home Hardware or Wal-Mart there is a tremendous interest in providing proper consumer information. They like doing that, and if you get those people involved as the front-line troops who are doing the selling, they start saying, “That's an interesting model, but this one has something you may not be able to see. It has this advantage or that advantage related to climate change, and I'm sure you'd like to bear that in mind when you make your purchase.”

    We're going to have to have a pretty broad approach. I would also say I'd like to see the 301 members of Parliament involved. We have ridings that are quite an appropriate size for the one-tonne challenge or local climate change measures. There are many areas here. In fact, Bob and I have had some discussions with respect to a very interesting proposal he's put forward, again related to children's education. So members of Parliament have an opportunity to help too.

    If I give you the impression here—which I'm sure I haven't—that we have the answer, it's wrong. We don't have the answer. We're working on trying to find a better way of getting the message out.

·  (1335)  

    Ms. Paddy Torsney: Are we looking at programs that would somehow encourage, whether through some kind of financial incentive, or—I don't know what other encouragements there are—something getting people to buy new fridges? Maybe it's only 25 or 50 bucks that will make the difference, if someone's already thinking about purchasing a new fridge: knowing that there's an encouragement to get a fuel-efficient model, or increasing the number of energy audits. I know lots of people in my community who unfortunately had to make a tough decision to get a new furnace but realized there were huge savings when they got the new furnace and it provided air conditioning for them as well; that it was worth the investment and they saw the return.

    Can we do more to communicate to people that, yes, it might cost you $1,000 for a fridge, but you're already paying this amount and you're paying monthly? Your energy costs are that amount; here are the numbers, so get going. Do we have to say, “Here's 25 bucks from the government; go and buy a new fridge”?

    Mr. David Anderson: I think we have to combine the two. I personally believe that when we have our incentive schemes in place, as rebates or whatever they may be—there was a question earlier from our colleagues across from you—they will help us very much in selling the one-tonne challenge. I think the two things will go together: you save money on your gas furnace—you save $450 to $500 a year—but in addition, here's a cheque for $200. That's what I think we can use to tip the balance of the person who is at the moment doubting whether they will proceed.

    It's not just furnaces; it's windows. There's a big opportunity. People do change windows in older houses over time, at considerable cost. It's quite an expensive prospect; we've been doing it in our house. You change your windows; you change your furnaces; you change your water heater; you change your stove. As long as they have the right information in the future, they will probably make better choices.

    The Chair: Thank you very much.

    Mr. Rajotte.

    Mr. James Rajotte: Thank you very much, Mr. Chairman.

    I want to touch first upon the decision-making process for Kyoto implementation. I think industry would like some clarification on which minister is ultimately in charge. I must admit it is a bit cloudy at the moment. You have two lead ministers—you yourself, obviously, and the Minister of Natural Resources—but you have Industry and Finance involved at a secondary level. Now apparently there is an ad hoc cabinet committee in which you and the natural resources minister now report to the agriculture minister.

    Can you explain why that is? Can you explain which minister ultimately is the minister responsible for the climate change file? Under that, to put some specific questions, who is making the decisions on these issues? Is it done by consensus? Is there one minister taking the lead? For instance, how was the decision to limit the price per tonne for large emitters to $15 per tonne arrived at?

    The second question is who made the decision to exempt the auto industry, and why are other industries not exempt as well? And who will make the decision on allocating the $1.7 billion fund?

    Mr. David Anderson: I think actually your speculation is pretty accurate. It is I and the natural resources minister who have the direct ministerial responsibility. Not surprisingly, as with many other areas of government, we report to a government committee, which brings in all the others who are affected. Agriculture, for example, is affected. Industry is affected. You have correctly pointed out that Finance is affected. The Department of Fisheries and Oceans is affected as well, and there are other departments. The interprovincial portfolio is obviously affected as well—very much so—because of the importance of the provinces.

    This is a normal cabinet process, to pull together a group where all the important vantage points can be heard. We do, of course, have comment from ministers who are not members of the committee, and I haven't given the exclusive list of those who are members.

    It is chaired by another minister, quite rightly, because we are quite often there putting forward propositions or proposals or suggestions. But that is again standard. It could be any minister. The fact that it happens to be at one time the Minister of Agriculture and at other times the Minister of National Defence, or any other minister, is not really significant. A competent chair is what the person has to be.

    You ask who is finally responsible. It's the Prime Minister. This issue is simply too big, and the amounts of money are too great, and the impact on our economy and society is too great for this to be simply the role of one minister. That said, obviously as Minister of the Environment I think I play an important role, along with the Minister of Natural Resources.

    Regarding the exemption of the auto industry, my recollection is this was done by a committee of our climate change group that was at the officials level, simply because we were focusing on the improvement in mileage, if I may use the old term. There was so much less that could be gained from trying to increase efficiency. General Motors, for example, have increased the energy efficiency in constructing the vehicle by 54%, I think it was. In other words, it took 46% of the amount of energy used 10 or 15 years before to build a vehicle. There really wasn't a lot of room there to go further, but there was plenty of room to go in terms of mileage.

    That was a committee decision for which I would take full responsibility as one of the responsible ministers.

·  (1340)  

    Mr. James Rajotte: On that issue, then, you said it was a committee--I'm assuming a cabinet committee--that made the decision to exempt the auto industry. You yourself pointed to emissions intensity reductions in the oil and gas industry. The steel industry stated they have made emissions intensity reductions, certainly since 1997.

    So draw the line for us. Why are you exempting the auto industry, not the steel industry, not the cement industry, not the construction industry? There should be a clear line as to why you're exempting one industry and not others. I think that's only fair to ask the government to outlay this for all industries.

    Mr. David Anderson: Well, the answer to this is that large industrial emitters are precisely that. There are relatively a small number of sectors and a small number of plants involved. I would expect there are around 450, in total, in terms of plants. So the decision was made on perfectly logical grounds. It didn't make sense to go after something where the energy opportunities were so small compared to these other sectors that we're dealing with.

    Of course, that doesn't mean to say all the other sectors are treated the same. There will be differing opportunities, and of course, as Mr. Bigras has pointed out, industries such as the forest industry have made already great strides that must be, in some way or another, taken into account as well.

    So it's a flexible system. We are not trying to create a Procrustean bed for everyone, which of course would drive certain industries into the ground.

    Mr. James Rajotte: It's fine to say it's flexible, but I think industry also wants some certainty on some rules and some guidance as to what sorts of emissions targets they're going to make.

    Another question along this line is how are you going to measure emissions for each sector and each industry? Within one industry, I visited two companies in Ontario here, and one company said they had reduced their emissions since 1997 by 24%. I went to the second company, and I stated this, and they said, that's not true, that company has reduced it by 12%, not 24%.

    So within a certain industry, say, if you even take Syncrude or Suncorp, how are you going to measure each company so that the companies themselves agree to the measurements, and then how are you going to measure it by sector?

    Mr. David Anderson: You raise a good point, which bedevils all taxation, which bedevils all areas of the interface between government and industry: how do you measure when people say they've done this or they've done that, or their costs are this or that?

    We think we're going to have to, as we work into this new system. We don't think we're going to get it perfectly right at the very beginning, but we do think you can have some fairly good ballpark figures. And in discussions with sectors, as we discussed with the oil and gas sector, we think we can have a certain amount of integrity, because other companies within that industry probably have a very good idea of their competitors' cost structures and what the competitors are doing.

    I would like to correct one impression. We're not exempting the car industry; we're just giving them a different target, a much more difficult target. In fact, if we start to put the car industry target on the oil and gas sector, wow, you'd hear some complaints. It would be a very different world.

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    Mr. James Rajotte: That's the 25%?

    Mr. David Anderson: Well, if we said to the oil and gas sector, make sure your product, when it's used, has 25% less emissions, they would say that's technically impossible.

    You have to wrestle with these things when you try to work out an overall fair scheme that doesn't disadvantage any sector of the economy or any region of the country. You can't have the absolute certainty of hard regulation without running the risk of unfairness.

    The Chair: Thank you very much, Mr. Rajotte. I must move on.

    Mr. Marcil.

[Translation]

    Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): Good afternoon, Minister. I heard you talking about relations with Quebec and I would like to continue along the same lines as Mr. Bigras.

    I'd like to know whether you've had any exchanges with the new Minister of the Environment of Quebec with respect to the environment in general and the implementation of the Kyoto Protocol in particular.

    Mr. David Anderson: No, we did not discuss Kyoto. However, he does know that we will be doing so and that his officials are well informed about the position taken by his predecessor. Personally speaking, I think that it is only polite to give him the time to determine whether he wishes to completely adopt the position of his predecessor or whether he wishes to make some changes. Once he is ready, we will be ready as well to continue. But we are in no hurry; nothing is lost because a minister takes the time to make such a decision. There are often provincial elections—there are two or three a year in different places in Canada—and this is a courtesy that we extend to our colleagues.

    Mr. Serge Marcil: I'd like to ask you a second question.

    We live in a federation, we have a federal system involving partners that in our country, are called provinces. In the United States, the governors of each of the States become partners. In fact, it is a central government.

    Each province has its own way of doing things. It's not simply a question of culture or language, it's often a question of origin or culture probably more than language. For example, in western Canada, as in British Columbia, in the central provinces or in the east, like Ontario and Quebec, our approaches are often similar, but they are sometimes different.

    We can see this in the framework for the implementation of the Kyoto Protocol. We also see it in other sectors where greater flexibility is given to federalism. This allows for a national strategic framework and as part of this framework, the provinces may choose their own particular way of implementation, with possible differences from one province to another.

    Mr. Rajotte asked you questions about this and the same thing was said by representatives of the Department of Natural Resources. It appears that preference is being given to a sectoral approach as opposed to an overall approach. When it comes to the different sectors, many industries have made enormous efforts with respect to greenhouse gas emissions.

    If the Government of Quebec made you its own proposal, while respecting the common objective, that is a 6 per cent reduction, would the Government of Canada, through the Department of the Environment, be open to such an approach, or will there be strict adherence to a sectoral rather than a global approach, with people being given the opportunity to intervene according to their strength and their capacity as long as they meet the 6 per cent objective?

    Mr. David Anderson: You have described an example where a province and the federal government have the opportunity to reach a bilateral agreement where the province becomes the sector for the reduction of greenhouse gas.

    You refer to a province and the federal government, but don't forget that other provinces can be opposed to such an agreement because they see this as the possibility for setting up different regimes relating to investment. In this way, one province might be able to steal an investment that would normally go to another province. There is the possibility that greenhouse gas reduction programs and a federal provincial agreement could be used to divert investment from one province towards another. We cannot simply take two governments into account, we have to think of the other ones as well.

    Generally speaking, provinces prefer to have a system where we do not have any effect on decisions about where an industry or a company will invest, whether the level will be the same, or whether the advantages and drawbacks will be equal. We have not yet received from the provinces a clear example that it is what you have described. If it happens, we shall see, but personally, I think that consideration must be given to the other provinces, not only to the single province that will find itself in such a situation.

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    Mr. Serge Marcil: I agree with you that we must not direct our efforts towards a single province. Let me give you an example of the concept.

    We have shared jurisdiction with the provinces with respect to the environment, in another words we don't have exclusive jurisdiction. Since we have shared responsibilities, this supposes that the 10 provinces and the federal government will agree on a strategic framework for the implementation of the Kyoto Protocol. As part of this strategic framework, the 10 provinces could propose to the Government of Canada a particular approach. We could go along with different approaches from one province to another, all of them being part of the strategic framework. That is the way my question was intended. There will be a certain flexibility.

    My second question, Mr. Chairman, relates to the agricultural sector. I'd like to know what the view is of the effort to be made by the agricultural sector in implementing the Kyoto Protocol.

    Mr. David Anderson: For agriculture it is easy. Under the Kyoto Protocol, there is a chance for new sources of revenue because the methods used in cultivating land can become a means to reduce greenhouse gas. A quarter of the greenhouse gases in the atmosphere caused by human activity come from the agricultural sector or from the cutting back of world forests. That amounts to a quarter. So there are certainly opportunities to create revenue sources based on $15 a ton or $35 a ton, if it is $35. This can be an advantage for farmers.

    However, what they are doing at the present time cannot be used to provide them with funds immediately. What we decided in the Kyoto Protocol was that we would set a base, that is 1990, as our point of departure. Sometimes farmers ask me for advantages because of what they have done so far in reducing greenhouse gas but they have done very little. Their land cultivation methods may be favourable but we cannot give them payment for what they are doing already because this would make the system impossible. We have to provide payment for reductions in relation to the 1990 level. 

[English]

    The Chair: No, that's it.

    I gave you extra time for your patience.

    Mr. Mills, one question, and we have to conclude.

    Mr. Bob Mills: On competition, perhaps I can use the cement industry as an example. They're very cost sensitive. They have a lot of competition. Thailand can provide cement at a competitive price. The chemical process results in a lot of CO₂ being given off into the air. They will, in time, possibly develop the technology, but not in the timeframe as set out by Kyoto. There are many other industries, but how are you going to deal with an industry like that, specifically?

·  (1355)  

    Mr. David Anderson: It's a very good question, the issue of competitiveness. Ultimately, the answer to this is, of course, international agreement that we will not allow a steel, cement, or other product that creates greater emissions from a non-Kyoto country to be imported, free of charge, without tariff, into a Canadian or other Kyoto economy, perhaps also the United States.

    There will undoubtedly have to be some disadvantage to prevent a share substitution of the less-climate-change, greenhouse-gas-producing Canadian product from being supplanted, such as you suggested. That will be an adjustment on the trade side. I think it's inevitable that we will have to have such adjustments. And I have no doubt they will occur.

    The reason for that is simple. As we get more and more clarity on the problem of climate change worldwide, to create the type of anomaly that you correctly put your finger on, Mr. Mills, simply doesn't make sense. And the trade restrictions are quite easy to put in place, they can be quite precise, and I think they would take care of this.

    Have we reached the point of working all that out with the WTO, etc.? No, we haven't, but I'm sure that's going to come. After all, a very substantial percentage of the world's economy is under the Kyoto Protocol, as you point out. It's 43%. Therefore, I don't think this problem will be a problem for long.

    Mr. Bob Mills: You're assuming the WTO would accept that as a reason for that tariff.

    Mr. David Anderson: Well, the purpose of the whole Kyoto Protocol becomes vitiated if we allow this to happen on any scale, at any grand scale. The whole purpose of being in the Kyoto Protocol gets destroyed. I might add, the whole purpose of President Bush spending in the United States budget some $4.5 billion on climate change measures becomes ridiculous if we allow that type of seepage to occur from overseas suppliers. It doesn't make sense that this would happen, because it destroys the purpose of the accord.

    So all those countries are well aware that they're going to be facing trade barriers unless they bring their industries into compliance with Kyoto countries.

    If, for example, in Thailand, the industry does say, look, we have the same standards within our industry, whatever the national government does, we are achieving Kyoto targets of emissions reductions, then of course their cement would not have any penalty for Kyoto reasons.

    I think it's going to be quite an interesting opportunity to use the Kyoto accord to improve specific sectors within the economies of the countries that are outside Kyoto in the developing world. India, China, Thailand, and Brazil know full well that they're going to have to face that barrier very soon after the Kyoto accord is ratified and brought into effect.

    The Chair: Thank you, Minister.

    Thank you for being with us today. As you see, we have a lot of interest on the industry committee in seeing how things progress in the climate change program. I would like to thank you for being with us, and I'm sure we'll be calling you back in the future to have you bring us up to date and answer questions for the industry committee.

    Thank you very much, and have a good day.

    The meeting is adjourned.