Proceedings of the Standing Senate Committee on
Energy, the
Environment and Natural Resources
Issue 17 - Evidence, March 24, 1999
OTTAWA, Wednesday, March 24, 1999
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 12:36 p.m. to examine such issues relating to energy, the environment and natural resources generally in Canada.
Senator Ron Ghitter (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we are very anxious to hear from our witnesses today. By way of background, our committee has had considerable involvement with this issue. We spent four or five days in Washington discussing matters relating to Kyoto with representatives of various departments. We have had a number of meetings in that regard, both within our country and beyond, and are very interested in your responsibilities and the subject matter of the day. I hope this will be the start of continuing communications with your department.
Please proceed.
Mr. David Oulton, Head, Climate Change Secretariat, Natural Resources Canada: Honourable senators, I appreciate the opportunity to be with the committee today to provide committee members with some background on what we are attempting to do in the development of Canada's climate change policy.
The Climate Change Secretariat is a hybrid government organization set up following the Kyoto agreement. It did not pre-exist Kyoto. It has one very clear mandate, which is to work with other federal government departments, provinces and territories in developing a national strategy for Canada in following through on the Kyoto agreement.
We are a hybrid inasmuch as we report to two departments in the federal structure, Natural Resources Canada and Environment Canada. We also, though, are a joint venture with the provinces inasmuch as my colleague Ms Gotzaman is co-manager of the national secretariat, which is managed with Alberta. My colleague and assistant deputy minister from Alberta and I are co-chairs of the national secretariat, and Ms Gotzaman is co-manager with another colleague from Alberta. The national secretariat has both federal and provincial people working in it.
Before we get to the slide deck, I presume everyone has a copy. I will quickly go through it over the next 20 minutes.
I would ask committee members to turn to the section marked "A. Recap: Kyoto Challenge and National Process," and then flip to slide A.1, which is the graph called "Kyoto Challenge -- Addressing the Gap." This is meant to set out the basic facts of the challenge we think we face. It shows that we have a base line in terms of our greenhouse gas emissions in 1990, the CO2 equivalent of which is 599 megatonnes.
According to the Kyoto agreement, our target is 563 megatonnes, or 6 per cent below the 1990 level. The most recent measurement of our current emissions is for 1996, and that is the 671 megatonnes you see in the first third of the graph. That is up about 12 per cent from the 1990 level.
That gives you the basic parameters of where we are and the challenge that Kyoto would set for us.
In terms of the magnitude of that challenge, we have also done a forecast. The upper triangle shown here demonstrates where we think we would be going if we, and the governments of the provinces and municipalities, kept current policies and forecast what we call "business as usual." It sets out a path of going to 700 to 750 megatonnes of emissions in the year 2010, the midpoint of the Kyoto commitment period, which runs from 2008 to 2012.
If you compare that to the target of 563 megatonnes, there is a gap of 140 to 185 megatonnes. That indicates that we would need to put in place policies and practices that would achieve a reduction of roughly 20 to 25 per cent from that target. This sets out a general measurement of the challenge. It is a bit of a moveable feast because "business as usual" changes as our information about what has happened in the past changes. If anything, it tends to move up, so the challenge will probably not get easier, but more difficult, in the sense that "business as usual" may end up being more than 750 megatonnes.
Slide A.2 depicts another way of measuring the challenge and then determining how to deal with it and manage it. The far left-hand side of the graph depicts gross domestic product divided by greenhouse gas tonnes. It really measures how many dollars of GDP are generated per tonne of greenhouse gas that we emit. Therefore, it indicates the efficiency with which we use greenhouse gases in the economy.
From 1970 to 1975 there has, generally speaking, been a drift upwards, largely due to embedded technology change that happens in the economy and it tends to move in the direction of using carbon, in particular, because carbon is the largest of the greenhouse gas elements. That means that over time you tend to use carbon more efficiently because of technology changes.
In the forecast period from 1995 to 2010, our "business as usual" track, which is the solid line, shows that we expect to improve by about 1 per cent per year because of our expectations regarding technology, government policies and business practices.
The dotted line shows that in order to meet Kyoto, we would have to improve by close to 4 per cent per year. That is a fairly significant shift upward in how efficiently we use greenhouse gases in the economy.
You may wonder whether we have ever been able to make a similar improvement in our efficiency. In the period called "OPEC price increases," where the line bends upward more than the average, the increase is about 2.5 to 3 per cent. It is not the 4 per cent that we are looking for, but it is not far off.
Two or three key things happened in that period that caused us to use carbon and greenhouse gases much more efficiently. The most important thing was that the way in which industry and consumers used energy, and particularly carbon-based energy, clearly changed during that period. Two things caused that change. First, there was an offshore crisis in terms of oil supply, which captured everyone's attention. That focused people on things like line-ups at gas stations and concerns about the security of oil supplies. That affected consumer behaviour. In addition, there were government programs -- federal, provincial and municipal -- that reinforced energy conservation and renewable energy.
As well, the price of heating oil and gasoline increased, causing people to make different decisions about how much they would drive, what they would drive, and what products they would purchase. Companies made different decisions about what industrial processes they would invest in for future processing.
On the other side of the picture is what I describe as coincident-appropriate technology becoming available. The early 1970s marked the beginning of the invasion of small cars from Europe and Japan. These smaller, lighter, more fuel-efficient cars were being marketed in the mid- to late 1970s, at a time when there happened to be an oil crisis, giving consumers the choice of buying different vehicles. Indeed, small cars first became ubiquitous on North American highways between 1975 and 1985.
Nuclear energy also became more common. The AECL presentation showed that more of their electricity in the Ontario market was being generated from nuclear energy rather than other forms, in particular carbon forms.
Therefore, a number of new technologies and new products were coming onto the market at the time that responded to a consumer demand. Consumer demand allowed that technology to come forward. Those conditions allowed the change that we experienced then. In a sense, it is that kind of change of both consumer and business habits, in terms of what they purchase and the availability of the new technologies for them to purchase, that will allow us to meet the Kyoto target.
The Chairman: While you are on that point, none of those conditions exist today.
Mr. Oulton: Very few of them exist, and that is one of the great challenges.
The Chairman: You would agree with that?
Mr. Oulton: I agree with that. Oil prices are at least as low as they were prior to the 1970 oil crisis. One of the challenges we face is that we do not have reinforcing conditions in terms of the price of carbon or the price of greenhouse gases in the economy, nor do we have a sense of a threat, as we did in the case of oil security. That all means that we will have to figure out how to reproduce those changes in a different way from the way we did in the 1970s.
The Chairman: We now have recreational vehicles, which are major polluters, that did not exist at that time. As a result, consumer habits regarding motor vehicles are changing, as well.
Mr. Oulton: Consumer purchasing patterns this year, versus 1979 or 1980, are certainly different with regard to the size of vehicles and engines that are being purchased. To put that in an optimistic light, however, there is a lot of technological advancement in terms of low to zero emissions that was not available in the 1970s.
Slide A.3 shows greenhouse gas emissions in different regions of Canada. It shows the 1990 base line and a forecast for 2010. I did not want to get caught in specific numbers there. I wanted to illustrate that the challenge is considerably regionally differentiated.
Ontario is obviously the largest single emitter in Canada, but that is because it has the largest bulk of concentration and the largest concentration of industry. The second largest emitter is Alberta, because the nature of the economy in that province is very much carbon based. Therefore, their emissions per capita or per unit of GDP will naturally be higher.
It also tells you that if you are looking for a policy to deal with Kyoto and greenhouse gas emissions, you will not find a one-size-fits-all approach. The approach to dealing with greenhouse gas emissions in Ontario, Alberta or in Atlantic Canada will need to be different. You will not put in place one or two measures nationally that will work across the country in an effective and efficient fashion.
Senator Spivak: Manitoba is so low because of the hydroelectric power, is that right?
Mr. Oulton: That is right.
Senator Spivak: Therefore, would a change be required in Alberta regarding carbon safety gas? How would that tip the balance? Would it be massive or minimal?
Mr. Oulton: It is a substantial challenge. In Manitoba, much of the challenge will be in two or three particular areas. Transportation, for example, will be a large challenge in Manitoba because that is where much of their carbon emissions will come. In Alberta, on the other hand, there is a transportation challenge but, indeed, there is also the challenge of dealing with the oil and petrochemical-based industry.
Senator Spivak: I say that because Alberta has a significant amount of natural gas. It would not be such a big leap for them, theoretically, to use gas instead of carbon.
Mr. Oulton: That is true. There is a cost factor, which is one of the elements. Coal has been used as a generator because there is a relatively high quality of coal available for use in both Alberta and Saskatchewan. It is efficient to use in terms of its closeness to market.
You are right, though, senator. There are other commodities available, at a price.
Senator Hays: The bar graph for Ontario shows plus 13; for Alberta, it shows plus 20. On the bar graph, it does not look like you are comparing 1990 to 2010. Can you explain that?
Mr. Oulton: The proportions there are somewhat misleading in terms of the bars. The percentages are accurate. The bars, optically, do not lead you there.
In terms of this data, we are in the process of reconsidering it. For example, if you look at British Columbia, which shows plus 37, that figure is based on certain assumptions about economic growth, immigration and a variety of other things. We revise those data every couple of years.
You heard testimony from representatives of the National Energy Board recently. We use their data in terms of overall energy supply and demand. As they receive better data, we are able to use that data in revising our own estimates. Thus, these numbers will be subject to change as we receive the better data.
Senator Taylor: Why is B.C. going up so fast when everyone is leaving the place?
Mr. Oulton: That is largely because of the economy's rate of growth. Most of their consumption is in transportation. There are also some cases in which incremental power is being generated by carbon rather than hydroelectricity. There are a variety of factors, mostly in the transportation area. As well, on the island, for example, they use a significant amount of heavy fuel oil for some of their industrial processes. The bulk of it was forecasts of basic economic growth and population growth generating greater energy use.
Senator Fitzpatrick: When did you do these forecasts?
Mr. Oulton: These were done on the basis of 1995-96 data, which is why they are being updated.
Senator Corbin: With respect to this table, why do you not disaggregate the information from the so-called Atlantic region?
Mr. Oulton: We do. We put it in this way because it is easier to see the large groupings.
Senator Corbin: Is it available now?
Mr. Oulton: We can provide that, certainly.
Mr. Oulton: In a sense, the next slide depicts the starting point for the national secretariat in our exercise. There was a meeting of first ministers immediately after the Kyoto conference. Climate change was not on the agenda at that meeting. Because of the concern, primarily, of the western premiers, it was put on the agenda.
What came out of that, in a sense, was an entente between the federal government and the provinces, which said, "Yes, we cannot ignore Kyoto. It is a challenge for Canada, but it is a challenge we must take seriously. However, we must ensure that we develop a strategy for managing Kyoto jointly and look for a strategy that tries to equalize its impact across the country, rather than one that will have grievous impacts from region to region."
It sets out some benchmarks. It provided the path and the vehicle for moving ahead in terms of developing this as a joint federal-provincial enterprise.
Turning to the next slide, you will see that, in a sense, this is what came out of the meeting. It is an organization chart of what energy and environment ministers decided in April 1998 following the meeting of first ministers.
Obviously, energy and environment ministers have been meeting collectively once or twice a year since the early 1990s. The National Air Issues Steering Committee has also been in existence since the early 1990s.
Some new things were set up as a result of this process. A decision was taken that we would need a national secretariat that would be a joint enterprise between the provinces and the federal government. They also said, "This process in climate change is a complicated issue; thus, we will not try to sit a number of people addressing the whole issue in one room. Rather, we will try to break down the project into more chewable bites and parts. Let us use issue tables and bring experts to these issue tables to focus on the key elements of the climate change issue."
Therefore, we have set up about 16 issue tables, some of them sectoral. They include agriculture, forestry and transportation tables. All of the main industry sectors are covered. We also set up ones to cover horizontal ways of coming at the issue. Thus, there is one for technology, one for credit for early action and one for publication education and outreach, which is a key area of importance.
We have tried to break the issue up into chewable bites on which we could focus and then try to aggregate the output of those tables at a later point in the process.
That was a key methodology decision that the ministers made back in April 1998. We set up an integrated group, which is composed of the co-chairs of all the issue tables, which we call together periodically to ensure that the process is working. The issues tables have about 450 people working on them. They are people from industry, environmental groups and municipalities -- people from all walks of life -- all of whom are looking at particular issues from an expert perspective. They are all funded with budgets that allow them to hire the necessary support that they need to produce the product.
We are asking them to look at each of those areas and give us options as to how we could manage our reductions in Canada. Each of these individual sectors in individual areas have been commissioned to come up with reports that outline the available options, as well as the benefits and costs from an economic, environmental, social and health perspective. Thus, when ministers put them together, they can come up with a sense of what are the series of options we would have to use if we were to manage climate change and make the reductions that Kyoto was demanding of us.
You will also see some comments with regard to other federal-provincial councils. This is not simply a problem for energy and environment ministers. They are the ones who have been tasked with it by first ministers. However, clearly, when we have an agricultural table, that table will be speaking to the provinces and the federal government when they meet as part of their federal-provincial processes. Therefore, agriculture ministers are participating in this process, as are ministers of transportation and forestry. There may be other groupings of ministers, such as industry ministers, who will also participate.
It is complicated by virtue of the fact that it includes all of the major industry sectors. We are not just using one institution but many, which were available to us to generate and refine policies.
Senator Gustafson: Have you studied changes that have come about in agriculture? I am speaking of the fact that the tractors are bigger. They cover more land, which means that there are fewer of them moving all the time. It is the same thing with combines.
The other thing is that, in continuous cropping, there is not the amount of cultivation being done as was done previously. Have you any figures regarding that?
Mr. Oulton: I do not have those figures now but we will have them eventually because the people involved in the process are looking at that issue. The answer is yes. Agriculture is actually one of the more challenging areas. It is responsible for roughly 10 per cent of our greenhouse gas emissions. However, in Canada, because of movements to things such as low-till or zero-till practices, we may find in the next few years that our soils, which have been net emitters of carbon because of tillage, are going to become net sinks. In other words, they will become net absorbers of carbon rather than net emitters. We must balance that off against the fact that we have a thriving and growing livestock industry -- at least, up until recently it was thriving -- and that results in more emissions of other greenhouse gases.
We are looking at agriculture. An agriculture table will be looking at exactly the factors you are specifying. We will be getting their reports in the May-June period, and they will be considering all factors, including the ones you mentioned. We hope to have the numbers then.
Senator Kroft: Regarding transportation, what work have you done to indicate the efficiency or the benefit of moving a given amount of product, whether it is grain, auto parts, automobiles or whatever, some distance by train as compared to truck?
Mr. Oulton: I do not have an answer now, because that is still in the process. The relative efficiencies of different modes of transportation for different commodities are being studied. How you would compare the greenhouse gas emissions produced when using trucks to transport grain versus, say, using the train? That is one of the factors that you will need to examine in order to determine whether you should be making changes in your transportation policy, if it is being driven by considerations of greenhouse gases. We do not have the figures on that yet. That is in the works.
Senator Spivak: In connection with that question, many policy changes are taking place, such as, for example, the closing of rail lines. That will make it more difficult if you decide that it is better to transport by rail.
What sorts of policies are being undertaken to ensure that, if that option exists, you can actually execute it? If you close all the rail lines, and all those trucks are on the road and there are those big throughput things, you will not be able to move product by rail.
Mr. Oulton: I will frustrate you in my answer to this because we are in mid-process, so we are not coming up with answers right now. We will be giving ministers options at the end of the year to make tradeoffs on explicitly those kinds of issues.
Senator Spivak: Are you taking all that into consideration? As you are working, things are happening.
Mr. Oulton: Exactly.
Senator Spivak: Government policy is a big part of the equation.
Mr. Oulton: It works both ways, yes.
Senator Fitzpatrick: Are you measuring the mode of transportation at the present time and its growth? I just happen to know that the production and sale of trucks are at an all-time high right now. Are you taking that measurement?
Mr. Oulton: Those things are being examined by the transportation group.
To return to your first question, you are right, we are not working in a static policy environment. Frankly, one of the issues with regard to climate change is that, in the end, the nature of the solution is not to take one decision on everything at one time. You will be working on a business-plan type of solution that points out the sensible things to do in the year 2000, and there may be things that you need to do in transportation. However, you do not do it all at once; you start working at it.
Senator Spivak: Quite some time ago, when Sheila Copps was the minister, the government policy was that all departments had to examine their programs to look at the environmental consequences. I know that has died somewhere. It has sunk down in some hole. Is that completely eliminated from the government policy portfolio?
Mr. Oulton: All departments have been required to produce sustainable development plans, which will be reported to Parliament. Indeed, that will ensure that they are keeping their eye on the ball.
With regard to climate change, we meet every week or two with almost all of the 15 or so key federal departments that have responsibilities that touch on climate change. Therefore, there is a high level of interdepartmental commitment in terms of looking at the consequences, to come back to your original question, for, say, the Department of Transport's policy on greenhouse gas. Those are the things we will need to bring together. Ideally, if you were looking at the best policy outcomes, you would try to find ones that achieve both sensible transportation policy and sensible greenhouse gas policy, where they both work together. I am not so naive as to think that you will not have tradeoffs. In many cases, you will find that something may move against transportation policy but be favourable to greenhouse gas policy, and we will be asking ministers to examine those tradeoffs.
Senator Kroft: Would you give, in a word, the same answer on a jurisdictional basis across the provinces? You have spoken about this from the federal government's perspective, but from province to province, is there a similar sort of structure?
Mr. Oulton: That is not an easy question to answer. I think it is fair to say that the provinces, in the Kyoto period, were somewhat disaffected because of their concern that Kyoto was not in line with their original expectations.
The first year of this effort, last year, was really one of trying to build joint federal-provincial confidence in the process and in this joint enterprise concept that I referred to earlier.
Provincial resources have been very strained, in terms of their ability to work on this. Frankly, however, we have managed to get the provinces largely working with us. Some are much more focused on it. Clearly, in provinces like Alberta and Saskatchewan, as a result of the nature of their economy, climate change is a major issue. They invest a lot of time and policy resources into that. Interestingly enough, so does Quebec, which views this as a strategic issue. The commitment is not the same across the country but, to a large extent, we have a considerable amount of federal-provincial commitment on this now. In the end, that will be key, because we will only be able to put in place sensible policies if we have not only the federal government but also the provinces and municipal governments pushing in the same direction, prepared to establish both complementary and supporting policies. They are not all in the same place, but they have all been working with us for close to a year and a quarter.
Slide B.1 was meant to summarize where we are in the process. Really, in the first year, right up to about the December period, we were mostly trying to determine whether we could put together a sensible national process that would engage not only the federal departments but the provinces, industry, environmental groups and others who need to be engaged in this. We worked on that for a year, both in terms of conceiving how it would work and putting it in place. By the fall, we had it in place, funded, set up and running.
You can get a better appreciation of that if you look at Appendix 1, which gives a list of the issue tables and shows where we are placing our focus.
The group of tables initially had to produce something called a foundation paper, which was really the first analysis of what the challenge was in their particular sector and what the key elements were that they would have to work on in terms of dealing with that challenge. Those papers were largely completed by calendar year end. Most of them are now being made publicly available as we get them translated into French. About half of them are up on the Web site now. They are each about 100 or so pages long. That is why we are trying to ensure that they are available electronically. There will be about two dozen in total.
Senator Spivak: What is the name of the Web site?
Mr. Oulton: We will give the clerk the Web site designation, for those who want to use it. There is a significant amount of information in those foundation reports with regard to how the individual sectors see the issue and how they are laying the basis for looking at options. As I mentioned earlier, the next phase in this process is moving on to options reports. That is what they have been working on since roughly January and we hope to have them completed by the end of June.
I have not been answering your questions about whether this or that works because it will not be until we get their reports in the summer and have a chance to look at them and try to put them together that we will have an answer that we think we can bring to ministers around year end that says, "We have pulled these reports apart and synthesized what we think is the right way of putting the results together. We have a fix on some of those issues as to the right starting point in individual sectors and the path that we need to follow in order to get to minus 6." We do not get our raw materials until the summer.
The second page, B2, talks about another element in the federal government side. In a sense, we had an advantage from the provinces inasmuch as the federal government decided in its 1998 budget that it would dedicate $150 million as seed money for the next three years -- that is, $50 million per year -- to do two things. First, it would fund this policy development process that I have been talking about.Second, it would say that there are good ideas in the areas of technology, public education and outreach, and climate science, and that we should now be looking at the impacts and our adaptation to them.
The major part of the fund, namely, about two-thirds of it or more, is being used to try to fund good technology ideas and good public education ideas so that we can proceed with action early.
To date, 32 projects have been announced that are worth about $10 million. There are about another 100 projects in the mill, and we anticipate that a number of announcements of technology and public education projects will be made over the course of this year. Most of these projects are partnership projects that are being done not only by the federal government but also by them in partnership with industry, universities, environmental groups and provinces.
Senator Taylor: Is the money spent in the budget the government's budgeted share or is that the total project cost?
Mr. Oulton: That is the government's budgeted share. Our target is to leverage the government's budgeted share. For every dollar that the government spends, we are trying to leverage at least $1 or $2 of money from industry or other public sector participants. This is just the federal government's share.
If you look at appendices 2 to 5 of this deck, you can get a good sense of the projects in more detail.
Senator Cochrane: Regarding the 32 projects that are announced, could we have it broken down as to how many there are for each province and the types of projects?
Mr. Oulton: We can provide that. I do not have it with me but I have it on one of our Web sites. We can also give the committee a hard copy.
Senator Cochrane: It will be a province by province breakdown?
Mr. Oulton: Yes.
Senator Adams: You mentioned the environmental group. Are you funding them?
Mr. Oulton: We have about three dozen representatives of environmental groups participating in the issue tables. Their costs of participating and their opportunity costs of being on the table are funded. There is an element of joint funding with the environmental groups so that they can fully participate in our process.
Senator Adams: Why is that? Those people have organizations, do they not?
Mr. Oulton: They do, but most of them do not have the same pockets that the industry people have. We are asking them for anywhere from three days per month up to eight, in addition to their normal work. In many cases, environmental groups now tend to do work for other companies. For example, the Pembina Institute in Alberta or Pollution Probe in Toronto will often be running their own funding work in other areas. In order to get them to participate with us we had to say, "We are prepared, as we do with everyone, to offer to offset the costs of travel and the costs of being at meetings. In addition, we will offer you some opportunity cost offsets." We have done that with them in order to ensure that we have the necessary representation at the table. It goes beyond the environment. It really covers non-governmental organizations.
Senator Adams: That may be typical for those organizations, but other people are told that they cannot do that. That happened to me in the fall with Parks Canada. They have been funded by the government and they are telling us, "You cannot go in there." Their excuse is that they are protecting the environment. This is very typical for people in these organizations. Why do you give them money when they get funding from their own organizations?
Mr. Oulton: We funded them because we did not want tables with only industry people on them.
Senator Adams: I hate fighting with the people who are funded by the government, but when another project comes along, they are not approaching it with an open mind.
Mr. Oulton: In this case, it is more policy development. In many cases, the environmental groups have some of the expertise that you want in terms of, for example, emissions trading. Some of the environmental groups, both in Canada and the U.S., have the best expertise in talking about how you would develop an emissions trading system. We wanted to ensure that we had them available for us and, in order to do so, we had to offset some of the costs involved.
Senator Adams: I understand that. However, most of the time these people do not even live in the communities and they are reproaching the people who do live in them. That is my concern. They may have an expertise but they are fighting with the people who live in various communities. For example, they created a national park because the caribou were there. However, the caribou will soon move on to another area and we will not be able to attract a mining company in that area because it has been made a national park.
Mr. Oulton: I appreciate your view on that. We felt that when we are dealing with global issues we needed to err on having the right kind of expertise on the table. Getting a good mixture of company, university, environmental group and other participation was important to developing good policy.
We may have erred in our judgment, but that is how we made it.
Senator Adams: At least the next time you come to the committee to give evidence, we will know from where the money came.
The Chairman: I do not have a sense of your time frames here. I can see the progress that you are saying you have made to date, the reports that are coming in and the groups that are doing the work. However, you have 2010 sitting out here and all of this happening. Before we go further, for my clarity and possibly some of my colleagues, I should like to get a sense of your time frame as to when these things will come to a head. When will you start action? When will you start seeing results?
Mr. Oulton: Our objective is to give a draft strategy to federal-provincial environment and energy ministers by the end of 1999. We were given that target when we were set up.
We are hoping that we will have the key elements in place so that they will be able to get together and look at the draft strategy. I am not making the assumption that they will not have any views that will not change or alter it. My assumption is that they will need to meet beyond 1999 and go through further iterations of it. We were asked to provide them with a draft strategy to look at as a result of this process by the end of 1999. Some of the charts later on go through the steps that will take us there between now and December.
The Chairman: By the time they meet in December, you will have a recommended plan of action for them to take on in order to start achieving these targets, will you?
Mr. Oulton: Our ambition is to have both a strategy that says, "Here is what you need to do from now until 2010" and what we call core measures that they would be asked to look at for in federal, provincial, municipal governments for the years 2000, 2001 and 2002.
I refer to it as a business plan, and it is very much that. The key in terms of climate change is that you are working in an uncertain environment. You know that the issue is developing around you; however, you do not know where the international negotiations will go. They have annual negotiations, the conference of the parties, each year. How that will develop still remains uncertain. You do not know where some of our key partners such as the United States are going in terms of their strategies.
When you make a Canadian strategy, it should be like a business plan, setting out a general direction and a set of actions to be taken in the first three years. You should evaluate and assess your successes and failures and then reset next year's action plan. Look at what your partners are doing that will affect the competitive position of industries and the various elements of your plan.
Indeed, our ambition is to ensure that the federal government, as well as provinces and other levels of government, have a sense of what must be done in the first three years of this business plan in order to lay a good foundation.
We also hope to give a sense of the actions needed in the period 2003 to 2010 to actually achieve the goals. All those decisions need not be made in the year 2000 but you must decide how to start and which overall path to take. You must be prepared for making later decisions, which are tougher decisions. As the business environment changes, you must decide how it affects those later decisions on strategy.
Senator Hays: You referred to the period of increase in OPEC oil prices as an interesting period. You listed three concerns that arose then: energy issues, programs that were developed, and price.
Clearly we are, today, extending those concerns. Regarding the programs, such as R-2000 and vertical wind turbines, most of them are gone. Some may have helped.
On price, it seems the government is clear on one thing. They will not use carbon tax as an economic instrument. Such a tax could be equivalent to the petroleum revenue tax. It could be used to internalize environmental costs, which have been externalized thus far. Nevertheless, the government chooses not to use it.
This committee's report, which was tabled in 1994, stated that economic instruments are an important part of the package and that the government should be working on them. That did not happen for a long time but it may be happening now because Appendix I refers to the tradeable emissions permits issue which, of course, flows from Kyoto.
Where do you expect to achieve the most, on a weighted basis: on programs or on economic instruments? You are moving on all three fronts with particular emphasis on the economic instrument, or so we have heard.
Mr. Oulton: It is difficult to estimate the mix. I see the results as a number of different hybrids. We have many issue tables testing different methods. One method looks at a range of measures, which are very sector-specific and which focus on the changing public and business attitudes. That covers public outreach and the business portion.
You are looking at providing incentives for R&D. You are also looking at tax vehicles or other economic instruments that will motivate people or businesses to purchase or not purchase particular commodities. This method says not to use any big stick that would cut right across everything, but rather to surgically review many different measures which might be chosen by the three levels of government in different areas of the economy. You would not use one big tax nor one big instrument, such as emissions trading, but a variety of smaller instruments. Economic instruments, public education and research and development are some examples.
A second method makes use of the experimentation that is ongoing now in emissions trading as an instrument. The United States had some success there in handling their acid rain issue. Virtually every other OECD country is examining emissions trading but no decisions have been taken yet because policy exploration is still ongoing, as it is in Canada. This is one instrument that is also blessed internationally and there may be international emissions trading.
Perhaps then emissions trading should be the primary vehicle to reach reduction targets and little use would be made of those other smaller, targeted measures.
That is the other end of the spectrum. One big economic instrument may achieve 60 per cent of reduction goals and the balance is filled in with a number of other smaller instruments.
Being a good bureaucrat or a good policymaker, one might choose a hybrid method. One might use an instrument like emissions trading but not use it across the board because it does not work well in all sectors. You may then achieve only 30 or 40 per cent of needed reductions, and the balance would be filled with specific targeted measures that are different from province to province. A different mixture of economic instruments and R&D and other things would apply to each jurisdiction.
We have a graph that shows different emissions in different parts of the country. That graph implies that a one-size approach will not be effective. First ministers want a policy that is broadly equitable in terms of impact. One instrument may be effective and efficient but it may not address regional equity concerns. The answer may lie in using that instrument selectively in combination with other instruments, which differ by region.
You are asking me to speculate. I think we will end up with a typically Canadian hybrid approach that allows the regions to tailor their approach to fit their economies.
Senator Hays: You have not mentioned what other countries are doing on the competitiveness issue. You seem to say that the economic instrument will provide perhaps half of the gain or half of the improvement. Am I right on that?
I know you do not know the answer. We know very little about where we are going right now. Senator Ghitter's question about time frame is important because we need to know. You are saying the end of this year. Will we get something to chew on before that?
Mr. Oulton: The answer is yes. Much information is coming out about the work on climate change. The foundation reports are there and 24 of those will be tabled, showing the basic information in each sector.
In June and July, about two dozen options reports on individual tables will be issued. The integration of those two dozen reports should be available by year-end.
You will still not have a final answer. In my view, the climate change issue does not lend itself to a one-time strategy to be used come hell or high water. Flexibility is necessary. Your environment can change in terms of other countries' actions. Your decision-making environment changes. You must start with a sense of strategic direction and a sense of the options that must be considered. You choose a sensible foundation for years one, two and three. Those decisions can be made now and into the year 2000. The ministers should choose the path and describe the business plan approach and so move the issue forward year by year.
The Chairman: Thank you, witnesses. We will have you back very soon.
The committee adjourned.