Welcome everyone to this 18th meeting of the Legislative Committee on Bill C-30.
We have a very full agenda today. So let us start right away.
Thank you to the witnesses for showing up on time. I would request that we pass on to our fellow members of the committee that timeliness is important.
We have a full schedule today. I anticipate we'll probably have to drop off the last two questioners to get in a little bit of business.
We can commence to hear testimony with a quorum of five. That's what we have, so we are going to proceed.
Today we'd like to welcome, from the Canadian Labour Congress, Marie Clarke-Walker, executive vice-president; and Andrew Jackson, national director of social and economic policy. From the Canadian Renewable Fuels Association we have Mr. Bliss Baker, chair. From Iogen Corp. we have Jeff Passmore, executive vice-president. From the Office of the Commissioner of the Environment and Sustainable Development we have Mr. Ron Thompson, interim commissioner; and Mr. Richard Arsenault, principal.
By video conference from Vancouver we have Michael Brown, chairman, Chrysalix Management Inc. Thank you again, Mr. Brown, for getting up so early out in Vancouver to join us.
Before we proceed, a memorandum was passed to members of the committee by the clerk giving you notice of some of the people you may want to contact about getting down to clause-by-clause after we come back from the break. There are phone numbers and contacts there for the legislation counsel, the legislative clerk, and the Library of Parliament analysts. That's some information you'll need when we proceed after the break.
Witnesses, we typically give each of you about 10 minutes to tell us about tools and fiscal issues with respect to Bill C-30—we're trying to focus on that. Then we go to questioning from the various sides of the room.
We'll start with the Canadian Labour Congress and Marie Clarke-Walker.
Thank you. I'd like to thank you all for the opportunity to appear on behalf of over three million members of the Canadian Labour Congress.
Our brief puts forward a labour perspective on climate change issues, which form a major part of . It doesn't address all the provisions of the bill, but it does address some.
The labour movement strongly supports effective and concrete measures to avert catastrophic climate change, while also building a stronger economy with good jobs. Our environmental and job goals should not be in conflict. Good policies can and must address both of these goals at the same time. The science tells us clearly that we must move very quickly to make deep reductions to greenhouse gas emissions if we are to avert a planetary disaster. The costs of inaction far outweigh the costs of action.
Dealing with global warming seriously will involve fundamental changes to our carbon-based economy. Major polluting industries, especially the oil and gas industry, have used the threat of economic dislocation and job loss to resist implementation of a real global warming plan. We in the labour movement reject the idea that there is a fundamental conflict between the economy and jobs, on the one hand, and environmental sustainability on the other. In fact, dealing seriously with global warming has the potential to create a strong and vibrant economy with many new good jobs.
We have a major opportunity to create a better economy, but governments must carefully plan the transition. We should not minimize the scale of the challenges ahead. Some jobs may be lost as others are created. Our climate change policies must therefore include a green industrial policy and just transition policies to create jobs and protect workers and communities.
We support inclusion of clear greenhouse gas emissions reduction targets in , consistent with our Kyoto commitment, as well as deeper minimum, medium, and long-term reductions. Dealing with global warming will involve major changes in the structure of our economy and society. It's imperative that climate change policy be implemented with and through a Canadian green jobs/green industrial strategy to maximize the creation of good new jobs. Such a strategy will include a mix of regulation, public investment, and direct government support through spending and tax measures for needed new private sector investments.
must set the framework by ensuring that the federal government has the power to regulate emissions and product standards as needed, and should also create the legislative framework for an umbrella climate change investment fund. Any new federal revenues from the imposition of charges and taxes to deal with global warming should be credited to the fund, along with a significant portion of existing government revenues. This fund can and should be used to support significant investments by the federal government as well as the provinces and municipalities. The federal government should work through public agencies and its procurement policies to promote such areas as renewable energy alternatives, energy efficiency, and green transportation technologies.
We support the elimination of perverse tax subsidies to the primary oil and gas industries in the next budget, especially the write-off of 100% of capital expenditures for tar sands development. The primary oil and gas sector is highly profitable and can afford to invest much more in carbon reduction measures without special subsidies.
We support provisions in to impose hard caps on emissions by large final emitters. The goal must be to force significant real reductions in total emissions, especially in the primary oil and gas sector, not simply a reduction in emissions intensity. An emissions trading system, a responsible one, would be a useful means to lower the total cost of compliance, allowing operations that lower emissions beyond required levels to sell their excess emissions to those who have not. The details of the emissions caps will have to be established on a sector-by-sector basis through regulation. Labour should have the opportunity to have direct input to the design of an emissions trading system and allocation of initial permits.
Some industries, such as the pulp and paper sector, have already made major reductions in their use of carbon-based energy by switching to biomass and cogeneration of heat and power. These efforts should be rewarded through caps that are only modestly below current levels.
In regulations implementing a cap and trade system, competitive realities that could cost production and jobs with no environmental gain will have to be taken into account. In sectors that are closely integrated on a North American basis, significantly raising costs in Canada ahead of the U.S. could cause transfers of production and job loss with no net reduction of carbon emissions. Caps should still be imposed but at initially modest levels.
Emission caps should be accompanied by direct government support for investment in emissions-reducing new technologies and processes by industry, including accelerated write-offs for investment in effective environmental technologies.
To the extent that energy prices for households increase as a result of climate change measures, low- and middle-income families should be protected through tax credits fully offsetting the extra costs, while still giving everyone an incentive to use energy more efficiently. Utilities could raise prices above a threshold, while selling a basic allowance at low cost.
The key to a just transition for the workers affected by changes in employment resulting from transitions to a green economy is an aggressive green economic development strategy. Energy efficient economies are more labour intensive. This will create jobs and new opportunities for workers.
However, as I said before, there is the potential for job losses in some sectors with high carbon dioxide emissions. Higher energy prices may also compound problems in the wider manufacturing and non-energy based resource industries, such as forestry products.
The principle of a just transition holds that workers who are displaced or who experience wage cuts due to structural economic changes benefiting society as a whole should be fully compensated, as should the communities impacted by such changes. The principle has often been expressed in response to trade-driven economic change, but has rarely been translated into practice.
In creating the legislative framework for expenditures to deal with global warming, Bill should establish a just transition fund, to be governed by a board including labour representatives. The fund should be authorized to make payments in support of retraining of workers who lose their jobs due to climate change policies, and to compensate workers for any income losses. Communities should also be eligible for support. And provinces must also be encouraged to integrate just transition into climate change plans.
In conclusion, Bill must set a clear framework for a national action plan to meet specified greenhouse gas reduction targets, including hard emissions caps for large final emitters and an emission trading system; a framework for new regulatory standards; the establishment of mandates for funds to support a green jobs and/or green industrial strategy, including a climate change investment fund and funds for just transition. Also, funding for climate change programs and related tax reforms should be included in the 2007 budget.
Thank you very much, Mr. Chair and members of Parliament, for the opportunity to appear today.
My name is Bliss Baker. I am the chair of the Canadian Renewable Fuels Association. I am joined by my colleague and fellow board member Jeff Passmore, who is also executive vice-president of Iogen, who will have a few things to say when I conclude.
I think, without exception, all of you are familiar with the renewable fuels industry, the ethanol and biodiesel industry. The CRFA represents a wide variety of ethanol and biodiesel producers, potential producers, technology providers, and a host of agricultural commodity groups, all of whom will stand to benefit from an expanded biofuels industry in Canada and from the passage of Bill .
The CRFA has been around since about 1993 and was started by a group of corn farmers in southwestern Ontario. Since that time we have been advocating, pushing, prodding, lobbying, and educating on the benefits and merits of renewable fuels, and we are poised for a significant expansion in biofuels in the coming year or two as a result of the passage of this bill.
I have a few comments. I'll try to keep them brief because I prefer to leave some time for questions, but first let me say that I don't think I'm understating it when I say that the potential for our industry is huge with the proposed renewable fuel standard and the passage of this bill. It means a significant expansion of both biodiesel and ethanol in Canada, and when I say potential, it's because not all the work is done yet with this bill. A significant amount of work needs to be done, and I'll touch on that in a second, but I think there's little debate within most jurisdictions about the environmental benefits, the agricultural benefits, and the rural economic benefits of expanding the biofuels industry in any jurisdiction.
With respect to the environment, there are significant clean air benefits in reduction of CO2, there is significant reduction of particulate matter with the usage of biodiesel, and significant greenhouse gas reductions with the implementation of ethanol and biodiesel into the fuel pool.
Second is economic development. I think many of you who represent rural communities will know that there are dozens of communities across the country right now that are anxious to see biofuels facilities built in their towns, for the simple reason that it will have a huge impact on their local economy. The vast majority of the resources and money are spent in the community, and any town that's gotten an ethanol plant in the U.S. Midwest can attest to the fact that their rural economies have expanded significantly as a result of introducing ethanol and biodiesel plants into their town.
Third, agricultural benefits again are significant. There are three primary benefits. One is the direct impact on grain prices. Our large facility in Chatham, Ontario, has had a huge impact on the local price of corn, and farmers are benefiting from that. Secondly, it's a great hedge for farmers. When grain prices are very low and if they've invested in ethanol or a biodiesel facility, the biodiesel and ethanol plants are making money; and conversely, when grain prices are high, the plants may not be making money but the farm is making money, so it's a great built-in hedge for the agriculture sector.
Finally, from a government perspective, if you are increasing revenue to the agriculture sector through these kinds of value-added propositions, then clearly it means fewer support payments from government to the agricultural sector. Those benefits are undeniable and widely recognized across North America.
The 5% renewable fuels standard that is being promoted by the government right now will create a market for about 2.5 billion litres of ethanol and biodiesel. There are many initiatives that the government could support to reduce greenhouse gases today, but there are very few initiatives that the government can support in the transportation sector that are readily available and immediately available to reduce greenhouse gases, and expanding the biofuels sector is one of them.
The blending of these fuels into the nation's fuel pool will reduce greenhouse gases by over four megatonnes annually, and this will be the equivalent of taking thousands of cars off the road annually. Undoubtedly, today's legislation will achieve this outcome. There is no question about it. The passage of a renewable fuel standard will create a demand for 2.5-plus billion litres of biofuels in the marketplace.
The question for all of us, I suppose, is this. If we are going to achieve those other benefits, the agricultural benefits and the rural economic benefits, then we have to build these plants here in Canada.
Let me just elaborate. We're happy to say that the government has consulted with our industry. They've listened to our proposals. We've put a proposal forward that will ensure that plants are built here in Canada. It's a proposal that puts us on a level playing field with the generous tax treatment and regulatory instruments that we see in the United States, where they're launching a new ethanol plant or biodiesel plant every two weeks. Our proposal will generate over $2 billion in investment in industry infrastructure, generate thousands of direct and indirect jobs, and provide much-needed value to grain and oilseed crops across Canada.
Of course, as anyone knows who's living in the GTA right now, or even in parts of Montreal, where there have been some refinery outages, we know refineries are running at maximum capacity these days. Injecting 2.5 billion litres of fuel into the fuel pool at a time when refineries are running at maximum capacity can only have a good impact on the pricing pressures in the marketplace right now.
In short, let me just summarize what our proposal is. Many of you are familiar with it, because we've met with many of you over the last several months.
In order to achieve some kind of tax parity with U.S. producers, ensure that we build plants here, and make that $2 billion in investments, we have proposed a 10¢ per litre ethanol tax credit program and a 20¢ per litre program for biodiesel. Anything less will put Canadian producers at a serious disadvantage with U.S. producers. We run the risk of simply importing fuel to satisfy the renewable fuel standard, and the investment that we talked about will end up in the U.S. I know all of you understand that.
Again, just to close and pass it over to Jeff, we are very pleased with the level of consultation that we had with the government. We know they certainly heard us, and I believe they now understand very well the economics of production in Canada versus the United States. We await the federal budget to see the next step of the biofuels policy in Canada.
I don't intend to speak for ten minutes, Mr. Chair, but I thank you very much for the invitation to be here.
Members, it's a pleasure for Iogen Corporation to have the opportunity to appear.
I just want to echo the comments made by Canadian Renewable Fuels Association chair Bliss Baker, and briefly describe cellulose ethanol.
Iogen Corporation is in the cellulose ethanol business. Ethanol is ethanol. It's the same molecule. The unique difference between grain-based ethanol and cellulose ethanol is that grain-based ethanol comes from corn or wheat or barley. In our case, we would not use the corn, we would use the cob and stalks and leaves, or we would use the straw in the case of wheat or barley. The other interesting thing about cellulose ethanol, of course, is that like grain-based ethanol, it has a very good greenhouse gas emission reduction profile, which is part of the goal of .
Iogen is the world leader in this technology. We have a demonstration plant here in Ottawa, right in your backyard. Any of you are welcome to come and have a tour of it. We're the only company in the world to have built a demonstration plant.
This technology has yet to be commercialized in the world. We are looking forward to getting it commercialized, but there are three legs to that stool. One leg is the technology leg, which we're responsible for. Another leg is the financing leg. Third, when you do financing, you have equity and debt. On the equity side, we have our partners, Goldman Sachs and Shell, ready to provide the equity, and we've had a long-term partnership with the Government of Canada. The government has been supporting our research and development over the last number of years. But on the debt side, lenders simply don't take technology risks. They don't lend conventional debt to emerging technologies. There's where the role for government comes in.
Iogen is looking forward to the commercialization of the cellulose ethanol technology. We've had good discussions over the years with a number of countries' governments, including the Canadian government, and we certainly are looking forward to the implementation and commercialization so that we can deliver on both the greenhouse gas emission reduction benefits and the rural economic development benefits that Bliss spoke about a few minutes ago.
Thank you very much, Mr. Chairman.
You've introduced my colleague Richard Arsenault. I also have with me Mr. Bob Pelland, who can help us if we need him.
As you know, the commissioner's group that I lead conducts performance audits of the implementation of the government's policies and commitments in the area of the environment and sustainable development. In commenting on what has happened in the past, we make recommendations to help point the way to make things better in the future. In all of our work for Parliament, we are strong advocates for sound management of environment and sustainable development by government departments, agencies, and corporations.
As you know, I have been in the post of interim Commissioner for about a month, although I have been involved with the Commissioner’s group for some time. Allow me to make an overall observation with respect to an important challenge faced by government in the area of environmental sustainable development.
With respect to climate change, it seems to me that the task is somehow to encourage and support government officials to work as if there was no tomorrow, day in and day out, for weeks, months, and years at a time, to bring about change, much of which only our children and perhaps grandchildren will see. When you think about it, this is an incredibly difficult but absolutely essential management challenge that must be addressed. That's where the commissioner's group can play a significant role.
Frankly, we are experts at auditing the quality of environment and sustainable development management and in reporting what we find to Parliament. Our findings and recommendations are carefully crafted to help parliamentarians understand what has happened and what may need to change in the future.
For example, last September, after 18 months of detailed audit work in federal departments and agencies, we tabled a report on the management of climate change by the federal government.
In a nutshell, we said that Canada was not on track to meet its international obligations to reduce its greenhouse gas emissions; that Canada was not prepared to adapt to the effects of climate change; and that the federal government’s efforts were not well organized and not well managed.
On the positive side, we also said that the government had a foundation to build on. There are several positive programs and practices and there are many motivated and talented public servants committed to success.
In our report, we made a series of recommendations to address the deficiencies that we had identified. When we were finalizing our 2006 report on climate change, the current government stated that it accepted our recommendations and would address them in its climate change approach, the development of which was then under way. As we understand it, the Clean Air Act is seen by the government as an integral component of its climate change plan, which is still being developed. As we have done for the previous government's plans, we will eventually audit the implementation of this new plan once it is in place.
Furthermore, in future reports to Parliament, we intend to examine the status of actions by the government to address the deficiencies that we have identified and the recommendations that we have made with respect to the management of climate change programs.
Mr. Chair, it is my understanding that your committee is also interested in exploring tax system opportunities in relation to Bill . We did some work in this area in 2004. Back then, we conducted an audit of the implementation by Finance Canada of three commitments it had made in its sustainable development strategy of 2001, on using the tax system to achieve the integration of the economy and the environment.
It's well known that the tax system can have an important influence on the environment, directly or indirectly, by encouraging environmentally positive activities through tax credits, for example, and by discouraging environmentally negative activities.
As part of the 2002 plan of implementation of the World Summit on Sustainable Development, the Government of Canada and other countries agreed to pursue certain issues related to fiscal aspects of sustainable development. These could include issues such as restructuring taxation and phasing out harmful subsidies where they exist.
During our 2004 audit, we found that Finance Canada had analysed a range of issues associated with the tax-related commitments, made in its 2001 sustainable development strategy. However, we found that Finance Canada’s approach to implementing these commitments had been piecemeal and fragmented. We also found four cases that led us to question whether the department had the appropriate capacity for environmental analysis. Consequently, Finance Canada was not in a position to tell Parliament and Canadians the extent to which it had analysed how the tax system impedes or favours the attainment of sustainable development.
We recommended that in order to meet the intent of its 2001 SDS commitments, the department should conduct a systematic review, based on risk, of key opportunities for using the tax system to better integrate the economy and the environment. In our view this would be an important step toward using the tax system as a tool for sustainable development.
I'd like to conclude my remarks this morning with two final observations.
First, with respect to commenting on the Clean Air Act directly, our long-standing practice in the commissioner's group and within the Office of the Auditor General more generally is to avoid commenting on a bill that is before the House of Commons unless the bill directly affects the work of our office.
Second, my group of 40 dedicated environmental audit professionals is working very hard on a good dozen audits to be reported in October of this year and February of next year. They deal with issues such as toxic substances, pesticides, and contaminated sites. We have scoped out additional audits and studies that will be slotted into future reports once our consultation process with parliamentarians and others is complete.
Mr. Chair, this ends my opening statement. We would be very pleased to answer questions that members may have to the extent that we are able. Thank you.
Thank you. I appreciate the opportunity to talk with you all this morning.
I will start off by saying I am not an environmentalist. I represent no special interest groups. I am a capital markets person who has been trying to grasp this issue for more than 20 years, and I have attempted to keep up personally not only with the science but with the economic and social impacts and the way in which capital markets can be expected to respond, especially to changes in fiscal policies.
I try to steer a course between worry and realism. I have five suggestions: one about science and four about policy.
I believe this country is not prepared for what seems likely to happen. This is reflected in the apparent unwillingness to distinguish between mitigation and adaptation, and the difference in fiscal policies that arise from that failure.
My first point is on the science, and the melting of the permafrost. I believe the Canadian government should instigate a thorough emergency research program into the melting of the permafrost. We usually think of this as being the impact of climate change on the residents of the north, but the other side of the coin has incredible implications. This is the feedback loop of how the melting of the permafrost is and will be liberating hundreds of millions of tonnes of carbon dioxide and methane.
I prepared a chart that is being left with you. It's my attempt to quantify the best research I can find. As you can readily tell, if my estimates are anywhere near right, we are headed for a greenhouse gas stabilization that is three and a half to four times pre-industrial levels. This is quite stunningly about double other estimates, such as are in Nicholas Stern's report to the Government of the United Kingdom or the most recent IPCC reports, which do not account for this feedback loop.
Under this scenario, Canada would be the source of maybe one-sixth of global emissions, not one-fiftieth. These emissions might already be out of control, because the faster they happen, the bigger the feedback.
I have not put estimates of resulting temperatures in the charts because I can't find any authoritative work. It would appear most likely that the temperature changes and rises in sea level would be much greater than the recent IPCC estimates.
The outcome of this research will have many implications. One, about 30% of the permafrost is ours. It is our international duty to get the answer to this question.
Two, the public expects its leader to tell them all the news, especially the bad news, so we can prepare ourselves for the future. How awful it will be if it turns out the government knows how serious things are but doesn't tell us.
Three, if the research I've used is anywhere near right, the global economic damage will be far greater than that estimated by Nicholas Stern. Canadians will suffer.
Four, maybe this will inspire China, India, and other developing nations to work more closely with us to avoid a truly huge disaster.
Five, it will help Canada determine where to focus attention and resources. We need to decide whether we should spend our scarce resources on adapting to climate change or trying to slow it down.
If I'm right about this, and I'm right in my unconditional skepticism about international treaties, then we should try to understand how to prepare our citizens for living with what's coming.
Reducing our greenhouse gas emissions by 60% by mid-century would be a cruel target because it would not be enough to have any positive impact on Canadians then alive. We'll have to learn to live with drought in many places, with vastly reduced global food production, with overriding gross changes in the economic well-being of citizens around the world and in our own country, with a very different makeup of the job market, and with new diseases.
This implies to me that it might be far more important to focus fiscal policy on changes like new genetic improvements for humans, nano technology combined with biotechnology to produce new and maybe artificial crops, water conservation and use, much less energy per unit of GDP without sacrificing standards of living, and new adaptations of urban living.
Secondly, there are economic and social issues. The argument about whether humans are conscious of climate change is surely over. Now it is time to turn to how much we should be spending. To simply say “do everything you can” is to ignore fiscal scarcity. Climate change is a trans-generational problem, not unlike the national debt. We have to decide what, if anything, we give up when the real cost is squarely on my and your grandchildren.
I would request that the government fund an independent third party, someone such as the National Round Table on the Environment and the Economy, to estimate the social and economic cost to Canadians at predetermined intervals of, say, 20 years from different temperature regimes and depending on the accumulations of greenhouse gases--so for example, in 2020 or 2040 or 2060 or 2080.
The results of the research about emissions from the permafrost must be included.
These costs should include estimated impacts on things such as agricultural production, including the impact from reduced water flows from the Canadian Rockies to the prairie grain crops. As The Globe and Mail noted last Saturday, at 40°C, temperatures that are now starting to occur in many areas, heat stress causes photosynthesis to shut down. Making fuel from food is a very short-term proposition. The costs should include the estimated impacts on fisheries, both ocean and fresh water, especially since there are those who now believe our salmon are doomed; rising sea levels and their impact on real estate values or the cost of dykes; flora such as forests, whether through heat, dryness, or disease such as the mountain pine beetle; water for personal and industrial consumption, including the ability to generate electricity from hydro and manufacturing--for example, will there be a Canadian car manufacturing business in 2060?
The effect on people will include population dislocation and decisions about whole sections of a dispossessed society similar to paying for the loss of fishing income for the Maritimes, but on a massively greater scale; first nations livelihood from the loss of fauna; reduced birth rates and increased immigration, especially from nations whose food outputs are under siege; just about every job in the country; revenue collection; and additional expenditures for federal and provincial governments, meaning less is available for key services such as health care and education.
Demonstration site. Canada's human emissions make little difference to total greenhouse gas accumulation. After all, Canadians emit less than 2% of global human emissions, which is about the same as the annual increase in emissions from China. We should be addressing why causing some potential disruption to the Canadian economy will make a difference globally.
I believe our attention should be on helping the developing world. If Canada doesn't make the effort, why should they? After all, they argue--and convincingly, in my view--it's been our greed and wealth accumulation that has caused the problem. Why should they be restricted from seeking the same standards? China has made it very clear that on the basis of equity alone, it is entitled to ignore its emissions of greenhouse gases. Telling China to cut back on future standards of living is no more likely to succeed there than it would here.
The question is how do we help. The implication, to me, is this. Canada should think of itself as a demonstration site to show two general things: first, that there are systematic approaches that can work; and second, that we can be a place that spends time and money developing new technologies whose feature is enablement of improved greenhouse gas performance at low cost. Many of these technologies can't get to their lowest manufacturing price with the volumes available in the Canadian market, and perhaps not in our traditional markets either. If they are a feature of developing economies, volumes can be sufficient.
Using Canada as a demonstration site is useful only if we have a deliberate, proactive dissemination plan. Such a plan ought to include, one, inviting foreigners to play a role in demonstrations, including those funded by Sustainable Development Technology Canada; two, agreeing that the business opportunity is not to sell Canadian goods, but instead to use Canadian technology as a partnering opportunity to combine forces with developing nations to drive down manufacturing costs; three, the government guaranteeing intellectual property protection; four, the government promoting the effective use of the clean development mechanism to recirculate Canadian dollars; five, proactively supporting organized industries--for example, the Chinese want our hydrogen and fuel cells to improve fuel efficiency, improve their local air quality, provide an industrial opportunity, and maybe even reduce their greenhouse gasses, and they don't care what our rationale is--six, using the low-cost manufacturing technology overseas for partnered access to third country markets; seven, setting up an industrial feedback loop whereby we agree to be the first developed market to buy and deploy the products they make less expensively as part of our own systematic approach to reduce greenhouse gases. The other reason for such a plan is to attract capital, and to that I'll turn next.
Capital markets and new technologies. These two subjects are intimately related. First, there are only two ways to influence international behaviour: either diplomacy along the lines of Kyoto--and that is demonstrably going to fail because the big countries will not submit to sanctions--or through the actions of capital markets.
Capital markets are unsentimental. They care only about winning and not losing. International money, institutional money shifts very fast and is waiting to move where fiscal policy shows it can either benefit or maybe, more importantly, avoid losses. It will move to places where it's evident that GHG-benign policies are put in place. It will move away if policies continue to encourage industries whose output will not sell. Capital markets are going to be the great rationing card as we scramble to allocate future scarcities.
Second, capital markets are enthused about funding new solutions, and they will respond. Conversely, there's no point in trying to introduce new technologies unless there's receptivity in capital markets.
Sustainable Development Technology Canada plays a great role in pre-market demonstrations. The work it does is unique in the world and must play a role in a comprehensive Canadian policy. The Commissioner of the Environment and Sustainable Development has endorsed its results, and especially its governance model. I encourage you to give it more funding.
Even for SDTC, profit-oriented capital market uptake is crucial. The same market acceptance filter ought to be imposed on every so-called technology fund the bill mentions.
If you introduce underlying fiscal policies that improve the general circumstances for making money out of technology change, entrepreneurs and capital markets will pay attention. In other words, I believe that every fiscal measure you think of introducing should be measured more against the impact on capital markets than against anything else. Fiscally induced changes in behaviour are important only if they cause capital markets to pay attention. Send the right signals, and capital markets will react.
For example, capital markets—
A recent survey indicates that Canadians, on average, won't pay more than $100 to permanently eliminate climate change. Citizens will not tolerate reductions in their standards of living, and that is why those who suggest hair shirts and bicycles will not prevail. South Coast Air Quality Management District discovered this more than 20 years ago, and its answer was to focus on forward-looking regulations, such as vehicle emissions standards. Mark Jaccard loves those and has an effective explanation of them in his book. This is what got Ballard Power funded: send the right signals, and capital will react.
I like the idea of increasing the proportion of hydrogen to carbon for all Canadian hydrocarbons delivered to the border or to the refinery.
Another plan is tax shifting, where we make deliberate decisions to introduce, over time, higher and higher new consumption taxes on carbon-based products, offset by reductions in other consumption taxes and corporate and personal income taxes. We should assure the public the net change will be revenue neutral. The key is that people will be able to make choices about where to spend their money and will gain economically.
Finally, let me commend prizes. For example, you might consider joining up with Sir Richard Branson and doubling his $25 million prize for GHG extraction techniques, but payable by Canada only if Branson's winner's work is done here.
Select other far-out radical targets, maybe such as fusion or very deep drilling for geothermal power. Don't think for a minute that capital markets won't pay attention.
Humans are at a crossroad. Future generations will fault our leaders if they do not recognize the importance of the situation. But to say we should do everything we can is a gross oversimplification, unless we study better what the impacts will be and when they will occur. Technology is not at fault. Getting the fiscal and regulatory conditions right for capital markets to do their thing is the critical issue now. That, as I see it, is your job.
First of all, what was announced yesterday in Washington was an invitation to commence negotiations with the U.S. Department of Energy. It was not an award of funds. It was an announcement that they intend to start discussions for an award of up to $80 million U.S. That whole process will unfold as it will over the next few months.
It does not guarantee that we would build a plant in the U.S. The grant money that is being proposed is going towards the project that we are proposing to build there, but you still need to cover the debt financing component of the facility. In that case, the instrument that the U.S. government has chosen to use is a loan guarantee.
To the extent that we are talking here about tax policy, the federal government doesn't have a lot of levers at its disposal, but one of the strongest levers it has is tax policy. We've had discussions for many years with the Canadian government, looking at a combination of economic instruments. They could be loans, they could be grants, they could be loan guarantees, they could be any combination of the above. Certainly we've had a lot of support from the Canadian government with respect to cost-shared R and D and repayable contributions through the Technology Partnerships Canada program, but the Department of Finance has decided, in their wisdom, that loan guarantees are not an economic instrument that this government wishes to use. At least, that's been their position so far.
Another country where we're looking at building a facility is Germany. For the German government, loan guarantees are just a common way of doing business to encourage emerging technologies. In fact, it's such a common way of doing business in Germany that PricewaterhouseCoopers has a standing contract with the Government of Germany to manage their loan guarantee program for emerging technologies.
The U.S. government is kind of halfway in between Canada and Germany. It does not have a standing program, but it instituted in legislation in August 2005 a loan guarantee program to cover the technology risks associated with emerging technologies--not just cellulose ethanol, but the next generation of nuclear, something called coal to liquids, and so on.
We continue to have discussions, quite positive ones, with the Canadian government. With respect to the coming budget, we hope to see some initiatives put in place for the commercialization of cellulose ethanol in Canada.
Thank you, Chair. Five minutes is not enough, but that's all I have.
I have just a very quick comment. I appreciate Mr. Jackson's comments on carbon credits. Some of the witnesses who have been before this committee, for example, Professor Boyd from UBC, Professor Mark Jaccard from Simon Fraser--I'm quite sure you're aware of them--Ms. Donnelly from the west coast.... There is a common theme that we've heard about carbon credits, and I'll just quote Mr. Jaccard:
||Buying credits is an option often discussed but little understood, Mr. Jaccard said. “Buying international credits in a four-year timeframe is virtually impossible because you have to buy it from someone. Someone somewhere has to have done some greenhouse gas reductions and we have to be able to verify that they did that. That is really difficult,” he said.
So that was the theme, but I don't want to go down that path. We all basically need to reduce our greenhouse gas emissions, and this government is committed to doing that.
I want to ask Mr. Passmore questions about the cellulose ethanol. I had a tour of and was very impressed with the demonstration facility we have here in Ottawa, and I'm very optimistic that it is a technology that will help us to dramatically reduce greenhouse gas emissions and to provide cleaner fuels by using, basically, a waste stock.
You have these giant bales. You pulverize the straw, and then by adding an enzyme, you create alcohol, like in a big still. You then add gasoline to come up with 85% alcohol and 15% gasoline to create what is call ethanol E85. Am I understanding that correctly?
For the benefit, maybe, of the people who are watching today, and to understand how the technology works, what can you use for a stock? You are using straw at Iogen right now. What other type of stock can you use? Is it grasses, wood? What can you use to create ethanol?
Thank you very much for the question.
Let me start off by saying that ethanol is ethanol. The molecule that we make at Iogen using cellulose is the same molecule as Mr. Baker makes using grain. Ethanol is ethanol. But you're right, our ethanol comes from various feedstocks that are high in cellulose content. We can use any number of grasses.
In Canada, if you were building a plant in Ontario, you'd be using corn cobs and stocks and leaves, because we grow a lot of corn in southwestern Ontario. In the Prairies--in Manitoba, Saskatchewan, and Alberta--you'd be using cereal straw. We grow a lot of wheat and barley in western Canada, so we would use the straw from the wheat and barley.
We can also use things like switchgrass, which is a native prairie grass that grew back in the days when the buffalo roamed. The U.S. Department of Agriculture has identified switchgrass as a dedicated grass that it would like to see farmers start to grow as an energy crop on land that they're not currently growing crops on, or on marginal land where they could actually grow an energy crop such as a native prairie grass.
Your description of the process is correct. We bring in these big bales of straw, and we add enzymes. Enzymes are no different from the saliva in our mouths that helps us digest food and starts to break it down the minute we put food in our mouths. These enzymes attack the cellulose and convert that cellulose to glucose. Glucose is just sugar, so you ferment it and distill it to make alcohol.
It doesn't have to be used in an E85. Right across the country--and this is a little bit to the question that member Holland asked--E10 blends can be used by all cars today. All car manufacturers warrant up to the blending of 10% ethanol. It goes seamlessly into the existing infrastructure.
As for the E85 that you talk about, which is 85% ethanol and 15% gasoline, we have a fleet of vehicles at Iogen that run on cellulose E85. These are called flexible fuel vehicles. They exist because of U.S. law, not because of Canadian law. The U.S. CAFE standards--corporate average fuel economy--require that across your vehicle fleet, if you're an automotive manufacturer, you have to have a minimum of...I forget if it's 28 miles to the gallon. If everybody were buying Geo Metros, that would be easy. If everybody is buying SUVs, it's hard to meet those mileage standards, but you get a credit against your CAFE standards for alternate fuel vehicles. So if you can run a vehicle on 85% ethanol....
Chrysler makes them, Ford makes them, General Motors makes them. There are about, I can't remember, six or eight million of them on the road in the U.S. today. We have a fleet of E85s. I've been running my Chevy Impala on cellulose E85 for the last two and a half years.
We'll move directly to the question.
(Motion negatived: nays 10; yeas 1)
The Chair: I'd like to provide a little bit of guidance, then, for the conduct of the business of the committee.
On January 29, 2007, the committee adopted the following work plan: “That the Committee hear witnesses until March 2, 2007; That the two week break in March be used to formulate amendments; That the Committee begin clause by clause consideration the week of March 19, 2007 and; That the Committee report the Bill back to the House no later than March 30, 2007.”
At its organization meeting on December 14, 2006, the committee adopted the following motion with respect to amendments: “That amendments to Bill C-30 be submitted to the Clerk of the Committee 48 hours prior to clause by clause consideration without limiting the ability to present additional amendments at the meeting itself.”
I take this to mean that members will make every effort to have all their amendments prepared and sent to the clerk so that comprehensive amendment packages can be compiled and distributed in advance of the first clause-by-clause meeting. Assuming that the committee wishes to begin clause-by-clause study on Monday, March 19, this would mean that the amendments should be in the clerk's hands by Thursday, March 15, at 5 p.m.
Is that clear to all? Okay.
If there is no further business, then this meeting is adjourned. Thank you very much. Have a good break.