Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 18 - Evidence - December 8, 2016
OTTAWA, Thursday, December 8, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:05 a.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
My name is Richard Neufeld. I represent the province of British Columbia in the Senate, and I'm chair of this committee.
I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the Senate of Canada website. You may also find more information on the schedule of witnesses on the website under "Senate Committees."
I would now ask senators around the table to introduce themselves. I'll start by introducing my colleague, the deputy chair, Senator Paul Massicotte from Quebec.
Senator Massicotte: Good morning.
Senator Fraser: Joan Fraser, Quebec.
Senator Patterson: Dennis Patterson, Nunavut.
Senator Lang: Daniel Lang, Yukon.
Senator Seidman: Judith Seidman, Quebec.
Senator Raine: Nancy Greene Raine, British Columbia.
The Chair: I would also like to introduce our staff, beginning on my left, with our clerk, Maxime Fortin. On my right are our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
Today marks the twenty-seventh meeting of our study on the effects of transitioning to a low-carbon economy as required to meet the Government of Canada's announced targets for greenhouse gas emissions reductions.
In the first segment of our meeting, I am pleased to welcome, from the Federation of Canadian Municipalities, Clark Somerville, President; and Dallas Anderson, Manager, Policy and Research. We understand you have a preparation to make; after that we will go to questions and answers. Thank you very much for being here.
Clark Somerville, President, Federation of Canadian Municipalities: Thank you very much.
[Translation]
Thank you, honourable senators. I'm happy to appear before your committee.
[English]
I would like to begin by thanking the members of this committee for the invitation to discuss the vital role that FCM and the municipal sector can play in Canada's transition to a low-carbon economy.
The Federation of Canadian Municipalities is the national voice for Canada's municipal sector. We are the only national organization that has membership in every single riding across this country.
Our 2,000 members represent 91 per cent of Canada's population in every province, every region and every territory, in big cities, rural towns and in northern rural and remote communities. We understand very well that cities and communities across the country are on the front lines of climate change. The truth is, municipalities used to prepare for once-in-a-century weather event. Now climate-related emergencies are happening with more and more frequency, from wildfires in Fort McMurray to ice storms in southern Ontario or floods in Calgary.
The good news is that municipalities are also on the forefront of climate solutions. Canada's cities and communities have already taken a critical leadership role in adapting to climate change and reducing greenhouse gas emissions. Local governments in this country have influence over roughly half of Canada's greenhouse gas emissions.
Increasingly, the decisions we make are sustainable ones — like in Nelson, British Columbia, where city-led building retrofits, green fleet initiatives and stakeholder engagement workshops have reduced emissions by 20 per cent based on its 2013 emissions inventory, or in Guelph, Ontario, where a community energy initiative is on track to cut energy use in buildings, industry and transport by 50 per cent by 2031. Across the country, more than 300 municipalities have publicly committed to reducing emissions as part of FCM's Partners for Climate Protection program. These 300 communities represent 65 per cent of Canada's population.
The fact is some of this country's most innovative and cost-effective low-carbon practices are being modelled at the local level. This has led to real expertise in sustainability among local governments. If Canada's is to meet its ambitious goals set out by the Paris agreement last year, we're going to have to tap into local expertise. We're going to have to empower local governments and scale-up proven solutions. It's simply not possible to make the kind of progress we need without engaging local leaders on the ground who are addressing sustainability every single day.
Scaling-up local green innovation would be transformative for people, for communities and for the planet. An FCM analysis earlier this year found that, if the emissions reductions targets of a select group of 23 of Canada's municipalities, representing 8.6 million Canadians, are met, it would cut more than 51 million tonnes of GHG by 2030. That's a full quarter of the reductions the Parliamentary Budget Officer says Canada needs to make to meet its federal targets. So the solutions are there, and the potential is huge.
Transitioning to a resilient low carbon economy will require all orders of government to work together. I'm here to tell you that Canada's cities and communities and their local governments are ready to partner to get the job done. FCM was there in Paris as part of the official Canadian delegation, helping to make history at COP21. We were at COP22 as well, just last month in Marrakesh, and this past summer, at our annual conference in Winnipeg, municipal leaders stood united behind a resolution endorsing Canada's Paris commitment.
Municipal leaders are pleased to see that the federal government understands the central role that local governments must play in building a more sustainable future. Budget 2016 included a new capital investment of $125 million in FCM's Green Municipal Fund, which is Canada's leading driver of local climate solutions. It entrusted FCM with a new federal program to help municipalities with climate innovation.
Making meaningful progress on climate change will require further strategic investments like these, grounded in local expertise. After all, it's local leaders who know what our communities need and which projects offer the best return on investment.
Specifically, phase two of the federal infrastructure plan must include a dedicated carve-out in its green infrastructure component to support large-scale mitigation and adaptation projects at the local level. Projects like these, from energy retrofits to extreme weather preparations, are vital to reducing GHGs and protecting the quality of life Canadians expect. Of course, this type of investment also needs to take into account the unique resiliency needs of Canada's North. Phase two must also include predictable allocations for local governments to build out our transit systems. Municipalities already have transit projects on the go, projects that will cut greenhouse gases, create jobs and build more sustainable communities. To unlock that potential, we need to overcome the limited fiscal capacity that so many of our local governments face.
As orders of government, we continue to grapple with climate change. Municipal leaders are confident that partnership is the path to vital progress, partnership that taps into the strengths that each one of us brings to the table. Local governments are ready to work together because we're already combating climate change every single day and because our children and grandchildren deserve nothing less.
Thank you very much, and I look forward to your questions.
The Chair: Thank you very much. We'll begin with the deputy chair, Senator Massicotte.
Senator Massicotte: Thank you very much to both of you. I think we all agree that, obviously, the municipal level is the forefront of serving Canadians and also extremely important in managing and meeting our climate change objectives. Congratulations, and, yes, we're very dependent upon you to get those goals achieved.
I'd like to make a couple of observations here, and you can respond to them so I can see if my understanding is accurate. One deals with urban planning, which obviously can contribute immensely not only to climate change objectives but also to greater efficiencies, green infrastructure and green transportation. It's fundamental to how our cities are built and the consequences to Canadians living in those cities. I think probably 50 or 60 years ago we developed this concept of nodes whereby, if you want to save on infrastructure costs, if you want to save on CO2, you should have very high density at major transportation nodes. You should discourage, basically, the outlying, going way off in the suburbs and so on. The theory is very clear; yet, decade after decade, we see many cities not doing so. In fact, I just read this past week that, in Montreal, we're planning this train station, and now we're rejecting any density around the future train station for some reason I don't know, whereas we should have 20-storey buildings there. I constantly see cities building new bridges, new roads to the suburbs, which will only increase the people living there. You will have more congestion and so on. What is the problem? Why can't we get there? The theory is very strong and very clear, yet many cities are not following that supposed better approach to better urban planning.
Mr. Somerville: The staff might be a little upset because I'll go off my notes, but I will tell you from a personal perspective. In Ontario, the province has brought in the Places to Grow Act, which has actually designated the places in Ontario where the growth will be. One of the things we've been doing in my own community in Halton Hills, an hour west of Toronto, is planning for growth that we know is coming, and we're taking those densities into account. But we're not taking it in for a higher-order transit. It's not for subway, bus, rapid transit or LRT, but we're making sure that, wherever we are putting the growth, it is closer to the transit centres.
If you look at Vancouver, you can see that there has been tremendous growth along the transit lines when you look at the Canada line and how that has grown and down around False Creek where they have had that growth as well, but I think a lot of it is that we need to have that shift in our mindset as we have put in these transit areas. They will eventually do that with the growth, but people still have that where they say, "We want to have the yard. We want to that single detached home. We want to have the suburban lifestyle." But I think we are seeing a shift as you look out into the suburbs, especially in southern Ontario where the lot sizes are getting smaller. You're seeing more stacked townhouses. You're seeing more semis. It is coming. I think it's just taking us a while to be able to get there.
Senator Massicotte: We had some witnesses from the Association of Transit, and I always thought that urban transit, the bus and so on, is very good for climate change and so on, but we noticed from the witnesses we got that the ridership of urban transit barely moves. It only moves up a little bit when the employment rate goes up and more people are working and need to get to work. Otherwise, if you look at history, it barely moves, around 20 or 21 per cent. In fact, the previous government had a transit credit for people. If they used mass transit, they got a credit. It had no impact on ridership whatsoever. If you look at the frequency of buses other than urban, at night they're often riding nearly empty.
I'm reaching the conclusion that this whole urban transit basically won't contribute to climate change, to our objective on climate change, but it is an important service to render to Canadians for security and for convenience. It's not a climate change issue; it's really urban planning, density and just providing transportation to citizens. Is that accurate? What are your thoughts on that?
Mr. Somerville: It is important to build the transit systems because, when you start looking at the congestion that we're facing in our cities, the congestion is having a real economic impact. Building the transit will allow people to move in and out of work faster. It will actual allow us to get our goods and be able to do trade a lot easier. I only have to look at the 401 and the amount of time that it takes to get from one end of the city to another now.
We are getting there with that where we have the transit. As well, transit has such a positive impact on the economy because, for every dollar you're investing in transit, there's a return of $3 in GDP, especially with the amount of jobs that it creates as it's being done. The transit is an important component of it, but, again, we have to get people into that shift of being able to think of it to make it useful. If the transit is there, people will use it. If the transit is convenient, they will use it. One of the other things is making sure that there's that critical mass that allows people to be able to use it.
Senator Seidman: Thank you very much for being with us this morning.
I come from Montreal, a city that has spent a lot of time developing sustainable energy plans, especially over the things that they themselves can control. There are things that municipalities have very direct influence over, like their own fleets and garbage disposal areas. There is a whole series of things.
My question to you is: What do you see municipalities doing with the areas that they have very direct influence over, and what are the biggest impediments for municipalities in moving forward with developing sustainable energy plans for their cities?
Mr. Somerville: That's a great question. One of the things that I've really noticed, especially more now that I've been travelling extensively across the country, is the number of electric car chargers. That is a small one. Municipalities have really adopted going to hybrids, or electric vehicles, when it makes sense. It doesn't make sense for a snowplough, because you need the torque and everything to be able to do it. You really notice the hybrid buses. They run on a combination of diesel, gas or natural gas and electricity. Those are some small things.
I'm seeing in my own municipality that we have five municipal buildings that are all heated geothermally, so we're are doing that as well. You are seeing municipalities looking more at district heating systems, if it makes sense. It doesn't make sense in every municipality. That's the important thing: there's not a one-size-fits-all. It has to be what works for a municipality of that size and in that area as well.
Senator Seidman: There are some great international models for cities. I can think of a lot of the Nordic cities, for example. Personally, I know Helsinki has done an awful lot of burning their own waste for electricity, and a lot of the other Nordic cities have done similar things.
The two-pronged question I have for you here is: Based on your experience and knowledge, how much do municipalities use international models in helping them evolve with this challenge, and how difficult is it to get public support to move forward on these things?
Mr. Somerville: I always look at it in the sense that the public tends to lead us where we should be going. I found that in my own community when we started looking at doing a green plan. We knew that we weren't doing things the right way, and we wanted to improve, which led to our community sustainability plan. It was the community that led it; they were telling us this was what they wanted. I find there is tremendous public support for a lot of the initiatives because the public does understand it.
The one thing that I think we have to make sure of as well is that the public understands the rule of unintended consequences. With broad legislation, municipalities need transition time to be able to move over from diesel buses to hybrid buses or the charging stations. I think the other thing the public really looks for is that we make sure we're not jumping in too fast — that we transition over and we lay out a path to be able to get from one end to the other. I think that's something the public does look for.
Senator Seidman: I'd like to ask again about the international models piece of the question.
Mr. Somerville: I apologize. I made a note of that, but I realized I couldn't read my own writing.
Every municipality does look at the international model and they do a scan to see what might be out there. I know when we were looking at our waste management site in my own area, and in other areas across the country, they looked to see what our municipalities had done across the country, but they also look at the international models. The one thing we have with the Green Municipal Fund that FCM manages is the case studies that come in, so that knowledge base is available.
Senator Seidman: So there is a sharing of best practices among municipalities in this country through your organization?
Mr. Somerville: Yes. I have had somebody from the St. John's area of Newfoundland and Labrador ask what we were doing when they were looking at waste management solutions because our waste management site was one of the last ones in Ontario that was open as a municipal one; they wanted to see how we did that and we gladly shared the knowledge with them.
Senator Seidman: I'm still trying to understand what the biggest challenge is you see and hear about from the mayors across the country. What would be the biggest challenges for Canadian cities to move forward?
Mr. Somerville: Fiscal capacity. When the municipalities receive 8 to 12 cents of the tax dollar and they have direct or indirect control over more than 50 per cent of the greenhouse gas emissions, that's the biggest challenge.
Senator Raine: I'm just a substitute on this committee today, but I'm from British Columbia where we do have a carbon tax. I can't help recalling that when it came in, there was a lot of concern from municipalities and requests that they not be obligated to pay the carbon tax, because you're taxing money that's already being paid for by tax money. It's kind of double taxation.
With regard to carbon taxes, has any consideration been given to having any tax paid by municipalities go into a special fund to give sustainable funding for green projects? That way, at least the taxpayer would then know that they're paying a tax to the municipality for some of the services that they're getting, but that money is staying with the municipality for green projects.
Mr. Somerville: Well, we would like to have a conversation about any opportunity for funding for municipalities.
Senator Raine: I'm thinking if you want to try to capture that tax at the municipal level, as an organization, you'd have to put the case forward.
Mr. Somerville: One of the things that FCM believes is carbon pricing can play an important role in helping meet the mitigation objectives, but again, we have to make sure there are not those unintended consequences. We have to take into context municipal concerns where we have the local capacity to implement the large-scale infrastructure. We do have that, but we have to make sure, without having transitional support, that we can't reduce our capacity by suddenly replacing bus fleets.
I think a discussion on that would be well warranted, and I know our staff is making notes on that.
Senator Fraser: Good morning. I have two different questions that are both transit-related.
Senator Massicotte pointed out that ridership never seems to change much on transit systems, and he went on to suggest that therefore transit wasn't going to be part of the solution. I have one two-part question on that.
First, electrification on the existing transit system surely would make a dent in emissions. I take your point about snowplows, but how long will it be before we can assume that most municipal transit fleets and buses will be electrified, or at least hybrid, is the standard across Canada? And how much will it cost to get there?
Mr. Somerville: Those are great questions, and I wish I had an answer for you on either one. I could give you a number, but it would just be made up. I think there would be backbone work needed before they would be able to go to large-scale electrification, because they would need to make sure they had the charging stations and the capacity.
In Paris last year, I saw a tremendous model where every time an electric bus pulled up to a bus stop, there was a little electric charger that came out and gave the bus a quick little charge for that 30 to 45 seconds that the bus was there, and then it withdrew. It was automatic.
Senator Fraser: Isn't that neat.
Mr. Somerville: When you're getting off the bus, you tend to stop and look at that because you're fascinated by that international technology. I've never heard of anywhere else having that. I think that's the kind of thing that municipalities need to look at as they change over their transit fleets so it can do that little quick charge.
Senator Fraser: At every bus stop? That will cost.
Mr. Somerville: It will cost. But the backbone will cost a lot of money as well, if you're getting into putting in systems that will be able to charge a fleet of buses, especially overnight, plus the rotation of buses. If all the buses were electric, you would need to have capacity for downtime so they could be charged, especially if you have a 24/7 operation. You would need to have that additional fleet built into that equation as well.
Senator Fraser: Is anybody in Canada, as far as you know, looking seriously at a congestion charge, similar to the kind of thing London has done? It seems to me that there are a whole lot fewer vehicles on the road in central London, but there are just as many people. Presumably they're using transit to get there. Of course, they have a good network, which not everybody does, but nonetheless the congestion charge has obviously made a great difference there. I know other cities have done it, but that's the one I'm most familiar with.
Mr. Somerville: I'm not aware of any areas looking at that. Also, with the way provinces sets out what the municipalities can do, I don't know if municipalities even have the capability to be able to do that, because that would vary by province.
Senator Fraser: It never occurred to me that it wouldn't be within municipal jurisdiction. That's something to look into.
Senator Griffin: Thank you for your presentation here today. I've seen you many times at the FCM meetings, as I was a councillor until one month ago, which tells you I'm new here. I had applied to be on the committee or the board for the Green Municipal Fund but had to withdraw my application, because I'm here.
I was there to support the resolution in Winnipeg in terms of the Paris commitment and urging the Canadian government to commit.
I agree with you about the limited fiscal capacity that municipalities have as one order of government; I don't think they're treated equally when it comes to revenue sharing, and by revenue, I mean the tax-base sharing. Has the FCM taken action in this regard? I realize each of the provincial associations have been working with the provincial governments in this regard because I was on the provincial association, but at the national level, have you had discussions with the Government of Canada about a more fair, predictable and equitable tax-sharing system?
Mr. Somerville: I think it has been part of every speech I've given at every provincial and territorial association. I think I've done nine this fall. It's something that we do raise. At the board, it's something that we have raised with the government over the last number of years as being a priority, because it's reality when you start looking at the fiscal framework.
The other thing that I have mentioned in every speech I've given since becoming president, especially at the provincial-territorial associations, is that it was great that the government did the 50 per cent allocation in some of the funding for phase one, especially when you start looking at the life cycle costs. By the time you take in the operation and maintenance of a lot of the infrastructure, municipalities end up paying more than 50 to 70 per cent of the total cost because we are doing the repairs, the maintenance and the long-term care of it.
The other thing I've been very clear about at the municipal associations is making sure that, if the federal government is doing the 50 per cent share, that we're also holding the provinces to account to make sure that they're continuing to do their traditional one-third. Municipalities are at 17 per cent, which is closer to our fiscal capacity.
Senator Griffin: When the Green Municipal Fund first came out — and I still think this way about it — it was a great example of a partnership and an example of how our federal government and our national spokesperson — or spokes-group — can work together for the municipalities in our country. I'm hoping I'll get a positive response to this question, and that is: Do you see this fund continuing on into the future for quite some time?
Mr. Somerville: Absolutely. This fund is at the board level. We have a board that manages the fund and reports through FCM, and then we report to the Government of Canada. We are always making sure that the fund is sustainable and that we are within the funding agreement we have with the federal government. Thanks to the top-up that the federal government made to it last year in the budget, as well as with the other two programs on asset management and climate change mitigation, this fund will be around for a long time, which is great. It is a great source of pride for us to see the projects that are being done with this fund and the innovation that's coming from the municipalities as they apply for it.
Senator Griffin: Great. Thank you.
Senator Lang: Thank you for coming here this morning. As I mentioned to you privately, I'm from the North and represent Yukon. One of the concerns that has been expressed to me is the question of where we're going as we move to a low-carbon economy and, with respect to the question of a carbon tax, how it's implemented and the cost associated with that. At the same time, we know there's only one taxpayer. He or she lives in a municipality or in a rural setting, but they, at the end of the day, pay the bill.
As an organization, have you done any in-depth studies with respect to what the effect will be of the implementation of a carbon tax across the country as far as costs to the taxpayer in the municipalities? And in turn, do you know how that will affect the municipalities' ability to raise funds when the time comes that the taxpayer can't pay anymore?
Mr. Somerville: I'm not aware of us having done that level of study, but if it's something I can find out, we can follow up.
Senator Lang: Would it be safe to say that should be a concern of your organization at the end of the day? The reality of it is that in order to be able to function, we all have to be able to pay our fair share but at the same time have the capability to pay it individually.
Mr. Somerville: That gets back to what I said earlier about the unintended consequences. Anything that reduces the municipal capacity is always a concern. We will follow up on that, senator.
Senator Lang: Just to conclude that line of questioning, I take it your organization has not taken a firm decision one way or the other on a carbon tax because you don't have the knowledge to be able to take that decision. Is that correct?
Mr. Somerville: That's correct.
The Chair: I have a couple of questions and then I'll go to the second round.
In Guelph, Ontario, you said they're going to cut their energy use in buildings, industry and transport by 50 per cent by 2031. What will be the result of that? Say you do cut your energy use by 50 per cent. What reduction in GHGs will that result in?
Mr. Somerville: I'm not sure. We may have to follow up to get that number for you, Mr. Chair, to see if they have it on the City of Guelph website. I know one of the things the city was actively doing was assisting companies that were putting in geothermal, for example. When we did it in my own community, we looked at the Guelph model. It's something we will follow up on to see if we can find out the number that they are doing.
The Chair: I ask that question because it's easy to say 50 per cent. However, when you have to put the coin on the table, it might be a little different. I'm not inferring that they haven't done it. I'm just saying that 50 per cent sounds great when you talk to the public about it, but really what does that mean? If you extrapolate that over the whole population, what does that mean? I was a mayor once, so I know how some of that stuff goes.
Mr. Somerville: On that, senator, Guelph is part of the Partners for Climate Change Protection program within FCM, and one of the things you have to do is an inventory of greenhouse gases. That's probably where the number that they've projected is coming from. We will follow up to get that information for you.
The Chair: Another statement you made is that of a select group of 23 Canadian municipalities representing 8.6 million Canadians, they could cut 51 million tonnes of GHGs by 2030. If we took all the cities, we'd clear everything out. We could meet our targets, I guess, when I look at that. I'd like you to explain that a bit more, because for me it's a bit confusing. I'll tell you in the next question why, but I first want to hear what you have to say.
Mr. Somerville: As any wise member of council knows, whenever you get a tough question, you always look to staff to maybe explain that. I will ask Dallas if she can explain it, because she had to walk me through that yesterday as well. It's probably better to get Dallas to explain.
Dallas Alderson, Manager, Policy and Research, Federation of Canadian Municipalities: The point to your question was really to articulate the ambition of local governments. The 23 municipalities cited in that statistic have ambitious emission reduction targets and specific plans to meet those. There would be a range of things included in each of their individual plans — everything from electrification, to building retrofits, to other sorts of district energy systems, et cetera. The detail of those 23 plans would be comprehensive.
I think it is an important piece. There are large and small local governments represented within that group of 23. They have really thought out the full detail of what's required at the local level to meet a low carbon future. That really reflects the intention of citing that statistic.
The Chair: Mr. Somerville talked about unintended consequences. Does this also identify unintended consequences? I ask that because, again, I think it's a bit easy to say that 23 Canadian municipalities could cut more than 51 million tonnes. If that's the case, fly at it, because you'd reach all the targets. But the experts tell us that's not so easily done.
Numbers that we get from the environment industry, extrapolating out to 2030, are that for just average growth in greenhouse gas emissions, we have to meet the target of 30 per cent below 2005 levels. The target is 291 megatonnes. That sounds pretty easy when you think about it in comparison to 51 megatonnes. You can say 291 megatonnes quick and it doesn't sound like much. But, sir, if you actually stop the whole oil and gas industry in all of Canada, every bit of it, in every part of Canada, you won't meet 291 megatonnes. If you actually stopped all transportation in Canada, you'd meet about half of 291 megatonnes — I mean buses; I mean everything. It just goes on and on.
People will then say about electricity that we're already 80 per cent clean across Canada. We're one of the best of the world, in the top six.
To reach that 291 megatonnes, I would suggest, is going to be pretty difficult. But when I look at a statement that says just 23 Canadian municipalities — I don't know exactly how many municipalities there are, but there are a lot — could reduce 51 megatonnes, I have trouble with that number. I have trouble corresponding that to the collateral damage that would happen if in fact we did that. Do you understand a little bit where I'm coming from, sir?
Mr. Somerville: Yes. Those 23 municipalities are all in British Columbia, correct?
Ms. Alderson: Not all.
Mr. Somerville: No, but the majority are from British Columbia, correct?
Ms. Alderson: Yes.
Mr. Somerville: I think that's what we're facing now, namely that difficult path that we have to take if we are going to meet them. Having the municipalities doing that will require us to redesign our thinking of how we design our cities, how we design our communities, how we can protect areas like the North that are vulnerable to climate change and the low-lying areas around the country as well. How we are going to do that is part of the challenges we're all going to be facing, because there is no one-size-fits-all. There's no cookie-cutter answer we can use. This is something that we have never had to face before and it's something that will require us to look at the different ways we can do it.
I am fully confident that Canada's cities and communities and our local governments are up to the challenge of trying to do it as well. If you look at infrastructure you get in a municipality — that is, an ice plant for creating hockey arenas, pools, the transit system, the roads — they're all contributors to greenhouse gases. It will take us to look at the innovative ways, especially ones that have been done around the world and other ones that we will come up with to be able to do it. But I'm fully confident that Canada's cities and our local governments are up to the challenge.
The Chair: That's good. I'm glad to hear that. I tend to think along the lines of Senator Massicotte when it comes to the planning of cities. I think cities have to really start thinking about how they plan. Instead of building big highways and roads, maybe it's time to think about squeezing that down and actually taking that money, instead of asking for more, and putting it into mass transit and those kinds of things to actually get people in the cities.
I think there are all kinds of ways that cities can change things. It takes bold action from people like you to do those kinds of things, but that's great. If you've got it, I'll expect to see it, because we have to meet these targets in 14 years, and 14 years is not very long. And you know what? After that, it gets tougher. It's easy. Even though I say it's tremendously hard, it's easy compared to what comes in the second tranche to reduce greenhouse gases. Thank you for that.
Senator Patterson: I come from a region in Nunavut of all small municipalities. Even our capital, at 8,000 people, is probably a small municipality. We have no alternative energy, sadly. It's all diesel.
It sounds like the FCM has enthusiastically endorsed Canada's Paris commitment, and then you were in Marrakesh after carbon pricing was announced as a federal policy to be imposed if not implemented in provinces and territories. Yet, if I understood correctly from Senator Lang's question, you haven't really done an analysis of the impact of carbon pricing on municipalities.
I'm wondering how the FCM achieved authority to endorse Canada's COP commitments. How did the municipalities you represent agree to that commitment?
Mr. Somerville: It was part of a resolution that came up. I believe the City of Toronto was one of the sponsors, and then it was also the other municipalities. It went to our annual general meeting as a resolution for the floor. It was widely discussed and debated. Our resolutions are fully open, as the senator knows. It was one that was passed.
On the carbon pricing, I think the reason that we have not done the full analysis — and that's why I said I do have to follow up on that as well — is that we have to make sure that whatever is done as carbon pricing and the other approaches on climate mitigation is part of the toolbox that municipalities have to use. I think that's the other part of it, making sure that it's part of the suite that we have. We can't say one size fits all.
In discussions I've had with Mayor Redfern from Iqaluit, she was saying the risk that the North has, especially in Nunavut, for climate change and for the infrastructure that's needed, is in the billions of dollars, and they would never be able to afford to be able to do it as a city. We do rely on our members for that.
The broad analysis is tough to do when there are 4,000 municipalities in Canada, so that is one of the tough parts of being able to do that. We wouldn't have the fiscal capacity to be able to do that as well, on a broad scale, for every municipality.
Senator Patterson: Thank you for that. You talked about the Partners for Climate Protection, and you mentioned 300 municipalities. I'm wondering if those municipalities include smaller municipalities, more remote municipalities, Northern municipalities. Maybe the best way to answer that question would be to ask if you could give the committee some detail about that program.
It would also be interesting, I think, to know more about the 23 municipalities that have analyzed their emissions and are forecasting dramatic reductions. May I ask for detail on that?
Mr. Somerville: Certainly.
As to Partners for Climate Protection, I know my own municipality has been a member for probably about a dozen years, but we didn't do a lot of stuff with it for the first 10. In the last couple of years, we've been getting to Milestone 3, which is where you've done your inventory of the community for where greenhouse gas emissions come from as well. The next two stages are the most difficult ones as you set out your plan to start reducing them and then ultimately implementing the plan as well.
The membership for that group is from every area of Canada. The list is on our website at fcm.ca. It is on the website, and we will send the link over to you so that you can see the communities, especially in your provinces, that are members as well. I do know Yellowknife is a member in the North. I do know that as well, and I know that there are municipalities of all sizes. Like I said, it does represent 65 per cent of the population of Canada. It's not just the large cities; it's rural, Northern and remote ones as well.
Senator Massicotte: While I have both of you here — and you're obviously very much involved and responsible at the municipal level — I want to ask you more of a macro question. For all of us, anybody representing the public, our effectiveness is highly determined by our credibility. There have been many comments in the past about the governance model at the municipal level. I make the observation that you have the lowest level of votes by citizens compared to provincial and federal. I'm generalizing, but for the big cities anyway, if you look at the pension benefits, the salary level, the studies have indicated that the municipal level is always the highest of all three, suggesting, again, poor governance. A recent article about Montreal bus drivers says that one-fifth make over $100,000 a year. A lot of information, including pension benefits, is way more generous. In fact, as you know, 40 per cent of Canadians don't have any pension benefit. Yet, the municipal level is even more generous than the provincial and federal levels. How do you respond to that? Eventually, the public is going to say, "We're not sure we can trust you; we're not sure we like what you guys are doing." It will erode your effectiveness. Do you want to comment on that?
Mr. Somerville: That's a difficult question to comment on, but you know what? You don't become a municipal politician by being afraid to answer difficult questions.
One of the things that I will say that we do quite well at the local level of government is our transparency. We do have, with most of the provinces — if not most then they should have — the Sunshine List, where it is published. At least the numbers are out there for people as well.
We also have it that, being the level of government that's closest to people, I can usually get a quick check into what people are thinking in my community by going shopping. When I get the grocery buggy, I tend to hear from people what their thoughts are on any variety of subjects as well. Each government and each municipality has to decide what they are doing. I can't speak to a Montreal bus driver, same as I couldn't for one from Calgary or Vancouver
However, everyone has the opportunity to elect whoever they want representing them as well. Whenever there's anything that's on any cost, it's something I know I weigh in my own mind as to how I'm going to deal with that as well because I know the best barometer I have of that is the phone call I will get from my mother the next day when she sees the council meeting, asking what the heck I'm doing.
I can't ask it directly like that; I can only tell you my own personal view. I know any budget number is one that always concerns me, and I spend hours going through what our budgets are to see if there are things in there that we do not need. That's just my own personal way that I'm able to do it.
Senator Raine: I'm interested in — from my background and other things I've done — the impact of urban planning on active transportation. That's a concern that's coming up in a group that's working on a national cycling strategy. I would just ask what FCM is doing in that area. Do you have a working group working on urban planning principles for active transportation? This is transportation that would include cycling, all-purpose trails, walking trails, making sure speed limits are such that people feel comfortable walking on sidewalks or, where there are no sidewalks, walking on the shoulders. I'm just wondering if FCM has a plan for that. Because I do believe that, going forward, it is part of reducing carbon emissions if people get out of their cars and get exercise, which is very good for your health. But it needs to be planned for. Do you have a working group on active transportation?
Mr. Somerville: We do not. I think one of the other important pieces of that, as well, is that the conversation would need to be with Canada's urban planning association as well to make sure. I know that a lot of municipalities are right now very actively putting in the trails, bike paths and very safe passageways for them as well. That's the other thing. You can't just put in a multi-use path if it's not safe for cyclists or for people who are walking as well. So we do not have a working group on that, but it is something I will take back with me. I would also suggest following up with the Canadian urban planners association because it's something that I know they've been actively working on because we've been looking at it in our area as a regional approach to active transportation. You can't just get somebody to the border of your community if there's not something in the neighbouring one to get them somewhere.
Senator Raine: I guess what I'm looking for is that municipalities are doing this all across the country. Is there no forum for best practices and sharing their expertise? Is it siloed, FCM and the urban planning association? Isn't there any kind of connection back and forth?
Mr. Somerville: We do have some conversations back and forth, but there's also the Green Infrastructure Fund. We're hoping that, as it's formulated, we are able to use it for active transportation as well.
The Chair: Thank you. It's been very interesting. Thank you very much for being here and taking time out of your busy schedule to come and present and answer some questions. We appreciate it very much.
Continuing our study on the effects of transitioning to a low-carbon economy, on this panel I am pleased to welcome Professor Mark Jaccard, from Simon Fraser University. Thank you very much for being here. You have testified before us previously, and we appreciate your input and your long-standing work on some of these issues we're trying to deal with. I look forward to your presentation, after which we'll go to questions and answers.
Mark Jaccard, Professor, Simon Fraser University, as an individual: Thank you very much.
[Translation]
Thank you for inviting me to appear before you today.
[English]
Much of my career as a professor since 1986 has involved the design and application of energy economy models that governments use to evaluate climate policies, and it's based on that experience that I have a few comments to start off with. I believe you have the written notes in front of you. I'm going to follow those fairly closely, with some elaboration, and will try to be quite quick so we can get to the questioning.
The first assertion I will make is that government must implement compulsory policies of increasing stringency, and that has relevance even to what you just talked about with regard to municipal governments. It's interesting: What they can actually do is a question that I'm actually working on at this very moment, in part, with the City of Vancouver.
I believe you have a graph showing that compulsory policies can be divided into two types of carbon pricing and two types of regulations. The two carbon pricing policies are a carbon tax — like B.C.'s, and what Alberta is about to implement — and cap and trade, which Quebec has implemented and Ontario is about to.
The two types of regulations are prescriptive regulations and flexible regulations, and I'll get into some more detail on that later.
Only these types of policies incentivize the switch from high-carbon to low-carbon technologies and fuels. In contrast, those non-compulsory policies may be attractive for other reasons, but on their own they are insufficient. There's a list of what those are and I'm going to pass on from that.
Starting with the policies of the B.C. government in 2007 — Senator Neufeld knows very well about those — the last decade has seen a growing recognition by several Canadian governments that compulsory policies are needed and that these must increase in stringency over time: hence, a rise in carbon tax, a decreasing emissions cap or flexible regulations that force a transition to lower-emission technologies and fuels.
The second assertion is that no one compulsory policy is essential, but they do perform differently.
The Ecofiscal Commission, which is based here in Ottawa and may have appeared before you, has said that carbon pricing is essential to reduce greenhouse gas emissions. That statement is incorrect. Any economy can achieve near- zero carbon emissions via regulations alone or via carbon pricing alone. Governments have to decide which policy, or combination of these, to employ based on their balancing of standard policy evaluation criteria, especially the criteria of economic efficiency balanced with political acceptability, because really effective climate policy-making is very politically difficult, and it always will be.
The Ecofiscal Commission has also said that carbon pricing is most economically efficient, and that statement is likely true in most cases, although it is possible to botch that, depending on the talent of your politicians, let's say. It all depends on design.
The Ecofiscal Commission has also said that carbon pricing is the most practical climate policy. This statement is misleading: practical depends on your objectives. Carbon pricing was not practical for Stéphane Dion or for the former Prime Minister of Australia. It may turn out to be impractical for the current premier of Alberta. Our political leaders must always pay attention to the political acceptability of their compulsory policies when deciding what is practical. If not, they risk electoral repercussions.
Regarding my next assertion, I was itching to answer some of the questions that you were asking the previous panel because you were asking about emissions in particular. That is what I do, and we did a study on September 20 in which we, as the assertion says, estimated the carbon price path that Canada needs to achieve its climate targets. You have the full Internet listing for getting hold of that article. It's short — 35 pages — and written for a non-expert audience, except for the little bit on modelling that you can skip over.
I and two research associates released that report, entitled: Is Win-Win Possible? Can Canada's Government Achieve Its Paris Commitment . . . and Get Re-elected? We simulated the carbon price trajectory if this were the dominant policy tool of Canadian governments. We estimated that that carbon price would need to immediately start at about $30 per tonne of CO2 — that's the level of the B.C. carbon tax — and rise at a steady rate to achieve $200 by 2030.
To continue on with targets that the Canadian government has talked about, the Harper government did a 60 to 80 per cent reductions in Canadian emissions by mid-century. That price would have to go above $300 in that 2030-40 period.
With the rising emissions price, sales of gasoline and diesel vehicles by 2030 would be at much lower levels, and electricity generation across the country would burn only small amounts of natural gas and no coal. By 2050, most buildings would use either renewable natural gas or near-zero emission electricity for space and water heat, oil sands production would have almost no emissions, and most other industries would meet most of their thermal needs from electricity, biomass and another non-emitting sources. This is important: Most of the needed technologies and fuels are already commercially available, and that's what makes it possible for people like me to estimate the cost of switching to those.
Finally, as part of thinking about Canada in the world, in the policies that we designed, we gave a break to emissions-intensive, export trade-exposed sectors.
In the same report, we simulated a portfolio of flexible regulations that would also achieve the Paris 2030 target and continue reductions to 2050. These include an electricity regulation, like that in B.C. but with more allowance for the use of natural gas in Alberta, Saskatchewan, New Brunswick and Nova Scotia; a low-carbon fuel standard like that of B.C. and California; a vehicle emissions standard like that of California; a performance standard for industry like the one the one Alberta has had for the last 10 years, and some other regulations. What I'm describing are regulations we've seen applied in other jurisdictions and can see what the effect was and what the costs are.
While the cost of this approach is somewhat more expensive than a pure carbon pricing approach, the policies are more consistent with those that have been applied in various jurisdictions where they have significantly reduced emissions. We simulate this option so that politicians might be aware of alternatives to strict reliance on emissions pricing should this approach involve too great a trade-off in terms of its political costs.
Finally, recently announced federal policies are consistent with the mapping out of the flexible regulation approach we designed six months ago; we've been working on this since January of last year. In October, for example, Prime Minister Trudeau announced a minimal national carbon price, which you're aware of, but on this price trajectory he would need additional regulatory policies to achieve Paris, as I've said.
Earlier, in March, Trudeau announced regulations on methane emissions; then in November he announced a coal phase-out regulation and in December, a clean fuel regulation. Although the details are yet to be determined, these regulations are projected to provide similar reductions to our September policy portfolio.
I'll end there and look very much forward to your questions. Thank you for your attention.
The Chair: Thank you very much for that presentation. We'll begin with Senator Massicotte.
Senator Massicotte: Thank you, professor. This is very good because it finally gives us a plan where one could, from a model sense, get to where we want to go. It gives us some meat to respond to.
You say "in the theoretical model of only carbon pricing," which is the most efficient economically in theory, but you can't get there for real practical reasons.
In the last sentence you said that a policy is basically less stringent relative to emissions intensive trade-exposed sectors. I presume those are the same sectors that the government has already identified to be significant exports. You say "less stringent." What exactly did you propose for that sector of the economy?
Mr. Jaccard: In oil sands, for example, on the price scenario, you're going to $200 per tonne of CO2 by 2030. Oil sands would have a price of $100 per tonne of CO2. There's also what I'll call kickbacks that help with technological changes as well. We do know that the oil sands industry is saying, "We can get our production emissions down significantly. We're doing carbon capture and storage and using more natural gas. We're developing solvents for in situ." Those have a cost. That would be an example, namely, $100. That ends up increasing their production cost by from $2 to $6 per barrel of oil. So if the world oil price is way too low, they're in trouble, but if the world oil price is above $50 or $60, that's affordable.
Senator Massicotte: Let me throw at you a comment our chair often makes to show you how dramatic our challenges are. He basically takes the CO2 number of tonnes — and, as you know, we need a reduction of 35 or 40 per cent — and if you look at the Canadian economy, to get there you've got to shut down all road transportation and the oil and gas production. You can sort of do the addition. It's simple arithmetic. How do you respond to that? That's a practical way to illustrate the challenge, but you have a more complicated model. Your projection seems to be easier to achieve than the simple arithmetic model. How do you respond to that? Help us out there.
Mr. Jaccard: I'm happy for that question. I don't know if I can ask Senator Neufeld, but did you say 290 megatonnes?
The Chair: I said 291. Those are numbers from Environment Canada, not ours.
Mr. Jaccard: Our numbers are from Environment Canada, but they're not those numbers. Canada is currently over 700 megatonnes, and a 30 per cent reduction takes us to just over 500 megatonnes. It's in the 200 megatonne reduction level. Subject to correction later — and I invite you to check this later — those aren't the numbers we got from Environment Canada.
The Chair: These are extrapolated out by Environment Canada — I'll maybe just explain it a bit — to 2030. So there's the high cost, the medium and the low.
Mr. Jaccard: Yes. That's what I'm using.
The Chair: They're extrapolating these numbers out on the medium, to 2030, of what is expected from oil and gas or from electricity. I don't know. I'll look at your numbers. I'm not trying to make it more difficult; my goodness, it's difficult enough already. But those are the numbers we get from them, and those are the numbers we've been using since we started.
Mr. Jaccard: Okay. When we use their numbers, we have Canada in a "business as usual" out to 2030. That just means staying with the current policies. That is, still saying just above 700 megatonnes. It could be how one's measuring land use and forest net emissions, and so on; I won't go there. In the report that you have the link to now, you can see what numbers we've got there.
Whether it's 300 or 200 megatonnes, in our report, we do show how that is achieved. Even though you might say you're doing a model so it's complicated, in our results, though, we say in our figure 4 — and I'm sorry you don't have that in front of you — here is the reduction from personal transportation, about 20 megatonnes. Here's the reduction in freight transportation, almost 60 to 70 megatonnes. Here is the reduction in oil and gas, 50 to 60 megatonnes. Here is the reduction in electricity generation, almost 30 megatonnes. There are others for buildings and so on.
We do the same math there. I'm sorry for this discrepancy. I don't think we should spend a lot of time on it now. We're doing the same exercise and we present our results in the same way.
Senator Massicotte: One final minor question and then I'll leave it for second round. You also say in your idealistic model that electricity generation across the country burns only a small amount of natural gas, not coal. What will Alberta and Saskatchewan do if they're not burning coal and they're not using much natural gas? Are you supposing that B.C. and Quebec will transfer the electricity to the adjoining provinces? Help me out there.
Mr. Jaccard: No. However, there will be some of that. If you just think of Ontario over the last 10 years, which had 25 per cent of its electricity coming from coal initially — and Alberta was closer to 50 per cent — you'll see what happens. To get emissions down, you've got to do either carbon capture and storage on the coal — and Saskatchewan has one facility, as you probably know — or you're going to have to switch to renewables and use natural gas as some kind of backup to help you with the intermittency of renewables. Basically, that's what Ontario has done. That similar scenario would play out in Alberta, Saskatchewan, New Brunswick and Nova Scotia.
Senator Massicotte: Help me out there. As you know, in Ontario you've got a base load, nuclear and some hydro. You're saying that the base load in Saskatchewan and Alberta will be natural gas, but it would be totally wind and solar?
Mr. Jaccard: Yes. They have some hydro as well, but you would basically match up renewables with some kind of possibility. It could be biomass, but it can be natural gas that is there to ensure that you've got electricity when you need it.
Senator Lang: I'd just like to perhaps go on the premise of your report, if I could, and the assumptions that you've taken. I guess this would be to the Government of Canada as well.
Most Canadians don't know this, but approximately 500,000 new people are welcomed in this country every year. Approximately 500,000 become new Canadians by the time it shakes down. In 15 years, we'll welcome approximately 7.5 million new Canadians welcomed to this country. Obviously, each one has to have the amenities that each one of us takes for granted. Are those figures considered in your model, the fact that we're going to have that increase in population?
Mr. Jaccard: Yes. We took the base forecast that Environment Canada is using.
Senator Lang: Can you tell us what that base is?
Mr. Jaccard: No. I don't know. It's whatever they have, both GDP growth, population growth.
Senator Lang: Can you provide that for us?
Mr. Jaccard: Absolutely.
Senator Seidman: Thank you, Professor Jaccard. In your presentation to us, you listed what we could expect to see across the country in terms of moving closer to sustainable energy, and I think Senator Massicotte began by asking you some questions about that. Then you made a statement that I'd like to follow up on, if I might, based on a lot of witness testimony here in this committee about innovation and the need to spend a lot more money on new technologies, our problems with commercialization in this country and not showing leadership in this area.
You said most of the needed technologies and fuels are already commercially available. That kind of caught me a bit off guard, and I would appreciate it if you could help us understand that.
Mr. Jaccard: Yes, I'll give you an example. First of all, we already talked about electricity, so we can agree on that. We've seen that we can get our electricity emissions way down. Other countries and jurisdictions everywhere are doing that. I'm sure there is no dispute on that in your mind, either.
Transportation is a major source of our emissions. Being sold right now are flex-fuel vehicles that can take 85 per cent ethanol and 15 per cent gasoline. Those are commercial vehicles. In 10 years, if we started a policy today, we could have 90 per cent flex-fuel vehicles on the road, and we could be producing the ethanol that would go in those. Scania forecasted it will sell about 1,500 bio-diesel semi-vans this year. We could over, a 14-year period, have 30 per cent, 60 per cent or 90 per cent of the biodiesel fuel that's driving the large intercity trucks produced in Canada. Again, these are all technologies that are available, and that's an example.
Finally, if I went to buildings, whether commercial or residential, we use heat pumps. Those have been around for 20 years. We highly insulate some buildings and then use some resistance heat in British Columbia, and it's probably similar in Quebec if you count apartments, condos and townhouses as well as detached and semi-detached. In British Columbia, I think 40 per cent of households are actually using electricity that's coming from zero-emission resources.
It involves, at the end-use level, either electrification or biofuels. All of it involves technologies we've had for a decade, at least.
Senator Seidman: What we also heard is that industry takes an exceptionally long time to adopt and adapt their products to these new technologies, as in the transportation example you gave us. What kind of incentives would be necessary to move in the directions that you're proposing to us?
Mr. Jaccard: It would either be the carbon tax that rises all by itself, as I showed, and that creates the incentive, or flexible regulations. California has a low-carbon fuel standard that basically requires the share of gasoline and diesel to decline over time, and vehicle retailers have to achieve that or pay penalties of $5,000 to $10,000 per car.
If we were to look at one example, Brazil — I will probably get the dates wrong but it's something like the period between 1982 to 1992 — converted its entire vehicle fleet over to ethanol. Industry will always tell you that it takes forever, and it does take time. I modelled what we call, in the jargon, the turnover of capital stock. When I say cars, the number 16 pops up in my head. It takes about 16 years to turn over the car stock, but really it's more like almost 20 years because the manufacturers are taking time to adjust and get sales. It's not that you only sell this kind of car five years from now, but it would get 20 or 40 per cent of the market.
That's what goes on in our modelling here. I have a figure that shows new vehicle sales in 2030. It's still mostly gasoline cars being sold in 2030, or it's just starting to change at that point, but the whole stock has started to shift.
Senator Seidman: And as we know, when new innovative products come on the market, they usually cost consumers a whole lot more; right?
Mr. Jaccard: It depends how you do it. What you saw in Brazil, as an example, is there was sort of a blip in cost, and then the manufacturers were mass-producing these and — boom — the cost went down.
That's the result whenever we watch a cycle of forcing, let's say, anything. We tried to get sulfur out of refineries and coal-fired power plants to stop emitting sulfur. First, they said it was really expensive and we had these debates, and then there has been publication after publication showing that in the first couple of plants that switched, it was more expensive, and then it got way cheaper than industry ever said it would be. So while we thought the price per tonne of sulfur would be about $800, it ended up being $100 and the effect on the price of electricity was negligible.
I would argue, from the evidence I've seen and following the literature, that we should look in hindsight at what went on. I would be very cautious when someone tells me this is an exorbitant cost. There is a starter cost, absolutely.
Senator Patterson: You mentioned Senator Neufeld's leadership on the B.C. carbon tax, and you're right, in B.C. I know you recommend carbon taxes should escalate and I think the escalation has stopped in B.C. Is it clear that the carbon tax has reduced carbon emissions in B.C.? I've heard some varying views on that. What's the correct analysis?
Mr. Jaccard: When we talk about the time for the turnover of capital stock takes, when B.C. implemented its carbon tax, people asked me how quickly it would reduce emissions and whether it would reduce emissions in the next five years. I would always say to them that I look at Sweden, because there has been a lot of research done on the implementation of their carbon tax in 1991. It took up to 10 years for us to detect significant changes.
In British Columbia, the economists who do statistical analysis of this have to sort out a lot of factors: Are people just driving across to the United States? Is it because Vancouver was doing more in transit and densification? What are the reasons why gasoline consumption in British Columbia might fall faster than in other provinces, or not rise as quickly? Can you get causality on that carbon tax?
Generally, they say yes, they're starting to detect an effect from it, but it would need to keep going higher than that for people to either use their cars a lot less or not buy gasoline cars. I'm not recommending a $200 carbon tax. I'm just reporting, as someone who does work in this area, that this is what you would need to do to achieve your Paris target, or do equivalent regulations.
Senator Patterson: Thank you. I think your paper is very timely for us, because this is very closely related to what we're studying.
I notice you believe there should be favourable treatment for emissions-intensive and trade-exposed industries, because they don't have too much flexibility when they're making steel, although the processes have improved greatly. And then, of course, we have a new administration in the U.S. that may change the competitive environment between Canada and the U.S. on carbon.
I'd like to ask you about my region of the North. Today, the federal government and the provincial and territorial ministers are going to announce a climate plan for Canada. In the North, I'm sure you're aware that our populations are too small to really pay for hydro. We have darkness in the winter, solar is limited and we have variable wind, so we're heavily reliant on diesel. I wonder if you would cast your mind to the more rural and remote regions of the country. Would you say that they need favourable treatment when it comes to things like carbon pricing, as you've recommended for emissions-intensive and trade-exposed industries?
Mr. Jaccard: Thank you for that question. Just to clarify, when we did this modelling exercise, we weren't recommending what the government should do. We were saying that if you want to do it by an emissions price, here's how, and if you want to do it with flexible regulations, here's what we think it will cost and how you would do it.
Then we just tried to add in there things we hear from everyone. In British Columbia, the government has said, "We're not going to raise the carbon tax anymore unless we protect trade-exposed industries." Alberta has been designing its climate plan to give some protection for trade-exposed industries. It's not a recommendation of mine. It's me trying to model what I think people said they wanted and to try to help to clarify what the implications of that are.
In terms of remote communities, your energy costs are way higher. Fossil fuels are fantastic, which I have to keep telling people all the time. They're wonderful. They've had a great benefit to humanity. Whether I'm talking about a remote community in India or in colder or isolated areas of Canada, fossil fuels are fantastic to get that energy out there.
Right now, we can make ethanol. We can make biodiesel. I didn't mean to give the impression that no innovation can go on. There's continued innovation, especially with these fuels in very cold temperatures, that is going on as we speak and being applied. But you'd have to do some of that, and it would be more expensive.
Now, whether or not your climate policy should also include, somehow, transfers to people who are more impacted is again something that I don't have a recommendation on, but, as an economist, I can help to do those calculations for people if they want to make that argument.
Senator Patterson: You said it's possible to botch carbon pricing. You got me intrigued. Can you tell us where it's been botched or how you botch it?
Mr. Jaccard: At some point, one of the senators sort of said, "How much more can we afford when you take away a carbon tax?" I felt like saying, "Wait a minute. You don't take away a carbon tax." Government levies a carbon tax and has this money, and it does something with it. That's why, even when Saskatchewan says, "You're taking this carbon tax," the Prime Minister was very clear that the money would go back to Saskatchewan. You decide what to do with it. Don't call this a loss to your economy. But governments could literally take that money and burn it somehow. They could waste it badly, so unproductively, that even a carbon tax might not be the most efficient way if you misused the funds.
Senator Fraser: Gee, every time I come to this committee, I become more aware of the depth of my ignorance.
In the flex reg model, you're talking about a low carbon fuel standard like that of B.C. and California, a vehicle emissions standard like that of California. So we're talking about a whole lot of ethanol; right?
Mr. Jaccard: No.
Senator Fraser: That's good.
Mr. Jaccard: Maybe or maybe not. But vehicle emissions standards say, "You retailers of vehicles, and, by implication, manufacturers as well, need to get a small but rising share of near-zero-emission vehicles," and then you can decide if you want to include or not include ethanol in that, include or not include electricity, include or not include hydrogen. So you can rule that out, and the Europeans, with some of their policies, have said, "We're going to rule out one kind of ethanol but not another kind of ethanol; we want to know how it's made." You can do any of those kinds of things in that policy. Quebec, I think, right now, is implementing something similar to California, but they're really focused on electricity.
Senator Fraser: We had a very interesting presentation from Hydro-Québec. If we don't need that much ethanol, the second part of my question is perhaps less relevant.
Mr. Jaccard: I might just say, if I may, that I'm a strong supporter of using lots of ethanol.
Senator Fraser: Okay. Then where do we get it? Where does it come from?
Mr. Jaccard: There are so many ways to make ethanol, and we are innovating in that regard. You can make it from grains. You can make it from all sorts of other biomass possibilities, wood waste and so on. There's just a lot of good research out there that is telling us, "Wow, there may be some real myths people have that food prices will go up."
Senator Fraser: You hear that about the United States, and I wanted to know about that.
Mr. Jaccard: So right now you have still growing amounts of ethanol consumption in the U.S. over the last eight years, while food prices have fallen. So it's complicated, but I would be really careful if one hears, "Oh, we can't do ethanol because we wreck biodiversity or drive up food prices for poor people." I think the evidence doesn't support that. There are ways of doing it that wouldn't have that happen. There's a lot of marginal land that can shift in. Maybe the price of Christmas trees will go up a little bit. There are all sorts of possible land uses to produce biofuels of various kinds.
Senator Raine: I'm just wondering what the role of nuclear energy is in this. Are there a lot of advances going on? In particular, we tend to think of nuclear energy as these massive power plants that create electricity in parts of the world, but I'm just wondering if there is any possibility or any research being done on smaller nuclear plants that could work in our North.
Mr. Jaccard: Yes, there is, and there has been, for quite a long time, the idea of small, modular nuclear plants. In fact, at one point, when we had higher natural gas prices — I can't remember if it was a decade ago — people talked about Alberta possibly building small nuclear plants — even Saskatchewan — as part of oil and gas development for electricity and heat raising and so on. So you have these available.
Our model drives on economics, but sometimes we have to override the model and say, really, this is a political decision. Do you build a new large hydro power project, like Site C in British Columbia? You really have to say, "Are politicians willing to do that?" Nuclear is like that. Are politicians willing to site a nuclear plant somewhere? Because that is a very big challenge. It's a very big challenge in wealthy countries, and it's becoming a very big challenge in developing countries, even in China where they are expanding nuclear.
Senator Raine: One of the reasons I've become interested in nuclear energy as a potential clean energy source is that I know there's an issue with the disposal of the spent fuel, but there are solutions for that in Canada because of our unique geography. I'm always interested if I can be assured that study is still going on because, at a certain point, the political decision making can change. Public policy cannot get ahead of public opinion. Right now, the public is still very much afraid of nuclear, and yet I think that, as the technology develops, that can change. I'm just wondering where we are in the spectrum, and is that, "Oh, don't go there; they'll never approve that?" Or is it, "This should be part of the mix?"
Mr. Jaccard: There aren't huge amounts of R&D funding going into nuclear as a percentage of the whole research and development pie today compared to 20 years ago or 25 years ago. It has gone down, but that's again reflecting public priorities and reflecting that renewables have been a very pleasant surprise. We thought of renewables as just intermittent, and they need a lot of land base because it's a lower energy density than fossil fuels. But we humans are getting pretty good at innovating how to get concentrated energy, whether in what looks like a propane tank or in a fuel tank of a car, from renewable energy or producing electricity especially. The challenge for nuclear is that there are other clean energy competitors out there, and they don't have that social anxiety related to them about risk, even though much of that risk may well be a perception. We know it's not a complete delusion, though, because things can happen with nuclear that we never expected, as we know from Fukushima and other accidents.
Senator Griffin: Thanks for your presentation here today. I'm finding it really fascinating.
In the last month or so since the U.S. election, my level of concern has been vacillating in terms of what it's going to mean for Canada and for us moving toward a low carbon economy. This morning, while listening to the radio, I heard that the person who's being nominated to the cabinet to head the Environmental Protection Agency is said to be a climate change denier, so my level of concern peaked again.
What's your impression on the impact in Canada based on what could happen in the United States as a result of these recent changes? What will it do for innovation here and for us moving to a low carbon economy? Are there positives? Are there negatives, or both?
Mr. Jaccard: I could talk for a long time on this. I think it is too early to speculate a lot in any case, but there are some things I would like to point out.
One of them is that in eight years, President Obama didn't have the political ability, the legislative authority or backing to put in either a carbon price or a whole bunch of rapidly rising flexible regulations, but he did do flexible regulations in transportation, in vehicles, and he is doing that now in electricity generation, in coal-fired power. It's possible the new U.S. federal government will not push as he did on those things.
I want to point out, though, that just as we didn't go very fast at all under the Harper government for nine years, things happened provincially then to compensate. California has a bigger population than Canada, close to 40 million. I get a strong sense that the state of New York is now going to quickly follow some of what California is doing. California kind of led the way and said, "Look, it doesn't destroy your economy. There are costs, but it doesn't destroy your economy. We have alternatives to burning coal, oil and natural gas." And sometimes it involves burning more natural gas.
My general answer to you is I would look to certain states acting more aggressively. The sum of the kind of states that might do that could well be over 100 million people in the United States. It still would be very significant on a global scale, and even for Canada as the neighbour next door. Now we have Quebec and possibly Ontario about to join the California cap and trade. Don't be surprised if that system gets quite large over the next four years and that the states of New York, Oregon, Washington and a bunch of other New England states look to join that cap and trade system, which is a very good system. There are lots of flaws in these systems, but it has a wide coverage. It covers transportation fuels, not just electricity and not just industry.
The Chair: Before we go to the second round, I have a few questions. I appreciate your presentation, professor. It's always interesting to listen to your thoughts.
We're doing five reports and a final one, hopefully, by the end of 2017. Just so you understand, we're not here to say climate change isn't happening and all of those kinds of things. We know we have to deal with these things somehow, but in a rational way that Canadians will, at the end of the day, accept and be able to accept.
Trade-exposed industries are one area that I worry a lot about. I'll give you an example. We went to Kitimat to see the aluminum plant there, Alcan, a brand new plant. They reduced their emissions by 50 per cent. But they said if you applied a greenhouse gas tonnage rate to their process, it would start making them non-competitive in the world. What do you do with that? How do you deal with that? That's just aluminum.
I'll give you another example, steel. We went to Dofasco. It's easy to say they can use electricity to make steel with, and they do. There's a lot of that in the U.S. They explained that to us. But they said if you want certain kinds of steel that are needed for making vehicles light and all of those kinds of things, you still need to use coke, coal. In fact, they told us — and you have to be careful when you listen to this — there's no technology, even in the near future, that can change that.
Those two meetings brought some fairly interesting things to my mind about how we actually continue to have those industries that are trade exposed with the world. What kinds of things can we do there? Are we saying we should take public money and actually put it in place so they are competitive? I don't know. Give me an idea of those two. That's only two but there are tons of them, and you know that. We have a short time, so I'm just talking about two of them.
Mr. Jaccard: I know that. I modelled them. I had an institute at Simon Fraser University called CIEEDAC, Canadian Industrial Energy End-Use Data and Analysis Centre. We're especially the people who work with industry in Canada. I won't get into the discussion of technologies, but I've heard of pelletization of natural gas and a lot of new applications for electricity in steel itself. But these cost. The issue is still there. Even if we do have technologies, it raises the cost of production. There are two things.
First of all, I caution you. Industry's role is to come in here from time immemorial and say, "Don't do anything or we're going to get hurt right away," and I'm not saying they're saying this entirely. When you brought in the policies in British Columbia, the cement industry said, "This is really going to affect us," and then they showed how their sales had gone down in the first few years. The Government of British Columbia hired research associates, many of them formerly trained by me, who were independent economists. They did an analysis of where cement went in other Canadian provinces at the same time that didn't have the carbon tax and that tax structure. Surprise, surprise; the carbon tax had not gotten high enough to affect their cost of production enough that their relative competition compared to elsewhere in Canada had been affected. The reason cement sales were going down was because the Chinese were outcompeting cement manufacturers in Quebec, Ontario, and so on.
But obviously, at some point we're going to get to where you're affecting the production cost of somebody who is vulnerable to competition from elsewhere. If it is for domestic sales like cement, then what we've all done analysis on is called border tax adjustments. Jurisdictions are starting to put these in in small amounts. It basically says: "China, we're going to look at your cement production. If it's way more carbon intensive and you don't have policies similar to ours, there will be a tax adjustment on that."
In fact, all of the legislation that almost passed in the U.S., sort of 2005 — John McCain's bill in the Senate, the Waxman-Markey bill that passed in the House of Representatives in 2010 but then failed in the Senate — all of those bills were giving China and countries like that about five to ten years' leeway and then saying, "Here's how border tax adjustments will be phased in over time."
Finally, what you can do — and that's sort of more what Alberta is looking at right now with let's say the oil and gas sector and other trade-exposed sectors — is say, "We're going to apply the policy differentially to you. You're not going to get the same hit as others until we see your competitors facing a similar carbon price climate policy." That's what we simulated in the study that I was describing to you and that you have access to now.
The Chair: I'm aware of cement. Cement wasn't taxed — and for a good reason — with the carbon tax in British Columbia. I get what you're saying, but they still have to go out there in the real world and actually sell their products, regardless of where. I can give you one more example.
Mr. Jaccard: But they were taxed. The carbon tax was applied to cement.
The Chair: But not right away. I know that.
Mr. Jaccard: Okay.
The Chair: Anyhow, we could have that argument.
Mr. Jaccard: That's why we were asked to do the analysis, because of the effect of that tax.
The Chair: The cement industry also told us that when they electrified part of Dofasco — I'm trying to remember the numbers; I hope I got them right. They said that, on average, for steel made in Hamilton, there was about one tonne of greenhouse gas in each tonne of steel. They used that as an example. If you get it from China, it's about three tonnes in every tonne.
We had the FCM here. If they were going to actually purchase a lot of steel for doing something in their community, would they buy their steel from China or would they buy it from Dofasco in Canada? There would be a huge difference in cost. How do you deal with that? Again, do you just say to China, "I'm sorry; we're going to put a tariff in, and it's so high that it will meet ours"? They have to export into that market.
Mr. Jaccard: Yes, but this is how you would have to do it. Otherwise, humanity will not act on this problem because you will always go to the lowest denominator. So you cannot avoid that problem. You can't say, "Oh, let's not reduce our emissions from industry," because there will always be some country somewhere in the world that isn't doing that.
That's why we do need tariffs. We do need climate-related tariffs. What I described for you is that that's exactly what the U.S. government intended to do when it enacted significant climate policy, and I wouldn't be surprised if Donald Trump will be the first to do that.
The Chair: I would agree with you; probably he would.
The other thing is that Canada is 1.6 or 1.5 per cent of the greenhouse gas emissions in the world. Say we cleaned that right up and we met the emission targets and everything. There are other countries. We understand there are 2,400 coal plants that will be built in the next decade or so. We've heard from India. It's not on their mind right now about greenhouse gas; they just want their population to have some of the benefits that the Western world has, like we do, cheap energy. It's likely coal, those kinds of things. But if we were to actually meet that target, do you think that would change the temperature in the world at all? When you look around the world, even though 100 and some countries signed on all of those kinds of things, do you think the temperature is not going to rise?
I am of the opinion that we can do all these things. I'm not saying we shouldn't. We should do as much as we possibly can. But at the end of the day, I don't think the small amount that we have in the whole picture will make a huge difference in the temperature of the world. Should we not be looking more at adaptation, at how we're going to actually deal with this issue? Because I think it's real, and it's probably going to come. We have to have that target and work as hard as we can.
I don't hear much from anybody about adaptation, to be perfectly honest. I asked a lot of people, like you. Nobody talks about adaptation. Somehow, how do we adapt to it? How does Nunavut adapt to it? How does where I live adapt to it? How does Vancouver or cities that are on the ocean adapt to it? I don't hear that from any corner. Can you help me a little bit? Have you done studies on adaptation and what we need to do? If you have, could you send them to us?
Mr. Jaccard: Yes. First of all, I was going to tell you who has done studies on that.
You've given me two questions, if I may. One of them was about what we call the fallacy of composition. It's the idea that because one thing is a small component, where everything is a small component, and when added together you have a bad outcome, doesn't tell you that, therefore — so the logic is "I don't have to worry about that one thing." It would be like each individual cigarette you smoke, you can say to yourself, "It's going to be like .000001, the percentage risk of my getting lung cancer," and I can say that about every single cigarette.
An example similar to that would be Canada's role in World War II. We weren't more than about 1 or 2 per cent of the personnel that helped defeat Nazi Germany and the risk to the planet it had. We could have used some kind of argument like we're only 1 per cent of this solution, so why be there?
The Chair: I'm not disputing that. I'm saying if we do that, if we actually meet what that target is, Canada-wide, at the end of the day —
Mr. Jaccard: But I am answering your question.
The Chair: — adaptation will still happen.
Mr. Jaccard: My answer to your question is that the only way you deal with a global collective action problem is you act and you try to get others, by example — or by force, the trade measures we talked about — to act with you. That's the whole intention of acting. It isn't the intention of, "We're going to reduce our emissions, but we know the rest of the world won't." It's, "We are going to reduce our emissions as part of a survival strategy for the planet."
If we all fail on this — and we've been failing for 30 years, since Brian Mulroney first said, "We're going to act on this," and other world leaders — the costs, from what I'm told by scientists, are horrendous, and adapting to many of these things will involve incredible costs.
The last study I was involved in on this was when I was appointed by Stephen Harper to the National Round Table on the Environment and the Economy. We looked region by region in Canada at the costs, and we looked at adaptation possibilities as well. Certainly that report is available somewhere. I understand many reports have been done since then, and I can look that up for you if you'd like to see them.
The Chair: Thank you. That's what I'm looking for. I'm not saying we shouldn't try to do the best we can and be leaders and all those kinds of things. I come from British Columbia; obviously you know that.
Mr. Jaccard: Yes.
The Chair: But I still think we should spend a little bit more time thinking about adaptation and how we're going to adapt to a changing climate, because it's happening and it's going to continue to happen. It's good to have a target that we're not going to raise more than 1.5 or 2 degrees, but I think those things are far beyond our control. We should do whatever we can, but in the meantime we have to look at how we adapt to all of those issues.
Senator Massicotte: Briefly, two quick questions. In what you called the practical approach, what's the carbon price under that model?
Mr. Jaccard: The flex regs one?
Senator Massicotte: Yes.
Mr. Jaccard: By 2030, it's around $40.
Senator Massicotte: You made a comment at the very end that a recently announced federal policy is consistent with our flex reg approach. In other words, given what you've heard so far and given what should be announced shortly with the provinces, is it enough? Are we doing okay?
Mr. Jaccard: The electricity one, if I understand it correctly, is very good. The vehicles one is starting to get in the right ballpark. I'd want to know how it played out in terms of freight transport, because that is so important. The oil and gas, like the methane regulations and what they do, we're not there yet. I haven't heard anything about what we're going to do about buildings and really about other industry in terms of performance standards.
So we're not there yet, but I'm kind of shocked at all the things being announced right now. I'm optimistic about that. It reminds me of the two-year period under Premier Gordon Campbell, with Senator Neufeld as the critical minister in that government, about how they rolled out things very quickly.
The Chair: Thank you very much, Professor Jaccard. We appreciate your presentation very much and your answers to the questions. Thank you for your time, sir.
Mr. Jaccard: Thank you. It's been my pleasure.
The Chair: The meeting is adjourned.
(The committee adjourned.)