Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 5 - Evidence - May 4, 2010
OTTAWA, Tuesday, May 4, 2010
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:09 p.m. to study 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 evening, honourable senators, guests and viewers on the CPAC network and on the World Wide Web and welcome to our two guests.
This is an official meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. We continue our study tonight on developing a strategy for a national energy policy in Canada.
I am pleased to welcome my friend and former colleague Perrin Beatty and his associate, from the Canadian Chamber of Commerce, Shirley-Ann George. Mr. Beatty has had a very distinguished career. He was the minister of almost everything that I can remember in the period 1984 to 1993. He is now the president and CEO of the 175,000- member Canadian Chamber of Commerce, Canada's largest and most representative national business association. In his capacity as president and CEO, Mr. Beatty is the principal spokesperson advocating the policy positions of the Canadian Chamber's many, many members to the federal government, international organizations, the media and the general public. That is broad group of stakeholders.
I know you have done a study, which interests us greatly, on energy sustainability and the whole issue around the subject matter with which we are wrestling, which is to try to find a way to re-engineer the way energy is produced, delivered and consumed in Canada given all of the overlapping economic and environmental considerations.
With Mr. Beatty is Ms. Shirley-Ann George who joined the Chamber in May 2005 and now leads the team responsible for the Chamber's core raison d'être policy. That sounds like everything. We have the two top honchos from the Chamber of Commerce. I know you both have very pressing engagements starting in about an hour, so hopefully we can hear what you have to say and even question you a bit.
The Honourable Perrin Beatty, P.C., President and Chief Executive Officer, Canadian Chamber of Commerce: Thank you, Mr. Chairman, and thank you to your committee for your hospitality and gracious introduction. It is a pleasure for us to have a chance to meet some of the senators for the first time but also to see friends of longstanding we have known over the years and to be able to renew acquaintances.
Senator, I thought we might take a few minutes to offer some introductory remarks, and then I would be delighted to engage in a dialogue with members of the committee if that would be helpful. When we have to leave, if there is further information the Chamber of Commerce can provide for you for your work, we would be pleased to do that as well.
Let me start by saying how much we welcome the initiative that the committee has taken. This is an issue of central importance for Canadians, one which will determine our future in so many ways, both economically, socially and environmentally, a whole range of different areas. The work that has been done by the Senate in taking a very thoughtful approach toward the development of our energy strategy in Canada can make a major contribution. We are privileged to be part of it.
The Chair: Excuse me, Mr. Beatty. I did mention to you earlier, and it seemed you and I are on the same page on this, we have both identified a number of other groups in Canada who are busily responding to the challenge of a national energy policy, not an NEP or National Energy Program of the 1970s, but you have noticed the same thing. We have been calling in some of the other groups that are doing the study and saying we are interested in your methodology. What is your approach to the problem, and let us not overlap and duplicate the work but let us work towards sort of a joint finding. Perhaps we are better positioned, ultimately, to deliver the message to the final decision makers.
I hope you do not mind that interruption, but I think you were on the same page.
Mr. Beatty: It is complementary to what we were doing. I was just about to explain that the nature of the Chamber of Commerce is that it takes me across Canada to visit various communities, meet with business leaders, and exchange ideas on issues of importance to us all and on the well-being of the country. The unique role that I see the chamber playing in this is precisely because of the spread. These issues are of such importance to Canadians that it is important that as we develop policy that it is as participatory as possible and that Canadians from all sectors of the economy, producers, consumers, all regions of Canada have a chance to participate. We certainly see that as our role, and we see it as complementary to what you are doing as well.
As I travel throughout Canada, I am struck by how diverse our land is but also how common our concerns and aspirations are. Nowhere should that be more the case than when we are discussing our energy security in our common environment.
The energy sector is a cornerstone of our prosperity. It plays a critical role for Canada in serving the energy needs of all Canadians and in generating major income from foreign sales. There is virtually no other country in the world that does not look at our energy inheritance with envy.
The Canadian Chamber of Commerce has identified the energy industry and its impact on the Canadian economy as one of our priority research areas for this year. Last year, we released a paper entitled Powering up Canadian Prosperity, which we developed through consultation with our members from across the country. In it, we call for all levels of government to come together with stakeholders, including the business community, to develop a Canadian sustainable energy strategy, to ensure that Canada will continue to have a strong and vibrant energy industry that will help our economy grow and to meet our future energy needs.
What we have in mind is not simply a federal government policy to be imposed on the regions but a truly national strategy in which all regions are full partners. Nor must the purpose be to simply transfer the resource wealth from one region to another but to respect our Constitution and to recognize that rising prosperity in one region will lead to opportunities in the rest of Canada. As one who represented a Southern Ontario constituency in Parliament for 21 years, I cannot think of a better example than the manufacturing sector in Central Canada that has suffered serious losses but which stands to benefit enormously as a supplier to the oil sands in Western Canada.
As we prepared our report, we consulted with our members and heard about the state of the energy sector, about the need to work together to address the many complex energy issues that face our nation and about the core principles that should guide us. Now perhaps most importantly our members told us of the enormous cost of inaction — the lost opportunities, the lost jobs, the lost prosperity.
Consider the facts. Canada's energy sector accounts for about $70 billion of our gross domestic product and it spends $68.9 billion on capital repair and replacement every year, which is about 35 per cent of total private sector investment. In addition, the energy sector directly employs more than 372,000 people and hundreds of thousands more in related industries.
Unlike the United States and other members of the G8, we Canadians are in the enviable position of producing more energy than we consume. It is a blessing, but it comes with responsibilities as well. We need to ensure that we capitalize on our resource-based advantages to the fullest extent in a manner that is sustainable for the future. It is very easy for us to become complaisant and to take for granted what we have here in Canada, but we do so at great risk.
Canada's energy sector faces serious challenges today and many more that are on the horizon. I would like to take a few minutes to talk about these challenges, and I will share with you some thoughts about what the Canadian Chamber of Commerce and other members of Canada's business community can do to help.
With regard to some of the challenges, the first challenge for Canada concerns the rising consumer demands for energy efficiency coupled with the need to respond to climate change and to follow the best possible environmental practices. People want better and more sustainable choices. Canada's energy-rich economy must be able to develop and implement new technologies and strategies to respond to the challenges of protecting our environment.
Technology is the second challenge for Canada. We need to do a better job of leveraging the advantages that our tremendous natural wealth provides. That includes developing and implementing innovations that both benefit and flow from the energy sector. Especially in the oil sands, we are seen as a leader today, but maintaining that leadership will not be easy.
As things stand right now, our overall efforts in energy-related research and development are lagging. One study published by the University of British Columbia found that Canada's public funding of energy research is at a 30-year low. In addition, a 2009 federal study by the Science, Technology and Innovation Council ranked Canada second last on the amount spent on research and development by companies as a portion of gross domestic product. It cites energy as one of the key areas for investment in the future.
The third challenge to draw to your attention to concerns growing developing economies such as China's. Are we adapting to the competitive pressures that China is forcing into the global marketplace? Are we making full use of the trade opportunities that are opening up? To answer that, let us consider the current state of trade with China.
Here is how the Financial Post summed up the problem in an article from the fall of 2009:
. . . China seems to have made significant oil and gas investments everywhere but Canada, while Canada seems to have seen an influx of significant foreign investment in energy from everywhere but China in recent years.
In April, this may have turned with Sinopec, China's second-largest oil producer and top refiner, buying ConocoPhillips' stake in Syncrude for over $4 billion. Foreign investment that lives by Canadian rules should be encouraged.
China is a growing country, an emerging superpower and is expected to have a growing demand for energy. Equally important, China is a fierce competitor with an abundance of low-cost labour that is making giant strides in developing new environmental and energy technologies. We cannot afford to underestimate the challenges and opportunities that are at hand with this trading partner among other developing economies.
For those of us who have visited China in recent years, you are struck by the contrast wherever you go. You taste the pollution in your mouth from the coal-fired generators they use for electricity. You see the haze in the sky that is simply lighter in one area than another where you believe the sun should be. You see many primitive technologies that are primitive and would not be accepted for a minute here in Canada. You must also realize that China is making remarkable investments in new, cutting edge, green energy technologies.
I do not know whether the Chinese government believes in climate change and global warming, but they believe in the economic opportunities that come from servicing needs that countries will have in the future to deal with the issue of global warming. They are moving very quickly in terms of research, investment, and development to bring these new technologies on stream.
There are opportunities for Canada, but we have to recognize that we have to move quickly to take advantage of them and that countries like China represent both an important market for us and an important competitor if we do not move with some dispatch.
The fourth challenge, Mr. Chairman, is that we need to find the money to implement a national strategy for energy and the environment. Developing new sources of energy and bringing them to market will be extremely expensive, and the costs of dealing with climate change will be simply staggering. Without a doubt, it will be the single biggest investment that we have ever made, but it is clear that both citizens and governments around the world are insisting on action.
Last July, I spent a week in Britain to study that country's approach to climate change. It was a fascinating experience, both encouraging and in some ways worrying. Here is some of what I learned. First, the degree of consensus that action on climate change is urgent is striking. Support for acting has become more of a value than an issue. The business community is focused not on whether action will be taken but on the form it should take, and the Conservative Party, which is ahead in the polls at the present time, criticizes the Labour government for not having done enough on climate change. There is no reason to believe that a change in government would result in a decline in Britain's commitment to act.
My counterpart from the Confederation of British Industry was here in Canada last week at the G8-G20 Business Summit. I told her that during my week in Britain, I probed members of the business community to see whether there was a rearguard action within business against the need to act on climate change and she said there is not. The consensus is very strong. In essence, in Britain this has moved from being an issue to being a value that is widely accepted in society.
That is in itself something quite different from the situation that we have in Canada today, and it conditions the response that government and business are able to make.
Second, the debate on climate change in Britain is probably at least three years ahead of where we are in Canada. The British have concluded that climate change must be framed as an economic issue, that whatever the costs of acting, the costs of inaction would be much higher. As one non-governmental representative said, pictures of polar bears are not enough to persuade people to make major changes. It is important to demonstrate how individual communities and families stand to be affected as a result of these environmental changes.
Third, British governments are well advanced in developing their strategies. When I was there, the government had just released what amounted to an industrial strategy for climate change that identified where the national government would make investments, how it hopes to leverage private sector resources, and where British companies have the best opportunity to beat foreign competitors as other countries act on the issue. It has also set out a plan for ensuring that the lights stay on during that process.
The element that will leave them dependent on natural gas from Russia is, to say at the very least, worrisome given the Russian's willingness to open and close the tap based on how happy they are with their customers' policies.
Another major part of their strategy is their commitment to nuclear energy. What interested me when I met with NGOs is that, unlike many of their Canadian counterparts, they accepted nuclear power as an important part of the equation, or at least said that they had decided not to oppose the government on the issue.
I probed when we met with NGOs and went beyond the opening statements they made to probe them to say a key element of the government's strategy, which you say you endorse, is reliance upon nuclear generation to keep the lights on in Britain and to do so in a way that is environmentally responsible. Do you, as a non-governmental organization, accept that strategy? A number of them said that they did. Others said that they chose not to engage the government on that issue, that they would, in essence set it aside, and not oppose the whole strategy because of the concerns they might have had about nuclear power. Again, this is very different from the debate one might have in Canada today.
Fourth, I was struck that, even with its extremely ambitious plans, it is hard to see how Britain can hit its targets without a run of sustained good luck. What is more, I am still not satisfied that governments have levelled with the public about how expensive the process will be.
You still hear people saying that more jobs will be created over the next several years than will be lost and that the actions required will pay for themselves. There is almost a belief in cold fusion, that you can create energy without disruption. I do not dispute that there will be business opportunities, including the development and deployment of new technologies and in the efficiencies that come from businesses learning to be less carbon-intensive, but it is hard to see the actions that will be needed except as a major intergenerational transfer. If people conclude that their leaders have misled them, support for dealing with climate change will melt more quickly than the Arctic ice cover.
What are the implications for Canada? The most obvious to me is that to deal effectively with environmental and climate change issues and to develop our energy resources and bring them to market, progress in one area is essential for progress in the other. Simply put, both the Canadian public and our customers will expect us to be responsible stewards of the environment, but support for making major environmental strides will require a strategy that provides for our economic and energy security, both now and in the future.
I agree that, with our economies so deeply integrated, we must work very closely with the United States, but we do not have the luxury of simply deferring drawing up our strategies until they have theirs in place. We will either be in the room as negotiators when the rules are set or we will learn about them when others come out and tell us what has been decided. We should not think for a moment that other countries will not attempt to write the rules to their own advantage or to be the first ones to benefit from any benefits that are created.
It is not enough to just wish for changes. Our response to these issues must rely heavily on technology and, in many cases, on technologies that simply do not exist today. We need to find new ways to invest wisely in the energy sector, and to do so in a manner that does not adversely affect the significant tax revenues that it currently generates or the tens of thousands of jobs that it produces.
Now, senators, as you can see, each of these challenges is daunting. Despite that, Canada lacks a coherent strategy. What is worse, some of our political leaders have taken actions that pit one region of Canada against another. Some of the statements made by Canadians in Copenhagen that targeted Alberta can only exacerbate the regional strains that so often pull at the fabric of our country. When I was in cabinet, the Prime Minister once commented that the easiest thing to do in Canada is to get nine provinces to agree on a policy that came at the expense of the tenth province but the toughest thing was to get all provinces to agree. Achieving a national energy strategy for which there is truly national support may be difficult, but a strategy that does not reflect the needs and aspirations of every region will fail.
I agree with Prime Minister Harper when he refers to Canada's potential to be an energy superpower, but our research suggests that this is still more of an aspiration than it is a reality. What is Canada's plan? What are its goals for energy? The challenges and opportunities that we face today are too great for us not to have a clear answer to those questions.
We need a plan. It has to be a flexible, market-based approach that encourages both conventional and alternative energies. It has to provide Canada with stable, secure and affordable energy. It is essential that this plan be supported by regulations that allow energy projects to proceed in a timely and predictable manner while ensuring a level playing field for all sources. This requires clear coordination and cooperation between the federal and provincial governments, as well as our First Nations.
We need a plan that can take a balanced approach to development, one that ensures good projects proceed in a timely and predictable manner and also considers environmental protection and helps to address climate change.
Furthermore, it is critical that we make large investments in research and development and pilot projects for new technologies to address our unique challenges of being a large and growing producer of energy. We must also leverage our energy endowment to exploit every opportunity for secondary processing, for spin-off technologies and for value- added manufacturing. This topic is the subject of a Canadian Chamber of Commerce paper that we will be releasing in the coming months.
Our plan must include steps to modernize and expand Canada's energy infrastructure, including energy grids, oil and natural gas pipelines and port facilities. It must ensure that we continue to be seen by the U.S. as a highly valued, trusted source of secure energy. At the same time, we need to expand our horizons by opening up new markets for our energy exports.
Finally, we need to stop the drift and confusion about whether the Canadian nuclear industry will survive. This is an area in which we have massive investments, on which we rely today for much of our electricity and which will be critical to our energy security in the future.
The time is right to do the right thing. We should be ideally positioned to respond to the challenges I have outlined, but it is not possible to deal with this lengthy list of complex challenges without a comprehensive strategy.
I would like to tell you about the tremendous benefits of taking action now and the serious risks associated with doing nothing.
As with all matters involving public policy, what we are talking about here involves making choices. Where there are choices to be made, you can be sure that there will also be differences of opinion among citizens. It is important to ensure we have fair and honest debate about what we want our Canadian sustainable energy strategy to look like. Having an open and transparent process will be essential to the success of the policy itself. I cannot underscore that enough, and why I am delighted with the effort you are undertaking and why I see what we are doing is complementary. The process itself is part of the product. This is a contentious issue that could be deeply divisive among Canadians. That is why the process itself needs to be seen as transparent and why Canadians must feel a sense of ownership in the development of the policies that are ultimately adopted if we will be successful in building the social consensus required to move ahead.
There are important benefits to be gained by adopting a national strategy and by investing in innovation, in human resources, in the way we manage our trade relationships and in the way we market our exports. Each offers opportunities to develop spin-off technologies.
It will also help ensure that Canada has an improved competitive position. We must do more to make certain that we are no longer thought of strictly as a country where raw resources come from. It is time to establish a reputation in the global marketplace as a knowledge-based society with an economy driven by ideas. Let us take full advantage of every opportunity to leverage the advantage that Canada was given so we can make it easier than ever before to develop and market new products for new and emerging markets. Let us also consider the risks of not acting now.
We are already falling behind, and the problem will get worse until we have a well-thought-out, multi-partner plan. Complacency has led to our not doing enough to further transform our raw materials into value-added jobs here in Canada. We have assumed that the U.S. would buy everything that we want to sell to them, and we have been caught off guard, unable to adequately address such concerns as allegations that the oil sands produce "dirty oil." We need to act responsibly in developing our resources, and we need to do a better job of telling our story, both at home and abroad.
The world is hungry for secure, reliable sources of energy, and we simply have not done what is needed to ensure our infrastructure can get Canadian energy to world markets.
I cannot overstress the fact that this is also a matter of global security. As the developed world becomes increasingly dependent on supply lines stretching around the world into areas that are politically unstable, the secure and dependable supplies of energy that Canada can offer are more valuable than ever before, not just to keep industry in the developed world functioning, but also to protect our security. It may be potentially and literally a matter of war and peace if we are unable to secure the supplies of energy that are critical for Western industrialized countries. As a consequence, then, Canada has a critical role to play.
I have stressed before that this is about more than the energy industry. It is simply unacceptable that in a country with such energy abundance, far too many of our job producers are questioning the long-term viability of their Canadian operations because of concerns about whether they will continue to have an assured supply of affordable energy. It is also unacceptable that we are seeing energy producers in Western Canada questioning whether they are wanted or needed in this country.
All of these shortcomings put in jeopardy tens of thousands of jobs today and many more in the future. These are not just theoretical concepts; the risks are real to business owners, professionals, workers and citizens across this country. Our entire economy is at stake.
To be successful, a comprehensive energy policy needs to take root in conversations in the boardrooms and on the shop floors of businesses across Canada, as well as in our country's kitchens, schools and stores. The Canadian Chamber of Commerce, through our network of local chambers of commerce and boards of trade, is working to ensure that those conversations take place. We are encouraging all businesses to look at their own energy needs and ask themselves how they can contribute to the strategy, including by working together on innovations that benefit both Canada's energy producers and its users. We are also calling on governments at the federal, provincial and territorial levels in Canada to work as partners with the industry, business, consumers, community groups and First Nations in developing and implementing a Canadian sustainable energy strategy that benefits all Canadians.
The Chair: You left one out; they should also work with each other.
Mr. Beatty: Indeed. Canada's energy future is in our hands and the time for action is now. We would be very pleased to respond to questions.
The Chair: Thank you, Mr. Beatty. In some ways, that was a bit of a sobering dissertation.
Before I go to my colleagues, I want to point out, when you talk about Prime Minister Harper's aspiration that we become an energy superpower, I believe the government's policy, both the Prime Minister and Minister Prentice, the Minister of the Environment, is to become a clean energy superpower. I am sure you chose your words carefully, so I am interested to know why you have not emphasized the "clean" part or the words "renewability" or "sustainability," words that did not arise much in your remarks.
You indicated that you did this sustainability study a couple of years ago and now a paper on the subject is in the works and be published in two or three months.
What methodology are you using to prepare these papers and to come up with these findings?
Mr. Beatty: I will ask Ms. George to respond with regard to the papers we are producing and how they fit in.
As you laid out in your opening remarks, there are a number of different organizations, including business organizations that are involved in different elements of developing energy policy. We are trying to coordinate what we are doing with other organizations to ensure that each of us is not reinventing the wheel.
We also want to ensure we start with the principles that were laid out in our paper, for which there appears to be a broad consensus. As we drill down from there, we do not want to present the government with 15 competing points of view from the industry, rather a series of coordinated and coherent proposals that simply make sense and that industry can get behind. You would not get the cacophony of voices there would otherwise be. Surely I will address that.
On the first part of your question, I cannot overstress the importance of clean and renewable energy. The whole point our paper tries to make is that we will only be successful in developing our energy resources in Canada if they are seen as being responsibly developed. That means investments and renewables, using all forms of energy and doing so in a way that respects the needs of the environment and other social policy needs as well. It is one of the reasons we called for a broad discussion in having all stakeholders involved.
The two are interlinked; we will not be successful in developing our energy wealth in Canada unless we do so in a responsible way. Frankly, we will not be successful in addressing issues like climate change unless the Canadian public is satisfied that our economy will continue to grow and we can keep the lights on.
It is interesting that, since the recession, public opinion has changed as it relates to the importance of the environment or climate change relative to the economy. The key is that we can have both if we do it responsibly and if we have sufficient imagination.
Shirley-Ann George, Senior Vice-President, Policy, Canadian Chamber of Commerce: Thank you for that question. When we developed this paper, we were looking at a framework document that examined the issues in the broadest perspective, not only from that of the large producers of the many different types of energy we are fortunate enough to have in Canada, but also that of the user community.
As we developed the paper, the one thing that came to us most clearly was that you cannot look at all the various issues that need to be addressed without understanding quickly the overlap, the complementary nature of the issues and the driving need to have some sort of strategy. To deal with them in stovepipes makes no sense at all. Therefore, this framework document lays out a number of other issues that need to be addressed. We have since gone back to our members and asked which of those issues they think we need to address first. We literally had not finished the announcement of the framework document before we had people running up to us wanting us to look more deeply at the issue around value-added manufacturing and secondary processing.
Canada has a great success story around the oil sands, where we have made a significant technology win in turning what many of us around this room called the tar sands while growing up, because that is literally all they were. It is now a very important industry for Canada. We need to take that success and the ingenuity we have shown and build it further up the value chain.
There is a significant interest outside of Edmonton in chemical processing, for example, and building an entire cluster that would look at that. There are other opportunities around nuclear energy and others in the energy sector.
We also have a significant amount of interest from our membership to look at smart grids. We need to look at the potential in taking the existing infrastructure, which was built on a patchwork basis and glued together. If you take a hard look at it, you are sometimes amazed that we are so fortunate to have such a robust energy supply. What needs to be done and what can be done to make the grid smarter? We will not tear it down and start afresh. How can we build more intelligence and efficiency into the existing grid? Then, as we start to replace and build, what can be done?
We will be doing a paper this year on First Nations. You cannot talk about First Nations and how they intersect with the business community as a whole without talking about the impact of the energy sector.
We are also considering a paper on demographics. The energy sector, like the other sectors, is facing a very serious issue with aging workers. What will that mean to them? Again, energy will play a role there.
When you start to think about it, it is hard to envision a topic of importance in the energy industry and Canada as a whole that does not have an energy component.
Senator Mitchell: Thank you to both of you. That was a very good and stimulating presentation.
I think everyone agrees that carbon must be priced. The question is how, and I am asking everyone this question; you are no exception. Should there be a carbon tax or cap-and-trade?
Mr. Beatty: At our conference, I put the same question to Rick George from Suncor Energy. Mr. George said that his preference was a carbon tax as opposed to cap-and-trade. The question I followed up with him on was whether we have any choice if the Americans go ahead with cap-and-trade. His response was no. I am inclined to agree.
Most economists would say that, if you were starting from scratch, the desirable way to put a price on carbon would probably be through a carbon tax. The bottom line is that our economies are so deeply integrated in North America that, if the Americans go ahead with cap-and-trade, I do not think there is a great deal of choice in terms of what we do.
Senator Mitchell: Might there not be some manoeuvrability if the proverbial bottom line is that there is a price placed either way on carbon? Could we not argue that we could meet their price?
I am not advocating either way that Canada could meet their price by pricing carbon here with a tax and save all the money it would take to administer the cap- and-trade system, and actually be more competitive as a result.
Mr. Beatty: It becomes difficult to do if you get two systems that are incompatible, with a North American economy that is deeply integrated, with the same company operating on both sides of the border, and with companies supplying each other with so much of the trade internal within the company. The extent to which we can have coherence and compatibility in our systems should be the driving factor for us.
I mentioned in my remarks that we have to link what we are doing with the United States and be very much aware of the development of their policy. However, I was also quite careful to say that we should not wait for the Americans before discussing the policy and looking at what we need. First, not all elements of Canada's energy and environmental strategy are susceptible to being designed in Washington, nor should they be. There are elements properly designed here. In addition to that, as the Americans are developing theirs, we should have an idea of what we want and argue for it, as well.
Senator Mitchell: Are you suggesting we are not doing that? Do you know?
Mr. Beatty: It is a work in progress; we do not have that strategy. What you are doing and what we are calling for, as well, is indeed a national energy policy that does not exist today.
Senator Mitchell: The government will do, we would hope, more than simply price carbon. In the United States, there is a great deal of effort being put to supporting and using incentives to help the development of, for example, renewable energy.
From your point of view, representing the business community as you do, what sort of government support initiatives have you considered and which would you choose if you were the Prime Minister of Canada to help the business community make a suggestion?
Mr. Beatty: This may be one of the areas where we will be going into it further. We have identified there is a need to incent research and development in this area. We are relying on technologies that do not exist today. There are opportunities for Canada.
If I were to respond to your question most directly, I think I would say that certainty is the most important thing from the perspective of business is certainty. If you are making multi-billion dollar investments, in some cases, you need to know what the rules are.
The advantage that British industry has over us today is they have an idea of what the rules will be. They are working together with government to identify where strategic investments will take place on the part of British government and where there are opportunities for British industry to take advantage. The British government is identifying things they will not support. They are saying, we will put taxpayers' money into offshore carbon capture and storage but not into onshore because we believe that offshore better suits Britain's needs and there is a greater commercial opportunity here for British industry.
The challenge for us at this point in Canada is that, in the absence of the policy we have been talking about, business is cast into a difficult position of knowing we have major investments to make but not knowing the rules under which they will be made.
What happened in Britain, I am told, just a few years ago was that the Confederation of British Industry essentially had been engaged in the debate on climate change. They looked at it and said, we are not scientists; we will not weigh in on the science of climate change, but we accept as inevitable that the public and governments around the world are expecting that action will take place.
That being the case, British industry requires certainty so it can make fundamental investment decisions. That changed the whole nature of the debate in Britain. They have moved ahead and there is considerably greater certainty there today, both where the government is targeting its efforts and what business can do.
Our government is committed to dealing with climate change, as governments around the world are. There will be regulations on this. There will be decisions made that will affect how business operates. We just need to know what the rules are, and they need to be sensible ones. We need to work together in how we develop them in a way that does not undermine the competitiveness of Canadian business.
[Translation]
Senator Massicotte: I tend to agree with your report. You recommend letting the market set the rules, that it will give business people the confidence they so desperately need. You also say that the government should not favour one sector in particular but should leave the field open to all energy sectors; that would give way to the best solution.
But, as a businessman and former member of your board of directors, I am always a bit cynical when someone asks for certainties and "affordable" ones at that, according to the heading on page 11 of your report. Business people want certainties, but are they willing to pay $100 a tonne to store carbon, for example?
You talked about research and development, infrastructure and electrical transmission lines, among other needs, and you expect the market not to call for any government funding, no financial intervention from the government or anyone else?
[English]
Mr. Beatty: No, we are certainly not proposing that. When I am talking about certainty, we accept as a given that there will be action. The federal and provincial governments will set policies that will affect the conduct of business. We cannot have certainty without that.
What we are saying is, having set fair rules, step back and let the market, within the context of those rules, decide where investments will be made. Do not constantly be putting the government's thumb on the scale in a series of different areas.
Would this spontaneously happen without intervention of governments, whether in Canada or around the world? No, it would not, because there is not the economic incentive to do it.
Set the rules, do so in a way that is transparent, collaborative and favours Canadian business in the competitive world, and then step back and let the market work within those rules.
Senator Massicotte: You also say in your report to let the market decide and allocate resources. At the same time you talk about infrastructure.
If that is the case, that is an easy one to buy into, but you seem to suggest also that the government should provide infrastructure money or give subsidies somehow to certain sectors. When it does so — either electrical lines, carbon capture — it has basically chosen some winners and losers. It is then allocating resources in favour of one versus the other. You talked about nuclear earlier. If you really want the market to decide, do not subsidize any sector and let the market allocate those resources. How would you respond to that?
Mr. Beatty: If you were to take the government entirely out of the nuclear business and take the position that it was up to Ontario Power Generation to privatize all of the operations, it would fall to OPG to decide on where they got their supply. Even in that scenario, the government would still have to make decisions, even in terms of granting licenses. Inevitably government comes into the process.
Senator Massicotte: The government needs to get involved for sure, but do they need to subsidize any sector? Do they need to allocate their own financial resources to any sector? Why not let the market decide completely?
Mr. Beatty: There are instances where the government is already involved. For instance, where you have a Crown corporation, they are already involved.
What we are saying is we recognize it is not a pure free market situation. Governments need to make decisions. In some cases that will mean an allocation of tax dollars in one area or the other. This should be kept at the minimum. We should maintain, once rules are set, the maximum flexibility within the free market.
In case of the Government of Ontario, the position may be taken that there is no such thing as clean coal, that under no circumstances can coal ever be used in a way that is compatible with the environment and therefore we will simply ban it and not consider its use in any way.
What should be done is to set environmental standards and say that any means of generation that can meet social and environmental standards that have been met and the economic standards that have been set should be allowed to go into production. However, to simply rule out one type of generation and say it will not be accepted is a distortion of the market that, in our view, makes no sense.
The Chair: We have been told that 90 per cent of the generation of electricity will not be from coal by 2020. We have also been told that in developing the kind of comprehensive energy policy you have described, we do not want to make the same mistakes that have been made in the past. We must go carefully. It could take as many as 20 years, but we must get it right. There needs to be a leader, and the government is the obvious leader. That is what some people have told us.
Senator McCoy: Senator Lang and I both come from strong regional backgrounds and we are wondering how the federal government can tell Ontario what to do with its own resources.
I want to ask you. It is aspirational, we have heard. Not a bad aspiration.
I am pleased with your messaging here and particularly agree, as we enthusiastically endorse your approach to the collaborative, all stakeholders and all jurisdictions coming — through repeated conversations — to a consensus on a national energy strategy. I think that would be very helpful. If we can walk hand in hand down that path with you, I think we will all have done our country a good service.
I am taken with your call for a plan. I was encouraged to see hear you speak of the first challenge of consumption. I was looking forward to seeing what you had carved out in your framework as you are telling us about it tonight in that regard. I was disappointed to hear all of the specifics in your plan on pages 11 and 12 in here have to do with production or market selling or value-added jobs or clean environments, none of which has to do with consumption.
Yet, 10 days ago, you and I sat as guests of the British High Commissioner and heard that Marks & Spencer — their version of our Hudson's Bay, I suppose, including energy investments — launched their wise use of resources program. They expected the program to cost them £40 million over five years and made £50 million in two years. They actually made money in two years when they expected it would cost them money over five.
I am curious to know if you have any ideas for your members to increase productivity — as you keep saying they should — increase their competitive position — as you keep saying they should — and take advantage of a consumption approach to our energy strategy.
Mr. Beatty: Indeed. I apologize if I did not cover all the area you wanted. I get the feeling you would not have had four minutes for this exchange if I had.
The reduction of consumption is absolutely critical. It makes good economic sense, apart from anything else. I will argue an economic case. It is very straightforward, because I am representing the business community. However, if you look at Canada, what are the two things that more than anything else puts us at a disadvantage because of our position? The first is our cold climate, and the second is our thinly populated vast territory. If we can improve the efficiency of our use of hydrocarbons, we can significantly cut our costs of production and our cost of supplying goods and services in this country, and it gives us a competitive advantage in the process.
You talked about Marks & Spencer. You are seeing industry across the country engaging in putting in programs to be far better stewards of our resources and to use energy far more sparingly, because there is a powerful incentive for them already to do that. There are certainly thing that government can do to incent it even more fully, but even as it stands today, particularly with the rising cost of energy in Canada, the incentive to look for ways of conserving more effectively is growing every day, and it is a powerful incentive. It enhances our competitiveness.
Senator Seidman: Your fourth challenge talked a bit about having to level with Canadians and tell them the hard truths about how expensive this whole process will be. When we talk about expense, we not only talk about monetary costs but also about the social and environmental costs.
Could you talk a bit about how we will deal with the legitimate concerns that communities may have about many of these developments? Government can regulate, but it may also be that corporations have to take a different kind of attitude about their projects in terms of communicating with various communities. For example, this morning there was an article on the front page of the Montreal Gazette about enormous dissatisfaction and conflict in Quebec over a wind project that had not been properly vetted with the communities. They are really up in arms over this. Could we perhaps talk a bit about this issue?
Mr. Beatty: I alluded to it in my remarks when I talked about the oil sands and how we have to tell our story far more effectively. The simple fact is that we are perhaps better at performing a service or producing a product than we are at consulting, explaining and helping to educate people. For this to succeed, for us to be able to unlock the incredible natural wealth that we have in this country, we will need public support for doing so. It will not be done over the opposition of the public. It will have to be done with their support. Very often, the concerns they have are legitimate concerns, whether it is noise or other environmental impacts as a result of wind farms. To dismiss their concerns out of hand is irresponsible. There are significant issues to deal with in the development of the oil sands and the same with nuclear energy. It is the same with the development of new transmission lines for hydroelectricity. All these issues have to be dealt with in a transparent and open way, and proponents of projects have to tell their story in an open, honest and educational way. Here is the corollary; we need to have a process that allows decisions to be made. Just because there is opposition to development is not in itself reason to stop development. Someone has to be in a position to take a decision as to where the broader public interest lies. Clearly, there is a real public interest in ensuring that the lights stay on, that our homes are warm, that we are able to get to work, produce products and feed our families. Government, at whichever level, has to cut that Gordian knot and make the decision. You asked, can business tell its story better? It must, or else we will not succeed.
Senator Lang: Mr. Beatty, I am pleased to see you, and I am pleased that you recognize the federal authority versus the provincial authority, because that is what we struggle with, in some respects. We ask what can the federal government do in conjunction with the provinces, and what is our responsibility.
The first question I have has to do with the environmental process. You mentioned it very fleetingly in your opening remarks. We have all lived with the Mackenzie pipeline assessment process that started almost before I was born, and I think we are coming to a culmination here in the next little while.
Mr. Beatty: I certainly remember it from my early days as a member of Parliament.
Senator Lang: Has your organization studied the processes that are in place and, if so, what changes would you recommend to make the process more timely and more business-like so decisions can be made?
Ms. George: That is a very important question. The Mackenzie Valley Pipeline is, unfortunately, a textbook case of failure on the regulatory side, not by any ill will, but just by the fact that it does not take that long to do all the assessments that are needed. Having 1,700 different groups, any one of which can say no, just does not make any sense.
We believe strongly that there is a significant opportunity for better cooperation between the federal and provincial governments. In many cases there is no need to do the same assessment twice but with a slightly different set of questions. In essence, it is the same work twice. We have heard that there has been significant delay, and often it is because the federal government is not as able to be as timely.
Some excellent work has been done in this area with the major projects office on the infrastructure projects, for example. They looked at when is it possible for the federal government to accept the provincial government assessment. They found that, in many cases, they are able to accept it and still live up to their important legislative responsibilities. That is just one area. That alone could make a massive difference in being able to move large projects of all kinds forward.
Mr. Beatty: It is not just in energy either, senator. Another example, and Senator Runciman will be very much aware of this, is on transportation and the Detroit-Windsor crossing. It is simply stunning that the process of getting a new crossing between Detroit and Windsor, the most important crossing in North America, has taken this long. We built the causeway to Prince Edward Island, or you can look at some of the other major projects that have been under way in which the environmental impacts are far more serious, in much less time. We need to have a process that is fair, open, transparent and workable, particularly where issues of national security are involved, whether it is energy security or economic security.
Senator Lang: The process you spoke about earlier involved bringing all the players to the table, whether they are the provincial governments, the First Nations, non-governmental organizations or environmental organizations. There is a process under way. I would like to hear how you envisage this coming to an end so that some decisions can be met. You are in the process of doing a number of studies, as are we and other organizations. In what time frame do you see us having to come together to make some of the difficult choices that have to be made? Are we talking a year or two years? Have you given this any thought?
Mr. Beatty: In some cases, we do not have the luxury of putting off decisions, but in terms of putting in place a strategy, the process itself is vital. It needs to be transparent and collaborative, but you need to bring it to a conclusion. I think you are talking about taking another year in your work. I do not think that is inappropriate at all. However, we need to be able to move, and government needs to be able to say, "Look, there have been several processes put in place to ensure that the people could be heard. We have had recommendations. Now is the time to decide." Then, let us have clarity of action.
The great challenge for us, beyond that, is that what we are talking about will require a sustained will over the course of a generation. That is not something we have been good at in peacetime in Canada. We need to be able to have a good process in developing the policy, we need to make decisions and we need to be able to sustain the decisions afterward.
Senator Peterson: I enjoyed reading your paper, Powering up Canadian Prosperity. In there, you encourage the development of a new greenhouse gas regulatory framework that would have achievable results. At present, we have 17 per cent reduction from 2005 by 2020. First, do you think that is achievable? Second, would you describe that as a target or a plan?
Mr. Beatty: It is a target. It is achievable, but it will be very hard to meet without a plan.
Senator Peterson: Does your organization support a strategy of increasing energy prices to consumers over a period of three to five years to reflect more accurately the costs?
Mr. Beatty: That is happening today. We are seeing energy prices going up as a consequence of market forces. Clearly, that is having its impact right now on decisions being made by business.
Senator Peterson: However, are consumers facing this as well? If they do not, they will not help us to meet our targets. It is subsidized in a lot of areas for various reasons.
Mr. Beatty: If you look at this province, for example, we are seeing electricity rates going up.
The Chair: You mean Ontario?
Mr. Beatty: Ontario, Mr. Chair, yes. We are also seeing the cost of gas for your car going up.
Consumers are aware of the fact that we are living in an era when energy prices will continue to rise. The faster they rise, obviously, the greater the incentive for people to take actions more rapidly; but very few people anticipate energy prices will fall. When they are making decisions, for example, on new homes, they are looking at how to ensure they have the proper insulation to minimize the cost of electricity. You are seeing an impact in terms of cars that people choose. You are certainly seeing industry decisions being made to look at how they can reduce the cost of energy as a result of reducing the amount of energy being consumed.
Ms. George: We will never make the target if consumers are not a very large part of the answer.
Senator Peterson: That is what I say. We have to have a plan around this. Targets are not enough.
Mr. Beatty: It will not happen spontaneously, but the single most important mechanism is the price mechanism. We are seeing prices increase.
The other thing that happens as prices increase is that alternative technologies become affordable. You begin to develop a market in which they are able to compete and be brought on-stream. That is not the case for many of the alternative energy sources that we have because they are not economically competitive.
Senator Runciman: This is a fascinating subject. It makes me almost wish I was a member of this committee. As they say about a certain politician, I am just visiting.
First, on your comments with respect to the nuclear industry and the drift and confusion, we know that the government is considering bids on the commercial side of the business. I am curious about what you are suggesting in terms of specifics. Do you have a view on Ontario's decision to defer a decision, after leading bidders on for about 18 months at the cost of millions and millions of dollars? I am interested in that subject.
You talked about market and again, I am focusing on Ontario. In the costs of alternative producers, we know solar and wind power are about four to five times what the residential ratepayer is now paying per kilowatt hour. I am not sure what the implications are for not just residents in Ontario, but the businesses that operate there.
I know in Spain, because of the economic situation, they are desperately trying to renegotiate contracts with folks that have signed these kinds of significant commitments a number of years ago.
Mr. Beatty: I will dodge, to some extent, your question with regard to nuclear. Suffice to say, though, that nuclear needs to be a key part of the energy equation for the future. We will not be able to hit our targets for climate change and keep the lights on without strong reliance on nuclear. We rely on it today; we will need it in the future.
In doing the planning, we need to have clarity as to where, first, the federal government sees as the future of the nuclear industry in Canada; and second, decisions made by provincial authorities as to who suppliers will be. Either we will develop these technologies ourselves or we will buy them in. You can probably detect from that, if I have a prejudice, it is that we develop them ourselves. However, more than anything else, we need clarity. If we have drift, you have the worst of all possible worlds. What was your other question?
Senator Runciman: That was the Ontario decision, but you may not want to respond to that.
Mr. Beatty: I thought I approached that as closely as I wanted to.
Senator Runciman: The other was the question of affordability. We talk about consumers having to understand that prices will rise, but when there is such a significant difference —
Mr. Beatty: The question is the pace at which it does.
Senator Runciman: Yes and that could have a negative impact in terms of acceptance of the direction you would like to see it take.
Mr. Beatty: Absolutely. If you find that suddenly the jobs that they are counting on to be able to pay for their homes disappear, then support for the policies that cause those jobs to disappear melts away as well.
While we all accept that the cost of energy will increase, the issue is the pace at which we do that. It has to be a pace that is not punitive to people on low incomes, for example; or that we find ways of trying to buffer them against some of the impacts.
Second, we have to ensure that we do not put our industries at a competitive disadvantage, which again brings us down to the question of when do we decide. My argument is that there are tough decisions to be made and people will debate them extensively, but we need to have a process in place that leads to a strategy sooner, as opposed to later, so we know where we stand.
The Chair: Mr. Beatty, we have hit your deadline. Do you have a little bit more time? I know you have a very important meeting to go to.
Mr. Beatty: Unfortunately, we are hosting the Minister of Transport and a number of business people from across the country tonight.
The Chair: You be sure to tell Mr. Baird that they are 28 per cent of the consumers of energy in this country, that they have to cut down and it can only be clean going forward.
Mr. Beatty: I will pass along your good wishes to him, Mr. Chair.
The Chair: Colleagues, I think we all owe Mr. Beatty and Ms. George our sincere thanks for their input this evening. Hopefully, we can read between the lines and divine a willingness to work with us as we go forward. You have many important "ins" that we do not naturally get. Perhaps you could think of us when you are having these gatherings and we will think of you.
This is key and time is pressing. I wish I had more time to pursue with you the ominous words that you uttered when you said you could not stress enough your concerns about China, and you even mentioned the title of a well-known book, War and Peace. These are sobering utterances, so we all must reflect carefully before we go further.
The Chinese indicated at Copenhagen, where I had the privilege of being present, that they are ready to come to the table and they are willing to set targets. They are willing to talk to Brazil and Russia and India and people like the United States and Canada in dealing with these issues. I believe that is your experience as well.
Mr. Beatty: I hope that is the case, but your comment, senator, reminds me of President Regan's comment at the time of negotiations with the Soviets, where he talked about "trust but verify." I would want to ensure that in any agreement, we had the ability to verify that all the players were doing their part.
The Chair: President Obama brought that message clearly to the table in Copenhagen. I think it is important that we understand what is going on there and look them in the eyes and work with them. As somebody said, there is only one atmosphere here. It does not have stars and stripes or a maple leaf. Senator Mitchell pointed out that they are opening coal-fired plants apparently almost every day. Is that correct Senator Mitchell?
Senator Mitchell: Every week.
The Chair: It is very scary. Pollution and carbon emissions from those coal-fired plants are coming here. It is in our interests to get to the table and to work with these folks. Without further ado, thank you very much.
Colleagues, we will reconvene on Thursday morning at 8:00 a.m. We have people from the Canadian Academy of Engineering. Also, the steering committee will bring you up to date on how we are doing with our report on the GLOBE conference, on our interim phase one report and on witnesses for the future.
Senator Massicotte: Thank you, chair, for not scheduling another witness. The hockey game is starting in half an hour.
The Chair: I think Mr. Beatty had something to do with that. He is a very understanding gentleman. Ms. George, I cannot bang the gavel down without dispelling the rumour that you are the wife of Rick George.
Ms. George: No, I am not.
The Chair: Thank you all.
(The committee adjourned.)