Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 5- Evidence - October 27, 2011
OTTAWA, Thursday, October 27, 2011
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:06 a.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: This is an official meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. We are continuing our study, which began in June of 2009, into Canada's energy sector as a whole. We are consulting with Canadians on traditional and alternative sources of energy with a view to finding a way forward for a more efficient, cleaner and more sustainable energy policy for Canada.
We are coming to the end of our study and hope to report in June of 2012. We have consulted with Canadians in Atlantic Canada, Ontario and Quebec, and we will be travelling soon to Saskatchewan, Manitoba, Alberta and British Columbia. While we are in the West, we hope to hear witnesses from Canada's vast northern territories.
Today we are privileged to have with us representatives from the Federation of Canadian Municipalities and from Sustainable Prosperity. This ties in well with some of the evidence we have heard in the past. If we are to succeed in this country in utilizing our wonderful natural resources and sustainable energy as efficiently as possible, the communities and municipalities must play a part. We heard interesting evidence on this in Halifax, where they are quite advanced in this area.
We are looking forward to hearing from our witnesses today. I am pleased to welcome, from the Federation of Canadian Municipalities, Mr. Alex Long, Senior Manager. Mr. Long is responsible for successful delivery of Federation of Canadian Municipalities national programs and development of new programming to increase the sustainable development capacity of Canadian municipalities.
Ms. Shannon Joseph is the policy advisor for the federation. She leads policy research and advocacy strategy development for environmental sustainable development and northern and remote community issues within municipal and federal jurisdictions.
Mr. David Thompson is the Director of Sustainable Communities. He is also the principal of PolicyLink Research and Consulting, an Edmonton-based public policy consultancy. He co-authored Sustainable Prosperity's Smart Budget, a background paper on environmental pricing reform for local governments and was the principal researcher for the Smart Budget tool kit.
I am Senator David Angus from Quebec and I chair the committee. This is Senator Mitchell from Alberta and he is deputy chair of the committee. We have with us today two representatives of the parliamentary library, Marc Leblanc and Sam Banks. Also with us are Senator Peterson from Saskatchewan, Senator Banks from Alberta, and Senator Merchant from Saskatchewan, who is a long-time member of this committee. From time to time we are privileged to have her represent senators who might not be available. In this case she is representing Senator Sibbeston.
Seated at the table as well is Lynn Gordon, our clerk. We then have Senator Lang from the Yukon Territory who is representing Senator Neufeld, Senator Wallace from New Brunswick, Senator Seidman from Quebec, Senator Massicotte from Quebec, and Senator Brown from Alberta.
I welcome viewers on CPAC and anyone tuning in on the World Wide Web. We have our own dedicated website for this particular study. It is part of our collective effort to engage Canadians in this important subject. It will have huge effects on our grandchildren, great grandchildren and generations to come, given exploding populations and ongoing needs for energy.
Please proceed.
Shannon Joseph, Policy Advisor, Policy and Research, Federation of Canadian Municipalities: It is a pleasure to be able to speak to you today. Our president, Berry Vrbanovic, from Kitchener, Ontario, sends his best wishes.
FCM is pleased to be able to contribute a municipal perspective to the research you are doing on Canada's energy present and future and to your development of a national vision for Canada's energy sector.
As you know, FCM has been the national voice of municipal governments since 1901. We represent close to 2,000 municipalities, which in turn represent over 90 per cent of Canada's population.
Like all other orders of government, local governments are major consumers of energy. We own buildings, vehicle fleets, and spend millions annually on the procurement of products that have embodied energy from Canada and around the world. We are in a position to influence the energy consumption choices of our citizens, like other orders of government.
In our 2009 milestone report, Act Locally, we showed that municipal governments have direct or indirect control over 45 per cent of national greenhouse gas emissions in Canada, a majority of which are driven by energy consumption. We also demonstrated that there was a significant stock of effective, low-cost, locally driven emission reduction opportunities. These opportunities have the potential to deliver between 15 and 40 per cent of Canada's 2020 GHG emissions reductions targets, savings thousands of kilowatt hours, metres cubed of natural gas, and litres of fuel.
In terms of direct municipal control, we are talking about energy consumption and losses in municipal operations, buildings, arenas, fleets and waste management. We are also talking about opportunities to harness landfill gas for productive use — either as a fuel for vehicles or heating, or to generate electricity — as municipalities like Vancouver and Rivière-du-Loup have done. These initiatives save communities millions of dollars and make smart use of resources and waste.
In terms of indirect municipal control, policies and programs can promote energy efficiency in residential and commercial buildings, institutional buildings and in local industry. Municipal planning can also lower the energy consumption associated with personal and freight transportation. A good example, which I think many of you have heard of, is the Halifax Regional Municipality SolarCity initiative. It is a pilot project that will provide low-cost financing to homeowners to retrofit their homes and install solar heating or electrical capacity. They will be repaid through property assessed payments. It is a great example of local governments using the levers at their disposal to promote smarter energy use.
The benefits of capturing these direct and indirect local opportunities not only address Canada's energy future, but also our overall economic prosperity.
I would like to direct your attention to figure 2, found on page 9 of the Act Locally report, which is part of our written submission. This is to provide you with a sense of how much these energy-related initiatives cost, the savings they provide and the revenues they can generate.
The Chair: Senator Dickson, from Nova Scotia, was just arriving when I was doing the introduction. Inasmuch as the Halifax model is quite important, I wanted to point that out. Carry on, please.
Ms. Joseph: Figure 2 indicates that municipalities have a number of large, low-cost energy consumption reducing and GHG emission reducing opportunities that can be implemented over the next decade. These include building retrofits for lighting and insulation, installation of combined heat and power systems, district energy systems, and a host of other initiatives that get progressively more expensive. It is important to note that over one quarter of these initiatives can provide a return on investment, so they cost zero dollars per tonnes reduced. That is true even without the implementation of a carbon price. More than two thirds of the emission reductions can be achieved at a cost of less than $25 per tonne. All of the emissions reductions in that figure — which are associated with energy consumption reductions— can be achieved at a cost of less than $75 per tonne reduced. In provinces with favourable conditions, like British Columbia with its carbon tax and Ontario with its feed-in tariff, local governments are increasing their renewable energy generation capacity. They are implementing district energy systems and fleet management policies that reduce overall energy consumption, but particularly reduce non-renewable energy consumption.
This leads me to FCM's most recent research that identifies the role municipal governments can play in Canada's transition to a more energy-efficient and green economy.
Municipalities have a range of policy tools at their disposal to influence energy use in Canada, including planning, zoning, development control, establishing protected areas, property tax and other mechanisms. Using these tools, cities can undertake essential action in a number of key areas for a green economy. These actions can create jobs, lead to GDP growth and help green businesses across Canada to develop.
The more favourable the national policy environment, the more likely municipalities will be to maximize local policy levers at their disposal to reduce energy consumption in their communities and contribute to renewable energy production in Canada. While we recognize that some of these policies will have to come from the provincial or territory level, there are a few key actions that the federal government can take to contribute.
The first is to evaluate and shift any subsidies that discourage energy efficiency or clean energy projects.
The second would be to use market signals to reduce excessive automobile use, provide an incentive for denser development, and more efficient energy use. A carbon price could be used to send this type of signal.
Sustainable transportation could be made an infrastructure priority. As the federal government develops a new long-term infrastructure plan for 2014, it can catalyze sustainable transportation actions in communities, create jobs, reduce fuel consumption, and prevent the loss of $5 billion annually in delays due to traffic congestion.
They can also introduce a green top-up to federal infrastructure funding, incentivizing project proponents to go further and leverage environmental benefits in their projects.
They can introduce a Canada clean energy program. This could work to reduce the cost of clean energy generation and transmission and reduce the cost of renewable energy to consumers, encouraging consumer uptake of renewables.
Another option would be a financing program for energy efficiency retrofits that is delivered in collaboration with the municipal sector.
These actions could have widespread beneficial impact and leverage significant, private sector investment.
Finally, the federal government could spearhead a new green economy partnership among governments, bringing together federal, local and provincial and territorial governments to build a new partnership that empowers each order of government to use the levers at their disposal to achieve the greatest benefits in terms of clean energy production, renewable energy efficiency and to move the economy towards more efficiency and a green economy.
[Translation]
Aside from FCM's policy related mandate, we also administer a range of both national and international programs, including the Green Municipal Fund (GMF), Partners for Climate Protection (PCP) and until recently the EnviroFleet program. These programs enable municipalities to pursue energy-related objectives and to share their expertise with communities around the world. I will describe each program briefly as well as some of the important takeaways.
The Green Municipal Fund is a $550 million federal endowment through which FCM offers funding and knowledge to municipal governments and their partners for municipal environmental projects, a majority of which are actually energy- related. Since the fund's inception in 2000, over 875 initiatives have been approved for funding, including 150 capital projects, of which 40 have been completed and have reported environmental results.
Under the energy umbrella, we have funded energy efficient retrofits and new LEED buildings, district energy systems, geothermal exchange systems and renewable energy installations.
Based on reporting to date, over 194,000 tons of CO2 will be eliminated annually just by the roughly 40 FCM- funded projects. The cumulative impact of thousands of municipalities across Canada taking similar action can make a new energy future possible. Moreover, these GMF-supported initiatives have the potential to leverage over $3 billion of economic activity in more than 430 communities, highlighting the municipal role in Canada's Green Economy.
The Partners for Climate Protection (PCP) program is a network of Canadian municipal governments that have committed to reducing greenhouse gases (GHG) and acting on climate change. By participating in the program, municipalities commit to taking action and work to achieve a series of five milestones to reduce their GHG emissions.
Since its inception in 1998, 216 municipalities representing approximately 80 per cent of Canada's population have joined PCP.
The 2010 PCP National Measures Report, which is included in our submission, highlights 182 initiatives undertaken by 37 municipalities across Canada to reduce GHG emissions. As indicated in table 3, page 11 of the report, these initiatives have led to significant energy savings and have reduced GHGs by 350,000 tonnes annually. They represent more than $145 million in investments and have saved municipalities nearly $3.5 million per year. Since the Measures Report began in 2008, more than 1.5 million tonnes of GHG reductions have been reported, which is the equivalent of taking close to 400,000 light vehicles off the road.
Finally, FCM's EnviroFleets program was a two-year program funded by Environment Canada and run through PCP to help municipal vehicle fleet managers find cost-effective ways to green their fleets by being more energy efficient or using fuels that produced fewer GHG emissions.
Overall, the program directly engaged 319 municipal staff and elected officials in workshops and webinars and resulted in the establishment of a contact network of over 1,300 municipal fleet managers.
The program is another excellent example of federal collaboration with the municipal sector to achieve energy-related objectives.
[English]
I would like to touch briefly on some of the federal programs that have been introduced over the years to support energy-related initiatives at the municipal level. It is important to note, first, that local governments have faced a long- standing fiscal constraint. They receive 8 cents for every tax dollar collected in Canada, and besides this depend on property taxes and user fees to fund their operations.
In recent years, however, the federal government has begun to contribute more significantly to municipal infrastructure and to energy-related programs. The Gas Tax Fund and the Building Canada Fund are two important examples. They have provided $2 billion and $1.2 billion annually to municipal infrastructure projects, including energy projects. The federal Green Infrastructure Fund, which is a $1 billion fund, has contributed to six municipal energy projects.
Other programs of note include the ecoENERGY Retrofit grant for homeowners, which was recently renewed for $400 million, and the ecoENERGY for Aboriginal and Northern Communities Program, which provides $8 million over two years for the deployment of clean energy technology in diesel-dependent northern and remote communities.
These programs have been critical to supporting front-line infrastructure renewal, and this needs to continue.
Our main message to you, in closing, is that Canada can have a brighter energy future if all orders of government collaborate to make it happen. Local governments can help achieve national energy objectives, as FCM has found through our research, but also through our experience as a program delivery agent. Some cities are already way ahead of the curve.
The Chair: Thank you, Ms. Joseph. Before we turn to Mr. Thompson, I just want to make a couple of comments.
You have seen the light and brought everything together that we are trying to encapsulate as we start working on our report. You have laid out beautifully what the federal government can do and/or is doing. Given the provincial jurisdiction and energy and the environment and the like, everyone is asking: What is the role of the feds? What can the feds do?
I thought you put it succinctly in terms of what they are already doing as well. Of course, not only is collaboration important, but communication is critical as well.
[Translation]
I would like to congratulate you for your perfect French. A perfectly bilingual witness. Thank you very much.
[English]
Now we turn to David Thompson, who will make a 15-minute opening statement, following which we will go to questions from senators.
David Thompson, Director, Sustainable Communities, Sustainable Prosperity: Good morning, and thank you, Mr. Chair and members of the committee, for the opportunity to speak with you this morning about Canada's energy future, and particularly at the municipal level of government.
I also appreciated Ms. Joseph's comments, her coverage of the issues and her eloquence. I got up this morning at 4:45, Alberta time, so I cannot guarantee that I will be equally eloquent, but at least Ms. Joseph has said it all.
I am the Director of Sustainable Communities at Sustainable Prosperity. Sustainable Prosperity is an independent policy research organization based at the University of Ottawa. Our mandate is to promote the development of a green economy in Canada, and particularly with a focus on the role of market-based policies in achieving environmental and economic outcomes.
Our work revolves around a basic observation in economics, and that is that market prices sometimes omit the environmental and other costs and benefits of those transactions. Those costs and benefits are externalized in the economics jargon, and that is the root of many environmental problems. With externalities, regardless of people's intentions, rational economic decisions often lead to environmental harm, as well as distortions in the economy and economic inefficiency. Using market-based instruments we can capture some of those externalities, protect the environment and boost prosperity.
Within the Sustainable Communities area of Sustainable Prosperity we are working on identifying policy measures that can be used at all three levels of government that will reduce energy consumption and greenhouse gas emissions while boosting local economies and improving the fiscal situation of municipalities.
As I mentioned, Ms. Joseph's presentation covered a wide range of areas where federal policies can assist municipal governments in achieving those kinds of goals. I will focus on one key problem that is a priority for our Sustainable Communities cluster, and that is urban form. I will talk about three things; the problem, the opportunities and the solutions. On the latter point, I will focus on what the federal government can do in this regard.
We all know the non-financial costs of suburban sprawl. It eats up valuable farmland and hollows out cities. It locks us into automobile dependency and boosts climate change and smog emissions. Medical research has recently established a link between sprawl and several chronic health conditions ranging from obesity to heart disease, diabetes and a number of others. This is not to mention the injuries and deaths from motor vehicle collisions and the health impact of air pollution.
On that latter point, transportation is recognized as one of the largest sources of air pollution in Canada. A City of Toronto report a few years ago estimated that 400 deaths and 1,600 hospital admissions every year are due to the health impacts of air pollution — just within that city.
Nationally, the Canadian Medical Association estimates that the health care costs of air pollution are on the order of $400 million a year. This is dwarfed by the cost of injuries from transportation accidents, at $3.7 billion per year. There are very significant non-financial and financial costs arising from sprawl and the transportation that sprawl requires.
In addition, suburban homeowners face financial risks from sprawl. As we leave the age of cheap oil and gasoline, that will become worse. As we saw with the U.S. housing bubble collapse, suburban home values dropped more quickly than urban home values, and I think we will be seeing that as energy prices go up.
Sprawl also creates a serious financial risk for municipalities. My current hometown of Edmonton recently put out a report entitled Costs and Revenues for New Areas. It examined 17 new residential developments that were being planned or being built at the moment out of over 40 new developments that are happening. The city of Edmonton found that there will be a net cost to the city from these developments. The cost to the city will be almost $1 billion in the next 30 years. In the 30 years after that, the net costs of sprawl will be almost $3 billion. That is just one city of many cities across Canada, and less than half of its new neighbourhoods.
Having delivered the gloom, I will talk about the opportunities, because a big problem is a big opportunity. We can achieve a lot of benefits if we are able to rein in sprawl. To start with, we can reduce the non-financial costs that I mentioned earlier. We can also improve the balance sheets of municipal governments, as the Edmonton example would illustrate. We can strengthen the overall economy, and one way to do that is by addressing those negative externalities. That would reduce the economic distortions, reduce the economic inefficiencies and boost growth. That is basic economics.
The more interesting economics has come in the last few decades. Economists have pointed out that by boosting urban density we can improve the access of firms to workers. When you do that, firms have more potential workers to choose from. You can get a better fit between jobs and employees and you boost labour productivity. Job seekers also have more access to firms when you have a denser municipality, which tends to reduce friction-related unemployment.
Density also improves the access of firms to both suppliers and markets for their goods and services, and enhances knowledge spillovers between and within sectors. A great example of that is Silicon Valley in the United States. Such economies of agglomeration can have a significant impact on boosting economic growth.
Finally, density can help improve the federal balance sheet. I referred to the high health care costs of sprawl and transportation earlier. The federal government picks up 40 per cent of health care spending nationally, so we can have significant savings for the federal government. It is easy to see why municipal governments right across the country are adopting urban densification as a key goal.
As to specific solutions, as Ms. Joseph mentioned there are many policy actions that municipalities can take. Reforming property taxes and development cost charges are an example. These can be used to make it relatively cheaper to build within the city, to densify, to use in-fill development, to redevelop brownfield sites, that is, abandoned or polluted sites. We see that cities are starting to use these policy tools. For example, the city of Calgary has recently reformed its development cost charges to try to close the gap between what it spends on suburbs and what it receives from suburbs in revenues.
There are areas where provincial governments need to step in to help municipalities, for instance by transferring legislative authority to municipalities where needed. Again, that has begun in places like Vancouver, Toronto and Calgary. It needs to happen more broadly.
As we mentioned earlier, there is a federal role here. For instance, as FCM has pointed out for many years now, there is a need for sustainable transportation to be included in a national infrastructure plan for Canada.
Other federal spending can also be analyzed through a sustainable communities lens. As one example, we could look at the stimulus federal spending in 2009-10. In examining this, the UN found that compared to other G20 nations Canada's stimulus spending was not very green.
Fiscal restraint is currently a stated goal of government but current news indicates that there is a real possibility of further stimulus coming. If that is the case, we want to make sure that we do not miss a second opportunity to invest in energy efficiency and conservation, and try to help municipalities along the way.
Another opportunity where federal policy could play a role is in location-efficient mortgages. These mortgages, which are being given in the United States already, recognize the lower home ownership cost when you live near the centre of town and near transit. People have lower expenses, which helps them meet their financial obligations, reducing the risk of default; lenders will offer lower borrowing rates for residences within the city. A federal role here could be for CMHC to offer reduced mortgage insurance premiums, as it already does for energy efficient housing.
Another area where the federal government could play a role is in using its tax powers to complement municipal efforts; for instance, by offering tax credits or accelerated capital cost allowances for investments in district heating or other integrated community energy solutions. I note here that QUEST Canada presented to you about a year ago, so I will not go any further into ICES.
In looking at municipal policy on energy, policy compatibility is another important test for the federal government. Municipalities aiming to tackle sprawl often find themselves swimming against a bigger policy tide. The externalities that subsidize sprawl and excessive automobile usage make it harder for municipalities to turn around these trends. The federal government could help by addressing some of those externalities.
How could the federal government address those externalities while still meeting the needs for investment that I and others have mentioned to you?
There are two big answers and a lot of little answers. I will focus on the big ones. As Ms. Joseph said, the first thing to do would be to remove harmful subsidies. This is along the line of the physician's credo, "First, do no harm." I am pleased to report that economists — who are usually a pretty disagreeable bunch — agree with the doctors on this. They have identified the very large financial subsidies that the Canadian government provides to the oil and gas extraction industry. It is a highly profitable industry and not desperately in need of subsidies. These subsidies have the effect of artificially suppressing the cost of fuel, thereby subsidizing long distance commuting and development of sprawl. This locks communities into housing and infrastructure decisions that last for decades. They may not be terribly good decisions as the price of energy goes up. It also makes integrated energy systems, such as district heating, less feasible. Artificially stimulating oil and gas investment draws capital away from other sectors' private investment capital. It inflates the dollar, and undercuts green sectors and other sectors that municipalities depend on.
Removing these subsidies would reduce greenhouse gas emissions and improve the fiscal situation of the federal government. It would boost employment levels, as savings and private investment are shifted into areas of the economy that have a better return on jobs per dollar than oil and gas extraction. The leaders of the G20 countries agreed to remove those subsidies in 2010. Later that year, the Deputy Minister of Finance advised the government to eliminate those subsidies as well. I am happy to report that in my home province of Alberta, a large majority appear to support such a move. According to public opinion polling, 78 per cent would prefer subsidies for clean and renewable energy rather than oil and gas extraction.
Carbon pricing is a second way that the federal government can eliminate or address those externalities while finding revenues. This is essential. Carbon pricing is essential to any discussion of municipalities and energy. As noted by FCM, it creates an incentive for denser development and a shift toward transit. More broadly, it would support municipal efforts to reduce energy waste.
I notice in your interim report, Attention Canada — and through witness presentations — that you have heard many times that Canada needs carbon pricing. Rather than repeat that, I will offer a slightly different observation.
Canada has carbon pricing. It is not very good. That is the problem. That is where the federal government could make a difference.
It is geographically uneven. Some provinces have explicitly adopted a carbon price and others have not. It is also inconsistent between fuels. There are implicit carbon prices that we can calculate embedded within gasoline taxes and diesel taxes. At the federal level, the excise tax of 10 cents a litre represents a carbon price of $42 per tonne. However, there are fuels like coal where there is no tax and no carbon price.
The federal government could start by addressing these issues and harmonizing our existing carbon prices. For instance, one policy could be that the federal government maintains the implicit carbon price point on gasoline, which is $42 a tonne, by maintaining its existing excise tax. At the same time, raise the implicit carbon price on coal — which has higher GHG emissions per unit of energy — and perhaps reduce the implicit carbon price on natural gas.
These were recommendations of economists Jack Mintz and Nancy Olewiler in a report we put out a few years ago. Such an adjustment would be phased in. It would raise $12 billion to $15 billion per year without increasing prices at gas pumps.
Next, the federal government could address geographic inequality by collecting backdrop revenues against a carbon price. If the carbon backdrop price was, for example, $30 a tonne next year in 2012, perhaps the federal government would not be collecting anything in B.C. because it will already have a $30 per tonne price. It might be collecting part of it in Alberta, where we have $15 a tonne on some industries. In order to retain the revenues in their coffers, provinces and territories where there are no carbon prices would likely adopt a carbon price.
The price would need to go up in order to meet federal targets over time, however, hitting a level of $200 a tonne — which is what would need to happen by 2050. What we would see is a 40-cent per litre increase in the price of gasoline. That is well within existing market fluctuations of the past few years, let alone what will happen by 2050.
Those significant revenues — which could come up to $40 or $50 billion a year by that point — could be returned to the individuals within those provinces. They could be returned to provinces with investments in clean energy production, energy efficiency or conservation. They could be spent on transit. These are things the public likes to see. Economists are very fussy about revenue neutrality. The public does not tend to be. They like to see tangible outcomes.
The bottom line is that carbon pricing is coming, whether it is from internal, provincial and territorial policies, or imposed upon us by our trading partners. I will note that both California and Australia have taken steps to formalize carbon pricing within the last two weeks. Canada's exports will be looked at closely if we do not follow suit.
That raises the issue of policy certainty for business. It is probably the main reason businesses support carbon pricing. I am talking about businesses within the resource sector. Sustainable Prosperity put out a research report this year looking at major firms and business associations in the resource sector. It found they overwhelmingly support carbon pricing.
I will end on carbon pricing because it is the single most important step the federal government can take to help municipalities in developing cleaner energy systems. We can adopt many other policies, but without carbon pricing their effects will be stunted.
Thank you for the opportunity to speak this morning.
The Chair: That was a very articulate plea for carbon pricing. It brought a huge smile to the face of my colleague. I notice you steered away from describing the form of such carbon pricing. We hear many witnesses talking about a carbon tax. You mentioned we have pricing in some provinces, including B.C. and Alberta. We have cap-and-trade in others. The debate goes on. Do you have a preference? I think you plead for consistency and a harmonized approach to the essential step that needs to be taken. How would you do it?
Mr. Thompson: If it were up to me, I would want to look at a few key criteria. The first thing would be that we make sure that we achieve our environmental goals. You can do that with carbon tax, cap-and-trade or regulation. The second criterion I would have is low cost, that we do it in a cost-effective way.
In order of what economists have found, again carbon tax is the cheapest, lowest administrative costs, cap-and- trade the next cheapest, and command and control regulations is the most expensive.
Looking at those two criteria, it makes most sense to look at a carbon tax. In terms of political reality, we do live in a second-best world. It is a little uncertain whether a carbon tax could really be passed. I think it can be, you just have to look at what has happened in Australia recently, look at what happened in B.C., where the B.C. government did it, fought an election on it and won. We should be looking at the best policies we can — probably a carbon tax. If not, then cap-and-trade.
The Chair: Thank you very much.
Colleagues, I have a long list here. The smiling deputy chair has the floor. Do not gloat too much now.
Senator Mitchell: Thank you very much. In fact, the chair turned to me and said, "Did you write this?"
I am very interested in your presentation. They were both excellent and speak for themselves, so I will not have to clarify too much. I want to establish a couple of things.
Ms. Joseph, clearly the FCM accepts the science of climate change. There is no doubt. That is official. There is none of this maybe, maybe not. You believe there is a consensus in the science and you are actually operating and spending money under that very explicitly.
Ms. Joseph: Yes, we are. Our Partners for Climate Protection is about fighting climate change as a reality.
Senator Mitchell: You both mentioned, and maybe you can both jump in on this, that we need to eliminate harmful subsidies. Sometimes that debate is not as clear as it might be, because often the subsidies that are referred to are royalties that are lower than they might otherwise be, but compared to what? It is like the stumpage fee rate. What are they really?
When you talk about eliminating subsidies, is there a list of them? Would it be carbon capture and storage subsidies to oil and gas companies? Is it the CCA? Is it lower than what might otherwise be the level of royalties? What is it?
Ms. Joseph: FCM does not have a specific list of royalties that we believe the federal government should target. We recognize there is an issue. There are things that keep the price of clean energy more expensive than harmful or dirty energy, if you want to call it that, and this does not help municipalities move in a direction that is environmentally beneficial and economically beneficial.
It is up to the federal government, in terms of their outlook on the country, to look at what subsidies to address first. We feel those subsidies are there and are distorting opportunities for municipalities.
Mr. Thompson: Where I would start is with the externalities, just because we have a win-win situation there. If we can address the externalities, we can reduce the environmental and negative economic impacts of externalities as well.
Looking at rents and royalties, why not experiment with the market? Why establish royalties at a particular level? Why not, for instance, have a competitive market system for bidding on what the royalties should be? Have the private sector come to government and say what they are willing to pay and have an auction, essentially, and let the market decide what the royalties should be. I think we will find they would be much higher. Indeed, in other places in the world where that has happened they have been much higher.
Senator Mitchell: That is a very interesting thought. Maybe we could have you back to spend more hours with this. This is good.
Senator Massicotte: Or repeat it five times.
Senator Mitchell: Exactly, just keep going. One of the implications of much alternative energy is it does not get created in centralized, huge plants, but it can be spread out through all kinds of municipalities and local areas and so on. Have any of you done specific work on how support for alternative energies could be structured to create community development, regional development, rural development, and sustain municipalities that are dying because of the kinds of economic forces that the modern world presents them?
Instead of having a Genesee-off, creating all kinds of energy in one spot, you could have energy projects all over Alberta in small towns. Has any policy work been done on that?
Ms. Joseph: I will turn it over to my colleague.
Alex Long, Senior Manager, Federation of Canadian Municipalities: In Mr. Thompson's statement he referred to a concept called ICES, which stands for integrated community energy solutions. This is a concept first developed by the Council of Energy Ministers a few years ago. It was elaborated by Natural Resources Canada, and is a concept that FCM fully supports and is looking to implement in communities, ranging from small to large.
The focus of ICES is very much what you addressed. The idea is that communities start to integrate how they produce and use energy through an integrated approach that has a number of economic spinoffs and benefits. You are basically not looking at just one large source of energy, but how energy can be used for transportation in a community, to fuel your water and waste water production. How do you build your communities so that energy is better used? It is a very integrated focus as to how energy is being produced.
Along with Natural Resources Canada, FCM is exploring and doing research on how to build on the projects already taking place in communities that are using this lens.
I will give you two quick examples of communities looking at ICES. One is a project in the city of Toronto at Exhibition Place. This is an integrated project where you have solar energy, geothermal energy and wind energy. The point is that these elements are part of a long-term integrated energy plan. For Exhibition Place over the next 20 years, the key questions were how far energy can be used in a way that is cost-effective, but also to plan so that even if it cannot afford the upfront costs for all of these projects at once, it can plan into the future to ensure that the energy used is the most cost-effective but is also based on renewable energy sources rather than traditional sources of energy. That is Exhibition Place.
Understanding that the FCM represents communities across the country, a smaller example is the community of Revelstoke in British Columbia, which basically took a project to transform its large forest products plant from using natural gas to wood waste. By replacing a more expensive source of energy with wood waste, the project was also innovative as the excess heat was captured to actually fuel all of the municipal buildings and large components of the infrastructure.
Those are two areas. I could go on and on, but the fact is that municipalities are turning more and more to projects that have multiple economic and environmental benefits but also use energy in an integrated and cost-effective way.
Senator Mitchell: Of course, Okotoks in Alberta ranked high on that list.
Mr. Long: Yes.
Senator Mitchell: Could I be on the second round if there is time? This is great — very stimulating.
The Chair: Watch out for that sprawl.
Senator Merchant: Thank you, chair, and thank you very much for your concise presentations. They were most interesting. I am happy to be back here because I enjoy the subject that you are studying. I come from Saskatchewan. We are very interested in energy.
It was striking to read in the material last night that Toronto and Montreal are among the worst locations in the world for daily commuter rates and times. I have a couple of questions, even though I do not live in a big metropolis like that, because I am interested to know what the estimated cost would be of putting these two cities in the best commuter times category. How many years would it take, and what percentage of that cost should be assigned to the federal government through their infrastructure funding?
Ms. Joseph: We currently have numbers for Toronto, so we know that there is a $5 billion price tag for traffic. The challenges in both Montreal and Toronto are some of what Mr. Thompson was touching on, that is, once you sprawl a community you got locked into certain patterns of transportation.
To reverse that and make those cities "best cities" in terms of commute, many things will have to be adapted in terms of densification, mixed-use communities, thinking about how to renew neighbourhoods slowly to make transit and active transportation more possible. It is not clear how much that will cost, but it could cost billions of dollars. Think of what it will cost to replace the Champlain Bridge to make it amenable to light rail and more efficient bus use, to add active transportation on to that. It will cost in the billions of dollars, and that is one bridge.
It will be a process over time. It is important for the three orders of government to sit together and look at what opportunities exist to pay for this, be it tolls or other options, and then develop a financing plan. Even though we cannot specify what part of that the federal government should pay, it should be a collaborative effort.
Mr. Thompson: You can have a few essential solutions that will take a long time, like dealing with urban form and building out transit infrastructure. One fairly quick solution, to which Ms. Joseph alluded, is road pricing and tolling. London, England created a cordon toll around its downtown and contributed the proceeds of that toll to transit. That immediately reduced traffic in the downtown area by 20 to 25 per cent. There are steps we can take right away to address that, and we will need to have a longer-term plan.
Senator Merchant: In the same vein, what is the best urban centre of over 500,000 people in Canada with regard to commuter rates and what is the most important single element that resulted in it being the leader?
Ms. Joseph: I cannot say which is the best in terms of commuter rates, but many cities are improving their commuter rates. Vancouver is an example. Calgary is trying to move in that direction. Smaller communities like Guelph and Kitchener are thinking about how to move people more efficiently. Even Whitehorse had an active transportation pilot to reduce traffic in their communities. It was funded through Transportation Canada and it was very successful.
Different communities across Canada are moving forward on this. The biggest factor in what makes them leaders is the political will to do this and selling it to their citizens as something that will be beneficial for their quality of life and for the future of the community.
Senator Banks: Thank you very much for your excellent presentation and answers. As the chair will recall, this committee has issued several reports in the past that refer to some of the things you are talking about. They have fallen on deaf ears in governments of both stripes. One of them specifically said that the answer is internalization of the real costs and that the market will take care of everything if we tell people that we have to begin paying the real cost of what we use, of the services we provide, although that is a tough sell.
I am going to ask a rude question in order to get the discussion of municipalities on the table. I first asked this question of Mr. Layton when he was an executive with the FCM. I was involved in a study on cities that led eventually to the gas tax rebate.
It is true, as you pointed out, that only about 8 cents of every tax dollar that is generated by the cities and towns is kept by them, based mainly on municipal land taxes of one kind or another. Politicians in other orders of government — Mr. Klein, Mr. Harris, Mr. Martin — have seen what the problem is and have internalized some costs. They have seen that from time to time we have been in the glue and that the way to get out of it was to raise taxes and reduce services. They have done that and they have taken the political lumps. They have usually succeeded in doing that because the people have usually seen that that is the right thing to do. Sometimes they used an axe that was too big and done things too quickly, but they got us out of the glue in Alberta, in Ontario, and at one point federally.
Municipal politicians are loath to do that. There are two ways to address the imbalance of the proportion of tax money that is kept by municipalities. One is to ask other orders of government to send them money; the other is to raise municipal taxes, internalize municipal taxes, because everyone who lives in a municipality in Canada pays less than the actual cost of delivering the municipal services that they receive.
I guess it is because they are closer to the ground that municipal politicians seem loath to take the same kind of political chances and provide the same kind of political leadership that some politicians at the provincial and federal orders of government have in the past taken.
Is part of the answer not for municipalities to take into account and recognize the fact that their citizens are not paying their fair share of municipal taxes for the services that they get?
The Chair: We should point out that Senator Banks is not running for the Republican nomination.
Ms. Joseph: That is a "root" question.
Senator Banks: I said it was "rude."
Ms. Joseph: I was giving you the benefit of the doubt.
Senator Banks: I ask it simply to get the question on the table, because the easiest way to address that imbalance is to raise municipal land taxes.
Ms. Joseph: Part of why municipal residents are receiving services that are not entirely covered by their property tax is because the municipalities have started to deliver services that were not their responsibility. There has been a significant downloading in Canada of things like child care, public housing and integration of immigrants. All of those add to the municipal cost side of the equation without the municipalities necessarily receiving support from the order of government that downloaded the responsibility.
Part of the hesitancy in raising property tax, which is kind of a regressive tax because it does not grow with the market, et cetera, is that it is unfair to have had those costs downloaded. Before we impose increased property taxes on our citizens, we need to work with our partners in other orders of government to figure out whether a property tax increase is the best way to pay for some of these other services or whether can we work something else out, perhaps a share of sales tax.
Because some of these are downloaded costs, the solution needs to be a little more complex, and I think the solution requires the different orders of government to collaborate.
Other orders of government have stepped up, and I am thinking of British Columbia in particular that said they would have a carbon tax, and municipalities have started moving. They have started spending money implementing district energy. They have started taking political risks. Road pricing is a risk; it can upset your residents. However, if you say that road pricing will have specific environmental benefits and that the entire province is doing this to address the energy and climate questions, then more than just your municipality is moving the thought process and public opinion moves in a different direction.
Senator Banks: I agree that all the solutions require great collaboration, but would you agree that at least part of the solution is the internalization of the costs of living in a town or a city?
Ms. Joseph: That is part of the solution.
Mr. Thompson: You mentioned property taxes. We see across Canada that municipalities are in what I have called the "property tax box." It is often their biggest source of revenue. For some municipalities it is the majority of their revenues.
When I looked at public opinion polls of municipal revenues and tax options I was surprised to find in my home province of Alberta, in both Calgary and Edmonton, that the majority of the population there supports maintaining or increasing municipal revenues provided that they could see what services were being paid for. Only a very small minority, 10 or 11 per cent, wanted to see municipal tax cuts.
The other part of the opinion polling that was surprising, or maybe not surprising, was that people do not support property tax increases. They want municipalities to get at least as much revenue as they are getting now, but they want property taxes to go down. They want to see alternative types of taxation. They want to see user fees that relate to some of those externalities.
This gets to Ms. Joseph's point about collaboration between different levels of government. If provincial governments, for instance, could give municipalities the authority to tax in other areas, as the city of Toronto has been given, they could boost their revenues without having to go to the most unpopular source of revenue possible, the property tax. They can boost their revenues with a tax instrument that reduces externalities.
Senator Banks: No one likes raising taxes and no one likes paying more taxes, but sometimes you have to.
Mr. Thompson: It is the price of civilization.
Senator Peterson: Thank you for your presentation this morning. Is it possible to quantify the infrastructure deficit in Canada?
Ms. Joseph: The number we have been using for the past few years is $123 billion, but FCM is currently working on a state of the cities report that will re-evaluate infrastructure in Canada to update the way we talk about the deficit. It is a difficult thing to quantify. That was the last number, and we are looking to be able to speak on the infrastructure deficit in a new way in the coming months.
Senator Peterson: It is a big number. Municipalities can be most effective and efficient in dealing with these matters when they have long-term assured funding. What do you think is the best matrix to achieve this? Is it an equal partnership between the feds, the province and the municipalities, or should it be weighted higher to the higher levels of government?
Ms. Joseph: It really depends on the community. The one-third one-third one-third model, for example, does not work in Northern Canada where most municipalities do not have a tax base. Obviously, there needs to be a consideration of ability to pay, but it can be more complicated than that.
Taking the Halifax example and the property tax assessment model, let us say the federal government wanted to move in a direction where it was going to take a strong step towards energy efficiency and wanted to work with municipalities to get this done. They could help finance that by giving a municipality funds to lend homeowners and earn a return on. That would start a self-perpetuating fund, revolving financing that came from an order of government that had it as a priority and had the means to provide it. It is something that municipalities can make last.
There are many different approaches to how the different orders of government can share costs and what can be done with that money depending what the different orders have available to them to offer their citizens and to offer people moving in this energy efficiency direction or moving these projects forward.
Senator Peterson: Mr. Thompson, you talked a lot about carbon pricing. Do you think the feds should take the lead on this to get the provinces engaged by stipulating that if they did not do this they could not participate in federal funding projects?
Mr. Thompson: Do you mean existing federal funding projects?
Senator Peterson: Or new ones that came up. You could not be a player if you did not move forward and address this problem.
Mr. Thompson: I think the most effective way to get provinces and territories on side is to show them that they are missing out on the party. If the federal government were to create its own carbon pricing system and receive revenues from all parts of Canada except where provincial governments are already doing it, I think that very quickly you would see the provinces and territories coming on side.
For instance, say the federal government imposed a carbon tax effective across the country with an offer that if the provinces created their own carbon taxes the federal government would not take the revenue anymore. I think provinces would be quick to come on side.
I would not necessarily get involved with other areas of revenue or other program spending, but rather just put it right back into the instrument itself, the design of the carbon pricing.
The Chair: You were very explicit, Mr. Thompson, on the pricing of carbon. I asked you the choices and you listed the three ways to go in order of cost. Senator Neufeld was involved in the implementation of the carbon tax in B.C. We recently had a meeting of provincial energy ministers with the federal government at Kananaskis. As I understand, it was quite a step forward just to get them all at the same table trying to go into the same direction on energy efficiency. After that meeting Quebec announced a cap and trade initiative that was not greeted enthusiastically by the citizenry.
In terms of your insistence on getting the maximum benefit of harmonization, how do we reconcile those kinds of diverse approaches to the solution?
Mr. Thompson: That is a great question, especially the political end of it. I am not a politician, obviously, which is why I speak my mind so freely. In terms of the policy side of it, it is an issue that many governments worldwide are dealing with, and there has been research on how you get a carbon price across a federated structure.
Just dealing with the reality of the Canadian federation, which is very decentralized compared to others, I believe that the easiest kind of solution you will get is one where you have a very clear choice for provinces, where you allow them to do whatever they want to do about this, but where you create an incentive for them to do it.
You do not necessarily try to integrate every province and territory's price into a national scheme. You create a national scheme and then allow the provinces to do what they will. It could completely displace the federal scheme within a year or two, if a federal scheme is created that allows it to happen. I think that is the reality of the Canadian federation.
The Chair: It is. We are not real politicians, as Senator Banks pointed out the other day. We probably lean more toward public policy, our bent, anyway. We all have political backgrounds.
Some of us, in the early 1970s, campaigned in favour of price and wage controls, and others campaigned against them. The victorious political party formed the government. They had campaigned against them, but then they initiated them. Of course, the sun came up the next day and life went on and Canada is still a wonderful country.
We have had the minister before us recently, and he was asked these questions about a carbon tax or a pricing of carbon, and he said that our government campaigned against them a couple of elections ago. This is the political answer, because it is the reality: they did. The other government campaigned in favour of them. I think the minister was talking politically as opposed to public policy, but these are the realities.
When you are externalizing your non-political views, I think we all need to keep that in mind. We are not in any particular box here, but I was wondering how we can bring the potential flip-flop into focus in a way that would be palatable and workable for all Canadians. I do not think I need an answer for that, but maybe.
Mr. Thompson: I can give you a quote — it may be a misquote. Mahatma Gandhi once said: "If I tell you something different tomorrow from what I said today, chances are it is because I learned something in the interim."
The Chair: Exactly.
Senator Mitchell: That is very good. In life, we all change our minds. In politics, if you change your mind, you are a hypocrite. It is a powerful statement that you have made.
As a supplemental, what is different about the politics in Australia that they have been able to bring in a national carbon tax and we have not? Was it the profound fear that people felt after those wildfires, or is it an accumulation of that kind of natural disaster? We had Slave Lake. What is the difference?
Mr. Thompson: I think it must have been panic at what has happened with the weather in the last two years. Of course, you cannot pin a particular weather event on climate change, but you can say that climate change is loading the dice on weather events. The Australian government came up with the political courage to act. We will see if it pans out politically when they hit the next election. There is a serious campaign on against the Australian government for doing that.
As we saw in B.C., it can happen, and the sun will rise in the morning.
Senator Mitchell: Yes, hotter than yesterday.
Senator Lang: I appreciate the comments and presentations made by the witnesses here.
Another point of view in respect of the principle of a carbon tax is no tax, whether it be cap-and-trade or a carbon tax. I find many times, around this table, especially when I was a member of this committee — I was transferred to another committee a number of months ago — the question of no tax was seldom put. What is your choice between a carbon tax and cap-and-trade? Most people said a carbon tax if that is what they had to do.
The other option is no tax. That is the position where I come from, because the price of fuel, even during the recession, is at its lowest point. It went down to just below $80 a barrel, as opposed to any other recession that we had ever experienced, which at one time I believe it went down to $20 a barrel.
The point I am making is we are looking at high fuel costs, no matter how we cut it. That goes for the consumer, municipalities, all governments and all of us as individuals. Subsequently, it will take that much more, on a consistent basis, out of our pay.
The reality is that public opinion has been expressed over the course of the last election, and that was the national election. One of the major platform positions taken was that there was going to be a lower tax policy for Canada in order to meet the economic factors that we face as a country. To date, it would appear that it is working, at least to a great degree, compared to other countries.
Knowing there will not be a carbon tax or cap-and-trade put in by the federal government, over the course of the next four years at least, I would like you to expand, Mr. Thompson, on a number of suggestions that you have in your presentation. One was the reduced mortgage insurance premiums. Also, you talk about tax credits or accelerated capital cost allowances for municipalities. I would like to hear your observations, if I could, on the question of coal and the pricing of coal in the latter part of your presentation.
Both the provinces and the federal government are taking steps in respect of the regulation of coal and the emissions that are permitted to the point where a number of these coal generation plants will be closed down within the next decade.
Perhaps I could hear your comments on that.
Mr. Thompson: I would like to pick up on the last point first: the pricing of coal and the regulation of coal-fired generation. The problem, of course, with command-and-control regulation is that it is inefficient. It is not cost effective. It costs more to regulate than it does to put a price on something. This is not controversial economics, this is Jack Mintz. This is all neoclassical economics. It is a fundamental result.
The reason that I suggest carbon pricing and pricing of coal and other fuels rather than command-and-control regulation is because we want to not only achieve the environmental benefit, we want to do it in a way that is cost- effective instead of a way that wastes money.
That being said, those coal-fired generation regulations are in place, or will hopefully be in place and effective in a few years. What we saw recently in Alberta was generation companies trying to get in under the wire before the regulation takes effect. Succeeding in doing that brings up another challenge with policy instruments that are designed in a complex way — command-and-control regulation is usually designed in a very complex way — and that is that you can game the system.
The other problem with regulating coal-fired generation, or regulating any industry, I suppose, is coverage. You now impose a cost on one particular sector — generation — and the cost of that will be passed on to consumers, in much the same way as a tax would be. What you find then is you have created a distortion in the economy, where you have artificially raised the price in one area where other prices are not raised.
A positive effect of that, of course, is that you will encourage generators to look at cleaner options, but you will also have an employment and GDP impact any time you create a distortion in the economy that way, which is why economists prefer pricing.
To pick up on the other points you mentioned, the CMHC option with location-efficient mortgages, as I mentioned, this is something that has happened in the United States, and Fannie Mae supports it, the Federal National Mortgage Association. We all know Fannie Mae. They are in support of it as well.
I believe some cities in Canada are starting to look into it. I think Vancouver is studying the option in its quest to become the greenest city in Canada.
It can be a useful tool for addressing urban form. If we can show homeowners and developers they will get a financial advantage from living closer to transit and the centre of town, we will be seeing more dense urban development. If they are talking about rebating or reducing the costs of mortgage insurance, it would be a small price for CMHC to pay. It sends a positive signal to the private suppliers of financial capital for housing and buildings. If it is announced with some policy certainty, business will feel comfortable proceeding and lending in that area, and creating those instruments.
The other point you mentioned was tax credits and accelerated CCA for green investments. If it is announced in a consistent way with policy certainty, we will see business investing in that way. On the other hand, if it becomes a political football, it will stunt investment. I will use the example of the ecoACTION energy retrofits. There was a program. It was cancelled. There was another one, but it was allowed to lapse. I think it has been re-announced but I had to look it up. It was all within the space of about four years, which creates the kind of policy uncertainty that businesses and homeowners cannot deal with. As a homeowner myself, I would not have looked into it because I did not think it existed. I actually had to look it up for research purposes in the last couple of weeks to find out whether it existed.
The bottom line on both federal policy areas is that they can make a difference if they are announced as a serious policy initiative — set on more or less permanent footing — and if it is clear it will not become a political football. I hope the government will consider those.
Senator Brown: Thank you for your presentations. On page 5, you have a graph on the municipal role in climate change. It says in that graph that your membership is 194 municipalities, 52 have set a reduction target, 41 have developed a local plan, and 13 have implemented a plan. It also says that you have 78 per cent of the population of Canada and 41 per cent on an emission target. You have 34 per cent developing a local plan and 12 per cent that have actually done something. What is your timeframe to reach 78 per cent or, for that matter, 100 per cent of reductions?
Ms. Joseph: I want to point out that the Act Locally report measures information from an earlier measures report. The numbers, such as the 78 per cent, is now at 80 per cent for PCP. That is in the other submission we sent.
The PCP program is one where communities are voluntarily stepping forward. It is about promoting champions. I will speak to Senator Lang's point about what happens when we have no carbon tax. What happens is that communities are saying, "Let us move forward anyway."
To give you an example of just some of those initiatives, Rivière-du-Loup got funding for a project to divert organic wastes and generate landfill gas to fuel their vehicle fleet. That is saving them 1.4 million litres of fuel per year. That is a lot of money. They can tell that story. Part of what FCM is doing to get that number up is to empower through our programs and the information we share in capacity building. There are stories about communities that have moved forward and received funding from us. They have reaped major rewards in terms of energy savings and dollars for their communities, which can now be dedicated to other things. That is an incentive for people to say, "We want to do this in our community." We are getting those numbers up by sharing success stories.
Senator Brown: I am really glad to hear these are voluntary things that you are doing.
Yesterday was the final day for $400 billion to be given to save Greece from collapse. Last night on television, the scroll at the bottom of the screen said Europe will need $1.4 trillion to save the euro.
I know of no country on the globe that has gone faster on climate change and GHGs. Alberta MPs held a caucus meeting two days ago. The power companies were there. The minister has asked for coal-fired plants to be down in a 45-year time frame that started when they were built, instead of 55 years. Power companies are warning that we have the fewest cents per unit of coal-fired energy in Alberta now. If they do not take at least five years off the projection, we will go to as high as $9 for the same amount. This is absolutely staggering. I think everyone in the caucus was staggered by it. We are getting the minister back this week and will be talking to him about whether we can afford to shut down coal-fired plants that will go from a few cents to $9. Our capacity grows so fast in Alberta that we may need more plants, and it takes 10 years to build a plant.
The Chair: Are you asking a question?
Senator Brown: I am asking a question. I asked a question about the time frame. I am explaining why it is so important that the timeframe is done voluntarily and not through government or anyone else trying to push this. It is driving Europe crazy — $1.4 trillion from $400 billion two days ago. We have big problems and we caused a lot of them by trying to force climate change.
The Chair: Ms. Joseph, would you like to comment? You do not have to.
Ms. Joseph: An important part of our program is that it has been voluntary. Municipalities have had an opportunity to sell this to their population. That has allowed them to go further than if there was a policy that had to work for everyone. Going further as champions provides examples to other communities that motivate them to do more.
Mr. Long: It is important to know that the PCP program occurs in the vacuum of other types of policies or leadership. Municipalities are moving forward on this because they are seeing increasing energy costs. They are seeing the impacts of climate change on local communities. With the lack of regulations or other types of federal policy direction, they are taking proactive action.
It is really on the ground that municipalities are seeing expensive energy costs and other impacts of lack of planning and other costs and other drivers. Municipalities are filling that space and learning from their peers how they can best create sustainable communities that address and are resilient to climate change.
Senator Brown: I appreciate everything that is being done in terms of getting rid of pollution and is being done voluntarily, but I am very afraid of regulations from governments. I think they have been a total disaster.
Senator Dickson: I must compliment you on your presentation. It was excellent, and the discussion was one of the best that we ever had, particularly because you came onside with our deputy chair, Senator Mitchell.
I was looking at an article recently in the online Daily Mail from October 25. It was a piece about the U.K.'s climate change act. Are you familiar with the policy of the new Prime Minister, David Cameron, in the U.K.?
Mr. Thompson: Maybe parts of it.
Senator Dickson: It may be just a suggestion that you glance at it. Would you agree that the policy purpose behind this is to address this issue of catastrophic, so-called — as I sit here I do not know whether I should say catastrophic global warming, but global warming? That is the gut of it, is it?
Mr. Thompson: Yes. I started out my career in geology and wished I had stayed there, because I think I would have a little bit more expertise about climate change itself as opposed to about the price of everything.
We have the vast, overwhelming majority of actual scientists in the world telling us that climate change is real, that it is caused by humans and that it will be catastrophic. That is just at the physical level. At the economic level, we have economists taking the outputs of that science and saying that it will be catastrophic economically. This is consensus, right? We do not typically take issue with the findings of particle physicists or aeronautic engineers. If we did, we would be very foolish to do so.
I do think that a lot of what is motivating governments now dealing with climate change, whether it is in Australia or the U.K., is a recognition that the systems are getting affected. What climate scientists are telling us now is we are into climate change. It will be happening. We have already started to see the symptoms of it. It is no longer a theoretical possibility out there ten years in the future. I think what is motivating them is the downside costs of inaction.
Senator Dickson: You do not want to come out to comment on the scientific evidence. Have you done any background or do you know of anyone who has done any background studies as to the effect or how much harm will be done as a result of global warming and what the time parameters are in which this event will occur?
Mr. Thompson: I tend not to read the original primary research. I tend to read things like Science magazine and Scientific American, which pull together the findings. Some of the things that they are talking about include, within 50 years, a loss in the order of 50 per cent of biodiversity. That is categorized as a mass extinction on par with the kinds of extinctions that ended the reign of the dinosaurs. That is the scale of what we are talking about. The time frame is 50 years out, and we are talking about having targets for emissions reductions in 40 years. If we have not done it by then, our children and grandchildren will be living through some very unpleasant times.
Senator Dickson: You may want to check. Professor Happer from Princeton just came out with a paper, and he said it is far from clear based upon the scientific evidence that there is going to be this catastrophic problem.
To put this in perspective, when Minister Kent was before our committee, he said Canada is responsible for 2 per cent of global emissions. Are you on board with that? Would you say that is reasonable?
Mr. Thompson: Yes.
Senator Dickson: Coincidentally, the U.K. is responsible for 2 per cent of global emissions. The point is that it is a global problem. China and India are big causes. We have to get a global agreement here with the big emitters. Would you agree or disagree? Perhaps we are going too fast.
Mr. Thompson: I absolutely agree that we need global action. There is no real alternative to having global action. At the same time, if every country sits back and says, "I will not be first, and I will not do it until you do it," then no country will ever do it. Canada has a proud history on the international stage of doing things that were not necessarily in Canada's interest, like its peacekeeping role, which has unfortunately gone by the wayside, but also its involvement in Europe and its involvement in Africa. I mean European wars and African aid. Canada has done things for the world before, and it can do something for the world in this case, or we can sit back and say we are not going to do it until everyone else has.
Senator Dickson: You mentioned that collaboration among governments would be very effective. One of the things the committee learned during our study up to this point in time is how important educating the public is, to bring them up currently as far as the problem is concerned, if there is a problem. I was wondering whether the Federation of Canadian Municipalities made any representations to government whereby, at the municipal level, they are looking forward to an education program in cooperation with the federal government, and perhaps, who knows, get the provinces on board as well, to more or less bring the public current with regard to the problem, and once again I say if there is such a problem.
The Chair: Mr. Long, will you take that one, sir?
Mr. Long: FCM delivers a range of programming to municipalities that are done in collaboration with federal departments. For example, our Partners for Climate Protection program, which Ms. Joseph has mentioned, has a number of elements that are undertaken in partnership with Natural Resources Canada, Environment Canada and other departments. A key view of FCM has been to increase communities' capacity, so I would say strongly that FCM is committed to delivering programming in communities in collaboration with federal departments.
Senator Dickson: The Province of Nova Scotia now has the highest targets insofar as greenhouse gas emissions of any province in Canada. The result is that people are just looking at the negative effects on the economy, power rates, industry, et cetera, that these high standards will have. It is a very serious problem. It would be interesting if you looked at what the negative consequences are so you can come back to pace of implementation. Pulp mills are closing in Nova Scotia. It is a very serious problem. You set your standards too high and your pace too quick.
Mr. Thompson: I can speak to that briefly. The National Round Table on the Environment and Economy has come out with modelling, as have other sources. Jaccard and Associates also came out with modelling on the macroeconomic effects of carbon pricing. What they found was that, without carbon pricing, we are looking at 40 per cent GDP increase by 2020. With carbon pricing, we are looking at 37 to 40 per cent GDP increase by 2020. The people who have been saying to the public that carbon pricing will actually shrink our economy have not been entirely accurate with that statement. The impacts over the long term are relatively trivial. As I mentioned, the downsides are much higher. I believe the round table's prediction was 150 per cent GDP growth by 2050 without carbon pricing and a range of 145 to 148 per cent GDP growth with carbon pricing.
There is a very small downside to action and a very large downside to inaction at the international level. It comes back, as you pointed out, to the need for global action, and global action requires leadership.
Senator Brown: When do you think climate change began?
Ms. Joseph: Many studies associate a rapid increase of CO2 emissions with the Industrial Revolution. However, regardless of when climate change began, the important thing from the municipal perspective is that they are seeing climate changes; they are seeing coastal erosion and the melting of permafrost. There are buildings in the Northwest Territories that are sinking.
Regardless of when or why it started, the important thing is that it is happening. The important thing is that GHG emissions impact the climate and that our scale of industry is significant. The question is whether you do nothing in the face of this or you do something. Many communities across Canada that have faced these impacts have decided to take action regardless of when it started.
Mr. Thompson: On your broader question, climate change has always been happening. Up until now it has been a natural process. The current view of science is that human influence on the climate may have begun as long as 8,000 or 10,000 years ago with the agricultural revolution. However, the current day influence, as Ms. Joseph mentioned, probably started during the Industrial Revolution. Levels of CO2 in the atmosphere that had been stable for 1,000 years suddenly increased, corresponding exactly with the timing of increased emissions — originally from coal and then from oil.
Senator Brown: I do not disagree with any of the ideas of climate change. I am sure it is changing. You talked about starting out in geology. I have a geology book at home that says that the climate has been changing for 18,000 years.
I am 100 per cent against pollution. I live close to Calgary and I have seen it look as though it was being sprayed with mustard gas. When the wind takes the pollution out it goes past Strathmore. I believe absolutely that pollution is bad, and I believe absolutely that we should get rid of some pollution from transportation, which is what LNG is working on now. We heard from a group the other day that is working on cutting 30 per cent of pollution from transportation, which is the biggest polluters we have in this country. I am all for that. I just think that we get into a panic over something that might not be quite as bad as we think, especially since only 2 per cent of our land mass is urban. In Alberta, 2.8 per cent of our land is urban. In Quebec, less than one third of 1 per cent is urban. Quebec is a very big province.
The Chair: Ms. Joseph, your opening statement was in the context of what you call urban form and you gave a commentary about how bad suburban sprawl is. I have been hearing this at home for quite a few years from Madam Angus, who hates urban sprawl. We drive into the countryside and see evidence of zero municipal planning. However, I do not know the technical definition of suburban or urban sprawl or and what the alternative is.
Do we just compress Montreal onto the Island of Montreal and have no South Shore? You are right that Montreal and Toronto are the worst places in the country for commuters.
Ms. Joseph: It was Mr. Thompson who really lashed out against sprawl. Urban sprawl is about reduced density of a city. You have a lot of services and businesses and people in the core, and then you have all these people who bought properties that were cheaper away from the core and commute in. From a local government perspective, the further out those people are, the more expensive it is for us to deliver services to them. It also coincidentally happens that the property taxes in those areas are often lower because homes in the city core are more expensive. Therefore, it costs more money to deliver services to the sprawling areas that contribute less.
This creates a real fiscal challenge for municipalities, and many of them are starting to adapt. Calgary, as an example, recently increased their development charges and they might do so again. Many other communities are following suit.
I believe that the solution to sprawl is about mixed use development. It is about not just thinking core and then these other areas; it is about making those other areas places where people would want to be, places where they can go out to eat instead of driving downtown. It is about making those communities more liveable rather than having only residences out there and requiring the residents to go elsewhere for services.
The long-term solution is to design the external areas of Montreal better.
Mr. Thompson: I do not know what it would look like if we did not have sprawl. There is the European example of cities that are of moderate density and very pleasant to be in. Those are cities that were developed over the last 500 years. Whether the future would look like that I do not know. However, why not find out? Why not take away the subsidies to sprawl that we have been giving, improving our balance sheets as a result, and have housing pay its own way, pay the full costs? Let us see what the market does. Let us see what we come up with. We know that we cannot continue the way we are going.
Senator Banks: Mr. Thompson, you and I both live in Edmonton. As you pointed out a moment ago, Edmonton has found that the sprawl of 18 of its new developments a long way from downtown is, in the long run, going to cost the city billions of dollars.
Are we completely stupid? What is the rationale? What is the reason that argues against and mitigates common sense? If we are going to do that over there it will cost us $3 billion in the long run which will have to be paid by everyone. Let us not do that.
What is the argument on the other side of that fence? I suggest this is because everyone wants a big backyard and a lawn, and it is simply quasi-political pressure. No one wants to say you cannot go out anymore we have to go up now, because that is a really unpopular thing. Everyone wants to have a big yard, a garage, a backyard and barbecues outside. Is it as simple as that?
Mr. Thompson: There are a few theories about why we are seeing this bad investment that we are making from a municipal financial perspective. You mentioned the political one and I will not go there, although many others have.
I like to be optimistic about these things. My optimism says we actually did not know what the costs and benefits were until we did the study. This was the first time that Edmonton had done that study. It sounds like you have actually read it because of the number you quoted there.
Senator Banks: We do read things from time to time.
Mr. Thompson: I had a hard time finding that study, so good on you for finding it and reading it.
It is the first time that Edmonton has looked into the actual cost, which to me is astounding. What organization that deals with money does not look at what the costs and benefits of its decisions are? It is astounding that that has not happened before.
However, it is happening now, and I have heard other municipalities are interested in doing that kind of study. The optimist in me says we lacked the information, and when we have the information we will make a rational decision.
The Chair: Thank you. Senator Mitchell has withdrawn his request for a final word.
Without further ado, I would like, on behalf of all senators, to thank you, Ms. Joseph, and your colleagues, Mr. Long and Mr. Thompson, for a most edifying presentation this morning. I think you note our interest and attention. Certainly the municipalities' federation's input is critical to us. It touches so many elements of the report we are trying to put together.
We may well be in touch with you further. If you have, at any time, suggestions that we should call so-and-so or you should see what so-and-so has to say as we wind down, please be in touch with Ms. Gordon on that.
I will terminate the meeting. Thank you very much.
(The committee adjourned.)