ENVI Committee Meeting

STANDING COMMITTEE ON ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

COMITÉ PERMANENT DE L'ENVIRONNEMENT ET DU DÉVELOPPEMENT DURABLE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, June 1, 2000

• 0907

[English]

The Chair (Mr. Charles Caccia (Davenport, Lib.)): Good morning.

[Translation]

Good morning, ladies and gentlemen.

Today we will be discussing the United Nations Framework Convention on Climate Change.

[English]

Before launching that, I would like to inform members of the committee that there have been a number of items in the media in recent weeks about the environment commission in Montreal that was created on the NAFTA and the difficulties it seems to be facing in its operation. Therefore yesterday the clerk and I made inquiries with the commission about inviting them to appear before the committee before the summer recess. If the executive director will express an interest in appearing at a mutually convenient time, we will have an opportunity to do so either next week or the following week. We will send a notice to that effect when matters are finalized.

On the subject matter before us today, I would like to welcome, on behalf of the committee members, Mr. Drake and Madame Gera and Mr. Moore. By way of the discussion that is to take place this morning, they will let us know where their thinking of the committee is at.

The committee is aware, of course, of the meeting of the conference or the parties that is to take place next November in The Hague or somewhere in Europe. The committee is also aware of the fact that provincial and federal ministers of energy will meet in October to discuss something like a national energy implementation strategy or some of those fancy words that are being used these days.

• 0910

The question that is in the committee members' minds is of course whether a strategy will be devised in time for the November meeting of the conference of the parties. Some of us, including myself, are actually inclined to assume that Canada will not be in a position to ratify because of that closeness of time, but we would certainly be glad to be proven wrong.

By way of background, it might be worthwhile to remind our witnesses today how our collective memory stretches back. It doesn't stretch very far, but nevertheless it stretches back a few years to 1993 or so, I believe. At that time, at the end of a process that lasted at least a year, a package was put together for governments to implement on the Kyoto commitment. As you will recall—I'm sure the officials would—instead of implementing the package, Canada's national action program on climate change was devised in 1995. It was a rather vague program with very few commitments. It was strong on strategic interactions and so on and so forth.

Then there was another set of events that some of us recall. After the Kyoto conference, again the federal and provincial ministers of energy and the environment got together and they established another consultation process for another 18 months or so. Their work seems to be complete now, and apparently it was presented in Vancouver in March of this year.

The question in our minds in anticipation of this event in November is what action will be taken as a result of that development in Vancouver. Will the ministers act? If they don't act, what will be the consequences? We had in essence two consultation processes. As members of this committee, we would like to know whether specific measures will be implemented and when.

Finally, I should draw to the attention of our witnesses today an article by Duffy in the Montreal Gazette just a month or two ago entitled “Provinces rejected bold greenhouse-gas action,” which is a leaked document from the federal-provincial meeting. I'm sure Mr. Drake is fully familiar with that, since these matters do not go unnoticed by attentive officials. At that time, the Quebec environment minister, Paul Bégin, walked out of the talks. He is quoted as saying that “the ministers refused to consider substantive measures to meet Canada's Kyoto commitment.” There is something building up here that doesn't bode well.

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So it is against this background of indecision, wavering, and uncertainty that we are holding this meeting. It would be helpful if parliamentarians were to have an inside as to what is being planned and what the specific objectives are, if there are any, so that then we can respectively, either in the official opposition or in the non-official opposition or on the government bench side, perform a constructive and helpful role.

I hope you didn't mind, Mr. Drake, Madame Gera, and Mr. Moore, having to listen to this fairly lengthy monologue, which didn't take more than five minutes, so as to somehow warm you up and then launch you in the hope that we can have an interesting exchange this morning.

On behalf of the committee, again I thank you for your appearance here today.

[Translation]

The floor is yours.

Mr. David Drake (Acting Director General, International Environmental Affairs Bureau, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman.

[English]

Mr. Chairman, we will make a very short presentation based on our deck, which is available in both official languages. I will start off and Mr. Moore will continue and then I will try to wrap up.

To respond to your initial introduction, Mr. Chairman, I should just point out that while we are familiar with the national process, we of course are part of the international negotiating team. There is a limit to what we can say and certainly our responsibilities are limited as far as the domestic process is concerned. I imagine you will be talking to many people on the domestic side in the months to come. Nevertheless, of course we can talk about that.

Mr. Chairman, at COP-5, which was the last conference of the parties and which took place in November last year, we agreed as an international community to double the number of negotiations before COP-6, which is a watershed meeting to take place in The Hague in November of this year. We are still at a relatively early stage in preparing for that major meeting. We'll explain this, I hope, as we go through our presentation.

The federal negotiating team will need a final mandate before COP-6. In the meantime, we have dedicated consultations with provinces and territories and other consultations with stakeholders, which the provinces and territories also partake in, which will help us formulate the position that will go to cabinet before COP-6.

Our task at this point is to set up the negotiating text for COP-6. The decisions will take place at that point in November. There are relatively few decisions to be taken before then, but essentially we need a negotiating process to get us to that point. This may be helpful background just in explaining where we are in that process.

[Translation]

The first slide shows the key events and dates. In order to give you an idea about the time lines, I will first of all state that the Conference of the Parties in Kyoto was held in 1997 and that Canada signed the Kyoto Protocol shortly thereafter. One year later, the Conference of the Parties was held in Buenos Aires and it resulted in the adoption of a work plan, which is to be completed during the sixth session of the Conference of the Parties, which will be held in The Hague next November.

Since the Kyoto Protocol was adopted, we have been busy, and will continue to be so until next November, working out the implementation of the details. During the fifth session of the Conference of the Parties, which was held last year in Bonn, we agreed that the scheduled we had established was too tight and that we needed twice as much time in order to conclude our negotiations. We have, therefore, doubled the amount of time set aside for workshops and sessions. We have prepared a relatively heavy agenda which is already keeping us very busy.

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Most of us will be leaving for Bonn tomorrow to participate in the 12th session of Subsidiary Bodies, which will be held on June 15 and 16. The Subsidiary Bodies will be holding a special additional session in Lyon, France, from September 4 to 15 in preparation for the sixth session of the Conference of the Parties, to be held in The Hague next November.

Indeed, our journey will be far from over in November. In The Hague, we will turn our minds to the eventual ratification of the protocol. Starting in 2002, 10 years after the Earth Summit in Rio, we will be examining the situation of the earth. Right now, there is a movement afoot that has been sponsored by Europe and other countries to get the industrialized nations to ratify the Kyoto Protocol in 2002.

According to the Kyoto Protocol, in 2005 the parties will have to show demonstrable progress towards meeting their targets.

Then there is the implementation period for the Kyoto Protocol, which is to take place between 2008 and 2012. I will deal with the overall objective for CoP6. The United Nations Framework Convention on Climate Change and the Kyoto Protocol are the basis for coordinated international action on greenhouse gas emissions. They enable us to work as an international community. Our general goal between now and the end of CoP6 is to draft a ratifiable document, a goal which, in my mind, is still far away. In just under six months, we will know whether it will be possible to meet this goal. For the time being, the general goal is to present national parliaments with a document that they will be able to ratify nationally.

Canada's objective is to negotiate the remaining details of the implementation of the Kyoto Protocol according to Canada's interests, namely, the reduction of greenhouse gases at a lower cost, the inclusion of all major developed economies as well as developing countries, and the promotion of niche markets for Canadian businesses. These objectives are, of course, interdependent.

I refer to all of the economies because, although the provisions of the Kyoto Protocol on the reduction of greenhouse gases is aimed primarily at the developed countries, we fear that within 20 years, the emission rates of the developing countries, particularly China and India, will surpass those of the developed countries. This is a global problem which we must deal with through a process involving all major economies.

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[English]

Gentlemen, perhaps I will just go over the specific objectives for COP-6.

At this particular time, the basic objective is to try to get the rules or details of what was agreed at Kyoto. We've spent several years trying to get this. It's an enormously complex process of trying to put in place not only an effective international multilateral agreement, but also one of unique vision, in that it is trying to engage the market into an environmental sphere and make the market work for the global environment.

Much attention has gone into setting the rules that will engage this market and bring about reductions at the lowest cost, as the ultimate objective is to reduce the global emissions of greenhouse gas. Therefore it is fundamentally an environmental agreement.

First of all, at COP-6 we have the rules for the Kyoto so-called flexibility mechanisms and carbon sinks. These are both essential for a cost-effective global approach to reductions. So we have the clarification of the rules of the Kyoto mechanisms and the definitions of sinks, which is going to include the acceptance of additional sink activities and agricultural soils. My colleague Wayne Moore will come back to that in a moment.

Secondly, we need to make progress in creating a level playing field. This is an environmental agreement with enormous economic and social consequences. We want to make sure that as we proceed in this process, Canada is proceeding on the basis of a level playing field. A very big part of establishing this level playing field is setting up a credible compliance regime. Indeed, we are looking at a compliance regime that goes beyond, even at this point, the majority of international economic multilateral environment agreements that are currently in force.

Thirdly, we need to address developing-country issues. This is required first of all for a buy-in from developing countries. This is global community negotiating, and we need to make sure their agreement is part of an overall agreement. It is important in terms of engaging developing countries in the longer term, as I mentioned their emissions are rising, and is part of a global problem that we need to address.

Finally, they have legitimate issues that prevent them from fully participating in this agreement. Those are issues such as capacity-building, technology transfer, adaptation and vulnerabilities for the poorest and most vulnerable, and finally, financing difficulties. These are the issues that are familiar to the members of this committee.

If I may just point briefly to the slide, there's a bit of a diagram there about critical points of resolution at COP-6. It's meant to try to put things into a bit of a timeframe. At COP-6, on one side the annex 1 parties, or the developed countries, particularly want to have rules for the mechanisms. We certainly want to see some kind of agreement on carbon sinks and compliance. At the same time, the developing countries are asking for some kind of recognition and investment in capacity-building, technology transfer, adaptation, and addressing vulnerabilities. Some of these issues, in some form, will continue after COP-6. But there are many issues that are on the table in a general form that will continue over a longer period of time.

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The road we have set on to reduce greenhouse gases is a very long process indeed. Kyoto is only the first step in this process. We will be looking at issues such as relative competitiveness; developing country engagement in the protocol itself over time and perhaps targets eventually; the opportunities for Canadian business to capture opportunities abroad with world-class environmentally friendly technology; and finally, addressing science and adaptation needs.

I might just remind the committee that there is a separate and important scientific process led by the intergovernmental panel on climate change, which essentially provides a basis to try to increase a global understanding about the science of climate change as we proceed.

With your permission, Mr. Chairman, I would like to turn to—

The Chair: You have done extremely well and you've been very helpful. At this stage, perhaps because time is not unlimited, it would be helpful if the balance of your presentation, or Mr. Moore's, could concentrate on Canada's position. That's what we would like to know, particularly in view of the fact that under critical issues and points of resolution there is no indication what Canada's commitment will be, in terms of reduction. It is not mentioned on this particular page. So you might want to focus on that, because that's what the committee is mainly interested in.

Thank you.

Mr. Wayne Moore (Director, Climate Change International, Environment Canada): Thank you, Mr. Chairman. Your timing is perfect, because that's exactly where we were headed.

In terms of our reduction commitment that's inscribed in the protocol, as members are likely aware, we've signed on to a minus 6% target below 1990 levels. That covers all six relevant greenhouse gases. Looking ahead from business as usual, where we would otherwise be in the period from 2008 to 2012, it's much more significant than minus 6%; it's in the sort of minus 25% to minus 26% range. So this is a challenging agreement.

I'd like to very briefly run through some of the positions we will be taking to Bonn when we get on our plane tomorrow for a couple of weeks of negotiations. The meetings in Bonn in the next two weeks will really be focused at a technical phase. In September, hopefully with negotiating text out of June, we'll be in a winnowing phase, trying to narrow down options so the parties—our political masters and other heads of delegations—will be able to make some choices at COP-6

So what will our positions be on some of these key issues Mr. Drake has raised? The first one is the Kyoto mechanisms, which really covers the three areas of international emissions trading; joint implementation, which is really emission reduction projects between annex 1 or developed countries; and the clean development mechanism, which is investments in non-annex-1 countries to realize emission reductions and sustainable development in developing countries.

The mechanisms are a key element of this agreement because, as my colleague has noted, this is one of the first times we're bringing market forces to play in a major way in an international agreement, for the benefit of the global environment.

With the three mechanisms, we feel we have a good basis to reach decisions at COP-6. We have what's close to a negotiating text, and with luck we'll see some good work done on it in Bonn over the next two weeks. Clearly there have been some dynamics on this in the past, where there's been some tension between the European Union, some members of the G-77, and the umbrella group. The umbrella group refers to a group of like-minded countries, including Canada, United States, Japan, Australia, New Zealand, Iceland, Norway, Russia, and Ukraine, that really focus on taking market-based approaches.

There's been some tension over these Kyoto mechanisms and how they might be used to meet the targets. I think that dynamic is changing because members of the European Union are realizing they will need access to these mechanisms if they are to meet their targets.

The G-77, or the majority of developing countries, see the clean development mechanism as a vehicle for increased investment in their own sustainable development. So the CDM is really very much win-win-win. It's a win for developing countries, a win for developed countries, and a win for the environment.

Ms. Marlene Catterall (Ottawa West—Nepean, Lib.): What is CDM?

Mr. Wayne Moore: It's the clean development mechanism, which is the third of the three Kyoto mechanisms.

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Ms. Marlene Catterall: Thank you.

Mr. Wayne Moore: There is still some concern in the European Union about the extent to which the umbrella group countries—Canada and particularly the U.S.—will rely on these international mechanisms for reductions. They're really pushing for a cap on these mechanisms to say countries can only do a certain percentage of their reduction through these mechanisms.

From our perspective, the idea of a cap on the use of mechanisms is flawed in three ways. Firstly, it makes no difference from a global environmental perspective. A reduction in Europe, a reduction in India, and a reduction in Canada are the same from a global atmospheric point of view. Second, it's clear from studies that have been done that a cap or a constraint on the use of these mechanisms will simply drive up the cost of implementing Kyoto for all parties. And there's some clear evidence that it will complicate domestic implementation. We can come back to this during the round of questions, if you wish.

In terms of the remainder of Canada's position on the mechanisms, we're really looking for a low-cost system. We're looking for a market-based emissions trading system that lowers transaction costs. We also strongly emphasize, though, environmental credibility. This is an environmental agreement, and we believe that through making linkages to the provisions of the Kyoto protocol related to reporting and monitoring, we do ensure that environmental credibility. The real key here is the idea of measuring it: knowing the amount of emissions we have and reporting it so that we can be held accountable for that.

Next is the question of carbon sinks or carbon sequestration. This is a provision in both the Framework Convention on Climate Change, which was negotiated in 1992, and the Kyoto protocol, which was negotiated in 1997. It comes from the realization that we can address the issue of carbon in the atmosphere both through direct emission reductions but also, as the language of the framework convention notes, by protecting and enhancing greenhouse gas sinks and reservoirs. So in a way it's the flip side of emission reductions.

Currently this is a divisive issue, and I think a lot of that stems from the negotiations in Kyoto, where there was a clear division in understanding between the forest sector and the agricultural sector on the nature of how things work. There are some who perceive these as loopholes. In our mind they're clearly provided for within the framework convention and within the Kyoto protocol, and there's clearly good scientific evidence to support these. There are a number of countries, however, that are also strongly behind sinks, in addition to Canada.

What do we need to resolve by the time we get to COP-6? There are really two separate issues. There is a set of definitions related to forest activities, reforestation, afforestation, and deforestation. Also, to what extent will we include additional activities such as agricultural soils?

One interesting point here is that while we have a very broad treatment of carbon sinks and carbon sequestration in the Framework Convention on Climate Change, we in fact have a very narrow treatment in the Kyoto protocol, and what was negotiated was very restrictive. In fact if you look at the protocol as it's written now, our farmers and our agricultural community count their emissions from agricultural soils, but they don't get credit for the significant progress they've made in sequestering carbon in those soils. So the discussion now is very much unbalanced, and Canada's goal is to rebalance that.

Another important issue is the eligibility of sinks within the CDM, the clean development mechanism. Right now in the protocol as written, the sinks are not specifically referred to in article 12, which addresses the clean development mechanism. It's Canada's view that they should be included. They're generally included in the protocol and the framework convention, so it simply follows that they should be included in the clean development mechanism.

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Overall, we could characterize the position we will be bringing into these negotiations as desirous of a broad inclusion of all relevant carbon sinks. I'm sure we'll get into some discussion on that question.

The question of compliance, as Mr. Drake has noted, is a very important issue in these negotiations and something fairly unique in multilateral environmental agreements. Compliance is important from two points of view: environmental integrity—making sure parties meet their commitments—but also parties' relative competitiveness. Canada doesn't want to be in the position of meeting its targets and having somebody else make a less significant effort and being able to skip out on their targets without consequence. So there's both the environmental and the competitiveness aspect.

Right now, as with the sinks issue, there's a lot of technical progress underway. Negotiating texts for compliance is not as advanced as the one for the Kyoto mechanisms. We do hope to have one coming out of this next round of meetings, and that will give us the basis for really starting to narrow our choices in September so that ministers and heads of delegations can make final decisions at COP-6 in November.

Clearly in the international community there is significant interest in this. Many countries, including our neighbour to the south, are pushing for binding consequences. “Binding” may not be the best word; I think “mandatory” may be better. All international treaties that Canada ratifies are binding upon Canada, but the U.S., for example, is suggesting that if a party were found not to be in compliance, they would be automatically penalized.

As for Canada's position going into these negotiations, we're very much looking for a quasi-judicial model with a minimal role for political influence, and I don't mean domestically but internationally. We want to try to see a process with a great deal of integrity and very much in the quasi-judicial models we design at home, to ensure that compliance assessment is fact-based and not opinion-based.

We very much see the importance of the technical integrity and the expert review teams who will go over our inventories when we table them and essentially evaluate them to see if they're reflective of the actual situation in Canada.

On the question of scope of compliance regime, Canada very much sees this as an issue of the commitment we took on in Kyoto. The pith and substance of the Kyoto protocol is really the quantitative reduction commitments that are there. So our opinion and our position have been to clearly say, let's limit it to that issue, because that's really the pith and substance of the protocol.

On the important question of consequences of non-compliance, our positions are still in development. The approach we are taking on this is to look at the range of proposals out there—and there's in fact a list of about twenty right now, if not more—and really look at each of them in terms of their feasibility, their effectiveness, and their competitiveness implications and try to winnow down the list. From our perspective, what choices can we support?

Clearly there's one we've eliminated from our perspective. It's still on the list internationally, but our position is very clear. We are opposed to financial penalties or trade sanctions, as they're really outside the ambit of the Kyoto protocol.

I'll turn it over to my colleague, Mr. Drake, to wrap up, and then I guess we'll turn it over to you, Mr. Chairman.

Mr. David Drake: Thank you, Mr. Chairman.

I know you would like to get straight to questions. I think I've covered the major points about developing countries. We can certainly come back to those in questions, if you would like. I'll just wrap up.

Just to make sure there's no confusion as we proceed, at Kyoto in 1997 Canada negotiated and was designated a target of minus 6% of the 1990 baseline. That is the target we have negotiated. There is no renegotiating of the target. We are working on that basis. We are trying to fill out the details of how we would reach that target.

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The next step, then, is to decide whether or not we can ratify. Canada only ratifies treaties if in fact it feels it can comply with the treaty. The domestic process as well as our international negotiations will inform an eventual cabinet decision as to whether or not to ratify the protocol. At this particular point we are negotiating in good faith on the basis of a minus 6% target for Canada and of course a whole series of targets for the annex 1 developed countries that have signed.

We have a very challenging road ahead. We are focusing right now on getting the best deal for Canada. We're trying to bring clarity to a whole set of rules and to set up the text for a global agreement at COP-6, which will essentially resolve the majority of the details that had to be negotiated after the 1997 Kyoto conference. At the same time, we need to keep our eyes on the longer term. As I mentioned, this is very much a longer-term issue. Competitiveness is a longer-term issue, and of course the global environment is a longer-term issue as well. We have a step-by-step domestic process in Canada, which is trying to determine what we will do and how we will undertake to fulfil this commitment. Eventually a decision will have to be made as to whether or not we will ratify the protocol.

Perhaps the best thing to do is to stop there, Mr. Chairman. We'd be happy to answer questions. Thank you.

The Chair: Thank you, Mr. Drake and Mr. Moore.

Mr. Jaffer, would you like to go first?

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Yes. Thank you, Mr. Chair.

Thanks to all of you for being here this morning. It's good to see you all again.

I'd like to focus on what you just finished with, David, when you talked about the process of trying to get the evaluation of compliance when it comes not only to the international level, taking in all the other countries and seeing if in fact the international agreement can be ratified on a unilateral basis, but also domestically to raise the issue of trying to evaluate our own circumstances and being able to see whether we can in fact comply with an agreement that we signed internationally.

As you know, one of the big criticisms when the Kyoto deal was signed was that there wasn't enough consultation with the provinces on the international deal. As you know, Gary Mar was with us in Bonn last October. There's a real interest on the part of people at the provincial level. Perhaps you could elaborate on how the provinces will be included and how we can make sure that if in the end we do ratify this deal, we will be working proactively with the provinces to reduce our emissions. Ultimately, if we don't have that, there are going to be some real problems.

Mr. David Drake: We work in a federation, and that automatically means that we have a level of complexity that other countries—for example, New Zealand, which has similar general policies as we do and so forth—do not have because they're a unitary state. So this is a very important part of how we look at things.

First of all, as you know, there is an intensive domestic process underway. The chairman referred to the joint meeting of the federal, provincial, and territorial ministers of environment and energy in the fall. That will be an important step. But there is a national process taking place now that is very much a joint process, which involves the federal, provincial, and territorial governments. So at that level you have a very intensive process going forward. There are an enormous amount of meetings and a focus on issues to try to see how the domestic process meets the target. Again, I suggest that we may not be the right people to go into that in great detail, but certainly that is well underway. We participate in that process to inform that process about the international dimensions.

Secondly, on the international negotiations themselves, we have undertaken quite an intensive process of involving our provincial and territorial colleagues in a dedicated consultation on the international positions themselves. That has been very fruitful. Quite frankly, we're quite stretched on the international team, and it is good to have extra minds on this. We get excellent advice and a variety of opinions, because fundamentally the provinces have very different interests in this. We have a wide variety of ecological, economic, and social circumstances in Canada, and they look at things quite differently. So it is not quite as simple as a federal-provincial dynamic. One has to look at the whole range of issues that are faced.

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Finally, we very much include and welcome the participation of provinces on delegations. We have a representative of the Province of Quebec on our delegation this time. We're expecting a very significant component of provincial ministers and officials on the delegation at COP-6. I think we would have more people with us in Bonn except that it coincides with a major meeting of the domestic process. We're in competition with ourselves in that process. So there's a very intensive process to bring the provinces along.

I should point out that it is the responsibility of the federal government to negotiate and ratify treaties. In the final analysis, it will be the federal government's responsibility to make that eventual decision about whether or not we ratify. However, once again I come back to the issue, which I mentioned before, that in order to be able to ratify, we must know that we can comply. That is based on having a sense of whether Canada as a whole can do this, and that will be based on a dialogue with the provinces. Eventually there will be a decision by the federal government, as is stipulated in the Constitution.

Mr. Rahim Jaffer: I'll just ask one more quick question.

When we were in Bonn the last time, David, one of the things I noticed—it was the first time I had ever seen the process take place, and it was a fascinating process—was that the Saudis had many problems with certain aspects of the protocol, and the U.S. raised some issues as well. What I'd like to hear is, in your opinion, what's going to happen in COP-6 if in fact some of these countries that were having some concerns walk away from the table or say they can't meet this compliance? Do you still see an agreement going ahead? How would Canada deal with that, especially since the U.S. is quite a significant partner for us? What are your opinions on that?

Mr. David Drake: There is no short answer to your question. Let me just deal with the Saudis, because that's a little simpler to deal with.

Of course one has to look at the climate change convention and the Kyoto protocol in terms of different interests. From the point of view of the oil-producing countries, whose economies are entirely based on the production of oil, the spectre of a reduction in the demand for petroleum is quite frightening. There has not been a great deal done to diversify their economies and so forth. So we certainly see an attempt on their part, to put it politely, to represent their particular point of view. This is not a point of view we share. We find—and I'm not divulging anything secret here—that we are completely on the other side of the fence from our colleagues in OPEC. Our instructions and our behaviour I think very much demonstrate that. Certainly it will be our intention to make sure that it is the vast global consensus that emerges, and not the interests of a few who are not interested in promoting that consensus.

As far as the United States is concerned, of course much rests on the United States. The way the protocol is set up is that one needs 55% of the parties with 55% of the emissions so that the protocol would enter into force. Strictly speaking, that could happen without the United States, but there are questions as to whether or not that would make for an effective protocol.

As you mentioned, the American election comes just before COP-6, and the U.S. will be somewhat constrained, because one way or the other they will not have the same administration. If Mr. Gore gets in, it's not quite the same administration. If it's Mr. Bush, it's quite a different administration.

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I think it is a bit of a mug's game to say that we can't really do anything because of the Americans or whatever. This tends to focus people in Canada a lot at this point in time, and understandably so. We are economically integrated with the United States, and of course we have to look at the U.S. Fundamentally, though, the Americans are very well situated to go either way, either pro-Kyoto or against Kyoto.

It may take some time, but it is clear that the current American administration has taken a lot of steps to make sure they can access the mechanisms. Significant actions have been taken in the budget. Mr. Clinton has actually been quite successful in getting money in the budget for technology-related issues and tax incentives and so forth, even if they can't call it Kyoto specifically.

It's very hard to say, but in the final analysis we will have to make our calculations a little closer to that time. At this point, we are negotiating in good faith, keeping a very close eye on what happens with our partners to the south.

The Chair: Thank you.

We now have Madam Girard-Bujold, Madam Kraft Sloan, Madam Catterall, Mr. Herron, and the chair.

Madam Girard-Bujold.

[Translation]

Ms. Jocelyne Girard-Bujold (Jonquière, BQ): I listened carefully to all of your comments, but I come back to what the Environmental Commissioner said in his report for the year 2000. You also said in your statement that the Government of Quebec would play a very important role at the sixth meeting of the Conference of the Parties.

I'm also looking at the press release issued on March 28 of this year by the Quebec Minister of the Environment, Mr. Bégin. He said that he left the meeting in Vancouver because Canada had still not begun discussions on a fair distribution of the effort to reduce greenhouse gases by 6%. This objective is to be achieved between now and 2008-2012. So I would like to know what the government is going to do to meet Quebec's expectations in this regard, and what it is going to do as well to comply with the comments made by the Environmental Commissioner. He said, at point 3.5 of Chapter 3 of his report:

For its part, Canada made a commitment to reduce its emissions to 6% below the 1990 levels by 2008-2012.

And the report goes on to say:

However, Canada's emissions were already 13% higher than the 1990 levels in 1997, and, according to the forecasts, they should continue to increase.

I agree with everything you said, but, as you know, there are going to be many issues at the next meeting. What are we doing at home to solve our own problems and to come to the sixth meeting in a strong position?

[English]

Mr. Wayne Moore: Thank you for that excellent question. I'll take it in perhaps two or three parts.

Specifically with regard to the question of the involvement of provinces from the international.... As Mr. Drake has noted, we do very much involve these parties and are actively engaged in seeking advice.

With regard to going back to the meeting of the joint ministers of environment and energy, which you referred to, and Quebec's decision to leave that meeting, my understanding is that the goal they are seeking is a division, if you will, of the target at a provincial level. They're seeking allocations so that each province might know its share, its part.

We certainly want to work with all provinces. Our concern about that is that we would tend to focus.... I think one of the counter-tendencies there, or one of the other views, was to look at a sectoral approach. One could imagine—in a provincial approach, for example—that you might have industries in two provinces next to each each other being treated very differently within each province and having very different aspects.

We very much see encouraging a sectoral approach according to economic sector so that you will have some of these effects across the country, because actions taken in Alberta can affect businesses and individuals in Quebec, and vice versa. I think that is the type of debate that's going on.

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I would counter the argument that the process is not moving forward, that the process is not committed to achieving serious work. I think there were some decisions made in Vancouver to move forward, develop a business plan with concrete actions. Those are underway; they are being developed. My understanding is that ministers have agreed to bring those back before we go off to COP-6. So I'm optimistic on that account.

The last point you raised was with regard to the emissions trend, and I think that's a very important one. The commissioner has noted this trend. I think the one thing I would add on, because what we've noticed over the past couple of years—and the data isn't out for this year yet, but we're expecting it fairly shortly—is there is still growth going on but the rate of growth is slowing down. So in fact what we're starting to do is change the curve in Canada.

There's a huge number of factors that impact on this. We're seeing the same trend in the United States. I think it's important that we consider—you're right—we're not ideally where we would want to be, but we are moving in the right direction. Once we get a national implementation strategy and a business plan in place, I would anticipate seeing those trends accelerate and we would continue moving in the right direction.

[Translation]

The Chair: Ms. Girard-Bujold.

Ms. Jocelyne Girard-Bujold: The sixth meeting of the Conference of the Parties will be held in six months. You say that Ontario will have some influence, but if you have no plan whereby each province would do what it has to do, how do you expect to go there and tell the other participants what to do? How can you do that if you are not doing as much in your own area of jurisdiction? What is your plan at the moment, here in Canada, to achieve what you have agreed to do, to have a winning card when you get to the Convention and to be able to tell the others that you succeeded, that you have achieved the results, and that they can do so as well? From what I see, you say that we are going to try, that we are going to see that... What is your overall plan for going to The Hague in a strong position next November? That's what I want to know.

[English]

Mr. Wayne Moore: Thank you. There are four points I would raise in response to this question.

The first point is I would note that we're dealing with the domestic aspects of this, and we're very much focused on the international aspects. But having said that, I will try to go into this a bit. I really look at this from three perspectives.

The first phase is the actions we've taken to date, because there have been a number of actions the government has taken to date. I think the minister, when he was here recently, spoke about some of them in terms of the climate change action fund that has been put in place, and in terms of energy efficiency measures and technology measures that have been put in place up to this point, which have reduced emissions. We've seen estimates of about 60 megatons in emission reductions.

The second part of the activities we've undertaken are the announcements we've just seen in the recent budget that was tabled by the government where over $500 million was allocated to address this issue. There are a number of specific projects or initiatives that were undertaken. There was a renewal of funds for the climate change action fund, which really focused on technology initiatives, science initiatives, and public education and outreach. An important part of this is changing not only technology but also the behaviour of individuals in terms of what kinds of cars we choose to drive, how we use power in our lives, etc.

I think another important part is this sustainable development technology fund that was launched. It contributed approximately $100 million to focus on environmental friendly technologies, because technology will be part of the solution to this.

There has been money allocated for investments in infrastructure and working with municipalities in that area. There have been investments for working on developing countries. As we said, this is increasingly becoming an important part of the problem. So that's really, in my mind, part two.

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Part three is the national implementation strategy, which is the domestic process ministers will discuss in October, in the fall. I believe the date is scheduled in October and the meeting will be in Quebec City. This will be the other part of the plan. So when we go into COP-6 I do believe we go in with a solid track record. Coming out of COP-6 I think there are really three final points to mention there. In COP-6 the decisions that will be taken there on these matters we've discussed this morning are very much an input into our national implementation strategy. That, within our national plan, is going to be part of our making a decision as a country about whether or not we choose to ratify this treaty.

The last point I would raise is on the national implementation strategy, which we have been discussing this morning. One of the key principles of this is really a phased approach, and I think this is a very important concept. What we're suggesting is that as we move forward and get further clarity on the international scene about what the rules of the game are we're dealing with—because the rules are not all known right now—our domestic action will increase in parallel to that. So we're not going to be behind the game. We don't want to be way out in front of the game. We want to move along as the international community moves along.

I hope that clarifies some of my comments.

[Translation]

The Chair: Thank you, Ms. Girard-Bujold.

[English]

Madame Kraft Sloan, followed by Madame Catterall and by Mr. Herron.

Mrs. Karen Kraft Sloan (York North, Lib.): I'm quite disturbed by your last comment. Why wouldn't Canada want to be in front of the game? Canada certainly has had a reputation of being in front of the game in environmental issues, and, very sadly, Canada has been accused of being behind the game and holding the game up. Anyway—

Ms. Marlene Catterall: You asked the question. I'd like to hear the answer.

Mrs. Karen Kraft Sloan: Did I ask a question?

Ms. Marlene Catterall: Yes: why don't we want to be in front of the game?

Mrs. Karen Kraft Sloan: Yes, why don't we want to be in front of the game?

Ms. Marlene Catterall: Sorry for interrupting, Karen.

Mrs. Karen Kraft Sloan: No, I was just muttering it to myself.

Ms. Aileen Carroll (Barrie—Simcoe—Bradford, Lib.): Whether it was a two-way question, I don't think you'll make members happy with that answer. Win, win, win is the right answer.

Mr. Wayne Moore: Thank you very much.

I do think that if we look at the work that's been done on climate change in the past and the actions we've taken, Canada has been playing a leadership role on this initiative. I would probably focus on a number of areas. First, as I said, the recent announcements in the budget are significant, and we're not seeing many other countries that have taken to spending that level of energy and resources and committing it to this exercise.

Clearly, as my colleague has noted, the United States has made some investments. There are some countries that have tabled draft plans but have not put the resources behind that. I think Canada has been showing some leadership capacity. I think the point I was trying to raise is that there is a concern out there that we need to take a pragmatic approach and we want to move ahead while being very active in forums, such as the Intergovernmental Panel on Climate Change, to move forward on science while being very active contributors to these negotiations and really trying to invest capacity in this while investing resources.

There are concerns that have been expressed by many within Canada about the potential competitiveness implications. I think we heard some of those concerns this morning that we don't want to, for example, rush too far ahead of our neighbours to the south in such a way as to really put Canadian firms at a disadvantage.

I would probably come back and suggest that I think Canada is pursuing a course of prudent leadership. And I know that may be some kind of oxymoron, but I think it is important that we are showing leadership but at the same time I think there is a question of being prudent in doing that, because there are very real implications to getting too far ahead of many countries. If you look at the track record internationally, I would disagree personally with the assessment that Canada is far behind. I don't think Canada's far behind. We have a different process because we are a different country.

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Mrs. Karen Kraft Sloan: First of all, I think we can provide a lot of opportunity competitively for our corporations if there is support for them to develop the kinds of technologies they need for energy efficiency.

Secondly, Canada is actively involved with the JUSCANs, and they're not known for their leadership on this particular issue. Certainly if you take a look at the European Union, they want to advance things. Canada's position is that there's no cap on the use of mechanisms. Canada doesn't want to see any financial or other kinds of trade sanctions if there's non-compliance. This doesn't sound like leadership to me.

But the question I really would like to ask is this: when the federal and provincial ministers get together for these meetings, do they not understand the economic, health, and social consequences of inaction? I'm not hearing any discussion about that. People talk about economic costs of moving on Kyoto. Well, let's talk about some of the economic consequences of not moving on Kyoto. We've had problems with the Great Lakes here in Ontario, with low water levels. Whether that is the result of climate change or not, it will be a consequence of climate change, and we're going to see what happens.

Canada has done some remarkable stuff on the science and the Canada Country Study. I really have to commend the people at Environment Canada who have done that work. They did that work without a lot of resources. They put it together because they have excellent people doing that.

But we're not listening. This is a major problem. We're diddling around and diddling around with bean-counting and putting beans here and putting beans there, and deciding what beans we're going to put on the table—are they yellow beans, green beans, or brown beans, and how are we going to get people to agree to these things? We're counting beans. We're developing a system for counting beans.

What are we doing with nature's account? That's where the true measure is going to be. That's the true measure of Kyoto, not whether you can get agreement on clean development mechanisms or joint implementation, or whether we're going to count our forests as sinks, or whether we till our farmers' fields or don't till our farmer's fields—the real reductions are going to come in real reductions.

Mr. Wayne Moore: Thank you very much for those comments and the questions.

Mrs. Karen Kraft Sloan: Try not to be so oblique—

Mr. Wayne Moore: No, I think they are very useful, because they do underline the point that at the core this is an environmental agreement. That's why we're at the table. Canada is particularly driven by the question of impacts and adaptation. As a northern country, we're particularly vulnerable, more so than many other countries who are at this table.

Just to go through some of the questions you've raised, I think that direct reductions are clearly a part of this. Just to underline to you comments that ministers have made, I mean, ministers have expressed their intention that they're going to aim to do the majority of their reductions at home, because they believe it's important. Ministers have clearly stated that on the record.

In terms of technology, you raised a very important point. As I noted before, it's really a two-sided question, one of technology and behavioural change, because it's about individuals and it's about technology. We have made investments in technology and I think that they've stood us in good stead.

The climate change action fund, for example, had a component known as technology early action measures. Some of the investments that we've made there, for example, have contributed to such successes as Ballard fuel cells. Car manufacturers around the world are now just really eating this up because it's a great new technology to reduce emissions that really works. We do see technology as important.

Clearly there's also, in terms of the sustainable development technology fund I just mentioned, another area where there's important investment in technology that we've made. In coming back to the question of impacts and adaptation, we've committed to doing further work on this. A recent foundation on atmospheric sciences was established in the last budget. That will continue our work on understanding.

We are at this table and actively engaged in this process because those questions you raise are important. While some people may have concerns about some of the company we keep, I think that the United States record on spending, for example, speaks for itself. Last fiscal year, out of a $4 billion proposal, I think, the administration succeeded in getting $3.5 billion. This fiscal year they've tabled an even bigger budget proposal that is really focused on technology and related sorts of measures.

• 1015

So there is action among JUSCANs, as you referred to, which have now really sort of evolved into this umbrella group I mentioned earlier. There is action among those players. The Australians were here earlier this week; I met with the deputy minister for the environment. They were outlining the billion dollars of spending that they've put on the table in terms of what they're doing at home.

So the company we keep may not be as bad as it used to be. In fact, we're proceeding to try to make this a real deal, to get a deal at COP-6, which will allow us to move forward with a goal to early ratification of the protocol.

The Chair: Thank you, Madam Kraft Sloan.

Madam Catterall, please.

Ms. Marlene Catterall: Mr. Chair, I understand that you hope the committee will produce some recommendations for our various ministers involved in this file, so I'm going to put a few thoughts on the record as we go. I shall try to walk a very narrow line of not holding our witnesses today accountable for decisions that are not their decisions to make.

Let me first put on the table that I am strongly opposed to emissions trading. I'll be taking that up with the minister, because I can only see that resulting in fewer and fewer and wealthier and wealthier corporations having the capacity to buy the permission to pollute, frankly.

I also bring to this the knowledge that every Canadian child in their lifetime will use more energy and produce more atmosphere-destroying emissions than 80 African children.

I look around the world and I see other companies, other countries, investing in alternative technologies while we're still hitching our wagon to fossil fuels. Not only are we going to be left behind environmentally, we're going to be left behind economically if we're not involved in that major movement around the world by major companies, while some of our oil companies are sitting here and pleading for the right to consume and the right to produce vehicles that consume as much energy as possible.

Ms. Kraft Sloan mentioned the cost of inaction. I heard throughout your presentation about the cost of action and I think the quote was the “enormous economic and social consequences” of trying to reduce. What are the “enormous economic and social consequences” if we don't?

This country is built on a principle of peace, order, and good government. How much peace, order, and good government are we going to have when people are gasping for air? And that will be our children and our grandchildren.

A voice: That's right.

Ms. Marlene Catterall: Where would we be if every African child today used the same amount of energy and produced the same amount of pollution as our kids are going to produce in their lifetime? Where are we going to be when our factories are closing down, when our oil fields are dry because we wanted to stick our heads in the sand?

This isn't a lecture to you. I hope you appreciate that.

So let me come to a couple of questions. Since 1997, by how much, precisely, have we reduced our emissions? Since we signed the Kyoto agreement, how much have we reduced our emissions, and where and how?

Mr. David Drake: Do you want to...? You're the Department of the Environment.

Mr. Wayne Moore: Thank you very much for your comments.

As you said, there are some you will take up with the minister. You may not direct them as a lecture to us, but I think these comments are very useful because they do underline why we are here—not only at this table but at the table we're going to be at next week.

Ms. Marlene Catterall: Yes.

Mr. Wayne Moore: This is an important exercise.

Canada has been very blessed with natural resources, and with that come some obligations as well, so this is why we are actively engaged in this.

• 1020

With regard to your specific question about emissions reductions since 1997, I have two comments. One, we don't have that data with us, but we will get it for you. The real challenge here is the lag in producing inventories of data for this. Once you get to the year end, there's a really complex modelling exercise that they go through to calculate actual inventories—

Ms. Marlene Catterall: Let's cut to the tape: have we reduced or increased emissions?

Mr. Wayne Moore: Emissions have gone up since 1997.

Ms. Marlene Catterall: Okay. We have not reduced. We've increased emissions.

Mr. Wayne Moore: Yes, but the rate of growth has decreased.

Ms. Marlene Catterall: The rate of...?

Mr. Wayne Moore: The rate of growth has decreased. So as I mentioned earlier, we're bending the curve. You're right, we could certainly be decreasing. There are not many countries that are decreasing, but there are some. Most countries are still growing. We've started to bend the curve, and I think that's in the right direction.

We will follow up with you on your specific request.

Ms. Marlene Catterall: Okay. It disturbs me when we talk about signing an agreement based on what we can do, not what we must do. I would really like to see us move that goalpost, frankly.

Let me ask you another question you won't have the answer to. The Ballard fuel cell you mentioned is a very good initiative. We need a lot more of that. We're behind other countries in those kinds of developments. I'm sure you're aware of that. How much would we anticipate—for the investment we put into it—the Ballard fuel cell to save in emissions, depending on certain levels of usage we might anticipate? And how much will emissions increase from two-cycle engines such as jet skis, which pollute more in two hours than an average car does in its lifetime? And what are we doing about that?

Mr. Wayne Moore: I'm very pleased to say to the honourable member you're right, we don't have that answer here.

I think the important point to note about Ballard is that the development of technology is one question. The real question in terms of emissions reduction is the deployment of technology. That's why in the programs they have on the domestic side, the commercialization aspect is very important. So having developed a fuel cell is one very important investment, but now it's up to manufacturers to actually deploy that and put it in the cars so that direct emissions reductions do result.

On the question of the relative impact versus two-cycle engines, we can get specific data for you on that.

Ms. Marlene Catterall: Okay, I have one final question.

We put $500 million into the budget. How much in that budget is going into subsidies, either directly or through tax expenditures, for fossil fuel development?

Mr. Wayne Moore: Of the $500 million?

Ms. Marlene Catterall: No, no. That $500 million is in the budget. That's to do what we said we'd do in Kyoto. On the other side of the ledger, how does that compare to the amount we're spending through tax reductions, tax write-offs, or any other direct subsidies to fossil fuel development?

Mr. Wayne Moore: As we noted earlier, we are members of the international negotiating team, and we're getting a little deep into the details of the domestic implementation strategy—

Ms. Marlene Catterall: You gave me one thing we're doing on one side. I want to know what we're doing to subsidize damaging emissions. That work's been done.

Mr. Wayne Moore: That work has been done, and we will make it available to the committee.

Ms. Marlene Catterall: Thank you, Mr. Chair.

The Chair: Thank you, Madam Catterall.

Mr. Moore, I invite you to read the report of this committee two years ago on that very question just raised by Madam Catterall. The information is there, but you don't seem to know it.

On the other side of the ledger, there is this tax deductibility on oil sands production. There is an additional subsidy of roughly 4% to 4.9% that has been provided since 1995, I believe. It is in our taxation system as a perverse subsidy that encourages the production of petroleum through the oil sands technology, which produces four times the amount of carbon dioxide emissions as the normal, conventional production of petroleum.

You may want to take that information and keep it in your pocket when you discuss matters with your colleagues in other departments here in Ottawa.

• 1025

Next is Mr. Herron.

Mr. John Herron (Fundy—Royal, PC): Thank you very much, Mr. Chair.

This was indeed very informative. I became immersed in this particular file during the Kyoto period by attending that conference in Japan back in December 1997. I have some comments that I'll put on the record, but I do have a couple of specific questions as well.

One of the reasons Canada is not ahead of the game.... I believe we can demonstrate quite clearly that we've been behind and we've been playing catch-up prior to Kyoto and over the last little while.

With respect to the $500 million that was allocated over a prolonged period of time by the federal government in the last budget, I'd like to point out that's essentially two years after Mr. Clinton's commitment in his state-of-the-union address on investing in energy efficiency to the tune of $9 billion to $10 billion. We're clearly behind our principal trading partner in that regard.

Some commentary had been stated with respect to the difference between the JI and the clean development mechanism being that this tradeable permit regime is for developed countries, maybe in the North American context. And we've demonstrated through sulphur dioxide trading on acid rain that it's a very useful tool for us to move the yardsticks and have a net decrease of sulphur. It was a valuable tool to get industry on board and actually move even faster than we anticipated.

So in a Canadian context, in order to maintain no limit on CDM, I think it's critical that you maintain that position because of the comments that are made saying the Europeans are leaders in this.

I believe that a lot of countries in Europe in particular are incredibly disingenuous in terms of their position. Look at Sweden, for example: they're going up about 7% above 1990 levels. That's their target, but blended under the EU bubble. They're a northern country that has winter, like ours. They're a resource-based, energy-intensive economy, like ours. Relative to their population base, they're a country with a large amount of geography, like ours, and one that has some challenges with closing some nuclear power plants. We might see that, depending on what happens in Ontario. The possibility does exist in that regard.

I see the CDM issue as being fundamentally critical in the Canadian context for us to remain.

I have a second question, but I'd like some comments on that.

Mr. David Drake: Thank you very much, Mr. Chairman.

If I may just make a few comments, I'll then turn to my colleague, Dr. Gera, who is not only the top person in Canada on the CDM, as the head of our CDM-JI office, but also a world authority on many of these issues.

A lot of what we're trying to do is establish a regime that essentially drives at real reductions, and that's really important. We have to establish the baselines and the ability to be able to get real reductions. That's really what we're doing now—trying to get the rules in place to make sure that the CDM, the clean development mechanism, and JI and emissions trading are not international scams. There's an enormous amount of work going on in this regard, and I'll ask Sushma to make some comments.

This is important. And I think another thing that is essential is that this is a global agreement. In order to get a global agreement, we have to deal with the majority of people on this planet, who see things through a completely different lens—the lens of sustainable development. What we are trying to do is establish a process by which you engage the market into helping them develop, and you also have real reductions of emissions at the same time.

• 1030

As my colleague mentioned before, whether you take a tonne of carbon out of the air over Shanghai or over Toronto, it has the same effect on the environment. There are questions about what you do at home and so forth, and we've covered that, but the ability to make this work is very important. It's also important in terms of engaging countries. Let me just give you an example.

There are 53 countries in Africa. Those countries have only 3% of global emissions, as a whole, in sub-Saharan Africa, of which two countries, Nigeria and South Africa, have 85%. If we are going to engage those countries in a process and if they're going to come along in the global process, we will have to make sure they can see their way into this and see some way in which they're going to benefit from this. This is where we failed in the past in other international treaties. The clean development mechanism is an enormous opportunity to engage them. It's their number one priority for the Africans, and for the Latin Americans, in particular.

We're tying to keep this on the level now, and there are very intensive detailed discussions about how this should be done. We are trying to make sure we do one of these win-win-win situations again, because it's not only important for Canadians, it's important for our partners in a global community as well. One has to look at it in that duality. There should be no contradiction between Canadians working for credit and profit abroad and real sustainable development and emissions reductions.

Sushma, the real expert, is here. I should pass over to her, with your permission, sir.

The Chair: Briefly, please.

Ms. Sushma Gera (Deputy Director and Head, Clean Development Mechanism and Joint Implementation Office, Climate Change and Energy Division, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman.

I want to say just a bit about the mechanisms, and the clean development mechanism, in particular. As we know, when we got the Kyoto target, we also got the challenge of some flexibility in the mechanism. How do we meet our target? The three mechanisms were there to allow us some flexibility, in terms of time and geographic flexibility. These mechanisms work because there is a cost differential, in terms of meeting your targets from one country to the other.

The mechanisms, in general, are not only about us being able to reduce emissions; they are about engaging the private sector, so we change the way we consume and produce over time. The clean development mechanism is the only mechanism that engages developing countries. It's a global treaty. It's a global problem we are dealing with, and that's the only mechanism that allows us to bring in developing countries. It's the only mechanism developing countries are interested in, or want to see progress on.

There are two objectives very clearly laid out in the protocol. The clean development mechanism should not only be about helping us reduce our emissions. It should also be contributing to the sustainable development of developing countries, so we can engage them in a partnership way. Even if they have not taken on the quantitative commitments, we can bring them aboard on the cleaner development path.

How will it work? Very clearly, the protocol talks about real measurable and long-term emissions reduction, so we are not talking about bogus emissions trading of hot air there. We want to make sure, and ensure, that the mechanism is very simple. The more we complicate it, the more the transactions cost.

The Chair: Thank you, Dr. Gera.

Ms. Sushma Gera: Thank you.

The Chair: Mr. Herron, do you want to ask a brief question?

Mr. John Herron: I have just a brief comment. One of the reasons why Kyoto became such a lightning rod in this country was the Regina debacle, when we agreed to a target with our provincial cousins and then went over and changed our position almost overnight.

The one comment I will make is that as we head toward the next stage and get a commitment on what needs to be done, we must engage the provinces fully in deciding our bottom line and must not break the trust on that, because we can't implement anything unless our provincial cousins are onside.

Thank you very much, Mr. Chair.

The Chair: Thank you, Mr. Herron.

We may have time for a very brief second round of questions, if the answers are short.

Allow me to ask a few questions of you, Mr. Moore. Can you inform this committee when the Government of Canada will stop giving tax credits to the oil sands industry, possibly as part of the national implementation strategy? It is difficult to see how we can achieve the real emission reductions to which Mr. Drake referred if the tax system we have presently in place favours greater emissions.

• 1035

The second question is about a statement by Mr. Drake regarding Canada opposing financial penalties or trade sanctions in case of non-compliance. Could you please supply this committee the number of the article, the section in the Kyoto agreement that specifies that particular or gives power or provides the basis for that position on Canada's part?

The point of engaging African countries is a very interesting one, except for the fact that the major per capita emission countries are the U.S. and Canada. I don't know whether all the effort that is going into the sub-Sahara or South Africa and so on is warranted, considering the massive per capita emissions that come out of North America.

On the theme of prudent leadership, Mr. Moore, we can understand where you come from, and I'm heartened by the fact that you recognize the Kyoto agreement to be an environment agreement. The fact, however, is that over the years, it has been gradually turned into a short-term economic vision. The more time goes by, the more the economic consideration for the short term seems to prevail.

As you said, we are attempting to bend the curve, but that is all we seem to be able to achieve. By the year 2012, even if everybody achieves the maximum committed reductions that were agreed upon in Kyoto, without even calculating the sinks, without reducing by way of calculations or trade emissions and the like, the curve will still be climbing, according to the intergovernmental tenets on climate change through the report. We are really facing a massive challenge that is perhaps beyond our capacity to meet. I don't know.

I would like to put on the record my full concurrence with Madame Catterall's statement that she is opposed to emission trading for that very reason. Every attempt to modify and reduce Canada's contribution to the reduction, as well as the American, will only allow the continuation of this curve, even if it's bent. I'm sure you have seen those graphs, as I have seen them.

It's true, as you indicated, that many solutions will come from the technical fix in which we all believe, up to a point, of course. It will have to come also from changes in behaviour, as you have pointed out. You may want to give us a larger context of the 60-megaton reduction that you have referred to so that we can appreciate that against the background of the larger picture. Perhaps you could do that by way of a note or a memo one of these days.

The key question is how the curve will look in 2012. When will we see a plan by the provinces and a plan by sectors? This is what we have all been waiting for for some time. Will there be a plan by provinces and by sectors? When is it being made public? What is wrong with some transparency on a such an immense, difficult task, so that the public—and the parliamentarians, of course—can appreciate what is going on behind closed doors? This matter, as we all know, affects everybody.

• 1040

Finally, I would like to say the obvious here, and that is that it has been proven so many times that competitiveness depends also on energy efficiency and energy conservation. Is that elementary theme sinking into the collective brains of those involved in these negotiations in Canada? We don't get that impression, but if it is, we would love to know that.

We have time for a fast second round, starting with one question, one answer. Mr. Jaffer, if you would like to ask a question....

Mr. Rahim Jaffer: Didn't you want a response?

The Chair: I think I would like to see it in writing rather than today. I think you should give us the benefit of something on paper that would be in the form of a memo—it doesn't have to be an elaborate form—so that every member of the committee can have the benefit of looking at your answers, rather than leaving it to the verbal record.

Mr. Jaffer.

Mr. Rahim Jaffer: I'll just ask a quick question. In your presentation you said the position of Canada...when it comes down to consequences of non-compliance and our positions on that basis. I guess on the level of non-compliance, what is the proposed system that will monitor compliance once this treaty is ratified, if that happens, and how will that be patrolled? What are some of the proposals that are being made in the sense of what will happen? Could you just expand on that, given the situation right now?

Mr. Wayne Moore: I will try to be brief. This is an issue that doesn't induce briefness. Essentially, under the Kyoto protocol, once ratified and once it enters into force, parties will be required to report their greenhouse gas emissions and removals by sinks during the period 2008 to 2012 under the protocol. There is a set of guidelines being set up for that. Article 5 says we must have a monitoring system of the protocol. Article 7 says we must report this to the convention. Under article 8 of the protocol, it says there will be expert review teams who will look at that data that is submitted by parties or countries—there's only one party that is not a country and that is the European Commission. They will look at that and evaluate that for completeness.

Most of the current proposals would have that report going to some variety of a compliance body. The composition, the nature of the compliance body, its relationship to the conference of parties—there are a lot of options on the table, but essentially that report would go there. There would be a judgment made on whether or not a party was in compliance. Most of the proposals on the table right now would have some availability for a true-up period. If a party is found to be in non-compliance by accident, for example, they have an opportunity to true up, if you will.

Another proposal that is gaining a lot of momentum is the notion of having a compliance fund, where, for example, a party might make a contribution to a compliance fund, the proceeds of which would be invested in mitigation reduction projects in the global community. So you do make the environment whole and you don't let anyone off the hook.

Then, as I mentioned, there's the question of consequences, what consequences exist for those parties who do not choose to true up or who do not choose to comply. As I said, there is a list of about twenty on the table. There are those who would like to focus on just publicizing non-compliance. There are those who are looking at warnings. There are those who are looking at prescribing policies and measures. There are those who are looking at subtracting allowances from the next commitment period, such as the U.S. There are those, as has been noted, who are looking at financial penalties—our sense of financial penalties is that they seem to be very hard to collect in the international community, so consequently we've looked at that. But that's the kind of overall system, generically, we're looking at.

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The Chair: Thank you, Mr. Jaffer.

[Translation]

You may ask a very brief question, Ms. Girard-Bujold.

Ms. Jocelyne Girard-Bujold: A little earlier, Mr. Moore, you told me that you handled negotiations at the international level. I'm also interested in what you wrote about the commitment of developing countries. You say that developing countries should make a commitment, but if I were in your place, I would feel extremely uncomfortable to tell developing countries that, because Canada has not met the objectives that it set for itself. Emissions have increased by 13% between 1990 and 1997. Do you not think that developing countries are aware of that? So I fail to see why you would make such a comment. You say that they must do this. You tell other countries not to do what you do, but to do what you say. That is what you were saying to developing countries.

You said earlier that you had some projects and that there would be some investment funds, technology funds and funds for change, but that the total would be very small. You also said that last week, you met with some people from Australia who were going to invest billions of dollars. The United States is going to be investing $3.4 billion. From what you say, our investments are peanuts: $25 million and $100 million in various funds. I don't think Canada has the will to do what we would like to be doing internationally. The will is simply not there.

What are you doing to tell your governments that they must do their homework before you start giving orders to other countries throughout the world? That is what I find deplorable, and that is what I would like to have you talk about on the international stage.

[English]

The Chair: A brief answer, please.

[Translation]

Mr. David Drake: You have actually given a very good description of the situation we are facing. The emissions of developing countries are increasing. We are trying to correct this, but we actually find ourselves in a difficult position with respect to developing countries. However, this is not the end of the argument. Earlier, we spoke about some African countries, and the chairman said that the African countries are not really going to make a difference, which is quite true. Rather, it will be the Chinese, the Indians and others whose greenhouse gas emissions are constantly increasing. We must involve them in the process.

It is true that we have a big job at home. For developed countries, it is difficult, of course, to negotiate on the basis of rising greenhouse gas emissions. However, we must not forget that in 20 years, it could happen that China's emissions will exceed those of the United States, with India not far behind. Other developing countries are also going to be increasing their emissions dramatically. We must also make a commitment to reduce our emissions in the near future. Unfortunately, we do not have what we need in the protocol to really achieve the objective at this time. However, we must give them some means of meeting this objective and we must encourage them, because this is a global agreement. In order to have a comprehensive, global solution, we must have a global response.

It is true that there is a certain paradox here, but that is our fate at the moment.

The Chair: Thank you, Ms. Girard-Bujold.

[English]

Madame Kraft Sloan, a brief question, please.

Mrs. Karen Kraft Sloan: I defer to Madame Carroll.

The Chair: Madame Carroll, please.

Ms. Aileen Carroll: Thank you, Mr. Chair.

I apologize for having to jump out mid-stream to my other committee, which certainly blows your train of thought, but I did want to pick up on something the chair mentioned—and obviously I am one of the three who said win, win, win.

When we talk about Ballard.... I've been a small businessperson for a number of years. Essentially an entrepreneur is a risk-taker, and I recognize that. But it was a risk taken by the private sector that brought forward Ballard, and in the end, after a long, it seems to me, meandering walk, we got in with them and started to support them. They are still a long way from commercialization.

• 1050

When you make the jump from business to government, you do come in as a risk-taker, and it is somewhat dismaying to see what frequently appears to be an inability to be risk-takers within the public policy domain. I think maybe that was what Ms. Catterall was saying. If she wasn't, that's certainly what I'm saying.

So we do look to you as wanting to lead the parade. We do participate in a process here where we try to take risks and break out of the mould.

So I think if I can just—and I know I'm supposed to end up with a question. The chair said he thinks it's very important—and many others have said it before me—that we reduce subsidies to oil and gas, and I agree with that. More than that, we need to increase our assistance to those environmental companies and those who have come forward with a product and have come forward as a result of going on their own. We have to subsidize those.

So you have to not only get into bed with Mr. Martin, you have to get into bed with Mr. Manley. I think our failure to do so has been part of the dilemma.

I have had people come to me, as many MPs probably have, saying “I have this incredible product that will greatly impact on”...what we're talking about this morning. But when we sit down together, I too get daunted by the task ahead, to ever walk them through the maze, to get the kind of assistance that Ballard should have got, and in the end almost refused to take.

So I think we have to be very careful when we come to the table and say as the government, “We bring Ballard”. No, you didn't bring Ballard. You were late getting on the Ballard train. I think it's great that it has a Canadian stamp, but it was still developed by the private sector. And we on the government side have to get on and push and not have to be pulled.

I'd like to say something about Georgian Bay, but I think I've taken my time.

Mr. Wayne Moore: Just one very brief comment. I think the point raised by the honourable member is excellent, about the importance of the private sector and this enterprise. There have been many Canadian companies out there who have demonstrated a real willingness to move forward on emissions reduction as well as on technology.

Government, I think, as has been pointed out, does not make or break all of these. I think some of the assistance that's been there has been helped to push things along. I think the climate change action fund has been useful in terms of trying to do some of the experimentation you refer to, and I would leave it at that.

But I think the important role of the private sector is something that Canada in the negotiations has been really pushing. What they've been telling us, in terms of our consultations with our stakeholders and the private sector, is the importance of flexibility and the importance of them being able to have options open to meet their target—not being put down one narrow route, but having some options there.

I sense among many a real willingness to take on the Kyoto challenge.

The Chair: Thank you.

Madame Catterall, please.

Ms. Marlene Catterall: There is a heavy focus on market mechanisms here. Others have come to this point, but I'd like to understand it a little more clearly. We say we don't support financial or trade sanctions for countries who don't keep their commitments. As a parent you learn that the best way to have your children grow up strong, healthy, and able to lead good lives is to make sure they suffer the natural consequences of their actions. If one is not meeting emissions targets, it's usually for economic reasons, and it seems to me the most natural consequence is an economic consequence. So why have we taken such a strong position against financial and trade sanctions?

The Chair: A brief answer, please.

Mr. Wayne Moore: Very briefly, I think the underlying thinking on this position is really one of pragmatism. We are engaged in a discussion on consequences, to be sure. As I noted, we're going through the menu and looking at which ones are feasible, and there are many still on that list outside of financial and trade that do have real economic consequences, as you mentioned.

• 1055

From a financial penalties point of view, I think there's a matter of pragmatism in the international fora as to how you collect financial penalties. The one example I might point to is the UN dues. We've heard previously about the difficulties in collecting those. I'm not trying to be facetious, but it does point to a practical problem.

The second matter I would raise around trade issues is that there are two sides. One is that there's obviously a very complex relationship with the World Trade Organization and those rules, which needs to be sorted out. There are those who have started to try to sort out these relationships, but I think that homework is far from done.

I'm not a trade lawyer by any stretch of the imagination, but our sense is that a lot of the success from using trade penalties in the context of a world trading organization or regional trading blocs is because of the bilateral nature of it. A country does something that impacts another country, so you have tit for tat, if you will. That's really—

The Chair: Thank you, Mr. Moore.

Next is Madam Kraft Sloan, followed by Mr. Herron and the chair. We have only five minutes left.

Mrs. Karen Kraft Sloan: Thank you.

Will Canada be seeking credit under the clean development mechanism for the trade of nuclear reactors abroad?

Mr. David Drake: The issue is not whether we have nuclear reactors or others under the clean development mechanism. The question is, do you start establishing lists?

If you start establishing lists, you get very long lists, and you immediately get into some real problems. Equally prominent on the list, for those who are concerned about nuclear getting credit, is, for example, hydro, and there are others. The concern here is a question of first of all establishing lists and where you go with that. You need to make sure there is integrity within the individual projects. Secondly, there is a question of sovereignty. We do question whether or not it is up to us to tell other countries what their choice of technology should be. It is a fairly basic issue in the United Nations system, and it is the United Nations that is negotiating. So there's a—

The Chair: Thank you. Do you have a supplementary question?

Mrs. Karen Kraft Sloan: Just very quickly, Canada has a concern about establishing lists, because you develop these long lists. But if you don't have a list, we're not talking about excluding nuclear technology. So is it the Canadian position, then, to look at having credits through clean development mechanisms by the use of nuclear reactors abroad?

Mr. David Drake: Very briefly, our position is that there should not be any lists that exclude technology.

Mrs. Karen Kraft Sloan: No, I'm not talking about lists. I'm talking about the use of nuclear reactors abroad for credits through clean development mechanisms. Is that the Canadian position? Is that something you would like to see? I don't want to talk about the lists. I want just to talk about nuclear reactors.

Mr. David Drake: It's whatever the country feels is its requirement.

Mrs. Karen Kraft Sloan: No, I mean Canada's position.

Mr. David Drake: Our position is that it's up to the countries to decide.

Mrs. Karen Kraft Sloan: No. Would Canada like to see nuclear reactors? Is that something you would like to promote as your particular decision?

Mr. David Drake: At this point our position is purely that it is up to countries to decide, and we do not exclude nuclear.

Mrs. Karen Kraft Sloan: But would you like to decide—

The Chair: Thank you. Mr. Herron.

Mr. John Herron: Very briefly, to pick up on what Madam Carroll said in terms of engaging the private sector and really moving the yardsticks on this, with regard to aggressive massive tax incentives, it has been stated, even by the Commissioner of the Environment and Sustainable Development as late as this week, that in the domestic regime the government is really missing the boat. Energy efficiency is important, given that we trade about $260 billion each and every year with the Americans. If the Americans better their energy efficiency and we don't, that's going to have very negative implications.

In that vein, today we're around 26% or maybe 30% above 1990 levels. You said that you will not sign on if you know you can't comply. Are there enough things we can put into our tool kit so that we can actually comply and meet that target by 2008 and 2012? Can it be done, in your opinion? What is the indicator that says we can do it?

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Mr. Wayne Moore: I don't know if there's one magic indicator out there. Clearly, what the national climate change process is setting out to do is to develop that plan. As to whether or not it's doable, they're still working on it, and I suspect they're moving forward in good faith with a view to achieving the commitments that have been negotiated.

The Chair: The final question is whether the Canadian position will be guided by ethical values and considerations when discussing matters in The Hague in November—namely, the obligations and values we have vis-à-vis the rest of the world.

Mr. David Drake: I think there's no question of that, Mr. Chairman. This is also guided by our general foreign and development policy, as well as the domestic response.

The Chair: We didn't notice the word “ethical” in your presentation this morning.

We thank you for your appearance, and we hope to see you again. Also, we look forward to receiving your written replies.

The meeting is adjourned.