Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 52 - Evidence - November 27, 2018
OTTAWA, Tuesday, November 27, 2018
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5 p.m. to study the subject matter of those elements contained in Division 5 of Part 4 of Bill C-86, A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018, and other measures; and in camera, for consideration of a draft report.
Senator Rosa Galvez (Chair) in the chair.
The Chair: Good evening and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Rosa Galvez, and I’m a senator from Quebec. I’m the chair of this committee.
Before we begin, I would like to welcome three new members to the committee. Welcome, Senator Carignan. Senator Patti LaBoucane-Benson will be joining this committee too and Senator Paula Simons from Alberta. I speak on behalf of all committee members when I say we are looking forward to working with you. Thank you very much.
Now I will ask senators around the table to introduce themselves.
Senator Neufeld: Richard Neufeld, British Columbia.
Senator Carignan: Claude Carignan from Quebec.
Senator Seidman: Judith Seidman, Montreal, Quebec.
Senator Mockler: Percy Mockler from New Brunswick.
Senator Massicotte: Paul Massicotte from Quebec.
Senator Richards: Dave Richards, New Brunswick.
Senator Simons: Paula Simons, Alberta.
Senator Woo: Senator Woo from British Columbia.
The Chair: We have our analysts from the Library of Parliament, Jesse Good and Sam Banks, and to my left Maxime Fortin, the clerk of the committee.
We are studying the subject matter of those elements contained in Division 5 of Part 4 of Bill C-86, A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018, and other measures.
For this meeting we welcome from Natural Resources Canada, Annette Tobin, Acting Director, Offshore Petroleum Management Division, Petroleum Resources Branch; and Jessica MacIntosh, Policy Analyst, Offshore Petroleum Management Division, Petroleum Resources Branch.
And from Environment and Climate Change Canada, we have with us Judy Meltzer, Director General, Carbon Pricing Bureau; and Philippe Giguère, Manager, Legislative Policy.
Thank you very much for joining us. Please proceed, Ms. Tobin.
Annette Tobin, Acting Director, Offshore Petroleum Management Division, Petroleum Resources Branch, Natural Resources Canada: Thank you for having us. It’s a real pleasure and I look forward to the discussion.
There are six amendments included in Division 5, Part 4, for which NRCan has contributed to the Budget Implementation Act 2018, No. 2. The purpose of these six amendments is really twofold. Clauses 176 through 178 and clause 181 facilitate the application of carbon pricing into the Canada-Newfoundland and offshore area in a manner consistent with the co-management framework for offshore oil and gas.
As to the second purpose, clauses 179 and 180 extend the application of transitional occupational health and safety regulations under the Offshore Health and Safety Act. These are for both for the Canada-Newfoundland and Canada-Nova Scotia offshore area.
With respect to clauses 176 to 178 and clause 181, the intention is to allow for the incorporation by reference of Newfoundland and Labrador’s provincial carbon pricing regime into the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act and to facilitate the application of this provincial carbon legislation into that offshore area.
These amendments reflect approaches to offshore carbon pricing agreed upon by the federal and provincial governments, including the alignment with the Greenhouse Gas Pollution Pricing Act. The amendments would also provide the authority for the Canada-Newfoundland and Labrador Offshore Petroleum Board to act as the responsible regulator for the provincial carbon pricing regime in the Canada-Newfoundland and Labrador offshore.
With respect to clause 176 on cost recovery, as laid out in the accord acts, the federal and provincial governments provide equal shares. They front the offshore board’s budgets, which are then fully cost recovered from industry and returned back to the governments on a 50/50 basis.
Clause 176 introduces conditionality to this cost-recovery scheme to enable that 100 per cent of the costs associated with the Canada-Newfoundland and Labrador Offshore Petroleum Board administering this provincial regime will be provided for in full by the province, and once cost recovered from industry, they will be remitted in full back to the province, so a deviation from the way the regular cost-recovery scheme works.
Clause 177 is incorporation by reference of the provincial carbon pricing regime. So proposed section 164.1 and subsection 164.2(1) of clause 177 introduce Newfoundland and Labrador’s provincial carbon pricing regime entitled the Management of Greenhouse Gas Act and incorporates it by reference into the Canada-Newfoundland Atlantic Accord Implementation Act. It also identifies exemptions and limitations of the incorporation by reference. The effect of the incorporation by reference is to federalize the provincial statute by enabling its application to activities authorized under the federal accord act. But we also need these exemptions to avoid imposing federal mechanisms in addition to a process already subject to similar provincial requirements. Examples include exempting the incorporated provincial regime from the Statutory Instruments Act as well as the Services Fee Act.
Clause 177 also specifies that the Canada-Newfoundland and Labrador Offshore Petroleum Board, the offshore regulator, will get delegated authorities to administer the provincial carbon pricing regime in the Canada-Newfoundland offshore. It doesn’t currently have that authority. It is through that agreement that the province would provide and cost recover 100 per cent the regulator’s costs associated with administering this provincial carbon regime.
Clause 178 amends the federal Greenhouse Gas Pollution Pricing Act to specify that if, in the future, Newfoundland’s provincial carbon pricing regime no longer meets the federal benchmark that the Canada-Newfoundland offshore will be added to Part 2 of Schedule 1 of the Greenhouse Gas Pollution Pricing Act which will in effect stand down the application of this particular incorporation by reference. In other words, we’re incorporating the provincial regime so that it can apply to the offshore, but if in the future it’s found that that regime no longer meets our federal benchmark, we have this provision within the federal carbon pricing act to have that stand down. This was an important provision.
As to when it will take effect, it is identified to come into force on January 1, 2019, by order-in-council. This is November 27, so we don’t have a whole lot of time, but we have built into this a retroactivity clause that if this isn’t passed by then, it can apply retroactively. That’s the plan.
That’s four amendments. The other two, the second part of the purpose of these amendments, relate to the Offshore Health and Safety Act. We have transitional regulations under that act that govern health and safety in the two offshore areas: Canada-Newfoundland offshore, as well as Canada-Nova Scotia. We have transitional regulations that were brought into force in 2014 while the permanent regulations were being developed. As you can appreciate, it takes quite some time to get those permanent regulations in place. The five years really have not been sufficient time, so we have sought an extra year for those transitional regulations to apply so that we will have the permanent ones ready at the end of December 2020.
I think that covers the six amendments that are there, so perhaps we could turn it over to questions if any clarification is required.
The Chair: Thank you very much for your testimony. I have some senators that would like to ask questions.
Senator Massicotte: Thank you for joining us this evening. When we look at the bill and the amendments, everything seems consistent with our current practices. I gather that there’s nothing new and that the standard is being applied in the same way as it is elsewhere. If that’s the case, why is this being done now? Why wasn’t this done when the carbon pricing bill was passed?
Philippe Giguère, Manager, Legislative Policy, Environment and Climate Change Canada: I can start answering your question, and my colleagues can add their comments, if necessary. When you saw the bill before you, the bill that’s now the Greenhouse Gas Pollution Pricing Act containing the part that provides for the possibility of incorporation by reference, these authorities could have been used.
That said, in this specific case and in the spirit of co-management of the legislation and implementation of agreements, Newfoundland and Labrador specifically asked to proceed through this legislation. That’s the accommodation in the proposed amendments before you.
Senator Massicotte: Are we talking about co-management with all the other provinces? A great deal of co-management is carried out with Newfoundland and Labrador when it comes to outdoor wells? Is that consistent with this practice?
Mr. Giguère: The Newfoundland and Labrador and Nova Scotia offshore is governed by the legislation under the responsibility of Natural Resources Canada. This is mirror legislation. The Newfoundland and Labrador House of Assembly has similar legislation and is preparing to make amendments that are similar to the amendments currently before Parliament.
It’s in this spirit of co-management.
Senator Massicotte: Thank you.
Senator Neufeld: Thank you very much. Can you folks tell me how far offshore Canada will reach to charge the carbon tax? I just got a note that Hibernia is 300 kilometres offshore and Hebron, Terra Nova and White Rose are 350 kilometres away. How far will Canada extend its reach to say all of this becomes taxable?
Mr. Giguère: The offshore zone is defined within the accord act, and so the extent of the application of this regime can extend up to the limit of the offshore zone defined within the Newfoundland accord act.
Senator Neufeld: Where does it tell me that? Where in these amendments is that? Because the carbon tax is new. Or is that just theory and we are saying that’s what is taxed now and that’s what we will tax?
Mr. Giguère: The proposed amendments are located within the accord act. Within the accord act — and maybe NRCan can speak to that — I think there is regulation defining the limit or the extent of the offshore zone covered by this piece of legislation. What is proposed through those amendments is the incorporation by reference of the provincial regime. We are talking about the Newfoundland provincial regime in here.
It’s a bit like extending the coverage. Concerning the provincial regime that will be introduced in Newfoundland and Labrador, Parliament has been advised to extend the coverage so that the regime can be applied in the offshore defined in the accord implementation act.
Senator Neufeld: Will all activity in that area be covered with Canada’s carbon tax, including ships coming in and out and all of those things that take place on the water out to that area that you described? Will all those ships now have to pay a carbon tax?
Judy Meltzer, Director General, Carbon Pricing Bureau, Environment and Climate Change Canada: Newfoundland and Labrador propose to implement their own carbon pricing system, and they provided the government with details of their proposed approach to ensure it aligned with the common federal benchmark criteria.
Newfoundland and Labrador will be implementing their own system. I won’t presume to speak on their behalf about all the details, but it will include a fuel charge and also put a price on the pollution of heavy industry. But the federal system will not apply in Newfoundland and Labrador.
Senator Neufeld: The federal system will not apply to any shipping that takes place?
Ms. Meltzer: The federal system will not apply to Newfoundland and Labrador.
Senator Neufeld: Nova Scotia?
Ms. Meltzer: In Nova Scotia, as mentioned this morning, provinces and territories have the opportunity to implement their own system. Similarly, Nova Scotia has proposed a cap-and-trade approach to price carbon emissions in their jurisdiction; and, similarly, it was on track to align with the benchmark, so the federal carbon pollution pricing system will not apply in Nova Scotia, either.
Senator Neufeld: So the area that is covered, you are saying that’s all provincial jurisdiction. There is no federal jurisdiction at all offshore? I find that a little hard to believe.
Mr. Giguère: In the offshore zone — this is the reason why it’s presented to you through those amendments to incorporate by reference. It is a federal zone, the offshore, but again, in the spirit of the accord act, we’re talking specifically about the Newfoundland accord act. The idea is the co-management. This is mirror legislation, and the legislature will have to do the amendments as well in the spirit of co-management.
I will add one detail. Subsection 164.2(2) of the bill provides that the incorporation by reference of the provincial regime that we’re doing here is with respect to their proposed output-based pricing system and not with respect to a tax. So any tax measure is not extended in here through those amendments to the offshore zone. It’s only with respect to the proposed Newfoundland output-based pricing system, which is essentially a regime similar to the federal one but that applies to large industrial emitters in the offshore zone.
Senator Neufeld: Thank you.
Senator Seidman: Thank you very much for your presentation.
In the press release from Newfoundland and Labrador announcing this on November 27, they say:
The implementation of this provincial plan remains dependent on the implementation of a national carbon pricing system. The Government of Newfoundland and Labrador reserves the right to cancel its plan if any other province or territory does not put in place their own plan or face the Federal Backstop.
Do you have some comment on this?
Ms. Meltzer: I don’t have a comment specifically on Newfoundland’s public communications around their approach. My interpretation of that is the intent of the pan-Canadian approach is that there’s a price on pollution in all jurisdictions across the country. I assume that if it were the case that that was not applied throughout Canada, there would be concerns from specific jurisdictions about a level playing field. But I can’t speak specifically to the intent of their comment.
Senator Seidman: Basically, they are saying they could cancel their plan “if any other province or territory does not put in place their own plan or face the Federal Backstop.” That’s the point they are making. So there’s the issue about the federal backstop.
Ms. Meltzer: As to the back end of that question, I can confirm, per the announcement on October 23 by the Government of Canada, that the federal carbon pollution pricing system will be applying in whole or in part in the jurisdiction specified at the time, so in part in Saskatchewan, in full in Manitoba, in full in New Brunswick, in full in Ontario, in part in P.E.I., in full in the Yukon and Nunavut. As for the other jurisdictions, Northwest Territories has plans to implement its own system; B.C. has a system already in place; Alberta already has its own system in place; Nova Scotia has its planned system, which was also aligned with the benchmark; and P.E.I. is implementing, in part, its own system. All of that is to reassure that all jurisdictions are on track to either implement a plan that’s aligned with the benchmark, to request the federal system, or to maintain the system that they have in place already.
Senator Seidman: In your presentation, Ms. Tobin, you said that there’s a clause in here where you can decide if they’re no longer meeting federal government standards. I presume, then, that you would impose your own backstop.
Ms. Tobin: I’ll turn this over to Environment because there is a process.
Ms. Meltzer: When it was announced in 2016, the starting point was the fact that there were already robust pricing systems in place in various jurisdictions in the country. The federal and the pan-Canadian approach is to set a common benchmark to give a lot of flexibility to say there are different systems, whether cap and trade or direct forms of pricing. Obviously, jurisdictions need to be able to implement the type of pricing system that makes sense for their circumstances, but it sets some common benchmark criteria to ensure that there’s a minimum stringency.
Minister Morneau and Minister McKenna indicated in their public letter of December 2017 to their counterparts was that there would be an annual assessment of provincial and territorial systems or plans to ensure that they did meet the federal criteria or benchmark or standard — it gets different names. If for some reason a jurisdiction either requested the federal system rather than their own, or if they only wanted to implement a part of a system or chose not to implement a system, then the federal system would apply. That has been the fairly consistent pan-Canadian approach since that announcement in 2016.
Senator Seidman: It’s interesting because a piece also published on November 27 asks, “Why the lax tax?” In Newfoundland, the sense is that things are much laxer in terms of the tax there and there are a lot of exemptions. A lot of companies are exempt from this tax.
Ms. Meltzer: I know Newfoundland and Labrador is still moving forward to implement its proposed system.
Certainly, with the benchmark criteria that are listed — and I’m happy to forward the full list — there was some flexibility in recognizing that the jurisdictions may have particular circumstances and that a particular system would work.
But it does set a minimum benchmark price for direct pricing systems. When I talk about direct, it’s juxtaposition to cap and trade, so where there’s a fixed price. The benchmark price that is required is $20 per tonne of greenhouse gas emissions in 2020, rising $10 a year to $50 a tonne in 2022. All jurisdictions that opt for a direct pricing system have to implement according to that benchmark.
As in the federal system, there are some tailored exemptions to take into account particular circumstances, for example, unique circumstances in the North, and we recognize jurisdictions will do that. While the benchmark sets some common criteria to ensure minimum stringency, it doesn’t detail-prescribe. For example, for direct pricing systems for Newfoundland and Labrador, it won’t prescribe the specific output-based standard for heavy industry, including for offshore. Of course, I can’t speak to that particular comment.
The benchmark requires that there be incremental reductions in emissions explicitly driven by a carbon price signal. Of course, provinces and territories have different levers for other types of measures in their hands, but the benchmark does ensure that there is a minimum benchmark price.
Senator Carignan: My question concerns the control of expenditures and investments from tax revenue and collection. I gather that the revenue will be collected and the Government of Canada won’t issue any directives on how the revenue should be spent, for example by investing in the province or offshore. The provinces will have free rein. Why doesn’t the federal government take a share of the tax revenue, as is the case for other royalties under offshore development agreements?
Ms. Meltzer: Thank you for the question. I apologize, but I’ll need to continue in English.
Senator Carignan: It’s your constitutional right under section 133.
Ms. Meltzer: I’m sure there will be a translation. I want to be clear, even though I should practise my French.
Again, the pan-Canadian approach was a clear commitment that jurisdictions — and some jurisdictions already had systems in place at the time: B.C., Alberta, Quebec and Ontario. Those jurisdictions that are implementing their own system will, of course, be able to use the proceeds however they choose. We can look around at the systems in place, and the revenue is used in different ways. It’s used for further emission reductions like Quebec’s Green Fund; it’s used in Alberta to mitigate cost impacts for low- and middle-income families. Proceeds from a price on pollution can be used towards a whole range of ends.
The commitment, and I think I’m confirming what you indicated, is that provinces and territories that implement their own system can, of course, use those proceeds however they see fit.
Where the federal system applies, the commitment is to return direct revenue to the jurisdiction of origin so that the direct revenue returns to where it was generated. But that’s for where the federal system applies. In the case of Newfoundland and Labrador, they’re implementing their own system and will able to make all the decisions around how they use that revenue.
Senator Carignan: The collection can amount to huge sums in one sector, while investment in environmental value-added, through greener measures to reduce greenhouse gases, won’t necessarily occur in the same place and could end up in another province. An imbalance may be created.
Ms. Meltzer: I apologize if I didn’t fully understand the question, and you can correct me.
It’s certainly the case that how a jurisdiction chooses to invest revenues can either enhance or reduce initiatives, but the pricing system as a whole is an incentive system. Its aim is to realize reductions where they are the lowest cost to achieve. If a jurisdiction is applying its own system, reductions will occur where they are the lowest cost in that jurisdiction. If revenue is invested in an emissions reduction initiative in another sector, it can achieve further emissions reductions.
Alternately, if it’s used to offset cost impacts or innovate and try and spur innovation in clean technology, particularly the industrial sector, it will have different effects. In a sense, how the revenue or proceeds are used doesn’t detract from the price signal of the system as a whole. Over a larger economy, there are more opportunities for emissions reductions.
Did I miss part of that question?
Senator Carignan: We had five years to implement occupational health and safety standards. We weren’t able to do so in five years, and we’re asking for another year. Why? It’s beyond me.
Ms. Tobin: We found that multiple stakeholders, multiple parties, are part of the regulatory development process. We’re talking about a very technical set of regulations. To that end, they have found that there has not been enough time to complete the work that needs to be carried out. Consultation is required as well.
Also, I understand from colleagues who were closer to this regulatory work that it’s also in addition to all of the other regulations and work that has taken place.
When that five-year estimate was created and sought, it was felt at that time that it was sufficient, but the reality is that it isn’t. The risk of not extending the transitional regulations is not having occupational health and safety regulations in place before those permanent ones are ready.
Senator Woo: Thank you for your testimony.
I want to ask about Nova Scotia. We’ve heard that Nova Scotia has a plan that’s consistent with the Pan-Canadian Framework cap and trade, but the Canada-Nova Scotia offshore accord is not going to be subject to Nova Scotia’s plan, and they don’t require amendments to their accord. Hence, it will be subject to the federal backstop, I understand.
How does that work where the province has its plan that’s consistent with the Pan-Canadian Framework and therefore not subject to the backstop, but this particular offshore project, which is jointly managed by the province and the feds, is subject to the backstop? How does the backstop work on that project, which is jointly managed by Nova Scotia?
Ms. Meltzer: Thank you for the question.
Just a point of clarification: In some respects, because of the relatively unique emissions trajectory projected for Nova Scotia’s offshore, there are not expected to be emissions to be covered from Nova Scotia’s offshore, unlike Newfoundland and others. So, in fact, the federal backstop will not apply to Nova Scotia’s offshore. That is not the intent.
The Minister of Environment and Minister Morneau have indicated that systems can change over time, as can emissions trajectories, so if new development was going to result in emissions in the offshore, then the expectation would be that either the provincial system would cover those emissions or the federal system would. But for 2019, as per the announcement on October 23, there is no intent to apply the federal system to Nova Scotia’s offshore because of the fact that the emissions profile has obviously declined.
Senator Woo: Thank you.
Senator Simons: First of all, I want to say that as an Albertan, I appreciate the fact that the Alberta government has been allowed to create its own carbon tax regime and use it in the way it sees fit.
I have some questions about the occupational health and safety legislation. I didn’t quite understand what is happening, if it’s transitioning from a federal to a provincial law or how this affects the protections offered to workers working in offshore facilitates, which can be quite dangerous.
Ms. Tobin: This particular amendment is not to change anything. We’re seeking the extension of transitional regs. There are regulations around occupational health and safety that apply in the two offshore areas that were brought into force in 2014.
Senator Simons: Those are federal regulations?
Ms. Tobin: Federal and provincial. As I think my colleague explained, in the two offshore areas, you have federal and provincial legislation and federal and provincial regulations that mirror one another.
In 2014, when the Occupational Health and Safety Act was brought into force, the regulations weren’t ready at that time, so there were transitional regulations. I think it was agreed that an earlier set of regulations would continue to apply until permanent ones were developed.
It’s a modernization exercise. We have other similar exercises under way for these regulations that govern the two offshore areas.
So it doesn’t change this particular amendment. Really it is just seeking an additional year to get those permanent regulations in place.
As per my response to the senator’s earlier question about the risk if permanent regulations are not ready by the end of 2019, there’s a risk of not having any regulations governing this area. The one-year extension was to avoid that.
Senator Simons: It seems an awfully long time. What’s the holdup?
Ms. Tobin: As I said, we have two provincial governments and that always requires more time. As you can appreciate, it requires more time. We’ve got two regulators. There are consultations required. Unfortunately, I haven’t been close on the technical development of them, but I understand that these regulations are quite technical, such as how to do to dive safely.
That five-year estimation was an ideal. I think we all strived for that, but it has proved not to be the case.
We’re still working toward that deadline. This was an effort to ensure that if it’s not met that you have that health and safety coverage there to ensure you’re not without a regulation.
Senator Simons: Do the health and safety regulations for the two provinces have to be precisely parallel? I would imagine that would hold things up even more. Obviously, the carbon tax regimes are going to be different, but are the occupational health and safety rules the same for both the offshore in Nova Scotia and the offshore in Newfoundland?
Ms. Tobin: In the case of occupational health and safety, that agreement had been reached with both provinces to have a consistent regime across the two offshore areas. It was one that we were able to all agree upon.
Senator Simons: Thank you.
Senator Woo: I want to go back to the Nova Scotia question. Our briefing note from Finance, or perhaps from one your departments, says that the federal backstop will apply for Nova Scotia, but my understanding is that because the emissions profile does not require a backstop, it won’t be applied. Is that the right interpretation?
Ms. Meltzer: Yes. I apologize if there was misinformation in the briefing note, but I can confirm that per the announcement on October 23, the federal system will not apply in Nova Scotia, either mainland or offshore. That’s correct. That is a reflection of the anticipated emissions trajectory, which has declined.
Senator Woo: Perhaps the briefing note is wrong. The emissions trajectory is changing so that there may not be a need for pricing or some other system, but to the extent that a system would apply if the emissions trajectory changed, what would that system be?
Ms. Meltzer: We recognize that systems and choices may change. It’s sort of an ongoing assessment. The assessment against the benchmark criteria is an annual assessment, but if there were, for example, new developments in Nova Scotia’s offshore that were going to result in greenhouse gas emissions, the province would have the option to extend its own pollution pricing regime to cover those emissions. In that case, we would need to make sure that was enabled. We have taken steps to recognize that, but it may be the case that there would be a preference to have the federal approach, which is designed to apply in whole or in part. I’m speaking to your original question. It would be possible for the federal back stop to just cover a portion of emissions in the province if that was the choice or the circumstance.
Senator Woo: The province had said that they wanted the accord to be revised in the same way that the Newfoundland accord was revised, but they changed their minds, I understand. Is that because they came to the realization that the emissions profile would not require any plan to be put in place, or was there a different reason? Why would they have wanted in the first place to be considered for the same kind of amendment that we’re considering for Newfoundland if it was not a material question in the first place?
Ms. Tobin: Thank you for the question. It would be speculation on my part. I really don’t have any insight into their change of thinking and the carbon approach in the offshore context, and even more generally within the province onshore.
I do believe that with both natural gas offshore projects wrapping up production and operations at the end of this calendar year, there indeed was not any pressing need to have a carbon pricing regime put in place for the offshore at this time and to make those mirror amendments to the Atlantic accord implementing legislation.
But conversations continue on the path forward should they find that the profile and the appropriate mechanism for regulating carbon change down the road.
Senator Woo: It seems curious to me that you wouldn’t have a default mechanism for including the offshore area of Nova Scotia in the Pan-Canadian Framework when the whole idea is to ensure everything is covered, whether through cap and trade or carbon pricing. Of course, a carbon price would not apply in a sector where there is no carbon emitted. Having a price doesn’t mean a price is applied to a product or service; it depends on whether the product or service has carbon content.
In the case of Nova Scotia, it’s curious that it’s not covered by anything, on the grounds that the emissions profile is changing, when you could have a regime that covers it and doesn’t penalize it, that doesn’t incur penalties on the sector or incur cost for that sector.
Ms. Meltzer: I think you’re speaking to one the key criteria of the federal benchmark. It was to ensure broad coverage of key sources of emissions, and the benchmark is explicit. It points to, for example, the coverage of emissions in British Columbia as a general guideline, recognizing that there are different sources of emissions. Some jurisdictions will have different sources and some will not have the same as B.C.
Nova Scotia, like other jurisdictions, was required to submit their plans to price pollution this past fall. The September deadline was given to all jurisdictions. They were all systematically assessed against that same criteria. Nova Scotia’s proposed cap and trade does cover all its key sources of emissions. Again, that’s one of quite of few criteria. The systems need to meet the specific stringency requirements, need to be based on legislation, et cetera. There is a long list of criteria, and the assessment of Nova Scotia’s proposal was found to meet that.
I apologize if I’m treading over the same ground, but this assessment is done on annual basis. It is hard to project which investments will be made where, but the criteria will ensure that any major source of emissions is covered by a price on pollution.
Senator Mockler: I listened closely to the responses provided by the officials.
Good evening, Ms. Meltzer. We’ve been seeing each other a great deal lately.
I’m listening carefully to what Newfoundland and Labrador’s carbon pricing plan is. The plan intends to repeal the temporary 4 per cent gas tax and replace it with a 4.42 per cent carbon tax. It also contains many exemptions for large producers and consumers, and there are a lot of question marks on this. Some have characterized this carbon pricing plan as very lax. Where I come from in New Brunswick, the federal government deemed that this plan aligned with the standards in Newfoundland, but New Brunswick’s carbon plan was rejected.
Can you explain the reason or reasons for this, and can you walk us through where New Brunswick should be?
Ms. Meltzer: I can certainly say that all systems are systematically assessed against a common benchmark criteria and the pan-Canadian approach. The federal benchmark, to the extent that jurisdictions do need to meet common criteria for stringency and effectiveness, does enable jurisdictions to implement the type of system in a way that makes sense for their circumstances. So there are differences between systems across jurisdictions both in the type of pricing system and how it is applied.
I wouldn’t be able to comment further than that, and it’s a bit beyond the scope of the questions around the offshore. But I can reassure you that they were all systematically assessed against the benchmark criteria and do result in incremental reductions from a carbon price signal.
Senator Mockler: But you have not explained the reason why it was refused. Can you explain why it was refused?
Ms. Meltzer: What I can say is that the system was assessed against benchmark criteria. While I don’t have the sheet in front of me, I can go into it. It is very detailed. There are pages of guidance around the requirements of the system, and each jurisdiction’s plans were systematically assessed against the same criteria. The decision of whether a processed system aligned or not was made based on the systematic assessment.
Senator Mockler: I have one last question. I believe we need to look at it with a pan-Canadian vision and with benchmarks, but I’m not satisfied with the answer that you have given. Could you supply, through the clerk, why and how New Brunswick was evaluated, and what are the benchmarks that they did not meet and what are the pan-Canadian visions that they have not met?
Ms. Meltzer: Again, I would say this is a bit beyond the scope of the offshore amendments, but I am very happy to follow up to provide the details of the criteria that were used to assess all systems. We can certainly follow up with the clerk to provide those documents.
Senator Mockler: Was that decision made by bureaucrats or by the minister?
Ms. Meltzer: The systematic assessment was done by the Department of Environment and Climate Change Canada and then the government made a decision based on those assessments.
Again, I feel it’s a bit beyond the offshore question, so I don’t have a lot of details to provide, but in December 2017, Ministers Morneau and McKenna asked the provinces and territories to submit their plans by December 1. The department has worked closely with all jurisdictions — both Finance Canada and Environment and Climate Change Canada — to provide technical support, modelling, clarifications and assessments, et cetera.
The provinces and territories submitted either their existing systems information or their planned systems. The benchmark criteria, including the additional guidance released in August 2017 and again in December 2017, were used for very systematic assessments, so it was a consistent approach across plans. Environment and Climate Change Canada was the lead department.
Senator Patterson: I’d like to ask a specific question about the bill, proposed subsection 164.2(2), which specifies that the application of the provincial carbon pricing regime in the Canada-Newfoundland and Labrador Offshore Area excludes any tax-related component of the provincial carbon pricing regime.
What is the distinction being made in this clause between a tax and the carbon pricing regime? I always thought carbon pricing was a euphemistic way of describing the carbon tax, but it’s really the same thing. Can you explain why this clause talks about tax and carbon pricing as if they are different?
Mr. Giguère: The reason for this clause is that the Government of Canada believes that the elements and parameters of a federal tax should be determined by Parliament. In the specific context of these amendments the intent was to only incorporate by reference Newfoundland’s system for industrial emitters. There was no intent to incorporate by reference a provincial carbon tax but only the output-based pricing system proposed by Newfoundland.
Again, the principle here is that a federal tax should be determined by Parliament, and because in here what is proposed is the incorporation by reference, that would remove the ability of Parliament to fully look into imposing a tax.
This is also the type of provision that we have for the incorporation by reference of a provincial regime under the Greenhouse Gas Pollution Pricing Act. This is a standard clause that you would find in our legislation.
Senator Patterson: My understanding is that “tax” in this bill means a federal tax compared to provincial pricing schemes. Is the word “tax” defined so that we can be sure it’s relating to federal jurisdiction?
Mr. Giguère: “Tax” in this context relates to a provincial tax. So in the context of the specific provision you pointed to, it relates to a provincial tax.
Senator Patterson: And is that defined so we don’t have to ask an expert like you when we’re trying to understand what it means?
Mr. Giguère: The term has not been defined through the proposed legislation.
Senator Patterson: Could that not be confusing?
Mr. Giguère: I guess —
Senator Patterson: Maybe not to you.
Mr. Giguère: Obviously there is always attention given to trying to define every term within the legislation. In this case, “tax” has the general sense of a tax and will be left to the courts to —
— rule on the exact parameters in this matter.
Senator Patterson: The amendments would enable the province to delegate to the Canada-Newfoundland and Labrador Offshore Petroleum Board authority to enforce and administer the provincial carbon pricing regime in Newfoundland and Labrador. Would that new authority result in additional responsibilities for the board, and will the board have sufficient capacity to undertake those additional responsibilities?
Ms. Tobin: Thank you for the question. They will be new responsibilities that will presumably require new resources, both financial and human resources.
As to the cost recovery clause I spoke to earlier, in your package here, the approach will be the provincial government will front the financial resources. The board, the regulator, will recover costs associated with administering the provincial carbon pricing regime. Any recovered monies will be returned in full back to the province.
Does that answer the question?
Senator Patterson: Thank you.
The Chair: Since there are no further questions, we want to thank the witnesses for joining us.
(The committee continued in camera.)