Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 43 - Evidence - Meeting of March 1, 2018
OTTAWA, Thursday, March 1, 2018
The Standing Senate Committee on Agriculture and Forestry met this day at 8:04 a.m. to study the potential impact of the effects of climate change on the agriculture, agri-food and forestry sectors.
Senator Diane F. Griffin (Chair) in the chair.
[English]
The Chair: Welcome to the meeting of the Standing Senate Committee on Agriculture and Forestry.
I am Senator Diane Griffin from P.E.I. and I am chair of the committee. I will ask the vice-chair of the committee to introduce himself.
[Translation]
Senator Maltais: Ghislain Maltais from Quebec.
[English]
Senator Ataullahjan: Senator Ataullahjan, Ontario.
[Translation]
Senator Petitclerc: Chantal Petitclerc from Quebec.
[English]
Senator Oh: Victor Oh, Ontario.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from Quebec.
[English]
Senator Woo: Yuen Pau Woo, British Columbia.
[Translation]
Senator Gagné: Raymonde Gagné from Manitoba. Welcome.
[English]
Senator Bovey: Patricia Bovey, Manitoba.
Senator Mercer: Terry Mercer, Nova Scotia.
The Chair: We’re here with the minister, the Honourable Jim Carr. We also have with us his Assistant Deputy Minister for the Canadian Forest Service, Beth MacNeil.
Minister, would you like to make your presentation now?
Hon. Jim Carr, P.C., M.P., Minister of Natural Resources: I would, and thank you very much.
I want to make a confession. I have a deep admiration for the Canadian Senate, and I want to tell you why. One of my heroes and mentors in life was Duff Roblin, who was the Premier of Manitoba, was voted by hundreds of thousands of Manitobans as the greatest Manitoban of all time, and was the government leader in the Senate. I had the great pleasure of editing his political memoir.
In the course of this intimate relationship with Duff Roblin, I learned first-hand the appreciation he had for the work that you do, an appreciation that I share. You are a vital part of the governance of Canada. The work you do is important and impactful, and I am very happy to be with you for an hour this morning.
[Translation]
Thank you, senators. It’s great to be here, participating in your study on how a changing climate is affecting Canada’s forest sector. Your work is both important and timely.
[English]
It is important because the forest industry employs more than 200,000 Canadians and contributes more than $23.1 billion a year to our GDP. In fact, it provides more jobs per dollar than any other resource sector.
It is timely because we are at a pivotal moment, a time when climate change is one of the greatest challenges of our generation and when investing in science, clean technology and innovation is the new imperative for a low carbon economy.
Canada’s forest sector is central to all of this. I even would go so far as to say that there can be no global solution to climate change without the forest sector.
As we learned in our high school science classes, and for me that would be Winnipeg of the 1960s, forests are the planet’s lungs. They absorb vast amounts of carbon from the atmosphere and store it for decades. That makes the forest industry unique among our resource sectors. It represents enormous opportunities for Canada’s wood and wood products and for the mostly rural and Indigenous communities that produce them.
The bioeconomy is a case in point. Everything that you make from a barrel of oil can also be made from trees, like biofuels. Think of what that could mean in terms of transforming transportation, reducing greenhouse gas emissions, improving air quality and creating jobs, especially in rural and Indigenous communities.
That’s why the Pan-Canadian Framework for Clean Growth and Climate Change is heavy on bioenergy and bioproducts. It’s also why we joined with our provincial and territorial partners last September to endorse a Forest Bioeconomy Framework, a comprehensive new approach to make Canada a leader in the use of sustainable biomass.
We moved quickly to implement this framework including funding that, for the very first time, will tap forestry’s potential to decarbonize the economy as a whole. The timing couldn’t be better, particularly when our softwood lumber and pulp and paper producers are being buffeted by unfair duties and mounting trade protectionism south of the border.
We are vigorously defending Canadian workers by challenging the duties before the World Trade Organization and through NAFTA. We’ve also stepped up with a $867 million Softwood Lumber Action Plan, but it’s our investments in the forest sector’s ongoing transformation that are most promising.
We’re supporting R&D in science. We’re helping to launch world firsts right here in Canada, expanding collaboration and enhancing inclusion: everything to make the forest industry one of the most innovative parts of our economy. Budget 2018 captures all of this. It echoes what we’ve been hearing through our national conversation on forest science.
We will be building on this over the next six months, hosting a series of events to define our science and research priorities, to identify gaps for the forest sector, and to develop more opportunities for collaboration, including for women, youth, Indigenous people and non-traditional stakeholders.
One quick aside on the important role of women in science and how we can make it even stronger, Natural Resources Canada recently achieved gender balance for women researchers in forest science. We did it by finding innovative ways to profile and support our female scientists through a Women in Research program. We will continue those efforts because all of these initiatives are part of a bigger picture for ensuring Canada is a global leader in the transition to a low carbon economy.
Today, I’d like to highlight three key areas from your study that are part of that vision. The first is building climate change adaptability and resilience. We all know that forest fires, infestations and disease occur naturally in Canada’s forests, but climate change is now intensifying their impact and creating new risks for the forest industry and the communities that depend on it. This means we have to rethink our approach to sustainable forest management.
The national integrated assessment of forest change is a critical part of that. Led by Natural Resources Canada, it has identified the vulnerable areas of the country where climate change impact could be most severe.
Researchers at NRCan are also studying tree genetics, the relationship between climate and tree growth, and the migration capacity of trees to determine the resilience of Canada’s forests to continuing warming.
The climate change adaptation platform is bringing governments, Indigenous peoples, industry, not-for-profit organizations and academics together to further identify priorities and promote collaboration. That includes assessing the industry’s state of readiness and the required next steps.
Second is the impact carbon pricing will have on the forest sector. Carbon pricing is a key component of the Pan-Canadian Framework and widely recognized as an efficient way to reduce greenhouse gas emissions. It also ensures the forest sector’s climate advantage is recognized and creates new opportunities for the industry, such as biofuels.
Canada is well placed to lead. We have 9 per cent of the world’s forests, more than 40 per cent of the world’s certified forests, and in those forests are the world’s largest reserves of biomass. In fact it is astonishing that when you add in agricultural feedstocks, Canada has more biomass per capita than any country in the world.
Carbon pricing supports the bioeconomy by creating favourable market conditions for low carbon fuels and materials based on forest biomass, which is why our government is making those significant investments to support this innovation, to expand markets and to develop new products.
The net result of carbon pricing is that while there will be a small increase in production costs for some wood product producers of somewhere between 1 per cent and 3 per cent by 2022, other top performing facilities will actually be able to generate new revenues from surplus carbon credits.
What is the role of federal, provincial and territorial governments in reducing greenhouse gas emissions? As I’ve said, Canada’s forests represent one of the largest stores of carbon in the world. The Pan-Canadian Framework commits us to enhancing carbon storage in forests, generating bioenergy and bioproducts, encouraging greater use of wood in construction projects, and advancing innovation for GHG-efficient forest management practices.
I have three quick examples. First, we launched the clean growth program last fall that provides $155 million for clean technology research, development and demonstration projects in Canada’s energy, mining and forest sectors. One of the five priorities is advanced materials and bioproducts because we can accelerate their adoption.
The second is wood as a building material. I had the pleasure of helping open the new student residence at the University of British Columbia, Brock Commons, that now stands as the tallest mass timber building in the world. This magnificent building is an environmental game changer, storing close to 1,600 metric tonnes of carbon dioxide.
Third, I had the chance to tour the new eco district in Tianjin, China, a $2.5 billion sustainable community featuring almost two square kilometres of Canadian lumber, ingenuity and expertise.
[Translation]
These are just some of the ways the forest sector will help us tackle the most important issues of our time, lead environmental performance, drive clean growth and innovation, and advance Indigenous partnerships.
That’s probably a good place to stop, Mr. Chair. I want to thank your committee for this opportunity, and I would welcome any questions.
[English]
Thank you very much for your attention, senators. I now welcome your questions and a conversation.
[Translation]
Senator Maltais: Welcome to our committee, minister. We are pleased to welcome you.
In your presentation, you talked at length about biomass and biofuels. Does the current technique allow this process to be commercialized in a relatively short time, and will it be profitable on the market?
[English]
Mr. Carr: Yes, and I hope so. I had the pleasure of making an announcement, actually, in Quebec two summers ago, in cooperation with le gouvernement du Québec and the private sector. I believe that the technology is there and is developing.
Commercialization is a top priority. The Government of Canada’s role is to incent and to work with the private sector that has to take the lead. We believe that the potential is already there. It’s growing.
There are investments in research and development within the private sector. The sector understands very well that it has to be on the cutting edge of innovation and that biomass is probably the leading possibility and potential for its diversification.
We are very hopeful, and the Government of Canada is engaged.
[Translation]
Senator Maltais: Still along the same lines, we know that, last year, British Columbia was affected by a catastrophic and almost unprecedented fire. Could the recovery of trees that have remained standing — because not all the wood burned, of course — be part of a special biomass processing program?
[English]
Mr. Carr: Yes, the wood can be burned and reused, and it is. Regrettably, as you know, senator, the incidence of wildfires is growing as a consequence of climate change. The technology to be able to use burnt wood is also growing because of that potential.
The answer to your question is yes. It can be used. It is being used and the technology is advancing.
[Translation]
Senator Maltais: Okay. In the budget, I saw that we had planned $80 million to fight the spruce budworm in New Brunswick. Quebec has a forest area as large as the entire territory of New Brunswick that has been attacked by the spruce budworm, and yet, I have not seen a cent in an agreement with the Government of Quebec to help fight this plague. What can you tell me about that?
[English]
Mr. Carr: The government recognizes that the forest sector is vital to employment in communities across the country.
You are right, through Budget 2018 the government proposes to provide as much as $74.75 million over five years to work with the Atlantic provinces and forest industries to prevent the spread of spruce budworm.
More than that, the government is proposing investments to protect Canada’s ecosystems, landscapes and biodiversity, including species at risk, with an historic investment of more than $1.3 billion over five years. This represents the most significant investment in nature conservation in Canadian history.
[Translation]
Senator Maltais: Minister, let me come back to Quebec. Are there any specific agreements that can be included in the next budget to fight the budworm, which has attacked my entire region, the Côte-Nord? I am from Baie-Comeau, in the Côte-Nord. The forests are very much at risk, and they are huge. In the coming year — if we wait two or three years, everything might be destroyed — can we finally expect federal-provincial agreements, as there have been in the past? We can be sure that it would not be the first time that federal-provincial agreements have been put in place to help fight this plague immediately.
[English]
Mr. Carr: Quebec will benefit from the early intervention strategy. There are no specific agreements yet, but I have a very good relationship with Minister Blanchette, who is part of the Canadian task force on softwood lumber. We will certainly be having conversations to ensure that the Government of Quebec and the industry of Quebec can be part of the early strategy.
We have researchers in our Laurentian Forestry Centre who are now working on the spruce budworm problem.
Senator Mercer: Thank you for being here, minister. I appreciate your time.
You made a statement earlier in your presentation about vigorously defending Canadian workers by challenging duties before the WTO and through NAFTA.
Can you give us a brief update as to the status of where things stand at the WTO and our challenge?
Mr. Carr: We’ve lodged an intervention, as we have before. To read the history of the softwood lumber dispute between Canada and the United States is really to read the history of the continent, dating back to the first contact with Indigenous peoples.
Most people think the real beginning was in the 1840s and 1850s when a trade war broke out between New Brunswick and Maine. They almost came to blows, but finally it was resolved.
This latest round started in 1983. It invariably begins with the United States claiming that Canada is unfairly subsidizing the forest industry. It always ends with international tribunals telling the Americans they are wrong. We are in the process of that again.
These interventions in NAFTA chapter 19 and the WTO will take some time, but we are confident they will end the way they have always ended, which is that the countervail and the anti-dumping tariffs imposed by the United States will be proved baseless and that we will recover the duties that will have been collected.
This is unfortunate. I can tell you that Minister Freeland has a very good relationship with Secretary Ross. If this issue were left to the secretary and the minister, it almost certainly could have been resolved; but the reality is that the lumber coalition in the United States essentially has a veto power over a binational managed trade agreement between Canada and the United States. That is what we have to contend with at the moment.
We are taking every opportunity to use every tool available to us as we defend the interests of the sector, particularly the employees of the sector who deserve to have the full authority and confidence of the Canadian government.
The answer to your question is that we have done what we can do. The international tribunals will move at the pace they do. Meanwhile, we remain hopeful there can be a negotiated settlement between Canada and the United States. Minister Freeland continues to offer all the due diligence to ensure that the deal we sign is not any deal but a good deal for Canada.
Senator Mercer: I wish you well, but I would caution you, though. I was here for the last round. The frustration I had then has lingered on. I think we’re seeing the results of it now.
We left some money on the table the last time, a significant amount of money, which I assume is the money they’re using today to pay the lawyers in the United States for this new challenge. We left our money there that is being used to create the problem we have now.
I know you probably don’t have the answer now, but I’d caution government not to leave a nickel on the table this time.
Mr. Carr: I think a billion dollars were left on the table, 20 per cent of the $5 billion settlement.
Let me assure you that it is very important to note there is a task force of all implicated provincial and territorial ministers with the Government of Canada who stay in very close touch about keeping a united Canadian front intact.
That is not as easy as it might sound because, as you know, there are regional differences in the sector. In spite of those differences, and this is a tribute to the provincial governments, we have maintained a united Canadian voice on this issue and we intend to keep it that way.
Senator Mercer: Another thing this government has done is talk about imposing carbon pricing of some sort, depending on the jurisdiction.
Does the carbon pricing policy work without Ontario’s participation? I raise Ontario only because those of us who don’t live in Ontario are sitting back, watching the soap opera happening in the Ontario Progressive Conservative Party leadership race where all candidates have said that the carbon pricing deal of the current Ontario government will be cancelled after an election, if the Conservatives are elected.
Can this program work without Ontario?
Mr. Carr: You know that it’s hazardous for politicians to engage in speculation, particularly about who may win elections.
I am glad to know your views.
Senator Mercer: I am sure you’re surprised.
Mr. Carr: I can say that Ontario is part of the carbon pricing regime.
Different provinces have different modalities. The senator will know that in British Columbia there is a carbon tax that is revenue neutral. Whatever is collected at the pump is given back to taxpayers in the province of British Columbia.
Ontario has chosen cap and trade. There are hybrids across the country. I believe the number of Canadians who are now covered by some tax on carbon pollution is over 90 per cent. The only holdout is Saskatchewan. My own home Province of Manitoba recently signed the Pan-Canadian Framework.
I can’t speculate on what policy changes may come after an election in any province, but I can tell you the government is committed to the Pan-Canadian Framework and what that implies for Canadians. I think most Canadians would understand that putting a price on carbon pollution is good public policy.
Senator Mercer: Senator Maltais brought up the issue of using the partially burnt wood in the forest fires in British Columbia. I remind everybody that there is also the use of the trees destroyed by the pine beetle, particularly in British Columbia. Creative efforts have been made in places like Quesnel to find unique uses for that wood.
I’d encourage you and the department to continue to encourage research in that area to try to make sure that we maximize our resources. If the trees are to be killed anyway, let’s see if we can find a practical use for the wood that creates jobs for British Columbians and brings money into Canada.
The Chair: I am taking that as a statement rather than a question. We have eight more of us who want to ask questions and only 30 minutes. If the minister doesn’t mind being two minutes over, that leaves us four minutes each.
Senator Oh: I have a few small questions for you. Natural Resources Canada has been working to reduce greenhouse gas emissions in the energy efficiency fields of the housing and building communities, industry and transportation, such as fuel-efficient vehicles.
I visited quite a few construction warehousing project sites using only wood across the country. According to Natural Resources Canada, wood-based construction materials help to reduce GHG emissions.
Do you know to what extent the use of wood as a construction material is applied in Canada? Do you anticipate an increase in the use of wood in the construction area? Is there any government funding to encourage the use of wood in construction? What are the main issues you are facing with the expansion of green building technologies?
Mr. Carr: The answer is yes. What we are we doing? Forestry has a four-point strategy for maintaining and enhancing the forest’s ability to store carbon through reforestation by increasing density, by reducing the risks of wild-line fires, by paying attention to the FireSmart program, through early intervention for pests, by changing building codes for allowing for the increased use of wood products in construction, and by the increasing the use of wood for construction in wood buildings and bridges.
Also, there is B.C.’s forest carbon initiative. I made reference already to Brock Commons at the University of British Columbia. There are many other such examples. By the way, it’s not only of domestic interest for us in Canada, but we also have the capacity to export wood products in such lucrative markets as China, as we are doing now in Tianjin.
I had the pleasure last June of leading a business delegation that included CEOs and others from the forestry sector to promote Canada’s capacity to begin to develop that market. You can only imagine the extent and the potential in China for Canadian wood products.
We already have early successes, and we continue to build on them. The answer to your question is yes, there are incentives and investments in promoting the use of wood in construction. We continue to work with the private sector to take full advantage of that potential for Canada.
Senator Woo: I am picking up on Senator Oh’s question, but I will ask more specifically about the pricing mechanisms that can be used as an incentive for forestry to be a better source of sequestration of carbon or for the use of wood in building and other projects, not for government incentives and promotion and so on, but through the pricing mechanism itself.
I note that in the presentation you talk about how top performing facilities may have surplus credits that they can sell. Presumably that’s only in cap and trade type environments, such as in Ontario. I noticed they had an auction yesterday that was successful.
Could you say a bit more about the way in which market forces are being used through some kind of a pricing system, cap and trade or carbon pricing, to actually encourage maintenance of forests, maybe expansion of forests and use of wood products so that all of that contributes to our greenhouse gas reduction goals?
Mr. Carr: When you use the term “market forces,” I think that implies that government would have only a modest role to play.
Senator Woo: Through the carbon pricing framework that you’re putting in place.
Mr. Carr: We would be open to any creative suggestions that you might have on how government could become a positive and constructive player in the use of public policy to help influence those forces. I think there are examples of where that has happened.
Forest certification helps, and we would be very open to creative suggestions that you or others may offer the government.
I agree entirely with the premise of your question that market mechanisms can be very impactful on behaviour that would reduce greenhouse gas emissions across the Canadian economy. We, of course, would be open to any suggestions that you might make.
We also have to keep in mind the reality that the provinces manage our forests. The figure is very small of forests under federal jurisdiction. I think it’s below 10 per cent, isn’t it?
Beth MacNeil, Assistant Deputy Minister, Canadian Forest Service, Natural Resources Canada: Yes.
Mr. Carr: We have to keep that in mind. We are also working through the Canadian forest ministers. We meet once a year, most recently in Ottawa, so that we can, as best as we are able, align federal and provincial policy in forest management.
A lot of the levers rest with the provinces, but I take your point and would be very open to any suggestions that you might be able to offer.
Senator Woo: That’s all the time I have.
The Chair: We’ll put you on second round if you need any more. We have the two Manitobans next.
Senator Bovey: I am going to take to us to Manitoba. You mentioned the research that is under way and the number of women researchers. You mentioned the involvement of the Indigenous community. We in Manitoba know the Indigenous community is an ever-greater part of our demographics. You also mentioned the natural cycles of disease.
I will go back in history for a minute. There used to be a big market for birch syrup out of Manitoba. Years ago, the birch trees in northern Manitoba were smitten with the blight, so you couldn’t find birch syrup anywhere. I gather it’s back on the market, or the birch trees are coming back.
My question comes into the science of climate change. I have been doing a fair bit of work with some of the scientists out of the University of Manitoba on climate change. In the agricultural field, I know there are new products and better products or better grains.
With the projection of forestry, will we see the forest growing further north in Manitoba and providing jobs for Manitoba citizens? Will climate change contribute to that so that they can become a greater part of the economy of Manitoba and Canada?
Mr. Carr: I wish I had the brains to answer the second part of your question. I don’t know what scientists would say about the pace of change that would be significant enough to alter forest practices within a jurisdiction. I just don’t know the answer to that question.
I think it’s clear that over time there will be significant changes. I am not quite sure how long, but one could make the assumption that over time the treeline will be moving north. At what pace and to what extent, I just don’t know.
You are right on the money when you talk about the importance of Indigenous communities, and the importance of the significant Indigenous workforce within the forest sector. As a Manitoban, I was very proud of some of the initiatives announced in the budget, particularly as it impacts employment, training, and a $500 million initiative for Metis housing over a number of years. These are significant investments.
It’s very important that we partner with Indigenous communities in the monitoring of our natural resources. We’re doing that now right across the country. We’re very proud of the environmental monitoring committees that we co-developed with Indigenous communities, both across the Trans Mountain Pipeline expansion and the Enbridge Line 3 replacement. Co-developed is the key phrase, in some cases for the first time. We also know that there are Indigenous communities who want to be very much involved in the protection of the forest.
We continue to have very important conversations with industry and Indigenous communities. Yes, there is significant economic development potential in that partnership.
As to the pace of climate change that would put forests farther north, I am not sure. Adaptation in forestry is less advanced than in agriculture. We are unsure of the rate of migration but our scientists are working on this all the time.
Senator Bovey: I guess with the melting of the permafrost, the changes in Manitoba could be quite significant very quickly.
Mr. Carr: We are seeing that in other ways in Manitoba. You would know, if I used the Churchill example, what is happening there. The polar icemelt means that the season is expanding but, at the same time, the rail bed is thawing. What nature is giving, nature is taking away. It’s our responsibility to adapt that in the most intelligent ways that we can.
We know through growing evidence and experience that the North is most impacted. As a matter of fact, the International Institute for Sustainable Development, headquartered in Winnipeg, had very early warning signs. It produced documentaries in the Arctic that proved through Indigenous cultural knowledge, it’s important to say, that this effect was profound and moving much more quickly than anyone thought it would.
[Translation]
Senator Gagné: That is the problem with having my turn after my colleague from Manitoba. My question was about Indigenous communities. I am pleased to hear that you have come up with initiatives to include them in development plans.
I would like to congratulate your government for initiatives to create more opportunities for women, youth and Indigenous people. As you mentioned in your brief, I think the intent is very well received by all Canadians.
Given the challenges we have with the United States in the softwood lumber sector and the initiatives we have launched with China to try to explore this market, are you exploring other international markets right now to expand the export market for lumber?
[English]
Mr. Carr: Expanding our export markets, not only in forestry but across the Canadian economy, is a very important objective and priority of the Canadian government. Let me give you some examples.
What percentage of our exports of oil and gas do you think go to the United States? It is 99 per cent. That’s one of the reasons we approved the Trans Mountain Pipeline expansion. We think it is essential for Canada to diversify its export markets in oil and gas.
What percentage of Quebec softwood lumber, in its exports, goes to the United States? It is 99 per cent. British Columbia has been able to diversify into the Asian market for obvious geographic reasons. That is not enough. I think 65 per cent of British Columbia exports still go to the United States, but that’s not 99 per cent. It has been able to expand those markets by virtue of aggressive marketing and obvious geographic advantages.
We are very aggressive in looking to expand our forest exports. I have been to Canada wood operations in Asia, in Japan and in India. We’re increasingly aggressive because it fits with what ought to be a long-term public policy goal of the government. There are also possibilities in Europe.
We have competitors. We are not in this alone. Through the biomass conversation this morning, we have been talking this morning our capacity to innovate and to make it as easy as possible for Canadian firms to get access to these markets. Governments can help with that when we lead trade missions abroad and take with us industry leaders. It’s actually quite remarkable how well we work together.
Politicians facilitate the introductions. The business leaders begin to develop relationships. They are patient, as you have to be. You don’t go over there on a Monday and sign a deal on a Tuesday. You have to go back again and again. They are and we are.
We are making progress. It’s a generational responsibility and an ambition for the government, but I can assure senators that we understand the importance of the expansion of those markets. We are doing everything possible to work with the private sector to make that happen as fast as possible.
Senator Ataullahjan: Thank you, minister, for your kind words about the Senate. Most of the questions have been asked, but I would like to refer to your opening remarks where you mentioned that the government has moved quickly to implement the Forest Bioeconomy Framework, which includes funding.
Can you tell us where this money is being spent and what kind of analysis or studies are being done?
Mr. Carr: Across the sector and across the diverse regions. I made reference to one announcement I had the pleasure of making in Quebec in the summer of 2016.
It’s also very much a part of the Softwood Lumber Action Plan we announced in the wake of the United States countervail and anti-dumping tariffs. Market transformation is a part of this $867 million package. It is a combination of loan guarantees that would be made available through the Export Development Corporation, through Business Development Canada, through the Indigenous initiative, through NRCan, and through expansion of markets and market transformation.
There are investments available. We have taken a very aggressive approach to the industry, not only to announce the policy, but we actually write letters to companies to make them aware of the available programs, including the very programs that you’re referring to.
This is exciting. We announced at NRCan alone, quite apart from announcements made by Indigenous Affairs and Northern Development Canada, a $225 million investment in taking remote and Indigenous communities off diesel. We made this announcement in Winnipeg a couple of weeks ago.
That’s very significant and part of a cross-government commitment to work with northerners, remote communities and Indigenous populations to take them off diesel. Much of that replacement will be in renewable sources of energy, wind energy and solar energy. This is a very significant commitment from the Government of Canada that we’re actually quite excited about.
The Chair: That is exciting.
Senator Petitclerc: I also want to speak about research. For this study we heard from many scientists and academics who spoke about different challenges regarding funding, for example.
One of the challenges was due to the nature and the structure of funding. It’s part public and part private corporations. Some of the studies are not being done because perhaps the private sector or public sector is not interested in doing it.
In fact, we heard from Anja Geitmann, Dean of Agricultural and Environmental Sciences at McGill University. I asked her a very simple question: Because of the nature and the structure of the funding when it comes to climate change and environment, are studies and research simply not being done? She had a very simple and clear answer: “Yes, some things that should be done are not being done.”
Are you aware of that challenge, and how is it being addressed?
Mr. Carr: Quite a few ministers were very excited when Finance Minister Morneau stood up in the House of Commons this week and delivered his budget. I don’t think there was a minister more excited than the Minister of Science because of unprecedented investments in research.
As part of our platform in the election of 2015, we were very aggressive on the importance of evidence-based decision-making across the government and investments in scientific research.
We have now had the opportunity to breathe life into the platform. We’re just getting the numbers now, but I can tell you that there has been a $150 million commitment in federal science and innovation programs in forestry alone at NRCan. The cross-government commitment is in the billions of dollars. NRCan is mobilizing academia and industry through our labs. There has been a significant financial commitment to bolstering our lab capacity across the country.
I can say, without hesitation or fear of contradiction, that at this moment there is more commitment by the federal government in investment and science than there ever has been before in Canadian history.
Senator Petitclerc: The concern was with independence of that research. Everybody was very clear that the results of their research are never influenced but what is being studied depends on where the funding comes from.
I assume what you’re saying is that with increased funding they will be able to study what they feel is important.
Mr. Carr: Yes, it’s not only the independence of the research being funded. It’s also the freedom of the scientists to discuss openly the results of his or her research.
That has not always been the case, so I think that your question is well timed and important because it gives us a chance to say that.
The science is all peer reviewed. There will be a very open public discussion of what the science yields, and the freedom of the scientists to debate among each other and then to the Canadian people. Our peer-reviewed science is internationally recognized, and we are proud of that.
[Translation]
Senator Dagenais: Thank you for your presentation, minister.
My first question is related to biomass technology. Can the development of biomass technology be applied as effectively in all Canadian provinces, or should some efforts be focused in particular locations?
[English]
Mr. Carr: The forest resource is not the same from one province to another. As a matter of fact, the vast diversity of our forests is the reason that it’s so difficult to maintain a single Canadian voice or point of view when it comes to trade disputes, particularly trade disputes with the United States.
We have been able to manage that in part because the prices are high at the moment. There are many firms within the forestry sector now that are doing very well. That has a tendency to change the tone a bit of how major players in the industry are talking at the moment. We have the advantage of high prices.
There is biomass technology in all of the provinces. That would include from coast to coast and in the North. There is the capacity. The product is not the same from one province to another, but there is equal understanding of the possibilities through these technologies. Technologies are being developed in every jurisdiction. I believe we are making steady progress right across the country.
[Translation]
Senator Dagenais: In your presentation, you mentioned that the use of wood has a great future. I would say that I have seen it first-hand in Montreal, because I saw an eight-storey condominium building in Griffintown entirely built of wood. In fact, it’s the first of its kind in Montreal. In addition, we were told it was very safe.
Can you tell us about the other benefits of wood and how safe it has become? I think that builders are interested in tall buildings. It seems that it is safer in case of fire, unlike buildings made of concrete. I would like to hear what you have to say about that, because you brought it up.
[English]
Mr. Carr: They are carbon sinks. That’s the beauty of using wood products. They are actually soldiers on the front lines in the fight against climate change, so that is a tremendous advantage. Also, they are very strong.
We’re working with the National Research Council on research into how safe these products are. The results look very promising.
There will be the importance of the relationship with municipalities, of building codes and of working with firefighters to ensure the safety and the strength of the materials used. Indications are that this technology and product will become increasingly important. It has already, not only domestically, but also in the expansion of export markets. We think it’s very promising.
We are working with architects, engineers and builders to assure Canadians of the safety of the process and the product. We’re hopeful that this will be a very important part of the future of the industry.
The Chair: I have a question. If we have any time for a second round, we’ll start it.
The punchline for my question is: Why is there a fixation on price rather than looking at emission reductions?
For example, Manitoba, as part of its climate change strategy, has increased substantially the amount of biofuel or biodiesel that will be used and therefore will reduce the emissions above what the national targets would be. It’s intending to set its carbon tax price at $25 per tonne rather than $50 per tonne as per the national proposal.
Wouldn’t the emissions reduction be what we should be fixated on as opposed to a fixation on the price?
Mr. Carr: I don’t know if I would use the word “fixation.” I think I would welcome both and also note that there would be a relationship between the two. I think it’s important to note that.
Every province has the capacity to come up with its own set of policy initiatives. As we discussed earlier, it’s not the same. There is a variety of mechanisms used.
Manitoba’s initial policy announcement is consistent with the Government of Canada’s. The $25 for the first two years is just fine. We’ll see what they intend to do in year three. That’s when the conversation will become, I am sure, more intense than it is now. We welcomed Manitoba’s announcement. We think that the provinces absolutely should have the capacity to develop their climate plans in the context of their own realities. The ambition is the reduction of the greenhouse gas emission using market mechanisms as a part of the policy.
Every province in the country, save one, is on board for now. We continue to work with all of the provinces and continue to respect their capacity to mould the policy that is most in line with their own jurisdiction and their own capacity.
The beauty of Canadian federalism is that the provinces are absolutely free, but it’s also important to know that the money collected by Ottawa goes back to those provinces and the provinces are perfectly free to spend that money anyway they want.
If one province wants to give a tax break, to reduce the price of farmland or to otherwise adjust its own fiscal regime to accommodate the priorities of the particular province, it is entirely within their jurisdiction to do.
We know that agriculture and forestry represent the greatest carbon sinks. We are looking at ways in which we can increase this potential.
The Chair: Great. It is a couple of minutes before nine o’clock. I understand you have an important meeting and that you’re on the agenda. You agreed to spend an hour with us, so I want to thank you. I greatly appreciate that. We’re pleased with your contribution here today.
For our next panel, from Environment and Climate Change Canada, Matt Jones, Assistant Deputy Minister, Pan-Canadian Framework Implementation Office, and Judy Meltzer, Director General, Carbon Pricing Bureau; and from Finance Canada, Sean Keenan, Director General, Sales Tax Division, Tax Policy Branch, and Gervais Coulombe, Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch.
Mr. Jones, the floor is yours.
Matt Jones, Assistant Deputy Minister, Pan-Canadian Framework Implementation Office, Environment and Climate Change Canada: I understand there are a few items in particular you wanted to discuss, so we’ll try to touch on each of those topics briefly and then, of course, open it up for discussion.
I understood the committee was particularly interested in discussing emissions trends in these sectors on mitigation, adaptation and resilience for agriculture and forestry, as well as the economic competitiveness impacts of carbon pricing.
That topic has already been discussed a bit this morning but we expect to speak a bit more to that. Judy Meltzer and all of my other colleagues here are working actively on that file.
On emissions trends, greenhouse gas emissions from the agriculture sector have remained fairly stable since about 2005 until 2015, the most recent year for which data are available. In our projections they are expected to decrease only slightly between now and 2030.
Greenhouse gas emissions from agriculture were 10 per cent of Canada’s total emissions in 2015 and consisted mostly of methane and nitrous oxide from livestock and crop production systems, as well as some emissions from on-farm fuel use.
Greenhouse gas emissions from the extraction and transformation of forestry resources were only 1.3 per cent of Canada’s emissions and have been declining slightly as a result of a drop in demand for forest products.
These trends in greenhouse gas emissions for the agriculture and forestry sectors do not take into account, of course, the potential for the increase in carbon sequestration, as Minister Carr mentioned. Agricultural soils and forests are, of course, key tools in the fight against climate change.
I am pleased to report that Canada’s total emissions are on a downward trend. From 2005 to 2015, they fell by 16 million tonnes of CO2. That’s about a 2 per cent decrease. We expect that drop to accelerate over the next few years as measures from the Pan-Canadian Framework on Clean Growth and Climate Change are implemented. We also expect this trend to continue as we remain on a pathway to meet our Paris commitment of a 30 per cent reduction from 2005 levels by 2030.
Before turning it over to my colleague Judy Meltzer shortly, I want to highlight a couple of measures on agriculture and forestry specifically within the Pan-Canadian Framework or the PCF.
As you know, the implementation of the PCF is a collaborative effort across the federal government. Environment and Climate Change Canada works closely with NRCan and with Agriculture and Agri-Food Canada, as well as a number of other departments, to help the agriculture and forestry sectors reduce their emissions and adapt to the impacts of climate change.
You have no doubt already been well informed on many of these activities, but I’d like to take the opportunity to flag a few of them. There are four key measures to reduce emissions and waste from forestry and agriculture within the PCF, and significant progress has been made on each of these.
The first measure seeks to increase stored carbon by protecting and enhancing carbon sinks in forests, wetlands and agricultural lands. The Low Carbon Economy Fund announced by the federal government in June 2017 supports new and expanded provincial and territorial actions to reduce greenhouse gas emissions, including through enhanced carbon storage in forests and agricultural soils.
This funding is available to all provinces and territories that have adopted the Pan-Canadian Framework. Manitoba announced last week that they are joining other provinces and territories.
The second measure seeks to increase the use of wood in construction by investing close to $40 million over four years in the Green Construction through Wood Program, which you heard a bit about earlier this morning. These three measures focus on generating bioenergy and bioproducts. This is supported by the federal investments of $55 million in bioheating as part of the federal Promoting Clean Energy for Remote Communities program led by Natural Resources Canada.
Third, in 2017 the Canadian Council of Forest Ministers released their Forest Bioeconomy Framework for Canada to promote the use of forest biomass for advanced bioproducts and advanced innovation in the forest sector.
Fourth, mitigation measures seek to support innovation in GHG efficient management practices in the forest sector. In support of this activity, $70 million for science and innovation is being invested with a focus on climate change and soil and water conservation.
Also, $25 million was announced in Budget 2017 to support the adoption of clean technology by Canadian agricultural producers, $27 million for innovative projects to help farmers mitigate greenhouse gas emissions, and a little over $2 million to attract youth to green jobs.
Our understanding is that the committee is interested in the second section we wanted to chat about on adaptation and resilience. With respect to adaptation and resilience, climate change will affect Canada’s forests and agricultural sectors in a range of complex ways. Some impacts will be sudden and dramatic, and others will be gradual and subtle.
For example, an increased number of large fires, greater drought frequency and intensity, shifting patterns of disease and invasive insect outbreaks over the last five decades are impacting Canada’s forests and have resulted, at times, in loss of jobs and homes in some communities.
In addition, a changing climate can have both positive and negative impacts on agriculture. Warmer temperatures can provide opportunities for agriculture in certain regions with longer growing seasons and milder and shorter winters.
On the other hand, one of the concerns is that climate change could change the frequency of natural disasters and extreme weather events. Droughts could result in crop yield declines, and higher temperatures and heat waves could lead to impacts on livestock. Change in precipitation and temperature certainly could increase the prevalence and range of pests and diseases, as we have already seen.
Loss of business, economic productivity and environmental impacts felt by these sectors, associated with fire, drought, pests and flooding, have lasting impacts on Canadians. Extreme events like the flooding in Ontario, Quebec and British Columbia in 2017 and the devastating wildfires in British Columbia and Fort McMurray, underscore the need for urgent action on climate change.
In response, the government is making major investments to build resilience to our changing climate. In Budget 2017, $260 million was announced for adaptation programs related to information and capacity, climate resilient infrastructure, human health and well-being, vulnerable regions and climate change related hazards and disaster risks. These built on past investments.
Further detail on green infrastructure was also provided in that budget. These very significant resources for green infrastructure are crucial to building resilience in the country. In addition, there is the $2 billion disaster mitigation and adaptation fund that is being established by Public Safety in collaboration with Infrastructure Canada.
We also believe strongly that decisions to build resilience should be based on the best available science and information. This science has to be available to the people making decisions in a manner that they can use. This is why we are moving forward with the establishment of the Canadian centre for climate services to build regional capacity and expertise and to provide information in a form that is usable for key decision-makers, including farmers, municipal planners and individual citizens.
Carbon pricing is a key element of the PCF, so I will turn it over to my colleague Judy Meltzer to provide a bit of an overview of the status on this key issue.
Judy Meltzer, Director General, Carbon Pricing Bureau, Environment and Climate Change Canada: As Matt Jones noted, carbon pricing is a foundational element of the Pan-Canadian Framework. It provides incentive to reduce emissions while encouraging innovation and sending long-term signals to investors and others about the low carbon economic transformation of the Canadian economy.
In October 2016, the Government of Canada published the Pan-Canadian Approach to Pricing Carbon Pollution. This set out the government’s plan to extend carbon pricing throughout Canada in 2018.
The approach recognized that Canada’s four largest provinces, Ontario, Quebec, B.C. and Alberta, which represent over 80 per cent of the population, already have pricing systems in place. It gives provinces and territories the flexibility to implement the type of pricing system of their choice. It can be either a direct pricing system such as the B.C. carbon tax or the Alberta hybrid mix of a carbon charge on fuel, an emissions trading system for large industry, or cap and trade system such as those in place in Quebec and Ontario already.
The Pan-Canadian Approach to Pricing Carbon Pollution also sets some common criteria that all systems must achieve or meet. This is referred to as the benchmark or standard and ensures that systems are fair and effective.
The government also committed to implement a federal carbon pricing system which would only apply in provinces and territories that ask for it or choose it, or in any jurisdiction that does not implement a carbon pricing system that meets this federal benchmark.
We refer to the federal carbon pricing system as the backstop system because it would only apply in circumstances where there wasn’t a provincial or territorial system in place.
There are two components to the federal backstop system: a charge on fossil fuels generally payable by the fuel producer or distributor, and a separate component for industrial facilities with high levels of emissions or emissions intensity and also high levels of trade.
This approach exempts these facilities from the fuel charge and puts a price on a portion of their emissions. We can provide further detail on that, if helpful.
With respect to timing, provinces and territories have been asked to confirm by March 30, 2018, if they would like the federal backstop to apply in their jurisdiction. Those provinces and territories that are opting to maintain or develop their own systems would need to confirm their plans by September 1, 2018.
These plans would be reviewed against the federal benchmark. If a jurisdiction does not have a system that meets the benchmark criteria, the federal carbon pricing system would apply in whole or in part on January 1, 2019.
The impacts of carbon pricing on agriculture are expected to be modest. Emissions from animals are not priced, so biological emissions are not priced. British Columbia and Alberta pricing systems and the proposed federal backstop do not price gasoline and diesel used on farms.
There are also potential economic opportunities for the agricultural sector as a result of carbon pricing, for example, through the generation of carbon offset credits.
The federal backstop, or the federal carbon pricing system, is also being designed to limit competitiveness impacts for industries with high levels of emissions and international trade such as chemicals, fertilizers and pulp and paper.
These industries, as mentioned, would be exempt from the fuel charge and instead face a price on just a portion of their emissions above a certain threshold. This is designed to create an incentive for emissions reduction and innovation from a carbon price signal, at the same time as limiting adverse impacts on competitiveness and a risk of carbon leakage. These industries will also have access to emissions trading, which will allow for lower cost compliance options.
This component of the federal system is still very much a development process, and there will be ongoing engagement with stakeholders through the course of the development process.
The Government of Canada has committed to returning all direct revenues from the application of the federal backstop carbon pricing system to the jurisdiction of origin.
I’ll turn it back to Matt Jones to continue with comments and will be pleased to answer questions with respect to the carbon pricing approach afterward.
Mr. Jones: I want to flag two more things of relevance for the committee. One is ongoing work with Environment Canada’s regulatory branch on the development of a clean fuel standard designed and intended to lower the carbon intensities of fuels. It is a regulatory standard based on the lifecycle approach, but it is one intended to have significant flexibilities to allow compliance through a number of means that ultimately is expected to increase demand for lower carbon fuels and technologies, importantly renewable fuels and renewable natural gas.
There is the expectation that economic opportunities for the agricultural sector, in terms of the forestry sector as potential feedstocks for fuels, could result from the application of this clean fuel standard. There is a lot of potential for the capture and use of methane gas from agricultural operations.
In conclusion, I want to flag that we have been reporting quite regularly on the status of our many policies under development. Recently, we provided a fairly comprehensive report to the United Nations on the status of Canada’s climate change efforts. Additionally, we sent an annual update report to the first ministers as they had requested at their last first ministers’ meeting. It is meant to represent a very up-to-date listing of all of our policies and the state of their implementation. That’s not just the federal policies; that’s all jurisdictions in Canada. It’s quite a comprehensive document that could be a useful reference, if you’re interested.
With that, I will stop and apologize for taking so much time. Thank you for your patience.
The Chair: It’s all very interesting. We would not have wanted to have heard any less.
I open the floor to questions. We’ll start with the deputy chair.
[Translation]
Senator Maltais: Thank you very much, and welcome, ladies and gentlemen. I have carefully read your brief. Is Canada’s future in there? I think you are trailing behind some provinces, such as Quebec, Ontario and part of British Columbia. The Government of Canada is really behind on this front. I hope you are not here to impress us with your document.
In this document, you do not talk about the consequences of the carbon tax, how to be accountable. How will the money be redistributed in new technologies, as Quebec and Ontario are doing? You do not mention it. Some provinces have not joined, and you do not say whether you have a way to force them to do so. Can we expect a carbon tax such as the one in some U.S. states, which have provided for an accountability mechanism? Are you planning for a mechanism like the Council of Europe, which has a carbon tax but, which redistributes money in those countries to be used to build bridges, roads and schools? How is the carbon tax going to be used for new technologies, the way it is in Quebec, Ontario and part of British Columbia? You do not say.
Have there been any prior agreements with the provinces? Have there been any serious discussions with Newfoundland, which produces oil, New Brunswick, which has refineries, and Nova Scotia, which has forests? Have you made any serious agreements, or are you just launching a comprehensive policy, the outcome of which will be seen in five years?
I’ll let you answer, because what’s in your document is also reflected in last Tuesday’s budget. The document is dated March 1, but you did it last night. I do not see what you can bring to the work we are doing on assessing the carbon tax in agriculture. I would like something new. I would like you to teach me something new this morning.
[English]
Mr. Jones: I will start and turn to colleagues on the specific question of carbon pricing.
In terms of lagging behind, in Canada at the federal level we’ve been working very hard in recent years to catch up to efforts that have been put in place within provinces to address climate change, not just on carbon pricing but in terms of reducing emissions by a number of means.
We had a lot of work to do. The Pan-Canadian Framework is the most comprehensive climate change plan that has ever been produced in the country. It’s the first time the majority of jurisdictions have agreed on a collaborative way forward. We feel that significant progress is made.
We’re now quite urgently working to implement the many new measures within that framework: regulatory measures, pricing measures, policies for codes and standards, and funding programs. We’re moving as quickly as we can.
In terms of the document, you’re correct. It is dated March 1. We updated it to try to reflect the most recent developments. We tried to provide the most up-to-date information to this committee that we could, but there are a great deal of new developments, partially through the budget, but also on an ongoing basis in terms of new measures and policies and new milestones being achieved in terms of the implementation of these many policies. I believe there are 19 federal departments and agencies involved in some way in the implementation of the Pan-Canadian Framework.
There is a lot of work in a lot of places. We are working to catch up and to move as quickly as we can.
I’ll turn to my colleagues on the specific questions that you raised about carbon pricing.
Ms. Meltzer: With respect to the Pan-Canadian Approach to Carbon Pricing, one of the benchmark commitments was that revenue remains in the jurisdiction of origin. We see varied use of revenue across the provinces that already have systems.
There’s a mixture, as you note. Some of the revenue is invested in further initiatives to reduce emissions or create incentives for cleaner technologies. Some of the revenue is also recycled to offset cost impacts on, for example, low-income populations. There are different ways in which revenue generated from a carbon price can be invested.
There are two other things I would note. One is that the federal government has committed to returning revenue to the jurisdiction of origin. There is not a specified the mechanism for doing so, but the revenue will remain in the jurisdiction of origin.
The other thing I would note as well is that carbon pricing is only one mechanism for emissions reductions. It’s a very important one, both for mitigation in the near term and for providing the signal of a transition to a low carbon economy over the longer term. It’s one of many policy tools. I know Matt Jones touched on a whole range in his presentation, but I would just note that point.
[Translation]
Senator Maltais: Let me stop you there. I’m not satisfied with that speech. Canadian farmers have been quite ahead with nitrogen as they have no longer been tilling for a number of years. What stage are you at in carbon capture in agriculture? What are the amounts invested in research to capture carbon in each of the agricultural provinces?
[English]
Ms. Meltzer: I’d point to two things. We know there is opportunity to reduce emissions in the agricultural sector. We know from looking at provinces, including Alberta, which has had various incentives for doing so, that there are already in place many practices to reduce emissions, whether it’s low till or how fertilizer application is managed, et cetera.
One of the things I would put in the context of carbon pricing is that there are some incentives to recognize the types of practices that have economic value in and of themselves. These are incentives through offset credit programs.
The proposed federal backstop system is expecting to recognize offset credits, including potentially from agriculture, although I will note that the type of credits that would be recognized under the federal system is in development and will be informed by the ongoing work by the Canadian Council of Ministers of the Environment on offsets for a pan-Canadian approach.
[Translation]
Senator Maltais: Thank you, but I want more than that. Growing cannabis is on our doorstep. What stage are you at with carbon capture in growing cannabis?
[English]
Ms. Meltzer: I don’t have an answer to that question. I don’t know if there’s a comment from others here.
[Translation]
Senator Maltais: Has there been any scientific research to indicate how much carbon and greenhouse gases growing cannabis is going to emit? Do you have the research in the various departments that you represent? Have you done any studies on that?
Gervais Coulombe, Director, Excise Taxation and Legislation, Sales Tax Division, Tax Policy Branch, Department of Finance Canada: My understanding of a greenhouse operation is that plants do not emit carbon, but they capture it. We could ask those questions.
Senator Maltais: Any homeowner can grow four cannabis plants, which could increase greenhouse gas emissions. When can you give me an answer on the amount of GHGs related to growing cannabis?
Mr. Coulombe: We can ask our Agriculture Canada colleagues.
Senator Maltais: I was expecting an answer from you, because two weeks ago, the Minister of Agriculture, the Honourable Lawrence MacAulay, appeared before our committee. I asked him the question and he said there was no study on it. If you have a study, please forward it to him so that he can then send it to us.
Mr. Coulombe: I take that question seriously, Senator Maltais.
Senator Maltais: Thank you.
[English]
Senator Ataullahjan: My question is for the Department of Finance. The minister mentioned that net result of carbon pricing will increase production costs for some wood product producers.
How is your department working with provinces to mitigate the increase in production costs? Is there a plan or will the provinces take care of that?
Sean Keenan, Director General, Sales Tax Division, Tax Policy Branch, Department of Finance Canada: As my colleague Judy Meltzer described, the federal pricing system has two components. There is a fuel charge levied on fossil fuels consumed generally by the transportation sector, for example, or home heating fuels. Then, for large emitters, facilities that emit more than 50,000 tonnes in a year, or if there is an opt-in provision for smaller facilities, such as would be involved in the forestry sector, there is a different regime called the output-based pricing system.
They are exempt from the fuel charge because a different pricing conditions apply. Essentially they reflect the fact that they are in competitive industries internationally and apply a price at the margin. You still have a price incentive but it doesn’t apply necessarily on all of the GHG emissions.
In some sense, it’s the design of the system having the two components and having an output-based pricing system that is a design feature to address some of the competitiveness concerns.
As was mentioned earlier, the fact that the money will be returned to the jurisdiction. Any revenues that are generated will be returned to the jurisdiction. As Senator Maltais was commenting, some provinces have already adopted policies to say, “We are going to use the revenues in a certain way to either offset some of those impacts on industries or individuals or families, or make investments in further reductions at the industrial sector.”
Those tools are available. Essentially that is the framework we have put together.
Ms. Meltzer: Just to reiterate, we are in the process of consulting and engaging with those types of stakeholders right now.
We released a framework paper on January 15 that is proposing the approach to this output-based pricing system. Again, this system is designed to ensure that there is a price signal on emissions-intensive trade-exposed industry, but that it doesn’t come at the expense of competitiveness in carbon leakage.
I referred to carbon leakage a couple of times. As you are likely well aware, I am referring to the risk that economic activity is displaced, as well as emissions.
We are in those conversations now. The approach would exempt emissions-intensive trade-exposed facilities, including some in the pulp and paper sector that have high levels of emissions from the fuel charge. Instead, it would put a price on a portion of their emissions above a certain limit. We’re in conversation to develop this through the regulatory process currently. We’re happy to provide more details on that proposed approach.
In addition to those direct impacts, we know that costs of electricity, for example, can also have an impact on those sectors. While electricity isn’t necessarily classically trade exposed per se, we know it’s a significant input for the sectors that are. We’re also considering treatment of electricity and, again, we’re in the process of engaging with stakeholders, the provinces and the territories on the proposed approach.
Treatment of electricity would also see that same approach where it would be exempt from a direct fuel charge and instead see a price on a portion of its emissions. This is very much in discussion currently, so we’ll continue to have clarity over the coming months as details of this system are developed.
Senator Woo: I want to pursue the whole question of the pricing system. I am very focused on whether the carbon pricing system is sufficiently robust and comprehensive in its totality. As you know, the more exemptions you have, the less effective the system will be. It is the same with any taxation system. I am a little concerned that we are moving too quickly to too many exemptions and creating leakages, so to speak.
I like the output-based pricing system, but it can be done without exemptions on fuel. I fear you might be giving away too much. I understand that the lobbies will want to push in that direction, but it’s entirely possible to have an output-based pricing system where fuel is included. There is an incentive to move to cleaner fuels, renewable fuels and so on, and yet protect the output of these industries so they are not unfairly exposed to international competition and other sorts of pressures that they face. You know you can design a system that has less leakage than we currently have.
I would like you to maybe comment a bit on some of the optimal designs of carbon pricing, even for trade-exposed competitive sectors, that can be put together so that we really drive toward reducing carbon with as little leakage as possible, and yet recognizing some of the special circumstances of our industries.
Then I will have another question on offsets, which is the flip side of that issue.
Ms. Meltzer: You are absolutely right. The design of these systems is really important. The conversations we’re having now with stakeholders and provinces will be central to that.
I would point to a couple of things. We released a framework paper in January. I would be really happy to send the link. It is not a long paper. It is about eight pages. We have come out with a fairly stringent proposal.
We have proposed a starting point common across all sectors of the emissions-intensive trade-exposed sectors defined in this case as having emissions at or above 50,000 tonnes per year. We have come out with a fairly stringent proposed approach to put a price of 70 per cent below the national average. If a facility has emissions at the national average for that sector, they would be priced on 30 per cent of those emissions. It’s a considered a fairly stringent starting point.
We are giving consideration to whether that approach makes sense across sectors. We are having those discussions now. We see that as a significant price signal, both for the near term and the longer term.
Maybe more importantly I would point to the fact that the Pan-Canadian Framework has a commitment to review, not just the federal system, but the system as a whole across Canada, an interim report in 2020 and another report in 2022. Those reviews will be important for helping us understand and respond to very questions. Is the approach we’re taking the right approach? I am talking across Canada in that context.
We have recently been working intensively on the other thing I would like to flag. A big question is whether you want to make sure the appropriate recognition is being given to sectors where there is a risk of competitiveness in carbon leakage. You also want to make sure it’s appropriately designed so that it’s reaching the right sectors in the right way.
One of the early deliverables to these reviews is a commitment by provinces, territories and the federal government to take a closer look at competitiveness in carbon leakage risks from carbon pricing for these emissions-intensive-trade-exposed sectors.
Recently we have launched that. The more information we get about a better understanding of the component of the Canadian economy that is potentially at risk for carbon leakage will be helpful to inform as we go forward.
We are trying to balance those considerations, ensuring there is a price signal and at the same time minimizing competitiveness in carbon leakages as a result. As you say, it really is important as to how you design the system. I am happy to be in those conversations now. It’s an interesting time for the federal development of the backstop.
Senator Woo: It’s mostly a comment that I want to follow up on, and you may want to elaborate on my comment.
The agricultural sector, to my understanding, is not actually one of the emissions-intensive sectors. We have certainly heard from many producers that on-farm fuel costs are a very small percentage of their total costs. I am not sure of the logic of exempting a lot of the on-farm fuel costs, if in fact you have an output-based system that can compensate them in other ways.
The real key is the offset system you’re designing. I hear that you haven’t finished designing it yet.
How are we to provide price incentives for carbon offsets, sequestration of wood products and forests, and all of the stuff that goes on in farms? I asked the same question of the Minister of Natural Resources. It’s the same question that Senator Maltais asked as well.
For this study, I think it’s really important that we hear what the framework will put in place on offsets because we cannot produce a report to properly understand the impact of climate change on agriculture if we don’t know what the mechanism will be.
Maybe you could tell us what is the timeline for this offset backstop.
Ms. Meltzer: As you note, offset credits or the opportunity to incent reductions in non-regulated sectors is a really important part of these programs. It’s either in place or planned in the existing systems. We know that offsets played an important role in the systems in place in Alberta, Quebec, Ontario and B.C.
I can actually confirm that we expect to be coming out with some additional guidance and detail on the approach that is being proposed for the federal backstop carbon pricing system in terms of recognition of offset credits.
In the first instance, currently, there wouldn’t be a stand-alone federal system, but rather guidance on the type of credits that would be recognized under that system. There has been a lot of work under the Canadian Council of Ministers of the Environment, including the development of a Pan-Canadian GHG Offsets Framework. It is important that offsets recognize reductions in non-regulated sectors, but it’s also important that those reductions are additional to what would have happened in a business as usual scenario so that we can verify those. A lot of the collective work has been trying to set the parameters for what are robust and effective approaches to recognizing offsets.
I can’t comment on the timing of the release of that report, but that certainly is informing our approach. We are expecting to release further guidance. We released our framework paper on the output-based pricing system regulatory approach in January. In the coming months, so soon, we expect to release additional guidance specifically on the offsets.
I would note as well is that it will be on the other compliance flexibility parameters around, for example, surplus credits. I think that will help to clarify some of the questions you’re raising today.
The Chair: We have 15 minutes left and three people on the list of questioners. I’d like to remind you that roughly means five minutes each for your question and for the answer. If both could be concise, that would be great.
Senator Oh: I want to follow up on the question from Senator Maltais about marijuana. I visited a lot of greenhouses in Ontario last summer. They were worried about being priced out of the market, the economic sector, with the carbon tax pricing system.
We are trying to control greenhouse gas effects, and now we are creating urban greenhouses, a super big greenhouse for growing marijuana, four trees per household. Just imagine, in a high density area it will be like a humungous greenhouse within the city.
Are you guys recommending anything to the government about the pricing? Maybe each household should be taxed on carbon tax pricing? How do you control that instant greenhouse right in the city?
Mr. Jones: On the question of marijuana and the carbon implications of growing marijuana, whether it’s in greenhouses, indoors or outdoors, there are two things to note.
First, like all biological plants, they absorb carbon through photosynthesis. Then that carbon is released when they are consumed if they are incinerated. That’s the same for tobacco products, for wood products and for marijuana. They are generally considered carbon neutral in that there is absorption, combustion and release, and then repeat.
If there haven’t been studies on the specific CO2 implications of the combustion of these products, that’s probably because they are presumed or understood to be either zero or very close to it.
In terms of the specific heat island effect of having greenhouses with elevated temperatures, my understanding is that the volume of space is so limited that this is a negligible impact on the warming of the planet. There are emissions associated with how those greenhouses or indoor facilities are heated, which is generally the combustion of natural gas in the Ontario and Quebec context. Those emissions are presumably covered in the same way that heating a warehouse, heating a factory, heating a home or heating an office building would be covered by the same carbon pricing system.
I’ll turn to my colleagues who have more expertise on that topic.
Ms. Meltzer: I would just reiterate that. In a sense, it speaks to the importance of the Pan-Canadian Approach to Pricing Carbon which extends a price signal, including on any energy sources such as the one you referred to. I don’t know if my colleagues want to add to that.
Mr. Keenan: I don’t think so. In terms of the cannabis legalization, we’re seeing that there is a lot of money going into the industry in expansion of production as new licensed producers come on board. Depending on where they are located, they will be subject to the pricing system that applies, as Matt Jones said, if you grow plants in your home.
Senator Oh: Yes, but you can’t tax the cucumber and not tax the marijuana. I have been with the police force in the early days of the illegal growing of marijuana. I used to see the whole house. It’s ready to turn the whole house into a greenhouse. Just imagine a humungous greenhouse inside an urban city.
Senator Gagné: I am going to change the line of questioning. We know that the impacts of climate change are being magnified in the Arctic. Temperature, I believe, has increased at least almost three times more than the global average. Obviously, that poses a tremendous risk or a significant risk to the Indigenous peoples.
Pertaining to the announcement of the $73.5 million over five years toward the establishment of the proposed Canadian Centre for Climate Services, could you describe its mandate? How will they be impacting on all of the research, scientific information and traditional knowledge of the Indigenous peoples and how will that be translated into action?
Mr. Jones: On the Canadian Centre for Climate Modelling and Analysis, committee members may be aware that following the Vancouver First Ministers’ Meeting an effort was launched to study mitigation, adaptation, clean technology and pricing options to inform what eventually became the Pan-Canadian Framework.
In the working group on adaptation, there was a view from the participants that we could always know more about the impacts of climate change, certainly, but part of the problem was that what data and information we do have are disjointed and not necessarily easily available. Sometimes it is stored in places that are hard to get at or people don’t know it’s there. If they do know it’s there, they may need extreme technical capacity to download it. Sometimes it’s not in a usable format.
There is a view that there needs to be a central clearinghouse for relevant data and information, and to turn that information into useful products that are actually helpful for people to understand their risks.
Step one is to understand the risks of climate change and relevance. That’s a bit local. The impacts vary widely across a country like Canada. Then, what we do about it?
The Canadian Centre for Climate Services is intended to be an opportunity to pull together information, to make it available, and to make it available in a usable format. We are working on an online portal with an interactive map that allows you to click on a space and understand the various data sets in terms of temperature, precipitation and other things.
More important, we’re working with regional centres of expertise. This has been fairly region specific. Quebec has an organization called Oronos that is focused on impacts in the Quebec region. B.C. has an organization and Ontario is launching one. We’re working with those organizations to collect federal information and share it out. Ultimately, it is a local issue to a certain extent but certainly regional.
One of the regions is the North. That region doesn’t have an existing organization as do Quebec and some other jurisdictions. We’re working to build some capacity in the North. Actually, my colleague, the executive director that is running and trying to establish the Canadian Centre for Climate Services is currently in the territories, working there to build capacity. We’re looking to embed staff potentially in the North as the beginnings of building up the capacity to have partnerships there and to pull the territories together.
With respect to the question of Indigenous engagement and traditional knowledge, we have three distinctions-based tables associated with the Pan-Canadian Framework: Metis, Inuit and First Nations. The impact of climate change and adaptation is a particularly important topic for participants in those discussions. We have been sharing a lot of information and having a lot of discussions. That’s certainly a hot topic.
In terms of traditional knowledge, this is a delicate one. On the one hand, there is relevant information that everyone can benefit from. On the other hand, it’s intellectual property, and making it available is a complicated matter to a certain extent.
There are good discussions happening as we speak, particularly with Inuit leaders, on how to manage this information and to make the best use of it in a way they are comfortable with.
Senator Bovey: I am now really confused with your last answer. I have to agree with our deputy chair of this committee in that I think the federal government is very behind.
You said earlier that there are 19 departments involved in this. What is the coordination between those departments? Are they 19 different streams running in different directions? I had hoped not, but then you just said there was no agency in the North.
I am well aware of what is ongoing at the Cambridge Bay research centre. I spoke the other day with Dr. David Barber at the University of Manitoba who has been working on climate change in the North.
I have to question your conclusion. I am well aware that these people are working with universities across the country. They are working with the federal government and with international governments. I am confused and don’t really understand what you indicated about Inuit leaders. At another committee we heard from the Premier of Nunavut the other day, and he was very articulate about what is going on.
Help my muddled head. Is the issue a lack of coordination? My sense is, it seems to me, that there is a fair bit of work going on. I’ve known for years that Dr. Barber’s research has been publicly available.
Mr. Jones: I am happy to field that question.
In terms of coordination, we have put in place quite extensive processes to coordinate all these many pieces. There are deputy level oversight committees, ADM level oversight committees, and coordination mechanisms. We have been working very well closely to coordinate. In fact, there is a meeting on Friday of a number of deputy ministers from across the federal family, which happens typically monthly. Any time you have an initiative that is broad in scope, you need coordination mechanisms to avoid left-hand/right-hand issues or unhelpful silos.
That has been an acute focus for us. We have put those mechanisms in place. We had them sort of drawn up and organized before the Pan-Canadian Framework was even completed because we were very aware of the need to ensure effective coordination of these many related measures.
In fact, the organization I am responsible for is called the Pan-Canadian Framework Implementation Office, which was created explicitly for that purpose.
On the question of the Canadian Centre for Climate Services in the North, in my attempts to be brief I have perhaps left out relevant information. I apologize for that. Certainly lots of research is happening in the North. Federal research, research by academics and international organizations, and multi-purpose research facilities are very much the case. Environment Canada has a significant presence in the North.
My point was simply that it was unlike Quebec with a single purpose organization on climate impact research. It’s a bit more disjointed and there’s less total capacity across the territorial governments than is the case in some of the provinces. That’s why we’re putting a particular emphasis on that coordination role in the North, and hence why my colleagues are in the Northwest Territories at the moment.
Senator Bovey: Where are they working in the North?
Mr. Jones: Environment and Climate Change Canada has research facilities.
Senator Bovey: No, with whom and where are your colleagues connecting in the North to try to pull this together? I came in here encouraged, but I am leaving this meeting totally discouraged.
Mr. Jones: I wouldn’t want to give you the false impression that there is good reason to be discouraged.
On the impacts of climate change there is more work happening currently in the country at all levels than has ever been the case in the past.
Senator Bovey: Correct.
Mr. Jones: It is happening within federal departments. It is being coordinated within federal departments. It is happening within academic institutions and various international organizations. There is more coordination now than there has ever been.
The colleagues I mentioned are currently in Yellowknife meeting with territorial government officials there from their Ministry of Environment and with Indigenous leaders in the area. There is a lot of work with Polar Knowledge Canada, the other two territorial governments, Indigenous leaders, and Environment Canada’s climate scientists. We are also working closely with the Ministry of Natural Resources that has a dedicated team on the impacts of climate change and adaptation.
I don’t want to give you the false impression there is a lack of work or lack of coordination on this topic.
Senator Bovey: I never said there is a lack of work. I am concerned about the lack of coordination. As I said, from conversations I had earlier this week on other topics, I had thought there was more coordination than you’d led me to believe today.
[Translation]
Senator Dagenais: Thank you to our guests. I would like to come back to the much-touted carbon pricing. If there were to be taxation on marijuana some day, we would have to return the profits from the tax to the police, because that would allow them to fight organized crime.
That said, the economic situation in each province is different, so carbon pricing at the provincial level will be inherently different. Do you think the provinces are entitled to apply it differently, which may be more difficult in some regions than in others? We are hearing all sorts of things, but it’s certainly not easy to apply taxes consistently across Canada.
Ms. Meltzer: Thank you very much for your question. I will answer in English, if I may.
[English]
As you note, as a large and diverse country we recognize there are regional and jurisdictional distinctions in terms of economies.
One of the ways in which the pan-Canadian approach recognized this was explicitly to give flexibility to the particular province or territory to implement the type of system that makes sense and yet strike balance to ensure that these systems are effective in the goals of carbon pricing, to which first ministers for the most part agreed in December 2016.
It strikes the balance between the flexibility in approach versus a common outcome. Again, I will point to the commitment. It’s a federal-provincial-territorial commitment to review the systems that are put in place and to assess how these systems are working. It is that balance of recognizing difference but also wanting to ensure that there’s a price signal that extends across the economy throughout Canada. I think the approach strikes that balance in that regard.
[Translation]
Senator Dagenais: Thank you, Ms. Meltzer.
[English]
The Chair: Thank you, senators and panel. It has been an interesting and vibrant discussion.
(The committee adjourned.)