Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 7 - Evidence - November 17, 2011
OTTAWA, Thursday, November 17, 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: Good morning colleagues, Mr. Stewart-Patterson and our viewers on the CPAC network, the World Wide Web and our dedicated energy study website, www.canadianenergyfuture.ca/ www.avenirenergiecanadienne.ca. This is a formal meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. We continue our study into the energy sector. I believe, sir, you have been following that. We are welcoming this morning, from the Conference Board of Canada, David Stewart-Patterson, Vice President, Public Policy. Mr. Stewart-Patterson is respected as one of Canada's most creative and articulate policy minds. I know that to be true. He joins the conference board of Canada after 15 years at the Canadian Council of Chief Executives, the past seven of these as its executive vice-president, where he engaged in policy development and advocacy across a broad range of national and international issues.
As you know, sir, we are engaged in a fairly profound exercise in public policy development, having noted that energy demands globally are not diminishing but are burgeoning with the world population. This just passed 7 billion, we are told, and is headed, maybe in some of our lifetimes, to the 9 billion range. Since Canada is, on a per capita basis, the greatest consumer of energy in the world, if not close to that, we have found that Canadians need to be educated to develop a literacy about energy matters and our energy system. We are so well blessed with natural resources and a wide variety of energy sources in the country, but the latter are not the most efficiently exploited and used, nor are they the most sustainable, clean and green.
Our endeavour, for the past 2.5 years, has been to develop, or to find a roadmap for developing, a pan-Canadian collaborative strategy for improving our energy system. We are leaded towards the conclusion of our study and hope to bring out a report in June, 2012.
We are about to complete our dialogue with Canadians across the country as we travel in a couple of weeks to the western parts of our country, where we will be covering British Columbia, Alberta, Saskatchewan and Manitoba. We will also continue hearing witnesses here in the nation's capital.
Mr. Stewart-Patterson, I think you know who we all are, but let me quickly say I am David Angus, a senator from Montreal. I am the chair of this committee. To my immediate right is our deputy chair, Grant Mitchell from Alberta, and our fine staff from the parliamentary library, Marc LeBlanc and Sam Banks. To Marc's right is Senator Rob Peterson from Saskatchewan; my predecessor as chair, Senator Banks from Alberta; from Montreal, Quebec, Senator Paul Massicotte. To my left is our able clerk, Lynn Gordon, who I know you are familiar with. To her left is Senator Richard Neufeld from British Columbia; Senator Janis Johnson from Manitoba; Senator Judith Seidman from Montreal, Quebec; and last, but not least, Senator John Wallace from New Brunswick.
Without further ado, I understand you have a statement. We will be ready to question you when you are finished. The floor is yours.
David Stewart-Patterson, Vice President, Public Policy, The Conference Board of Canada: Thank you, chair. I do not want to take up the committee's time with a long opening statement. I have had distributed, I believe, a sample of some of the work that the Conference Board of Canada has completed in recent years. I did a quick count, and I think it adds up to 24 studies in the past three years alone that have touched in one way or another on the issue of sustainable energy.
This is a vast topic. As someone who has only joined the Conference Board six months ago, I would ask your indulgence that I not be assumed to be conversant with every detail of every one of those studies. What I will be bringing to you this morning may reflect more broadly my experience in dealing with energy and broader competitiveness issues over the past few decades.
When the Conference Board looked at the idea of a comprehensive framework, which is essentially what you are working with now, we put our paper out in 2007, which is called Canada's Energy Future. It suggested there were ten elements of a comprehensive strategy. Our list included carbon reduction, sustainability, renewable energy, innovation and technology, competitiveness, transportation, energy efficiency, electric power, resource management and information and communications technology. We saw it as a vast web, if you will, of issues.
The Chair: It sounds like maybe our work is redundant if the job has already been done.
Mr. Stewart-Patterson: No, on the contrary. What we are saying is if you are to deal with a sustainable energy strategy, you have to take into account many elements. Looking at the interim report that this committee produced, it pretty much reflects the complex reality that we are grappling with.
The Chair: Was Canada's Energy Future released by the Conference Board or by the Canadian Council of Chief Executives?
Mr. Stewart-Patterson: The Conference Board.
The Chair: That is still available, I hope?
Mr. Stewart-Patterson: Yes. I wanted to open with that thought.
The Chair: That is an excellent thought.
Mr. Stewart-Patterson: There are a number of issues which, in my experience, tend to be a bit top-of-mind with various players. I think there is a major frustration with the lack of coherence across jurisdictions in the country. That is something that I am sure you have heard in the past; I have seen it reflected in your work. I have dealt with it especially in the context of climate change where we have various jurisdictions with different targets and measures following different approaches, and that lack of coherence has certainly been a major frustration for the private sector in particular.
Obviously, one of the touchy issues here is carbon pricing. We have had a lot of debate over how to deal with that. Even within the business community, there are split opinions as to whether a cap and trade type of format is preferable to a carbon tax. Some people favour the flexibility of a cap and trade mechanism; others prefer the predictability and certainty involved in a tax. I do not think there is any consensus even within the business community, certainly not within the country as a whole. I think we have seen that reflected at the federal level as well as within provinces.
The Chair: Is there a consensus, though, that there needs to be a price on carbon?
Mr. Stewart-Patterson: Again, going back to my previous work with business chiefs, I think there was a consensus that if you want to change behaviour, price signals matter. The consensus tends to break down when we try to move from saying, ``Well, we need a price signal'' to saying, ``How do we transmit that price signal and to whom?''
Even with something like cap and trade, advocates recognize that it works well perhaps for large emitters but does not translate well down to individual households or mom and pop stores. It is not a practical kind of mechanism at that level. You then must determine, if you are to apply a price to carbon and apply it broadly across the economy, how do you get there from here? That is one of those big questions we have as a country and that we have not managed to grapple with in terms of how we want to send the signal that behaviour should change. Price certainly is an important way of getting there.
The alternative, which has been the default, is the regulatory approach. If we set the regulations, then people have to figure out how to comply with the regulations. If that drives prices up, well, that is seen as an incidental.
To be fair, the problem with that approach is that regulations do not always take into account what is practical and what is realistic, and it can impose costs that may not have even been intended.
Within the broader subject of energy strategy as opposed to just GHG reduction, I make the observation that there are two sets of issues involved in regulation, one being the regulation involved when we are talking about how to increase the quantity or security of our energy supply. We have seen that play out in the United States recently with the Keystone XL pipeline. We have seen the same kind of debate play out here with Mackenzie Valley, for instance. There is a great frustration, I think, particularly among companies that are trying to develop Canada's energy resources, over the cost and the length and the uncertainty of regulatory processes, especially when multiple jurisdictions get involved, as they often do.
There is one set of concerns about regulation. The other set happens when you are talking about regulations, for instance, to constrain the growth of greenhouse gases or to reduce them. There again, the concern is because we have not been able to deal with carbon pricing and we are falling back on regulations as an alternative tool. It is often being applied by getting into the kinds of regulations that use existing rule sets in ways that perhaps they were not intended and turning economic decisions in some cases into potentially criminal matters. That causes a lot of concern within business communities because it creates a whole different level of uncertainty and risk as it affects business decisions and business investments.
Regulation is another big area where, on the one hand, we could use greater simplicity, less duplication, more clarity and greater certainty. On the other hand, I think we also need to be cautious about how we are using regulation in the pursuit of either energy efficiency or GHG reduction.
The Chair: As you are developing your thoughts, we are constantly wrestling with, given the Constitution of Canada and the nature of our federal state, what the right role is, if any, for the federal government and how one reconciles with the partners in all of the provinces. I know you will touch on that.
Mr. Stewart-Patterson: If I may, let me put it in this context. I recently co-chaired a major Conference Board event dealing with the future of Canada's North and the development of resources, not just energy but metals, minerals and so on. It is a huge factor in the future economic growth of Canada's North. There are a bunch of issues involved in that, including transportation infrastructure and so on. Energy resources are certainly part of it. The point is that there are different issues in different parts of the country. Energy reflects Canada's diversity. If we are talking about mineral development in the Yukon, we have an established hydro infrastructure, but it is reaching the limits of its capacity. How do you fit in the growth of additional mines, which tend to be energy intensive?
On the other hand, in somewhere like Iqaluit, in Nunavut, the entire city is dependent upon diesel, which has to be shipped in, and it is not practical to connect to a Canada-wide grid. There is a separate set of energy issues there.
Coming back to the regulatory question, one thing we did here clearly for business is to say: We just want to get on with things, so tell us what you want. Tell us who we need to talk to. Tell us what we need to do and let us get on with it.
Coming back to the federal role, which you referenced, I think the federal government has been making important efforts in Canada's North to work towards simplification and to work with provinces and territories to simplify that process and reduce the potential overlap and duplication. The jury is still out in terms of how effective those efforts are, but I think the principle has been established; the efforts are being made and they are moving in the right direction.
I can touch on a few other issues, if you like, or we can go to questions.
The Chair: I think it is good if you carry on a bit — we are in good shape for time — maybe within that framework of the 10 parts of the cobweb.
Mr. Stewart-Patterson: Let me mention a couple of other things. I talked about diversity and the need to recognize the diversity of Canada's energy needs, as well as, obviously, its energy potential and which energy resources may be produced in which parts of the country.
Another piece of it is an important need to keep debates in perspective. A lot of these debates have been highly emotional and divisive. In energy, as in other important but sensitive areas such as health care, we need to keep our sense of perspective.
Canada is experiencing that on the global stage when it comes to the development of the oil sands. We have seen this struggle internationally over whether the oil sands represent dirty oil or ethical oil, and these kinds of debates have been raging back and forth and tied into things like the Keystone XL pipeline debate in the United States. It is flowing into some of the discussions in Europe as to whether Canada's oil is good or bad. There is a moral tone that creeps in.
It is important to keep perspective and bring it back to the issue of how significant are the numbers? While we can talk about the GHG contribution of oil developed from the oil sands compared with, say, a conventional oil well here in Canada, you also have to look at what are the other energy sources in use out there.
The reality is that the GHG output from the oil sands, as massive as they are, still pales in comparison to the GHG output from coal-fired plants in the United States alone, never mind the number of plants that are being added daily in China. If the entire footprint of Canada's oil sands is roughly equivalent to the footprint of coal-fired plants in the state of Wyoming, are we blowing this out of proportion? That is perhaps less a debate within Canada as something Canada needs to keep in mind within its international relations, but it is important to recognize that this is an important natural resource and an important economic resource for Canada, and we need to see it in the proper context.
The Chair: We sometimes hear witnesses talk about the three Es — energy, the environment and the economy — and how intertwined they are. I think that is where you are right now.
Mr. Stewart-Patterson: If I can step back and look at Canada's place in the global economy, we are seen to be an island of relative prosperity in a very troubled world right now. We look at what is going on in Europe and with our neighbours to the south, and we can say we are pretty well off here in Canada. That is in part because we made some tough and good choices. When we were up against the wall, when we faced the kinds of crises that some European countries are facing now, we dealt with that in the 1990s, and we dealt with it effectively and we have been reaping the rewards for that.
It has also been a testament, for instance, to the effectiveness of our regulatory structures. I have talked about regulatory frustration in the resource business. There is always a worry about too much regulation as opposed to not enough. However, the fact is that our regulatory structures and financial services seem to have served us well, but so have corporate strategies. It was only a few years ago that Canadian financial institutions were being roundly criticized for not being ambitious, innovative or aggressive enough in global markets. That relative conservatism is now seen as a great virtue. I think that is a reflection of other folks going too far. The reality is that we are in relatively good shape.
We must keep in mind, though, that one of the reasons that Canada's economy is still doing relatively well is the fact that we have a wealth of natural resources, both energy and other commodities, including agricultural products, which a world of 7 billion-plus needs in ever-greater quantities. If we are looking at our future as a country, we have to recognize that, no matter how much knowledge and innovation we pour into other sectors, much of our growth will flow from our natural resources.
The question is: How will we manage those resources? How will we extract the most value we can? How will we develop our economy using those strengths? In that sense, while recognizing that we have an environmental responsibility not only to ourselves and to our own children but also to the rest of the world, I think that is a question of applying our ingenuity to what we have, recognizing that energy and the environment have to go hand and hand because they are integral to sustaining both a strong economy and the kind of place that we all want to live in. Yes, there is an interrelationship that we cannot avoid.
The Chair: We had some people here from the National Research Council this week. They talked about the ingenuity of Canadians in the development of necessary new technology to not only help Canadians and Canadian business but also globally in this clean energy goal. We keep hearing these phrases. You mentioned ``ethical oil.'' What is ethical oil to one is dirty oil to another. What a clean energy superpower means, to me those are just three words.
You might want to comment on that as well. Is that a legitimate goal or is it just a euphemism?
Mr. Stewart-Patterson: I think that is a legitimate aspiration in the sense that there is no question that energy will be a big part of our economic future and that, as a large energy producer and exporter, we have both an economic interest and a moral duty to do whatever we can to minimize environmental impacts of our energy production, as well as our energy use. The fact that someone else may be burning the oil does not absolve us of the responsibility for doing whatever we can to ensure that the impact of that energy use is minimized in terms of the future environment.
We have expertise in this field, and because it is such a big chunk of our economy, we should be using that expertise. As we talk about how to apply Canadian ingenuity to promote economic growth and innovation within our economy, that is clearly one of our strengths in terms of knowledge areas. If you look at the evolution of energy technology in this country, the growth has been astounding.
When I was a young journalist for The Globe and Mail back in the 1980s, in those days oil sands were experimental, extremely costly, and they required huge subsidies to get these early efforts of digging into the ground working at all.
The Chair: We thought Syncrude was not a company but a product.
Senator Mitchell: A department.
The Chair: Yes.
Mr. Stewart-Patterson: Yet it was less than two decades later that I was having a conversation at Suncor, which at that point had just managed to finance a doubling of its capacity when oil was $12 a barrel. That is when I realized this has gone from an experimental, highly subsidized technology to something that is now viable and a marketable commodity, if you want, a mature technology. Of course it is technology that continues to evolve. They are moving toward techniques that essentially will get water use down to almost nothing — almost a closed cycle. There is a lot that can be done and is being done to make energy production more energy efficient and less damaging to the environment. Canada is demonstrating real strength in that area, and we should be building on those strengths and should be a world leader in that kind of technology. If that makes us a clean energy superpower, then so be it. I am not sure whether one claims that mantle really matters. What matters is that we are doing what we can and not missing any opportunities to advance Canada's knowledge base and performance in that area.
Senator Mitchell: I appreciate your presentation, Mr. Stewart-Patterson. It stimulates debate a great deal. As I was listening to you, I was reflecting on, not a tension, but an internal assumption that we always wrestle with, and that is if this is an energy study, is it really about climate change? We capture what happens over and over again, from people who present here from industry, from non-governmental organizations like yours, from the range of presenters before we even open our mouths, who clearly discuss energy in the context of climate change and greenhouse gases and you have done that very well. I for one certainly appreciate that.
Some of your comments relate to the reputational risk of Canada with greenhouse gases, and much of it unfair. I am from Alberta and am a Liberal. I spent a good deal of my adult life in the legislature opposing the Conservative government, but I give credit to Mr. Stelmach, the former premier, for the first cap and almost kind of trade regime in North America, for which we get absolutely no credit.
My first question relates to the nature of the reputational risk when you look at Keystone and the FQDs in Europe and the whole regime that is occurring now. How serious is that to not just our ability to market oil and gas products but maybe to do all kinds of other marketing and to have influence in external affairs in the world? What can we do about that?
Mr. Stewart-Patterson: If I can just focus on the energy piece, Canada is doing what it has to do in terms of laying the facts out there and not letting lurid descriptions get out of control. The reality is there is an environmental challenge in terms of developing the oil sands, but you look at the progress that has been made and you have to be impressed by it.
Canada has nothing to be ashamed of in terms of our efforts to increase the availability of that resource, but also to make it more energy efficient and less damaging to the environment. We need to be aggressive as a country telling that story and making sure we get the facts across.
Is it damaging to our reputation? It depends on the context. We are taking some flack on the latest round of climate change negotiations because of the decision not to proceed with Kyoto. The reality is that it really boils down to whether we doing the right thing with the resources we have. I do not think we can be ashamed of being a storehouse of natural resources for the world. There are people who need those resources to build better lives for themselves. Can we be part of the solution to ensure that as people around the world increase their standard of living it also is increasing their quality of life of which the environmental quality is obviously a big part?
Maybe we need to reinforce some of the positive things that we do and not be defensive all the time because that can breed an image in and of itself. The message must be targeted to the audience. If we are dealing with a political issue in the United States over the site of a pipeline that has become a litmus test for a bunch of other related issues, let us try and keep it focused on the essentials.
There will always be issues that affect Canada's image, for better or worse, and I believe we have generally a good image in the world, one we are proud of and should be proud of. We just need to deal with the questions and the criticisms as they come up, but not be afraid to deal with them.
Senator Mitchell: You have given Canada a D on certain features of greenhouse gas initiatives. In answer to Senator Angus's question you have indicated that pricing is probably essential. You also indicated that the debate in industry is between a carbon tax and cap and trade. What they are not interested in is regulation, yet that seems to be a priority choice right now.
It is clear — and not to lead you — that the cost would be greatest for regulation. I am quite compelled by this, and this could be something our committee could look at and that is the problem under the current regime that criminal charges become the default position if you regulate with what we have now. I think that really is a problem because there are people of very good faith in our industry who want to fix this, but they will be constrained by that and it will skew the possibilities. Are you suggesting, and maybe it is obvious, that we have to look at that and make a change? What is the choice? How do you do that?
Mr. Stewart-Patterson: That is a case where essentially regulation is being used as an imperfect fallback, if you want, because we have not been able to grapple as a country with the issue of pricing and come to a consensus on that. It is one thing to fall back on regulation, and it is happening in the United States as well, but when you do that you really have to be careful about how you apply, what is it you are trying to achieve, and be clear on the objectives of the regulation, what the real impact will be and whether it is realistic.
I have kind of criticized the diversity of responses on GHGs in particular, the lack of unity on either methods or targets, but the benefit of diversity is that we try different things and learn from them.
Alberta has recognized two things. One is the importance of flexibility. You have a target and you get to meet it. It will have an attached cost, but the economic cost flows back into technology. That is one of the critical pieces of this, which is that ultimately we will make progress on climate change by improving the use of technology in developing new ideas and deploying them. The focus of Alberta's roles in terms of capturing the cost and plowing it back into technology is a very positive direction.
I know Alberta has taken criticism because it is more intensity based rather than absolute. You have to deal with growth somehow. However, the recognition of the importance of technology is there. That ties into one of the flaws of regulation and that is time frame. It is one thing to develop new technology; it is another thing to put it in place. A lot of energy production, energy use, is capital intensive. Machinery has a long life cycle, and it does not make sense to take a power plant that is only 10 years old and scrap it and start over. What you want do is use the capital replacement cycle and make sure that the best technology is being put in place as that moves along. Regulations can sometimes be very blunt instruments that say it does not matter; you either shut down or replace it now. That is the kind of danger we need to be aware of and make sure it comes into place.
If you look at what is happening with, for instance, fuel efficiency standards for automobiles, that is one example where there has been some coherence across North America. Canada and the United States have been kind of moving in tandem on that, and there is very long lead time.
I gather the United States has just announced the next round of fuel efficiency standards, moving forward, but they are looking at beyond 2017. There is time. It is geared to the development cycle of new cars and reflects what is possible. With regulation, it is just important to understand that, ultimately, the progress will be made by the development of new technologies. The investment and the deployment of those technologies do take time and have to relate to the cycles of the industry in question. We have to be careful that regulations do not require things that do not make sense.
The Chair: Mr. Stewart-Patterson, you were talking about the North earlier. Another senator came in, just nearest to you, Senator Nick Sibbeston from the Northwest Territories. He keeps us honest when we are talking about the North. To your right, filling in today for Senator Fred Dickson from Halifax, is Senator Pierre-Hugues Boisvenu from Quebec. Welcome to you, senator.
Senator Banks: Mr. Stewart-Patterson, as the chair said, we have been trying to hear from all sides on this question. All of the sides are kind of wrapped up in you, so that is an advantage to us, because you have been around a bit on these and other questions. I have two questions, both of which derive from comments that the chair has made and the questions Senator Mitchell asked.
Are we past the point where there is a question of whether we have to put a cost on carbon? Are we past that and now at the point that we are deciding how we will do that in the overall view? I know you have said there is not really a consensus on that, but are we pretty well past that point and now deciding — ``deciding'' is the wrong word — floundering about trying to figure out how to go about doing that?
The second question is the one that the chair first asked you. I would like you to expand on it a bit because it is one with which we are wrestling. We represent, all of us here, our respective provinces and territories and their interests. We are perforce very concerned with the relationship between the feds and the provinces with respect to resource ownership. We also recognize that there is an inefficiency in a patchwork across the country of how we will deal with these questions, even with the diversity. Quebec is a different situation, and British Columbia, to a degree, because of hydro production, and there are not that many provinces yet that have things like oil sands in them. There is not only that diversity, but there is also either regulatory or goal-based alternatives across the country. What is the role of the feds in finding a way to get rid of that patchwork and to have some kind of consistency? You referred to a lack of coherence. What is the role of the feds in bringing that about? Do we lead? Do we follow? Do we convene? I am asking you that question because you have been around a bit and I suspect you have a strong opinion about that.
Mr. Stewart-Patterson: Let me deal with your first question in terms of carbon pricing. From a business point of view, the reality is that there is already an implicit price of carbon. It is priced in terms of risk as opposed to, ``Yeah, we know what it will be.'' Any company that is in the energy production business is making assumptions about what the burden of GHG production is likely to be down the road. They are basically making educated guesses, because there is no policy certainty, but I think there is a recognition that, sooner or later, to a greater or larger degree, jurisdictions will be looking to put a price on that.
It is not clear to me how large a price we may be looking at. What has happened to the global economy in the last few years has pushed climate change further toward the back of the stove. People right now, certainly across the developed world, are more focused on the immediacy of jobs and protecting their incomes and things like that, and of course economic slowdown in itself tends to lead to reductions in GHG production if factories are not operating.
Senator Banks: It is not a nice way to do it.
Mr. Stewart-Patterson: It takes a little pressure off. That is achieving GHG reductions the way Germany did it after the wall came down and just shut down the East German economy. That is not the way most of us would want to go.
We are past the point of saying carbon will have a price. I do not think we are at the point of figuring out what that price ought to be, much less getting anywhere near an agreement on how to apply that price. In having that discussion, we have to deal both with the realities of domestic politics and jurisdiction, but also the realities of what our neighbours and trading partners are up to. It comes back to we need coherence internationally as well as within Canada. Coherence on that front is pretty distant-looking as well. I am not sure we get to a coherent policy nationally or globally on saying, ``This is a reasonable price, and this is the kind of price that will affect behaviour to the degree that we think it ought to and will have the desired outcomes in terms of the environment.''
On the federal role, as I say, within a federal system, the federal role is determined partly by the issue and partly by what makes sense. Setting aside the legal side, what makes sense here? If we look at something like securities regulation, we now have the federal government going to the Supreme Court asking for clarification on what is the federal power on trade and commerce and how does it affect something where, when we look at the rest of the world, it looks like something that ought to get regulated at a national level and it looks like a good thing to do from an enforcement point of view, from a market efficiency point of view. The federal government is trying to clarify roles and responsibilities on a front like that.
On health care, we are heading for the next round of negotiations in terms of federal transfers to the provinces. Provinces have clear jurisdiction on the delivery of health care. What is the best way for the federal government to influence the future course of health care through its fiscal resources? Will there be terms and conditions attached? Will that federal money be focused on particular objectives still to be determined? The existence of those fiscal transfers suggests there is a lever there.
On energy, it is a little more diffuse. The resources themselves lie with the provinces for the most part. There are no obvious levers. In energy, I kind of see the federal role as being more convener, collaborator, consensus builder, perhaps enabler. For instance, where you have a situation where a project faces reviews from multiple layers of government, you can work out a common process and get into a mutual recognition kind of thing but, one way or another, it is possible to work out a review once protocol. There is an opportunity for federal leadership on that front. In this area, it must be a collaborative role. It is not something that the federal government can impose.
Senator Banks: If you were running an oil company, and you know a lot of people who have run oil companies, would you not rather deal with the question of GHG emissions on the basis of someone saying to you, ``Here is a goal. We do not care how you get there, and we are not going to tell you how to get there, but it is a goal and it is clear and there is not any doubt about it, so you figure out how to get there?'' In my personal view, the government, whichever order of government, ought not to prescribe how to get there.
Would it not be more acceptable — if that is the word — to someone running an oil company, with the interests of his or her shareholders at heart, to understand that that is a goal and that business will decide how to reach that goal?
Mr. Stewart-Patterson: There is a simplicity to that, which is a good thing because it gives predictability. On the other hand, it comes back to the issue I was talking about in terms of regulation as a tool. It may be a very clear goal, but you have to look at how that goal was determined, whether or not the timeframe and quantity of that goal is realistic and whether or not there is a way to get there from here. Effectively, even if you are not pricing carbon explicitly, saying that you have to get there from here means you have to use your current knowledge about what we could do, how we could get there and what that would cost us. You are implicitly putting a price on there, and I think you have to ensure that the price is reasonable in the context of the enterprise in itself and also in its competitive context. How is that affecting a given company in Canada against its competitors, within the country and globally?
It is another tool, but again to say, ``Let us just put a rule in place and you figure out how to get there,'' without addressing the question of what the cost of getting there is, is a very dangerous road to take if you have not thought it through. As a process, clarity is good, but you have to ensure that you have figured out —
Senator Banks: Reasonableness.
Mr. Stewart-Patterson: Yes.
[Translation]
Senator Massicotte: Thank you for being here today, with all your knowledge and your experience. It is very interesting. Thank you for sharing your knowledge and your points of view with us.
In May 2011, I think The Conference Board of Canada indeed declared that Canada was not doing enough to meet its own criteria in terms of reducing greenhouse gas. You said earlier that it was important. The National Energy Institute has stated a couple of weeks ago that, based on existing figures, the whole world is far from meeting its 2 per cent goal. If we keep going on with the current projects, we will reach 60 degrees Celsius. If all governments were to act as they promised, I think we could reach 3.50 degrees Celcius. It's still far from two. We are maybe at 4, 4.5 or 50. It confirms the Conference Board of Canada's comments of May 2011.
We do not make up a large proportion of the world, and our contribution to the world pollution is only 2 per cent, but our population is far less that 2 per cent. We live in a country that is influential and important. If we look at how members of the committee act, I wonder if we are doing enough and if we realize what the consequences of our actions will be in 20 or 30 years. We argue and we fear that world economy could grow only by 3 rather than by 4 per cent, but it is not all that important compared to the climate consequences that are forecasted.
Are we asleep? Are we missing something? From what I have read, the consequences are very dire. Missing our goal by 20 degrees Celcius will have huge consequences on our GDP. It will have huge consequences for millions of people. Should we wake up, or are we so sure that the experts are overstating the consequences?
[English]
Mr. Stewart-Patterson: I am not sure there are easy answers to those things. In those projections, people are making their best guesses about long-term consequences. I really come back to what I was saying earlier. What Canada does matters to the world. Maybe we are only 2 per cent. Maybe we are only a small part of the global economy, but we are a big producer. What we do by setting an example is important.
I think the reality is that we cannot control what the other 98 per cent are doing. If we look at the energy use that is going on in the rest of the world, what will we do to reduce GHG emissions in an economy like China? It is growing extremely quickly, and its citizens are increasingly moving from relative poverty to middle class. They want to enjoy some of the lifestyle that we take for granted. Who are we to deny them that? The reality is that the emissions continue to grow globally. Despite every attempt at a global agreement, I do not think we have seen a lot of progress. I think even most of the European countries have had trouble meeting their agreements under Kyoto.
I do not know that there is an easy answer. It comes back to us as Canadians; we have to do what we can. If we do what we can in terms of developing new technologies and in terms of figuring out ways to reduce our impact, we will, first of all, contribute to a global solution. Second of all, if we are developing clean energy technologies that have applications beyond Canada, that is a potential tool for our own economic growth. It is both a tool for our economic growth and, potentially, a contribution to global solutions, if you want, or global progress. I will not go into solutions because you are right that the long-term trends are not looking optimistic.
Senator Massicotte: I know that in May 2011 the Conference Board of Canada said that even we in Canada are not doing what we are supposed to be doing, even in terms of our own projections. I wonder how good the argument is to say, ``Let us do what we can, and sorry, world, we are not involved. In many other areas, including economic growth and banking matters, we have always punched above our weight on the world scene, and we do not limit ourselves by saying that we will do what we can in Canada. We see a responsibility to influence the rest of the world. I am concerned that our kids and grandkids will face significant impacts of this consequence. To use the argument of China, yes, China is having significant growth, but if you project to 20-25 years from now, their carbon footprint will be less half of what we are doing today per capita. I am not sure we can simply say, ``Yes, the problem is the developing world. We got to the party first, and we got all the food and the drinks; sorry guys, there is nothing left.'' I am not sure that argument works very well.
Mr. Stewart-Patterson: Frankly, that is one of the reasons we have had such trouble reaching a global agreement. The emerging economies, whether it is China, India or Brazil, are saying, ``You guys have had a great party for a long time, and we want to join the party. If anything, maybe you guys should ratchet down, while we increase our energy use.''
Again, I think one of the things we have to recognize is that we are a major producer of energy; that is a big chunk of our economy. We cannot just give that up and say, ``Yeah, let us just shut down Canada, and we will hibernate and live off of our savings.'' I think we have to recognize that we are stewards of that resource, and we have to make the best use of it. There are people elsewhere in the world who want to improve their standard of living and quality of life and are depending on those resources to do that. That is an inescapable part of Canada's role in the global economy.
How we manage the resource is the issue we have to deal with. I do not think we can pretend that we do not have it and run our economy as if it did not exist. That does not make sense for Canadians.
Senator Neufeld: Thank you for being here. We have had some interesting conversation. You describe the Conference Board of Canada as the foremost independent, not-for-profit, applied-research organization in Canada, and I appreciate that. I am not disputing that, but you have a huge database of members across Canada and diversity of industry and business. You obviously come with great knowledge and abilities, and I appreciate that. How do we encourage the industry — and I will talk about the energy industry here — to talk more about what it is doing and how it is doing it?
For as long as I was in the British Columbia government, even in opposition, I always talked to the Canadian Association of Petroleum Producers, CAPP, about the fact that going under the radar because no one is pointing a finger at you will not work forever. You will have to stand up and start talking about issues. That was evident when I became minister, with the development of coal bed gas and those things. They are doing a bit more with the oil sands, but to me they are not doing enough.
I think the government has a role to play here as well, but government should not be the lead. I think that industry must start talking about how good they are, what they have done and how they have changed, and maybe make some reference to countries everyone talks about as being so great, such as Denmark: They have so much wind energy there, look at how great they are, but no one says that they still generate almost 50 per cent of their electricity with coal and the price of their electricity is about 38 cents per kilowatt compared to about 7 cents in Canada.
How do you organize? We can talk about how provinces are disjointed, but how do highly independent industries organize themselves in order to talk about what they are doing and how well they are doing it, whether it is on the oil sands, conventional gas or electricity? No one talks about Canada. There are countries around the world that would love to have our electricity generation clean by 70 per cent across Canada. That is wonderful. Do you hear about it? No, you do not.
How do you do that? Can you be the catalyst to lead that with your knowledge, background and ability in representing so many businesses and organizations across Canada?
Mr. Stewart-Patterson: I have to be careful to distinguish roles here. As an independent think tank, we are not an advocate for any industry or group. I think our strength is in convening people across industry, government and academia and bringing them together.
I will not suggest that the Conference Board should be giving advice on advocacy to the petroleum producers or any of the other individual industry sectors. On the other hand, I came yesterday from a meeting of our Centre for Clean Energy, which brings together a lot of those industry sectors, whether it is the oil producers, individual companies or associations, as well as the renewable side. Essentially, it is a whole gathering of folks who care about this goal of moving Canada's economy towards cleaner energy.
The last session of our meeting yesterday afternoon was focused on the issue of communications. Around that table, we were trading interesting ideas. This group is funding interesting research. What more should we be doing to ensure that our research gets out there and that the evidence that we build in terms of what is happening and what could happen is better, becomes better known and reaches out to folks who may not be aware of it now?
We are conscious in terms of our role as a research organization and as a convenor of the importance of that kind of outreach in communications. It is something we are actively addressing.
Senator Neufeld: I will go a bit further. I see things such as Canadian policy wherein they put out things that the media carry, for instance about unconventional gas in Northeastern British Columbia. Some of it is true, but much of it is just someone dreaming who has never been there and had their feet on the ground. I do not see that coming from this sector.
I am not asking you to be an advocate. I am asking you about all the things you have studied, to get more of that knowledge out to people. That is basically how we started this study on energy in this committee, because Canadians do not know but deserve to know how well we do things. Are we perfect? No. Is anyone perfect? There was one guy on earth at one time they say was perfect.
Everyone has their warts and has made their mistakes, but it does not seem we are out there talking about how we have tried to correct those things and move forward with technology. What we know today will be obsolete in five years and we will be doing something different. Maybe that is part of the problem; things move so fast that one cannot keep up.
I would encourage you not to be an advocate but to get the truth on the table and work against some of the myths that are out there.
You talk about the federal government's role, and there have been questions here about that role. I am always nervous about that. When we talk about health care, let us be honest, they devolved that responsibility to the provinces and said, ``Here is what you will live with'' some 40 or 50 years ago. Today, if a province tries to do something innovative or different in health care, they cut back their transfers or fine them. That bothers me.
There is also the National Energy Program. If you want to take a pan-Canadian look at how to destroy something, take a quick look back at that. Some of us remember that.
I am interested to know a bit more about how you think the federal government can actually influence cooperation with provinces, again based on your knowledge and background in communications and your ability to get the provinces and the federal government to work together closer other than by just saying Ottawa knows best, the federal government knows best and this is how you will live by it. That crosses all political spectrums, to be perfectly frank. How can we do that?
Mr. Stewart-Patterson: In a way, some of that comes back to the sort of work that we do. As I said, we are not advocates on issues, but we do bring people together. I mentioned our conference on the North just last month, where we had folks from every level of government — federal, provincial, territorial, municipal, First Nations, as well as business people and academics — all together in the same room. I think we built a remarkable degree of consensus around some of the priority issues that needed to be addressed within that region.
I would hope that, as an organization, we can contribute to that kind of dialogue. We are not alone in that field, namely the ability to bring people together. Conversations involving jurisdictions are tough because if the federal government tries to hold a meeting, then it is seen as federally driven. If it comes from the other end, you end up with these inevitable tensions. I have seen it unfold on numerous issues over the years.
The reality is that we are dealing with something that affects every level of government. It affects people and where they live, regardless of whether they think of themselves as living in a city, a province or a country. The reality is that it is affecting people's daily lives and their future lives. It is important. We have to figure it out. Frankly, that is as much a matter of goodwill as it is a matter of power and authorities. I do not think we will get energy solutions in this country by anyone trying to impose something.
You pointed out the National Energy Program. We know that method does not work. However, the point is that we do have a problem. We have a complex set of problems here. That is what this committee is trying to get at. The fact is that they will not be solved by confrontation; they will be solved because we realize we have common interests between jurisdictions and between government and business. Frankly, we will have to figure it out.
I suspect we will figure it out piece by piece; I do not think we will get a grand bargain here. However, I think what this committee is doing in terms of laying out a framework and looking at potential approaches within that framework could be a constructive way to identify pieces we can deal with that will reinforce each other. As an organization, we are looking at that approach within the health care debate. We launched a major initiative and we have all the players around the table. We have a complex structure here. Now let us try to carve it up into a bunch of manageable, bite- sized chunks that will contribute to an overall vision. We will not solve it all overnight, but let us see what we can do piece by piece. That is how I see the discussion evolving, if it evolves in a constructive way. That is how I see it happening.
Senator Wallace: Mr. Stewart-Patterson, my first question perhaps drills down a bit further into the point raised by Senator Neufeld. I was interested in your comment about the lack of cohesion between the jurisdictions — the provinces and maybe to some extent between the federal government and the provinces in this country. I guess it is a consequence of the way we are constitutionally structured. They have the authorities within each of the provinces, and there are the federal government's authorities, so we each look after what is in our own backyard. When I think of that in terms of the work that your organization has done in examining the infrastructure requirements that are projected from 2010 to 2030, some $290 billion in infrastructure is projected to be required across the country.
Each of the provinces tends to look within their own boundaries, and I guess that is natural. However, when I think of electrical generation capacity, if the provinces were able to get together and partner on projects that may be located in one province or another, but the benefit could be shared across two or more provinces, it would seem to make sense to get the economies of scale and efficiencies in those generating capacities.
Is that something that your board has looked at? Has it looked at opportunities for this partnering? When I say that, it is not just a matter of — although this is one option — where one province could be the provider and another could be the customer of the electrical generation, but of new projects that could be developed where there truly are partnerships between provinces, where partners take an equity position in these joint projects and, as a result of that, they have entitlement to the output that comes from that.
Do you have any comment to make on that? Is that something the board has ever looked at? If any of that makes sense, would you see the federal government potentially having a role where it could encourage provinces to look at that type of solution? Invariably what happens is that these projects in each province require funding; and down the road, and not too far down the road, requests are made of Ottawa for the individual initiatives.
In terms of efficiency and a more effective response from the federal government in funding, where necessary, those projects, is there something there? Is there a nugget there? What role could the federal government play in that?
Mr. Stewart-Patterson: You have raised a couple of issues. On the electricity grid, we have done work on the electricity infrastructure and things like that. We have had conversations about what is the next step there. One of the most interesting current questions is how to shape that grid. Right now it tends to be oriented north/south. The electricity flows north/south across the border with the States. The east/west is largely missing. Should we aim for an east/west grid? From the discussions I have heard to date, I think the consensus would be more that a nationwide east/ west grid is not in the cards, but there is real potential for some regional grids.
We come back to, say, Ontario, Quebec, and Newfoundland and Labrador as making a lot of sense from a economic point of view. I have lived for a while in Newfoundland and I grew up in Quebec, so I understand some of the tensions in terms of conflicting interests between provinces. However, I think it illustrates that if those kinds of projects will evolve on a regional level, it is really an interprovincial matter. It is an economic bargain that must be worked out by the provinces that will be involved.
Where you have seen the federal government come into play is when Newfoundland and Labrador feels it cannot get a good enough deal out of Quebec, then it goes to the federal government and says, ``Can you help us get the power south across the Gulf of St. Lawrence instead?'' because that would not be economic otherwise.
I see the federal government having a potential role in the evolution of that grid, but I see really electricity as something that will probably evolve on a regional basis and, as such, really should be done on an interprovincial basis. I think the federal government should encourage, and certainly not discourage. Ultimately that will be provincial, especially since so much of the provincial electricity generation — not in all provinces but in many — is provincially owned as well. That jurisdiction seems pretty clear.
Senator Wallace: It is interesting that you mentioned Newfoundland. Muskrat Falls is a tremendous project. Being from Atlantic Canada, where we have four small provinces, we should always be looking at opportunities to combine our resources and scale up. With 2.5 million people, we have to look at things somewhat differently than you would from an Alberta or Ontario perspective.
That is an example of a project where the generation capacity is, of course, in Newfoundland and Labrador, yet the benefits of that will spread to all the Atlantic provinces. There are opportunities for the provinces to participate in that, I would say in a partnering method. In Atlantic Canada, that idea of scaling up by coming together is a driving force.
Mr. Stewart-Patterson: The economics of bringing Muskrat Falls south across the gulf is suspect in terms of a stand- alone project. You can also legitimately look at some of the other potential benefits and consequences.
For instance, Newfoundland and Labrador also has tremendous wind power potential. However, of course, wind power only works when you have a sufficient baseload. Something like Muskrat Falls, if it was coming south, could provide a baseload on the island, as well as wherever the power might go beyond that.
There are interesting combinations, and I think we have to look at that. When we look at the broader national objective, how do we reduce Canada's greenhouse gas emissions while maintaining economic growth? There is interesting potential that deserves to be looked at there.
While I am on the subject of Newfoundland, there is another little project that is under way in that province, which touches on what I was talking about earlier in terms of Canada's North and the problems faced by remote communities. Canada has a great incentive, because of our geography, to be leaders in technology on that front as well.
The Government of Newfoundland and Labrador is running a pilot project on the south coast in the town of Ramea, where they are looking at a hybrid system for towns that are not on a grid. They are looking at wind as the primary. The wind is blowing hard enough that the town cannot use it all. The excess power cracks hydrogen. The hydrogen gets burnt on a no-emissions basis when the wind falls off, and diesel is a tertiary backup. It is a long way from being economic, but it is the kind of innovative technologies we should be looking at, because they can not only improve Canada's energy future but potentially create products that we can export to the world.
Senator Wallace: There was an interesting article in The Globe and Mail within the last week and a half on that project. I thought it was very good.
Your comment about the oil sands and the greenhouse gas emissions and that the need for what is happening on the oil sands to be kept in context, obviously that is correct. You made a reference, for example, to the coal-fired facilities in Wyoming.
To give us a sense of context, is that an example? Do you have other figures that would give us a sense of where the oil sands fit in relation to that, or is there another example you might provide us with so that we could get a sense of what the context of the oil sands is in terms of greenhouse gas emissions?
Mr. Stewart-Patterson: There is a lovely map that I saw in my previous life with the Council of Chief Executives. I cannot remember off the top of my head this morning who it was that produced it. It is a bubble map of North America, showing the GHG emissions. Alberta looks pretty modest when you compare it to some of the big centres. Texas, for instance, has a much bigger bubble on that map than Fort McMurray does.
Senator Wallace: Is there anything you can provide us with following today?
Mr. Stewart-Patterson: Yes. If you are interested, it is a published document. I just cannot remember off the top of my head who published it. I can track it down for you.
Senator Banks: That would be helpful.
Senator Wallace: Yes. Thank you. I appreciate that.
Senator Peterson: I also want to focus a bit on the oil sands because I think they are critical not only for Canada but globally. Unfortunately, however, they have become a lightning rod for other countries and groups, I think in some cases to deflect attention from their own problems. For most Canadians, their only recollection of the oil sands is that unfortunate television image of the ducks in the tailing ponds, which is not, obviously, good.
We look at the beneficiaries of this resource. I would suggest that it is the oil companies, the provincial treasury and the federal treasury. Would it be unreasonable to say that each one of those groups will give up a third of some figure, percentage per barrel of oil, to put into a massive R & D fund and boldly make the statement that, within 10 years, we will solve the issue of the CO2 and the tailing ponds? When I say that, I am reminded of President Kennedy in the 1960s when he made his statement that, in addition to other things, within 10 years, we will put a man on the moon. That is bold, and they did it. We can do these things, but we have to stand up and make a bold statement and put the cash on the dash and do it. Is that reasonable, or am I just dreaming?
Mr. Stewart-Patterson: In a way, I think that is kind of the approach that Alberta has adopted. You may want to argue whether it is bold enough and whether enough money is going into that pot. The reality is that when you look at the kind of technological evolution that has taken place in the oil sands, they are getting near to zero water use on the latest gravity-assisted drainage systems. There is real progress being made. On the other hand, the fact is that no matter how efficiently and so on you produce oil outside of the oil sands, you are still producing a hydrocarbon that is getting burnt down the road. It is a resource which, sooner or later, when it gets used, will produce emissions.
I think the issue you have raised is one of scale. Should we be getting bigger and bolder in terms of how much money we will plough into technology? If we want to do big and bold, who will pay for it, which comes back to the pricing issue? Is it a legitimate approach? Potentially, yes. I would pick up on your preamble, though, and say that I think it is not just the federal and provincial governments and the companies involved that benefit. The fact is that the benefit of the oil sands flows broadly through the Canadian economy, not just through the tax thing but through the supply chains.
Senator Peterson: I agree with you totally. That is further down the road and harder to get at. It is easier to get at than the fisheries because they just have to give up a little bit.
On the matter of carbon tax or cap and trade, do we have to wait for our neighbour to the south to do something before we do?
Mr. Stewart-Patterson: I think we have to be careful not to put ourselves too far out of line. We are already dealing with competitive pressures flowing from the fact that our economy is stronger and, therefore, our currency is stronger. We must be aware of the impact of whatever carbon pricing mechanism we use on the competitiveness of our businesses.
I think the reality is that any energy intensive business these days is making long-term projections and taking their best guess at what the price will be and planning accordingly in terms of their investments. That is not saying that we should not do anything but, on the other hand, we must be aware of what our major market to the south is doing and ensure we are not unduly disadvantaging ourselves.
Senator Peterson: I agree, and we should look at it as more a North American challenge rather than Canadian.
Mr. Stewart-Patterson: That would be ideal, although I have to say I have spent a long time working on Canada- U.S. issues, and that is a struggle.
Senator Sibbeston: My question relates to energy projects in the northern parts of our country. I am aware that the federal government is committed to help and provide a loan guarantee to the development of hydroelectric power in Labrador and Newfoundland. In the Northwest Territories, the Mackenzie Valley gas pipeline is in a hiatus position waiting to get some help from the federal government, but that has not been decided yet. Do you think there is a role for the federal government in projects such as that in the northern parts of our country?
Mr. Stewart-Patterson: Yes. Anything involving a decision about subsidy really boils down to the national interest. If I look at the history of the Mackenzie Valley, that was conceived as a grand project and yet kind of bogged down in endless regulatory and other reviews and negotiations. It was telling that, as some of those regulatory hearings were going on, companies were spending hundreds of millions of dollars to try to get approvals. A lot of the interventions even in the federal regulatory process were coming from other federal departments. If the government felt there was a national interest in making this project go ahead, they were not demonstrating it through the regulatory process.
That said, if I look at our centre for the North and some of the work we are doing on that front and the realities of infrastructure, whether it is transportation or energy infrastructure and so on for northern communities — and I include northern provinces, not just the territories — the economics are different, and they also have a very fundamental impact. You either are connected year round or you are not. The conventional economics of road building do not come into play. You have to recognize the social impacts as well as the economic impacts.
It is very clear, when we look at any number of the challenges faced by the North, whether it is on the infrastructure end, the energy side, whether it is health care or access to education, that there are distinct challenges that are faced there, and funding is very much an issue. We talked about collaboration. There is a remarkable degree of collaboration across communities and the private sector and First Nations and so on in terms of trying to grapple with some of those challenges, but there is no question that the federal government has a role there and that funding will be a critical part of that role.
Senator Johnson: Given your extensive background on Canada-U.S. issues, can you give us an overview of the approaches we should be taking now and in the future? Many provinces, such as Manitoba, where I am from, are dealing state to province now and the federal government comes in after. What would you suggest in terms of our relationship with them? What happened recently was very traumatic, and it is very transparent as to why the decision was made about the pipeline. Could you enlighten us for future work with regard to our study? Our recommendations have to be what to do down the road.
Mr. Stewart-Patterson: When it comes to Canada dealing with the United States, the reality is that if we want things to happen, Canada has to take the initiative. That has been my experience consistently over the years, whether it was dealing with the smart border after 9/11 or cross-border regulatory issues. It does not matter what the issue is. We have to recognize that we cannot wait for Americans to think about what they want to do because we will be peripheral to local interests. The ``all politics is local'' rule really applies in U.S. politics.
My personal experience in business-to-business relationships, as well as business-to-government and government-to- government discussions, is we get a lot further if we, as Canadians, make up our minds about what makes sense, frame it to say that this is why it is in your interest, but take the initiative of figuring out what the best approach is, putting it on the table and being aggressive in pushing that.
Senator Johnson: I am happy to hear that has been the situation in all your experience because, as chair of Canada- U.S., we are finding it even more than in the last four or five years in terms of dealing them on a parliamentary level — congressmen, senators, MPs. It has been extremely tough, the last year, to, as you say, you have to take the initiative totally. Their senators are not interested in meeting annually after we have met for 54 years, and this is the kind of thing that is troubling when talking with them about the issues we are dealing with in a more global sense. It is very much inward thinking again.
Mr. Stewart-Patterson: We have to be aware of the reality that especially when economic times get tough, people tend to turn inward. We are seeing some of that in the United States these days. It has always been an issue for Canada to get attention in Washington, never mind state capitals. With the kind of economic troubles they have been going through, that is when we tend to see the Buy American provisions and stimulus bills and so on trotted out. The isolationist streak will tend to get reinforced when times are tough.
On the other hand, there is underlying recognition, and I think perhaps especially among border states. I think, more broadly, that we really have created a fairly integrated North American economy. Our supply chains are interdependent. We do have to figure out ways to make things work. The latest exercise in terms of the Beyond the Borders Working Group and the Regulatory Cooperation Working Group is not the first and will not be the last effort of its kind, but, again, you keep setting goals; the leaders weigh in and say that they want to see some things happen. It tends to be progress at a much slower pace than you would like to see, but you can grind forward and deal with things. The main thing is to keep moving in a more positive direction and avoiding a situation where we start sliding backwards and having the border become more, rather than less, of a barrier.
To bring the discussion back to energy, the reality is that we are their largest energy supplier. It is in their national interest to be strengthening that relationship. They have no one else who is as close, as reliable or as friendly as an energy supplier. It would be seem to be, to use the Keystone phrase, a no-brainer. Politics, as I am sure all of you would know, is not always a rational business. There is an electoral cycle in the States that it creates difficulties for us, and we just have to deal with those as we go along.
Senator Johnson: As for wind power in Newfoundland, Mr. Stewart-Patterson, you could use it for the whole country actually. There is so much wind there it is hilarious.
Mr. Stewart-Patterson: I looked at a wind chart of Newfoundland at one point. There are bands where there is too much.
Senator Johnson: It is too bad it is going into the Atlantic Ocean and we cannot harness it.
Senator Mitchell: It seems counterintuitive that we have so much difficulty in making the decision to tax pollution, yet we continue to tax income. Is there some structural economic process that renders taxing pollution instead of income ineffective or problematic, or is it just psychological, and we need a paradigm shift?
Mr. Stewart-Patterson: My observation would be that any time you introduce a new tax it is not popular.
Senator Mitchell: Even if it replaces a less popular tax?
Mr. Stewart-Patterson: I have seen a number of attempts at tax reform. I go back to business taxation and the Mintz commission back in the late 1990s. That was a revenue neutral exercise and governments can say ``revenue neutral'' all they want. I do not think people believe them. We saw this unfold in British Columbia with the HST debate. Even if you are giving someone a break over here and asking them to pay over there, they see where they are paying more, and they do not always see where they are getting the break. That is a human nature problem.
Senator Mitchell: The negative looms larger than the positive.
Mr. Stewart-Patterson: Ultimately, I think that with any form of shift in the tax base you essentially have to build the case not just in economic terms but also, perhaps, in moral terms, to say why this is better, not just that this is better for you. Say why this is better for all of us and sell that as ``we need to do this because,'' whether it is for our kids or our quality of life. You have to position it in a way that people understand; this why we need to impose a tax on this, and, to relieve that burden, here is how we will make it easier economically. As a purely economic case, it will never be an easy sell to reform taxes, never mind add them.
Senator Mitchell: You made the point very powerfully that governments have subsidized oil sands development significantly. You could make the case that if it were not for government taking an equity position in Syncrude in the 1970s, it would have happened eventually but nowhere near as quickly. There have been probably billions of dollars put into oil sands development, and, to this day, we are still spending government money on research for oil sands development. It is almost incomprehensible that we continue to do that.
Can you give us a comparison of how much we have put into oil sands development, which is now up and running, compared to what we are putting into alternative energy development? Can you imagine, if we did that, where we would be in 10 years?
Mr. Stewart-Patterson: I could not begin to estimate that.
Senator Mitchell: I am making my point. Thank you.
One of your reports talks about how government must act now in order to plan the impact of electric vehicles on electricity generation. That is quite a powerful, forward-looking statement. It also assumes a great shift to electric vehicles, and obviously that is starting to appear. What is your take on that? Is that the way the technology will emerge?
Mr. Stewart-Patterson: That is an illustration of some of the complexity involved here. There is a great sense that one way to deal with greenhouse gas emissions is to move transportation use, which is a quarter of the total, away from fossil fuels and towards renewables. Electric vehicles are seen as a key element in that, whether they be pure electric or electric hybrids.
The reality is that when you get into plug-in electrics, if you are plugging your electric vehicle into a socket that is generating electricity from a coal-fired power plant, as opposed to from a hydro dam, nuclear plant or wind mill, it is not necessarily getting you ahead. Ultimately, the source of your electricity determines how much ground you have made up in terms of greenhouse gas emissions through the electric vehicle shift.
If you have a massive increase in the electric vehicle fleet and a whole bunch of people are plugging in who were not before, what is that doing to the demand on your electrical grid? Where is the marginal power coming from? Therefore, if you want to encourage an economic shift towards electric vehicles, make sure you understand how you will drive the fuel for those vehicles.
Senator Mitchell: In the transition period, people tend to be plugging in overnight, which is the low period anyway. There is excess energy, probably, and it will just use excess energy. The trick, probably is not to allow more coal-fired plants.
You also mention in one of your reports the question of policy-makers making an increased effort in education, to use tools to demonstrate the long-term benefits, cost savings and so on. Do you have any concrete proposals of how policy-makers could do that, particularly given the federal and provincial initiative; is there a role for the feds to coordinate that? Would it be an institute or some sort of a Crown corporation? It is a very powerful thought.
Mr. Stewart-Patterson: Any time the word ``education'' pops up in a conversation, the question of a federal role is sensitive. I want to be careful about vocabulary there. However, education in terms of informing people, of helping people understand what they could be doing and what not, there is a long record of federal interventions of that kind, such as ParticipACTION and physical fitness.
That comes back to, is there a federal role in terms of leadership and demonstration, showing the way forward, encouraging, exhorting? There is always potential for that. You do have to look at how effective that is. How much is that costing you and what kind of impacts will you actually have on people's behaviour?
There are two ways to do it: telling people to do the right thing, versus imposing a tax that makes it more expensive to do the wrong thing. You have to look at which one is more effective. However, is it a potential role? Sure.
Senator Mitchell: I will mention one last thing because it came up in the context today of your testimony, but we have heard a few times in the last few weeks this idea that Canada only produces 2 per cent. However, when you think about it, Canada produces one-fiftieth of all the greenhouse gases in the world and we have one-two hundredth of the population. It is not insignificant.
What I really like about what you are saying is we need to do our best, whatever we can do. If we dealt with that quantity 50 times, it is over in the world; we have solved the problem. It is not insignificant. I think you have laid out a positive vision of let us do our best, one step at a time, and not run from it. We can provide real leadership in the world.
Mr. Stewart-Patterson: We are intensive energy users; we are also major energy exporters. Therefore, what we do within our borders to make ourselves more energy efficient, to reduce our impact on the environment broadly from our energy use serves us well. To the extent it leads to new technologies, which makes energy use more efficient and less environmentally damaging worldwide, then we are contributing beyond our weight to the global problem as well.
The Chair: We have covered a wide range this morning and I thought it was very constructive in terms of context. One thing that was not mentioned was shale gas. I do not want to open up a long discussion, but do you have any focused comment on shale gas? There seem to be incredibly deep reserves in this country. Is it something we should be developing?
Mr. Stewart-Patterson: I do not profess any deep expertise on shale gas. The relevant observation is that the development of shale gas technology and its application to this huge pool that exists within North America is certainly having a medium-term impact on natural gas pricing and, therefore, the relative attraction of natural gas as a fuel.
It is also opening up the question of whether to deal with the low pricing within North America compared with much higher pricing elsewhere in the world. It is producing new incentives to look at export possibilities through liquefied natural gas. It is changing the economics of the gas business. Beyond that, I do not want to throw out any great interpretation as to broader implications.
The Chair: We talked about the economic aspects of this overall issue and markets in the U.S. for our energy products. It looks like they have great potential to become much more self-sufficient and have no need for our gas or maybe other fuels. It is part of the big picture.
Mr. Stewart-Patterson: We are seeing that reflected in gas prices now, and I suspect that impact will last a significant time. As I say, if you compare North American gas prices with what they are paying in Asia, for instance, you will see a big differential. Any time there is a differential in the world, markets will tend to try and narrow that gap.
The Chair: That is right. Just phone Mr. Apache or whatever his name is.
I want to thank you very much for coming this morning. It is always a stretch at eight o'clock on Thursday morning. Your observations have been very helpful to us, and also this list you have provided us with of selected Conference Board of Canada reports related to sustainable energy. We are not in the business of overt plagiarism, but we are very good researchers.
Mr. Stewart-Patterson: Feel free to cite us.
The Chair: I want to thank you very much indeed. Colleagues, if there are no further questions, I would ask Senator Mitchell and Senator Neufeld to remain behind for a moment. Otherwise, I will say the meeting is terminated.
(The committee adjourned.)