Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 17 - Evidence, May 1, 2007

OTTAWA, Tuesday, May 1, 2007

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 288, to ensure Canada meets its global climate change obligations under the Kyoto Protocol, met this day at 6:20 p.m. to give consideration to the bill.

Senator Tommy Banks (Chairman) in the chair.


The Chairman: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment, and Natural Resources. We are presently studying Bill C-288. Before we begin, I would like to introduce the members of the committee. Senator McCoy is from Alberta, Senator Adams represents Nunavut, Senator Tkachuk represents Saskatchewan, and Senator Angus is from Quebec. Senator Spivak represents Manitoba, Senator Mitchell is from Alberta and Senator Robichaud is from the Province of New Brunswick. My name is Tommy Banks, and I am the chair of the committee.

It is my pleasure to welcome as witnesses today Pierre Alvarez from the Canadian Association of Petroleum Producers, Richard Paton from the Canadian Chemical Producers' Association, Robert Page, the TransAlta Professor of Environmental Management and Sustainability at the University of Calgary, and Rick Hyndman from the Canadian Association of Petroleum Producers. I presume you would like to speak to us for a few minutes before we go to questions. Please begin.

Pierre R. Alvarez, President, Canadian Association of Petroleum Producers: Mr. Chairman, I will quickly go through the document we submitted to you some time ago, but before doing so, I would like to make a comment.

Because the focus of this bill is Kyoto, my comments will focus on Kyoto and why we believe it is inappropriate for the Canadian circumstance, but that does not mean the issue of climate change is not one we have taken seriously. In fact, over the last number of years, we have seen several initiatives. We were prepared to move forward under the Chrétien 2003 plan, and we were very public in terms of being prepared to do so. We were prepared to move forward under the Martin plan of 2004 and had negotiated with former Environment Minister Dion a series of measures we were prepared to undertake, including regulations. On July 1 of this year, the Province of Alberta will begin regulations, including mandatory targets and offsets, which we have also supported. Our comments today will be more on the inappropriateness of the Kyoto mechanism as opposed to whether we are prepared to move on climate change at all. I will not go into the reasons for that in any great detail but they are focused on the Canadian circumstances and some other events that have happened globally.

I will refer to the slides as I go through our submission and only highlight the key points.

The issue of climate change and Kyoto are separable. The fact is that global challenges arrive from two factors. One is the anticipated rapid increase in the global demand for energy resulting from economic growth, which we certainly have in Canada, rising population, which is also here, and increasing standards of living, especially developments in the Third World.

The second reason is the continued global reliance on hydrocarbons as the predominant primary energy source even beyond 2050, despite rapid growth in renewables and nuclear power. Page one shows the Shell international forecast. Other forecasts may vary a little, but essentially they remain the same. They project that, going beyond the current circumstances, hydrocarbons will continue to play a role.

Stabilizing global emissions to 2050 and then reducing them requires transformation of the global energy system, and there are two stages of transformation. The first is the advancement and deployment of CO2 management technology. One of the most commonly discussed, which Mr. Page is working on, is carbon capture and storage, but the second, over the longer term, is the development of primary, new energy technology to be deployed on a global scale post-2050 — both extraction of energy from hydrocarbon resources without CO2 emissions and non-hydrogen primary energy.

I am sure you have heard about the discussion of the Socolow triangle, which is illustrated on pages two and three. It essentially shows that the challenge is how to get emissions down at the same time as consumption will grow on a global basis. You simply cannot wish this away. Socolow talks about capture and storage, carbon sinks, nuclear fission, fuel switching, energy conservation, renewable electricity and fuels, some of which are underway now and others that need to be considerably accelerated, but all of them will be required to meet the reduction targets over time.

We believe Canada mistakenly acquiesced to a Kyoto target that is unrelated to this country's circumstances and which caused a serious diversion of focus away from a framework for Canadian policies, programs and actions focused on dealing with the long-term management of CO2 emissions. You can see that gap is identified on page three.

Canada's domestically unachieveable Kyoto target has turned out to be counterproductive as a policy objective. We simply cannot reduce the emissions in this country to meet those targets and they would require the large-scale purchase of foreign credits. The outcome is that, since the Prime Minister of the day announced the ratification of Kyoto, the debate had been about who would pay for closing the gap between what we can do domestically and what is available internationally. There has been lots of arm waving but, in reality, it comes down to who will bear the burden because you simply cannot meet those targets. I am sure other witnesses have talked to you about the 40-per-cent, 60- per-cent, 70-per-cent reductions in emissions that would be required to meet the Kyoto targets.

The obligation on industry under Alberta's emission targets, for example, and the recently announced federal intensity requirement targets require greater improvements in performance than the obligations in Europe under Phase 2 of the EU, European Union, emission trading system and far ahead of what is being considered in the United States. It is important to point out that, apart from European producers, there are no greenhouse gas, GHG, emission improvement obligations on producers in any of the major oil-producing countries in the world. The OPEC countries have no targets. The Venezuelans have no targets. The Americans and the Mexicans have no targets. When we compare targets, it is important to compare apples to apples. Our competitors are not seen with any burden of any significance. If there are questions on this, Mr. Hyndman can go through that in more detail than probably any of you would care to listen to.

Reference to Canada's emissions relative to the Kyoto target as a basis for comparing Canada's efforts relative to those of other countries is also misleading in its implication that Canada is far behind other countries. For example, in 2006, nine years after Kyoto was negotiated, Germany proposed allocations under the EU emission trading system for its industry that were 103 per cent of projected business as usual emissions. My point today is that, when we compare the targets and what is going on in Canada, it is important to carefully compare them on a sector-by-sector basis. We would be happy to come back to you in terms of comparisons between Canada and the United States.

A comparison with initiatives and proposed legislation in the United States with Kyoto-based reductions and targets also reveals that the latter would put Canada seriously out of line with industry in our major trading partner. The U.S. climate action partnership, USCAP, a multi-sector initiative endorsed by several high-profile, environmental, non-governmental organizations, has committed to the following absolute targets: 100 per cent to 105 per cent of current levels within five years, 90 per cent to 100 per cent within 10 years, and 70 per cent to 90 per cent within 15 years. Proposed bills in Congress and policy statements at the state level are generally reduced to 1990 levels by 2020, with a compliance price envisaged in the range of U.S.$7-$10 a tonne, which is significantly below any of the numbers being discussed here in Canada.

Our belief is that the Kyoto target has proven to be counterproductive as a basis for formulating policies and programs to drive actions that will put the country on a path to managing its GHG emissions and making an appropriate contribution to the international effort to stabilize and then reduce global emissions. Establishing through law the Kyoto target level of emissions as the objective of policy for 2008 and 2012 would place demands on Canadians that are out of line with those of other countries and undermine the competitiveness of Canadian industry.

We believe Bill C-288 would be yet another diversion that would delay action in the areas required. The cost of buying foreign credits, if they were available, to cover Canada's 2008 to 2012 gap is conservatively estimated to be between $15 billion and $30 billion. To do the math, that is five years times a shortfall of 150 to 200 megatonnes per year times a range of $20 to $30 per tonne of CO2. That would divert Canadian expenditures from investments that would help us reduce our future GHG emissions to pay for foreign credits, many of them of questionable benefit for the global environment.

We would be happy to take you through any of these comparisons. With that, I turn it over to my colleagues.

Richard Paton, President and Chief Executive Officer, Canadian Chemical Producers' Association: My presentation will build on what Mr. Alvarez has put forward. I will deal more specifically with the bill itself and some of the challenges with it.

First, thank you, senators, for the opportunity to speak with you this evening. I always find coming to the Senate a good workout, with good questions and lots of discussion.

No doubt you have heard that many people characterize the Senate as the chamber of second sober thought. Let me perhaps suggest this evening that this bill is a fantastic example of where your sober second thought is required.

In the past couple of years we have seen a tsunami of concern and ideas about climate change, and now legislation, but little real discussion of the nature of the challenges, the options available and the implications of those options. The polls show that Canadians want action to address climate change, but they also show clearly that Canadians do not yet have a good understanding of what that means to them, the economy or their daily lives. Bill C-288 is unfortunately a perfect example of a bill which reacts to an issue without a solid policy platform that will lead to long-term solutions to this important issue.

The essence of my comments today is that climate change is a serious issue, but it deserves to be treated seriously. This bill does not do so. To do that, governments must honestly discuss with their citizens the factors shaping our emissions — and Mr. Alvarez has illustrated some of those — and the impact of making the revolutionary changes required to addressing those issues.

This bill will be, in fact, counterproductive in achieving real action on climate change because it ignores the realities of the issue and the magnitude of the action involved.

Before commenting further on that, I want to give you a glimpse of one sector — our sector. We are not alone; you have heard from manufacturing sectors and others on the kind of performance they have had. We have been committed to dealing with climate change since 1995. In 1995, we released a policy on climate change, saying to our companies under responsible care, we have to take this issue seriously and work on reducing greenhouse gases. We have been reporting greenhouse gas emissions, and you will see this is our fourteenth report on emissions since 1992. We are clearly out in front of this issue. A long time ago, we said this is so important that we will report our emissions.

Think back to 1992, 1994 and 1996, to how committed the government or the opposition parties were to this issue. It was nowhere in sight. Industry was out front dealing with this issue a long time ago, something that is forgotten in this current dialogue. We as an association are committed to what we call being the best resource operator globally in both economic and environmental terms. We believe firmly that you have to make progress both environmentally and economically at the same time, and that no self-respecting company or sector these days will sacrifice environmental concerns for economic development.

We look for balance and progress in those areas together.

Our sector is probably the most efficient in the world in dealing with environmental performance, and our productivity is 60 per cent better than the U.S.

You will see some charts that I have handed out. The most significant is the one which illustrates that Kyoto called for a 6-per-cent reduction from 1990 to 2010 in greenhouse gases on a CO2 equivalent basis, including nitrous oxide, methane and CO2; we are going to achieve a 56-per-cent reduction by 2010. You will see that, if you look at other charts, other manufacturing sectors have achieved similar levels of reductions.

When Mr. Baird testified here, he mentioned in response to a question that that was mostly due to one company, Dupont. That is partly right and partly wrong. Dupont changed a technology. It was a huge change, one unique technology that had a huge impact on nitrous oxide, but even without Dupont, our sector's reductions are at 28 per cent over the period 1992 to 2003.

The Dupont change was made because of a commitment by the association to responsible care and the climate change policy that we issued in 1995.

We continue to make those kinds of improvements. We have done many of them, about 1 per cent to 1.3 per cent a year in greenhouse gas performance, and we try doing that in the context of our economic objectives.

I read Jay Myers' testimony when he was here. He noted the kind of performance that large manufacturers have made over a number of years. One of the charts illustrates that. It uses a minus 7 per cent below Kyoto. In fact, large manufacturers are about 20 per cent below the Kyoto numbers.

Why have we done this? I have been asked in other testimony, ``If you have achieved all of that, what is the problem?''

We start from the same basis as if we had done nothing in all the policies that have been announced. The 2006 baseline is the one Minister Baird is using for his policy, and the Alberta policy is 2003 to 2005.

It is as if you are living in a neighbourhood where your neighbour builds an R-2000 house, puts in all the insulation, puts a solar panel in, drives a Prius car, has done everything possible for energy efficiency, and the guy next door does nothing. The government comes along and says, ``I do not care what you did; we are starting in 2006, and we just want your 18 per cent.''

Manufacturers are disturbed by this as it basically does not recognize anything we have done in the past. We have not seen a government yet that has actually done that.

Notwithstanding all of this progress, the reality is, by making all that progress, we are worse off because we have less potential to improve than if we had done very little over the last 10 years.

We have been penalized for our performance. I doubt that governments want that to happen. I doubt senators think that is a good idea, but that is the reality of the policy-making. As Mr. Alvarez pointed out, Kyoto is a zero sum game. If the manufacturers' progress is recognized, then the consumer will pay or the electricity sector, or Mr. Alvarez's sector, which is growing and is great for the country. That is the kind of dilemma Bill C-288 puts the country in. If you start recognizing the kind of progress that has been made, you end up with a zero sum game and effectively penalizing the high performers.

With that, as Avrim Lazar of the Forest Products Association of Canada pointed out, from forestry's inconvenient truth, we believe that governments must develop policy approaches that are sound, realistic and effective. Kyoto targets require very significant changes in our energy consumption. The economic analysis by the government has a 33- per-cent change. It is a huge intervention in how we live, work, travel, build cities, and even for our population.

Yet, looking at this bill, it is built on the simple notion that if you just set the target — if you build it, it will come — all of a sudden we as a country will miraculously turn around and everyone will be committed and nothing serious will happen if we try to do that.

I compliment the government on having come up with a report that actually does try to outline the costs of achieving these Kyoto targets. Mr. Alvarez, Mr. Paton, Mr. Hyndman and I have been asking for that kind of analysis for about eight years. Finally it has arrived. Too bad it has arrived so late because I think it might have informed the discussion for many years based on unrealistic assumptions and a poor understanding of the realities.

The reason this bill is so serious and important and why we take it so seriously is that it does not require the government to try to meet Kyoto, make best efforts, do something that is economically or environmentally realistic, but does not compromise future improvements. There could be a short-term long-term trade off. It does not say any of that. It states that the bill requires a plan to ensure that Canada fully meets its obligations under article 3, paragraph 1 of the Kyoto Protocol. There is no hedging here. This bill says that, if passed, we have to meet the Kyoto targets. This bill puts Canada in a straightjacket that seems unreasonable, even unnecessary.

Ensuring Kyoto targets are met would require Canada to purchase credits abroad, as Mr. Alvarez mentioned. Those numbers are in the Baird report — $6 billion a year, if you multiply that times five, you get $30 billion pretty fast.

I have heard environmental groups claim that sending that money abroad would not be such a bad idea — buying credits, et cetera. Come on. Do you think Canadian citizens are really going to vote for a $30-billion expenditure to buy credits from Russia? Really, the level of discussion here is primitive. There is a much better way to spend that money as a country.

I believe the onus is on the proponents of legislation as serious as this to demonstrate that it will be effective, that it will not have serious consequences for the economy and individual Canadians, and that it will deal with the issue it is addressing. I do not think this bill meets that test.

The parliamentary committee hearings on this were, I would argue, fairly unbalanced. I do not think the real information was put on the table, and I do not think the interest of many of the parliamentarians was to hear the real information. You have a bill that is based on a poor process and poor information.

Let me conclude by saying that, if Canadians want to address climate change seriously — not in the way this bill does — we have to look at how energy is consumed, at our population growth, the fact that our economy is growing, understand how our cities are growing and how they are structured, and the nature of consumer use of energy. We are going to have to deal with all of these areas in dramatically different ways. I do not see that kind of thinking here in this bill.

What I see is: make the targets, all will be okay, and citizens really will not have to pay very much because industry will figure it out and just make the reductions.

Senators, you are in a difficult position with this bill. It might be very hard to reject it totally. Some of you may not even want to reject it totally, but to accept it is also accepting a fairly reckless bill.

It may be a bit presumptuous, but I have a suggestion. You have the prerogative of second sober thought. It might be hard to amend it dramatically, but there are some things you could do to this bill that might make it more useful, more reasonable, more workable. The one thing I do like about the bill is that it actually asks for a plan. If this bill caused Mr. Baird to finally come up with a real costing, then it has already achieved a huge success. However, if you were to consider amendments, I would look at the words ``shall ensure that Canada fully meets its obligations.'' Those words could do with a little amending.

Robert Page, TransAlta Professor of Environmental Management and Sustainability, University of Calgary: Thank you, Mr. Chairman and senators, for this opportunity to appear before you.

My current situation, as of the last few weeks, is that I am the TransAlta Professor of Environmental Management and Sustainability in the Energy and Environmental Systems Group at the Institute for Sustainable Energy, Environment and Economy at the University of Calgary.

We are building a large international scale think tank at the University of Calgary to try and look at ways for the future in which we can address equally the environmental and the economic challenges. Ten years prior to this, I was vice-president of sustainable development for the TransAlta Corporation in Calgary, Canada's largest private sector electrical utility.

I have worked for academic, scientific or business-sense organizations on climate change issues for nearly 25 years.

I want to lead off by making it clear, as my two colleagues have today, in terms of my basic reaction to Bill C-288.

I have worked through the official delegation for Canada and in private work for the Government of Canada in a variety of ways over the last 10 years.

It is not with any degree of enthusiasm that I have come to this conclusion that it is impossible to implement the Kyoto Protocol target now that we are only eight months before they commence. That is pretty ominous for thermal electricity companies because there are two unacceptable paths, from our point of view, in terms of going forward.

If this bill is passed in its present form, we would see radical surgery in the Canadian thermal electricity sector, and Mr. Alvarez has already expressed the views for oil and gas here.

The alternative would require Canada to purchase billions of dollars in foreign GHG credits. I want to say that I did work for the Government of Canada in Moscow attempting to arrange for the Chrétien government the bilateral treaty, which would have come into place in connection with it.

I am very aware of the international market. I served as the chairman of the International Emissions Trading Association out of Geneva for several years.

In my opinion, this bill is politically motivated to a greater extent than it is in terms of the real climate change challenges and the real circumstances that Canada faces today.

I want to talk next about the timetable issues, which to me seem to be the critical ones in terms of dealing with the targets. With time, the electricity sector, can go way beyond the Kyoto targets, but the timetable of the next four years does not fit at all with the way in which we develop our technology.

There is something absurd about legislating what is normally an eight- to 14-year-period for a new power plant and fundamental technology in the Kyoto period where we could only be beginning those deep cuts at the end of that five- year period.

This is particularly true because any of the tonnes that we miss in 2008 are extra ones we have to pick up in the later years of the Kyoto period. This is not a target for 2012. This is the target for January 1, 2008. I just wanted to emphasize that because in this town I have heard — not from senators, so I am making no accusation here, but from others in Ottawa — misunderstandings on that point.

The next point I wanted to make is that there is a minimum eight-year cycle of design, regulatory approvals — because the public demands a say in any new power plants — financing, construction and commissioning of a new power plant. There are all these structural obligations for the electricity sector. This is important for us because technology for carbon is different than technology for other emissions, such as SO2.

The point I am trying to make here is that CO2 requires fundamental new combustion technologies. We do not have the equivalent of ``add on'' retrofits like SO2 scrubbers. I think there is some legitimate misunderstanding on the time frame because they do not understand the difference between the two.

We do not have a silver bullet. Ontario today is determined, for instance, to phase out coal. It was all going to be done by the end of this year. It is now delayed, especially in connection with Nanticoke, to 2014 or 2015 or beyond. This is a government that is determined to do what this bill was projecting, and in Ontario this is a government that has failed because of the essential nature of electricity supply.

The solution from the electricity point of view then is to try to put it into a longer time frame but to do deeper cuts as a result in connection with it. I will not go into the technical details. There will be other occasions possibly for this, but carbon capture and sequestration or storage is a marvellous opportunity for Canada because Western Canada has some of the world's best geology to do it right. In connection with this, our thermal power stations in Saskatchewan and Alberta are conveniently located in a way in which there would be minimum pipelining of the CO2 in order to accomplish that. However, our pilot plants are still behind the U.S. because, unlike the Bush administration, there has not been the same level of support for the electricity sector in terms of retooling fundamentally. I mention that because those are the kinds of means questions that are important in terms of trying to make this commercial.

In looking at this, then, we see carbon capture and storage as fundamental for thermal electricity for the future, but it also has added benefits in connection with oil sands and other areas.

I would like to touch on one other area in connection with the way in which Kyoto was designed. I spent a great deal of time at conferences as part of the official government delegation looking at these issues. The EU economy and emissions regime, as Mr. Alvarez has suggested, is not comparable to Canada. First, we have a much higher rate, especially in Alberta and in the West, of economic growth, which relates to emissions. We have a much higher rate of population growth, which relates to emissions. Most important, as Mr. Alvarez eloquently said, we are burdened with the emissions of energy production as well as the emissions of energy consumption, while the EU virtually only has to deal with the issues of energy consumption. This is very important. I am not trying to make a partisan point in terms of this bill because David Anderson, when he was minister for the Liberals, tried to address that with the proposal for energy export credits, which unfortunately, in an international sense, were not acceptable to our European colleagues for their own self-interest reasons, and therefore we were not able to secure those for the future. Above all, it is not equitable or fair to compare on a per-capita basis when the structure of the Canadian economy is so different from that of the European economy.

Lastly, many countries, not just Canada, will miss their Kyoto targets. Just ask some of those in Japan today. Go to Spain. Go to Italy. Go to some of the other countries and talk to those folks. The Kyoto commitment countries only comprise 30 per cent of global emissions, and that is declining. As we look forward to what is critical for the future, we have to try to build a global regime. How do we build that global regime? Especially how do we get China and India in? The only chance we have is with emissions intensity and a global regime quite different from Kyoto.

The time frame issues for technology are important for us. I would like to see Canada become a global leader on the development of oil and gas and thermal electricity technology. We focus on this, not just on the issue of the Kyoto targets, which will divert money on short-term emission credit purchases away from the long-term technology development.

In my humble opinion and due to the respect of the authors of this bill, I strongly urge that this committee — with its traditional role, as Mr. Paton put it, of sober second thought — come back either with amendments to, or rejection of, this bill so that we can build a Canadian plan that meets Canadian circumstances and really does deliver a program that will cut emissions significantly in an appropriate time frame.

The Chairman: Thank you, Mr. Page. I just want to confirm — do you represent the views of TransAlta or are you here as an academic representing the institute?

Mr. Page: I am here formally as part of my past legacy for 10 years as a vice-president of TransAlta. I do not think there is anything in what I am saying that is separate from our research group at the university, which is also focused on technology change in a longer-term setting.

The Chairman: We could reasonably assume that what you are saying is likely the view at TransAlta?

Mr. Page: Everything I have said here are things I said as a vice-president of TransAlta.

The Chairman: Thank you.

We have a long list of people who wish to ask questions, so I will request that you ask them with as much conciseness as possible. I invite our witnesses to respond in a like manner.

Senator Cochrane is the distinguished deputy chair of our committee and is from Newfoundland and Labrador. We have also been joined by Senator Milne, who represents Ontario.

Senator Cochrane: We are the house of sober second thought, and that is why we were late. We have to go by our rules, so we apologize for that. I should not make any apologies, because our job is to be there.

I will start with Mr. Page. You sure have the expertise from what you have told us. You are a think tank in yourself.

Mr. Paton: He even gets on TV.

Senator Cochrane: It might not be the last time, Mr. Page.

It has been said by some witnesses that investment in new technology, and I think you have said that as well, is what it will take to bring about significant reductions in our greenhouse gas emissions. What incentives do you think are needed so that stakeholders can make more investment in new technology and achieve greater results in terms of reductions?

Mr. Page: Could I answer that question specifically from the electricity sector and then try to come back in a more general sense?

Senator Cochrane: Yes.

Mr. Page: In terms of some of the concerns of the electricity sector, first, I think it is important, and this is why your deliberations are so important, that we need some certainty for the future in order to make the huge capital investments that are involved in changing our technology.

Second, the current technology, and by that I mean coal gasification, emissions capture and permanent sequestration underground, is probably 25 per cent to 35 per cent above what is commercial today, certainly in terms of Alberta. What we are looking at in order to try to speed the agenda of this investment and the new emissions capture and technology is to see the ways in which public policy can begin to close the gap to make this commercial as soon as possible.

Certainly, one of the preconditions for clean coal, for instance, is the necessary infrastructure. The Governments of Canada and Alberta are both exploring the ways in which public investment in infrastructure, like CO2 pipelines, can speed up the process. There are also issues with regard to the taxation of corporations and accelerated capital cost allowance. There are various other ways in which it can be made quicker for companies to then begin to make the investment and to cover their costs in that respect.

There are also ways at the provincial level that are critical. For example, in the electricity sector in the United States, those states that are prepared to allow the flow-through of costs to customers in connection with new clean coal technology will speed up the adoption of that technology and the necessary investment for it. Our institute at the University of Alberta is trying to do what I call ``fine-tuning'' to Canadian conditions necessary both with carbon capture and sequestration.

In Alberta, we had a marvellous federal-provincial-private sector partnership early on with the oil sands. It was called the Alberta Oil Sands Technology and Research Authority, or AOSTRA, and allowed breakthroughs in technologies to be sped up by far greater resources than any one company could do on its own. That partnership helped to lower the costs of the oil sands. We need a similar kind of partnership for technology on the current clean coal operations. Senator Cochrane, those are some of the ways in which we could begin to move this agenda forward.

Senator Cochrane: When did this national partnership start?

Mr. Alvarez: For AOSTRA, the substantial funding dropped off in 2001 or so, and we saw significant economic developments brought to fore when the oil sands started to develop. It dropped off the government's funding priority list in about 2001.

At the time, it seemed to be no longer needed from an economic point of view. We think it is time to regenerate it from an environmental technology point of view.

Senator Cochrane: It probably should never have been cancelled but that is not for me to say. My next question is for Mr. Paton. Everyone is getting a pat on the back today. Could you outline some of the specific improvements that your chemical producers are making?

Mr. Paton: It is difficult to answer that question because with chemical producers, unlike steel producers, thousands of technologies produce thousands of different kinds of chemicals. The processes are all very different.

Senator Cochrane: Tell us about the ones where you are making improvements.

Mr. Paton: We are making improvements in all of them. One example might be the use of what we call ``cogeneration.'' When you are producing chemicals, there are off-gases that you can recycle and burn to produce electricity. That process produces a far greater efficiency in the entire operation and fewer emissions. We have promoted cogeneration in our facilities and many of our companies now have cogeneration facilities. However, they always run into problems because, once you start developing electricity and you cannot use it all, then you want to sell it to the grid. There are all kinds of policy issues that require you to deal with provincial governments in that respect. It is an example of an area where governments can help to improve efficiency significantly if they were to deal with it through policy. Unfortunately, governments do not deal well with policy.

As well, Nova Chemicals has just completed a refit to their plant in Sarnia that is based on new chemical processes which significantly reduce both greenhouse gases and other emissions. One of the issues we have as a chemical industry is that we produce other emissions, and that is why we developed this report. There are about 400 other emissions and they present problems. Greenhouse gases are a problem but other emissions are also a problem. We are constantly looking for ways to reduce benzene, any volatile organic compounds, or VOCs, and other emissions that are health issues.

Senator Cochrane: Could you provide us with a list of all those things that you are doing?

Mr. Paton: Some of our efforts are in this report from case studies we have done. I would add that this builds on what Mr. Page was saying about the realities of this. You have all probably driven by one of those chemical plans with all the pipes. If you have ever been to Sarnia, you will have seen them. When you design a plant to last for 25 to 30 years, you are building technology, pipes and processes, and so that plant cannot be changed quickly. Rather, you have to reinvent the plant. When you build a new plant, it is about 15 per cent to 20 per cent better than the old plant was but, in fact, it is highly complicated, although you can make steady improvements over time. Dupont is the only company that we know of over 20 years that has made a leap by making a 98-per-cent change. It is usual in our business to make a 1-per-cent to 2-per-cent change per year. That is the kind of progress we have made. We began in 1995 and have made steady progress.

Mr. Page surprised me when he mentioned that the clock starts ticking at eight months. For a normal plant in our industry, eight months is about .05 per cent. It takes five years to plan a new plant or a major change to a plant because there are engineers, drawings, contractors and implementation to coordinate. Time is a huge issue. You can make improvements but you have to do it over a long period of time under a good policy.

The Chairman: Sometimes you can go quickly. You gave an example of that when you spoke to 3M having made changes to create a huge improvement in output.

Mr. Paton: Sometimes you can do that but it is not the norm.

Senator Angus: I must admit I did not have any difficulty figuring out where you stand with respect to this bill. You will not have much difficulty figuring out where I stand, either, as I agree with everything you have said.

However, we do have an obligation in terms of a piece of proposed legislation that has come forward from the House of Commons and has received second reading in the Senate, to which all of you have alluded.

Mr. Alvarez, Mr. Paton and Mr. Page, did all of you appear before the House of Commons committee that studied this bill?

Mr. Alvarez: I did not but several members of our association did appear.

Senator Angus: Mr. Paton, you made a statement that the process was unbalanced. Could you elaborate?

Mr. Paton: The committee had a potential 300 witnesses at one time so they had to make a decision on their priorities. Effectively, anyone who had testified on Bill C-30 — and most of the industry had — was told, ``You have already testified.'' Basically, many industry groups were not asked to testify. Any testimony that industry gave was linked to environmental groups' testimony. I think the process could have been better.

Senator Angus: I want to be sure.

Mr. Paton: Yes. We testified on Bill C-30.

Senator Angus: All four of you are from the petroleum industry. I understand that includes oil and gas. In addition to the things you have said in your testimony, I am gathering, and I would like confirmation from each of you, that you do not feel you got the story out at the House of Commons committee the way you got it out today. Is that correct?

Mr. Paton: Absolutely.

Senator Angus: Mr. Alvarez, do you agree?

Mr. Alvarez: I would argue we have not got our story out in the last 10 years we have been talking about this.

Senator Angus: Mr. Page?

Mr. Page: For electricity fields, especially on the thermal side, we have had great difficulty expressing to committees of the House. In fairness, we have been allowed to appear, but the resulting documents have not reflected what we tried to say.

Senator Angus: Some of you did not get a chance to get your story out, if I understand Mr. Paton's point.

Mr. Paton: Right.

Senator Angus: Mr. Hyndman, I cannot resist asking you, are you related to that other distinguished Albertan, Lou Hyndman? You look like him.

Mr. Hyndman: We are second cousins.

Senator Angus: That is a long line of great Canadians.

Mr. Paton, I think you said, in describing the advances made over quite a period of time in the industry you represent, that productivity was 60 per cent better than in the U.S. It made me perk up, as we are interested in productivity in Canada in another committee on which I sit. Could you elaborate on that?

Mr. Paton: Yes. At one point about five years ago we kept hearing governments saying we are not as productive as the U.S.

My members, and we serve our members well, kept saying that that does not make any sense. Within our global companies, Canadian locations are all the most productive.

We did a study with Industry Canada about five years ago. It came up with a number in the 30-per-cent to 35-per- cent range, which we discounted a bit because some of that was the dollar. We just redid the study and the number is 60 per cent.

Why? First, our plants are newer. I mentioned earlier that we have some of the most efficient in the world. If you have been near Joffre and seen the kind of plants we have, they are some of the best in the world. That is one reason.

We have a lower dollar, but that only has about a 5-per-cent to 8-per-cent impact and less now that the dollar is at 90 cents. Our engineering costs are lower. Our labour costs are slightly lower, but our workforce in Canada is also very good. It is stable, flexible and in locations where people stay for a long period of time.

Canadians have an export-driven economy, so if we do not compete well and win those kinds of competitions, we lose. We do not export.

Senator Angus: In terms of environmentally sustainable technology, do you consider yourselves to be state-of-the- art?

Mr. Paton: Yes. We look at it as top 10 per cent or 25 per cent. Canada invented responsible care in 1985. There are 52 countries in the world that have adopted it. Every two years we do a review internationally and Canada is number one every time. The chemical producers are seen as the environmental leaders in the world.

Senator Angus: There is a ringing in my ears. We have been holding a number of hearings, as I think you know. The people from the forest products industry were here and made interesting statements along the same lines.

I am hearing that about some industries; we also know of ones not doing a good job. Mr. Page told us about Ontario saying it will get rid of the coal in terms of firing these plants and suddenly it was delayed until 2014. I wanted to know why that was. Things like that give rise to bills like this. There is not consistency. Has it to do with political will or has it to do with industrial compliance?

Mr. Page: I would argue that political will in the Ontario government has always been there. Their credibility was on the line in terms of that pledge.

It was only slowly they began to realize the difficulty in replacing major power plants. There are many factors here. One is that base load is very difficult to replace. By ``base load,'' I mean coal, large hydro or nuclear. That was going to take much longer, so you could not eliminate the coal-fired plants because you did not have a replacement for them. If you did that without a replacement, all you were doing was importing power from the United States from even dirtier coal plants than would be the case. Ontario, especially in crisis periods, has imported power to supply industry and consumers.

Third, in connection with it, there are significant transmission constraints for power. What I mean by that is that the whole grid of Ontario to a certain extent is locked into the nuclear power plants and to the coal-fired Nanticoke plant. If you want to replace any of those, it almost must be in those same locations because it will take 15 or 20 years to create totally new transmission corridors for Ontario. It is the same all over North America. I am not criticizing Ontario here.

What you get into is that the process, irrespective of political will to actually change that technology and base load power, was far more complicated than the government, irrespective of its political will, understood to begin with.

Mr. Paton: Can I make a quick correction? We did testify on Bill C-288 but not on Bill C-30 because we testified on Bill C-288.

Senator Angus: They are totally different.

Mr. Alvarez: They tried to make Bill C-30 into Bill C-288.

However, my point remains the same: We do not think we were heard or listened to. That may be normal.

Senator Angus: I wanted to give you an opportunity to explain what you meant by unbalanced in the process. Here we do, believe me, try to give sober second thought and to improve, if necessary, legislation.

You have used words like ``absurd'' and ``the thing will not work'' and so on. There are colleagues who will suggest you are being very negative. I do not know whether it appears on the face of it, but I do tend to be a positive individual. I would like all of you to focus a moment on Bill C-288 and see if we cannot be more positive.

One of you suggested that this bill could be amended. You said to focus on the words ``shall do this'' or ``shall do that.'' You gave an alternative that I think would be in preference, total rejection of the bill.

Let us say we try to make it workable. In your view, can this be done with that bill? You are saying you are against the bill and it is absurd to try to legislate a 25-year process to be done in eight months. That is compelling language from responsible people. However, you say we in our own businesses have walked the walk and talked the talk and introduced the technology. The technology is impressive. You are doing away with the things causing climate change.

Is this bill subject to salvation?

Rick Hyndman, Senior Policy Advisor, Climate Change and Air Issues, Canadian Association of Petroleum Producers: I would like to comment first about closing down coal-fired power in Ontario. That was no doubt a sincere wish of the current government in Ontario when they were in opposition, but it is an example of people getting wishful objectives mixed up with reality. It turned out to be even as far off as the Kyoto target in terms of what could actually be done in Ontario. When they found out they cannot turn off the power plants without turning off the lights, they revised the timetable.

With respect to Bill C-288, from watching the media over a number of years and talking to my friends socially and otherwise, it is clear to me that most people identify Kyoto with action on climate change. When it gets down to the details of the Kyoto Protocol, the mechanisms and the buying of credits, most peoples' eyes glaze over. What Canadians clearly want is the government to bring forward a real action plan on climate change in Canada to make our fair contribution to the global effort on this.

It seems to me the spirit of a bill like Bill C-288, which is responding to what the public understands about this issue is to say, we want the government to bring forward a plan to have real action on climate change and forget about that Kyoto target which we sincerely believe is a real mistake made back in 1997 with little analytical effort going into how it related to Canadian circumstances.

There are some people who think that, having a target well beyond what you will achieve, is a motivational goal to have you do more than what you would otherwise do. I think the time has long passed on that. If you look at the record, the U.K. got a target that was above what their actual emissions are because they did a switch from coal to gas. They are very active in doing things because they are not arguing about whether they can meet a target that has nothing to do with where they are going to get. They can focus on actually improving on what they are doing without worrying about that target being well beyond them.

If you look at the evidence, you have the U.K. out there pushing things and other countries with targets beyond what they are intending to do or way below what they are going to do in terms of emissions, doing much less. We have been stalled in this country by admiring the gap here for a good part of 10 years. I think the evidence shows that having a target that is way beyond what you will do is counterproductive to really doing things.

Mr. Page: I just wanted to add a couple of things personally. When Kyoto was signed in December 1997, our company immediately launched work to ensure that we would meet our Kyoto target. We were hard at work on that. The difficulty was that there was no policy context. There were no means in which we could plan. I can remember going to our board of directors and they approved things where we still did not have in place the means to achieve some of this.

When we are sitting eight months before Kyoto kicks in and people are saying to me, ``you are abrogating an international obligation of Canada.'' I take that seriously. None of us take it lightly that there is an international agreement that we as a country both signed and then ratified. At the same time, we have to look at what can actually be done. I would be happy to see an amendment to this bill that separated the target and the timetable.

Senator Angus: If I were a government relations expert advising you as to how to take advantage of the process and you contemplated the bill could become a positive thing in your minds, because it does call on the government to come up with a plan, Canadians would want me to counsel you to come with specific suggested amendments. Do any of you have wording that would come close to accomplishing that?

Mr. Page: I will try to answer the question as simply as I can. As long as the targets and timetable are linked to Kyoto in the ironclad concrete way they are in this bill, there is no way my colleagues in our sector can achieve it other than closing power plants or buying huge quantities of international credits. Those are the only two options we have.

I can tell you right now that Keephills Three, the next approved power plant for Alberta — and Alberta needs 800 megawatts in order to stay abreast, in terms of our economic expansion — would not exist if this bill goes into law. We could not go to New York and raise the capital to finance that project. It is not that there is some immoral conspiracy at work here.

These are very real considerations. We are not attempting to criticize or to stop the target. The issue is the timetable. If you give us the time which reflects the way in which we do business, we can go way beyond it.

Senator Angus: With this unlinking you are talking about, it makes sense.

Mr. Paton: You are asking a good question. As I mentioned earlier, there are some things I like about this bill. This may surprise you.

Senator Angus: I sense that.

Mr. Paton: This is because it actually asks for a plan. We have been asked for a plan for 10 years, one that realistically deals with economic impacts. The first step I have seen of that plan is what Mr. Baird recently announced. We should have seen that plan 10 years ago. That should have been done when the Kyoto agreement was being negotiated. It was not. It should have been done again when it was being ratified. It was not. It should have been done a long time ago.

At least this asks for a plan, and it is providing a response, and we have seen Mr. Baird's costing which is a good first start.

If you turn this bill into, we need a plan, to respond to what Mr. Hyndman was saying there is a concern of Canadians. We need to respect that. Look at the words, the Governor-in-Council shall ensure Canada meets its obligations under article 3, paragraph 1. That creates an ironclad link as Mr. Page mentioned.

How about ``shall endeavour to ensure''? You have now created flexibility and the government will not go off and spend $30 billion buying foreign credits. Maybe the government falls and the Minister of Finance loses his job because he is proposing this. This is politically dangerous territory to get into. Obviously, if you can establish a bill that says have a plan to the extent you can meet what is a reasonable test, do it. That is not a bad bill. I do not have a problem with a bill like that.

However, this bill does not do that. This bill links those two things. You pass the bill, then you must achieve the Kyoto targets.

Senator Angus: Mr. Alvarez, do you have a response to my question?

Mr. Alvarez: The problem is clearly identified. We would be happy to provide an answer in writing back to you.

Senator Angus: I was intending to invite all three witnesses to respond, if you wish. If this bill can be rendered non- absurd and rendered positive in your view and something that can be added to this process, we can win this battle. I think we are all together. It is a huge problem that must be resolved. The way this thing is drafted puts the government in a straightjacket and would have the opposite result to its good intentions.

I am inviting all of you, if you wish, to provide our clerk with suggested amendments. I will not put in any time frame, but the chairman has a way of circumscribing. If you do that, you will find we will give them close attention.

Maybe you would be available to come back to be questioned on them.

The Chairman: I would like to crystallize what Senator Angus has said. Take that, together with what Mr. Page has said, when you are devising those proposed amendments. Bear in mind this is not a bill that will determine whether or not Canada is obligated under Kyoto. Canada is obligated under Kyoto. It has been signed. It has been ratified. Those goals and those times are there. This bill merely states, as Mr. Paton has said, that it obliges the government to do something that the government is already obliged to do. It is too late. Everybody knows that. It should have been done before. Everybody knows that, but what this bill says —

Senator Mitchell: I do not know that.

The Chairman: It may not be too late. Having read the bill, exactly as Mr. Paton said, it does not set out anything in particular except the timelines and goals, which already exist. It states that the government will come up with a plan.

It does not say, for example, Mr. Paton, whether that plan might recognize the good work your staff has done since 1995. It may, and it should, and this committee so you will know, has issued a report in which it said specifically, when these plans come down, credit must be given for what went on back there, not just starting today. We already said that and believe it very strongly.

Senator Angus: And we did it unanimously.

The Chairman: We did. Bear that in mind when you are preparing those proposed amendments.

Senator Spivak: You are, indeed, an impressive group. You are not perfect, though.

I just want to set the context. You are talking about being realistic, but there are two or three realities around this issue.

The first is exactly what the chairman said. When I spoke on this bill in the Senate, I said I do not know why it is necessary. We are committed. It is a legal commitment, and if we do not meet the targets, we are penalized unless something changes.

There are a couple of other contextual issues. The first is that we are almost at 400 parts per million of CO2 emissions. That has never happened in the last 650,000 years. Up and down, it has only been 300, even in the warming and the global.

We are 1 degree warming, and that is 11 degrees in the Arctic. If we are at 2 degrees, that is really venturing on dangerous, and 3 degrees is catastrophic. That is a reality that you cannot deny. Jim Hansen of NASA has said we have 10 years. We may have 10 years or we may have 200, but we are taking a big chance.

With respect to the costs, the projection that Minister Baird came out with is based on certain assumptions. Those assumptions have been questioned. Even within the cost analysis it says that, if this and this happen, the costs go way down.

There are, however, other cost analyses that have been presented by the government. One of them was leaked some time ago as to what the costs might be. Not all of them conform with this cost, but one of the things that comes out of there is that, given the rate of increase — and I hope you will comment on this, Mr. Alvarez — of the oil sands productions, five times maybe in the next decade, given intensity targets, the absolute emissions of the oil sands will increase by 179 per cent.

That is Natural Resources Canada's estimate. There are a number of other analyses, which the former minister of the environment told me about and we have asked for, so we will be able to compare them, hopefully, with this latest one and see what the differences are.

I listen to Premiers Doer from Manitoba and Campbell from British Columbia, and they are talking about being involved. They are hoping to be involved in a country-wide cap and trade system. However, they are also talking about being involved with California and Gary Doer has talked about being involved with Chicago for six years, so what is with this hot air from Russia?

There is a certain proportion under Kyoto that you can allocate to cap and trade. There is also the clean development mechanism, which has to be absolutely certified. I mentioned at the last meeting, for example, that Alcan makes solar ovens. If you could get the credits and the solar ovens, that would change the global emissions. After all, it is not just Canada that is increasing, it is global. If you decrease them somewhere else, it helps the world.

It would cost $15 billion to $30 billion in the next five years for carbon credits and carbon targets. That is exactly the cost of the GST. In my opinion, this is a higher priority than cutting the GST. What is your view as to how that could be done? Do you think if we, Canada-wide, linked into the United States and did the clean development mechanism, CDM, could we not do part of the Kyoto targets in that fashion while it is taking the time? I could not challenge your estimate of what it would take to get the technology in place.

Mr. Alvarez: Many questions, Mr. Chairman. Let me try and answer a couple of them, senator.

One is that we have been ready to go for five years on part of it; in 2002, we settled on a large final emitter program. We were ready to go.

Senator Spivak: I know.

Mr. Alvarez: We have been waiting. That included real targets with real payments. That administration came and went. Subsequent administrations came and went, and we have been working on this for a year. Do I think any of that is achievable by January 1, 2008? No.

Senator Spivak: It is an average of the five years. It is not that you have to immediately reduce by 2008. That is what the Pembina Institute told us.

Mr. Page: Let us be fair on this.

The Chairman: Mr. Alvarez is going to answer the question.

Mr. Alvarez: If we added no new production, senator, it would require a 25-per-cent reduction in emissions. No new production. Do not add new oil sands projects. It would be require a 25-per-cent reduction in emissions. It physically will not happen that quickly.

With regard to your comment about the oil sands and the growth there, it is significant in a Canadian context. If you put it in the context of what is going on globally, and what is going on in China, by 2009, China will overtake the United States as the largest emitter not even covered by this.

Our view is and remains — it goes back to the beginning of this whole debate — get a context and get it focused on improving our energy efficiency and reducing our emissions. Let us get started. I think we have spent so much time fighting about who is going to pay for the gap we are losing ground. I do not disagree with you.

Senator Spivak: My question is not that we should not do anything. I am asking you if some of the cap and trade could give you some time? I understand the timeline.

Mr. Hyndman: The idea of having a cap and trade system and then to miss our target by a long shot, so we are going to buy credits from the United States, which means —

Senator Spivak: Or clean development mechanism.

Mr. Hyndman: Let me come to that next. There is a lot of hype around North American trading. Think about it as saying that, because we have a target we will not meet, we will pay the Americans to do some reductions. They are the biggest emitter in the world. This world needs all the reductions they can make on their own without them claiming them as Canadian reductions, so we make fewer reductions all around. All we are doing is being taxed by American companies to pay them to do reductions, which they should be doing on their own anyway.

You then go over to the CDM and say we should be dealing with countries that deserve to be paid to make their emission reductions. I refer you to a recent article in The Economist where they point out over half of the CDM credits we have seen so far are coming from China, from plants that produce a chemical for refrigeration which is being phased out around the world and has a by-product that is a powerful greenhouse gas they get paid to destroy. They are now building more plants because they make enough by getting paid to destroy the by-product, more than they get from selling the basic product. The Economist, which is gung-ho on doing things, says this is a total scam and should not be happening.

There are some good quality activities going on under the CDM, but the world needs far more than that. That is back to Mr. Alvarez's presentation at the beginning. This is all about transforming the global energy system. Tweaking around at the edges on emission trading, which is a short-term thing, is distracting us from putting the money into carbon capture and storage now, and new technology to get other carbon management and other non-hydrocarbon energy. If we do not do that, the gigawatt of new coal capacity going into China every month will just swamp all of this. We should focus on what matters, not on tinkering around at the edges.

Senator Spivak: Gwynn Morgan wrote an article not too long ago suggesting that China and India are going to blow us away. He suggested that the way in which to leverage with China and India is through trade. The developed countries could say, ``We will not trade with you unless your emissions go down, and we will help you with the technology.'' Is that not a positive step?

Mr. Page: TransAlta did, in fact, do what you are suggesting here in connection with the clean development mechanism. We have real hard evidence from actually trying to do projects in India, Uganda and three Latin American countries of which one has come through to solution.

First, you have a minimum of about three years right now to get a project through the clean development mechanism bureaucracy. Second, you do not get all the credits that are being developed by those projects. Some go to the host country, and some go to the international mechanism that is self-financing.

The really big blocks of credits that are available are not the clean development mechanism but the collapse of economic activity in the Ukraine and Russia in particular. Canada conceivably would be the largest purchaser of those credits in the world because our gap is so large here. The numbers quoted earlier by one of my colleagues are accurate.

Are we to try and do maybe 500 projects in a whole bunch of different countries around the world to get that volume of credits we are talking about here? That would be time consuming and costly, and I can offline give you chapter and verse why I make that. I say this in sadness and regret, because this was going to deliver technology transfer on climate change to a whole variety of developing countries, and it was an idealistic concept to begin with, and a very worthwhile concept for a variety of reasons. The problem is the delivery of those credits cost effectively and in the time frame that we are talking about.

The Chairman: Senators, just to remind you, we have just over a half an hour left, and we have heard from three out of seven senators so far. Keep it short.

Senator Spivak: The point is, though, that we are talking about a reduction of emissions globally. It does not really matter. You are saying that we should forget the premiers and the Montreal exchange and all of those people who are talking about cap and trade?

Mr. Page: No. Please do not put those words in my mouth, because that is not my position. First, U.S. credits are illegal under Kyoto. We get rid of those that we were talking about. If you are talking about Kyoto compliance, then forget the United States, because none of their credits are Kyoto compliant.

Second, you have to understand what the rules of Kyoto are in order to be using offset credits. We have no system in place, unlike other countries, to get going on this. If you look at a forestry, agriculture soils or methane capture project, our experience as a company was that you needed 18 to 30 months to do the business deals and get the regulatory approval, because the government of Alberta is the only one with rules yet in this area, and it then has to go through a regulatory process and mechanism for public credibility, and that is fair.

Once again, it comes back to what all of us are talking about. If we started tomorrow, and we could not because it would take another 18 months to put the system in place, but if we did, it would be 2010 or 2011 before those projects would start coming into a domestic emissions trading system as verified credits. We have this time lag, once again, in trying to gear up and get going. I am not opposed to a domestic emissions trading system, and Mr. Alvarez and others can vouch for that, but we have to understand this is a limited option with regard to what is really needed to meet Kyoto.

The Chairman: It would be helpful to us, Mr. Page, if you would let us know. I know it is a good story — in respect of successes regarding emissions reductions that TransAlta has had. I have trumpeted them several times before, but I know that you have that at your finger tips. If you would send those to the clerk, we would be grateful.

Senator Mitchell: Gentlemen, thanks for your presentations. It has been very interesting. I will say, Mr. Paton, that I am actually surprised by your presentation. As I was listening to you, I was struck by this image of a punch-drunk fighter whose opponent is flat out on the canvas, and you are still throwing punches. You have won the fight. You are there. You are nine times Kyoto, 56 per cent by 2010. Just going to straightline the math on that, if I divide by 20, because of the year 1990, that is 3 per cent a year. It does not seem to me like five years may be too little. It just may be that we are just not thinking big enough. Maybe we have some breakthrough elsewhere. My point is that you have done it.

Mr. Paton: Tell Mr. Baird that.

Senator Mitchell: At that point, I did not know, but I thought you did because you appeared on Bill C-30. I thought you already told him that — and you should be telling him that.

Mr. Paton: We have been telling him for five years.

Senator Mitchell: Our carbon balance budget goes back to 1990, so you would be given credit, and you should be given credit. Do not worry about that. To argue against this bill because you think you are not going to be given credit is kind of — I cannot think of a quick analogy here, but it is like fighting a fight you do not have to fight. Again, you are still throwing that punch. It does not have to be thrown. You are left here doing what you have been doing — arguing for all these other industries on their behalf that we cannot do it.

Mr. Paton: I need oil and gas and electricity.

Senator Mitchell: I want to stick to the expertise that you represent here, which is chemical. Has all the work your industry has done to get to 56 per cent of your objective hurt your competitiveness? Has it reduced your viability as industries? Has it reduced or increased your efficiency? Has it done anything but just make your industries more competitive, more profitable, more efficient? Could you give me some downside here so that it would sound like you had some reason for saying it cannot be done?

Mr. Paton: I must begin with your first point. After 10 years of talking about the progress we made, I do not believe that this government or any provincial government will recognize in any way what we have done. I have seen many ministers talk about credits for reduction but I have not seen any real progress on that issue. The reality is, senator, that not only the chemical industry but also several large manufacturers are in this situation. Aluminum certainly is and forestry and steel have done very well.

By recognizing that, you are adding to the problem, because the numbers get higher for everyone else. You may say that is not a problem for me, but it is a problem for me because I work with all these other sectors, and not just as colleagues. I sell to them and I buy from them. The cost of my rail, my feedstock and my electricity is very important. The chemical industry does not exist in a vacuum. It exists in the context of an economy. If the program that is put forward screws up the economy, it screws us up. I have not seen any scheme that provides any credit for reduction or even for performance.

Notwithstanding that, your point is interesting. Has it affected us negatively? The answer is probably not. However, we have been working on this for 12 years. We started in 1995; we started reporting our emissions in 1992. Consistent with the points that the others have made, it is time. If you take time and you do it over a long enough period of time, you can make progress. New plants come on stream. You get the best technology. You do a refit of your plant and improve its performance. Most of our performance is not actually directed at greenhouse gases. It is actually directed at most of our other emissions. The greenhouse gases come with it. The real focus is benzene or chlorine or some other kind of emission. You can do this, but you have to do it in time.

As my colleagues have said, we have had 10 years of no direction, no decisions, and no policy framework. We have done what we could without that, and probably will now pay a price for having done that. If one was starting today in 1997 with the Kyoto treaty and you had 12 years and a policy framework, you probably could make significant improvements over that 12-year period. For example, 2 per cent a year is a lot. Twelve times 2 per cent is 24 per cent. That is how you make progress — time, constant effort on the technology, and constant improvement. There are very few leaps in this business.

The Chairman: I want to interrupt for a second. Are you saying that you and your association believe this or any government would fail to give credit to your members for work they have done that is significantly reduced?

Mr. Paton: Absolutely. When you set a baseline of 2006, what are you doing? You are ignoring everything that happened until then.

Senator Mitchell: We are setting a baseline of 1990. We should make sure you get a copy of our balanced carbon program. It is fundamental in that.

Mr. Paton: Remember the dynamics.

The Chairman: However, we are discussing Bill C-288.

Mr. Paton: I have not seen any government-recognized plans. Thank you for saying that and thank you for recognizing that.

The Chairman: Sorry to interrupt but we are discussing Bill C-288 now, and the questions must be in that context.

Senator Mitchell: We have plans that would work within that.

Each of you can answer this. Do you believe in the science of climate change? If not, then why would you do anything at all? If so, and you will not accept the levels of reductions dictated by that science — that is, you are arguing for some other level of reduction in some other time frame — what science do you have to say that that is enough to meet the requirements dictated by the science of climate change?

I will repeat the question, but do you accept the science of climate change? If not, then why would you bother, because you do not accept it? If so, why would not you do what it dictates, unless you have science that argues otherwise? Mr. Paton, you have said we will have to restructure society and this and that, and that it will ruin the economy. I do not see concrete numbers on that. The only study you quote is the least credible study that I have ever seen — and I am not exaggerating — namely Mr. Baird's study. If you read that study, you would see there are seven assumptions that it outlines itself for which it says it cannot account, for example, for carbon sequestration. Can you imagine doing a study on the costs of global warming initiatives that does not consider carbon sequestration, and you are here quoting that study. The next eight months, five years, the Prime Minister is already putting $150 million into a pipeline. I am saying that once we start we can go —

Mr. Paton: I am just happy there is some study.

Senator Mitchell: But you are using that as your only study. You are making aggressive statements about what is going to happen to the economy. I should point out that $30 billion over five years is one-quarter of 1 per cent of our GDP. It is not a huge chunk of the economy, and that figure assumes it would all be cost, not investment that would stimulate the economy.

What are your figures? Give us some real numbers, better than Mr. Baird's, that your industry is using to come to the conclusion that you are making here in front of this public forum on a very critical issue about which your industry probably says it accepts the science.

The Chairman: That was a question.

Senator Mitchell: Senator Angus went on a long time.

The Chairman: Who would like to answer that question?

Mr. Page: I have had deep involvement in the science since Toronto in 1988.

Senator Spivak: Me, too. I was there.

Mr. Page: I know you were. I would like to make a point here, because certainly our company and others have in no way been involved with attempting to challenge the climate change science. Anyone who lives in Alberta and sees droughts the way we have in the last five years, with all due respect, I do not think is attempting to do that.

The point I want to make here, which is important, is there is a direct linkage between what we are trying to do, both on mitigation, which is the sole focus of your bill, and adaptation. Our costs are not just the technology, they are the water droughts because our hydro will have to be out of business, which you know very well, because I know your background, Senator Mitchell; I was not meaning to imply you did not.

Senator Mitchell: Would not matter if you did.

Mr. Page: When we come to look at the cost questions, then we have a whole variety of costs. We also have to look at the fact that CO2 is only one of the emissions we are dealing with and the chemical folks are dealing with 100 of them. We are dealing with five in terms of thermal coal emissions here in connection with it.

Under your bill, as of January 1, we would have to cut 12 megatonnes of CO2. You can work out the figure on the back of an envelope. This is not some kind of mysterious way in which we have used Mr. Baird's figures or anything else. I will use Mr. Dion's figures. His figures are that, on January 1, 2008, our sector has to cut its emissions by 37 per cent. You use that figure; it is a straight mathematical exercise — 12 million tonnes against $20 per tonne, $25 per tonne, and then $30 per tonne. This is not some kind of mystery; it is things that our shareholders — and we just had a meeting — are very aware of in terms of going forward. They are a burden we carry.

I want to get away from Mr. Baird's figures because they assume that carbon capture and storage would not be in place in the next five years to meet Kyoto. They were not talking about the long term. If you want to get away from this bill and talk about the long term, then that is exactly what all the members of the panel have been talking about. Then we will be happy. Currently, the cost estimate for carbon capture and storage is very high because there is not the pipeline and other things in place yet.

Senator Mitchell: I wanted to pursue the idea that Mr. Alvarez said he was ready to go in 2002 but the government did not catalyze it so you did not do it. The chemical industry and the forest industry did do it.

My concern is, now we stop everything, reassess, throw this bill out, start the cycle all over again and there is no drive. What does it take if not this kind of precipitous action to get the attention of the industry? I have a lot of respect for it, believe me, I am from Alberta. However, I believe we have a huge responsibility given that as well.

Mr. Alvarez: I did not say we did not do anything. What I said is there is a regulatory framework that would be recognized and did not come into place. We have reduced CO2 emissions by six megatonnes in the Province of Alberta because of the flaring and venting initiative that Senator McCoy knows a lot about. Six megatonnes is a big number and it is going up. We are not going to move to B.C., we are going to move to Alberta.

Regarding the annual intensity improvements, if you take out Dow's project, the chemical guys have averaged about 1 per cent a year energy intensity improvement and so have we. That is what the average is and energy is our biggest input cost. We are not waiting, we will get going, but there is the situation of what is the long-term solution? The issue is on page one of our submission. Those are Shell's numbers. If we do not find a technology solution that breaks the linkage between energy production and CO2 emissions on a global scale, nothing we do here will matter. The technology piece is what matters most. That is what allows us to do the flaring and vending stuff. Six megatonnes is an awful lot. We did not stand around waiting for government, but at some point we need to know the rules.

Senator Mitchell: What portion of your budget goes into research to find the technology that will break that link between CO2 and energy production?

Mr. Alvarez: That is a big question because much of that is global. There is a lot of work done in Europe and here. I do not have a number for you offhand, but if you look at the Statistics Canada data, the number one spender on environmental improvements on a capital basis every year is the oil and gas industry, whether it is SO2 at refineries or the flaring and venting stuff we have worked on before. Capture and storage is something we are spending a large amount of time on trying to find ways to separate the sands from the oil without using as much brute force as we do now is probably the next threshold as the one that matters most.

Opting is interesting, but it is also carbon intensive at the end because of the gassing of asphalt; a very pure CO2 stream ready for capture and storage, but if there was an easy and quick one we would be there. There are trade-offs.

Senator Adams: It sounds like you have been working for 10 years on the issue of climate change. Can you tell us what is causing it? Are you talking about the rest of Canada, southern Canada or are you talking about all of Canada including the Arctic, the sea, the water and the lakes? You travel to go to work every morning in a car. I go up North and travel on the land up to a minus-60 wind chill and I go hunting. What is it costing in terms of climate change? You have worked for about 10 years with respect to climate change. We see everything changing up North for the last 10 years. Can you tell us what is causing it?

The Chairman: Internalized costs. There are contingent liabilities that are being built up that no one is taking care of. They will cost someone down the line and they are always offloaded on the public and half of them end up where Senator Adams lives. Will we take care of that?

Mr. Hyndman: Because this is a serious problem, it is important that Canada goes at it in the right way. People misinterpret when we point out that Canadian emissions are 2 per cent of global emissions. It really does not matter in terms of the actual emissions what we do in this country. What matters is we do something that is an example to the rest of the world about how to go about dealing with the climate change issue.

We think, as Mr. Alvarez pointed out earlier, if we look at the real challenge, which is to transform the global energy system, that this is not about driving a smaller car only. That helps. It is not about insulating your house only. That is a little bit of help. It is about transforming the primary supply of energy globally. If we divert our attention from doing what we can to improve efficiency and reduce energy consumption, but more so putting more effort into that technology starting out with CO2 capture and storage, moving on to other carbon management and non-hydrocarbon energy, then we are not providing a good example to the rest of the world of what has to happen. If the rest of the world does not transform their energy systems, it is a totally moot question what we do. It is totally irrelevant. We have to provide a good example of how to go at it.

In my opinion, emissions trading is a complete distraction. The idea of setting the targets and then meeting them by emissions trading as if you are actually doing something is really diverting global attention away from what has to happen. We should get on to putting money into technology and pushing energy efficiency.

The Chairman: We should because the minister of energy of China announced last week that they were actively and aggressively in the market for technology to reduce emissions.

Senator Adams: I do not think you answered my question. It is not only with respect to CO2 and emissions. We see the weather changing. We know things are changing with the ice and snow on the land within the last 10 years. I am asking if you know about it because you work on climate change.

Mr. Alvarez: I lived up North and worked for Nellie Cournoyea for a long time. A week does not go by when I do not get reinforced by what is going on up North. It is not just there. We are seeing visible evidence around the world.

Our point to you and the one I feel most passionately about is that it is about transforming the energy system from top to bottom. That is not an easy task but it is one we have to get on absolutely.

Senator Adams: When I first moved to Rankin Inlet in 1964, usually Hudson's Bay froze at the beginning of October. Now it is sometimes into December before it freezes. We want to know what is causing it. Is it caused by changes in the earth because of CO2 or other emissions?

With respect to seawater, we used to know things like the thickness of the ice but now we cannot rely on it anymore. We do not know anything about why the climate is warmer in the wintertime. The only thing we know is that the ice, wind and such things are different now. I was out on the land recently and we hardly had any snow. It was more like ice crystals. As long as you stay on the lakes, it is okay. That is the kind of situation we want to know about. We are talking about climate change and we want to know what is causing it. Are the chemical companies responsible? Do other countries say they will do something about it? How will we fix it?

Mr. Alvarez: It will be fixed by a change in the energy system.

Mr. Page: Your question is a good one. It comes back to a part of what I said a moment ago that Canada must look more seriously at adaptation and not just at the issues of mitigation. Carbon dioxide is in the atmosphere for an average of one century. What we put in today will be with us for a very long time ahead and we must live with the consequences of that. Similar to Mr. Alvarez, I have spent time in the North trying to research some of those areas. Earlier in my career I worked with the Berger Pipeline Inquiry in connection with that.

That experience showed me the conditions in the mid-1970s and they are so different today. When I travel in the North, I am acutely aware of precisely the points that you are making, senator. This comes back to the fact that we still have a great deal of scientific work to do to try to understand some of this. The urgency to act is clear to all of us in connection with it.

Senator Adams: Mr. Alvarez, you talked about emissions. I hope that you can find someone in your company to send up North. We tried for a few years but nothing works in the Arctic, whether the source is New York or Canada.

The Chairman: Maybe it will get really warm, Senator Adams.

Senator McCoy: I have been talking about this for 10 years in equally spirited ways, from time to time. I understand in Alberta we have been saying that we can do it but it is a matter of how and when to do it. There is no reason not to begin — so many of our companies have done just that. There is no question about the good efforts that we see across many sectors.

I am interested in getting a couple of facts on the table so if I do not put all my questions in sufficient time for a response today, you are invited to send written responses to the committee. If I frame my questions more precisely, it would no doubt help you greatly.

I would like to know what commitment you made in 2002 on a tonnage basis across your sectors. All of you said that you negotiated a plan to proceed with and that it was designed to meet the Kyoto targets. Then, you did it again in 2005. You will quibble with that.

I understand that you would be in negotiations, or at least discussions, with the government on how you will meet the current plan. I would be interested in hearing tonnage as well as percentage targets that all of you committed to in that regard.

The Chairman: For the record, what percentage is that?

Senator McCoy: I want to know the percentage reduction of CO2 equivalents. As well, I would like to know the status of each of your industries. We have heard some of these numbers but not in a systematic way. For example, Canada's chemical producers have told us that they are 56 per cent below where they were in 1992. I would like to know the figures in tonnage. The oil and gas industry has informed us of some of their reductions.

The Chairman: Gentlemen, would you like to take those questions under advisement and respond in writing?

Mr. Paton: They are good questions but, unfortunately, the answers are not easy because even the plans that we talked about with government were never clear. There are entire sets of assumptions, such as business as usual, that do not exist in the current plants. In fact, we never did get a number that was clear, such as what will be counted for offsets. We never had clear rules and so we never knew what we were being asked to do.

Senator McCoy: I agree that we should put all of this in writing, I preface my remarks in that way.

The Chairman: Should we also put the questions in writing?

Senator McCoy: Yes. I will ask this one last question. I would like to know the estimated cost of carbon sequestration and the timeline for it. For the record, I would like some of the positives that the industry has in the offing. We have heard a great many negatives this evening but I know there are many positives, depending on which reality and time frame you look at. It would be good to balance the record just to show what can be done.

The Chairman: Mr. Alvarez wants to say something but we will ask Senator McCoy to formulate the questions and send them to each of you and ask that you respond in writing.

Mr. Alvarez: I am happy to do that. I can give you a couple of examples now. Remember that the targets of former Prime Minister Chrétien, former Prime Minister Martin and former Environment Minister Dion were not the Kyoto targets. They were not the application of Kyoto but rather they were separate targets. Depending on how you define the oil and gas industry, the emissions reductions under Dion would be about 18 megatonnes remaining flat over the 14-year periods. The current plan sees that number at 22 megatonnes per year but escalating over a period of time.

By way of example on carbon, capture and storage, the project at Weyburn, Saskatchewan, has stored over 200 megatonnes in an underground oil and gas reservoir.

The Chairman: All of which has been imported from the U.S.

Mr. Alvarez: That is because we could not get certification or a local supplier in Saskatchewan, where the power company just about drove us nuts.

Senator McCoy: That is a good example of a pilot but there is discussion for larger scale efforts. I am sure that you can provide those answers in writing.

Senator Tkachuk: Mr. Page, you talked about some of the problems that some European countries are having in meeting their Kyoto targets. I would like you to talk about that for a moment.

Perhaps you followed with some interest the last meeting when they were trying to come up with the numbers for post-2012, and it is already 2007. They were not able to do it likely because they all knew they would not meet their 2012 targets, so the penalties would land and all hell would break loose. Everyone is talking about how easy this is and how we can simply get rid of fossil fuels and CO2 so the world will move ahead smoothly. It drives me nuts to hear that kind of talk. Nonetheless, perhaps you could talk about that so we would be educated about what is happening.

Mr. Page: First, countries in the southern tier, such as Spain, Italy, Greece and others, are clearly in considerable difficulty with meeting the guidelines. When I was in Spain, they were experiencing a drought and their hydro system was way down and their coal-fired power generation was way up. There were serious problems in the power generation sector.

First, understand that the Europeans had a huge head start with all the emissions from East Germany. Second, what Canada did in the 1960s with the TransCanada pipeline, the U.K. did only after former Prime Minister Margaret Thatcher destroyed the coal unions and moved Britain to natural gas in the North Sea.

Senator Tkachuk: It is so ironic and, actually, unbelievable.

Mr. Page: In any event, they got two huge boosts in connection with that. The U.K. emissions increased last year; they did not go down. Part of the reason you are into this is they underestimated, when they signed Kyoto, the transportation sector's expansion and the expansion of emissions involved in the transportation sector. If you talk to European industry today, as I try to do on a regular basis, you get a different message than you get from the governments that are still hopeful with regard to the targets they are meeting for clear political reasons.

Certainly, the Europeans today have gone through their three-year transition period — 2005, 2006, 2007 — with limited targets. On January 1, 2008, the real targets come in. They will be more difficult for Germany and a variety of others. The Germans are proposing to take out nuclear power. That means they have to get clean coal technology fast, or else they will be once again reversing some of the current trends. They already have close to 20-per-cent wind, so the capacity of wind to drive down emissions is somewhat limited.

You have industry and transportation sector problems. The degree to which natural gas from Russia will be sold to the Europeans at a cost-effective price is limited because the Russians want to drive the market hard in terms of the prices they get back.

There are all of those factors, structurally, sector by sector and others. I can go through cement, steel, chemicals and a variety of examples here, but I will not.


Senator Robichaud: At this point in time, we must take some action. We all agree that time is fast running out. We see many signs of this happening, especially in the Far North. At one point, you stated that the situation was slowly improving by one or two per cent, with the exception of what you mentioned to us earlier. Since the public is now demanding that government, businesses and anyone who has anything to do with greenhouse gases take action, do you not feel that people will be moved to pick up the pace and to develop new technologies much faster that if they had maintained the pace of the last ten years, where people thought they had all the time in the world to act?


Mr. Page: The issue of the scare tactics to get the issue going can sometimes work. The point I was trying to make earlier was, even if we get that scare today with a bill such as this, it will not affect the Kyoto time frame in terms of those emission cuts. We will still have to buy the credits as a company and the other things.

I wish, Senator Robichaud, that I could stand here today and say to you that this bill would mean that, by 2010, we would have the kinds of 12 megatonne cuts for my former company there. I wish I could say that, but I have worked closely enough in the industry, gone through regulatory processes and seen the time factor involved.

Second, both my sector and the oil and gas sector will require huge quantities of capital to achieve that. Scaring investors will not necessarily be helpful in terms of attracting the $100 billion or $200 billion of capital from New York, Toronto and elsewhere that we require in terms of going forward.


Senator Robichaud: I do not understand. Who is using scare tactics against whom?


Mr. Page: Do you mean that something I have said today —

Senator Robichaud: No, you are talking about scaring. I just want to know who is scaring who.

Mr. Page: We are scaring capital.

Senator Robichaud: Who is scaring capital?

Mr. Page: The prospect of the added costs involved for, say, TransAlta to operate. I am not talking just about new plants here. I am talking about existing plants. The $200-million-plus a year that could be involved with the purchase of credits could mean that investors in Toronto and New York would decide it is no longer profitable for them to put it into our sector. We went through two or three difficult years in raising capital for the electricity sector in North America recently. Some of it was our own fault in terms of Enron and other questions, but it is an issue here because we are requiring a lot for the future.


Senator Robichaud: Getting back to my first question, should we not see more progress, and at a quicker pace, on the development of new technologies, since we are now at a point in time where we need to take action? It is not a question of employing scare tactics. In our part of the country, people are noticing that something is happening just from the height of the tides and the intensity of the storms. The realization is dawning and people are linking these events to climate change. Should this not spur industries and researchers to pick up the pace and perhaps look for solutions that we have not yet contemplated today?


Mr. Alvarez: I certainly hope so. First, energy is already one of the biggest input costs into any resource or manufacturing company. The easy solutions have been developed, and when we shave things down, we have done a few step changes here and there.

You are right; it is about technology. The next big steps will be technology based, which is why we have strongly supported the idea brought up first by Mr. Dion and is in the current government's plan, which is the idea of the technology fund where there is a way to invest large scale dollars. These are eight- and 10-year programs, hundreds of millions of dollar programs. I am a great believer. I think the answer is in technology. That is why the investment must be driven towards technology far more than emissions trading.

What will the solution be? I do not think we know yet today. However, you are absolutely right; we need every piece of technology focused on this.

The Chairman: We have heard from industries in the past about how the sky will fall if we do certain things. We heard when we took the lead out of gasoline that everything would be shut down and we would lose hundreds of thousands of jobs and nobody would be working anymore. We heard the same thing when we had to take the sulphur out of natural gas. It would be end of it. We will cap the wells. There would not be any more exploration. Everybody will go away.

We also saw the results of the National Energy Program. There are two sides to the story, in Alberta, in particular. However, with respect to questions like the Montreal Protocol and the fact we have achieved much of those things — the world did not end, and we are not all living in caves and looking for berries to eat — why should we believe the present horror stories? Why should we believe the sky will fall if we undertake to do these things?

Let us assume for the sake of the argument that we are not going to make Kyoto if we go down the Bill C-30 or Bill C-288 road or the present government's plan. Let us assume we are not going to make it and it is a question of degree. Is there really a horror story here? Can we not take into account the good things that will happen, too?

Mr. Alvarez: Senator, if I left you the impression that I thought it was all doom and gloom, I failed in my evidence today. There are many things going on. I do not think we have said the sky will fall. We have said there will be a reaction. First, there always is.

Second, the question we have put to you is that this needs to be viewed in a global context. Page one of that submission clearly shows that this is a global issue and a technology issue. I am a believer. I actually think we are going to get there, but it is not easy.

Mr. Paton: This is a challenge. I do not think your comparisons work well for this issue. This is a challenge that is so huge it is beyond anything we have ever seen. You are basically talking about changing how the globe deals with energy, and changing that in a huge way. To think one can do it in a short period of time — I think one can possibly do it over a longer period of time — without serious impact, either on costs or on citizens' standard of living or employment, is impossible. It can be done. It can be done through technology, as my colleagues have said. There are technologies out there, if you do clean coal or nuclear. We have seen some of those technologies. We know they also take time, money, and often many regulatory approvals.

Those things can happen, but the question is how much in what time? This bill, unfortunately, does not give us any time.

Mr. Page: I am still an optimist, because I really do believe that in the traditional Canadian way we will pull together and achieve many of our goals. I have seen too many instances of that in the past.

My whole purpose in being here today, because I did not have to be, was to try to explain how we were going to do it, not to say why we could not do it.

My interest is in mobilizing the universities, government and industry to a new national partnership on climate change, and to do it in a realistic way so that I can mobilize the capital for shareholders, so you can deliver credibly for Canadians effective and deep cuts on climate change and greenhouse gases, and that we all do it in a collaborative and cooperative fashion.

Mr. Chairman, I appreciate your final question because I really think we can do it. The Senate report could be a great help in doing it, if it can give us some flexibility or some weasel words on the timing so that we can build this thing, so that in the Kyoto period we have a concrete plan in place to go way beyond Kyoto.

Senator Robichaud: My question was to Mr. Alvarez, who is in the oil industry. Do you think that if the price of gasoline keeps going up as it did today there will be the same demand on your products?

Mr. Alvarez: I have a two-part answer. Because of anti-competition legislation, I do not comment on downstream gasoline prices. We sell to them. What they do is up to them.

The real answer is that it has been amazing to us, senator, across the Western world the fact that we have crashed through 50 cents a litre, 60 cents, 70 cents, 80 cents, 90 cents, and are now through a dollar. Consumption has gone up every year. It is remarkable to me that that has finally happened.

My sense is, and this is just a sense, that we are now starting to see that people believe that the dollar-plus is going to stay and they are changing their habits.

If you had told me five years ago we would be over a dollar a litre and people would be driving more miles every year, in vehicles that were less fuel efficient, I would not have believed you.

Senator Robichaud: It is pure speculation on the price of gasoline, is it not?

Mr. Alvarez: I do not know. I look at the reaction on electricity consumption. Electricity prices have gone up across this country. Has consumption gone down? No. We are in bigger homes with more computers. A 60-inch TV screen takes five times the power that an old TV screen did.

Senator, to this point, the market has not worked to the degree that I thought it would.

The Chairman: We have not reached the point of resistance yet.

Mr. Alvarez: Maybe we have, senator, but I thought it was way below a buck. Of course, I have no opinion on this matter, and I will deny ever commenting on it.

Senator Tkachuk: It is possible that energy always has been very cheap.

The Chairman: Maybe we are just getting real now.

Senator Tkachuk: It is not much higher than it was in 1962, actually, if you take inflation into account. We were selling gas at my dad's station at 43 cents a gallon. That was a long, long time ago. That was a lot of money then. That is what they paid in Europe 15 years ago, $4.50 a gallon.

The Chairman: I have to thank our witnesses. You have been most forthcoming and very helpful to us in our deliberations. There will be written questions coming to you, which I gather you have agreed to try to answer for us. I thank you very much.

The committee adjourned.