Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 13 - Evidence - November 26, 2009


OTTAWA, Thursday, November 26, 2009

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:19 a.m. to examine and report on the current state and future of Canada's energy sector (including alternative energy).

Senator W. David Angus (Chair) in the chair.

[English]

The Chair: Good morning, colleagues. I call this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources to order. This is an early morning meeting, but I welcome not only colleagues of the committee but others here in our committee room this morning as well as listeners on the CPAC network and viewers on the World Wide Web.

[Translation]

My name is David Angus. I am a senator from the province of Quebec, and I am the chair of this committee.

[English]

I will introduce my colleagues. To my immediate right from Alberta is Senator Grant Mitchell, the deputy chair. Beside Senator Mitchell are the representatives from the Library of Parliament who serve us so ably, Ms. Sam Banks and Mr. Marc Leblanc. Then we have Senator Rob Peterson and Senator Pana Merchant, both from Saskatchewan. This is our Saskatchewan corner.

We heard in the news last night that they have moved into second place as the biggest producing province of haves and high GDP. Congratulations; your work is paying off.

To my left is our able clerk, Lynn Gordon. To her left are Senator Richard Neufeld from British Columbia; Senator Judith Seidman, our newest member from Quebec; Senator Burt Brown from Alberta; and Senator Daniel Lang from the Yukon.

Our witnesses today are very distinguished gentlemen — I think known to many of us — from the National Round Table on the Environment and the Economy. We have with us the chair, Mr. Robert Page; and the president and CEO, Mr. David McLaughlin. I am appreciative of your efforts to get here so early. I understand you are well aware of the ongoing study we have embarked upon of Canada's energy sector, not only its present status but with a view to developing a framework for the future. This is at a time when it is very much in the public eye, on the economic front burner and of great importance to the nation. We value your willingness to come and help us in our deliberations.

I believe Mr. Page will be the first speaker. Copies of your remarks have been circulated to all members. I am not sure what you will say exactly, but I hope you will tell us a bit about the round table, which we understand was originally established to develop strategic advice for the government on how to deal with these important matters of energy and environment.

Robert Page, Chair, National Round Table on the Environment and the Economy: Thank you, Mr. Chair, for this invitation to appear before you today on behalf of the National Round Table on the Environment and the Economy. Mr. McLaughlin and I each have a short statement to make to the committee and we will be happy to answer any questions you may have, not only today but also later if they emerge.

Let me begin by issuing a very firm note of congratulations to this committee on undertaking such an important study on energy policy. This is a critical issue for Canada's future, its prosperity and its sustainability. We see those two as intricately linked. I am sure your work will shed useful light on the policy issues and choices facing Canadians as we strive to integrate energy security, economic growth and environmental sustainability. We emphasize the word ``integrate.''

I have been involved with the energy sector in one way or another for most of my professional career, which is longer than I like to admit in public. Currently I live in Calgary and work as the TransAlta Professor of Environmental Management and Sustainability at the University of Calgary. However, for 10 years — and I have known some of the members of this committee in this capacity for 10 years — I worked in the private sector as vice-president of sustainability for the TransAlta Corporation, Canada's largest private sector electrical utility. Currently I also serve on the board of the ENMAX Corporation in Calgary, our municipal utility.

I have had the distinct pleasure of traveling around Canada, including the North, and around the world on energy issues of one kind or another, dealing with pipelines, oil and gas, and electricity. I have been particularly involved in some of the international negotiations relating to climate change.

I say with great confidence that the work you are undertaking on energy policy issues, especially as they relate to the environment and the economy, is both timely and important for Canada. I want to emphasize this: our country needs an integrated national energy strategy to achieve our economic and environmental goals.

Mr. McLaughlin will give you a brief overview of the research work of the national round table currently underway. Before that, I want to point out that today the round table is releasing its latest report, and I emphasize this. This is in the morning press, because we released it at one minute after midnight to get the morning papers. All of you will be receiving electronic copies of it later this morning. We presented a formal paper copy to your chair before this meeting.

There are aspects of that Arctic report that are so important, in our view, to Yukon, the Northwest Territories and Nunavut at this time. We would be happy to return at a later point if that would be useful to your work.

To assist you in your immediate work, I would like to set out what I see as the most important elements in energy policy today as it relates to both the environment and the economy. The round table works at the nexus of the environment and the economy. Right at the centre of that nexus today is energy policy. When you look at issues from a sustainability viewpoint you have to consider both the environment and the economy together. They are symbiotic, but you cannot look at either of those without considering energy policy.

For Canada to achieve the climate policy goals it has set for itself, we will need to consider the role of energy policy in helping to meet those goals. We have not yet seen that integral role of energy policy in the wider climate issues.

Canada is an energy producing and exporting nation. When you consider proven oil reserves, we are second only to Saudi Arabia. The bulk of those reserves are in the oil sands in Alberta and slipping over into Saskatchewan in the northwest corner. When you look at all of this in terms of what we are doing, then the energy issues are crucial. Second, in connection with it, they are so important in terms of our export economy, whether those exports are oil and gas from the western prairie region, or whether it is hydro from Quebec.

Today we are the single largest foreign supplier of energy to the United States, providing 17 per cent of U.S. oil imports and 18 per cent of U.S. natural gas imports to our trading partner. Together, this adds up to a huge generator of economic activity and wealth for Canadians.

At the same time, when we look at the projections for carbon emissions and greenhouse gases in the future, we know that significant oil sands production is a key component of these increases. Reliance on fossil fuels in both the Canadian and the global economies remains strong both now and in many projections for some decades to come.

On oil sands, the public is demanding immediate action to address water and emission issues, but the new technologies needed to solve and address some of those problems are probably a decade or longer away. The key issue for your committee, in our view, will include how public policy must close this time gap so environmental action and economic growth can go forward simultaneously.

As the round table has conducted its work, we have been very much aware of this link between energy issues and environmental policy. We have heard about the need to consider the economic implications of climate policy on our important energy sector. Of course, we are all aware of this on the eve of Copenhagen. We have come up against issues of provincial and federal jurisdiction as we have tried to implement and harmonize energy policy approaches towards a national policy.

Transforming our energy systems will be necessary to achieve our environmental goals. From carbon capture and storage on coal-fired electricity generating plants or oil sands plants to district energy systems such as we are looking at in Calgary right now, which would provide heating, cooling and power to some of our downtown core, this will all require integration of energy policy and environmental policy. We need a systems approach to that, and the word ``systems'' is very important here in terms of our context. For instance, if we are cutting coal-fired power generation in Ontario, New Brunswick, Saskatchewan or Alberta, we have to look at how that impacts nuclear, wind, hydro and other forces of power generation.

For this to be done effectively, we need to consider the role of energy policy at the national level, both federal and provincial here. We have been successful in the past on this as a country, but we cannot avoid the very important point of provincial ownership of natural resources and the issues of investment that are involved in connection with the future. As a country, we need to become a leader in clean energy technologies as part of positioning ourselves as an emerging low-carbon world economy and also to avoid protectionist measures from some of our trading partners in connection with marketing our products.

As you examine energy policy, let me suggest five possible questions that could guide some of the focus for your work. One, how do we bring about more collaboration and coordination of federal, provincial, territorial and municipal climate and energy policy approaches?

Two, how do we encourage sufficient investment in clean energy technologies, such as carbon capture and storage, wind, solar and other forms, to ensure we produce more energy more cleanly?

Three, how do we not just preserve but enhance our status as a reliable energy partner with the United States, not just for western oil and gas but for ensuring that hydro exports from Quebec, for instance, are deemed renewable in the U.S. market?

Four, how do we use energy policy as a lever for economic growth — and I pause there for a second — for new economic growth and prosperity while becoming even more environmentally sustainable?

Five, how do we educate and change consumer behaviour when it comes to energy efficiency and electricity use so that we reduce our overall economic and social reliance on cheap energy?

Each of these questions requires careful consideration on its own, but there is also a need to see them in an integrated fashion together, to ensure we have the right kind of energy policy for the right kind of environmental goals and the right kind of economic future. We come back to this fact, then, which is that we are looking at a sustainable energy system for Canada's future.

I would now like to turn to our president, David McLaughlin.

The Chair: Before you start, Mr. McLaughlin, first I want to thank Mr. Page for his very kind remarks about this committee and the work we are embarked upon. I would also like to make a reference. I believe an earlier version of this committee travelled to the Western Arctic at the same time the Fisheries Committee visited there, and we issued a report here earlier this year entitled With Respect, Canada's North; it is a fairly summary report because it was put together after the fact in a new Parliament. I do not know whether you are aware of it, but I commend it to you. It meshes with your own work.

Mr. McLaughlin please.

David McLaughlin, President and CEO, National Round Table on the Environment and the Economy: Thank you for the invitation to appear before you today. I begin by congratulating the committee for your decision to examine national energy issues in this comprehensive manner. I cannot stress enough how critical it is that the country have this conversation. Your committee is well positioned to undertake this, and we are happy to be here to help, both today and over the course of your two-year study if you see a need to have us come back and work with you.

My remarks will focus on the work of the National Round Table on the Environment and the Economy in this field so that you might have a better idea of our own analysis and advice on energy, economy and environmental issues and how these might assist you in your own deliberations.

The National Round Table on the Environment and the Economy is an independent federal public policy advisory agency whose purpose, as set out in our act is to ``play the role of catalyst in identifying, explaining and promoting, in all sectors of Canadian society and in all regions of Canada, principles and practices of sustainable development.'' We do so by conducting original research, consulting and engaging with environmental and economic stakeholders and experts, and providing relevant, forward-looking policy advice to governments, parliamentarians and Canadians. As your chair mentioned, we are just over 20 years old, so we have been at this for a while.

The role of the round table is to consider environmental and economic issues together, not separately, and in an integrated manner to arrive at sustainable development solutions. We have released five reports over the past two years that deal directly with issues of energy and climate change. These are Getting to 2050: Canada's Transition to a Low- emission Future, Achieving 2050: A Carbon Pricing Policy for Canada, Achieving 2050: Technical Report on Carbon Pricing, Geared for Change: Energy Efficiency in Canada's Commercial Building Sector, and Climate Forward: A Next- Step Policy Agenda for Canada, which emerged from our twentieth anniversary forum. I have copies of the reports here for you.

Our carbon pricing report, Achieving 2050, has been downloaded from our website 22,000 so far. It has become quite popular.

While I am happy to answer questions on any of these reports, I intend to concentrate in my opening remarks on the first two, which deal with how best to meet the Government of Canada's greenhouse gas reduction targets for 2020 and 2050. In both reports, energy systems are central as they both produce the carbon emissions in the first place and also are the key to reducing emissions through transformational technology change. Fully 82 per cent of emissions result from our energy systems, of which energy production accounted for approximately 46 per cent and energy end use for approximately 54 per cent.

Our objectives in the round table's analysis in these reports were to examine and advise on how to achieve the government's environmental targets at least economic cost. We found that an economy-wide approach, led by a strong and credible price signal on carbon, was essential to achieve the targeted emission reductions within these time frames and in the process stimulate the needed investment in clean energy and other technologies. We also found that policy certainty was needed to give investors, consumers and decision makers the confidence to proceed in making these investments.

Further, we found that a unified or Canada-wide approach, as opposed to the current patchwork of policies across Canada, to carbon pricing would be most efficient, cheaper overall and place us in a better position to align or link climate policies with our major trading partners, particularly the United States. The round table recommended a national cap and trade system in our Achieving 2050 report as a preferred and realistic approach to transition regional, national and ultimately continental energy systems.

Technology deployment and energy investment is crucial to long-term carbon emission reductions and policy success. Our research found that the electricity sector would grow by 25 per cent by 2020 and 50 per cent by 2050 in order to meet targets. New incremental investment in low-emitting technologies, such as carbon capture and storage, renewables and fuel switching away from fossil fuels generation, would have to total about $2 billion incrementally annually. It is a big investment, a big cost item.

In terms of contributions to emission reductions, our Achieving 2050 report with economy-wide carbon pricing found that by 2020, 38 per cent of emission reductions would come from carbon capture and storage, 21 per cent from switching to renewables and other fuels, and 20 per cent from energy efficiency. Therefore, a range of technologies and efforts is required.

Throughout our research and all of our reports, five major conclusions presented themselves. I would like to run through them for you.

First, there is no silver bullet or single technological solution to carbon emission reductions. All available emission- reducing technologies must be deployed. This is a practical consideration, since capital stock turnover time frames are often long, with stranded costs for long-life energy infrastructure.

Second, while economy-wide carbon pricing is the most effective and efficient mechanism to incent deep, long-term emission reductions at the lowest possible cost, regulations are required in certain sectors where the price signal is insufficient, such as the automobile sector.

Third, delay is costly. It is more efficient and ultimately cheaper to move faster and deeper on reducing emissions through carbon pricing at the outset than to try to achieve environmental targets too far down the line, when the economic costs would likely be sharper and more difficult to accommodate.

Fourth, acting in concert with the world, or at least our major trading partners, will keep costs down for Canada and help address issues of competitiveness and carbon leakage.

Finally, the overall costs to the economy in terms of GDP are manageable, but there are real impacts on certain sectors of the economy, parts of society and regions of the country that need to be addressed and understood.

To conclude, I would like to say a quick word on our current policy program, which will result in several key reports of interest to this committee next year. The round table has embarked upon a major new research effort looking at the economic risks and opportunities to Canada of climate change. We think this is as much an opportunity story as it is this kind of risk story that we have all been talking and reading about. We are focusing on two main areas: the physical impacts of climate change and the climate policy impacts of our major trading partners in the global transition to a low-carbon future.

To explore the economic risks to Canada from climate change, we will develop case studies on forestry, coastal zones, human health and public infrastructure to illustrate a range of economic risks while providing an estimate of the net national cost of climate impacts, including the costs of inaction.

From an international perspective, it is clear that Canada will also face significant economic implications as the world and especially our major trading partners transition to low-carbon economies. To this end, we are undertaking a Canada-U.S. climate policy case study to explore economic and environmental ramifications of how potential American climate policy options might impact Canada and what policy options work best for Canada in response.

We are also undertaking a benchmarking study that will highlight how Canada is currently positioned compared to its major trading partners in low-carbon competitiveness. From this, we will develop scenarios that highlight the economic opportunities for Canada and the policy pathways that we must take in key areas of low-carbon competitive success, including innovation, skills, governance, finance, trade and industrial development. Energy transitions will form a core part of that analysis.

I am happy to answer any questions you might have.

The Chair: Thank you, Mr. McLaughlin and Mr. Page.

I have a couple of points regarding your organization, which is well-known to people on the Hill and to others who are focusing on the energy and environment sectors. However, I do not know how widely known your organization is outside of this sphere. You say your organization is an independent public policy advisory group. For the benefit of our viewers and some of my newer colleagues, could you give us a sense of the composition, the budget and how it is funded?

You did not mention the word ``nuclear.'' Do you do any work in the nuclear field? You have indicated that you would like to help us in any way you can. We are looking for signposts as we study the various elements within the energy sector that can be clean and sustainable and form part of a new framework. Nuclear is an obvious element, but we are not sure how the land lies.

Mr. Page: I will address composition and nuclear, and then Mr. McLaughlin can address budgets.

We are made up of people who are leaders in the environment and the economy from across Canada, including business executives, academics, municipal leaders, one representative of a trade union and a variety of others. The key concept of membership in the National Round Table on the Environment and the Economy is that you have a strategic approach in your background and experience to the needs of the Canadian economy, from whichever direction you are coming at it.

The idea of the national round table, which came out of the Brundtland Commission in 1988, was that it would be useful to bring together a group of thoughtful Canadians to give independent, non-partisan advice on the environment and the economy, and that this would be useful to Parliament as well as within government ranks. We provide a series of reports, which Mr. McLaughlin mentioned in his presentation, to try to incent that. We frequently appear before parliamentary committees to share some of the information gained from our research. We like to think that the interaction of the experts we consult in order to build these reports, who are outside our membership, plus the way our membership critically analyzes the information going forward, is useful to Parliament and to the people.

As Mr. McLaughlin mentioned, over 22,000 Canadians have downloaded the entirety of our latest carbon pricing report. I did not know that many people suffer from insomnia. I say that with a great deal of respect, because this carbon pricing issue is one example where we need an independent voice.

The nuclear question is very important to the overall energy mix. It is our position that all the energy options, including nuclear, should be included in any systems approach. If I failed to mention nuclear in my presentation, it was inadvertent, because that is very much a part of it. Parts of Canada are without existing nuclear power facilities, such as Saskatchewan and Alberta, where this is currently under consideration. I will not go further than that regarding what is going on.

Mr. McLaughlin: The round table has a budget of $5.146 million, an appropriation from Parliament annually. This budget has been stable for several years. There are 30 people on staff, the majority of whom are policy people. I have been president since August 2007. I was appointed by the Governor-in-Council, and it is a five-year appointment. Members are appointed by cabinet for three-year terms, so there is a cycling through. It is a governance issue. Members are there for a period of time, with the normal renewal, so there is continuity.

The Chair: How many members are there?

Mr. McLaughlin: There are about 21.

The Chair: Is that a board of directors?

Mr. McLaughlin: That is correct. Mr. Page is chair of the board.

The Chair: Are all the members appointed by the Governor-in-Council?

Mr. McLaughlin: Yes, by the government of the day; that is correct. Members meet formally in a plenary session four times a year, but there are always meetings going on. We have subcommittees of members, conference calls and so on. However, by statute, we must meet four times a year.

The Chair: That is pursuant to the National Round Table on the Environment and the Economy Act?

Mr. McLaughlin: That is right. That act was passed in 1994. It was introduced by Minister Charest when he was Minister of the Environment and passed by Minister Copps in the change of government. The round table is 21 years old. It was announced in October 1988 by Prime Minister Brian Mulroney and then was given a statutory basis, from which I quoted the core mission of the act, in 1993-94.

We report to the government and to Parliament through the Minister of the Environment, but we are an arm's- length, independent body. We do the normal corporate reporting — annual reports, departmental performance reports, reports on plans and priorities — all the normal accountabilities that government agencies and departments have to go through. As the chief accounting officer, I am responsible for that under the Financial Accountability Act.

The Chair: That is helpful.

Colleagues, I point out, if you have not noticed already, that in our briefing papers from the Library of Parliament, we have a good summary of what we have just been told. I thought that was important. We are on the television network, and it is fundamental to our study to make it known that Canada has focused on these issues and there is an infrastructure for policy development in place.

To make our point for you, we too are here at your disposal to work cooperatively, in an integrated way, so that we can both make a difference in what we are trying to do.

Mr. Page: I wish to add an anecdote. Last week, I spent several days in Washington, D.C., as I do on a regular basis, conferring with some of my American friends. One of the Senate staffers said to me at that time, ``Gosh, I wish we had a national round table.'' I share that anecdote with you because I hope that Canada is proud of this institution it has.

The Chair: I have a long list of questioners. I am sure we will have a productive and stimulating morning. The first questioner is Senator Merchant from Saskatchewan. She has learned the technique now, and I salute her.

Senator Merchant: Welcome. I wish to ask a question that concerns people in Saskatchewan. You said we are one of the provinces that have the bulk of the reserves in this country. Our provincial government has been vocal in saying that we have to design an emissions cap program that will reflect the different conditions across the country so as not to punish the high-growth provinces. You are very eminent and could indicate whether you think this is a workable solution. Minister Prentice has said the Canadian approach has to reflect the diversity of the country, the sheer size of the country and the very different economic characteristics and industrial structures across the country. Is this a workable solution in a country with an uneven distribution of energy resources, and should low-growth provinces be given relatively stricter national emission targets?

Mr. Page: That is an important question, and it is right at the centre, if I can use the term, of the federal dilemma right now. In our reports, we have tried to look at the whole idea of national standards.

I will turn to Mr. McLaughlin for the technical knowledge in a moment, but I do think we need national standards. The way I see it today, with federal and provincial policy in both Saskatchewan and Alberta, there are strong incentives for some of the areas that will be facing the greatest challenges. I work quite a bit on carbon capture and storage issues in my daily job at the university. We are working with a whole series of private sector companies and the federal and provincial governments in connection with that. There is no question that the technology that will be required for the oil and gas sector, to give one example, is not commercial today — period, full stop. It will probably not be commercial until sometime in the 2020s.

We are seeing today — and Minister Prentice has been a strong supporter of this, along with other federal departments — that the federal government is stepping in to try to balance between the idea of national standards, such as minus 20 by 2020 from a baseline of 2006. They are trying to balance that by giving specific incentives to try to get the technology up to such a state that it would be commercial. We will need to do this for another 10 or 15 years, probably.

Is this impractical? No, it is not. I take people back to what took place in Alberta under the Alberta Oil Sands Technology and Research Authority, AOSTRA. The oil sands in Fort McMurray were not commercial at the time. There were questions about reliability and the economics of production. This federal, provincial, private sector and university partnership, which worked for about 15 years, made the oil sands commercial in the way they are today.

The National Round Table on the Environment and the Economy is trying to say we need national standards, but we also need to provide investment from the public sector, both provincial and federal, because the future prosperity of the country is, to a certain degree, dependent upon getting the new technologies off the ground. This is extremely important.

This is not just a question of meeting environmental standards. This is a question of making Canada the world leader on carbon capture and storage and other technologies. The benefits for that will be right across the country. Some of the research is being done in Montreal, Waterloo and Vancouver. This is not just a question of the Western provinces alone.

Yes, we need national standards. In my statement I tried to make the point that we have this time gap between what is commercial and non-commercial today and what must be commercial in the future. Public policy must address that time gap in order to allow companies to comply.

Mr. McLaughlin: I urge you to look at the Achieving 2050 report. Its core conclusion is that there is a cost to fragmentation of policies and that a unified pricing approach is more efficient and gets us the emission reduction targets that are the Government of Canada's own targets. We are not even talking about more ambitious targets. These are ambitious from where this country is at and the nature of the energy resource disposition across the country.

I do not know whether it is a new fiscal imbalance or the new horizontal imbalance, but this issue strikes at the tensions of federalism. When we modeled, we looked carefully at what would happen if each jurisdiction tried to meet the Government of Canada's targets in its own way. The price per tonne for each jurisdiction was in many cases astronomical. Alberta and Saskatchewan were high. There are a few tables on pages 32 and 33. Emissions in Saskatchewan were about 8 per cent of the national total in 2005. In our modelling, as we look forward to 2020, we had a contribution of about 7 per cent from Saskatchewan in emission reductions from there. As we worked it through, we were satisfied that there are ways to make this transition relatively equitable and manageable, but the sources of emissions is the challenge that you have to get to.

Can you have a series of regionalized and provincial initiatives on their own? You can, and you can find some ways to have them nationally equivalent. The genius of federalism allows us to do that. We have a great history on that. The question is whether that will be effective and efficient. Can they aggregate up, for example, in getting the national country emission reduction that we need to do?

We have to make a distinction as we figure out the right policy approaches between setting targets and then finding the right way to do this. There may be fluctuations. There are manageable ways of doing this. When we looked at it, we found that a patchwork or fragmented approach ran other kinds of economic risks. That is the message for policy- makers: think carefully about that in order to get at the kinds of issues you raised, senator, about different growth in different parts of the country. We have a financial transfer system that recognizes that and reflects that. We have to be smart about it, but it is not at all clear that a series of official provincial initiatives all by themselves, without some kind of national aggregation, would get us to where we need to go.

The Chair: A double-barrelled approach from Saskatchewan.

Senator Peterson: Thank you, gentlemen. We hear the term ``clean coal technology.'' Where does that sit right now?

Mr. Page: Where is clean coal technology? I wish I had about four hours, senator, but if you ever allow an academic extra time, you are in deep trouble. I will try to be brief.

Clean coal technology is a series of technologies; it is not one technology. In Saskatchewan, for instance, SaskPower is looking at one particular form of it. Alberta is looking at several other forms. You can have pre- or post-combustion in connection with it. By pre-combustion, I mean changing the nature of the technology and the way it is and converting to hydrogen or something else, and post-combustion is like scrubbers on a stack that extract the CO2.

Right now it is significantly out of the market, but it is technically making important progress. I say ``technically making important progress'' because TransAlta is going forward with a post-combustion project at Keephills in Alberta. We need to take that from what I would call the experimental stage, which is relatively small, to the full commercial stage.

The TransAlta project is a million tonnes per year. It is on an existing coal-fired power plant. It is a fully commercial operation. It is the first example in the world of that European technology being used on a commercial scale. By 2012 or 2013, I am hoping we will be in a position to look at how close to commercial availability that clean coal technology will be.

The Americans, the Germans, the British and others are very hard at work on this. The Chinese are desperate for that technology. I would try to put it in this form: in the next three to four years in Saskatchewan and Alberta, in the U.S. and in Europe, we will see a variety of this technology being applied. I hope that by 2015 we will have clearer answers with regard to the costs involved. Until we get to that, public support will be required for those experiments to go forward.

I hope that by 2020, clean coal technology would be commercial.

I am emphasizing these dates because we are looking at the challenge for the Government of Canada in making those cuts of minus 20 by 2020. That will be a challenge. Having significant cuts by 2020 will require some acceleration in the technology processes.

It is a huge question. I hope that is helpful.

Senator Peterson: It is. The reason I asked the question is the timelines. If nuclear will be a partial replacement of this, you do not build those overnight.

Mr. Page: That is right.

Senator Peterson: We need lead time as to which way we are going.

Mr. Page: That is correct.

Senator Peterson: Clean coal may not work. You said that by 2015 you may know something. That is why I brought that up. The whole matter of energy sector transformation and emissions standards will all tie together.

Another question is replacing high-cost energy with low-cost energy. I think one could say we have high-cost energy right now, but we are not replacing it because it is being subsidized.

At what point does the consumer have to play an integral part of this whole picture, and when and how will we tell them?

Mr. Page: First of all, the consumer must play a part. The report Mr. McLaughlin was talking about lays out clearly that this is a balanced approach between producers and consumers. This is not targeting producers with the assumption that somehow they can absorb the cost without a flow-through to the consumers.

The message that the government must give is that if people want the new environmental programs they are talking about right now, they must be informed of the costs involved. That is very simple. That is the key part of carbon pricing in our report. The linkage there must be clear in people's mind so they can weigh the options properly and decide what they want.

Electricity prices in most provincial jurisdictions are a very sensitive issue. In rural areas of Alberta, for instance, they are a very sensitive issue for the government. I am not trying to downplay that issue. There are political problems inherent in where we go from here.

Look at the estimates for nuclear power at the new nuclear plant at Darlington in Ontario. Look at the power estimates for new coal coming forward in Alberta and other jurisdictions with supercritical. Look at the cost estimates for carbon capture and storage. Look at the rising concerns of Canadians with regard to locating new wind power farms in their immediate locality. When you look at all our major potential baseload energy sources of generation, all of them face environmental and cost implications in connection with them.

The last point I would make is that the hidden factor in all of this, especially for renewables, is transmission. We must be able to transmit the power from the power plant to the markets. In many cases, especially with renewables, we are looking at locations that are some distance from the market or new hydro in Northern Alberta or Northern Saskatchewan. That transmission factor and public opposition to new transmission are additional aspects of it.

As Mr. McLaughlin rightly said, there is no silver bullet here. Emphasis in your report on integration becomes all the more important in showing the different options and what the costs and other factors may be.

Senator Mitchell: Thank you, gentlemen. Your presentation and the work you have done are very powerful. I would like to congratulate you on your proposed study into economic risks of climate change and climate policy impacts with our major trading partners. Those are two core issues.

We hear all kinds of debate and suggestions that there are huge costs related to action on climate change. I think those are overemphasized. The experience with the oil sands is absolutely instructive of how you take a technology and work it until it works. I know we will make those work on this side of the ledger, as it were, with respect to climate change.

It is difficult to quantify the costs of inaction. I know your new northern study addressed that. I have not seen it. Could you give us an indication of where you are going with that, what that study says about the costs of inaction, of mitigation or of adaptation now, and where you think this new study will go? How will it assess the risks, and what will costs be?

Mr. McLaughlin: The report True North: Adapting Infrastructure to Climate Change in Northern Canada focuses more on the risk management mechanisms to get infrastructure ready. That means codes and standards, insurance and disaster management. We did not do a full cost-benefit analysis looking at every bit of infrastructure. We found that a national inventory of infrastructure in the North does not really exist. There are still information and data problems there. In a couple of places where we dug through some secondary sources, we found you are talking about billions of dollars of infrastructure that needs to be adapted and made ready for these kinds of risks going forward, and that does not account for new infrastructure moving ahead.

You have to be careful, in economic terms, about making that an exact cost. If we are going to say that the number is X, we try to make certain we have worked it through with a number of variables to be satisfied that it is not just a number thrown out there to try to raise the risk quotient. We are trying to say that this is in fact the kind of range we are in.

That is why we are looking at this broader economic risk and opportunities to Canada of climate change. We found there are no reliable, publicly available numbers on the costs to the country of inaction. We did modelling in terms of action of carbon pricing, and we showed the impacts on GDP, price points and impacts on sectors. We feel confident that that kind of economic modelling is quite reliable. However, when you are looking at the costs of not doing something, the famous Stern review said it was a global number, and when you get down to the national and regional numbers, they become less reliable.

For the first time we will try to have a net national cost number and try to monetize it for Canada. To do that we have to look at both the positive and the negative of climate change. That may sound a bit heretical, if you will, but a warming climate does have a positive impact on agriculture, for example, to a degree.

These are the things we need to look at and not just throw out a negative gloss or an optimistic gloss that is not realistic either. We will try to bring these two together, and to do that we will do integrated economic assessment modelling, if you care to get into that.

I mentioned also these four case studies in forestry, human health, and public infrastructure in coastal regions. For the first time we will have bottom-up studies. We will look at these sectors and then use that to inform the data analysis we need to do at a national level. Again, it does not exist. We will be doing this over the next six months. We hope to have a report out towards the end of June that will be able to say for the first time to Canadians, ``Here are the costs of the physical impacts of climate change, and here are some directional things we need to think about.''

The ground still needs to be tilled on this. Some of the data is more reliable than other data, and some is certainly not publicly available. I know this committee is conducting these hearings and bringing more information out from briefs and other things so that Canadians are more aware. We will be happy to contribute to that.

Mr. Page: Our emphasis on adaptation right now is very much getting at some of the issues of the costs of inaction, because our hope is that as Canadians are made aware of the costs of adaptation to climate change they will want to move quickly, not slowly, to address some of these issues.

Senator Mitchell: That raises my next point. I had an epiphany while speaking to a class of Grade 9 students last week. I asked how many of them actually believe in the science of climate change and believe that climate change is occurring and is caused by human activity, and roughly 40 per cent put up their hands and said they did not. It is very obvious. Many people wonder, at best, and it is because there is not a fundamental understanding that this is happening, that we are causing it, and that the costs are infinite compared to the costs of action, really. Maybe it is obvious to say, but it really limits the policy room to manoeuvre. People who want to do something can quickly be discredited with three-line mantras, and you see the brutality of the debate and how hard it is to advance and how hard it is for governments to do what they perhaps think they should do.

What do we do about broader education? Can governments play a role in that? How do we create room to manoeuvre on this important issue?

Mr. Page: That is a huge question, and I will put two caveats before I begin to answer. I have been involved in climate change science since before the Toronto conference in 1988, and I know it is important to understand that this is a complex area of science. In areas like clouds and oceans, we are still trying to map out some of the basic science. That CO2 causes global warming is a different question in connection with it, but I want to make sure we understand that like you, senator, I get invited into the schools and at times I have trouble explaining quickly and easily some of the complexities of climate change science because they are not easy. There are areas in which we are still not totally certain where we are going.

My second point is that our work and our modelling show the cost for every province of going forward. While I agree with some of your comments, I do not want the Canadian people to think this is a free lunch. It normally takes a century to transform energy technology and we are going to transform it in 15 or 20 years, and that is going to cost, especially for energy-exporting countries like Canada. There are serious costs and assumption of those costs.

That is why earlier on, in answer to another question, I said that if people want the full environmental program, and I believe the Canadian people do want that program, they have to understand the costs that are involved.

How do we attempt to address this? Well, I will give a commercial here for the National Round Table on the Environment and the Economy. When a whole group of Canadians of differing points of view on climate change, such as we have in the round table, come together and put forward some of these reports, I believe that is an effort to educate Canadians. Does it get us as much coverage as it should? No, it does not.

A Calgary Herald reporter said to me a few weeks ago, ``Bob, I love to talk to you, but you do not sell newspapers.'' That is part of the problem. Both extremes sell newspapers, and there is a certain degree of commercial activity involved with that over which I have no control. On the other hand, I would like to come back to what Mr. McLaughlin said before, that over 22,000 Canadians have actually bothered to download a huge report for their personal edification to look at carbon costing. I find that encouraging.

In the speeches I give, and I speak all over the country — I am in Vancouver next Tuesday, for example — I find there is a real interest among Canadians for something other than rhetoric. There is a real, building frustration, which I hope your report will address. This is part of the reason for the round table's being so encouraged by your work. There is a real interest in seeing hard-nosed, objective advice out into the public arena today; people are tired of some of the political rhetoric that has been going on since Kyoto and that seems not to be leading us far as a country.

There are scientific bodies through the universities and hopefully public bodies through the round tables and similar think tanks across the country that are trying to address the issue. Are we doing it effectively right now? No, we are not. As well, there is a growing need in this country, and there is recognition of the need for something beyond just the rhetoric that has been dominating so much of the press coverage.

Senator Mitchell: The other side of your study is the impact of our major trading partners and what they do. Our committee had a wonderful trip to Washington five or six weeks ago and spoke to many people at all different levels, political included. There is a lot of going back and forth down there about the idea that the U.S. might not necessarily want to buy our oil sands oil, and they make the case, incorrectly, that it is a particular problem. Second, under at least Waxman-Markey, and I believe it has probably been threaded through, there is the idea that big hydro will not be considered alternative energy, and that could have implications for Quebec, possibly Ontario, although I am not certain, and B.C. being able to export electricity.

Could you give us your assessment of the risks there?

Mr. Page: I hope you will address this in your report. When I was in industry we had power facilities in six U.S. states. I spent a lot of time there. I have a lot of friends on the Hill and in Congress. I am very worried about the protectionism implicit in U.S. environmental regulations right now. There are three particular aspects of this that I want to address.

First, there are carbon-intensity standards being driven by forces from California, for instance, which would allow the marketing of only certain fuels in the United States with a carbon intensity. I could talk at great length about this issue. This situation is discriminatory against Canada because it is not life cycle assessment; it is just production assessment, which particularly targets the oil sands. For instance, the situation of the ducks in the Syncrude accident created a huge storm of press coverage in the U.S. That is one thing.

Let us get a life cycle assessment of all imports of petrochemicals and hydrocarbon fuels into the United States. That is something we can deal with, because we are then comparable to OPEC and various other nations.

Second, in connection with that, is the provision in Waxman-Markey for the President of the United States to have the responsibility to apply border adjustment carbon tariff surcharges. This is important to emphasize separately because it applies to energy embedded in Ontario or Quebec manufacturers. Look at what softwood lumber and other forestry products in which the U.S. was interpreting environmental standards meant for British Columbia. The U.S. lost every time it went to a dispute resolution panel, and Congress just ignored it and we had to deal with it.

The issue is that the Americans are upset with China and others. The difficulty is that if they put surcharges into legislation with regard to imports, there are far more carbon-intensive imports from Canada, such as automobiles, than is probably the case for China. The border adjustment carbon surcharge is a major issue for us.

The last point I would make is the point you made, senator, in connection with what is renewable power. Many in the United States, including the Secretary of Energy, have made the point in the past that renewable energy cannot be large-scale hydro. Because of its level of aquatic ecosystem impacts, large-scale hydro is not like run-of-the-river, small- scale hydro, which does not create dams and diversions, or wind or solar. That is a debatable point.

I spoke to the embassy people last week in connection with this issue, which is what Canada is trying to get across in the U.S. Congress. I am not suggesting that there is negligence in terms of our attempts. However, we have to understand that a group of people in the Obama administration view American energy security as not more fossil fuels, not more large hydro but, rather, new renewable power; and by ``renewable,'' they mean wind, solar, geothermal, and not large-scale hydro. We are up against a definitional issue in which the Americans have a definition of ``renewable'' that is different from ours. The Canadian definition is fairly consistent across the country.

Mr. McLaughlin: I will tell you about the research we are doing on this topic. We will be looking at a range of border carbon adjustments in the U.S — we have already looked at what Canada is doing in this regard — and what this does to our economy nationally, regionally and by sector. We are looking at low-carbon fuel standards. We will do about 50 different modelling scenarios. We have looked at Waxman-Markey to see the impacts, relative effort, and how emission reductions are achieved.

The thrust of this research is to answer some core questions. First, can Canada act alone? We have been talking about having to act in tandem with the United States. We will try to show that there may be a policy pathway of our acting alone but being smart about it.

There is the question of alignment. Do you align on certain policies or do you align across the board? To what extent do we have room to manoeuvre? This has been described as an either-or situation, that we cannot do anything unless the U.S. does. We are not convinced of that intellectually, and we will certainly look at that issue.

Ultimately, we have to have trading systems. If we are to go into carbon pricing in a bigger way, we need trading systems that can talk to each other. We will look at linkage. There are technical design issues, but the stated government policy is to have a cap and trade system at some point that can integrate with the U.S. There are big issues of design and economic impact, how you price carbon, safety valves and so forth. This is the thrust of what we will put on the table with policy directions and pathways.

Mr. Page sketched out the risks, and we want to look at the opportunity side as well. If the world is moving to a global low-carbon transition, it does not matter whether or not we want to move in that direction. That is the reality, and that will bring us along.

With regard to your earlier question about education and how to get people to deal with this issue, the economic argument will probably move the policy class in this country to look at the issues. If we can meet our environmental targets and achieve environmental goals in ways that are economically manageable, that will take out the two extremes of the arguments that we have seen, and we will find that the Canadian policy middle ground is actually where the solutions lie. That is the nature of the round table, because we have to bring those interests together. Some may not exactly agree with our recommendations, but they are in the zone of the kind of debate and public policy space where we will have to be, and I think that is the space where you will end up as well.

The Chair: I have a couple of points flowing from your dialogue on the education front. I hope that you agree that we at the oval table — if can use that analogy to your round table — with the wonders of the CPAC network and the web, which are covering our hearings, are contributing to this national debate, raising its profile and making it front- page news. Frankly, every paper I read these days has stories on these subjects, whether they are on page 1 or page 12.

Second, can we conclude from this last interchange with Senator Mitchell that the joint Clean Energy Dialogue we all observed being announced in February with such hope is not going so well and that clean energy cooperation with our friends to the south might not be unfolding as we might have hoped? Or is that a misconception by me?

Mr. Page: The dialogue is going more slowly than expected. When President Obama was here in Ottawa and met with the Prime Minister and other members of Parliament, four or five task forces between the two countries were launched. I asked at the embassy last week how things are going, and the answer was, ``Very slowly.''

You have to understand that American politics right now is totally dominated by the health care issue and the bitterness of that issue. Until that issue is resolved, we will not see much progress on climate change.

Also, on climate change, China, the European Union and some of the developing countries are far larger parties for Americans than is Canada. They see Canada as somewhat on the back burner here.

The Chair: Notwithstanding the concerted effort by our federal government in this regard, the problems are at the other side of the border at the moment, in terms of the complexity and the slowing down of the process.

Mr. McLaughlin: What is going on is useful, but it will not resolve those kinds of problems.

The Chair: Right.

Mr. McLaughlin: If we are into a year of transition, post-Copenhagen and while the U.S. sorts itself out and, to an extent, Canada sorts itself out and sees where the ground is shifting, it is a good year for policy reports to come out that will help nudge things along, from us as well as from you. My sense is that 2010 will still be a policy-thinking year, and we may not see the final outline of Canadian or American policy, for some of the reasons Mr. Page has outlined. It is germane that this organization and your committee are looking at this stuff and talking about it now. It could have a fairly influential impact.

Senator Neufeld: It is great to have folks like you come to testify, because you have a lot of experience in these kinds of things, and they can become quite technical.

I have a question about how closely we need to link with the United States, and I believe we do, in some of the things they propose. For example, California says that anything over 30 megawatts of hydro is not clean. I think they generate about 40 per cent of their electricity from coal but, interestingly, just on their borders, and then they import it. Because they generate so much from coal, they do not want to claim all of it when it comes to carbon. They want to claim just a percentage of it and try to work some process through. I am familiar with that, and we need to be careful.

I am happy about your answers to the questions from both Senator Mitchell and Senator Angus about the fact that we need to keep trying our best in Canada, and we had better not walk into something that will hurt us. I know exactly what happened with softwood and how it affected British Columbia. I will not ask other questions about that.

Mr. Page, in your paper, you call yourself the TransAlta Professor of Environmental Management and Sustainability at the University of Calgary. That is great. You worked for TransAlta for 10 years. Is that a title that you use? Is there some kind of secondment between TransAlta and the university there?

Mr. Page: If I can be frank and direct to answer your question, about two thirds of my professional career is in academia, not in the business world. When I went to TransAlta in 1997, I said I would do it for 10 years. I was the vice- president of the company for 10 years. I led their climate change and other activity in connection with it. At the end of those 10 years, when I left, they came to me and said, ``Can we continue to support your work?'' That is what they are doing. When they said ``my work,'' they meant things like the round table and so on. It was a generous effort on the company's part to keep that level of research and analysis activity going. They have never asked for any assessment or control over what I say or do or anything else. There has never once been an attempt to influence what I am doing or saying but, rather, just a continuation of that work.

Senator Neufeld: I certainly was not trying to infer anything like that; I just wondered how that worked.

Mr. Page: It is a legitimate question.

Senator Neufeld: That is interesting, and I appreciate that.

In one of your statements about the oil sands, you said the public is demanding immediate action to address water and emission issues, but the new technologies needed are a decade or longer away. Are you talking about technologies for removing the oil from the sands or some other technology?

Mr. Page: I am talking principally about thermal power and oil sands here, and carbon capture and storage and those types of technology.

Senator Neufeld: I wondered whether something else was coming in the oil sands that I was not aware of.

Mr. Page: I wish to address that for a second, because this is a very important point for your committee to hear. I believe we do not have the solutions yet. I am a strong supporter of carbon capture and storage and other things in the interim to try to address this. In 15 or 20 years from now, there will be new technologies that we are not even aware of today, just as there have been in the past in the energy sector. I will share with you one example of that, and we can supply your committee with further information on this.

At my institute at the University of Calgary, we have tested a new technology that will extract CO2 directly out of the air and put it into a solid form. The beauty of this is that, although it is expensive, it is simple and direct. Today, with carbon capture and storage and other climate technologies, we are getting into complicated technologies that use a lot of energy in order to capture that carbon. Your committee may want to think about the fact that our long-term energy solutions may not be things that are available today.

Senator Neufeld: I appreciate that. I wonder whether you agree with me that we will be using fossil fuels for a long time into the future, but we will be using them differently as the technology is developed.

Mr. Page: I would agree with that. It is even more serious than that, because our markets for our products, like the United States or the European Union, will be moving to carbon control. This is not just an environmental issue; this is a trade issue as well.

Senator Neufeld: Spectra has a large carbon capture and storage project in British Columbia. I am a firm believer in carbon capture and storage. We have a good idea about the technology. It has been around for a long time. It was used in Norway for a long time in the North Sea.

Mr. Page: That is right.

Senator Neufeld: When you talk about a future low-carbon world, this is a bit technical, because some people believe that a low-carbon world means that we do not use any fossil fuel, that we have wonderful wind farms and solar panels all over the planet and totally eliminate fossil fuels. When you speak about low-carbon fuel, you are talking about low- carbon emissions. Would that be correct?

Mr. Page: That is right.

Senator Neufeld: It was difficult for me to understand in your paper.

Mr. Page: You are absolutely correct. I am using the term ``low-carbon emission'' and not just ``low carbon.'' My view is that countries like the United States, Germany, Russia, China and India will be using coal for quite a long period of time. We have to address the environmental issues involved with coal or with hydrocarbon fuels and not just eliminate them. It is important that we eliminate the environmental problems but keep the energy value that is implicit in those. Hydrocarbon fuels are mobile. When you are trying to move electricity, you cannot just zap it through space. There are still some remaining advantages with hydrocarbons.

As well, from a developing world point of view, there is no way that India and China, to give two examples, will be weaned off coal in the immediate future. China is still bringing in a new coal-fired power plant about every week in their economic expansion.

Senator Neufeld: It is interesting that you use the example of sending electricity from the generation point to your home just like that. I have used that example many times when people do not want transmission lines built. I am sure you would love to have some kind of technology like that between Calgary and Edmonton right about now, but that is a different story.

Mr. McLaughlin, in your report Achieving 2050, you say 38 per cent of the reduction would come from carbon capture and storage, 21 per cent from fuel switching to renewables and other fuels, and 20 per cent from energy efficiency. That adds up to 79 per cent. Maybe it is obvious, but we need to think more about where a lot of this CO2 comes from, and that is from transportation. In my province, it is around 40 per cent, and it is probably about 35 per cent, on average, across all provinces, including those in Eastern Canada that may not produce oil and gas yet.

What is your opinion about how we deal with those things? In those three scenarios that you talked about — unless you are talking about fuel switching to some other fuel, but I do not think you are because of what I just got from Mr. Page — we will be using fossil fuels well into the future. A certain amount of electricity can be used, but that is limited, or hydrogen on specified routes where we know what those vehicles will do. However, for the average public, there is no infrastructure in place to replace what we use now.

Mr. McLaughlin: You are right. Transportation is a big contributor of greenhouse gases and carbon emissions. It is also an area where we need to focus to change the profile. The numbers I gave you are from page 83 of our report, which shows our technology wedge diagram. It shows the contributions of specific technologies from our modelling in terms of emission reductions. Those are the technologies that emerged from the economy-wide price signal.

I also mentioned the complementary regulations. The price signal only goes so far. We all reacted with our pocketbooks a year or so ago when the price of gas per barrel was $120, $130, $140 and moving on.

There are other parts in both of our reports, Getting to 2050: Canada's Transition to a Low-emission Future and Achieving 2050: A Carbon Pricing Policy for Canada, where modelling applied a complementary regulation piece for transportation. Here we used Corporate Average Fuel Economy, CAFE, standards and different things to see what the regulation would do to change the profile of use of the transportation sector by consumers and then also how you could use the price signal to get the kind of hybrid and electric cars out in the marketplace over 20 or 30 years.

There is no question — you are absolutely right — that the transportation piece is a big part of it. What we found, and I think what governments are doing is using a regulatory lever to get it. That means getting at the manufacturers' side and new low-carbon fuel standards and ratcheting those up over time and getting the changes in technology at the R&D level, the plant level, and so on. That is a critical part.

This is where the debate on carbon taxes or cap and trade or carbon pricing loses an important nuance. You need a price signal, but it can only carry you so far. You also need a regulatory piece in that to create the technology profiles that you will need and to get the changes in consumer behaviour.

We will all react to a certain point on the pocketbook, but then we subsume the costs and move on. I will drive more at $1.40 a litre and then I will pay less on something else, because I still need to drive. This is Canada, big distances and all the rest of it. At the same time, emissions go up.

We get new cars that are more fuel efficient. What do we do? We drive them more. We think that is fine because it is fuel efficient. In fact, there is a rebound effect and we end up putting more emissions in the atmosphere. It becomes complicated.

You are right to point at the transportation side, but there are different ways of getting at it. Our modelling found that the price signal was helpful but only to a point; you needed a regulatory approach by governments to get the private sector to incent and get the kind of technology and changes needed.

Senator Neufeld: We are such a small market when it comes to vehicles, and usually California is the standard that technology changes come from. In British Columbia we have low-carbon fuel standards; we put that in place.

British Columbia has done a lot to mitigate CO2 emissions through numerous things, and one is a carbon tax. Do either one of you want to collaborate a bit on what you think about a carbon tax?

Mr. McLaughlin: To a degree it is about a carbon price signal. You need an economy-wide price signal to get the kind of deep emission reductions that the government has set out. That is what our research found.

To that degree, we were initially agnostic about what the mechanism should be. This report, which came out about a year ago, said to do a price signal.

The Chair: You are holding up what report?

Mr. McLaughlin: Getting to 2050. This came out in January 2008. We said an economy-wide price signal was needed.

The Chair: Is this is the report that had the 22,000 hits?

Mr. McLaughlin: No, that is a different. Achieving 2050 said this is what the price signal should be and that it should be cap and trade system.

The Chair: One report is called Achieving 2050 and the other is Getting to 2050.

Mr. McLaughlin: Getting to 2050 shows the nature of the research that takes you a while to do it. In Getting to 2050 we looked at how we achieve the government's targets. Our research showed you need an economy-wide price signal, but we did not say what instrument. That is the question here.

Achieving 2050 looked at the mechanics and pathways of carbon pricing. We recommended a national cap and trade system.

There are advantages and disadvantages. Throughout our technical reports we show what a tax looks like and what a trade system looks like. They both have positive features and less positive features.

The round table looked at integrating both environmental and economic issues and where the policy debate was going and the realities of Canada today, and we decided that a cap and trade system was a more realistic approach because in large part you could transition from where jurisdictions were going.

While British Columbia has a carbon tax on a piece of it, it is also a member of the Western Climate Initiative, WCI, as are Ontario and Quebec. In the transition to an economy-wide approach that would link in and was looking ahead to where the U.S. was going, we thought it was more realistic to look at a cap and trade system. The round table certainly took note of that democratic exercise that happened in the previous year in terms of where people were at.

It is a legitimate tool. We studied the British Columbia carbon tax. As far as designing a carbon tax with the kinds of features that you would need to have in it, it is probably as good as you get in terms of transparency, the certainty of the price signal and using revenue recycling to address it.

Senator Neufeld: It is neutral.

Mr. McLaughlin: It is, in that sense. If you were to design a carbon tax, it has all the core features that a policy- maker needs to think about.

The Chair: Gentlemen, I know you are aware that we had with us, on Tuesday evening, Dr. Carmen Dybwad of the Canadian Energy Research Institute. She kept saying it was about technology, technology, technology. I suggested at some point that maybe the technology has already been developed and is being held. She talked about the costs.

However, you are saying clearly, Mr. Page, that we are not there yet in the technology we need.

Mr. Page: I would like to make it very clear. First of all, there are elements of our technology today that we have in place. We have sequestered CO2 in Midland, Texas, for 25 years. However, we have not put together for climatic purposes in cold climate some of the issues we are dealing with specifically. As an integrated system, for the purposes we are after today, that is true. Are some of the components ready today from a technical point of view? Yes, they are, if that is helpful.

Senator Lang: I look forward to seeing your new report and how it applies to our part of the world.

I have a couple of observations at the start. Perhaps I would go to Mr. Page on this. Senator Mitchell made the statement that we humans are causing climate change. I do not totally believe that. I know we are contributing to it, but there is climate change taking place as we speak not because of us but because of the way the world is structured and geology and all the other aspects of it.

I hope that as we move along in this world we will not continue the spin. The people on the extreme side of the question of environment change are maintaining that society is totally responsible for what we are facing.

I would like your comments on that, because it is important that Canadians realize that our emissions are in the neighbourhood of about 2 per cent of what the world's emissions are on an annual basis. Subsequently, we can do things better. We can make changes. However, at the same time, we must recognize exactly what we are facing in view of where Canada is.

If we compare ourselves to a small European country where people do not travel that far in daily commutes compared to what we do, say, in the North or in the northern part of our provinces, and given that we have these long winters, all of a sudden now we are comparing apples with oranges. However, if you make the statement without taking that into account, that makes it simple.

I would like Mr. Page's comment on that, as the chair of the round table.

The Chair: I can see that he is chomping at the bit to deal with it.

Mr. Page: It is a great question, so thank you for it.

Involved in climate change is natural variability, which probably began the warming trend before there were large industrial emissions. Natural variability is part of it, along with what we use the term ``climate change'' for in turn. However, climate change is much more than just industrial emissions. Climate change is land use changes in the developing world, for instance. It involves a variety of factors here.

As I tried to explain to Senator Mitchell before, I see this as a complex thing. We might end up with a situation 20 years from now where natural variability is reversing while industrial emissions are continuing to escalate. The only point I would make is that moderating factors are involved in connection with it.

The greatest amount of change has come from industrial emissions. Those levels we document clearly year by year connection with it, and it goes from there.

There are a variety of factors involved here, including the sun and the sun's rays and other factors. We are trying to look at something where there is probably only one thing we can manage, and that is greenhouse gas emissions, so we are focusing in on those greenhouse gas emissions, but there are a variety of other factors that are contributing to what we loosely call climate change.

Senator Lang: I have one other observation to make. In your opening comments, Mr. Page, you said 17 per cent of U.S. oil imports are from Canada and 18 per cent from Canada to the Americans on gas. Senator Mitchell mentioned our trip to Washington. For me as a Canadian and becoming more and more involved in this study, to find out that in reality we provide 77 per cent of the energy the United States imports, counting electricity, uranium and all the other aspects, was an amazing discovery.

Mr. Page: I question that 18 per cent on natural gas because there are some liquefied natural gas imports but it is nothing like oil, where there is a whole variety of other countries. There are four others that contribute at least 10 per cent to the U.S. oil imports. I believe your figure would be accurate. Almost all electricity coming into the U.S. is from Canada. My guess is that it will be about 20 per cent of the oil for this year, 2009. Venezuela and Mexico have dropped their production. The kind of figure you are talking about there is an accurate one.

Senator Lang: I say that primarily for the viewers. I think the more Canadians are aware of how much we actually export to the Americans, the better informed they are.

The Chair: It is also important that our friends to the south be aware.

Senator Lang: That is exactly true.

I have one more question.

The Chair: On this, Senator Lang, you might want to complete that last point by referring to the suggestion we had from the big oil industry organization that Canada should maybe think about playing that card a little more aggressively to get the dialogue back on track. We have some aces in our hand. Is that not what we were told?

Senator Lang: There is no question about it, and I am sure Mr. Page has been told as well. We Canadians have to get the message out to our neighbours in the lower 48 as to who provides their energy and who turns on the lights on Broadway. That is actually oil from Alberta.

Mr. Page: It is very important that we make that message come from more than just industry and government resources. That should be a broader message from Canada right now, because some of what has been said in Washington has been discounted because it appeared to be just vested interest of industry.

Senator Lang: In your presentation, you suggested five questions. The fifth was how do we educate and change consumer behaviour when it comes to energy efficiency and electricity use so we reduce our overall economic and social reliance on cheap energy.

What is cheap energy? Right now oil is about $79 a barrel.

Mr. Page: Yes.

Senator Lang: All indications are that number will go up because of the cost of producing a barrel of oil and the number of people in the world chasing that barrel of oil. What is your definition of cheap energy?

Mr. Page: In a dollar figure that is a little difficult because natural gas is extremely cheap right now compared to oil. In many provinces, electricity is subsidized. I was not thinking in terms of a specific dollar figure here; rather, I was thinking that the tendency in some political circles is either to downplay the importance of the price signal here or, in other cases, to directly subsidize to keep it unduly low so the environmental costs of that production are not included in the price. As long as we do that, we cannot ask people to consume less energy.

Senator Lang: I want to pursue that, because it looks to me like our costs of energy will ever increase.

Mr. Page: That is right.

Senator Lang: When it gets to a price point, obviously — and I believe you spoke to this earlier — all of a sudden people do not get into their vehicles; they do not go for that drive.

In conjunction with this is confusion over carbon tax, or cap and trade, which most Canadians do not understand. They know vaguely that something out there is being discussed, but there will be a cost attached to that and at the end the consumer will pay. The concern I have is that the cost, if it is not subsidized, will get so high and then we will go with cap and trade. What will the implications be for us as Canadians?

Mr. McLaughlin: You do have to get the price up if you want to change behaviour. To incent the technological development, business needs that for investment purposes, and consumers need price signals in order to change behaviour. This will take place over time.

Something that sometimes gets lost in this debate is that people think it will all happen overnight — a price signal of X and all of a sudden the world changes. We have been allotting ourselves decades literally to try to get this problem under control, and all of our research shows that while there are economic impacts, they are manageable at the national level. However, we have also been able to illustrate where the problems lie. They typically will lie with where the sources of emissions are in production but also in the bigger consumer use of transportation or households and so on.

The good news is that whatever kind of price signal is put on, whether it is a carbon tax or cap and trade, revenue will be generated. We saw the case in B.C. and we are seeing it in the U.S. with the Waxman-Markey bill and the kind of construct there. Revenue will be distributed around to mitigate impact. You have to look at this policy in a more complete and comprehensive way. Wherever there is a price signal that has an impact, governments have historically stepped in to help minimize the impact of any kind of regressive measure.

For example, there was the GST credit at one point. There is a long history of that, including Employment Insurance and whatever. I cannot imagine that carbon pricing at a national level at the scale we are talking about would be any different. You have to get the mechanisms right, no question about it.

In our research, we found that by 2020, in a cap and trade system, you would have some $18 billion of revenue that year. Well, you are going to distribute that. We said that because this is principally a technological issue, we have to get in front of that. The round table suggested investing most of that in technology in order to bring emissions down.

We also highlighted that there would be impacts on households, and we showed what the costs would be, as best we could, with Statistics Canada data. We said you would probably start to implement tax credits or other means to address these issues.

I think you are right at the starting point, in that there will be an impact and consumers will have to pay. However, there are ways of addressing the issue. You have to find the right policy approach, but it is not an either-or kind of thing.

Allocations of allowances to business under a cap and trade system basically involve cash. You are giving a subsidy of sorts to businesses to help them address the competitiveness issues. The issue can be complex, but the principles are straightforward: send the price signal and mitigate the economic impacts where they are most severe, at the economic, regional, sector and consumer levels. Government is ingenious at finding ways to do that.

Senator Lang: My question concerns the federal regulatory bodies we have in place across the country. One of the witnesses touched on that point.

I read that in the British Isles they are bringing in substantial changes to their regulatory bodies so that decisions can be made in a timely fashion. I would submit to you that we have a real problem across this country because of the way our regulatory bodies are set up and because of the lack of time frames within which to make decisions. We have created an industry that no matter what the recommendations are is never good enough, and there is another reason to stop it. Part of that, of course, is the not-in-my-backyard sentiment, a syndrome we Canadians face.

Have you thought of looking at the regulatory bodies across the country from a technical point of view and maybe bringing in recommendations for how to change those regulatory bodies so that the environmental considerations can be dealt with in a timely manner and decisions can be made?

Mr. Page: In our report, we have a whole chapter on governance. Yes, we have tried to deal with that issue. We would refer you to that chapter rather than giving you a detailed explanation at this time.

We are sensitive to the issue of provincial jurisdiction with regard to natural resources, as well as territorial jurisdiction, hopefully, with the Yukon. We have looked at the way equivalency can become a viable option for provinces or territories in connection with retaining the jurisdiction and at the same time addressing national standards.

The Chair: Thank you. That was a very good question.

Mr. McLaughlin, I thought your answer was going to be that it all has to do with what you call the genius of federalism.

Mr. Page: It is around the table, senator.

The Chair: The oval table.

Senator Seidman: Thank you for appearing before our committee and presenting us with a guide and focus for our work.

I would like to return to the important issue of cooperation between Canada and the U.S. and the meeting that President Obama and the Prime Minister had, which marked the beginning of the Clean Energy Dialogue last winter.

You have commented generally on environmental harmonization, but would you comment more specifically on areas of clean energy cooperation we might have with the U.S., such as perhaps renewable hydro from Quebec and elsewhere?

Mr. Page: As I mentioned earlier, there is a basic philosophical issue at the core of this on the U.S. side. We have to address that. With both First Nations and environmental groups, for instance, Hydro-Québec worked to try to deal with some of the environmental issues. There have been some bad examples in the United States of large hydro projects, and there is some pressure in the United States to get rid of dams so the salmon can migrate.

First, it is an informational issue to ensure that Americans are aware of the degree to which we have had vigorous debate in Canada, concerning James Bay and other topics, on the environmental questions. These issues were not ignored.

Second, it is important for Americans to understand the degree to which large hydro is carbon-free. In other words, the issue is really about climate change. If, with hydro, we get substantial reductions in emissions, then is it not worth the effort? For example, New England is looking at converting from coal-fired to gas-fired power generation. Gas-fired is still 50 per cent of the emissions of coal, so you are only moving part way.

The last point, which is important in electricity, is reliability. The ice storm created questions in the American mind with regard to the reliability of transmission from Quebec. That is almost never mentioned, but Americans with whom I have spoken have raised this issue. Again, we have to show them the degree to which we have progressed. Look at the new design of the towers, which is very different from the earlier towers.

Those are three quick responses to your question in terms of going forward. I do not think there is much pure energy, which is what they want, a kind of pure form of renewable. The problem with wind and solar is that they are variable and you have to have backup power, as opposed to hydro, which is secure in terms of long-term deliverability.

The Chair: I am sure you want to mention how the good people in New Brunswick are contributing to Quebec's reliability as a supplier.

Mr. McLaughlin: I am not certain I am allowed to comment on those matters.

The Chair: This is a free society.

Mr. McLaughlin: That used to be my file when I was a deputy minister in New Brunswick. I was also the deputy minister of intergovernmental affairs. Speaking from the provincial perspective, the dialogue with the United States must also happen through premiers and the connectors there, so that it is not just the two federal jurisdictions talking.

Quebec's engagement with the United States can be critical to make the Americans understand the nature of renewable hydro and why the path that has been talked about in Waxman-Markey is not a viable path. This is done cooperatively through the embassy, but Quebec has a strong relationship and a good lobbying campaign in the United States. I have been on the recipient end in New Brunswick.

The round table is looking ahead at physical impacts of climate change. We will be trying to understand different degrees of warming and what they will do. We will be looking at climate projection models. For example, if you have more precipitation, what does that mean for Hydro-Québec's future? Will the lakes and rivers have more flow? We have been talking to Hydro-Québec about sharing their data. If that is the case, then the opportunity for more clean energy will be growing for Canada. It is a resource wealth issue. That links us further in trying to remind the United States that we are a secure energy supplier, speaking to Senator Lang's point. We are approaching the issue in different ways, which gives us many avenues of conversation with the U.S.

Senator Seidman: You are obviously moving clearly and emphatically on issues of public policy. You mentioned that the new technologies needed are a decade or longer away and that public policy must close this time gap so that both environmental action and economic growth can continue. I am curious about how public policy can close that time gap.

Mr. Page: That is a good question. What I meant by that is the way we are seeing right now investment in renewables in Canada, for instance. The federal government is subsidizing wind power, for example, and there are questions about why there are renewables. This is huge. The precedents here are very impressive in both federal and provincial support for the new carbon capture and storage projects going forward in Canada now, and the level of that public investment is huge. The Alberta program is $2 billion.

Right now, Canadian companies are not world leaders in development, and we would like to see whether, through the tax system or in other ways, we can begin to get a much higher level of investment in R&D by Canadian private sector companies. This is the key to innovation. Above all, with sustainable development we are talking about innovation and incenting and encouraging them. It is sad that right now we could be in such a situation, given all the really exciting new early work, both in the universities and in the private sector in Alberta, on carbon capture and storage. Unless we go forward to the next stage, which is even more expensive, of demonstrating all these projects, we could lose all of that, and we would not become a world leader on carbon capture and storage and non-conventional oil production technology.

Your question is a good one. Those are some of the factors I see here in terms of trying to do it.

Mr. McLaughlin: That is the main thing when talking about public investment, but public policy certainty — and this sounds abstract — is also a core piece. If we do not know the rules of the game, if we do not have legislative certainty, if we have political uncertainty, how can business truly invest for the long term? How can consumers orient themselves to try to deal with this problem?

Senator Lang mentioned governance issues. That is a key part of this, and we tried to put a toe in the water to talk about it in terms of climate change. The U.K. has looked at its own structure of how it develops policy. It has actually taken policy tools away from the executive branch and from Parliament and created independent authorities, knowing that the political conversations are too tough to have it happen and that certain kinds of technical expertise are needed to do this. It is creating policy certainty for business and others, because they know the rules of the game and there is a lot of transparency and accountability and reporting so that there is a longer-term horizon. Public policy is not an abstract concept. It is fundamental.

As Mr. Page mentioned, core to that is the right kind of public investment. If we use tax dollars, we should put them in the right direction to have the kind of impact we want.

Senator Seidman: Would you see the federal government's Clean Energy Fund, which provides $850 million over five years for demonstrating promising technologies and $150 million for clean energy research and development, as the way to go?

Mr. Page: It is very much the way we see to go, and also things like Sustainable Development Technology Canada, SCTC, which I mention in particular because it is focused on small entrepreneurs who are developing some of these new, exciting energy technologies.

Mr. McLaughlin: You want to look at the role of government in picking technology winners. This gets into complex areas and the role of the market. Governments can either fill the gap or close the gap. SDTC does that. Governments can be at the front end of innovation. Mr. Page talked about pulling CO2 from the air. This is years away from being commercially viable. Governments have a role at that stage.

For us, it was a combination. We looked at economy-wide carbon pricing to get the market going. Do you want to pay the carbon price, or do you want to save it and invest in yourself? You know it will change the boardroom behaviour and the investment profile of companies over time.

The role of governments in technologies is a long and sometimes distinguished one in this country, and it is real, but you also have to look at the role of the market as well. It is a great area of focus for this table. You could add a lot of value and understanding on that.

Those are the things you would do, but they may not be to the scale or in the time — they could be a decade or more away — to get the kind of emission reductions we are already talking about.

The Chair: I take it from that that according to the round table, the government is going in the right direction with things like the Clean Energy Fund and the fully integrated carbon capture and storage projects that were announced with Alberta recently. These are big dollars. I know you need more, but it underlines what you said earlier about how costly it is and how much we are willing to pay for the result.

The next and last questioner is the chair. I reserved my prerogative here. We are on the eve not of destruction but of Copenhagen, and our federal government has been clear that at next month's meeting in Copenhagen, the Canadian delegation will push for all major emitters to accept CO2 reduction targets, alluding to the United States, China, India and perhaps Brazil. I would like to have your sense of what you see coming out of Copenhagen.

Mr. Page: I would love to be able to give you a conclusive answer to that, because I have spent a lot of time both in Canada and elsewhere in the last six months trying to think about that with some of my international friends.

Coming out of Copenhagen will be process and not results. It will be a process of how the developing world and the developed world, the European Union and the United States, can go forward. I would draw people's attention to the fact that the G8 is meeting in Muskoka six months later, and those meetings will be an important part of the ongoing work from Copenhagen.

I was on the Canadian delegation to a number of Conference of the Parties meetings. At The Hague, we postponed for six months. In other words, the conference adjourned. It did not terminate. I think that is what will happen at Copenhagen. The fact that President Obama is going to Copenhagen is a strong signal.

The Chair: Is he now going?

Mr. Page: That is what I understand. When I was there last week, I got an ambiguous answer, but I understand from the press reports that that is now clear. President Obama will go to Copenhagen only if he has something to announce. That is very clear. We can expect to see some pressure from the American side back on Canada in connection with Copenhagen and going forward.

There are enormous differences yet, as you are probably all aware, between the developing world and the developed world. China and India have made it very clear that they will not accept mandatory targets at this time. That is a major, long-term barrier. Whether it is through the Clean Development Mechanism or emission intensity targets — and those are two possible outcomes from this, as partial steps toward targets from the developing world — in the intervening period, we have to be clear about ways we can reach out to the developing world to try to get a reaction for carbon management.

China is the largest CO2 emitter in the world. India will become one of the top five within a very few years. The developing world is where the really great expansion of CO2 will take place over the next while, and we have to find a means, which we do not have today, to try to close that gap between the two and technology. From my experience in dealing with the Chinese, and I chair the management board for the ISO 14000 series, the Chinese are active there on all the technology questions.

If we can begin to develop here in Canada things initially for our own needs on the environment but then share with the Chinese and others in the longer term, that is also a means of reaching out to the developing world. I see only limited results coming out of Copenhagen. I see it will be a process that will continue. It is not a process that will be finalized in any way at those meetings.

Mr. McLaughlin: I do not believe that Canada's targets are contingent upon a future international agreement. I have not seen our 2020 and 2050 targets couched that way. We still have to do that. We still have work to do on that. There is a lot of work and many complexities behind it, as we have tried to show. Canada still has to work on that, and there is still a need for this committee and others to help pave the way for that.

The other part is a more complicated one. If we do not have a post-2012 agreement, then Canada remains a signatory to the Kyoto Protocol. There are implications from that for the country in terms of internationally legally binding provisions and all of that. We are in a transition period, and it is hard to predict the outcome, but we should all be using this time to get our policy act together, to figure out the costs and implications of going ahead and trying to find the right technology paths.

The National Round Table on the Environment and the Economy suggests pathways to achieve what the government has already said it wants to do in achieving these environmental targets at the lowest economic costs. That is what every government and country wants. We are looking ahead and saying that if the world is moving ahead to this global low-carbon-emission transition, we will lose opportunities if we do not orient ourselves and think about that.

Again, we are trying to look ahead and put ideas on the table and create that public policy space for that conversation to happen while we are in this transition. As Mr. Page says, it may be many years before this thing gets fully resolved. It is not a prescription for rolling up the carpet.

Delay is costly. If do we have to get to this at some point in time and those targets are right upon us, you will be looking at a higher economic cost and impact of doing it in a short time frame. That was part of the Kyoto problem that the government and Canadians fairly had, versus looking ahead.

We can manage this transition provided we get going on it and think about the smart ways of doing it and recognize these Canadian realities that Senator Lang and others have talked about. There are issues of comparability, but there are also differentiated circumstances. There is appropriate international language we can find on this; but, at the same time, I think we have made commitments for our own targets, and we need to find ways to achieve those.

If we do that, we would probably be in a better place to take on more ambitious targets, if that is what the science demonstrated and where the world was going. We would have the policy infrastructure in place, the changes in consumer and technological behaviour, and industry would get over this and orient itself. We also would get the provinces and the federal government working together.

The Chair: I have a factual question following Senator Seidman. She and I are representatives of the beautiful province of Quebec. Who and how many from Quebec do you have on the round table?

Mr. McLaughlin: We have two members from Quebec, Francine Dorion, vice-chair, and John Hachey, both from Montreal.

Senator Mitchell: We have come to the conclusion that when we do this it will be cap and trade, and the U.S. will do cap and trade so we have to be there. That raises the question of allocations. Would you auction them or give them away? Is the North American market big enough to make that work?

Mr. McLaughlin: In our report, we talked about moving to an auction system, initially doing some free allocations to transition industry; then it will not be as much of a sharp economic shock. Then it will move to full auctioning.

That is how in 2020 you end up, through the model, with some $18 billion in revenue. The U.S. has gone the other way with more free allocation, but there will be some auctioning. Now that we have a bit more information on where the U.S. prospectively is going, part of our Canada-U.S. study is to model different allocation scenarios and try to gauge the impact, both nationally on GDP but also sectorally and regionally, to come up with plausible advice that hangs together about how to do it given a certain set of circumstances.

There are different values for the allocations, but generally moving to full auctioning. Otherwise you subsidize forever.

Senator Mitchell: We would appreciate the direction on that.

Mr. Page: It is critical to see the linkage between the allocation policy and the technology policy. You have to be looking at it as an integrated package in incenting to begin with to get you over the initial hard steps, in terms of the cost of that technology, by free allocation. Then, as Mr. McLaughlin was suggesting, there is the progressive build-up from that. There must be that linkage, however.

The Chair: Colleagues, that concludes our meeting for today. I want to reiterate our sincere thanks to Mr. Page and Mr. McLaughlin. It is great to see you here. We have taken on board your offer to give us guidance and assistance as we proceed, and vice versa. I see a great opportunity for cooperative efforts in shaping a workable public policy.

Mr. McLaughlin: There may be an opportunity, as you are ready with your reports, to come and talk with the round table members. We meet four times a year, and we do meet in Ottawa. There may be a good chance to organize a particular dialogue.

The Chair: Maybe a working dinner.

Mr. McLaughlin: We are very open to doing that.

Mr. Page: We appreciate the opportunity to contribute to your work, so thank you.

The Chair: Colleagues, our next meeting will be on Tuesday at five o'clock. We have a busy agenda.

On Tuesday, December 8, via video conference from Vancouver we will be hearing from Professor Mark Jaccard of Simon Fraser University, who was recently in Beijing, China, reporting to the Chinese premier for the taskforce he co- chairs with the head of the Chinese coal association on the sustainable use of coal in China.

I do not know whether you all heard the news at seven o'clock this morning, but I understood there was an announcement from China about some targets specifically that they are taking to Copenhagen. We are looking at that file.

Mr. Page: Dr. Jaccard is a former member of the round table and contributed to some of this work.

The Chair: So we gathered. There are many key players out there. We are trying to interact with all of them.

I must say one last parenthetical thing. You have raised the genius of the Canadian federation. We all know, of course, that these issues of energy and the environment are provincial matters, yet there is a federal overview in the larger sense of federal jurisdiction. This is a tricky one, because we have all the provinces with their own legitimate and diverse situations, both in assets and resources, and we are about to bombard each minister of natural resources with a well-thought-out and structured request for information about the state of play in that particular province or territory. We will have a database if we have the cooperation.

I address all environment ministers in the provinces and territories: We are very earnestly hoping for your cooperation in this regard.

There is data there, and it is quite amazing when you start bringing it all together and looking at how different it is from Newfoundland to Saskatchewan, from Quebec to Alberta and so on. However, if we are developing an integrated, comprehensive and understandable public policy, we must bridge all these things. That is Canada for you.

Mr. McLaughlin: We have a lot of provincial and regional data that does not always make it into the reports. We would be happy to share and talk about what might be needed, looking at Canada and the U.S. We will present data on a national and regional basis.

We did a number of presentations to provinces on this report. There was a lot of interest in it, in part because we showed the cost to each province of going it alone. That found some resonance with provincial jurisdictions, at both the political and the senior officials levels. Your interventions are timely, and I suspect you will find good cooperation there. Again, we are happy to share the information we have.

The Chair: The meeting is adjourned.

(The committee adjourned.)


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