ENVI Committee Meeting

37th PARLIAMENT, 3rd SESSION

Standing Committee on Environment and Sustainable Development

EVIDENCE

CONTENTS

Thursday, May 13, 2004

À

1015

The Chair (Hon. Charles Caccia (Davenport, Lib.))

Mr. Charles Hubbard (Miramichi, Lib.)

The Chair

Mr. Charles Hubbard

The Chair

Mr. Charles Hubbard

The Chair

Mr. Charles Hubbard

The Chair

À

1020

Mr. Elliot Morley (Minister for Environment and Agri-Environment, United Kingdom House of Commons)

À

1025

The Chair

Mr. Julian Reed (Halton, Lib.)

À

1030

Mr. Elliot Morley

À

1035

The Chair

Mr. Bernard Bigras (Rosemont—Petite-Patrie, BQ)

Mr. Elliot Morley

À

1040

The Chair

Senator Lorna Milne (Peel County, Lib.)

Mr. Elliot Morley

Senator Lorna Milne

Mr. Elliot Morley

À

1045

The Chair

Senator Tommy Banks (Alberta, Lib.)

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

À

1050

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

À

1055

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Julian Reed

Mr. Elliot Morley

Á

1100

Mr. Julian Reed

Mr. Elliot Morley

Mr. Julian Reed

Mr. Elliot Morley

Mr. Julian Reed

Mr. Elliot Morley

The Chair

Hon. Serge Marcil (Beauharnois—Salaberry, Lib.)

Á

1105

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

Hon. Serge Marcil

Mr. Elliot Morley

Hon. Serge Marcil

Mr. Elliot Morley

Á

1110

Hon. Serge Marcil

Mr. Elliot Morley

The Chair

Senator Tommy Banks

Mr. Elliot Morley

Senator Tommy Banks

Mr. Elliot Morley

Senator Tommy Banks

Á

1115

Mr. Elliot Morley

Senator Tommy Banks

Mr. Elliot Morley

The Chair

Ms. Francine Lalonde (Mercier, BQ)

Mr. Elliot Morley

Á

1120

Ms. Francine Lalonde

The Chair

Senator Isobel Finnerty (Ontario, Lib.)

Mr. Elliot Morley

Senator Isobel Finnerty

The Chair

Senator Lorna Milne

Á

1125

Mr. Elliot Morley

Senator Lorna Milne

Mr. Elliot Morley

Senator Lorna Milne

Mr. Elliot Morley

The Chair

Hon. Stéphane Dion (Saint-Laurent—Cartierville, Lib.)

Mr. Elliot Morley

Á

1130

Senator Tommy Banks

Mr. Elliot Morley

The Chair

Ms. Francine Lalonde

Mr. Elliot Morley

Á

1135

Ms. Francine Lalonde

Mr. Elliot Morley

Ms. Francine Lalonde

Mr. Elliot Morley

The Chair

Mr. Julian Reed

Mr. Elliot Morley

Mr. Julian Reed

Mr. Elliot Morley

Mr. Julian Reed

Mr. Elliot Morley

Mr. Julian Reed

Mr. Elliot Morley

Mr. Julian Reed

Á

1140

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Á

1145

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

Mr. Elliot Morley

The Chair

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CANADA

Standing Committee on Environment and Sustainable Development

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NUMBER 019

l

3rd SESSION

l

37th PARLIAMENT

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EVIDENCE

Thursday, May 13, 2004

[Recorded by Electronic Apparatus]

À  (1015)  

[English]

    The Chair (Hon. Charles Caccia (Davenport, Lib.)): Good morning to you all, and in particular, welcome to our guests from the other side of the Atlantic pond, and a special welcome to our colleagues in the Senate. We are delighted to see senators at our meetings.

    The occasion is the visit of Mr. Morley, to whom we extend a particularly warm welcome. We express also our interest in hearing him because of his most diverse and rich biography, which we had an opportunity to read.

    On this side of the Atlantic we, of course, through the media, learn about statements made in the U.K. on climate change and, more recently, this very alarming statement by Sir David King, who is the head scientific adviser to the Prime Minister, who warned that climate change poses a far larger threat to the world than even terrorism, which is perhaps something you may want to elaborate upon.

    In any case, some six months ago we had an opportunity to....

    Mr. Hubbard.

    Mr. Charles Hubbard (Miramichi, Lib.): Mr. Chair, I would like to make a point before we begin today.

    As you know, Mr. Chair, I am a recent comer to the environment committee and have only been here since January. As today might be one of our last gatherings, since inevitably we are looking at an election some time soon, Mr. Ambassador, we would like to say—I'm sure on behalf of everyone around the table this morning—that the chair today has been a long-time member of our Parliament—

    The Chair: Mr. Hubbard, this is not on the agenda. We are not—

    Mr. Charles Hubbard: I would like to put on the record, if I could, Mr. Chair—

    The Chair: And I was in the midst of a sentence, Mr. Hubbard.

    Mr. Charles Hubbard: I think many Canadians have watched your long career, Mr. Chair, and your involvement with the Government of Canada and as a member of our House of Commons. We certainly want to salute you for the work you have done as a member and as a chair of this committee. Watching some of the great sustainable issues you have put forward, I'm sure that all of us want to salute you.

    We also want to say to our visitors today that our chair has also been chair of the Canada-Europe Parliamentary Association, which has brought to our House and to our members and the members of the Senate the great affairs that are happening in Europe. He watches them very closely. Certainly members of the House and all Canadians are indebted to his work as chair of this committee and chair of the Canada-Europe Parliamentary Association.

    I understand it is being put in the transcript. I think it's something that should be said today on my behalf and for you. We want to salute you, Mr. Chair, and hopefully you will continue to be the great Canadian you've been, and to—

    The Chair: Mr. Hubbard, you may have to salute me after the next election, you know, because I have the option of running as an independent, which I'm thinking very seriously of, so you will not get rid of me that easily. The news of my political funeral is premature.

    Mr. Charles Hubbard: I would hope, Mr. Chair, that now you've told us your ambitions, you will be back with us, whatever happens.

    The Chair: Thank you. I appreciate your thoughts. I appreciate it very much.

    Some hon. members: Hear, hear!

    The Chair: Mr. Morley, to conclude my brief introduction, just to let you know that some eight months or so ago, through the auspices of your high commission, we had the pleasure—some of us, at least—to meet another of your scientific advisers, who informed us of your policy to the effect that by the year 2050 you intend to reduce greenhouse gas emissions by some 40% or even 50%, an astonishing level. So again, on that topic we would like to be enlightened as well.

    To make it short, we welcome you most warmly. We are very happy with the fact that you included Canada in your visit to North America. Very often in Europe we find that North America is understood as being Washington only, whereas we have a different view, of course. We give you the floor and we welcome you, together with your colleagues at the table and your colleagues who are in the room.

À  (1020)  

    Mr. Elliot Morley (Minister for Environment and Agri-Environment, United Kingdom House of Commons): Thank you very much, Chair, for the welcome. I'm very pleased to be here today to talk with our parliamentary colleagues from both Houses in the Canadian government.

    As you know, Canada is a very important partner to us in the U.K.—a fellow member of the G-8, very influential within NAFTA, and a country that we've worked very closely with in all sorts of international organizations. So we very much appreciate that partnership.

    We've also had a very good dialogue on environmental issues and climate issues. I've personally had a lot of contact with David Anderson, who has been an excellent representative for the Canadian government on environmental issues.

    I'm joined here at the table, Chairman, by my private secretary, Bradley Bates; David Reddaway, who is the British High Commissioner; and Chris Leigh, who is from our global atmosphere division within the Department for Environment, Food and Rural Affairs, my ministry within the U.K.

    I'm actually in Canada to speak at the Conference of the Reducers. The Conference of the Reducers is part of the Climate Group that was launched in London quite recently. This is their first international conference. It's quite significant, I think, that it was held in Toronto, here in North America. I was very encouraged that the attendance includes people from Australia, from the EU, and three U.S. states, which I think is quite significant.

    The Climate Group is a group of people who want to take forward the whole issue of reduction of greenhouse gases and want to take forward the issue in relation to combating climate change with or without the Kyoto agreement. The Kyoto agreement is very important. We do believe, we are confident, that Russia will ultimately ratify that and it will come into force. We very much welcome the fact that Canada is a signatory to the agreement.

    But we actually have to look beyond Kyoto and we have to look into the second phase. Kyoto is important, but it should be seen as a first step. You are right, Chair, that we have a national commitment to reduce our greenhouse gases by 60% by 2050 and we have an interim target of reducing gases by 20% by 2010.

    We've just published our national allocation plan as part of the European Union emissions trading scheme. That sets us off on a target of a 15.2% reduction in greenhouse gases, but that's just an initial target. That just sets us off on our target for the 20% by 2010. We have already passed our Kyoto target of 12.5% on greenhouse gases. We're at about 14%, nearly 15%, reduction on 1990 levels.

    You might be interested in some reports that we've brought from the conference that give some very good examples internationally of what different countries are doing. But the nice thing about the Climate Group is it's not just governments, not just countries; it's cities, it's states, it's provinces, and it's companies who are also doing an awful lot themselves in terms of reducing gases. It gives the examples, including our own national U.K. plan, so you may like to have a look at that.

    We also have an outline on our energy efficiency program, which is part of how we plan to get to those reductions in terms of increasing energy efficiency, and also our strategy for a low-carbon future.

    We've had a great deal of debate within the U.K. It is an issue of great importance to Tony Blair. I was very pleased to see a video address at Toronto from Prime Minister Martin, along with Tony Blair, welcoming the conference. I thought that was very important. It was certainly very well received.

    We are determined to take action ourselves on CO₂, but we do recognize that of course it is a global issue. That means that we do have to engage the international community. We welcome the fact that the EU has taken this very firm action, but we are quite keen, of course, to engage the Americans, who have not ratified Kyoto but, nevertheless, have joined with us in partnerships such as the Renewable Energy and Energy Efficiency Partnership, which the Americans have signed up to. That was a U.K. initiative, which is now an international body based in Austria. We very much hope that will be a very important vehicle for the Bonn conference on renewable energy that will be held in June.

À  (1025)  

    You are also right that our chief scientific adviser, Professor Sir David King, identified climate change as one of the greatest threats of the 21st century. We accept that and accept that we must collectively take action on climate change.

    There is no cost-free option on this, because if we don't take action, then of course we're seeing some quite dramatic changes in weather patterns. We don't quite understand the relationship here; however, we have the Hadley Centre in the U.K., which has done some very interesting modelling about the potential for climate change.

    Professor King and I chaired a working group called the Foresight Program, which has been looking at the impact of climate change on floods and coastal defence. The conclusion there was that the costs of dealing with a rising sea level and changes in weather patterns will run into billions and billions of pounds if we don't take action.

    So there are no cost-free options on this. Ignoring the issue of climate change means we're building up serious problems for the future, and the longer we delay taking effective action, the more difficult and more costly dealing with it is going to be in the future. And of course it's a legacy for all the people who will follow us that is building up.

    So it is an important issue. We welcome, as I say, the partnership we have with Canada on this. It's been a key player. We all have to play our part in this.

    But there are also opportunities in this. You'll see from the comments on the U.K. program that we actually believe, in our modelling, that getting to the 60% reduction in CO₂ by 2050 will simply delay the growth in our economy up to that time by six months. That's the kind of calculation we've made on this.

    While there is cost, of course, to taking action, there are gains as well. There's a whole new environmental industry building up in environmental technologies—new technologies. There are cost efficiencies in relation to industry in terms of productivity and efficiency gains, and of course in relation to domestic users—and a lot of greenhouse gases come from the domestic sector—better insulation, energy-saving devices, reduced costs to consumers. Also, again there is an industy that is being developed on the back of these changes.

    So there are very positive gains in taking action on climate change; it's not all just about costs and impact on industry. I think that's a very important point to make. But I won't say any more, because I'd be very interested to hear views of members of the committee. I think there's a great deal we can learn from each other.

    I was very interested in some of the programs Canada is putting in place, particularly in awareness-raising. I am really quite impressed with that, because awareness-raising is obviously one of the keys to getting people to take this issue seriously.

    Thank you.

    The Chair: Thank you very much. This couldn't be a better opening statement to encourage interventions.

    So far on the list we have Mr. Reed, suivi par monsieur Bigras, and I invite other members to indicate.

    Mr. Reed, please begin.

    Mr. Julian Reed (Halton, Lib.): Thank you very much, Mr. Chairman. I welcome you all here. I had the privilege of seeing an outline of your plan to 2050 for the 60% reduction target. It's something I think our country should be seriously considering.

    You talked about awareness-raising. The most recent awareness-raising that has gone on in Canada has been the price of crude oil, which yesterday hit $40.77 U.S. I go back a number of years to the 1970s, when oil prices spiked. There was an incredible awareness-raising at that time, but then prices slackened and North America went to sleep. This brings me to my question to you.

    Are you stressing things like mandates in order to achieve these targets, and what is your method for bringing industry and governments along, reaching certain tipping points? We are considering mandates here for things like alternate fuels and that sort of thing and are initially meeting great resistance from industry. I'd be curious to know how you're dealing with that problem.

À  (1030)  

    Mr. Elliot Morley: On the issue of the price of oil, a lot of this is market driven, particularly by the growth of the Chinese economy. Of course, the lesson there is that oil is a finite resource; it's not going to last forever. That's a reason in itself to be looking for new technologies, and in particular clean transportation technologies.

    In the U.K., we've had a fuel price escalator, which has applied for some years to actually raise the price of petrol, and that's had an impact in terms of car manufacturers improving the fuel efficiency of vehicles, because of course there's an advantage for them in marketing to do so. We also changed company car taxation to encourage low-emission and fuel-efficient vehicles, and that's also had an impact on manufacturers.

    In terms of the mandates, we have approached it in a number of ways in the U.K. We've actually pioneered one or two issues, such as carbon trading. We've had our own U.K. scheme and now we're going into the European scheme.

    We also introduced a climate change levy, which is a tax on energy for the U.K. industry. However, that was designed to be fiscally neutral within the sector, because the money that was raised from the tax was plowed back by giving discounts on employers' national insurance contributions to their workforce, and also the money went into what we call the carbon trust. The carbon trust gives grants to industry to improve their efficiency. We also give tax concessions for energy-efficient equipment that industry puts in place. So the money is plowed back within the sector where it's raised, so it's revenue neutral.

    Under the climate change levy also, large companies, large emitters, could get an 80% discount in the levy if they entered into a climate change agreement. Climate change agreements set targets for them to reach in reducing greenhouse gases. In just about every case—and industry did complain a bit about this, as you can imagine; no one likes change, no one likes cost—all the sectors have actually hit their targets years in advance of what was set, and of course it's reduced their costs and they actually quite like it. They actually quite like the idea of carbon trading because it rewards those companies who improve their energy efficiency. That's good for the company, and it gives them a new asset, which is the carbon credit that they can trade within the EU sector.

    Ultimately, we'd like to extend that globally. We'd like to see Canada join. We'd like to see Australia join. We'd like to see other industrial countries join, because this is a global issue. It doesn't matter if you trade across continents, because if you're bringing down the greenhouse gases, it doesn't matter where you do it, because it's a global issue. So we're very keen to extend that, and I believe it will be extended.

    Industry quite likes the carbon trading approach. They are familiar with it. It's a market mechanism. It is probably one of the most cost-effective approaches. They're not very keen on the caps, although we have to have a cap. To make it work, you have to squeeze down the emissions, and they don't like that very much. There has been quite a lot of arguing about who gets what and whether our modelling is correct and whether we're taking into account outputs and things like that. But we've been through all that and I believe we have a workable plan. It's a firm but fair approach to industry. They have to understand that if the trading is to work, you have to force down the caps on the emissions. That is underway within the EU at the moment, and I think that will be quite significant. Once we get it up and running and bedded in, I think the next phase then is to go global.

À  (1035)  

    The Chair: Mr. Reed, I will come back in the second round.

    Monsieur Bigras, followed by Senator Milne.

[Translation]

    Mr. Bernard Bigras (Rosemont—Petite-Patrie, BQ): Thank you, Mr. Chairman.

    First of all, I'd just like to say that to avoid any misunderstanding, although I am seated on this side of the table, I'm not a government member, but clearly an opposition member representing the Bloc Québécois.

    I'd like to hear more from you about the environmental tax policy and measures that you have adopted with a view to reducing greenhouse gas emission levels.

    From what you've said, I understand that you support Canada's position to be negotiated at an upcoming conference which calls for the issuing of emission credits for clean energy sources. To my mind, the best possible course of action is to reduce greenhouse gas emissions at source.

    I'm curious as to whether your country awards a range of tax breaks, as does Canada, to the oil and gas industry. If I'm not mistaken, these incentives have totalled $66 billion since the 1970s, compared to incentives in the order of $350 million or so for renewable energy.

    For instance, do you have a policy of awarding tax incentives to finance wind energy production? Do consumers get a tax break of some kind if they purchase a more environmentally friendly automobile? What kind of tax policy have you adopted in your country to achieve reductions in greenhouse gas emission levels?

[English]

    Mr. Elliot Morley: Yes, that's a very interesting question. We do have a range of financial instruments, and there is quite an intense debate in the U.K. about the whole use of financial instruments—green taxation. I actually think there is still quite a lot of scope for all sorts of issues.

    As a matter of interest, we're also bringing in landfill trading. We're putting caps on landfill because we want to reduce landfill. We're putting limits for disposal authorities and they can trade the limits, so those with the reduced landfill again have credits.

    We do have grants for people who buy cars that are converted to liquid petroleum gas, LPG. There is a discount they can have from the state. We also give grants for the new hybrid cars that are coming onto the market. In fact, regarding the latest one, the Toyota, which is available and being marketed now, you can qualify for a grant of £1,000 from the U.K. government towards the cost of buying that car new. That's to encourage the purchase of this new technology.

    On renewables, we have a target of 10% of our energy to be generated by renewables. In fact, we've recently extended that to 15%. On the incentives there, we have something called renewable obligation certificates. What that means is that the generating companies in the U.K. have to buy a certain percentage of their power from renewables and they have to have these certificates to demonstrate that they are buying their power from renewables. The certificates themselves are tradable as well. It's all part of the financial instruments. It is a very firm commitment that they must make.

    To set an example in our government estate, we also have a commitment to buy 15%, I think it is, of our energy from renewable sources as well. My own department has managed to exceed that. We also give special incentives to combined heat and power plants. They have special treatment, not only in terms of financial incentives but under the emissions trading scheme as well. That's also part of an inducement to invest in that kind of technology and facility.

    We also give grants to farmers for growing biomass. We also have special rules for them so that they can grow biomass on set-aside land under the common agricultural policy. We give a discount of 20 pence a litre for biofuels, which is sold at the pumps. We actually have a very big expanding biodiesel sector in the U.K. at the moment. Although ethanol is still small in the U.K., biodiesel is really expanding and taking off.

    I did mention the tax incentives for energy-efficient equipment. There are grants for landlords to improve the energy efficiency of the houses they let, for example. That's being introduced. We also give tax advantages for water-efficient equipment. Water is becoming a serious issue, and of course that's not unrelated to climate change as well. So there are those measures.

    I heard what you said about the credits. Obviously you have to look at how they would be applied. I think the Canadian proposals predate the Kyoto proposals. There are facilities within Kyoto such as the joint initiative and also the clean development mechanisms, which may be of interest to Canada, but I think they would have to feature within the Kyoto agreement and not predate it.

À  (1040)  

[Translation]

    The Chair: Thank you, Mr. Bigras.

    You have the floor, Senator Milne.

[English]

    Senator Lorna Milne (Peel County, Lib.): I was going to ask you about your climate change levy, because members of Parliament in a pre-election period tread very gently around it—

    Mr. Elliot Morley: I quite understand as an MP myself.

    Senator Lorna Milne: —but you have pretty well answered that question already. And I saw Julian's ears pick up when you spoke of biomass and biodiesel.

    So I will ask you instead how you have managed to decrease the greenhouse gas emissions from energy production. How do you in the U.K. mainly produce your electricity?

    Mr. Elliot Morley: Natural gas is probably the biggest at the moment, but we have quite a big nuclear sector. That's about 20% nuclear. Then we have natural gas, then coal, then some oil. But the oil really is just for backup. It's not really used as a principal method of generation.

    We also have an interconnector into France, and we do import some electricity from France and export some, because we have different peaks. Therefore, on our peaks, the French take some of ours and we take some of theirs, which is quite an efficient use of management in relation to the national grid that we have within the U.K.

    In terms of the progress we've made, the number one reason is improved energy efficiency. I had a very interesting statistic for the speech I gave at Toronto, which was that if in the U.S. every household replaced their five most used lights in the house with energy efficiency filaments—bulbs—it would remove the need for 22 power stations. That's a very simple low-cost measure to take.

    We've been promoting low-energy lights. We have new EU regulations. All electrical goods must display their energy rating, graded A to E on them, in the shop so that people can see what the energy is. That's been very helpful as well.

    The other big impact is that we have had a big reduction in coal and a big increase in natural gas. That's true. But of course natural gas is a finite resource and we do have to look for the future.

    We have been experimenting with energy crops, with willow coppicing, but the technology is proving very difficult, as a matter of fact. In fact, what is actually more effective, just at the moment, is that the energy crops are being sold to our existing very large coal-burning power stations, and they are burning it with the coal. They're burning the energy mass with the coal and therefore reducing the percentage of coal and therefore reducing the CO₂. It's one of the ways that the coal-burning power stations will meet their caps under the emissions trading.

À  (1045)  

    The Chair: Thank you.

    Senator Banks, followed by the chair.

    Senator Tommy Banks (Alberta, Lib.): Thank you, Chair, Minister.

    I have a very short question that will need only a very short answer. I think I already know it, but I just want to confirm.

    This is not a unitary state, and there are divisions of responsibilities having to do with natural resources as between the Government of Canada on the one hand and provinces on the other. Is there any such impediment to the operations of the Government of the U.K. in making the various kinds of steps, all of which you have talked about, applicable in all parts of the U.K.?

    Mr. Elliot Morley: No, there isn't. It is a different structure. We are a much smaller country, as you know. We do have the Scottish Parliament and the Welsh Assembly, but overall energy policy is a Westminster issue and therefore it's a lot easier in terms of taking a unified approach.

    The Chair: Thank you.

    Mr. Morley, on the fiscal arrangement, Mr. Bigras raised a key question, and because he's such a gentleman he did not point to the fact that we have a fiscal system in this country that is full of contradictions and therefore it is designed in a pre-Kyoto mode, and we have a long way to go to redesign it so as to fit Kyoto.

    Our incentives for renewables and biomass, etc, are very limited, very modest, whereas the incentives for fossil fuels are still enormous. We seem to be, as a nation, as a country, attempting to ride two horses at the same time galloping in opposite directions. It's a very difficult transition that we're in, no doubt.

    The question I would like to ask you has to do with India, China, Brazil, and other countries. In your view, how would you go about bringing these large nations under the Kyoto agreement?

    Mr. Elliot Morley: At the moment, they are treated differently under Kyoto, as you know. Their argument is that they are developing countries and growth is very important in terms of poverty alleviation, which it is. Countries like my own have been through our dirty phase and have contributed to pollution in a big way. It's a bit much to ask them to cap their growth when we've been through that and enjoy the benefit of it.

    You can understand the logic in that in some ways, but what we've been saying to these countries is that they don't have to go through this dirty phase of industrialization. They can actually leapfrog into the new technologies. They can get the benefits of that. China, with its massive growth, has actually cut its greenhouse gases. They do take it very seriously in terms of the potential impact. They've stopped logging in China. That's also linked with desertification and water resource managements and flooding, although that of course pulls in more timber, with some of the problems that go with that, as well.

    But it's back to the point, that new, clean technologies offer savings and efficiencies and are not necessarily negative. You don't have to restrict your growth and reduce outputs. We have managed to reduce our greenhouse gases below Kyoto targets, and yet we've had a growth of about 30% within that same period. So we have had economic growth and a reduction in greenhouse gases. And if it can be done in a country like the U.K., then it can also be done in countries like China, India, and Brazil.

    Part of the way of doing that is to share technology, share information, work in partnership. That's where we're very keen to encourage organizations like RPET, why Tony Blair wants to take forward the issue of climate change as one of the key themes of the U.K. presidency of the G-8 next year, and again to involve the G-8—and of course, Canada is a very important member of the G-8—and how we can work in partnership in terms of approaching that. That's the way to do that and to demonstrate to the developing countries that they can have growth and they can also cut greenhouse gases.

    The Chair: How do you deal with that segment of the scientific community that denies climate change to be attributable to greenhouse gases?

À  (1050)  

    Mr. Elliot Morley: Well, they are declining in number, Chair, these people who deny the growth, I'm very glad to say. They're almost becoming the Flat Earth Society, really.

    I notice that even the U.S. Academy of Sciences produced a report acknowledging that global warming is a fact and it is as a result of human intervention. In fact, some of their reports have agreed with ours. There's also, in terms of interpretation, the impact. There is potential for huge international unrest—an enormous number of refugees from parts of the world where there'll be long-term droughts, crop failure, difficulties with their water resource and all the instability that will bring. That's another part of the problem of global warming. And that also goes back to David King's warning and why he regards this as such a big threat.

    Now, I know there's been a report presented to the White House along those lines. I think, really, the fact of global warming and its link with human activities is really undeniable. The weight of scientific evidence is really irrefutable. We can argue about what the long-term consequences are going to be. There are issues there of analysis, but there really is no argument about the fact that global warming is a fact.

    The Chair: Has your government so far already quantified the projected damage that could be caused to industry, such as insurance, forest fires, shipping, agriculture? Have you quantified any sector?

    Mr. Elliot Morley: We do have some figures on the potential impact on insurance companies in particular, which is why incidentally that when we've had these arguments about the kinds of fiscal measures we have taken in the U.K., while we've had some arguments with bodies like the Confederation of British Industry, the CBI, the position from U.K. industry has not been unified. There are many sectors of British industry that are very concerned about climate change, and insurance and banking is one of them.

    They recognize that the potential cost to insurance is absolutely massive. I think there's a case of Swiss Re in here that has some figures about the long-term consequences that run into billions and billions of dollars basically in terms of the costs. As one small example of our own, in 2000 we had the worst floods in the U.K. for 1,000 years basically. The cost of those floods ran into maybe £2 billion—what the insurance companies had to pay—and 10,000 homes were affected and the disruption that went with that.

    We've tried to look ahead to the end of the century in terms of the impacts of climate change. Our foresight program puts the costs in terms of damage, again, into multibillion pounds and, also, the costs in relation to improving our flood defences. For example, our Thames Barrier will have to be replaced as a result of rising sea levels--within the next 30 years, this is--but the costs of doing that and upgrading the defences around the Thames estuary will be something in the region of £5 billion at today's estimates.

    So the costs are gigantic as a result of this. It comes back to the point I was making, that doing nothing is not an option, and taking no action is not cost saving; it is likely to build up even more costs in the future.

    The Chair: Thank you.

    We have been joined by our colleague in the House of Commons, Madame Lalonde. Welcome.

    Madame Lalonde, like Monsieur Bigras, is a member of the Bloc Québécois and she is very active in the Council of Europe.

    Let me ask you this question in relation to climate change. Are you developing, as a government, a cooperation with the European Union; and if so, to what extent?

    Mr. Elliot Morley: We have agreed-- all of the EU have signed up--to the Kyoto Protocol. As part of the EU emissions trading scheme, the minimum requirement is that the national allocation plan that each country has to submit to the European Commission for approval must be designed to get those countries to the Kyoto target. It must be designed to do that. There are a number of European countries that are some way adrift of the Kyoto target at the moment. We and Sweden have hit and surpassed the targets. Germany is very close to its target.

    But you are free, within that plan, to go further. And we have taken the choice nationally to go further in our targets to meet our commitments that we published under the energy white paper, which is to take us to 60% by 2050.

À  (1055)  

    The Chair: Are you familiar with the Canadian one-tonne challenge?

    Mr. Elliot Morley: I heard about it this morning. I really like the sound of that campaign. It's a nice awareness-raising campaign. To link it with the one-tonne figure I think is a very good idea. I like that.

    The Chair: Also because it reaches out to citizens.

    Mr. Elliot Morley: Yes.

    The Chair: It's an indication to citizens.

    Mr. Elliot Morley: It's certainly something I might like to consider myself. I have no qualms about lifting a good idea, Chairman.

    The Chair: Do you think it would work in the U.K.?

    Mr. Elliot Morley: I think it would work in the U.K., because there is good awareness on climates particularly, ironically, because we suffered from these floods in 2000 and we also had some very bad floods in the Thames catchment in 2003. That has raised awareness, it's raised this question, it's raised debate. But there's nothing like linking the impact that a domestic home can have on the environment to bring it home to people. So I like the one-tonne challenge campaign. I think that's very good.

    The Chair: Thank you.

    Second round, Mr. Reed.

    Mr. Julian Reed: Thank you, Mr. Chairman.

    We need some coaching on political acceptance. Some of the apparent impositions can generate negative reaction among the public, and yet I see your approach to motor fuel, for instance. I was reading the other day where the truckers in Britain are now paying £4 for a gallon of fuel, and we have citizens complaining when gasoline reaches 90¢ a litre. I've had to reply to them--but I can reply confidently now, because I'm not running again. I say they never had it so good. It's among the cheapest petroleum in the world. But awareness is one thing, concern for the climate is one thing, but getting over that hurdle to political acceptance is something I think we all would like some help with.

    Mr. Elliot Morley: There is no easy answer to this, because it depends on the circumstances in individual countries, the attitude of different populations, and that can change at different times. We had some real trouble with fuel prices, with demonstrations and blockades of oil refineries. There was a combination of factors; it was mixed up with all sorts of different things, not least the discontent among tanker drivers' unions in dispute with their oil companies. There were all sorts of factors, but it was a problem. It has meant we have had to stop the mechanism of the fuel escalator. We still increase fuel duty, but it's basically being increased in line with inflation at the moment. It had de-escalated, it was above inflation. Of course, you have to recognize that you can only go as far as what people will accept.

    But you are right, even our fuel prices in the U.K., which are some of the highest internationally, are still lower in real terms than they were a decade ago. People forget that, of course, and they don't always respond to this argument either. And we have had our arguments with industry. We also, even with our ambitious plans, get criticized by the green groups and the opposition, sometimes simultaneously, for going too far and not going far enough. This, of course, is the freedom of opposition, but the green groups also say we haven't gone far enough. You're never going to satisfy everybody at any one time.

    Yet I think there is a broad consensus that what we're doing in the U.K. is the right thing. There is some nervousness that some of our competitor countries are not taking the same attitude, and I appreciate that this a big issue for Canada, with the U.S. right on the doorstep. That is a particular problem, but it was encouraging to see U.S. states attending this conference in Toronto, and I know the northeast states are introducing their own cap-and-trade system on carbon, and California is pushing ahead. Of course, California has a GDP that exceeds that of a great many countries in the world. So there is a recognition in the U.S., even if the federal government isn't recognizing it, at state level and grassroots level that we do have to grasp these issues.

Á  (1100)  

    Mr. Julian Reed: There is a growing interest in new technologies and in developing technologies, and we have some mechanisms in place to assist that development. When I think of the U.K., something that jumps out at me is the work you've done on wave power. Did that development work require incentives to industry?

    Mr. Elliot Morley: Yes.

    Mr. Julian Reed: What kinds of incentives were they?

    Mr. Elliot Morley: A lot of the research and development for the wave energy has been supported by government funds, though not all of it. There are institutions, companies, and universities that are doing their own work on this, but we have quite a big research program, based in Scotland, and we've put quite a lot of government money into tidal energy, wave energy, and a new development, underwater currents, which I'm really keen on, because if it is successful, you could have the turbines under water, where no one will see them, they won't be obtrusive, and you have a renewable resource. For a country like ours, an island surrounded by strong currents and with very high tidal range, this offers a great deal of potential, as it would to other coastal communities.

    Mr. Julian Reed: With the tidal power issue, has there been any environmental backlash?

    Mr. Elliot Morley: Not with wave and currents, but with tidal surge, yes, because to make that work, you'd have to put a barrage across an estuary, and our estuaries are internationally important as fly-aways for migrating birds and for biodiversity. We have signed international agreements, Ramsar, for example, and the EU habitats directive. So putting a barrage across estuaries in the U.K. would be very controversial indeed. However, there are advocates for it, because you can also get economic advantages. You can put a road on top, and it opens up areas for economic development; you can get cheap energy from the tidal generators. The Dutch have tidal generators in some of their barrages as well. I don't really see it as an option for the U.K., because it would be so controversial, and we do have those international obligations in relation to habitat protection, which is why the wave and the current are probably more viable.

    But there's an interesting one, a small one, in one of the Scottish islands, a wave energy one. It's actually built on the coast. It's a chamber, and when the waves hit the bottom of the chamber, it compresses the air inside the chamber, and the compressed air turns the turbine. That's not an obtrusive one, it's small, but this is all part of developing technologies that have some way to go but have potential.

    The Chair: Thank you, Mr. Reed.

    Monsieur Marcil.

[Translation]

    Hon. Serge Marcil (Beauharnois—Salaberry, Lib.): Thank you, Mr. Chairman.

    You stated in your presentation that the implementation of your plan to address greenhouse gas emissions, in which you have set a target of a 20 per cent reduction by 2010 and a 60 per cent reduction by 2050, will result in an economic downturn that you've assessed over a six-month period. I'd like to hear more about this. How did you do this assessment, and how has industry responded? What impact will this downturn have?

Á  (1105)  

[English]

    Mr. Elliot Morley: The assessment was done from the economic modelling by the Department of Trade and Industry. This is a cross-government approach; I'm the environment minister from the environment department, and we have responsibility for climate change issues and an involvement with regard to the target. A lot of the modelling work and the interface with industry is through our Department of Trade and Industry, but we work with them very well and very closely. As part of the long-term modelling, the effect on the economy, you also have to take into account the benefits. There are negatives and positives.

    You will see in this document, from some of the examples, how the companies have had a net financial benefit. We aren't saying that will happen in every case, so you have to model this in, but the economic modelling from the DTI comes to the conclusion that it will simply slow our economic growth by 2050; it will just take six months longer to get to where it would have been without these measures by 2050 than with the measures, as simple as that. As expressed in GDP terms--and I know there are different ways of doing it--it suggests that it's a very limited impact on our economic growth and the GDP of our country.

    The Chair: Excuse me, Mr. Marcil.

    Does this take into account the damage to the insurance industry, forestry, and agriculture?

    Mr. Elliot Morley: No, it doesn't.

[Translation]

    Hon. Serge Marcil: As far as achieving your target is concerned—by the way, I think it's quite an ambitious one—in your action plan, have you set targets for reducing greenhouse gas emissions by industry sector, for example, a target for the automobile industry, one for the natural resources sector, one for the forestry sector, and so on? Have you set target levels for the next 10 or 15 years?

[English]

    Mr. Elliot Morley: Yes, we have. In the national allocation plan it is done by industrial sector. Each sector will have a target, and within this sector, each emitter will have a target. To give you an indication of this, there are 1,080 emitters within the national allocation plan. Some of those will be the same company; they may have different sites. Our steel industry, for example, has a number of major sites within the U.K., and each of those sites will have a target on that.

[Translation]

    Hon. Serge Marcil: I understand that the price of a litre of gas is probably higher in Great Britain than anywhere else. As far as automobiles are concerned, do you charge a tax that varies according to the number of cylinders? Is the sales tax charged on automobiles the same for all classes of vehicles, or does it vary, depending on whether it's a four-cylinder, six-cylinder or eight-cylinder vehicle?

[English]

    Mr. Elliot Morley: There is a car tax, and that is not related at the moment to engine size. But there is a road tax that everyone has to pay to run their car on the road, as in most countries, and this is a differential tax. If you have an engine size under 1200 cc, you pay a lower rate of road tax than you do on all engines above 1200 cc.

    Perhaps the most marked difference is in the company car sector. The majority of new cars in the U.K. are bought by companies, and there are tax concessions on company cars. The old regime was based on the number of miles you did: the more miles you did, the more tax concessions you got. It led to people finding reasons for meetings toward the end of the tax year at very long distances around the country. It was a ludicrous system. Now the tax regime for company cars is based on engine size and emissions. That is why you are seeing the first diesel-powered Jaguar, for example. Emissions and fuel efficiency were not among Jaguar's high priorities in the past, I have to say, but because they have such a large market share within the company sector, it has driven quite significant changes in increased fuel efficiency. It's the same with other car manufacturers, including continental car manufacturers and others that are selling into the U.K. markets; they have changed their engine sizes, increased their efficiency, and reduced their emissions.

    So you can bring about quite significant changes through those fiscal measures and tax measures.

Á  (1110)  

[Translation]

    Hon. Serge Marcil: Where does wind energy fit in in Great Britain? What percentage of the energy produced is wind generated? Does the government assign a great deal of importance to the development of this type of energy?

[English]

    Mr. Elliot Morley: Yes. There is a massive expansion of wind energy going on in the U.K. At the moment it's less than 5%, but we are aiming for about 10%. There are applications currently being considered by the government for very large wind farms, many of them offshore. The offshore ones, I must be honest, are less controversial than the onshore. We are a small country with a large population, and these are big 60-turbine wind farms. You do run into opposition from the public on land, less so at sea. I do see a lot of them going offshore.

    The Chair: Merci.

    Senator Banks.

    Senator Tommy Banks: Thank you.

    With respect to wind farms, are there significant tax advantages for a specified period of time given to the commercial development of those farms?

    Mr. Elliot Morley: The biggest advantage for the investors is that they're getting guaranteed market access, which also inflates the price for their power, gives them a good return. They know they can rely on that, because of the renewable obligation certificates. The electricity companies and distribution companies are obliged to buy this power, and that tends to give a boost to the actual prices. So they know they can build these wind farms and get a good return from the power that's generated.

    Senator Tommy Banks: Is that regime more or less in lieu of a tax break?

    Mr. Elliot Morley: It's really in lieu of the tax break, because it's designed to give them a long-term stability in price, and that helps in relation to the investment they have to put in. It's clearly attractive, because the increase in applications has been absolutely huge.

    Senator Tommy Banks: The chair referred to our one-tonne challenge, which so far relies entirely on voluntary compliance. We try to do things that way in this country with respect to many things, and sometimes they don't work. I know it's difficult to quantify it, but you have also had information programs in the U.K.; it's not called a one-tonne challenge, but moral suasion has been applied. With respect to the importance in the overall scheme of things of domestic consumption of one kind of energy or another for one purpose or another, the individual choices, not the corporate choices, if you had to make a wild guess, would you think, in the first instance, that coercive persuasion would have worked without the mandates Mr. Reed has referred? I suspect that the answer is no. I think our committee has determined that the answer is no, that there have to be some hammers involved at one point or another. But in general, with respect to the efficiency of social engineering by suasion as opposed to mandate, would you comment in light of your experience?

Á  (1115)  

    Mr. Elliot Morley: There is this argument that one volunteer is always worth more than ten pressed men, and I think there's a bit of truth in that. The voluntary routes are part of evolution, and there's nothing wrong with starting off with the voluntary routes. Some of our measures with industry have been initially voluntary; it was not compulsory for industry to sign up. There comes a point where you have to move on and may have to start bringing elements of compulsion in. I think we've got to that in some of our strategy, particularly in respect of delivery of what are ambitious targets. This is an ambitious program, and we have no illusions about that. That's what we're doing, but there are still elements of a voluntary approach in what companies do. We had a very large awareness campaign called “Doing Your Bit”, with adverts on television and famous people involved. I don't think it was one of the best campaigns we ever paid for--it was very expensive as well--but we have to look at it in relation to the steps we take by encouraging people to do that.

    In the end, of course, the biggest incentive is if people save money. I think we can demonstrate that for a lot of the energy-saving approaches, there is a saving to be had. We can help it along with some of the measures that have been out there, fiscal measures, tax breaks, direct grants. One example is that there's a financial advantage for putting condensing central heating boilers into houses; there's money towards that. We may see in the not-too-distant future micro combined heat and power systems, which will be the size of a domestic central heating boiler, but run on gas. There's a car engine type of technology that produces heat for the central heating and electricity for the house. We're not very far away from seeing a commercial breakthrough in that. That might be something we want to support. The other thing we give grants for is photoelectric cells. If people want to put photoelectric cells on their roofs, they will qualify for a grant from the government as well.

    Senator Tommy Banks: I think I heard you say there was a benefit you had derived in auto manufacturing as a direct result of the price of petrol.

    Mr. Elliot Morley: Yes, increased fuel efficiency.

    The Chair: Madame Lalonde.

[Translation]

    Ms. Francine Lalonde (Mercier, BQ): Good day.

    I'm sorry I missed your presentation, but I'll be very interested in ready the transcripts.

    My question is one that I'm certain has not been asked already. On numerous occasions, I've been caught in traffic jams on the drive into London. I was therefore very interested in the initiative of the Mayor of London who moved to charge people a tax if they take their car into the city. Have you measured the environmental impact of this initiative, do you feel that measures of this nature have repercussions of any kind, and do you believe there's a link between the enhanced use of public transit and a reduction in environmental problems associated with automobile use?

[English]

    Mr. Elliot Morley: It's certainly an interesting experiment, the congestion charging in central London. It was very controversial when Ken Livingstone, the mayor, introduced it. A lot of people said it would result in complete disaster. He quite craftily chose a bank holiday Monday, when there was no traffic around, for the first day of the actual scheme. As well, there was such hype about what a disaster it would be that no one dared drive through central London for about a week, so it was even more successful than he'd hoped.

    There is analysis underway. The analysis is not quite as sophisticated as you've raised in relation to the impact on such things as air quality and emissions, and any impact on health. I think that will come. What we do know is that it has reduced congestion and traffic by between 20% and 30% in central London. The number of passengers on buses has also increased as well, although the fares have been kept down. The revenue from the congestion charging is directed toward public transport, buses in particular, to subsidize the fares.

    So the number of people on buses is up and the number of cars going into central London is down. Ironically, the number of cars fell so dramatically that it hasn't generated quite as much revenue as planned, because fewer vehicles have been coming in.

    There's a strange phenomenon here, because London before the congestion charges, like many other cities, was using very high car-parking charges as a deterrent to come in. What I find curious is that people apparently were prepared to pay these very high car-parking charges. It was £1 for 15 minutes in central London, and yet the congestion charge, which was £5 per day, appears to be a much greater deterrent. There's a psychological element with this. But it is working. There are more people on public transport and fewer cars in the centre of London. So it's been a successful scheme.

    Now, we do have problems in parts of London with nitrous oxide and ozone in the hot weather from car emissions, and that has led to an increase in asthma-related diseases. Obviously, if you get the number of cars down and emissions down, you should get a health benefit as well.

Á  (1120)  

[Translation]

    Ms. Francine Lalonde: Thank you.

[English]

    The Chair: Merci, Madame Lalonde.

    Senator Finnerty, Senator Milne, and the chair.

    Senator Isobel Finnerty (Ontario, Lib.): Thank you very much, Mr. Chair.

    I'm just curious to know whether you're running any awareness programs in the schools. I find if we can get our youth educated early enough on how important this issue is, we may have more success. Have you tried any of that in your schools?

    Mr. Elliot Morley: We have, although we need to do more. I wouldn't wish to pretend that everything is perfect, or in fact that anything is perfect. We have a lot to do. There are still lessons we have to learn and there are still examples from other countries that I think we can learn from and incorporate.

    We do have in the U.K. what's called the green ministers committee, the ENV(G), and I chair that as environment minister. There is a minister on the green ministers committee from every department, including the education department. I've recently been talking to Sir Charles Clarke, the Secretary of State for Education and Skills, about the environmental programs in schools. He's very enthusiastic about this, as is our Department of Culture, Media and Sport, and he wants to raise this.

    It is being done to an extent, but we think it could be done more. We'd actually like to see each school go through an environmental sustainable assessment. You could involve the pupils in the assessment. That would be a really practical way to learn about water use and energy use. We know, for example, there would be cost savings if you put water-saving devices into schools. You could save a lot of money on the schools' budgets.

    We also have some parallel schemes. While I like to think that we're ahead of most countries on things like climate, we are behind on waste management. One of my priorities is to increase recycling, reuse, and waste minimization, and to see a reduction in landfills. We have a landfill tax and we also have a landfill cap coming in. We've set up a waste minimization fund, and we also have our waste and resources action program, which is partly funded through the tax on landfill. They have schemes like Envirowise, where they do educational campaigns and produce leaflets, again using the money from taxing the damaging activities within society and using the money on positive activities.

    So we're doing that as well. This needs developing further, but we're certainly taking it forward.

    Senator Isobel Finnerty: Yes, I think that's where we're weak. I think in Canada we should start at the level of schools, because the youth will become more aware, and then they bring it home and make their parents more aware.

    The Chair: Senator Milne.

    Senator Lorna Milne: Thank you, Mr. Chair.

    I don't want to dominate the discussion and the questions from the Senate side of the table today, but Julian didn't ask this question, so I will.

    I'm interested in your use of biomass, particularly in the way you're using it in your coal-burning--

Á  (1125)  

    Mr. Elliot Morley: Co-firing.

    Senator Lorna Milne: Oh, I see, it's “co”, not “coal”.

    You said you're coppicing willows on some kind of land. Now, I'm assuming that this is land that you are paying the farmers to take out of agricultural production.

    Mr. Elliot Morley: That is correct.

    Senator Lorna Milne: So it's a form of tax that is going to help farmers, but then they can still use this land to coppice willows. Well, coppicing is not a method of growing trees, or growing biomass, that we use here in Canada at all, but we do in some area of the country plant poplars, the fastest-growing tree we have. Generally we chip them for use in paper production rather than cogeneration of any type.

    So I'm interested in your biomass cogeneration and how that's working.

    Mr. Elliot Morley: It's not all grown on set-aside land, but it is an inducement. Under the current CAP rules, a certain percentage of land can be taken out of production and farmers are paid for that, per hectare. They're not allowed to grow a crop on it, but they are allowed to grow willow on it. Therefore, they can get a crop, and that's an advantage.

    Some farmers are not using set-aside land; they have gone into it commercially on a large scale. It's a three-year rotation. At three years it is harvested, and there are special machines that chip as they harvest. So as the crop is harvested, it's chipped, and then the chips are sold, sometimes through a cooperative and sometimes through a wholesaler.

    Now, the idea was that there would be specialized power stations for this, but they've been slow to develop. What's been faster to develop is small-scale combined heat and power systems. I'm talking about the size of a school or a hospital, with central heating boilers that burn the chips. They're developing quite nicely, so there's a market developing for that.

    You can also chip--for example, forestry waste. When the timber is harvested, the branches are cut off, and in our country they're often just left there and used as a mat for the forwarders to drive on. Or you can pick all that up, chip it, and sell it. Waste timber can also be chipped and included. So there's potentially a good market here.

    I think this is quite an exciting development, because the co-firing in our coal power stations, which are enormous, are centred around the East Selby plain in the north of England. Not only does it reduce CO₂, but it's potentially a volume market. If we can get these volume markets running, then we will get more farmers moving to this.

    There also have been changes in our agricultural system through the CAP. We're ending production subsidies from next year. There will be no more production subsidies. There will be direct payment made to farmers, but there will no longer be payment for arable land, oilseeds, and all the crops that attracted a subsidy. This means that farmers can look at the market and decide what the market opportunities are. We do see a big growth in industrial crops as a result of that.

    The Chair: Thank you, Senator.

    Monsieur Dion.

    Hon. Stéphane Dion (Saint-Laurent—Cartierville, Lib.): Thank you.

    I would like to know what kind of cooperation you have received from, and what kind of best practices network you have with, the other EU countries. As well, what kind of pressure are you inclined to put on Russia?

    Mr. Elliot Morley: In terms of EU countries, it does vary, as you might imagine. Our attitude is shared by countries like Germany and the Scandinavian countries. All countries agree with the need to do this. They all agree. But those countries who are some way from their Kyoto targets.... The changes, of course, are quite difficult for them, and there's no use pretending otherwise. And some countries are nervous about the kinds of reductions they'll have to make to get to Kyoto under the EU scheme. That is inevitable.

    As far as Russia is concerned, I had a very constructive meeting with the deputy minister at the UN CSD about the Russian attitude. As well, very recently there was a very constructive meeting between President Putin and Commissioner Margot Wallström for DG Environment, which we took a lot of encouragement from.

    We do believe Russia will ultimately sign. They may be seeking some linkages, perhaps at WTO, but I think it's important to encourage them. I know that Canada has good relations with Russia, particularly in the Arctic Council. Indeed, there are severe implications for the Arctic, affecting both Russia and Canada, and I think it's important that we all bring as much pressure to bear as we can.

    The way we've approached it with Russia is to demonstrate to them some of the points I'll be making to the committee, that there are benefits to Russia in terms of signing on to Kyoto, joining in with carbon trading, and joining in with the joint initiatives in the CDMs.

Á  (1130)  

    Senator Tommy Banks: Perhaps I could add a quick supplementary to Stéphane's question.

    Stéphane asked you about other EU countries, and you said that you were ending certain kinds of agricultural subsidies for the foreseeable future. Are other EU countries doing this?

    Mr. Elliot Morley: Oh, yes, it's agreed, because it's an EU competence. It's a decoupling. From next year, the payments to agriculture will be decoupled from production. There will still be payments to agriculture; the EU hasn't gone quite that far. It's not as far as we would like in the U.K.--we've always been a liberalizer in relation to agricultural markets--but it is a big change. As a matter of fact, I think a lot of people underestimate what a big change that will be, the decoupling from production.

    The Chair: Thank you.

    Madame Lalonde.

[Translation]

    Ms. Francine Lalonde: I have a question. Some parts of my riding are heavily industrialized. People live right next door to factories. We have observed that the number of children in these neighbourhoods who are hospitalized with respiratory problems, in particular asthma, is extremely high. There is a fair amount of traffic in this same area of my riding, with trucks spewing out lots of exhaust. Moreover, residents smoke more than they do elsewhere. We are conducting studies to determine if there is any kind of synergy created by this situation or other types of pollutants present. I'm curious as to whether you've done any studies of this nature. I would imagine similar pollution problems exist in Great Britain.

[English]

    Mr. Elliot Morley: There are similar concentrations of pollutants. In fact, there are certain EU rules that apply to maximum levels. For example, Heathrow Airport has applied for a third runway and, indeed, has been given permission, but they will not be allowed to build that runway until the NO_x levels around Heathrow fall below the EU standards. There is a very big motorway junction there as well, which contributes. That may well induce the British Airport Authority, which owns Heathrow, to actually put their own money into developing public transport links, because they're really keen to built that runway, but they can't until the levels come down, so it might be worth their while to put their own money into improving public transport. It will be quite interesting to see what happens on that.

    We do have studies about areas with high levels of pollutants. Air quality in the U.K. has improved overall, and that's a result of stronger controls on industrial emissions, which have improved considerably. Because of the kinds of measures we were talking about and the increased fuel efficiency, the pollutants from cars have gone down as well, although the number of cars has gone up; that cancels it out a bit, but cars are cleaner in respect of their impact.

    Our problems relate to really hot spots, mainly in our big cities, and it's mainly transport. That's why we're experimenting in London with hydrogen-powered and fuel-cell-powered buses. There are only three of them, so I wouldn't want to exaggerate the change there, but we're experimenting with that. We may also have to look at restricting the number of vehicles in certain areas, by restricting roads, for example, although we haven't got to that position yet. So our overall air quality has improved, but we do have these hot spot areas that are a problem.

Á  (1135)  

[Translation]

    Ms. Francine Lalonde: The situation is the same here. Overall, air quality has improved, but problems persist in some areas. We can't lay the blame on any one industry, because the effects are undoubtedly cumulative and synergistic. Consequently, measures are needed to address all of these pollutants simultaneously.

[English]

    Mr. Elliot Morley: That's right.

[Translation]

    Ms. Francine Lalonde: I'd very much appreciate your bringing some studies to my attention. Thank you.

[English]

    Mr. Elliot Morley: I'm sure we have studies on this. I'm sure we can give you information on that.

    There's also the hotter weather, and we're back to the impact of climate change. Last summer was the hottest ever recorded in the U.K.; we had our highest ever temperature, which was 37.9 degrees centigrade, which is very hot for the U.K., particularly as a lot of our infrastructure is not really designed to operate beyond 30 degrees centigrade. So if you have long periods above 30, power lines start to trip, rails start to buckle, you can't work in the factories. Our tube system in London was really borderline last August as to whether it was safe for people to be in it. In fact, I have a feeling that with some of the temperatures the London tube reached, we would prosecute farmers for carrying animals in those temperatures, but people were on the tube.

    In France thousands of people died, probably due to very high levels of ozone, as well as the stress, particularly on elderly people. Ozone's a difficult one, because that's not altogether industrial; it has to do with the action of sunlight, and ozone can have a negative effect.

    The Chair: Merci.

    Mr. Reed.

    Mr. Julian Reed: Mr. Chair, when I heard of subsidies ending, all of a sudden I--

    Mr. Elliot Morley: I wouldn't go quite as far as all subsidies, but production subsidies are ending, yes.

    Mr. Julian Reed: Is this subsidy-ending process going to apply in France as well?

    Mr. Elliot Morley: Yes. There will no longer be any arable area payments, the old subsidies. There'll no longer be headage payments for cattle and sheep. They're all ending, and instead, the payments will be wrapped up in what's called a single payment. We will be applying that simply on the area of land, so a payment per hectare will go to the farmer. It will not be linked with production output or the kind of crop; that's gone. Therefore, the farmers now will look to what the market wants, not growing crops simply because they get a subsidy for them.

    Mr. Julian Reed: This is a revolution.

    Mr. Elliot Morley: I'm surprised how little interest there's been in the mid-term review, but it's really quite a big change. France was against it.

    Mr. Julian Reed: We would get news reports from time to time of manure spreaders down the Champs Élysée.

    Mr. Elliot Morley: Farmers will still get a payment, but it won't be linked to the production.

    Mr. Julian Reed: Thank you. I've got over my shock.

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    The Chair: I have a number of brief questions. The first one has to do with the green ministers committee. Are all ministers members of that committee?

    Mr. Elliot Morley: There has to be a nominated minister from each ministry, and that minister is known as the green minister. It's part of the ministerial portfolio responsibilities. One minister in each ministry must have that portfolio responsibility.

    The Chair: Is there more than one minister in each ministry?

    Mr. Elliot Morley: Oh yes. Most of our ministries have a number of ministers.

    The Chair: They meet monthly?

    Mr. Elliot Morley: We meet quarterly or every six months at the moment. But I meet individual green ministers on a bilateral basis to talk through what they're doing in individual departments.

    The Chair: Then you report back to the full cabinet?

    Mr. Elliot Morley: It does report to the full cabinet. It also produces an annual report and is subject to scrutiny by our environmental audit committee.

    The Chair: Some of us appeared before your environmental audit committee a year ago.

    Mr. Elliot Morley: So I understand.

    The Chair: The next question has to do with the congestion charges. Can you give a percentage indication of the increase in ridership?

    Mr. Elliot Morley: On the buses?

    The Chair: On public transit.

    Mr. Elliot Morley: The bus ridership has increased more than anything. All public transport is up, the tube system is up, the rail system is up, the commuter rail system has increased, but the most marked increase recently has been with the buses. Nicky Gavron, who was the Deputy Mayor of London--London is just starting an election cycle as well; they have their elections in June--gave a figure at Toronto of 20% increase.

    The Chair: The next question has to do with the auto industry, as raised by my colleagues. In North America we have this strange phenomenon whereby the first hybrid passenger car produced by one of the big three will see the light of day this coming summer. It's a Ford.

    Mr. Elliot Morley: I see.

    The Chair: I suppose that in Europe there is no hybrid yet.

    Mr. Elliot Morley: There's a Toyota in Europe.

    The Chair: Not European.

    Mr. Elliot Morley: It's not manufactured in Europe.

    The Chair: How do you explain the fact that the European manufacturers and the American manufacturers are so badly behind?

    Mr. Elliot Morley: I think it's because up to now they've failed to develop a model that could compete within the market. There's been a lot of research and development on the part of the European and, I think, North American manufacturers, but the calculation was that the cost of the vehicle would be so high that it really wouldn't sell. Obviously, this is a question more for the companies, but I think that as they refine their techniques, as they develop their technology and their manufacturing technology, their prices will come down. Toyota have clearly done it. It's not the cheapest car you can buy in the U.K., but it is a car people would be interested in buying at the price level where it's pitched. As I say, you also get a £1,000 grant from the government towards buying it new.

    The Chair: In Canada the Toyota retails at roughly $29,000, which is mid-range.

    Mr. Elliot Morley: Yes, that's equivalent.

    The Chair: Two provinces, British Columbia and Ontario, and only those two, provide a bonus of $1,000. You told us £1,000, so you're more generous that we are. But there are only two provinces. There's no federal government participation.

    Mr. Elliot Morley: This hybrid car is also exempt from the congestion charge, and there aren't many. When President Bush visited London not very long ago, his whole cavalcade had to pay the congestion charge.

    The Chair: According to the International Energy Agency, the people in Paris are predicting that the mid-term depletion point for petroleum will be reached around 2025. Do your studies arrive at the same conclusion?

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    Mr. Elliot Morley: I'm not sure what our latest projections are, although that doesn't sound unreasonable. North Sea oil is being depleting quickly, so that's not going to last much longer.

    The Chair: When it is realized on the market that the mid-term depletion point has been reached, the price of the commodity will just go through the roof.

    Mr. Elliot Morley: I think that's absolutely inevitable. There are still some untapped reserves, and there may be some unknown reserves, particularly in the Caucasus and Russia, but even they are under development at the present time. Although I don't have the up-to-date figures, I don't think that's an unreasonable assumption to make. But between now and 2025 there may well be new clean fuel technologies that are more attractive than oil. One of our scientists said the Stone Age didn't end because of a lack of stones, and the oil age may not end because of a lack of oil.

    The Chair: We in Canada place great hopes in hydrogen and the Ballard technology. Hydrogen is the next fuel. Is that something you are looking at in phase one?

    Mr. Elliot Morley: We're going a lot of research on this, and we're also collaborating with Japan and the U.S. on research. The problem with hydrogen, of course, is that it is quite energy-intensive to produce. That's why Iceland believes it has a potential advantage, because it has a lot of cheap energy from hydro power and thermal power. Iceland is already looking to be a major hydrogen producer, and indeed, there may be other countries that have clean and cheap power technology, hydro power for one. But that is a downside of hydrogen.

    The Chair: My final question brings us back to your opening remarks. What happens beyond Kyoto? What ought to be the next agreement by the international community? As we all know, Kyoto just flattens the curve. What would you want beyond Kyoto?

    Mr. Elliot Morley: We have to start thinking now of the next phase of Kyoto, despite the U.S. and Russia. We must move on with it, and I think we do have to start looking at a level of reductions of the order we're committed to in the U.K., 50% or 60% by 2050. Those are the long-term targets we should be looking for. Certainly, the next phase of Kyoto will have to bring about a larger reduction than the first phase.

    The Chair: We are greatly indebted to you for making yourself available. It has been a terrific exchange, and on behalf of my colleagues, I wish you well.

    Mr. Elliot Morley: Thank you, Chair. I often appear before committees in the U.K. Parliament, and they're not generally as friendly as this one, so I thank you very much.

    The Chair: The meeting is adjourned.