ENVI Committee Meeting

STANDING COMMITTEE ON ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

COMITÉ PERMANENT DE L'ENVIRONNEMENT ET DU DÉVELOPPEMENT DURABLE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, September 26, 2001

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[Translation]

The Chair (The Hon. Charles Caccia (Davenport, Lib.)): Good afternoon, ladies and gentlemen. Welcome to today's meeting, held pursuant to Standing Order 108(2). This will be a briefing session on the Seventh Conference of the Parties to the United Nations Framework Convention on Climate Change.

[English]

We're very glad to have here the distinguished officers from two departments, foreign affairs and environment. We welcome you, of course.

As it is customary, we invite you to give short statements if possible. If each one of you speaks for 10 minutes that will be 50 minutes. That will then give us an opportunity to have a good round of questions and answers, which is sometimes very productive and informative.

Do I take it that Norine Smith would like to be the first speaker?

Ms. Norine Smith (Assistant Deputy Minister, Policy and Communications, Environment Canada): Yes. Thank you.

We have actually just one presentation that I will give as an overview of the Bonn agreement and then—we have the expert negotiators with us—it will be over to the committee for questions. It will probably be more like 10 to 15 minutes.

The Chair: I see. That's very helpful to know. Who will then follow Ms. Smith?

Ms. Norine Smith: We will not be giving individual presentations. I'll provide an overview and then—

The Chair: Yes, you will be speaking for your department.

Ms. Norine Smith: I'm speaking for the negotiating team, which is a multi—

The Chair: So you speak for both departments?

Ms. Norine Smith: Well, yes. In fact it's a multi-departmental negotiating team. I have here with me part of the committee, the lead negotiators in a number of the areas. So they will—

The Chair: So all the others are cheerleaders or supporters—

Ms. Norine Smith: No, no.

The Chair: —or admirers?

Ms. Norine Smith: I'm anticipating that the committee will have questions about various aspects of the agreements and they have access to the experts here.

The Chair: Well, fine, if that is how you have structured it. And who will speak on the national dimension? You as well?

Ms. Norine Smith: Yes, I can.

The Chair: As well as on the international?

Ms. Norine Smith: Yes, I can.

The Chair: All right. Then the floor is all yours.

Ms. Norine Smith: Thank you, Mr. Chair.

I will be speaking to the short presentation provided to the committee two days ago, I understand. We have additional copies if there are members who do not have them.

My presentation will be focusing particularly on the international dimension, specifically on the Bonn agreement—how much has been achieved in the negotiations in Bonn and what remains to be dealt with in the negotiations in Marrakesh.

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Turning to page three, here is a very brief overview of what we have with the Bonn agreement. We have what Canada considers to be quite a workable compromise package. It was quite a success for the Canadian negotiating team with respect to the progress and the recognition of sinks. There was a lot of detailed work undertaken with respect to the Kyoto mechanisms. So we're well advanced and have what we think is now a fairly practical framework for the mechanisms.

We have a fairly reasonable compliance regime. Some questions are still to be answered there. The negotiations with respect to developing country commitments were finalized. It is quite a manageable package of commitments with respect to developing countries. We have launched a process on clean energy. In fact, next week there will be a meeting hosted by Canada on the subject of clean energy.

The Bonn agreement is a political agreement. It's a relatively short document. Those meeting in Marrakesh will be taking what was about a 12-page document and translating it into about 250 pages of legal text. But the agreement itself answers the key questions as to how we're going to be implementing the Kyoto protocol. From the key issues settled in that political negotiation, we have now reached the conclusion that we probably do have the flexibility we need in order to take the next steps.

The Chair: Excuse me for intervening for a moment. Are you now on page three, moving to page four?

Ms. Norine Smith: Yes, I am.

The Chair: Thank you.

Ms. Norine Smith: So on page four, on July 23, after the ministerial portion of the Bonn meeting was over, the Prime Minister commented on what he thought we had achieved at Bonn. Effectively, these comments are our instructions for the year ahead. He said:

I'm confident that the agreement reached this weekend in Bonn opens the way for Canada's ratification of the Kyoto protocol next year, following full consultations with the provinces, territories, stakeholders, and Canadians.

On page five, you will read a little about the dynamic of the meeting itself in Bonn. As you're aware, the negotiations at The Hague were very difficult and ended in stalemate. Bonn started with three or four days of technical negotiations among officials, then moved into two days of negotiation and further exploration of issues among ministers.

At the end of those two days, the chair of the session, President Pronk, who is the environment minister from the Netherlands, collected together all of the advice and the views he had heard over the course of the Hague sessions, the intermediate meetings, and the meeting at Bonn to date. He then presented a text, which was effectively a take-it-or-leave-it package.

Let me give you a little context on the umbrella group. It's unlike many of the other negotiating groups. It's a pretty loose coalition of about 11 countries. It was a rather divided group with respect to their views about the acceptability of President Pronk's take-it-or-leave-it text.

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There were a number of countries within the umbrella group that were quite happy with the text as it stood. The European Union was prepared to take the text as it stood. The G-77 plus China were prepared to take the text as it stood. Canada, Russia, Australia, and Japan expressed concerns and wanted to continue to negotiate on various aspects of the text.

The only area that did have any further negotiation was with respect to the compliance regime, and there were some changes in that area that occurred between Saturday night and when the agreement was reached on Monday morning. As this page identifies, for Canada at that point, in deciding what we thought about the overall package, we were looking at the balance within the package with respect to a very strong text in respect to sinks; a very reasonable text with respect to developing countries having made a lot of progress on issues like the mechanisms; and seeing some major concessions from other parties with respect to the compliance regime. So Canada joined the consensus when it was reached on Monday morning.

Turning to page 6, I'll spend a little more time on each of the four or five key areas. First of all, with respect to sinks, in particular how forests and agricultural soils absorb carbon dioxide and how that is reflected as a major contributor to the climate change solution, for Canada this was a very major point of principle in the negotiations. Sinks, when they are sources, when forest and agricultural soils are poorly managed and are sources, are a very large part of the problem. Globally, about 20% of annual emissions come from forest and agricultural soils. We wanted to ensure this major contributor to the problem was brought in as a major potential source of the solution as well.

The final arrangement with respect to sinks is one that will, it is anticipated, allow us to earn on the order of 30 megatons of emissions—call them credits, if you will, but I'm using the term very loosely—based on the forestry and agricultural practices that are in place in Canada. With additional investments we have room within the sinks package to have a slightly higher number, if that's possible.

The Chair: Perhaps for the benefit of all members, Ms. Smith, you may want to indicate the total number of megatons to be achieved, so the 30 megatons can be understood in that context.

Ms. Norine Smith: The estimate of the gap between the business-as-usual scenario of what Canada's emissions would be in 2010 and our target of minus 6% of 1990 emissions is on the order of 200 megatons. It's estimated to be about 15% that would be met by good management of our forest and agricultural soils.

What remains to be done in Marrakesh at this point is largely technical. It's with respect to the accounting and reporting guidelines. It's very important work, and getting it right will be something that our technical people will be focusing on very much. But the framework for the sinks package is now in place, and domestically our challenge is now to increase the pace of our work both within the federal government and with the provinces and territories on our national measuring, monitoring, and reporting systems and the levels of investment made by governments and by the private sector in forestry and in the education systems with farmers, for example, on how they manage their soils and can contribute to improving soils as sinks.

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With respect to the Kyoto mechanisms, the Bonn agreement effectively establishes the framework for the international marketplace for greenhouse gases. One of the things that was important for Canada was that there be no artificial limitations on the way in which that market operates. Some of the other parties at the negotiation were wanting to put constraints onto the market in a variety of respects.

One constraint is the idea of supplementarity. In particular, what that technical term means is the proportion of a country's total effort that is made domestically or can be made in other parts of the world. While Canada has stated for quite a number of years that we intend to achieve the majority of our reductions at home, it was nonetheless an important point of principle that this kind of numerical constraint should be brought into the system. There is no quantitative restriction of any sort in the Bonn agreement on the way a country can manage its policy for achieving its Kyoto target.

There was a lot of detailed technical work done on streamlining the process for project approvals under the clean development mechanism. One of the features of the clean development mechanism is that there will be a levy—the adaptation levy—assessed against those projects and used to finance adaptation projects in developing countries. The adaptation fee is 2%, which hopefully ensures there will be adequate resources for adaptation, but doesn't put such a high tax rate, let's call it, against the clean development mechanism that industry will steer away from using it.

Another issue was something called the commitment period reserve. That's the proportion of a country's total credits they're allowed to sell over the course of the commitment period. For a country such as Canada, the commitment period reserve is 90%, which means we're allowed to sell up to 10% of our units. Countries such as Russia or the Ukraine, whose emissions are currently well below their Kyoto target because their economies have taken such a profound downturn since 1990, are allowed to sell 100% of their current emission levels.

The commitment period reserve is important to make sure there's enough liquidity in the market, and we feel comfortable that the way in which it is set now, there will probably be enough liquidity in the market.

The use of nuclear power as a means of reducing emissions in other countries, in particular developing countries under the clean development mechanism, or in other countries who are under Annex 1, such as Canada, which is an Annex 1 country through joint implementation, was a major issue in these negotiations. The vast majority of countries were very strongly opposed to nuclear being included as a potential type of project. The text refers to countries refraining from using a nuclear credit.

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Those are the main political issues, so we now have a fairly good idea of how the Kyoto mechanisms would work.

Turning to page eight, what remains to be done in Marrakesh, a lot of technical issues still need to be dealt with in terms of measuring, reporting, and verifying emission reductions and how trades would be accounted for. There is a lot of “devil in the details” with respect to this text. But as I emphasized, we do have the broad framework in place now.

On page nine, with respect to the compliance regime, the main elements agreed to were that there would be a 1.3 restoration rate. That means for every tonne by which a country misses its obligation in the first commitment period, it would need to make up 1.3 tonnes in the second commitment period. A country would be obliged to file a compliance action plan to explain how it would make up that missed target amount, and that action plan is expected to give priority to domestic action. There are no financial penalties.

One of the issues that went down to the very last minute in the negotiations was, as I mentioned earlier, the one area that was only negotiated once. President Pronk presented his take-it-or-leave-it package, which was the compliance regime. The issue of legally binding versus non-binding consequences was one of those key issues.

Japan, Australia, and Russia were three countries that—for various reasons—were pressing very hard for a strong compliance system, though not a legally binding one. That issue was not resolved, and it will remain a subject for debate at Marrakesh—and undoubtedly in the years to come as well.

With respect to developing country issues, there is a wide range of things I could have talked about, and we do have the expert here. I suppose the common denominator is the funding the developed world was able to make available to help developing countries deal with climate change issues. There was a political declaration that was, I suppose, a side deal on funding. Canada's contribution is in the order of $35 million per year. This package caused a very high level of satisfaction among all parties at the negotiating table.

One of the developing country issues that remains for the longer term is when, and to what extent, they will eventually start taking on Kyoto targets of their own. No progress was made on this issue in Bonn, but the countries that currently have targets do have a consensus among them that developing countries should be taking on such targets at least by the second commitment period. Some countries would like that to happen earlier, but everyone agrees that at the very least it should be by the second commitment period.

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Clean energy exports was an area of particular interest to Canada. As you know, we export very large volumes of clean energy to the United States, with particular emphasis on natural gas and hydro. We wanted to ensure the launch of a process that would recognize the importance of encouraging the use of clean-air energy, and would promote greater recognition of the environmental benefits of cleaner energy. We have launched that process with the Bonn meeting.

Next week in Calgary, Canada will be hosting an international conference on cleaner energy and its global environmental benefits. Quite a number of countries from around the world will be joining us, and we will be reporting on that meeting at COP-7 in Marrakesh. We hope to see the process continue moving ahead by having a further workshop convened by the UNFCCC in the period between COP-7 and COP-8.

The negotiating team that's going to Marakesh will be watching closely to ensure that the political agreement achieved in Bonn is respected; that there's no backsliding on elements of that agreement; that it's safely translated into a factor of about 1:20 in pages of legal text; and that we can clarify a few areas where there are still issues of mechanisms and compliance to be dealt with.

There has always been a very active process in the two subsidiary bodies of the UNFCCC: one on implementation, and one on scientific and technological advice. Those two groups will be continuing their technical work. COP-7 in Marrakesh is the continuation of an ongoing process, and there will also be COP-8, COP-9, and COP-10. So there's still a lot of technical work to be done, though the Bonn agreement sort of breaks the back of the political negotiations required to lay out the implementation framework for the Kyoto protocol.

That is my overview, Mr. Chairman. I hope it didn't take up too much of the committee's time.

I will just briefly introduce my colleagues and their areas of expertise.

Paul Fauteux's colleague David Drake, from DFAIT, was to have been here with him today, but he's travelling and was unable to join us. Paul is co-head of delegation and negotiates with respect to certain areas of mechanisms. He's here to give you more detailed information in the area of sinks, if you have any interest.

Sushma Gera of DFAIT is lead negotiator for mechanisms. She has broad expertise in that area and specific expertise in mechanisms of clean development.

Pierre Giroux is also an expert on developing countries, and was a key member of Canada's negotiating team on the developing country package.

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Masud Husain is a lead negotiator with respect to the compliance package.

The Chair: Thank you, Ms. Smith.

Before we start the round of questions with the people on my list so far—Mr. Mills, Monsieur Bigras, Madam Kraft Sloan, and Mr. Herron—it would be helpful if you could put all this in the context of the totality of Canada's challenge. Could you indicate to the committee the level of megatons in 1990? From memory, I have the impression we would be at roughly 590 megatons, but you may want to correct me on that. On the business-as-usual curve, by 2010 we would be around 765. Would you please correct me, so that we know how the 200 megatons relate to these two basic figures?

Ms. Norine Smith: Mr. Chair, your memory is pretty good. Those figures move here and there, within five to ten megatons, as inventories are updated. We can provide the committee with the latest figures, but I think the ballpark figures I carry in my head are very similar to the ones you're using. The easiest way to think of it is as something in the order of between 600 and 800, with 200 megatons in between. We'll provide the committee with the very latest figures.

The Chair: Yes. In future, a presentation of this kind would be considerably enhanced if you could also include a slide that shows the curve—where we're at, and what will happen as a result of the 200-megaton reduction. That way, everybody gets a picture of the impact of just one nation's effort.

Ms. Norine Smith: In fact, the figures I have in mind include a graph showing how Canada's emissions have been evolving over time, where the business-as-usual line goes, and what would be required to achieve our Kyoto target.

I would perhaps ask for clarification on one point. With respect to what one country acting alone can do, were you looking for something more on that particular aspect?

The Chair: I'm trying to suggest ways and means to give committee members the broader national picture, so that everybody has an idea of the magnitude of the task. We could expand the Canadian domestic side, and also include the totality of the task being faced by the global community—bring in that megatonnage. So there would be two graphs. Your presentation would come to life more easily with a graphic, a visual type of presentation. It's just a suggestion.

Ms. Norine Smith: To comment very briefly on how Canada stacks up among other countries, we're responsible for about 2% of global emissions. So it's certainly not an issue Canada can tackle alone. We need to respond as part of the global community. But Canada is among the three or four countries with the highest per capita emissions, and we're currently at about 15% above our 1990 emissions level.

The Chair: That's a very important observation. Thank you very much.

We have Mr. Mills, Monsieur Bigras, Madam Kraft Sloan, Mr. Herron, Mr. Laliberte, and finally the Chair. Mr. Mills.

Mr. Bob Mills (Red Deer, Canadian Alliance): Thank you, Mr. Chair.

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First of all, I'd like to say that I saw Norine and Paul in action, and I think all of us as Canadians would thank them for the job done. They were pretty impressive my first time watching them in action. I congratulate them on that.

Now I'll ask you the hard questions, largely related to domestic issues. I'll give you a series here if I might, and I'm sure in the course of this afternoon you will answer them.

First of all, concerning the economics of the whole issue, and particularly when you talk about clean energy exports, if the United States is not part of this agreement and most of our clean energy goes to them, it would seem to me highly unlikely that we're going to get any credits, because we don't sell it to anyone else. So on the economics of the whole situation, how can we possibly get into an agreement like this if the U.S. and Mexico are not part of it, given NAFTA, given that one in three jobs is related to the U.S. economy? It seems to me impossible to even be discussing this issue.

Second, with regard to consultation, which is mentioned over and over again in your slides and in what we heard from the Prime Minister, and so on, a major meeting was held yesterday to discuss this, and of course Alberta was not present, through their own choosing, I expect. The point is, without prior consultation—and it didn't happen prior to signing Kyoto—it seems to me we have a major problem.

Third, when it comes to sinks, the question that would be asked most in the area I come from is who is going to absorb the cost of changed procedures. For instance, is the farmer or is the forester going to be asked to absorb those extra costs of changing methods in order to overcome that 20% as part of what they do?

I can go on, but because we have an expert here on developing countries, I would really like to know.... I've never heard the approach of selling our technology, or providing it at a discount, or as part of our aid package to actually get these developing countries onside. But if we can stop coal generation plants in China, that's going to have one heck of a lot more influence on our air quality than if we fine-tune a plant here in Canada or the U.S.

I think I'll stop there. As I said, I would like you to deal with as many or as much as you can.

Ms. Norine Smith: Okay. Perhaps I'll let my colleagues deal with your last question about selling the technologies.

On your first point, about how we do this in a continental context when Canada is the only country on the continent that would be subject to the Kyoto protocol, I think it is very important to pay close attention to the competitiveness implications of the policy that might be put in place. One of the things that have been discussed quite extensively among federal, provincial, and territorial officials and that was discussed when ministers met on Monday in Winnipeg is the analytical work that needs to take place in order to understand the implications under various scenarios of what Canada might do, how we might go about closing the gap, and also what other countries would do under various scenarios, in particular the United States.

The fact that the United States is not part of the Kyoto protocol doesn't necessarily mean the U.S. will do nothing with respect to climate change. As you know, they've had an extensive cabinet process addressing this issue, which has been a priority process for them. I'm sure it's not top priority right at the moment, but I'm also sure it hasn't totally dropped off the radar screen. Eventually we will hear from the United States what their intentions are with respect to action on climate change. They have already indicated in their earlier announcements the things they intend to do in the technology area, in renewable energy areas in particular.

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Your point is well taken that this is a question or a matter that needs to be watched very closely and clearly understood when the decision is eventually taken as to whether or not to ratify.

With respect to Alberta's participation at the joint meeting of ministers of energy and environment on climate change, they had a cabinet retreat that day; this is why they were not represented at the ministerial level. They did have deputy ministers there who actively participated, and they did participate at the ministerial level at the environment ministers meeting that took place on Saturday and Sunday, at which climate change was on the agenda.

Alberta co-chairs the national process at the officials level, so they are very actively engaged in the intergovernmental work that's going on in this area.

As the quote from the Prime Minister indicates, the need for a good consultative process is well recognized.

With respect to the cost of changed procedures, the main thing I'd comment on—and you commented in particular on foresters and farmers—is with respect to the agricultural community. In fact, making farms sinks rather than sources is actually a way for farmers to make money, because what it entails for them is less tillage, thereby saving on fuel and involving less use of fertilizers. So it's actually a money-maker for farmers.

Obviously not everything in addressing the climate change challenge is a money-making proposition. But the modelling work that was done pre-Bonn in the context of the federal-provincial joint work suggested that the impacts were in the order of 1% to 2% of GDP against a backdrop of expected growth of about 30% of GDP over that period. So you get 28% instead of 30%.

Now that we have the specifics of the Bonn agreement and have done that modelling work on the Bonn agreement ourselves, we feel that the impacts are probably about half of that. So we're talking about 0.5% to 1%.

The Chair: Thank you, Mr. Mills.

[Translation]

Mr. Bigras, you have the floor.

Mr. Bernard Bigras (Rosemont—Petite-Patrie, BQ): Thank you very much, Mr. Chairman. I have four questions.

On the matter of carbon sinks, if I understand correctly, the following commitment was signed in Bonn for Canada: the overall objective corresponds to approximately 199 megatonnes, and carbon sinks make-up about 22% of that global objective, which represents around 44 megatonnes. However, Canada's position last July 16, a few weeks before the Bonn meeting, was to set Canada's share of the overall effort to be achieved by carbon sinks at 15%. We know that that 15% amounts to about 30 megatonnes.

Why did Canada agree to negotiate a figure which is quite a bit lower than the figure which was publicly announced, at the international level? After all, there is a seven percentage point difference between Canada's position on July 16 and the one which was negotiated and ratified by Canada in Bonn. What is the explanation for that?

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Mr. Paul Fauteux (Director general, Climate Change Bureau, Department of the Environment): Mr. Bigras, what you say concerning Canada's assessment of the role of carbon sinks in its overall objectives before the negotiation is correct.

Then, the negotiation took place, which resulted in our being attributed a maximum acceptable credit of 44 megatonnes. That does not mean, necessarily, that we will reach that potential. Our estimation continues to be that the contribution of sinks to the attainment of the Canadian objective for the first commitment period will be approximately 30 megatonnes which represents 15% of the gap between the projections made in 2010 and the objective of a 6% reduction, as compared to 1990.

Mr. Bernard Bigras: Is that 15% contained as an objective in your national policies?

Mr. Paul Fauteux: No, it is an estimate. It is not an objective. Canada has never committed itself to reaching its objective by having sinks correspond to 15% of the total. This has always been an estimate. It is a projection, and reality may differ.

What we must retain from the negotiation in Bonn is that the ceiling that was set for the use of sinks by Canada is a ceiling that allows it to achieve that estimate, with a buffer zone, however. The sinks could be given a greater share, eventually, but as I mentioned that is a potentiality. It remains to be seen whether that potential target will be achieved. It would require additional investments. We have to see whether those investments will bear fruit within the commitment period, since, of course, quite a bit of time can elapse between the moment when the investment is made and the moment when the carbon dioxide is in fact absorbed into the atmosphere.

Mr. Bernard Bigras: Here is another question. With regard to the Clean Development Mechanism, I would like to know the reasons that justify Canada's position concerning the non-participation of the public in certain projects that fall under the Clean Development Mechanism, projects which would be authorized in developing countries. How can we justify—internationally, but also as concerns national responsibility—not consulting the population concerned when we agree to ratify a project within the context of the Clean Development Mechanism negotiated at all of the conferences, including the Bonn Conference? What reasons can justify not consulting the people?

Mr. Paul Fauteux: First, the text which was negotiated in Bonn on the Clean Development Mechanism was not the subject of a complete accord. As Norine Smith said before, some issues remain to be negotiated in Marrakech. That is my first point.

Secondly, the draft agreement, which has not yet been the subject of a negotiation or of a complete agreement, contains provisions for public consultation mechanisms. In Bonn, there was a debate on the project approval process within the framework of the Clean Development Mechanism; public consultation was to take place during that approval process. There is a project approval cycle which is quite detailed.

So, it was felt that there was a point at which public participation was timely, and there was emerging agreement on that. There was also preliminary agreement on the fact that the public did not have to be involved at each step of the process, because if the projects were not approved at every step of the approval cycle, this would make the implementation of those projects much more difficult, as well as technology transfer to developing countries and the attainment of sustainable development objectives.

Mr. Bernard Bigras: One last brief question concerning nuclear power. As you said, certain words are used. I am thinking in particular of “abstaining” from using nuclear energy. According to certain United Nations experts, “abstain” means “prohibit”. What is Canada's definition of "abstaining"?

Mr. Paul Fauteux: It is a very pragmatic definition. Since the international community has expressed its opinion on the matter through the ministerial agreement concluded in Bonn, it appears extremely improbable to us, if not impossible, that nuclear projects will obtain the agreement of the executive committee of the Clean Development Mechanism.

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This debate is behind us. It was agreed that the word “abstain” would be used rather than the word “prohibit”. For Chairman Pronk, Minister of the Environment of the Netherlands, it was a way of appeasing the countries that would have preferred that the use of nuclear power be allowed. But, practically speaking, the result is the same.

Mr. Bernard Bigras: Yes, but will the texts say? There will be legal texts, and I suppose there will also be negotiations around those texts.

Mr. Paul Fauteux: Indeed.

Mr. Bernard Bigras: Will the Canadian position be to equate abstention with prohibition, and to see to it that this is made abundantly clear?

Mr. Paul Fauteux: Canada does not, a priori, intend to insist on the use of the word "prohibit" since from our perspective, the result is the same and the matter is settled. In practice, there will be no nuclear power under the Clean Development Mechanism for the first commitment period.

[English]

The Chair: Before I recognize Madam Kraft Sloan, you may want to decide which of the two versions prevails, because in English you have “restrain”, in French you have abstenir. They are not exactly the same, so you may want to tell us which of the two is the one you have in mind that corresponds to your understanding.

Mr. Paul Fauteux: Mr. Chairman, if I may, the word in English is “refrain”, which I think is a correct translation of s'abstenir. It's not “restrain”, but “refrain”—“states shall refrain”.

The Chair: Do you want to correct your presentation accordingly? It's “refrain” in your text.

Mr. Paul Fauteux: “Refrain”, yes.

[Translation]

So, there is no translation problem.

[English]

The Chair: “Refrain”, thank you.

Madam Kraft Sloan, followed by Mr. Herron and Mr. Laliberte.

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

Mr. Bigras hit upon a question that I wanted to ask. You have said that this question has been resolved, if I understand it. But does this mean that Canada, at some later date, will try to promote the idea of using nuclear for credits? This is just the clean development mechanisms and JI, then?

Mr. Paul Fauteux: That's right. The only decision that was included in the political agreement concluded in Bonn concerned whether nuclear projects would be admissible for generating credits within the CDM and JI.

There is no restriction, explicit or implicit, on the sovereign right of countries, such as Canada and others, in using nuclear energy to achieve their climate change goals.

Mrs. Karen Kraft Sloan: Right.

Mr. Paul Fauteux: What I said was that this issue has been resolved for the first commitment period. The first commitment period will start in 2008, end in 2012. The Kyoto protocol only provides targets for the first commitment period. It also provides that beginning in 2005 the parties to the United Nations Framework Convention on Climate Change will begin negotiations on targets for the second commitment period, which will be another five-year period starting in 2013, ending in 2018. And it's envisaged that there will be continuous and contiguous commitment periods until this problem is resolved, which may take us well into the next century. So what I said is that this issue has been resolved for the first commitment period and it remains open as to whether there will be admissibility of nuclear projects for CDM and JI in the second and subsequent ones.

Mrs. Karen Kraft Sloan: Thank you very much.

Mr. Mills had asked you who will absorb the cost in making the changes required to reduce greenhouse gases. I'm wondering who will absorb the costs if we don't. Who will absorb the costs for our farmers, our industries, our communities, our fishing industries, for the people in the north, etc.? I'm wondering who will absorb the cost if we do nothing.

Mr. Paul Fauteux: A lot of people would absorb the cost if we do nothing, which is why the government is committed to doing something. In terms of the question that was put by Mr. Mills as to whether farmers and foresters would be made to bear an additional burden, as Mrs. Smith pointed out, there is in fact an economic incentive for farmers and foresters to manage the lands of which they are the steward, the forest lands and the agricultural lands, in a manner that is carbon friendly, in a manner than ensures that the forest and farmlands for which they are responsible are not net sources of greenhouse gas emissions, as they can be, but are in fact net sinks. So they're taking carbon dioxide out from the atmosphere rather than putting additional carbon dioxide into the atmosphere.

As we move toward a carbon-constrained world where there is a value put on carbon, this is an economic incentive for farmers and foresters to participate in the fight against climate change and to make money in so doing.

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There also is an issue as to what is the proper role of government versus the proper role of the private sector in achieving those sink reductions that I was discussing earlier with Mr. Bigras. As I said, there is a potential for up to 44 megatons per year in the commitment period that other countries agreed Canada would be entitled to, but in order to realize that potential there will be a need for additional investment. So it is a matter for discussion as to whether those investments should be public investments or private investments or partly public and partly private.

Mrs. Karen Kraft Sloan: Exactly, but I think the important point is to understand that there are huge costs, costs that we cannot even begin to estimate if we do nothing.

Mr. Paul Fauteux: Absolutely.

Mrs. Karen Kraft Sloan: I think the work that Environment Canada did a number of years ago, the Canada country reports, were very useful reports in taking a look at different regional impacts.

The other question I had is with regard to information you have on page 11 in your deck, and it's around the informal meetings on cleaner energy. Madam Smith had noted that there would be a look at natural gas, hydro, that sort of thing. I'm wondering what place wind and solar has in that mix and if you could identify some projects the Canadian government is doing to advance the use of wind and solar, and hydrogen cells and these kinds of things, as opposed to merely natural gas and hydroelectric.

Ms. Norine Smith: You're quite right that those are also clean sources of energy. In action plan 2000 and in budget 2000 there were investments made to support all of the sorts of things that you're just describing—for example, investment in technology development for hydrogen fuel cells, investment in renewable energy generation so that the Government of Canada was effectively drawing all of its electricity use from clean sources of electricity. There was the creation of the sustainable development technology fund, with an emphasis on climate change such that it would support the development of technologies that would help with cleaner energy. Those are just a few examples. There are quite a number within both the budget and action plan 2000.

Mrs. Karen Kraft Sloan: Just so that I understand correctly, these other renewable forms of energy will be discussed within these informal meetings as well.

Ms. Norine Smith: Yes, they definitely will be. It's on the slide under the heading of clean energy exports. The workshop itself is on cleaner energy more generally. It is much broader than the key areas of Canada's energy exports to the U.S.

Mrs. Karen Kraft Sloan: Thank you very much.

The Chair: Thank you. You may have a second round if you like.

Mr. Herron.

Mr. John Herron (Fundy—Royal, PC/DR): Thank you, Mr. Chair.

I'm going to reflect fondly back to the acid rain debate and the process that took place.

• 1630

It's 47 months since our colleagues were actually in Kyoto, nearly four years, and since then we really haven't seriously engaged the Canadian public the way the Turner government had done prior to our election win in 1984. It's been 47 months. We really don't have a provincial consensus, as we did with acid rain, which was done under the Mulroney regime.

In terms of actually getting going in a very significant way, in 47 months, beyond a very modest investment with respect to renewable sources of energy, we haven't even implemented what people would term a no-regret strategy, one actually having a significant investment the EU would take seriously. We only have sparse investments in terms of tax incentives with respect to renewable resources of energy or energy efficiency. We have yet to adopt anything like even an ethanol strategy, one where we would be able to invest en masse in the use of agricultural waste from corn husks to chips and perhaps even corn on some occasions.

We knew all along, 47 months ago, that if we're ever going to be able to seriously have and engage a strategy that would work for this country, it would have to be a North American strategy and it would involve tradable permits like those we had with acid rain. Why is it that it's 47 months down the road...?

I really appreciate your comment that even though the Americans won't sign on to Kyoto, it doesn't mean that they don't engage on climate change. Why, over 47 months, do we not have a tangible, rules-based regime in which the Americans have been seriously engaged? It would probably have been easier to move on this file during the Clinton administration than now. Instead, we are obstructive in terms of our approach at The Hague, more constructive in Bonn—bravo in that regard.

I guess my question is, why in 47 months did we not recognize the fact that if we were ever going to be able to move the yardsticks, we needed to have some form of a tradable permit regime? Do you think the 47 months was sufficient time to get the public engaged, to obtain a provincial consensus, and to develop a tradable permit regime? That's my question.

The Chair: Your mildly political question ought to be addressed in the House of Commons to the Minister of Natural Resources during question period. The officials cannot be blamed for the lack of consensus of ministers federal and provincial. The officials are only carrying out the instructions of their political leaders. Therefore, I think you would be quite all right to ask a question that is of a technical nature, but I submit that you're in a very legitimate political arena, one that is better dealt with in the House of Commons.

Mr. John Herron: I would say through you, Mr. Chair, that my point is that when it comes to the development of engaging the public and when it comes to the actual issues of having a no-regret strategy, clearly the officials would have a better capacity to negotiate. Their job would be easier if Canada had begun to move the yardsticks on this side from within our own domestic regime. I guess that's really where the origin of my point would be.

I have a very short second question if you will permit them to answer my first.

The Chair: Well, let's see whether the officials would like to comment on the public consultation portion of Mr. Herron's question.

Ms. Norine Smith: Well, perhaps I could comment a bit on some of the things that have happened in this period of time.

Mr. John Herron: Please do. Big ones, hopefully.

Ms. Norine Smith: I'll try to deal with quite a number of the things you referred to.

With respect to a tradable permits regime, there has been extensive work done in the federal-provincial-territorial context. There was a working group on tradable permits that produced a very in-depth study on how such a system would work, what the policy issues would be, and how you would design it. So we have a foundation on which to now take the next steps of beginning the consultative process with the people of Canada on how domestic emissions trading would work in Canada.

• 1635

One of the things that's pretty important in thinking about a domestic emissions trading system is understanding how it would mesh with an international market for greenhouse gases. Now that we have the Bonn agreement, we have the two pieces of the puzzle you can put together and actually take forward to the next step.

Mr. John Herron: But on that point, if I may.... I apologize for interrupting, because I did interrupt, but on that point, if we had started a tradable permit regime even though we didn't know exactly how the Bonn mechanism worked—or what would turn out to be something like a Bonn mechanism, so we could know the rules a little better now than before—wouldn't we at least have been able to get the process going? Obviously that would have been one element we knew all along, one we could have proceeded with. Why couldn't we have gone forward and tailored our approach, as opposed to waiting and then starting?

Ms. Norine Smith: I would say that the process has been started and that it's perhaps a fair bit further along than you are suggesting in the way you phrase your question. There is a very substantive piece of work, a consensus document that was done in the federal-provincial stakeholder context. Many people in the business community and in the environmental community were involved in that work.

It is a very technical area, obviously, and it is hard to capture the man on the street's imagination and interest as to the details of domestic emissions trading. But there is a group of Canadians who participated in that tradable permits working group, and through the national process that.... I'm saying that there are a lot of people both within governments, at the federal, provincial, and territorial levels, and within industry and environmental groups who now have a fairly substantial degree of understanding about how a system like that would work, how it needs to work, and what the policy issues are.

If I could, I'll just perhaps move on to touch on a couple of the other things you talked about. You talked about engaging the Canadian public. There has in fact been a continuous stream of work done through the climate change action fund, a component called public education and outreach.

I could provide to the committee what's referred to as the “scrapbook”, which is the compendium of the many very interesting projects that have been supported and that are taking place under public education and outreach. They're grassroots-level projects, which is perhaps why they're not ones you might know so much about, and there are a lot of them happening from coast to coast. I think they demonstrate a fairly exciting, creative, and wide-ranging effort to engage the public. There has actually been an awful lot that has taken place.

Mr. John Herron: I'll pose my short second question. I just think that Jane and Joe Doe aren't engaged in the issue yet. There are some neat things that have happened across the country, and it's very fair to talk about them to celebrate that, but in general people aren't really plugged into the issue. Whether at your cocktail parties, in your churches, or in your neighbourhood, they haven't really thought it through.

I just have a very simple question. I remember you were talking with the industry being involved in this tradable permit issue and trying to engage them a little bit. Over three years ago I asked questions in question period on this particular issue, the proper forum. When I asked questions on it, the response I received was quite clear: we will indeed provide rewards and set the rules for early action. Can you give me a tangible way where in the last three years we've actually rewarded an industry for early action?

• 1640

Ms. Norine Smith: Your question obviously draws from the extensive debate about the whole notion of credit for early action. Those words have been used in the very specific context of wanting to receive credit against some future Kyoto period obligation for actions taken today.

Mr. John Herron: But can you give a specific example?

Ms. Norine Smith: We have not implemented a policy for credit for early action in Canada, and I'm not aware of any other country that has implemented a policy for credit for early action either.

There is the voluntary challenge registry, VCR Inc., which operates on the basis of making sure people are aware—as you say, celebrating successes and providing a vehicle for successes in reducing greenhouse gases to be documented and celebrated. Companies who make considerable progress are recognized through this process, but there is no formal system of credit for early action.

Mr. John Herron: Thank you.

The Chair: Thank you, Mr. Herron.

Mr. Laliberte, please.

Mr. Rick Laliberte (Churchill River, Lib.): Thank you, Mr. Chair.

A few questions were touched on for which I want to get clarification. One that jumps out is the good management aspect of carbon sinks, especially the forestry side. What is the interpretation now, or what is negotiated? I haven't seen any text on it as a request since Bonn.

In terms of management, is it forest management lease owners; is it the foresters or their resource management councils; is it the provinces, the landowners—who gets the credits? You have talked about who bears the cost, but where does the credit go?

Mr. Paul Fauteux: We would be happy to provide you with a copy of the Bonn agreement, which includes the main political decisions that were taken on the sinks in Bonn, as well as a copy of the draft decision of the conference of the parties, which is what Norine referred to earlier as the translation of the political agreement into legal text.

As for your question of who gets the credits and where does the credit go, the agreement reached in Bonn leaves a lot of leeway to national governments over how they administer their credits in a national context. The Bonn agreement is an international agreement. It sets the rules as to how sinks will be recognized and accounted for internationally and the rules under which they may be used to meet part of the target, but it does leave a lot to be decided on a national basis.

Now that we have clarity on the international rules, there is a very substantial work program before us in a federal-provincial framework where we will be engaging provinces and territories, as well as private stakeholders, landholders, foresters, farmers, in how to set up our national system for monitoring and verifying absorption of carbon dioxide by sinks and how that absorption will be recognized in terms of a Canadian credit system. Those, as I say, are the national rules that the Bonn agreement sets the international framework for.

Mr. Rick Laliberte: So what level is the country at in this dialogue here at the national and provincial level? You've had some provincial ministers meetings. Was there a discussion of carbon sinks?

Mr. Paul Fauteux: Absolutely. Carbon sinks were mentioned. They were specifically highlighted at the request of one province in the communiqué approved by the ministers of energy and environment.

There is a process specifically dealing with sinks within the broader federal-provincial climate change process that is under way. As I said, we will be continuing to engage provinces, territories, and stakeholders with a view to establishing the made-in-Canada rules allowing us to take advantage of the international rules in order to contribute to meeting our target.

Ms. Norine Smith: If I may just add one sentence, federal-provincial-territorial agricultural ministers and forestry ministers have also been directly engaged in this. They're very proactive on this subject in an intergovernmental context.

• 1645

Mr. Rick Laliberte: From the perspective of someone living up in the boreal forest, this is of great interest—for people who are residents and traditional land users in those areas. But it seems like the dialogue is taking place at the board tables of the major forest companies, which are not in the boreal forest.

So the province is having a dialogue. The nation is having a dialogue. But the people living inside the boreal forest are not having a dialogue. I think that goes in a context of even the megatonnage that's being discussed here. There should be a website or something. You'd talked about a scrapbook. I think that should be—

Mr. Paul Fauteux: There is a website.

Mr. Rick Laliberte: They should be logged on to find out where the megaton...every year, is it jumping up or is it going down? Is there an indication that we're rounding the curve, so to speak, so we can all put our shoulder to the wheel? But nobody knows what wheel we're going toward and nobody knows where we're going.

As the chairman stated when he opened the meeting, this data is very important. It should be plastered on the weather channel or the science channel or CBC or wherever. But let us, as Canadians, know what we're up against.

Mr. Paul Fauteux: Thank you very much for that suggestion.

The Chair: Mr. Comartin, the floor is yours, and then the chair and then a second round.

Mr. Joe Comartin (Windsor—St. Clair, NDP): Thank you, Mr. Chair.

Ms. Smith, I'm not clear what Canada's position is on the monitoring of mechanisms. There's more to that still to be negotiated in Marrakesh. Correct?

Ms. Norine Smith: Yes.

Mr. Joe Comartin: What is Canada's position? That is, is it going to be done internally, or is there going to be an international body to do the monitoring?

Mr. Paul Fauteux: There will be, as I mentioned, several international bodies. There is the executive board of the clean development mechanism. My colleague, Sushma Gera, could deal with that in more detail, if you wish. There is also a supervisory committee for joint implementation projects, which was agreed to in Bonn.

So there will be international supervisory bodies that will ensure that the credits claimed for emission reduction projects in developing countries, in the case of the CDM, and economies in transition in the case of joint implementation, correspond to actual emission reductions, that we're not just trading in paper credits—that these credits do in fact represent actual emission reductions. There will be an international system of monitoring to ensure the validity of those credits.

Mr. Joe Comartin: Just to follow that up—I really don't want this to count as a second question, Mr. Chair—are there standards? Have standards been accepted as to how to do the monitoring?

Mr. Paul Fauteux: Yes. Sushma could answer that.

Ms. Sushma Gera (Deputy Director and Head of Canada's Clean Development and Joint Implementation, Office of the Climate Change and Energy Division, Department of Foreign Affairs and International Trade): Thank you.

Actually, one area Paul mentioned is directly with respect to the operation of the mechanisms, whether it's the clean development mechanism or joint implementation, where there are rules and procedures being developed. If a company goes out and does a CDM project, for example, it has to submit a monitoring plan before it can be registered. The second time around, when it goes to get certification for its emission reductions as credit, again an operational entity will be verifying whether the monitored data is real or not.

That's in the context of the project-based mechanisms. But there's another link here also. To be eligible to participate in these mechanisms, there is a criterion that the country as a whole should also be meeting its requirements with respect to inventories. There are provisions in the conventions as well as the protocol that experts could come and review the conventions or the protocols review teams as to whether their inventory data are right or not.

Mr. Joe Comartin: May I ask the second one?

The Chair: Sure.

Mr. Joe Comartin: We have obviously had some provinces who have indicated less than an overwhelming desire to comply with Kyoto. Has the federal government developed any strategy as to how they will enforce compliance, if they don't get the cooperation of the province or provinces?

• 1650

Ms. Norine Smith: I think our first premise is that we engage in a consultative process over the course of the months to come on how Canada could go about achieving its Kyoto target. I guess you're making a presumption about the outcome that the Government of Canada is not making at this point in time.

Mr. Joe Comartin: I assume that means there's been no planning done as to what we would do under those circumstances.

Ms. Norine Smith: There is work that's going on on different ways of achieving the goal. That would be the nature of the consultation process that is envisioned, to approach it around a different means of putting together policy instruments to achieve our goal. The Canadian way is a partnership way. Certainly with respect to environmental issues, that's the approach we try to take.

Mr. Joe Comartin: Do I still have time?

The Chair: Yes.

Mr. Joe Comartin: The Federation of Canadian Municipalities has been quite strong in their position that they could reduce their emissions from their institutions by 25%, but they would require financial support from the federal government. Is any work being done in that area?

Ms. Norine Smith: As you know, the municipalities in budget 2000 received $125 million to assist them with environmental projects, which they could choose to put toward this sort of thing should they wish. We also received their submission and read it with considerable interest, and we are well aware of the potential the municipalities have at their disposal to make a contribution. So it's certainly one of the things that's in the mix for consideration.

Mr. Joe Comartin: If they did meet the 25% that they think they can, how much would that be of Canada's overall share?

Ms. Norine Smith: I'm sorry, I can't do that arithmetic in my head. I don't know. I don't actually recall that in their document they gave the base they were putting it against.

Mr. Joe Comartin: Thank you, Mr. Chair.

The Chair: Thank you, Mr. Comartin.

The impression the government seems to convey these days, here and also abroad, is that the whole exercise in reduction of greenhouse gases is a costly one. Very little attention seems to be paid, at least publicly, to the benefits resulting from this exercise, the benefits that will come from energy efficiency, energy conservation, and the shift to other sources of energy and agricultural practices, to which you, Ms. Smith, referred earlier in reply to Mr. Mills, etc.

The question is, are studies being conducted on the benefits of reducing greenhouse gases? If so, by which department, and when will they be made public?

Ms. Norine Smith: There was a very explicit body of work that was part of the analysis and modelling undertaken in the federal-provincial-territorial context dealing exactly with that issue and trying to ensure that the cost analysis was married with the benefit analysis. If the committee wishes, we could provide you with more information about that work, or provide a presentation on it. It has been done, and you're quite right, the benefits can be substantial.

The Chair: So they have not been made public so far, those studies?

Ms. Norine Smith: I would have to check, actually, whether that work has been made public.

The Chair: All right. If you could please provide the members with that information, it would certainly be very helpful.

• 1655

The second question is this. Assuming that all goes well, and by 2010 we manage to turn the greenhouse gas emission curve very slightly downward, obviously that will not be enough to return to normality in climate trends. What is intended to happen after 2010 to turn that curve down the way it would have to be turned down to return to normality?

Ms. Norine Smith: The scientists who are part of the intergovernmental panel on climate change are telling us that the level of reduction in emissions that would be required just to stabilize the situation is in the order of 50% below 1990 levels, rather than the 5.2%, I think, that is the average from the Kyoto protocol.

The negotiations on what parties would undertake as their commitments for the second commitment period are expected to start around 2005. So the expectation is that there will be second, third, fourth, fifth, sixth, and ongoing commitment periods that will be progressively tougher targets. Aside from that level of generality about the expectation, there has yet to be engaged any specific negotiations or even any specific work within Canada about what second commitment period targets might look like.

I'm just being reminded again that one of the things that is going to be very important in subsequent commitment periods is the engagement of developing countries in taking on targets. It's getting to the point now where the level of emissions for those countries that do not have targets is more or less the same as the level of emissions from those countries that do have targets, and it will be very important to bring them into the picture.

The Chair: So to summarize, we are now in the first commitment period, which will end in 2010, and negotiations for the second commitment period will start in 2005?

Ms. Norine Smith: The first commitment period starts in 2008 and runs to 2012.

The Chair: Oh, that's when it starts.

Ms. Norine Smith: We tend to use 2010 just as an average, the year in the middle, when we do our modelling work, to make things a little simpler. So it would be five-year periods that would run continuously on from then. As I say, the negotiations are expected to start around 2005 for the commitment period that would start in 2013.

The Chair: On forest sinks, there are a number of theories being advanced by knowledgeable scientists in that field, and they are saying that.... No, I'd better not go into that, because it will take too much time.

Ms. Smith, you mentioned 13 megatons of credits for sinks. Mr. Fauteux spoke of 44. Does he refer to a larger area of credits? In our briefing papers, we understand there's a reference to only 12 million tons of carbon dioxide as an annual quota. Can you give us a better understanding of how all this breaks down?

Mr. Paul Fauteux: What the slide Norine was commenting on says is that we have estimated the credit that will be earned by Canada to be in the order of 30 megatons. That's our best guess at this stage.

The Chair: For sinks in general.

Mr. Paul Fauteux: For sinks in general.

The Chair: You spoke of 44.

Mr. Paul Fauteux: Yes, what I said was that the Bonn agreement would allow us to achieve potentially up to 44. So there is a cushion between what we think we are likely to achieve and what we could theoretically achieve.

• 1700

The Chair: And has this technique of calculation already been finalized?

Mr. Paul Fauteux: I'm not sure I understand your question, Mr. Chairman.

The Chair: For the calculation of the sinks in forestry and in agriculture, has the formula already been finalized?

Mr. Paul Fauteux: Yes, in the sense that the figures have been finalized, although there has not been negotiation of a formula. In fact, that is how we came up with the breakthrough agreement in Bonn. That's how we solved the political question of the extent to which sinks would be allowed to contribute to meeting emission targets. We'd sought for years to agree on a formula and always failed. We couldn't agree on a formula that would work for every country, so we agreed on an annex to a draft decision of the COP that lists the admissible credits for each country.

In Canada's case, we have 44, which is expressed in carbon dioxide, while the Bonn agreement is expressed in terms of carbon, so the figure is lower. But that is the maximum that Canada could achieve, through the application of the Bonn agreement, for forests only.

The Chair: All right. Finally—

Ms. Norine Smith: If I could.... Perhaps to clarify, you mentioned the figure of twelve?

The Chair: Yes.

Ms. Norine Smith: Twelve is the figure that's in the annex that Paul referred to, and that's carbon, as opposed to carbon dioxide equivalent, so....

Mr. Paul Fauteux: And the difference is three point something, so you multiply twelve by the conversion factor from carbon to carbon dioxide....

The Chair: Carbon is not a greenhouse gas, is it?

Mr. Paul Fauteux: Carbon dioxide is a greenhouse gas.

The Chair: Right. So what is the nature of carbon in this case?

Mr. Paul Fauteux: Sorry, carbon is a short form for carbon dioxide equivalent—that is, the unit in which the negotiations are conducted and in which the calculations are conducted. There is a basket of six greenhouse gases that are covered by the Kyoto protocol, and in order to make all of this intelligible so that you're not comparing apples and oranges, we calculate in carbon dioxide equivalent units.

The Chair: I see. Finally, in our domestic policies, in order to reduce our megatonnage, are you contemplating looking at our taxation system, including the elimination of perverse taxes that encourage the production of greenhouse gases?

Ms. Norine Smith: As you are probably aware, the only policy tool that has been ruled out at this point is a carbon tax, but virtually any other approach to dealing with the issues is under active consideration.

The Chair: Including an examination of perverse taxes?

Ms. Norine Smith: Certainly.

The Chair: Certainly? Thank you very much.

Do you wish a second round, Mr. Mills?

Mr. Bob Mills: I think we've covered a little bit of this. We've said that if Kyoto were implemented fully, we would have rather small changes in this first round, and we hear different figures. We hear that by the year 2100, if we just did that we would only save about six years. Bjorn Lomberg, in his new book, is saying that we're going to have a saving of 0.2 degrees Celsius by implementing Kyoto.

I'll come back to this question of the developing countries. It seems to me we could do so much more by looking at technology. I've listened to some oil people say they're going to start pumping carbon dioxide into the ground. I wonder, is that a technology that is going to really help us, or does it just sound like a good idea?

We've talked about sinks. We've talked about alternate energy. You know, my daughter took me on a tour in Germany of all the big windmills. They were seven or eleven storeys high, huge things, and I was told the amount of energy they produce, and so on. It would just seem to me, then, if we look at developing countries—if we look at the Indias, the Chinas, the Brazils, the Mexicos.... I mean, we've all been to those cities and tried to chew the air. It is thick. It would seem to me if we take some of that technology—not just here, but if we can transport it to the developing world—we're going to make a huge difference to the air. The impact is going to be dramatic, as opposed to what might be baby steps with something like Kyoto.

• 1705

I don't know if I have put the question in an easy format, but if you could, just help me out with that one.

Ms. Norine Smith: I think in terms of the long-run solution, you've very squarely put your finger on what needs to be done to really come to grips with this problem on the order that scientists are telling us we will need to. I guess we will look back when we're sitting in our rocking chairs in our elder years and will, I imagine, see quite a different world around us, because very active work is underway on many of these technologies you're describing, and not one of the ones you've described is a totally pie-in-the-sky dream. All of them need more work, but they have considerable potential and, as you mentioned with respect to windmills in some parts of the world, are already in place.

What the clean development mechanism is all about, in essence, is effectively trying to do exactly what you're describing. That is, to allow a market mechanism that actually provides an incentive for companies in countries such as Canada to bring these new technologies into countries such as Mexico or China or Brazil and help them leapfrog to that next-generation technology.

If you wanted, Sushma could provide you with a bit more perspective on the developing countries' perspective on that, or Pierre could as well.

Mr. Bob Mills: This might get into the tax thing that the chairman is asking about, too. I would think there could be incentives where you would make it worth developing and marketing that sort of thing, and maybe CIDA should get into that kind of a program as well to help these countries, as you say, leapfrog.

Ms. Sushma Gera: If I may just add a couple of things here, there is a provision for technology transfer in the convention; it's an obligation on us as developed countries. Then there are provisions within the Kyoto protocol for technology transfer. The clean development mechanism, of course, offers one of the most important mechanisms to us in terms of technology transfer, because it not only allows us as developed countries and our companies to reduce emissions and claim credits for them, but it also provides technology to developing countries. So that is a key mechanism.

In the case of one of the technologies you mentioned, carbon dioxide capture, as Norine pointed out, there's a lot of work going on within Canada and abroad, particularly at the IEA, I would mention, because what we don't know very well right now or have a good grasp of is the measurement, whether it's at the national level or the project level. Once the measurement problems are sorted out, certainly that is another technology that would be part of the calculations in terms of credits. But technology transfer, I would say, is at the heart of the protocol and the convention, through the mechanisms and outside the mechanisms.

Mr. Pierre Giroux (Deputy Director, Policy, Climate Change and Energy Division, Department of Foreign Affairs and International Trade): Maybe to complete your question, we have to see the problem at two levels fundamentally. The first level involves the global long-term commitments we have to confront in order to stabilize the greenhouse gases. Just to give you a perspective, when the industrial age started we were at 280 parts per million of carbon dioxide. We have gone now to 370. We project that as we reach 450 parts, we might start to see some effects. As the parts per million grow, the uncertainty grows.

The problem is that today 65% of the emissions are in the industrialized countries. In 20 years the proportion will be reversed, and 65% of the emissions will be in the south. So one way to address the long-term problem, as mentioned, is to work at the project level, to convince these countries to take punctual actions at the project level that would reduce their emissions.

The other strategy we're pursuing is more global, more general. It is that we hope that by the second commitment period, which means after 2012, we will be able to expand the Kyoto protocol from a partial protocol touching a certain limited number of countries to involve, in a differentiated way, many more countries. Hopefully, we will be able to make it global, so these countries will take part in the effort through their own national efforts, not only through projects in transfer of technologies, but also through policies they will implement.

• 1710

So we're pursuing a two-track strategy, in order to achieve what you've mentioned.

Mr. Bob Mills: Thank you.

The Chair: Monsieur Bigras.

[Translation]

Mr. Bernard Bigras: Thank you, Mr. Chairman. I have two questions. The first one again relates to carbon sinks, and the second concerns the power relationships Canada will be facing a month from now in Morocco.

Firstly, since the contribution of carbon sinks to the overall objective is estimated to be 15%, and since the figure which was negotiated in Bonn, in appendix Z, corresponds to 22%, do you admit that Canada, within that framework, has a 5 percentage point margin that would allow it to avoid committing itself to truly achieving a reduction in greenhouse gases? Between 15 and 22%, there is a margin that would allows us to not take strict, firm measures to reduce greenhouse gases, and mitigate this through the carbon sink mechanism. That is my first question.

Mr. Paul Fauteux: Thank you, Mr. Bigras. In reply to your question, I would first of all like to talk about the objective of the United Nations Framework Convention on Climate Change, of which the Kyoto Protocol is a subsidiary instrument. The objective of the convention is to stabilize the concentrations of greenhouse gases in the atmosphere at a level that will not trigger a risk of dangerous climate change. In your question, you focus on the difference between reducing emissions and the storage of carbon by sinks. The Convention does not frame the question at all in those terms. The objective is not to reduce emissions. The objective is to stabilize the concentrations of greenhouse gases in the atmosphere at a level that will not cause problems by triggering climate change.

Mr. Bernard Bigras: Through a reduction, since they must be stabilized.

Mr. Paul Fauteux: But not exclusively.

Mr. Bernard Bigras: No.

Mr. Paul Fauteux: After having set that objective of stabilizing atmospheric concentrations, the Convention—and the Kyoto protocol repeats its provisions—specifies that there are two ways of attaining that objective: reducing emissions to avoid adding to the concentrations that already exist in the atmosphere, and absorbing the already existing concentrations through the effects of carbon sinks. So, there is this movement that goes from top to bottom and from bottom to top. We must reduce additional emissions, but we must also maximize absorption by sinks to reduce current concentrations. Both means are equally legitimate and recognized by the convention and the protocol to attain the objective of reducing atmospheric concentrations.

Mr. Bernard Bigras: I see. My second question has to do with the power relationships Canada will be dealing with at the Morocco conference. It seems to me that Canada had a golden opportunity to arrive at that conference with a federal-provincial agreement that would have included all of the provinces. From what I understand about what happened last September 24, the federal government did not give the provinces any choice in the means to attain the objectives. I think that like in Bonn, it would have been desirable to have an agreement that would have been less rigid, less constraining. At least in Bonn an agreement was concluded, whereas on September 24, we came up empty-handed with all of the consequences this will have, in my opinion, at the international level. We have no agreement to put on the table, an agreement to foster partnership, as it happens.

Experience shows that when provinces are given a chance, things can work out. I am thinking, among others, of Quebec and British Columbia, who submitted action plans. That is a fact. In any case, we cannot change the future, nor what has already happened.

Here is my second question: how do you think Canadian objectives will be reached, in so far as the provinces are concerned? Would you favour attaining objectives by taking population proportions into account, or would you propose, rather, that current emissions be taken into account, as well as the efforts that have been made by some provinces? If we consider the population, on a pro rata basis, clearly Quebec could be at a disadvantage, since it has already made considerable efforts through clear energy choices in the 1960s—this just happened, but it is reality—and is thus in a position to attain a certain number of objectives.

• 1715

So, will we favour an approach according to which we would try and attain objectives on a demographic pro rata basis, rather than an approach that would take current emissions into account, as well as the efforts already made by provinces in the past?

Mr. Paul Fauteux: Thank you for your question, Mr. Bigras. With your permission, I will also react to the comments you made about the joint ministerial meeting of September 24. Since I had the pleasure of attending that meeting, I can give you my point of view on what transpired there.

Firstly, I want to reassure you as to the impact of the absence of the federal-provincial agreement on Canada's margin in Marrakech, as you described it. I do not believe that the failure to conclude a federal-provincial agreement in Winnipeg will have a negative impact on Canada's leeway and negotiation power in Morocco.

These are international negotiations and each country conducts its own internal consultations. According to my experience in international negotiations, whether consultations were successfully concluded or not, has no impact on the countries' negotiating position in those circumstances.

As for what happened in Winnipeg, as you noted, the press release issued at the conclusion stated that there had been no agreement on a federal-provincial territorial framework agreement and that those discussions would resume in Toronto next month, on a date to be announced shortly thereafter.

So, there still may be an agreement before the Marrakech meeting, since the Toronto meeting will be held in October before the Marrakech negotiations begin.

Finally, this is what happened in Winnipeg. A draft agreement that had met with almost complete approval in Quebec last year, at the previous ministerial meeting, was not concluded because certain provinces reopened some of the provisions of that agreement, which means that discussions will have to continue. I do not think the federal government's attitude was rigid. The discussion was reopened by some provinces and will have to be followed up.

As to your question on the attainment of objectives in the provinces, discussions are ongoing within the framework of the federal provincial process alluded to by Norine Smith. A working group is in fact studying the matter of target allocation. Should it be allocated in Canada on the basis of economic sectors? Should it be allocated on the basis of provincial and territorial divisions? Should it be allocated, as you suggested, proportionately, on the basis of population distribution? These discussions are ongoing, and the federal government has not yet adopted any firm positions on these matters. We are waiting for the discussions to resume.

The Chair: Thank you, Mr. Bigras.

[English]

Madam Kraft Sloan.

Mrs. Karen Kraft Sloan: Thank you, Mr. Chair.

The chairman mentioned this idea of tax reform and perverse incentives or subsidies, I suppose you might want to call some of these that happened, with regard to certain detrimental ways of extracting petroleum from the ground, for the environment in particular.

If you take a look at the concept of ecological tax reform, as I understand it we're really talking about shifting taxes away from labour, and that sort of thing, onto energy. I know that the Europeans have been looking at this, if not implementing some of this, as well. Essentially, this is a tax-neutral, revenue-neutral position. It's not going to be possible to do ecological tax reform without a carbon tax. Do you have any thoughts on that?

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Ms. Norine Smith: I guess, as a first point, there's a variety of ways in which the tax system might be brought to bear on the issue. One approach could be adjustments in the capital cost allowances, for example. Adjustments in capital cost allowances, to promote energy-efficient technologies and discourage other types of equipment, for example, would not be a carbon tax. A carbon tax is simply generally understood not to be anything of that nature.

I'm not sure your conclusion is quite that black and white, that it's not possible to bring the tax system to bear on this issue, in a way that would be consistent with some of the notions that are being discussed under ecological tax reform.

Mrs. Karen Kraft Sloan: I realize there are things you can do around providing incentives for certain kinds of investments, and there are ways of structuring it so those things are revenue neutral, as well. It might be that capital cost allowance on one type of machinery is reduced, and on another type it's increased. We always have to give clear, strong signals to industry. They need to have time to adapt, and it's a slow process.

I realize those things are possible, but if we are really going to make a difference and really make a strong shift to a particular kind of energy-consuming society, and if we're really going to utilize the tax system, in many respects we're just sort of nibbling at the edges around this. I realize that having no carbon tax is a decision made by the political arm in government, so I'm just wondering how effective these other measures could be, if you're not going to include a carbon tax in the equation, with an equal reduction in labour tax.

Ms. Norine Smith: The analytical work that's been done in Canada, as well as by many other countries on domestic emissions trading, suggests that this is an alternative approach that can be very effective. One of the advantages of a domestic emissions trading system is that because it brings the market to bear, it ensures that the lowest-cost opportunities for emission reductions are almost automatically sought out within the country. The trading system sets the price for carbon, and you either reduce yourself because you can do it more cheaply than buying that permit, or you buy the permit. So it becomes the way of brokering to find the least-cost approach within the country. Domestic emissions trading is an approach that has considerable potential, and needs to be discussed.

Back to the point Mr. Herron was making earlier, it does need to be discussed more thoroughly in Canada. The expectation is that within the next number of months, building on what's been done to date, we'll be able to launch that kind of consultation process.

Mrs. Karen Kraft Sloan: Emissions trading was explained to me by an ecological economist of fairly decent reputation, and it was suggested to me that this was merely for transition.

I personally have a problem when a lot of the focus on our climate change agenda is on emissions trading and trying to do the bean counting to figure out what the rules are going to be and how this is all going to be undertaken. We're really looking at an artificial accounting system; we're not looking at the real accounting system, which is nature's account balance.

It sometimes seems that a lot of squabbling and energy is put into figuring out these little rules and things like this, how it's going to happen, how the market is going to operate, and all these other things, whereas looking at some serious and real reductions is not addressed. But I would only have comfort knowing that emissions trading was used for a transitional phase, a transition that would get us off our reliance on a carbon-based economy and move away to things that are far more sustainable, because that is the reality.

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We are going to run out of our supply eventually, and if we don't act and heed nature's demands, it will be sooner rather than later. So I see emissions trading as only something very temporary. It may be temporary for ten or fifteen years, but it is still only temporary.

Ms. Norine Smith: I must say, I'm actually rather bemused by the advice that you've been given, because an emissions trading system is one that is very effective at facilitating transition, but that doesn't mean it's a temporary transitional system. So the context in which the work has been done to date on domestic emissions trading is that it would be a permanent policy instrument that would be very effective at facilitating the transition to get to where you want to go. And going back to earlier conversations around this table about a second, third, and fourth commitment period, it gives you an instrument as well that enables you to continue to adjust your policy to reflect the more stringent commitments.

Mrs. Karen Kraft Sloan: Well, as we know in politics, a permanent policy position is only as good as the government that's in power and until that government is replaced. So there's a lot of impermanence in the system itself.

Ms. Norine Smith: Every government has the ability to undertake its own policies, that's for sure. That applies to absolutely every policy instrument that you choose and is not unique to domestic emissions trading by any stretch.

The Chair: Thank you.

Mr. Laliberte, please.

Mr. Rick Laliberte: For clarification, we agreed on a 6% increase within the first period of decrease, a decrease from the 1990 level. You're saying we're at 15% increase right now at 2001, so that's 21% we have to decrease to hit our target. But you're also saying that carbon sinks are going to be recognized up to about 15% of this.

Ms. Norine Smith: We're kind of mixing what the base or the percentage—

Mr. Rick Laliberte: The denominator.

Ms. Norine Smith: —what the denominator is, so the business-as-usual expected gap by the time we get to the middle of the commitment period is around 200 megatons. Sinks are estimated to fill something in the order of 30 megatons of the 200 megatons that's going to need to be addressed. So I'm avoiding the percentages at the moment.

Then, with respect to that 200 megatons, don't hold me to this, because I don't know the actual figure, but we're probably at the point of about the 150 mark at the moment. I can provide more accurate figures to the committee, but you're right, we're at about 21%, and the business-as-usual forecast is 26%.

Mr. Rick Laliberte: Is there any publication of this report card, so to speak? We need this.

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Ms. Norine Smith: Yes, some of this information is in the early parts of Action Plan 2000. On an annual basis, the government files its inventory with the United Nations FCCC. That information is made public, and we can share with the committee the press release that came out—I think it was in July—that described exactly where we are right at the moment, the sectors of the economy where growth is continuing, but there are some parts of the economy where there have been very stable emissions for some period of time now. In fact, you might find the press releases from the last couple of years interesting, because together they give a fairly good story.

Mr. Rick Laliberte: You were referring to a website earlier, as well. What one is that?

Ms. Norine Smith: There is a climate change website, and we can provide the website addresses to the committee.

Mr. Rick Laliberte: There has been this protocol, I guess, nationally that for international commitments, Environment Canada would be the lead, and domestically it would be Natural Resources Canada. Is that still in place?

Ms. Norine Smith: We work very much as a team, as part of the international negotiating team. As I mentioned, Paul co-chairs with a colleague from Foreign Affairs, in fact, but we have as members of our team, experts from NRCan, from Agriculture, from Industry, from the Department of Finance. I'm probably forgetting a department—CIDA, how could I forget CIDA? Am I forgetting anybody? I don't think so.

So we have a very multidisciplinary negotiating team that, at the ministerial level, is led by Minister Anderson, but he shares his responsibilities in that area, as with any international negotiation, with Minister Manley, or with the ministers from Foreign Affairs and International Trade.

Domestically, Ministers Anderson and Goodale are joint members of the federal-provincial process, and as you're probably well aware, there is a reference group of ministers that again includes all the ministries and ministers here at the federal level who have a keen interest and role to play with respect to climate change. So I'd say it's a pretty inclusive approach all around.

Mr. Rick Laliberte: So the efforts of this committee are very advantageous to your negotiating team, any domestic or international efforts.

Ms. Norine Smith: Yes.

Mr. Rick Laliberte: So if we continue on this tack, I think it's to our benefit.

Ms. Norine Smith: Yes.

The Chair: Thank you.

Mr. Comartin.

Mr. Joe Comartin: Germany and Denmark have both set specific targets for alternative fuel, specifically wind power, and the Wind Energy Association of Canada was before us in the spring with a proposal to set specific targets. Is there any research being done as to what impact it would have on reducing the gases if we set those targets and achieve them?

Ms. Norine Smith: The idea of setting targets was something that was explored by the electricity issue table. If I could just take you back a few years, as part of the national process, some 16 tables were set up, some sectoral, some sort of horizontal. For example, domestic emissions trading was effectively one of the tables.

The electricity sector looked at the notion of setting targets, and it was not what they recommended as the approach for their sector. The very short story version of what they concluded was that a domestic emissions trading system would be the best approach for their sector because it would allow them the flexibility to find the cheapest way of doing it, whereas with setting targets, we may or may not have picked the right target level for them to find the cheapest way of achieving the ultimate goal of reducing greenhouse gases. In essence, that's the nature of the debate in that area.

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Mr. Joe Comartin: Is there any monitoring going on to see whether that process is effective? I'm not impressed that we're doing anything of any significance to move forward wind power in this country vis-à-vis the types of achievements that have been achieved in Denmark and Germany and, quite frankly, even in the United States.

Ms. Norine Smith: You certainly have picked the countries that have been the most aggressive in this area. There are commitments in this area that are part of the budget investments and the action plan 2000. It's well recognized that this is an area where there's much more potential and much more needs to be done.

Mr. Joe Comartin: Just one more question, Mr. Chair.

Is there any research or work being done on transitions for both workers and communities who will be negatively impacted? I'm thinking of the energy fields, the manufacturing fields, which might be negatively impacted, and the auto industry in particular.

Ms. Norine Smith: That kind of analytical work is part of the work program that's been identified with provinces. Those are the sorts of questions that we need to be able to answer by the time we're making a decision on whether or not to ratify. So those are the sorts of questions that are on the list.

Mr. Joe Comartin: I'm sorry—that analysis is being done by the provinces?

Ms. Norine Smith: It's being done as part of the joint federal-provincial-territorial analytical work program.

Mr. Joe Comartin: Is any of that material available publicly?

Ms. Norine Smith: I'll be checking to see how much of the work of the analysis and modelling group is available and providing the committee with whatever we can.

Mr. Joe Comartin: Thank you.

Thank you, Mr. Chair.

The Chair: Thank you.

I'll try to compress this into a few points. The first point has to do with institutional memory, which you will all agree is an important factor around here. It is to bring to your attention, in case it hasn't yet been done, that this committee spent a number of months studying the subject and reported back to the House of Commons under the title Kyoto And Beyond, a study that consists of some 20 to 28 recommendations.

In that study, if you are interested in going through it, of course, you will find quite an exhaustive treatment on the issue of reverse subsidies or taxation facilitations—that's encouragements—that do lead to greater production of greenhouse gases. In the appendix of that study you will find also the calculations made by Finance Canada as to what that subsidy really means in loss of revenue. So we have at least one policy in our system that not only encourages greater production of greenhouse gases, but at the same time also leads to a reduction of government revenue, which probably in the months and years ahead will be badly regretted.

The second point you will find in that report is a recommendation to the effect that as a first step a level playing field be established between renewables and non-renewables, which we have not yet achieved in our taxation system. But more important, the second step following that would be one whereby the renewable sector is given an advantageous position, an advantaged treatment, so to say, with respect to the non-renewables, and we are light-years behind that. Our entire treatment of the non-renewables is one of favouring it in every respect, and for reasons that are quite understandable, there are very good political reasons for that fact.

Nevertheless, if we are serious about Kyoto, an honest examination of our taxation system would not be out of place. It would not make your colleagues in the finance department happy, but I don't know if that is in your mandate, so you may be able to survive that shock.

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The Commissioner of Sustainable Development was very severe in the comments he made in his 1998 report. I would hope that the comments have been taken into account seriously by the various departments that were mentioned in the commissioner's report.

The second point I would like to make has to do with the unfortunate fact that Madame Kraft-Sloan raised, the issue of emissions trading, because that is in itself the object of an entire afternoon, if you like. I share her points quite fully. Let me explain why very briefly with one example.

Ms. Smith, as you told us, there is a ceiling that's being set below which one company, let's say, can claim credits that can be bought through emissions trading. In other words, you buy emissions trading from those who are performing well below a certain established level. So if all of us were to do that in the rich countries, we will have bought these credits, and then, having reached that point, we would still be in need of reducing the emissions, if not in the current then certainly in the second commitment period.

So the question arises as to how can we rely on these emissions trading systems if there is not a built-in formula that tightens up the system constantly and consistently and that is a policy fact that is made known from the very beginning rather than making it into a possibility later on downstream. This is why the emissions trading is a weak instrument.

But more than that, in articles 6 and 17 of the Kyoto protocol—which are the only two I know, so don't get the impression that I know it—there is a very strong reference to the fact that joint implementation and emissions trading are to be treated as supplemental to domestic action. “Supplemental” is a very important word here.

In Canada's case, if I understand the action plan 2000 properly, the reliance on joint implementation and emissions trading is in the range of 25%. If that is correct, it is not a supplemental role. It is much more than supplemental. This is why, then, at the end of the day, it is very difficult to reject the impression that what we are more preoccupied with is to find a way of establishing credits wherever we can, rather than finding ways of really reducing the greenhouse gas emissions. Let's hope this is the wrong conclusion, but I would like to have your comments on that.

Ms. Norine Smith: I'll start with domestic emissions trading and the need to be able to adjust it.

I agree entirely that as the level of the target adjusts the cap that will be set within the domestic emissions trading system would need to adjust accordingly. In fact compared to a tax-based approach, one of the advantages of a domestic emissions trading system is in fact the predictability of the results, because you set the cap. You set the limit on emissions. However, in a tax what you do is you set the tax rate, and depending on how well you've done your analysis about the elasticity of supply and demand and that sort of thing, you can't be sure when you've set your tax what exact impact it's going to have on emissions. You would need to calibrate your tax system more than you need to calibrate a domestic emissions trading system, just by the nature of the fundamental design of the two instruments.

• 1745

Second is with respect to your question on the international mechanisms or the Kyoto mechanisms being supplemental to domestic action. You're right that within action plan 2000, if my memory serves me correctly, of the estimated 65 megatons we are working to achieve, some 20 megatons were in the area of the Kyoto mechanisms.

Action plan 2000 is one step along the road, and I think one of the reasons why it's an area of some emphasis within action plan 2000 is because of the long lead times and the importance of getting started with a lot of those projects. The clean development mechanism is one area where, internationally, a credit that is earned prior to the commitment period is a credit you can use during the commitment period. So it's an area where you can get a particularly good bang for your buck, in terms of achieving your target.

The key, though, from the point of view of Canadian policy, is the statement that has been made continually for many years now that Canada's intention is to achieve the majority of its reductions at home. That is effectively supplementary in the Canadian context; it really doesn't matter what the protocol says, it's what has been said in terms of commitments of the government.

The Chair: Thank you. That's very helpful.

Finally, I would only like to warn you, if I may, about the uncertainty in the scientific community, still today, on the forest sink calculations. There is an understanding of the capacity of seedlings to absorb carbon dioxide in the early years of growth, but there is a period that follows in which the absorption capacity is much less than in the previous period. There is also a well-known negative carbon emission at the time of felling and forest clearance. The scientific community is still debating today whether a claim can really be made of carbon reduction, as it is affected by the existence of forests.

I can only draw this to your attention because the jury seems to be still out, but it's more up-to-date information.

Ms. Norine Smith: This was a question that was addressed by the intergovernmental panel of scientists on climate change. They came to the conclusion that while there is always more to be known on a scientific question—and this is one that is no exception to that rule—we know enough about the science of sinks, in both the forestry and agricultural areas, that we can get started. We need to make those investments, but we know enough to get started.

The Chair: Thank you. I will send you a copy of that article, which appeared recently in Science Magazine, so you may show it to your friends on the intergovernmental panel the next time you meet them.

Mr. Mills has the last question.

Mr. Bob Mills: I've been sitting very quietly listening to the carbon issue. I guess I can't help but remind you—and I'm sure you and members of the committee are aware—that the Prime Minister and finance minister have been very encouraging to the $36 billion development in the tar sands, which they hope will go to $55 billion. And in meetings with the President of the United States they've said that we welcome this development money and we can't wait to turn the tap on to send you more, because this is going to help our GDP dramatically over the next few years. That's not me saying this; that's the government saying it, and it's been widely published.

• 1750

Before you get the idea that everyone here is opposed to that, we might just check with the people who are saying that this is a good thing. This is where my original question came in. If the Americans aren't part of this, we should be getting credit, because we're absorbing the environmental costs to produce the carbon that the Americans then will use. So they're getting clean fuel; we're getting the environmental costs. Hey, that just isn't fair, and it has to be considered by somebody. Or else government is sending the wrong message to industry that this is a good thing.

Ms. Norine Smith: I would perhaps also comment on the role of technology in managing the emissions from those types of investments.

Tar sands plants have actually made, as you are probably well aware, considerable progress in reducing their level of emissions per unit produced. But what's happening is that the units produced are outstripping the pace at which that improvement is being made. But that's where technologies related to carbon dioxide capture and storage are very important. There's considerable potential for managing that situation. There's research with respect to how to strip carbon dioxide out of the emission streams that industry is working on, and it is also considered to have great potential in helping to manage to quite a large extent the emissions that would come out of those kinds of investments. Technology will have a big part to play.

Mr. Bob Mills: Yes. I can see the emphasis on technology, as long as it's not on taxation.

The Chair: Coming from western Canada, Mr. Mills, what do you think of the subsidies to the tar sands oil industry?

Mr. Bob Mills: You're asking me about the subsidies?

The Chair: Yes, sir.

Mr. Bob Mills: I get to be a witness too.

Obviously, I would like to see alternate energy get equal subsidies to carbon industry. I think that's a long-term positive. I think those oil companies will in fact get involved in some of that technology and should be encouraged to do that. But I think, as Ms. Kraft Sloan said, it's going to be a long process to cause that transition.

I think that at this point, slowly removing those subsidies, equalling the playing field, and then helping the new energy is positive. How long that might take, I don't know.

The Chair: All right.

On behalf of the members of the committee, I thank you for your presence today. We had a good two and a half hours of very fruitful exchanges, and we hope to see you again, perhaps after you come back from Marrakesh.

Ms. Norine Smith: Thank you very much for inviting us. We've taken careful note of all the things we've promised to the committee, and we'll attempt to get to you your stack of additional information as quickly as possible.

The Chair: Thank you.

The meeting is adjourned. See you tomorrow morning.