Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 24 - Evidence - April 6, 2017
OTTAWA, Thursday, April 6, 2017
The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill S- 229, An Act respecting underground infrastructure safety, met this day at 8 a.m. to give clause-by-clause consideration to the bill; and to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
Senator Neufeld: Good morning, colleagues, and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld and I'm honoured to serve as chair of this committee. I represent the Province of British Columbia in the Senate.
I wish to welcome all those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, these committee hearings are open to the public and also available online on the new Senate website at sencanada.ca. All other committee-related business can be found online, including past reports, bills, studies and a list of witnesses.
I would ask senators around the table to introduce themselves. I will begin by introducing the deputy chair, Senator Paul Massicotte from Quebec.
Senator Massicotte: Good morning.
Senator Mitchell: Grant Mitchell, Alberta.
Senator MacDonald: Mike MacDonald, Nova Scotia.
Senator Dean: Tony Dean, Ontario.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Mockler: Percy Mockler, New Brunswick.
The Chair: I would also like to introduce our staff, beginning with the clerk, Maxime Fortin, and our Library of Parliament analysts, Sam Banks and Jesse Good.
Colleagues, today we continue to study Bill S-229, An Act respecting underground infrastructure safety. This bill was introduced in the Senate on September 29, 2016, and was referred to our committee on December 6. We had a meeting on the bill on February 14 with Senator Mitchell, the sponsor of the bill, and Mr. Mike Sullivan of the Canadian Common Ground Alliance.
We have had an opportunity to review this bill, which I think is fair to say was developed after our committee study on the matter in 2014. We are now going to proceed with clause-by-clause consideration. There are 33 clauses in total. I also understand two proposed amendments were circulated to all members last week. I suspect they will be moved today.
Before we do this, I would like to remind all members that if at any point a senator is not clear where we are in the process, please ask for clarification and the clerk will help us. As chair, I will do my utmost to ensure that all senators wishing to speak have the opportunity to do so. For this, however, I will depend on your cooperation. I will ask all of you to keep your remarks to the point and as brief as possible.
Finally, I wish to remind honourable senators that if there is ever any uncertainty as to the result of a voice vote or a show of hands, the best route is to request a roll-call vote, which provides clear results.
Before we begin, is it agreed that, in the interest of time, some clauses under the same heading be grouped together for your consideration?
Hon. Senators: Agreed.
The Chair: Are there any questions before we begin? If not, I believe we can proceed.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill S-229, An Act respecting underground infrastructure safety?
Hon. Senators: Agreed.
The Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1, which contains the short title, stand postponed?
Hon. Senators: Agreed.
The Chair: Shall clause 2 carry?
Some Hon. Senators: Agreed.
Senator Mitchell: We have an amendment. I can address the amendment and read it. Then a member has offered to move it, because I'm not a member of the committee.
The Chair: Okay.
Senator Mitchell: Clause 2 would be amended in this way:
That Bill S-229 be amended in clause 2, on page 2, by adding after line 36 the following:
"province includes Yukon, the Northwest Territories and Nunavut. (province)''.
The reason for this amendment comes from the input from the committee during my appearance here, which was very helpful input. Senator Patterson at the time indicated that the bill read only "province,'' and that implicitly and explicitly excluded the territories.
As it turns out, our excellent lawyer, Ginette Fortuné had written this consistent with legal practice, but given the presentation of Senator Patterson, we felt it was easy enough, and certainly important, that we clarify that "province'' means "territories,'' and that's exactly what this does. It's a technical amendment.
Senator Patterson is here and he could move that technical amendment if I would like to.
I was just saying, Senator Patterson, that we're clarifying that "province'' means the territories, and we specify each of the three territories in order for this bill to properly recognize, in an equivalent and important way, that it applies to not just the provinces but the territories as well.
Senator Wetston: Why don't you just put in "territory'' and define it, instead of having "province'' include the territories?
Senator Mitchell: We just chose to do it that way. The Interpretation Act says that "provinces'' means the territories, so we don't actually have to do this, but just to strengthen and clarify and to respond to the committee's —
Senator Wetston: I understand. I would just like to give it the prominence it deserves.
The Chair: For Nunavut — correct me if I'm wrong, Senator Patterson — is not referred to as a territory; it's just Nunavut.
Senator Patterson: It is a territory, but it's described as Nunavut, yes.
The Chair: Senator Patterson, will you move that amendment, please?
Senator Patterson: I move the amendment to clause 2, page 2.
The Chair: All in favour?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 2, as amended, carry?
Hon. Senators: Agreed.
The Chair: Shall clause 3 carry?
Hon. Senators: Agreed.
The Chair: Shall causes 4, 5 and 6 carry?
Hon. Senators: Agreed.
The Chair: Shall clauses 7 and 8 carry?
Hon. Senators: Agreed.
The Chair: Shall clauses 9, 10 and 11 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 12 carry? There's another amendment?
Senator Mitchell: I can also address that. This amendment also stems from two motivations. One was that clause 12 specifies that there are three options, any one of which could be chosen by an underground infrastructure operator in providing notification and designation of where the underground infrastructure is. Again, with respect to the Interpretation Act, it is not considered necessary to say (a), (b) or (c). This is very technical.
But as it turns out, there were industry proponents and supporters of this bill who were concerned that if you didn't specify (a) or (b) or (c) — the first "or'' — then they might be required to do two of three or three of three, when they're only required to do one of three.
We responded to that input from industry, but in order to be consistent with the manner in which these things are to be written, we slightly changed the configuration. We took out the "or'' and said that these underground infrastructure owners could do "any of the following.'' That's what this amendment does. It points out that they can do (a), (b) or (c) and not be subjected to the idea that they might have to do two of or three of.
Again, it's a technical change, and it comes directly from the second motivation, which was Senator Fraser's understanding of the Interpretation Act regulations and rules, so we wanted to respond to that.
Senator Seidman: I would like to move the amendment.
THAT Bill S-229 be amended in clause 12, on page 6,
(a) by replacing line 9 with the following:
"time specified in subsection (2), do any of the following:'';
(b) by replacing line 15 with the following:
"(b) provide to that person, in writing, an accu-''
— and it continues on the next line. You can see that we're removing "any other,'' so it says "an accurate and clear description.'' The amendment continues:
(c) by replacing line 18 with the following:
"ground disturbance;''.
The Chair: Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
The Chair: Shall clause 12, as amended, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clauses 13, 14 and 15 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 16 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 17 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clauses 18 to 27 under "Offences and Punishment'' carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 28 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 29 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clauses 30 to 31 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 32 carry?
The Chair: Carried.
Shall clause 33 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the schedule carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1, which contains the short title, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the title carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the bill, as amended, carry?
Hon. Senators: Agreed.
The Chair: Carried.
Does the committee wish to consider appending observations to the report?
Hon. Senators: No.
The Chair: Is it agreed that I report the bill, as amended, to the Senate?
Hon. Senators: Agreed.
The Chair: Carried.
Thank you, colleagues.
Honourable senators, in March 2016, the Senate mandated our committee to embark on an in-depth study on the effects, challenges and costs of transitioning to a lower carbon economy. The Government of Canada has pledged to reduce our greenhouse gas emissions 30 per cent below 2005 levels by 2030. This is a huge undertaking.
Our committee has taken a sector-by-sector approach to this study. We will study five sectors of the Canadian economy which represent over 80 per cent of all the greenhouse gas emissions: electricity, transportation, oil and gas, emissions-intensive trade-exposed industries, and buildings. Our first interim report on the electricity sector was released March 7.
I haven't had a chance to communicate this to the committee, but the Agriculture and Forestry Committee has embarked on a study as to the effects of climate change on agriculture and forestry. I caught it yesterday. We will no longer study the agriculture portion as they've already called a set of witnesses. They have decided not to do forestry because we've already completed the forestry sector. It's a little bit of doubling up, but I guess it says there are a lot of people in the Senate who are excited about climate change and the effects of what will take place.
Today, for the thirty-ninth meeting of our current study, I'm pleased to welcome, from Environment and Climate Change Canada, John Moffet, Acting Associate Assistant Deputy Minister, Environmental Protection Branch; Derek Hermanutz, Director General, Economic Analysis Directorate, Strategic Policy Branch; and Matt Jones, Director General, Climate Policy Office, Strategic Policy Branch.
From the Department of Finance Canada, we welcome Sean Keenan, Director, Sales Tax Division, Tax Policy Branch; and Gervais Coulombe, Chief, Sales Tax Division, Tax Policy Branch.
I also understand that both departments have other officials in the room that may be called upon during our question and answer period if need be. Should any of you come forward, I would ask that you introduce yourself for the record.
Gentlemen, thank you for joining us today. I'm sorry we took a bit of time this morning, but because we had to cancel a meeting Tuesday night, we put over that piece of work to today so we could get through it.
Gentlemen, I don't know who is presenting, but I leave it up to you and the floor is yours.
John Moffet, Acting Associate Assistant Deputy Minister, Environmental Protection Branch, Environment and Climate Change Canada: Thank you, Mr. Chair. I will make a fairly comprehensive presentation around the pan- Canadian framework and the work that the government did to prepare the pan-Canadian framework. That will be followed by a short presentation from my colleague Sean Keenan, and then we would all be more than happy to respond to any questions that you may have.
Let me assure you from the many, many correspondences that I'm receiving on behalf of the minister and the various travels that we're doing that it's more than the Senate that is excited about the work that the government is doing. In general, I think the Canadian population appreciates the need to take action on climate change, so your study is important and timely.
We understand that there are four items in particular that you wish to discuss with us: our greenhouse gas emissions projections; the Pan-Canadian Framework on Clean Growth and Climate Change, what we refer to as the PCF; measures and policies that we are developing at the federal level and that we are working with our provincial and territorial colleagues to develop that will contribute to meeting Canada's 2030 greenhouse gas reduction targets; and the economic impact of those actions and of meeting our target.
We have provided to the committee electronically in advance of the meeting, and we have with us here additional copies, documents that we hope will be helpful: a copy of the framework itself; a summary of items that were included in the 2017 Budget that are relevant to the pan-Canadian framework; a copy of our most recent projections of greenhouse gas emissions that we published at the end of last year; and a document that we published again at the end of last year entitled Economic Analysis of the Pan-Canadian Framework.
I will start with an overview of the framework, including a summary of the process that went into its creation.
The PCF, as you can imagine, was a major accomplishment in that it represents the first time we have a national plan, a federal-provincial-territorial plan, to address climate change. My boss participated in eight previous plans and bears the scars to testify to the difficulty of achieving this agreement.
As you know, the plan is predicated on Canada's commitment of the Paris agreement to limit global temperature rise this century to well below 2 degrees centigrade above pre-industrial levels.
Throughout 2016, under the direction of the Prime Minister and first ministers, the federal, provincial and territorial governments, together with national indigenous organizations, worked together to establish the plan.
There were a number of tracts of work, the most prominent of which was the establishment of four working groups, which covered carbon pricing, co-chaired by my colleague Sean Keenan; having mitigation options, co-chaired by Matt Jones; climate adaptation; and clean technology. Those four working groups worked for four to five months and reported collectively to the ministers of environment and climate change, innovation, energy and finance.
At the first ministers' meeting, in addition, indigenous leaders met the first ministers to discuss their perspectives on the framework and their priorities for climate change. Indeed, indigenous peoples were involved throughout the process to establish the framework, consistent with the government's commitment to a renewed nation-to-nation relationship with indigenous peoples.
As a result of this involvement, the framework recognizes the important contributions that indigenous people can make to our understanding of climate change and its impacts, but also how indigenous peoples can participate in and benefit from the economic opportunities that the transition to a clean economy presents.
The pan-Canadian framework itself builds on previously announced federal, provincial and territorial actions to produce emissions and will help us meet our Paris target of a 30 per cent reduction from 2005 levels by 2030.
The framework also addresses adaptation, so it is in part a mitigation strategy and in part an adaptation plan designed to help Canada and its communities become more resilient to a changing environment, changes that are inevitable.
It's also, importantly, designed to ensure that Canadian companies and workers can take advantage of the emerging economic opportunities that are afforded by the transition to a low-carbon, clean-growth economy.
Budget 2017 further reinforced the federal government's commitment to the PCF by providing substantial new investments to support a number of actions related to mitigation technology, development and resilience. This includes the plan to invest almost $22 billion over 11 years, starting next year in green infrastructure.
Let me now turn to carbon pricing, which is central to the plan. In October, a couple of months before the pan- Canadian Framework was finalized, the Prime Minister announced the parameters of a federal carbon pricing approach. Budget 2017 reiterated the federal government's commitment to ensuring that carbon pollution pricing is in place throughout Canada by 2018.
Over three-quarters of Canadians already live in jurisdictions that have carbon pricing in place, in British Columbia, Alberta, Ontario and Quebec. The federal approach will ensure a level playing field across the country, with predictable price increases. We know that carbon pricing is the most efficient way to reduce greenhouse gas emissions; we also know it will create incentives for people and businesses to make low-carbon decisions.
In addition to reducing emissions, these sorts of incentives will create the framework and the incentives for an emerging clean technology sector as companies, consumers and households look for innovative and lower-emitting ways to do business and live their lives. Again, the goal is to ensure both that we reduce our emissions and that we support a transition by Canadian companies and workers to be able to participate fully in the emerging global clean economy.
Recognizing that there are some unique challenges with the territories, indigenous communities, and remote and northern communities in general, the government has committed to address the specific challenges of the territories with respect to carbon pricing before making any final decisions about the application of carbon pricing in the territories.
The framework recognizes that carbon pricing alone will not be sufficient to accomplish our objectives, and for that reason, the framework includes a number of complementary measures that will support carbon pricing. I'll briefly describe the main thrusts of these complementary measures.
Starting in the electricity sector, the goal is to build on an already clean electricity sector. Over 80 per cent of our electricity is generated from non-emitting sources, but the goal is to support the further transition away from fossil fuels to generate electricity. So the goal is both to clean the electricity sector and to enable increased use of clean electricity by industry and households. In other words, that would be to enable those users of energy to transition from their own use of carbon fuels to clean electricity.
We have a number of regulatory initiatives under way to accelerate the phase-out of coal-fired electricity, for example, and to establish performance standards for natural gas-fired electricity.
We are undertaking this work, which is being led by my colleague, Helen Ryan, who is here to answer any questions you might have. We are undertaking this work in close collaboration with the provincial governments, many of whom, as you know, have already played a leadership role in initiating the transition away from coal-fired electricity.
At the same time, Budget 2017 has provided funding to support a number of measures to accelerate the development and deployment of renewable energy technologies. Planned infrastructure investments will support things like smart grids and electricity grid interconnections, which this committee has already recognized in its preliminary study as important preconditions to the further de-carbonization of the electricity sector.
The Chair: Let me just stop you. I notice you have quite a way to go yet. I think there was an agreement of 15 minutes on both presentations, and so far 10 minutes have passed. I'm sorry; everything is important, sir, but we are pressed for time, so I caution you and ask you for that cooperation, please.
Senator Massicotte: We all have a copy of your written presentation. I think you can assume that we will read, or have read, the rest.
Mr. Moffet: You don't to hear me drone on at length? I'm happy to cut to the end and move to questions.
Briefly, we of course have measures to address the transportation sector and to increase efficiency in buildings. We're also taking action at the federal level to reduce emissions of methane and hydrofluorocarbons from the industrial sector. We also have a number of measures both to reduce emissions from the agriculture and forestry sectors and, importantly, to increase the sequestration of carbon from those sectors.
As I've emphasized, the third pillar of the framework is adaptation and climate resilience. As you know, the budget committed significant resources to support communities, businesses and individual Canadians to take actions to climate-proof our infrastructure and to disseminate information so we can all take the necessary action in response to inevitable climate disruptions.
I do want to emphasize that the government recognizes that indigenous peoples are particularly vulnerable to changes in climate and that the budget has included funding for adaptation programs for First Nation and Inuit communities but also to specifically enable indigenous communities to transition away from what is currently a strong reliance on diesel for much of their energy needs in remote communities.
Finally, the pan-Canadian framework placed a strong commitment on the deployment of clean technology, continued support for innovation and, importantly, for enabling Canadian innovation to translate and scale up into sustainable businesses that can create jobs for the long term.
I won't go through the long list of funding that has been provided in that regard, but I'm happy to answer any questions that you may have.
I'll close by emphasizing that the work to design the framework involved significant collaboration among the governments and received considerable input from Canadians.
And while we're all remarking that it was a significant accomplishment, we also recognized that full implementation of the framework will remain a significant challenge. The government is investing considerable energy in putting in place the governance mechanisms that will be needed to ensure that we continue to implement this in the most efficient and coordinated manner as possible. By "coordinated,'' I mean across the federal government and with our provincial, territorial and municipal colleagues.
The last point I will make is that, as committed to in the framework, we're exploring options for expert engagement to support the framework, to complement what we're doing at the government level, and to ensure that what we do is transparent, reported on and informed by emerging science and evidence.
The Chair: Thank you.
We'll go to Mr. Keenan for his remarks.
Sean Keenan, Director, Sales Tax Division, Tax Policy Branch, Department of Finance Canada: I think we can go straight to questions, if you want to. That's fine with me.
The Chair: Okay. We will begin.
[Translation]
Senator Massicotte: Thank you for accepting our invitation to appear before the committee, since we had to cancel the last meeting. This is a very important issue for Canadians that will have an impact on all families. We must have a serious discussion to ensure we have a clear understanding.
In your documents, you provide detailed calculations on achieving the objectives. That is reassuring, as there is a plan. We feel that we know where we are going, and Mr. Moffet's presentation this morning provides more specifics on the plan. Figures are fine and well, but we have to identify our objectives.
On the other hand, when I look at the budget documents, I see that figures are associated with objectives. I often have the impression that the budget document is like a wish list. Significant amounts of money are set aside for objectives, but is it only a wish list of hoped-for results or is there a detailed plan to achieve a reduction of CO2 emissions through these measures?
[English]
Mr. Moffet: I'll start, and then I will turn the response over to my colleague, Matt Jones.
The plan itself is multi-faceted and it includes some very concrete things we can describe in detail right now. For example, the federal government has committed to various regulations. The government will establish those through full consultation, but we know we will establish those regulations. They will serve to drive reductions in certain sectors.
The government has also committed to ensuring that carbon pricing is in place. At the moment, we can assure you that carbon pricing will be in place in every jurisdiction. I cannot tell you at this point what it will look like in every jurisdiction because the federal government has given the first mover opportunity to the provinces and territories, and given them until next year. So we know that we have four systems in place. We know that other provinces and territories are actively discussing what kind of system they will put in place, and we are also working to establish a federal backstop that we will implement in any jurisdiction that asks us to or does not take action on its own. That's not a wish, but it's not something that can be concretely described at this time.
As we move to funding, the nature of a lot of the funding we provided in the budget is directional, and there is a good reason for that. It is because we want to leverage as much of the funding as possible, so we want provinces to come forward with their own proposals and match our money. In other cases, in other parts of the money that the government has put on the table, we're hoping that the private sector comes forward with their own proposals.
We know what we want to use it for. We don't know exactly how it will be used or who will partner with us.
[Translation]
Senator Massicotte: In the documents you sent to us, you list the objectives and provide figures on the impact of CO2. In other words, you use exact figures to show how we will achieve our objectives. Let's say we meet in 2030, in 13 years, to have a retrospective look at the targets we have achieved with regard to our objectives. Are you 90 per cent sure that the measures we talked about will help achieve the objectives?
[English]
Matt Jones, Director General, Climate Policy Office, Strategic Policy Branch, Environment and Climate Change Canada: I will pick up on both of the points, this wish list and how the process works for implementing this plan, and what kind of certainty we have around our ability to fully implement and achieve the results intended. And also, looking backwards from the future, to what extent do we think we'll be able to achieve the targets.
On those points, the pan-Canadian framework is a framework, a lengthy document, but it is quite broad in scope. There are a number of new initiatives identified. I believe there are over 50 new initiatives across the four pillars that we talked about of mitigation, carbon pricing, adaptation, and clean technology. For each of those, they are at various stages of development. We have done significant analysis around all of the options that were the feedstock of the development of the plan, the working group reports. The mitigation working group report is more than 200 pages long and has looked a number of initiatives, policy options and tools and stringencies across the sectors. From that fodder, we pulled together the pan-Canadian framework, which has a number of initiatives, but there is work to be done to fully flesh out and implement those.
There are some measures for which we can credibly estimate and model potential emission reductions. For example, the accelerated phasing out of coal-fired power is a measure for which we have an understood timeline and sources, and we can model the emission reductions associated with that measure.
Other measures, particularly those relying on federal funds and leveraged funds with provinces and other partners, are much more difficult to estimate at this moment in time. And we have refrained from doing so because with green infrastructure, for example, the final terms and conditions and the call for proposals have not gone out. We don't know what the projects are, so we're not in a position to estimate.
We know that emission reductions will come from investments in public transit, but until we know what the public transit proposals are, we cannot credibly estimate the emission reductions.
We've tried to take a fairly conservative approach to the emission reduction estimates we provided, so we had 175 megatonnes worth of emission reductions. Those are from a collection of measures that we think we can credibly model or estimate, and it excludes a number of funding initiatives. As you know from the budget documents, they are significant funds for clean technology, for green infrastructure, the low carbon economy fund and so forth.
In our case, in terms of the resources that were provided in the budget, our view was that step one was to develop the framework in the list of measures; step two is to attempt to get agreement on that collection of policy measures; and step three is to implement that collection of policy measures. In some cases we can do that with existing resources and in other cases new resources have been applied.
My colleagues from the Department of Finance Canada can tell you more about the rigorous process they have for making us document, explain and justify why we need resources and for which measures, but I can assure you we had to make a strong case in order to receive resources to facilitate the implementation of these measures.
Senator Patterson: Thank you to the witnesses.
I'm from Nunavut and we would love to reduce our greenhouse gas emissions. We understand that carbon pricing, which you say is central to the pan-Canadian framework, is a policy that encourages consumers of fossil fuels to switch to alternative energy.
Let me talk about a gold mine that we're all excited about in central Nunavut, Agnico Eagle's project which employs 700 people.
It's inland, 110 kilometres from Baker Lake. They had to build the road there at their expense. It's got a 40- megawatt diesel plant and a 5.6 million litre diesel tank, and the company is saying they'd love to have an alternative to diesel, but there is no alternative. There are talks about extending to the Manitoba transmission grid and they're in a very early stage. We're looking in Nunavut for money to study the feasibility of building that transmission line. There is no clean electricity in Nunavut.
So 2018 is looming. Carbon pricing must be implemented, under the framework, in 2018.
There is a territorial election this fall, in October. There has been one visit from some federal officials to look at the lay of the land in Nunavut. I'm told there have been no discussions of any kind on details about the specific challenges with respect to carbon pricing. I'm quoting from your presentation, sir.
I have to ask: What are we going to do in Nunavut? How can we with creative? In the federal budget, it was announced recently INAC was given $21.4 million over four years to look at helping communities reduce reliance on diesel. You talk about a $21.9 billion fund over 11 years for investments in green infrastructure. To build a hydro dam — and there should be one in Iqaluit, which consumes a third of the diesel-generated electricity in Nunavut — and I hate to say it, but it's going to take 10 years to regulate, do the environmental reviews and plan a hydro plant in Iqaluit.
I think you're the folks to tell me this: How far along are you in coming up with creative approaches to carbon pricing in Nunavut before, as you said in your presentation, making final decisions? We're feeling an urgency there and I just don't know what's happening.
Mr. Moffet: Well, senator, we have made a firm commitment to conduct a study in collaboration with each of the territories, first, to fully understand the impacts that carbon pricing might have in the territories themselves, and to understand the impacts that carbon pricing south of 60 might have on the territories. That is because, of course, some of the costs that would be generated south of 60 may be passed on to the territories in the form of consumer prices.
We have just had initial discussions with officials in each of the territories, and we're a couple of weeks away from initiating a four-way discussion with the three territories and the federal government. Our proposal is to map out a common approach but then devolve into three bilateral reviews. It's all too easy to talk about the territories as a whole, but each territory has unique circumstances — economies, geographic conditions and indigenous arrangements — so we plan to conduct those studies on a bilateral basis, looking at the specific issues that arise in each of the territories.
Senator Patterson: The company I mentioned, which is one of three operating mines in Nunavut, has calculated that carbon pricing will cost them $20 million per year by 2025.
They want to invest $2 billion to develop two new deposits, which will employ 2,000 people. They're making very good progress in employing Inuit.
What I'm saying is that we need answers soon with investments like this. Mining companies want to know if this is going to be a cost that will further reduce the economic viability in the highest-cost region of Canada.
Is there a possibility that we're going to run out of time before 2018, and that the establishment of carbon pricing in the territories can be delayed?
Mr. Moffet: I can't speak to the last question, but I can assure you that one of our top priorities is to complete these studies. These studies will look at the full range of impacts, including those on the large proportion of government services that are provided in urban areas, impacts on residents in remote communities and those on the specific industrial activities, existing and proposed, that are at least on the books, in the various territories. We know how significant those are for the northern economy, and I'm confident that we will be able to complete that review over the course of this summer and early fall.
Senator Wetston: Thank you for coming today. I have a question regarding your comments on regulatory initiatives. You have, of course, studied the Ontario circumstances around the coal phase-out. Both Senator Dean and I have experienced that professionally in Ontario. I'd like to know whether you have considered what occurred from the point of view of the efforts to phase out coal in the interest of green energy. Have you done that analysis? If you have, can you share that with this committee?
My second question is more with respect to your ambitious goal regarding the 2030 target, which we all realize is ambitious. My sense of this sector, when it comes to energy, conservation and demand management is that the challenges are often not with technology; they are with behaviour. If you don't get the behavioural responses you're looking for, it will be very difficult to meet the targets. Behaviour generally requires incentives; it's more than just money.
We understand that the private sector will need return on capital and investment. Senator Patterson has just described that, but to implement your policy in the public interest, you have to go beyond that. Can you help me with a better understanding of how you're approaching the incentives to achieve the behavioural change that you'll be searching for?
Mr. Moffet: I'm going to apologize, but I didn't fully understand what you were asking in your first question.
Senator Wetston: Your paragraph talks about accelerating the phase-out of coal-fired electricity by 2030. We have done that in Ontario. I'm an Ontario senator. I've been quite immersed in this sector, and I'm wondering what the federal government has done to analyze what's occurred in Ontario. It will be a requirement in other provinces, potentially, to phase out coal eventually, and I'm trying to understand what you have gained from that experience. Perhaps you gained nothing.
Mr. Moffet: I might turn to my colleague Helen Ryan, Director General of the Energy and Transportation Directorate, who is responsible for the development of the regulations that we currently have in place and for their amendment.
Our focus is on working with each of the provinces that continue to use coal-fired electricity. The basic parameters are such that we've set a relatively long time frame for that transition, although we're now accelerating it. So that's the first thing. We've set a clear timeline that from the time of the initial regulations was over 15 years. It was largely designed around taking into account the normal life cycle of the existing capital stock. One of the goals was to avoid stranded assets, basically, "Let's make sure we don't invest in new coal-fired electricity.'' We're now accelerating that timeline a bit, but it's still a relatively long timeline.
The second thing we're doing, through the federal budget, is that in addition to the regulatory push, we're making money available to the provinces to enable the transition to alternative forms of energy, including potentially through the financing of electricity interties that will make it easier and more economically feasible to transition to an alternative form of energy with less cost disruption.
Let me turn to my colleague who has been immersed in the details.
Helen Ryan, Director General, Energy and Transportation, Environmental Protection Branch, Environment and Climate Change Canada: As John mentioned, we do have in place regulations that require the phase-out of coal-fired electricity. When we put those regulations in place, we detailed cost assessments in terms of the potential implications. Since then we have continued to look at the work, and we're now looking to, as John mentioned, accelerate that phase- out.
We're also putting in place standards for natural gas-fired electricity, including converted boilers, because the electricity system operates as a system. When you move from one, you have to move to something else. We are looking at it comprehensively, and we're working closely with our colleagues at Natural Resources Canada, which is responsible for helping provide the assistance around the interties, the transmission lines and those other projects that might be needed to ensure we have a clean and sustainable electricity system moving forward.
We did have consideration for things going on with respect to Ontario. Our original analysis was done some time ago because our regs took effect a while back, and we continued to monitor what's going on, including developments, for instance, in Alberta.
I should let you know that we have an equivalency agreement with Nova Scotia around the phase-out of coal-fired electricity. As part of the announcement that was made with respect to the pan-Canadian framework, Nova Scotia and the Government of Canada have laid out the elements for the principles for an equivalency agreement for our future amendments.
We worked closely with the jurisdictions that are responsible for the management of their electricity system, and then we try to have regard for the decisions they are making, making investments in the appropriate places in terms of where the federal dollars are best placed to support the transition. All of that work is supported by detailed cost-benefit analysis.
That work is currently under way for the development of the proposed amendments. We are starting the work around what the cost and impacts will be, working with my colleagues within the department on that, as well as with our industry stakeholders and provinces.
Derek Hermanutz, Director General, Economic Analysis Directorate, Strategic Policy Branch, Environment and Climate Change Canada: Building on what Helen said, every time the federal government puts out a regulation we do a detailed regulatory impact assessment statement. The one Helen referred to back in 2012 with the coal-fired electricity phase-out, we found that we worked very closely with the provinces and affected industries. Our cost-benefit analysis showed when you took into account all the costs and all the benefits, not just the GHG benefits but also the health co- benefits, that the benefits significantly outweighed the costs of the initiative. We will be doing the same analysis for the upcoming regulations.
Senator Griffin: I'm from Prince Edward Island. Sea level rise is a major consequence from climate change and one that affects me directly, as I have a waterfront home, so I have a vested interest in that.
Your plan is impressive. I like the way you used economic, policy and regulatory instruments to get the target. At the end of the day, it's still a very big challenge. Is there any estimate of how close Canada might come to actually reaching the target?
Mr. Moffet: Well, senator, the goal is to reach the target. The simplest presentation of the way in which the various measures in the pan-Canadian framework will work together to contribute to attainment of the target can be found on page 44 of the pan-Canadian framework itself. That's this bar chart that I'm showing everyone.
I'll briefly describe it to give you some sense of why we're confident we will reach the target. This analysis has been led by my colleague Mr. Hermanutz.
We've started with — on the top, the blue bar — measures that are already in place. While they are still having their impact, of course, the more concrete they are, the easier it is for us to model what their impacts will be. We're starting with a high level of confidence about measures that have already been designed. We know their details. They're projected to have this level of impact.
Then we go down to the next bar, and this includes very specific measures that were announced in the pan-Canadian framework, measures like the regulations that my colleague Helen Ryan just spoke about. Again, although some of them are not yet finalized, we know what the goal will be at a performance level. We have to finalize the details about how to get to that goal.
We have a goal for the heavy-duty vehicle regulations to reduce 41 megatonnes, for the methane regulations to reduce methane emissions from the oil and gas sector by about 40 to 45 per cent, and a performance goal for a clean fuel standard to reduce another 30 megatonnes.
We're in discussion with industry about the design details, but we can plug in those numbers because we have committed to codify something that will get us there. That's the next bar.
Then what we have done is say there are a number of other measures, like those described by Mr. Jones, that will provide support to Canadians to enable them to reduce their emissions — more support for transit, for example. That's the lower bar. That makes up the difference, and we've been very conservative in terms of the possible impact of those. We're not saying at a stretch we think we'll get there. We're saying that from a very conservative modelling perspective, we're confident that the collection of remaining softer measures will make up the difference.
The final point that the government has made is that in within the international regime, there remains the potential for governments to acquire emission reductions from other jurisdictions and count them towards our target. So if there is a small gap, there is a possibility we'll do that. We've made no commitment to do that. We are not committing to a specific number, because the goal is to make these reductions within Canada. As this chart describes, we're confident we can get there.
Senator Griffin: That's very positive.
Senator Seidman: Thank you for your presentations.
Mr. Moffet, I would like ask you about your comments on the industrial sectors. You say specifically that regulations to reduce emissions of methane and hydrofluorocarbons will combine with long-term innovation and technological development.
We heard from the cement, aluminum and steel industries, and they highlighted how certain sectors of the Canadian economy are at particular high risk. They told us that their industries have reached a ceiling in reducing emissions, given today's technology, and it would require major innovation that is quite a distance down the road before that technology is realized.
I would like to read you a brief quote from what one of these witnesses said to us and I'd like to have your reaction, if I might. This witness said:
As Canadian governments have moved towards carbon pricing, many highly regarded think tanks . . . have all studied the impact of carbon pricing on competitiveness.
The results are consistent. While the competitive impacts of carbon pricing are small in the aggregate, certain sectors are at high risk . . . and vulnerable . . . .
These sectors are recognized globally as energy-intensive trade-exposed sectors. The witness continued:
It is therefore imperative that when governments design carbon pricing systems . . . they must be attuned to the reality that our competitors in import and export markets don't have similar pricing systems and that puts Canadian industry on an unlevel playing field.
Based on the premise of no more real innovation and the huge cost to the industry, what's your response to this particular quote?
Mr. Moffet: I think the federal government completely agrees with the analysis, but maybe not with your premise that there will be no further innovation. Let's set that aside though.
The quote suggested that there is a modest but important subset of the economy in Canada, which is known in the parlance as emissions-intensive trade-exposed. These are sectors that require a lot of energy, and so long as we're relying on carbon-based fuels, then they're emitting a lot, which is one of the reasons we're putting such a tremendous emphasis on further greening our electricity sector and enabling industry to transition to increased use of electricity. That's one part of the solution.
But these sectors are also trade exposed. In other words, they're competing on the international market with companies that may not be faced with the same implicit or explicit carbon pricing.
We completely understand that. We completely agree that carbon pricing needs to be sensibly designed. However, I think virtually every one of those studies that the quote referred to further recognizes that it is possible to design carbon pricing in a way that achieves two things. First, it continues to create an economic incentive to reduce emissions, while at the same time continuing to minimize the overall cost to the sector to the total price from carbon pricing. So how do you achieve that?
We have two excellent examples in Canada. In Alberta, we have a system where, for these EITEs, the government is in the process of establishing output-based performance standards. That means the government is going to establish standards that are based on emissions intensity, best in class. It is a standard that says a good performer in this sector would emit 100 tonnes per widget that it produces. That will be your standard. At the end of the year, you'll determine how many widgets you produced and how many tonnes you emitted, and if you are over that standard, you owe us the amount that's over. When I say owe, it's the price associated with the amount that's over, not the total emissions. If you're under, you get a credit, and that's why the way we create the incentive. If you're under, you can get a credit you can sell to your competitor who is less efficient than you.
There is an ongoing incentive to continually reduce your emissions, but we're only pricing on the margin. The cost that company is bearing is significantly lower than a simple scheme that would price every tonne of emissions.
So we can design carbon pricing in a way that achieves the incentive to reduce while protecting the sector from the significant cost increases that it might otherwise face.
In addition, governments have lots of other options for addressing those sectors, including — and it's a critical part around any discussion about carbon pricing — how is the revenue going to be used? The revenue can sit in the coffers of our friends at Finance Canada or in provincial coffers, but it can also be used in numerous other ways. At the federal level, the federal government has committed that with any carbon pricing we put in place, all of the revenue will go back to the provinces and then a province can determine how to use that revenue. It can be used in a variety of ways. We have lots of examples across Canada where revenue is recycled to vulnerable households, to stimulate the kind of innovation needed to enable EITE companies to continue to compete in a low-carbon economy. Revenue can also be used to subsidize expensive retrofits in some cases. Those kinds of options are completely open to each government.
There are ways we can address this. I want to reassure you that we fully appreciate the challenge faced by these sectors.
Mr. Keenan: Part of the framework involves two commitments to work together with provinces and territories and experts on the pricing aspect. One will be conducted quite early, by 2020, which will be specifically related to ways to address EITEs. So we've got that on our work plan almost immediately. The second is to examine the path forward from 2022.
In addition to the fact that we have real live examples in Canada of jurisdictions that have put in place carbon pricing and have used the available tools to address some of the concerns of their industrial actors, we are committing to look at ways that other countries might use, other different mechanisms that we are unaware of right now or want to look into in more detail in the short term.
The Chair: I want to add to that a little bit. You have to talk about where the rubber hits the road. I get all this talk about doing a little something here and then something there. I was always taught that the world doesn't run on pixie dust and unicorns.
There are some real things that happen. These industries are really worried. They are clear about what they tell us, and not just for the fun of it. What Senator Seidman said was real. They have done a lot of the work, but I see nothing, any place, even what you said, sir — it's all nice to say, but nothing to say, "This is where the rubber hits the road and this is going to happen.''
We know, for example, from British Columbia that a cement plant has already been closed. I assume there are others, too. But it was because of carbon tax at only $30 a tonne.
I hope we can get to more substantive things about what we are actually going to do. Excuse me for maybe saying it that way, but I'd like that to happen, please, as I listen to the questions and the responses.
Senator Dean.
Senator Dean: Thank you for being here. I'm going to start by thanking you all for the work you do on behalf of Canadians every day. This is, by any measure, a tough and complex priority file for the government and for Canadians, and you're doing this in a federal, intergovernmental, continental and a global context. This is not a small job.
You've mentioned governance and the governance architecture that you have in place in terms of relationships across the country with provinces and territories. I'm interested in hearing about your internal governance within the federal architecture. There are a large number of players, some of them muscular, some of them driven by the stakeholders we've just heard about. I know that all of that leaks through into relationships between departments.
Given all of those competing interests, what governance structure do you have in place that ensures an optimal arrangement whereby information is shared in a timely way and promotes real-time discussion of questions about where the environment meets the economy? That would be interesting, because I'm interested in how government works.
I'd also be interested in what keeps you awake at night, given all that complexity. Is there any fault line or element of the whole plan that keeps you awake at night, or does the whole thing keep you awake at night?
They're related questions, I think.
Mr. Moffet: There is no question that implementation is and will continue to be a challenge. There's no question that governments are large, unwieldy beasts with institutional inertia and different mandates.
I would offer that there is no perfect solution, but the reason I can sleep relatively well is that we are seeing from our perspective in the departments a concerted effort from the centre of government to make this an ongoing priority. It's not just politically. Politically, you've seen that the mandate letters for every minister include an obligation to work with other ministers. I can tell you that those few lines themselves have had an impact on the way in which our respective organizations operate, because our ministers expect it and that trickles down.
In addition, I would say that the direction and the continued oversight are coming from the very centre of government, from Privy Council, at the highest level. The "muscular lad'' who is responsible for putting the governance together is Matt Jones, so he can speak to you in detail about those arrangements.
Mr. Jones: I would be happy to.
There are a number of aspects of governance within the federal government and the provincial and territorial counterparts, more broadly. I'll try to run through these fairly quickly.
Senator Dean: Just the internal.
Mr. Jones: Just the internal ones, sure.
Within the federal government, there is a political-level and an officials-level process to ensure a speedy and effective implementation of all of these measures. The most central organization that we've created is a deputy minister's committee co-chaired by the Deputy Clerk of the Privy Council, who is also the deputy responsible for the intergovernmental affairs, and the deputy at Environment Canada. That group meets regularly to hash out implementation-specific issues.
That group is also supported by an assistant deputy ministers' committee that meets even more regularly to monitor progress and to resolve issues as they emerge in order to ensure that these measures are moving forward in a timely way.
We've gone through a process of identifying and agreeing on leads, co-leads, who's supporting, who's helping on each of the individual measures in the pan-Canadian framework. We feel we have clear accountability. The individual pieces are moving forward under the guidance of individual ministers and deputy ministers across a number of departments, but coordinated through these mechanisms.
Additionally, the Privy Council Office has created the Results and Delivery Unit, which is responsible for ensuring the effective delivery of the government's mandate. I can assure you that climate change and the pan-Canadian framework is a key focus of their efforts. They're developing report cards.
Our minister, the Minister of Environment and Climate Change, is very actively engaging her cabinet colleagues, reminding them and getting updates from them on their responsibilities.
There are also a number of reporting requirements to cabinet but also back to first ministers. One of the many outcomes of the first ministers meeting is that we are to report back on progress to them, which is motivating for all involved, I can assure you. There are some other mechanisms as well.
Getting back to your question about what keeps us up at night, lots of things. For me personally, my office within Environment Canada has been created specifically to help coordinate these efforts and to ensure their effective implementation, to support those committees, my minister and others.
What is a source of stress and healthy pressure for me, my team and others is the need to move all of these pieces simultaneously. There are all kinds of healthy tensions within the policy development and implementation process. To shepherd all of these pieces of policies at the same time, as well as work through intergovernmental processes, to work with indigenous peoples of Canada, to work with experts, to work with stakeholders, to engage the public — there are a lot of pieces to this. We're trying to move them all simultaneously, but I would say with some good progress so far.
Senator Galvez: I think nothing has changed since I started working in environment 30 years ago in the fact that your minister is important — central to development of society — yet you are one of the most underpaid, under-budget ministries. So I am completely aware that you do what you can with what you have.
A lot of what I hear from my colleagues is pessimism, negativity: "We are not going to attain anything, and everybody is very unhappy.'' I think it's mainly because this is the way the people in Environment present themselves. It's the part of "all the work we have to do.'' But there is a part that is missing, and that I wish I could have seen it here, and I didn't, which is, for example, what is the cost of not doing anything? If we do business as usual, it's going to be incredibly expensive.
There are some advantages in this climate change story. We used to call it an inconvenient truth; you can call it a convenient opportunity. Canada is there to become a leader, with so much to offer.
I want to mention four things that I didn't hear in your presentation.
The first is food security. There is no country better than Canada to offer food security, to export food. Many other countries are already suffering so much; their agriculture is dying because of climate change.
We have communication coast-to-coast. We can communicate. We have infrastructure for communication.
Electricity: We export electricity from British Columbia to Alberta, from Labrador to Nova Scotia, or the Maritimes, and from British Columbia to California. Why can we not export between provinces? Maybe we should talk about that.
Adaptation: The people and the companies that will adapt, they will survive, thrive and lead. If you adapt, you will counter the cost of climate change. There is a very nice graphic that says that with adaptation, your benefits will grow; if you don't adapt, you will disappear. In a capitalist market, that's the way it goes. If you adapt, you survive; if you don't adapt, you die.
We live in a country where we are capable of mobilizing investment. Canada is one of the richest countries — I said it here one time — with so many zeroes in the amount of money that Canada can mobilize for investment. But talk to the people with pensions, to workers and to the people in the mining companies about that.
My last point is research, innovation and partnership with industry. We have an infrastructure that puts together researchers and partnerships. We are not like Europe, where you have to do fundamental research forever. We are here. For each dollar that industry puts in, NSERC or our research institutions put in $2. So we have leverage.
The last one is about women. Fifty per cent of our population is women. We are part of working society and we move society. We are not in an Arab country. We are not in my original Latin American country, where women are just there.
If you add up all these things, it will look more — you said it has to be horizontal and we will have to push the whole thing together. Maybe you have taken into consideration some of my points. I don't know. I'll let you tell me.
Mr. Moffet: Well, madam senator, I guess my first reaction is this: Where were you when we were writing the pan- Canadian framework? Or I wish that you had helped us write it. Your optimism is important and I can tell you that it is shared by our minister.
This is not to say that the framework has it perfect or that the government thinks it has all the answers. I think what has happened with the pan-Canadian framework is that the discourse has changed from "Should we do something?'' to "How should we do this?'' That's been an important change.
The other thing this government tried to do, through the pan-Canadian framework and subsequent public communication, is to emphasize the connection between addressing climate change and economic opportunity in precisely the way that you emphasized.
Our minister continually emphasizes that it's not an either/or choice. What she is emphasizing is not just that we, as global citizens, need to do our part to address greenhouse gas reductions, but that the rest of the world is also taking action. Maybe not smoothly or uniformly, but inevitably and inexorably, action is happening, and as a result there is an inevitable transition to a clean economy.
Every economy has a choice. We can wait and see what happens, or we can get ahead of the curve and ensure that we can participate in the emerging economy. That's what our minister is emphasizing.
The framework puts in place many measures specifically designed to enable us to both reduce our emissions and also take advantage of the economic opportunities, which is not to say that the government is blind to the fact that there will be costs along the way, but, as you say, there will be more costs if we don't take action. There will be more costs if we don't invest now to proactively set ourselves up to be able to take advantage of those opportunities.
The final point I'll make is with regard to your important point about the importance of working directly with industry. I think you will have seen in the budget significant investments in clean technology. That is not government officials in basement labs developing clean technology. No doubt some of that work will be under way; we have excellent scientists and technology institutes. But the bulk of the money is going to Canadian innovators across the whole spectrum of innovation, from enabling basic research, enabling start-up companies to get off the ground, but in particular, addressing a gap that we know we have in Canada, and that's the gap between start-up companies.
Canada is extremely good at generating ideas and start-up companies. What we have a gap in, and where we lag some of the other countries, is in scaling up investment so that a good idea in a small company can transition to a larger company that can sell its products in Canada and rest of the world. It's that scale-up that we struggle with traditionally across the whole range of technology and innovation, including clean technology, and that's the focus of a lot of the investment in this budget. You will see a considerable amount of money being allocated, for example, to the Business Development Bank of Canada, BDC, that's specifically designed to work with industry to enable that kind of scale-up so that we can reduce the costs that our traditional EITE industries will incur in transitioning, but also to create new economic opportunities for Canadians.
Senator Mockler: I like what I hear. However, as a parliamentarian, I have to tell you that what keeps me awake at night is trying to find ways so that Canadians from all walks of life, regardless of where they live in the best country of the world, can have a better quality of life. I think we agree on that.
I know that the goal and the commitment that you have is to reach that target. We have seen many governments look at trying to reach targets, and many times these goals and targets are still on paper or they have disappeared into oblivion.
Actually, this morning, the Government of Canada is having a serious discussion with our biggest trading partner. We know that the government of Mr. Trudeau has invested considerable time and effort in educating American politicians and legislators on the economic ties between Canada and the U.S., and that's important.
The integration of our many industries is important, as we've heard this morning from the other senators who have informed you about those links, which I know you know about, most notably on the manufacturing side of the automobile and aerospace industries. There's no doubt, as a former prime minister and a former ambassador is talking to the Canadian government's leadership, that the advice this morning will be to keep up the education programs between parliamentarians.
What effect will the new U.S. administration have on the climate change plan of Canada? We know where they stand this morning. My question is simple: Can we reach our goals going in different directions?
Mr. Moffet: Senator, that's an excellent question and it's one that is, of course, preoccupying the federal government across a wide range of policy questions, not just on climate change.
The answer that the Prime Minister, Minister McKenna and other ministers have given is, emphatically, yes, we can and will continue. I was with Minister McKenna earlier this week in Toronto in meetings with numerous members of the financial sector in Canada, and the first thing she said to everybody, ranging from heads of the major pension funds, as you have suggested, to small clean tech entrepreneurs, was that Canada remains committed to the pan- Canadian framework as a whole and to the full implementation of carbon pricing throughout Canada.
The reason for that, coming back to the previous question, is that, yes, the United States is economically significant and, yes, they're an important trading partner, but the global economy as a whole is transitioning, and this government is determined to be part of that transition. It has heeded the advice of Mark Carney, former Governor of the Bank of Canada, now Governor of the Bank of England and head of the Financial Stability Board, who is increasingly speaking out and warning governments and businesses around the world that one of the most significant risks for financial stability is inaction to address climate change. So the emphasis in Canada is to take advantage of those economic opportunities, and also, as you said, to work both with federal legislators in the United States and with states.
It's important to recognize that the United States, while differently constituted, is also a federation, and in some respects the powers of individual states exceed those of Canadian provinces. For example, on the methane regulations that I spoke about earlier, at the federal level the U.S. government could rescind all of its methane requirements, and many states already have stated that they will continue to have methane requirements in place. Carbon pricing will remain in place in California. We have increasing interest on the part of the states on the West Coast in developing carbon pricing, and we have increased interests on the part of states in the northeast to implement carbon pricing.
Significant portions of the American economy are not, in fact, unrolling their action on climate change. They're publicly stating that they intend to continue to maintain and increase what they're doing, and the Canadian government is not just working with Washington but with individual states to ensure we attain those important economic and policy linkages.
Senator Mockler: You said you have given us examples, within the U.S., of the states. What is your opinion, then, on a second nuclear plant within the province of New Brunswick? In your opinion, what impact will the Energy East pipeline have in light of the objective that we want to attain? Is it is a good project, or is it a bad project that should be shelved?
Mr. Moffet: I'm not sure I can answer that question as an official. I don't think the government has taken a position on the prospect of investment in a nuclear plant in New Brunswick. Of course, the topic of pipelines remains an ongoing issue, and I think what the government has signalled is that an important issue for it, with respect to any pipeline proposal, is to ensure there is appropriate analysis and engagement of affected parties. I do not think the government has taken a firm position as to the desirability of any given pipeline, but perhaps my colleague can weigh in.
Ms. Ryan: With respect to New Brunswick, their site was licensed for two nuclear reactors and they are giving consideration to whether they will move forward with one. That's part of their assessment around how they want to operate their electricity system. From a government perspective, we're watching to see, and we're in dialogue with them, around what they want to do, moving forward.
Regarding my colleague's comments with respect to the pipelines, there are a number of considerations. The government is looking to put in place robust requirements like, for instance, the methane regulations that John spoke about earlier. Those regulations will help to ensure that the emissions coming from pipelines are reduced.
As part of the assessment of any major project we do undertake, the department undertakes an assessment of the upstream greenhouse gas emissions to look at the ways in which the project can be developed to help minimize those emissions and ensure that things are being done in a robust and rigorous fashion. That analysis helps to provide decision makers with information around what those implications are. I think you really need to have a combination of strong regulatory regimes and a sound assessment process in order to determine which projects are best placed in terms of moving forward.
Senator MacDonald: Last week, Environment and Climate Change Canada released a report that said that in order for Canada to achieve its carbon targets, we would have to go to $300 a tonne by 2050 and at least $150 a tonne by 2030 and, at a minimum perhaps as much as $220 a tonne, unless we had the benefit of emission credits from outside the country.
This is a document that the government was loath to release. It was produced by your department. Could you expand on it and tell us if you have done an analysis of the impact of a carbon tax of $220 a tonne on the Canadian economy?
Mr. Moffet: So the question is have we done an analysis?
Senator MacDonald: It's your report, from your department. Have you done an analysis on the impact?
Mr. Moffet: I missed the reference to which report you are talking about.
Senator MacDonald: The report leaked last week from Environment Canada about what would be required to achieve these climate targets. We would have to go from $150 to $220 a tonne by 2030. We're going from $10 a tonne to $50 a tonne between 2018 and 2022 because the government says they want to meet their climate targets, but it's obvious from these numbers that they will not meet their climate targets with these types of increases. We require something much more substantial. So if they want to meet these climate targets, they have to increase these substantially. What would the impact be on the Canadian economy?
Mr. Moffet: Let me provide a preliminary response, and then I will ask Derek to respond and describe the modelling we have done. I don't know exactly which report you're referring to, but I do know there have been a number of studies done both kind of at a very basic level within government and outside government.
About the question of if we did nothing else, none of the other measures that we've talked about that are in the pan- Canadian framework, if the provinces did nothing, if we did nothing, invested nothing, if we just relied on a tax, what would that tax have to be? That number is pretty high. That is why the pan-Canadian framework includes so many different measures. It includes regulatory measures to ensure that we don't invest in capital stock that will lock in low emissions for decades. It includes a carbon price at a modest price that will create incentives across the board. It also includes significant investment to enable research, development and deployment of clean technology. It enables infrastructure that will address the behavioural concerns that a previous senator asked about.
So the particular study that you're referring to, and there are many such studies, has to be seen as a hypothetical question that provides a particular number that has no bearing on the full suite of measures that are actually in place, which is why I refer you to the summary description on page 44 of the pan-Canadian framework that describes how each of these measures will complement one another and add up to attainment of the goal.
In terms of the specific kinds of modelling we have done, perhaps Derek can provide more detail.
Mr. Hermanutz: I think what you're referring to is a memo that had referred to these external studies. In the way John described them, they look at what would be a carbon price in absence of other policies, other actions that would be needed to hit the target.
In terms of what we've modelled, there is no national carbon price. What we're modelling is the provincial systems that are in existence right now. So we include the four big provinces, their systems from the carbon tax in B.C. to the WCI Quebec-Ontario systems that are linked with California, and we also model Alberta's system. As provincial systems in other provinces evolve, we'll model those.
The ultimate economic impact of the carbon pricing systems will depend on each province's decisions. They'll be different by province, and each province will have to decide not just the design of their system, whether they go with a carbon tax or cap-and-trade system, but an important element is what we choose to do with the revenues. The economic impacts will vary depending on whether they choose to use that to cut taxes or to provide transfer payments to their provincial residents or to invest in new technologies or encouraging innovation.
Senator MacDonald: I have a follow-up question. In relative terms, of course Canada is a carbon emitter — most modern economies are — but in relative terms Canada is not a huge emitter of carbon — 1.6 per cent of the world's carbon.
Wouldn't we benefit the world more and protect our own economy better if we put more effort towards working with high-emitting countries to help them reduce their carbon footprint? If we reduce ours and they don't reduce theirs, and there are huge emitters like China and Russia, I think we're throwing a lot of effort down the drain. Wouldn't we be better off putting our efforts with those countries and putting our investment there to try to help them reduce their carbon footprint?
Mr. Moffet: That is an excellent point, senator. I'd like to address a couple of aspects there. Of course, the issue of Canada's contribution to global emissions has been central to the discussion for the last two decades about what Canada should do.
I think this government's perspective is that domestic action is imperative for two reasons. First, we have an obligation as a global citizen. If we don't, then we will suffer from the tragedy where no individual country feels an imperative to act and therefore we all suffer. So we need to act. We need to show leadership. We need to do our part.
Second, and perhaps more importantly, the government has articulated its view that we can act in a way that protects our economic well-being, not just in the short-term, but preserves it and creates opportunities in the longer term. Indeed, Minister McKenna is increasingly referring to comments and analysis done by Governor Carney that would suggest that failure to act will actually be more economically harmful than incurring some of the short-term costs that might be associated with action.
That said, however, the government is also cognizant of the fact that we will not collectively address this problem simply by taking action domestically. So Canada is making significant — sorry, I shouldn't make a political characterization. Canada has committed contributions to supporting the de-carbonization of less developed countries. Canada is also making sizeable contributions to enabling less developed and particularly vulnerable countries to adapt to the inevitable changes that will come as a result of climate change.
Do you have the numbers at hand?
Mr. Jones: Offhand, I believe $2.65 billion have been pledged to a variety of international initiatives and through various channels to developing countries to help with everything from reducing their vulnerability to the impacts of climate change to pursuing emission reduction opportunities.
A couple of other quick points on this topic and related to some of the previous questions. One, as John mentioned, the need to work together with other countries and have a truly global agreement is fundamentally important. You're absolutely right that the bulk of the emissions are distributed between a fairly small number of countries, the U.S. and China chief amongst them. It's important to note that that 1.6 per cent makes Canada the eleventh largest emitter. We were formerly the tenth, and we've fallen to eleventh, but still a significant emitter.
The delicate balance in international negotiations are such that if the eleventh largest emitter and a G7 country isn't prepared to make a contribution to the collective effort, it's very difficult to persuade countries such as India, Brazil or other significant emitters that are such key players in this process.
The other aspect that's been alluded to in other questions is that while we have been talk about regulations and carbon pricing, perhaps we're not focusing enough on the many other aspects of the pan-Canadian framework, as was suggested, more on the opportunity side.
As you have seen in the budget, Sustainable Development Technology Canada recapitalized to work with industry to develop new technologies and to bring them forward. Natural Resources Canada and others received new money for demonstrating clean technologies; bringing emerging technologies forward; new trade commissioners for clean technology; Export Development Canada, business development in Canada.
One of the things we have try to do is not just bring forward solutions, nurture solutions and create demands for solutions, but also to potentially export them to the world in the hopes of leveraging the emission reductions from new and emerging technologies and ideas.
The Chair: Further to Senator MacDonald's question, as I understand, the anticipated growth of fossil fuel use in the world will actually reduce over time from 1.6 per cent downward. No one knows, at least I don't know or have never been given the information as to what that will be.
You also agreed with what I have been saying, that even if we eliminated all the greenhouse gas emissions and went to zero, we wouldn't affect climate change. Climate change is still going to happen. The effects of climate change are still going to take place. Senator Galvez talked about that. I think that is, in fact, true.
For a long time I've said that we need to look at adaptation in a larger effort. I'm not against doing what we can to eliminate our emissions in a reasonable fashion, because that's what we're talking about in this committee, so we don't put people in the poorhouse in this country or drive businesses across the border or to other foreign countries.
Adaptation, to me, would be something we should be thinking about, more than at least what I've seen. I'm on the Finance Committee, and I don't see a lot about adaptation.
What do you think about those kinds of issues? That, I assume, would come from Environment also. How do we adapt to a changing world regardless of what we do?
Mr. Moffet: Mr. Chair, you made two important points. One is that the effects of climate change are inevitable. Second, we ought to do what we can to ensure that we are ready.
On the first point, I think the science is clear that climate change is occurring and that impacts will continue to occur. However — and this is the underlying premise of the Paris agreement — we have a choice. That choice is, essentially, how much additional impact will we have as a global community on the climate?
Although the science is somewhat less clear, it is apparent that the more we continue to emit and the higher the concentration of carbon dioxide and other greenhouse gases in the atmosphere, the more severe those effects will be. Indeed, there may be some thresholds. That's why in the Paris agreement there was a commitment to do our collective best to limit the global temperature increase to less than 2 degrees. So there is recognition that there will be a temperature increase and along with that there will be climate impacts, but the effort and commitment are needed by all countries, including Canada, to limit that increase so as to avoid the potential significantly worse impacts of continued emissions.
As to the second point, it's appropriate to say that the government does recognize the need for adaptation, so the government has and continues to make investments in adaptation through investments in infrastructure and increased information out to Canadians. I will ask my colleague to enumerate some of those critical investments.
Mr. Jones: As was mentioned, adaptation, while we haven't talked about it much today and it doesn't get as much focus as it should, it is one of the key aspects of the pan-Canadian framework. It's one of the four pillars.
There are a number of initiatives built in there that were the outcomes of the working group that I mentioned. There was a specific working group on adaptation that looked at best practices around the world. I think there is a view amongst the membership of that group that we have some catching up to do in terms of how we approach reducing the risks of the impacts of climate change.
A number of specific measures have been built into the plan, including, as John mentioned, protecting infrastructure and using infrastructure. There is the Disaster Mitigation and Adaptation Fund, which was $2 billion in the most recent budget, which is quite significant.
There was also a fairly significant amount of resources — $73 million, I believe — over a number of years for developing a centre for climate services. The view is that there is a lot of disparate information out there, and a lot of municipalities, provinces and companies want to understand the risks they face so that they can reduce them. The plan is to work with partners to really pull the relevant information together and do some modeling and projections so people can understand the risks that they face where they are in the country and take appropriate actions.
Additionally, green infrastructure includes investments that can address the impacts of climate change. Flood controls have been highlighted by a number of provinces. There are many great examples. The Red River Floodway pays for itself year after year on a pretty regular basis, and there are other very high-performing investments in terms of preventing the impacts of climate change.
I would note that one element of the pan-Canadian framework that doesn't get that much attention is the annexes that exist. There is an annex for each province and territory where they have identified their key areas of priority for partnership with the federal government. A number of provinces, including Prince Edward Island and others, have highlighted the importance of investments to help adapt to the impacts of climate change.
The Chair: What I would ask you to do, if you would, is list that out. When you go through the budget document, it doesn't say what's going to happen. If you could list those, not just the ones you talk about, but the $2 billion, where those adaptation dollars are actually spent today. I don't want something that just says, "We're going to spend it at some time in the future, in the next five years.'' I want to know what we're actually doing today.
I have a question for Finance. The $300 carbon tax that Senator MacDonald talked about was in a report that came out of Environment about where we have to go. In fact, it continued on from the last administration, which said we needed at least $100 a tonne to even start to meet our goals.
The last administration, you will all remember, was all about regulation, not about carbon tax so much. A lot of the regulations that were put in place by that last administration are giving us the reduction of 73 million tonnes today. We know that.
Has Finance done any work on what $100 a tonne would do to the overall economy, everything, or $200 a tonne, $300 a tonne? Are there any studies out there that Finance Canada has done for Environment to let them know what the costs would be? I mean the cost to the economy and "Fred and Martha.''
Mr. Keenan: Part of the work we have been doing with our colleagues at Environment and Climate Change Canada as part of the working group on carbon pricing mechanisms was to look at the pricing scenarios. What would be the impact of some pricing scenarios, and what would be the impact on emissions reductions and on the economy as a result of those scenarios, depending on certain assumptions of what was done to the revenues?
In the working group, we looked at three scenarios of prices rising. The highest was from $30 in 2020 to $90 in 2030. Then we said, "What if we make assumptions about the money going back to households in a lump sum?'' in terms of the modelling that was done.
As Derek mentioned earlier, a key consideration related to the impacts on families and the economy relates to which the system is put in place. We have different systems in Canada. We have examples of different systems. Is it a straight carbon tax? Is it a hybrid system like the one that's in place in Alberta, where you have a levy on fossil fuels, but for certain sectors and large emitters there is a different regime, as John described? There is the specified gas-emitters regime, or the regime under those regulations. Those will have certain impacts.
There is the cap-and-trade system that exists in Ontario and Quebec. What would be the distribution of some of those permits for free to certain sectors of the economy?
What is done with the revenues? In British Columbia, they've made commitments to recycle those revenues back to certain programs and certain tax reductions. In Alberta, the revenues from the specified gas-emitters regulations go back to industry to support investments in reduction of GHG emissions.
The Government of Alberta has also said that they are going to take a portion of the revenues that they collect from the carbon levy and give those back to households to offset some of the impact of the carbon levy on them. The individual will still face the choice of the carbon levy but still have the means to make other choices.
The impacts would really depend on the details. We can model numerous options, as I said we did in the working group, to say "What if governments did this with the money?'' But there are numerous choices that governments could make. The outcomes really will depend on the systems that are put in place and what they do with the money.
The Chair: I understand all of that. We've been working on this for quite a while, so we're not new to this.
Environment did a paper for the minister when she first arrived on the scene, saying $300 a tonne. You're going to need it. Although it was heavily redacted, we got it through freedom of information. Are there some studies that Finance has done without going to freedom of information to correlate some of those things that Environment talked about in dollars per tonne — $30 a tonne, $100 a tonne? Can you share that with us, or do we have to go some other route to get it?
Mr. Keenan: I can't make any commitments right now, but I will certainly look into it.
The Chair: You will look into it and get back to our clerk.
Mr. Keenan: Yes.
The Chair: Thank you for your presentations.
(The committee adjourned.)