[Translation]
EVIDENCE
[Recorded by Electronic Apparatus]
Monday, November 17, 1997
• 1532
[Translation]
The Chairman (The Hon. Charles Caccia (Davenport, Lib.)): Good afternoon, ladies and gentlemen. Welcome to today's meeting, on Monday, November 17. Pursuant to Standing Order 108(2), we are continuing our work on climate change in relation to Canadian preparations for the Conference of the Parties on the United Nations Convention on Climate Change.
[English]
Just to bring people in the room up to speed with us, to date the committee has heard witnesses from two departments, the Department of the Environment and the Department of Natural Resources.
Today we have a panel at which five departments are represented. The purpose of inviting this panel to come to the Hill is to get an idea as to what they and, through them, the government are doing to address the climate change issue with regard to, first, the stabilization, and second, the reduction of greenhouse gases. And that of course will include a better understanding of what has been done and is being planned with respect to incentives for the private sector.
At the table and in the audience we have, my dear colleagues, representatives and experts whose experience can be drawn upon. As usual, we will ask each representative to limit his or her comments to five to seven minutes to allow ample time for questions.
[Translation]
I would first like to turn the floor over to Ms Joan Catterson, Director General, Corporate Policy and Planning Sector, at Public Works, and then to Mr. D. Oulton, Assistant Deputy Minister at the Department of Agriculture, and to Mr. Ron Sully, Assistant Deputy Minister at Transport Canada.
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[English]
From Industry Canada we have with us Ron Harper, director and associate manager of the environmental affairs branch. And last but not least, we have Anne Park, assistant deputy minister in the Department of Finance.
Welcome back to the committee, particularly in your case.
If that is an acceptable order, would you like to start? If not, would you please indicate the order that you would prefer.
Again, welcome to the committee.
Ms Joan Catterson (Director General, Corporate Policy and Planning Sector, Government Operational Service, Department of Public Works and Government Services): Mr. Chairman and members of the committee, I would like to thank you for this opportunity to speak to you today on behalf of Public Works and Government Services Canada, which I'll refer to in the presentation as PWGSC.
I understand that the committee is particularly interested in policies and programs that address the challenge of climate change.
As the focal point for the timely and cost-effective provision of central and common services to other government departments and agencies, PWGSC is uniquely placed to support federal sustainable development priorities and help client departments achieve their mandates and goals, including the ones related more specifically to climate change.
In conjunction with other departments and the private sector, PWGSC has undertaken a number of initiatives in support of Canada's commitment to reduce greenhouse gas emissions. They focus on the promotion of greater energy efficiency and alternate energy use in our buildings and vehicle fleet. These initiatives are included in our sustainable development strategy, which our previous minister tabled in the House of Commons on April 22, 1997 and which has been provided to the clerk of this committee.
Our goal of being a valued contributor to the greening of government operations is the main theme of our sustainable development strategy. We'll be talking today primarily about buildings and fleet management.
In terms of buildings, in operational terms the Government of Canada is the nation's largest single enterprise. PWGSC acts as the custodian responsible for the management of about one-third of the total government inventory. The PWGSC portfolio includes 5.6 million square metres of floor space worth $6.8 billion and over 3,000 leases in 2,500 locations across Canada. PWGSC also provides professional and technical services to other custodian departments with respect to the management, design, construction, operation and maintenance of their real property portfolios.
For buildings, the principal source of greenhouse gas emissions results from heating plants and is tied to energy use. The average yearly cost for energy in Crown-owned facilities is now about $20 per square metre, down 25% from the cost in 1979. In order to achieve additional energy savings PWGSC has developed a strategy to implement the federal buildings initiative, a program led by the Department of Natural Resources, in all of its inventory, where economically and operationally viable, over a period of five years from 1994 to 1999.
A key element of this program is a savings-financing mechanism that allows the department to pay for improvements in energy efficiency out of the money saved from reduced energy consumption. Other spin-off benefits include creating healthier workplaces and strengthening Canada's environmental industry.
As of today, PWGSC has signed 22 contracts worth $34 million in energy investment that will generate close to $5 million in annual energy savings. These agreements have created about 700 jobs in the private sector. By the year 2000, PWGSC will have implemented federal building initiative projects in all of its buildings where economically and operationally feasible.
The implementation of energy renovations in all PWGSC-operated buildings is expected to result in overall private sector investment of about $60 million, leading to annual savings of $12 million in reduced energy costs. This translates to a reduction of 53 tonnes of CO2 emissions, a 14% reduction from 1995 levels. This investment is also expected to create up to 1,200 jobs in the private sector.
We will also contribute to Canada's climate change objectives by pursuing the construction, modification and upgrading of Crown-owned facilities, selecting the most efficient leased facilities consistent with cost-effectiveness and working jointly with tenants to promote energy conservation practices in daily activities.
Turning to fleet management, our fleet management activities include both the operations of our departmental fleet and fleet procurement services for other departments. As part of the “fleet wise” initiative led by the Department of Natural Resources Canada, PWGSC has developed an action plan to reduce the size of its fleet, improve its efficiency and environmental practices, increase the use of cleaner fuels, and develop and improve collection and monitoring systems. We've acquired a fleet management information system to monitor maintenance repairs and use of vehicles, and each request for a vehicle acquisition is reviewed to ensure that minimum usage standards prescribed by Treasury Board are met.
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Greater emphasis has been placed on the acquisition of
smaller, more energy-efficient vehicles. All new
vehicles acquired for departmental use that can
efficiently and cost-effectively operate on alternative
fuels are fueled with them. This will enable PWGSC
to meet the objectives of the Alternative Fuels
Act. A propane-operated shuttle bus system has been
set up in the national capital region in order to
lessen the requirements for taxis between major
locations.
As private fleet rationalization efforts in 1996, PWGSC carried out a comprehensive study of its vehicle fleet to assess its age, to identify vehicles that should be declared surplus, and to forecast replacement costs. The study also contributed to updating the vehicle database in order to better information reporting requirements. Our fleet rationalization has moved more quickly than expected. Starting with a total fleet of 568 vehicles at the beginning of fiscal 1995-96, our goal was to reduce to 445 by the end of 1998. As of March 1997, however, our fleet included 438 vehicles, which we expect to decrease to 417 by this coming March, for a total reduction of 151 vehicles. And in the coming months, we will continue to focus on downsizing our fleet.
As the purchasing organization for the federal vehicle fleet, PWGSC includes information on the availability of factory-produced alternate fuel vehicles in its government motor vehicle ordering guide, as well as pricing information of these vehicles in standing offers. These documents are distributed to all client departments across Canada.
In addition, we're in the midst of issuing standing offers for alternative fuel conversions. Standing offers are issued to various after-market alternative fuel conversion suppliers, who will convert existing gasoline vehicles to operate on either propane or natural gas. It is anticipated that these standing offers will be awarded by the end of this month.
Furthermore, we are working on a long-term standing offer for light trucks with the Department of National Defence and the Royal Canadian Mounted Police. These two organizations own approximately 70% of the federal fleet. The intent is to award a multi-year standing offer to one manufacturer of alternative fuel vehicles, and another to a conversion suppler.
In conclusion, PWGSC will continue to work in partnership with other federal departments on the identification and implementation of cost-effective measures to reduce greenhouse gas emissions. Progress will be monitored as part of the sustainable development strategy annual follow-up and reporting process. And our indicators will measure energy reduction in terms of volumes and dollars saved.
Thank you.
The Chairman: Thank you, Ms Catterson.
If one was to go by the second and the third paragraphs on page 2 of your presentation, and converted those figures into a rate of return on investment—and I'm referring to the 22 contracts worth $34 million in energy investment, which will generate close to $5 million in annual energy savings and the creation of 700 jobs—that is a rate of return of almost 15%. I would say that is a remarkable rate.
In the next paragraph, where you deal with the federal building initiative, there you have an investment of $60 million, leading to annual savings of $12 million in reduced energy costs. In my limited arithmetical skills, that would amount to some 20% of return on the investment. That is not bad either, and that is annual return, of course.
I think you ought to be congratulated for that initiative. Or am I wrong in my percentages?
Ms Joan Catterson: No, that's correct. The payback period on these projects does typically range between five and seven years, so that's about right.
The Chairman: These are remarkable figures.
Please proceed, Mr. Oulton.
Mr. David Oulton (Assistant Deputy Minister, Policy Branch, Department of Agriculture and Agri-Food): Thank you very much, Mr. Chairman. It's a pleasure to have the opportunity to meet with the committee today to briefly outline the work that Agriculture and Agri-Food Canada has engaged in recently, and to describe our plans for work in the future to address the agriculture sector's challenges and opportunities associated with climate change.
I'm accompanied by four colleagues. Michael Presley joins me, along with Dr. Brian Morrissey, Dr. Ray Desjardins and Dr. Henry Janzen, all from our research branch. Should you have scientific questions, they would be best able to respond to those questions accurately.
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In the next few minutes, I'd like to explain the
importance of this issue to the agriculture sector.
I'll then outline our activities to date to help the
sector address it, and conclude with a brief summary of
work that we are initiating to better assist the sector
to address this issue in the future.
I'd like to begin by noting how important this issue is to Agriculture Canada and to the agriculture sector. As you know, farmers are perhaps more dependent on climatic conditions for their economic health than any other group of business people in Canada. As a consequence, the industry has demonstrated a remarkable ability to adapt crop production practices to indeed develop crop varieties that are best suited to Canada's climatic conditions. However, the sector recognizes that our ability to innovate and adapt could be severely tested by the climate variability that is projected to accompany climate change. The productivity of the agriculture resource base could be threatened in some regions, for example, by reductions in soil moisture that can accompany increases in temperature. Risks of increases in insect infestations, drought, flooding and the crop failures that result may all have important negative impacts on food production in Canada.
While Canadian agriculture is vulnerable to the effects of climate change, through its practices, it also emits greenhouse gases that contribute to climate change. Recent work by scientists in AAFC indicates that Canadian agriculture is responsible for about 10%, or 61 million tonnes, of Canada's greenhouse gas emissions. This level is about the same as it was in 1990.
The most important greenhouse gases in agriculture are carbon dioxide, methane and nitrous oxide. Agricultural sources of carbon dioxide include the loss of organic matter from soils, and the use of fossil fuels. The sector's methane emissions can be attributed to livestock. And nitrous oxide emissions can be linked to animal manures, crop residue, and fertilizer use.
It's important to note that the percentage contribution of these greenhouse gases is changing as the nature of agriculture in Canada changes. For example, soil conservation management practices such as conservation tillage and reduced use of summer fallow have improved organic matter retention in the soil. The effect is that for the first time since the land was broken, Canadian agricultural soils are now close to functioning as a net sink, rather than as a source of carbon dioxide. This is where the Canadian farming community will make a substantial contribution to reducing Canada's greenhouse gas emissions, and we'll continue to make advances in the future.
Although carbon dioxide emissions from soils contribute to net productions, based on today's production practices, greenhouse gases from livestock will increase as livestock production increases in the years ahead. There is evidence, in the west in particular, of substantial growth in livestock production, especially if some industry forecasts prove to be accurate. From a greenhouse gas emission perspective, if current trends towards increased hog and cattle production continue, we can expect new challenges. Some industry analysts predict substantial growth, which could also mean increases in both nitrous oxide and methane. Our models indicate that if cattle and hog production increase significantly, sectoral greenhouse gas emissions could also increase unless cost-effective innovations in manure management and feeds are developed and adopted within the sector.
The department plays a part in helping the sector develop effective tools to address these challenges. This activity includes a national research program on greenhouse gases, which was initiated under the green plan program, much of which continues today. The research is resulting in a much better understanding, within the department and the sector, of the relationship between greenhouse gas emissions and agricultural production. We held a national workshop in Quebec last March to review the results of that research, and this has helped to focus attention on new sectoral environmental challenges and opportunities.
Agriculture and Agri-Food Canada has also implemented national environmental programs over the last fifteen years, and those programs have contributed to improvements in sectoral soil and manure management practices. The adoption of these practices has direct impacts on carbon dioxide emissions as soil organic matter is conserved, and on nitrous oxide as manure storage and application systems and practices are developed and adopted. Such programs as the national soil conservation program, the sustainable agriculture green plan program, the permanent cover program, and our new national soil and water conservation program have all focused on encouraging farm production management practices that either directly or indirectly mitigate the effects of production on greenhouse gas emissions.
We have also provided funding over the last three years to a national committee of sectoral representatives, the National Agriculture Environment Committee, which from its inception established climate change as one of its priority issues. This industry-department partnership is illustrative of the approach that we will continue to pursue to make progress on this issue in the agriculture sector.
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Although the department has been active in working
with the sector to address climate change issues that
affect Canadian agriculture, we recognize that
more clearly needs to be done. Before closing, I would
like to note a few of the initiatives we're in the
early stages of implementing.
Our department's sustainable development strategy, Agriculture in Harmony with Nature, was tabled last April. It details our department's environmental work plan over the next three years. That strategy includes concrete commitments to address the range of agricultural production activities that can affect sources of greenhouse gases. Among these are the development of affordable technologies that contribute to a more precise control of nutrients, such as fertilizer and manure, to match crop requirements, thus reducing nitrous oxide emissions and improving manure storage and handling techniques.
I've already noted the significant benefits that our investment in research can generate. We are continuing to place priority on research into mitigation technologies and practices. We know there is no silver-bullet solution to these challenges, but the cumulative impact of our research on soil management, manure management, crop nutrient uptake, and other areas of research will continue to produce results in mitigating greenhouse gas emissions.
Of course, our research efforts will also continue to focus on the development of crops that are more resistant to disease, drought, pests, and other potential effects of climate change. We understand that our research must focus on sectoral adaptation to the effects of climate change as well as on mitigating sectoral contributions.
In addition to building our scientific capacity, we're also increasing our policy capacity on climate change issues. For example, we're in the process of developing a set of national agri-environmental indicators to measure change, or the risk of change, in the state of environmental resources used or affected by agriculture. One of those indicators will measure the agri-environmental greenhouse gas balance. It will estimate the trends in the net balance between the accumulation and release of the three major greenhouse gases I mentioned.
Linked to the development of this indicator is the work to refine our predicative modelling capacity so we can better anticipate the greenhouse gas emission effect of changes in policy or industry conditions. This capacity is important if we are to understand the impact on the sector and on its emissions of various measures considered in the post-Kyoto process to design an action plan to implement Canada's commitments.
Finally, the department is being proactive in anticipating the new environmental challenges associated with increases in livestock production. For example, we are in the early stages of developing a national hog environmental management strategy with the Canadian Pork Council, our provincial government partners, and universities that will address the manure management concerns that affect this industry's growth. That strategy will directly contribute to solutions to hog sources of nitrous oxide and methane.
Thank you for the opportunity to outline these initiatives to you.
The Chairman: Thank you, Mr. Oulton. For the benefit of the members of the committee, could you please indicate whether you attended the Berlin conference on climate change, and if so, in what capacity? What was your title at that time?
Mr. David Oulton: I did participate in the climate change discussions in Berlin. I was assistant deputy minister of energy at that time.
The Chairman: Thank you, Mr. Oulton. Next is Mr. Sully, who's from Transport Canada.
Mr. Ron Sully (Assistant Deputy Minister, Programs and Divestiture, Department of Transport): Thank you, Mr. Chairman. I'm very happy to be here this afternoon on behalf of Transport Canada to speak to the committee about our initiatives in climate change.
In fulfilling its mandate, Transport Canada is committed to providing the best possible transportation for Canada, working toward sustainable development in the transport sector, developing and enforcing the highest standards for safe and secure transportation, setting policies that help the transportation system remain competitive, and gathering and analysing the information needed to make strategic decisions about the future of Canadian transportation.
[Translation]
The federal government shares jurisdiction over the transportation system with the provincial governments.
[English]
The Chairman: Mr. Sully, you don't happen to have a paper to distribute to the members of the committee, do you?
Mr. Ron Sully: I'm sorry, Mr. Chairman. I thought it was distributed already. It should have been done.
The Chairman: Then we'll try to find it. Please proceed.
• 1555
Mr. Ron Sully: Thank you.
[Translation]
The federal government shares jurisdiction over the transportation system with provincial governments.
Transport Canada has responsibilities for international transportation, standards for new vehicles, the air mode, almost all of the marine mode, and inter-provincial aspects of rail, bus and truck transportation.
The provinces have jurisdiction over highways, urban planning and transportation, vehicle licensing and emissions inspection.
Where common interests exist, federal and provincial governments work together, such as for highway funding and trucking safety.
[English]
The Minister of Transport will shortly table the department's sustainable development strategy in Parliament. Addressing the emission of greenhouse gases in the transportation sector is one of the key environmental challenge areas identified in this strategy for attaining a sustainable transportation system.
Responding effectively to climate change is a complex and difficult task. It's one with no easy solutions. This is particularly true in the transport sector, which is the single largest source of greenhouse gases in Canada. Transportation sources, largely trucks and private automobiles, are responsible for an estimated 27% of total greenhouse gas emissions in Canada.
The challenges of reducing transport emissions are significant and unique. The transportation sector is diverse and also widely dispersed. Urban transportation presents different challenges to those in more remote areas. Similarly, the challenges of passenger transportation differ from those of freight transportation. Car ownership and use is rising with income, population growth, and expanding urban areas.
The demand for air travel is expanding rapidly, particularly for transborder and international travel. The modes of public passenger transportation that are potentially more fuel efficient are rail, bus, and urban transit, which only serve about 3% of passenger demand now. Also, long-term ridership trends are declining as passengers switch to car use and air travel.
Trucking activity has recently increased at a faster rate than the increase in the economy due to the expanding trade and growth in goods of higher value and lower bulk in the economy.
Transportation greenhouse gas emissions are essentially caused by the consumption of fossils fuels. A significant reduction in these emissions will require changes in, first, individual behaviour, second, vehicle technology, and third, the composition of fuels. Achieving this change will require a step-by-step approach, as it will take time for Transport Canada to develop partnerships with provinces, municipalities, industry, and other environmental and transport stakeholders.
We have already initiated a dialogue with the provincial ministries of transport. We are evaluating mechanisms for widening this dialogue to include other stakeholders.
Our step-by-step action plan will cover three types of activities. The first type is where Transport Canada acts to fulfil its own mandate through ongoing policy. For example, this would come from a better integration of economic, social, and environmental goals in policy development; its ongoing regulatory responsibilities, such as those under the Motor Vehicle Safety Act, Aeronautics Act, and Canada Transportation Act; and technology development, such as support for new Canadian vehicle fuel cell technology.
The second type is where Transport Canada acts in partnership with others by continuing to work through international fora, such as the International Civil Aviation Organisation and the International Maritime Organization, to address emissions from international air and marine transport. It also works with key federal departments, provincial and territorial departments, municipalities and other stakeholders to identify effective initiatives to reduce emissions and to develop broad-based support for them.
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A foundation for such partnerships has already been
built through the extensive consultations that were
held with stakeholders during the development of
Transport Canada's sustainable development strategy.
Over 50 meetings were held with a representative
cross-section of stakeholders as well as six regional
workshops. It was also built by working as part of the
federal-provincial National Air Issues Coordinating
Committee to reap benefits for climate change from
cross-sectoral and cross-cutting related air issues
such as the recently released smog management plan.
The third type is where Transport Canada can encourage others to take preferred actions by working to increase the understanding of climate change among users of the transportation system so as to promote the lifestyle and behavioural changes needed to reduce fuel consumption. Transport Canada should encourage consumers to place a higher priority on vehicle fuel efficiency so as to pull through to market the technology for greater fuel economy in vehicles. Also, it should continue current work to strengthen the participation of transportation carriers in existing programs such as the voluntary challenge and registry.
In conclusion, no one level of government has all of the levers necessary for achieving change in the transport sector. In the coming months federal and provincial transport departments will be required to work together to develop a pragmatic, cost-effective step-by-step approach to reducing greenhouse gas emissions. No one measure offers a solution in the transportation sector. A broad range of initiatives will be needed. A serious effort will be required to build the necessary awareness and understanding of climate change in the transport sector. A broad-based response by all stakeholders in Canada's transportation system—by governments, by the private sector and by individuals—is needed if sustainable reductions in transport emissions are to be achieved.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Sully. Mr. Harper, please.
Mr. Ron Harper (Director and Associate Manager, Environmental Affairs Branch, Department of Industry): Thank you, Mr. Chair and members of the committee.
First I would like to say there is a prepared statement. I will refer to that statement, but in the interests of brevity I'll try to skip some of the portions.
The second comment I would like to make is that the five departments here today collaborate quite heavily in terms of the topic called sustainable development, and the three departments you will hear from on Wednesday also add to the collected information and analysis that is going on at the present time.
At first I thought what I might do is just give you a little overview of Industry Canada, since its activities are broad, and also to cover those activities that specifically relate to climate change. You may be interested to know that sustainable development is a core element of Industry Canada's mandate. Our mandate is to strengthen the national economy and promote sustainable development. We take the responsibility seriously, as all other departments here do as well, and are committed to promoting sustainable development as part of our overall mission to establish a growing, highly competitive knowledge-based economy in the country.
We have established four strategic policy objectives for Industry Canada designed to support our mission: improve conditions for investment in the Canadian economy; improve Canada's innovation performance and transition to a knowledge-based economy; work with Canadian companies to increase Canada's share of global trade; and build a fair, efficient and competitive marketplace for businesses and consumers.
In fact, to deliver on these strategic objectives the department is organized around three lines of business: microeconomic policy; industry sector development and marketplace rules and services. Within these lines the department includes programs to develop industry and technology capability, fostering scientific research, setting telecommunications policy, promoting investment and trade, promoting tourism and small business development, and last, setting rules and services that support the effective operation of the marketplace.
The bottom line for us is that we spend a lot of our time trying to improve the performance of Canadian companies large and small, at home and abroad, and ensure that the economy itself operates in a fair and efficient manner from the perspective of both businesses and consumers in Canada. We are more than just a federal economic department, as you may know. Industry Canada is part of a much broader portfolio, which includes as listed there in the statement, the Atlantic Canada Opportunities Agency, the Business Development Bank, the Canadian Space Agency, the Competition Tribunal, etc. It's a very comprehensive span of activity.
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Where I come from is the environmental affairs branch,
and it is one of a number of branches within Industry
Canada that focuses on industry sector development. In
a nutshell, our branch promotes the growth and
development of an internationally competitive
environment industry. The branch also facilitates the
transfer of Canadian-made environmental technologies to
less-developed countries and, in so doing, supports the
international competitiveness of the environmental
industry in Canada.
The environmental affairs branch works with other sector branches within the department, particularly, I might point out, our industry and science policy sector and the office of consumer affairs, and then directly with industry to find new and more innovative ways to address environmental challenges affecting business performance and overall competitiveness. We work to encourage voluntary action on the part of industry and to identify ways to harness market forces to produce solutions that are good for both business and the environment.
Now I'll go directly to climate change activities, which is currently taking a large part of our time in our branch. There's much being done across the industry portfolio, and specifically now I'll turn my attention to those activities.
Based on the results of a recent survey of the portfolio—and I should add that this was done quickly to give us a rough idea of how much activity was going on, particularly in the area of the period of 1987 to 2002—it looks like we will spend $100 million on climate change-related technology, research and development and economic analysis. A few examples might suffice.
Through the Canadian Space Agency, an Antarctic mapping mission is currently in production of data that will serve as a benchmark for monitoring the effects of global warming on Canada's climate. The National Research Council is conducting research on a range of membrane technologies that both improve energy efficiency and reduce the emissions of a variety of pollutants, not only greenhouse emissions, associated with the use of fossil fuels.
The Western Diversification office is presently looking at low-cost, long-life, submersible solar pumps and technologies for capturing methane from landfills.
Within the department there's a variety of different work, and specifically I'll turn my attention to the Technology Partnerships Canada program. I have chosen to suggest just three examples here of projects we have supported with the private sector: Dynamotive currently is assisting the development and commercialization of fuel additives from biomass, known as “Biolime”. That will lead to cleaner burning of fossil fuels. In addition to improving energy efficiency, the additives themselves are considered climate change neutral, and in that sense they produce no net emissions of carbon dioxide or other greenhouse gases.
GFI control systems: We feel these contribute to the development of propane and natural gas fuel injection controls for automobiles. These devices have been shown to reduce CO2 emissions by 24%, reduce nitrogen oxides as well, and to reduce the contribution to smog by a further 11% compared to current gasoline-based engines.
Ballard Power Systems: You've heard much about this recently. In that respect, there are two aspects of support. The first one is dealing with a stationary power plant that we hope will produce 250 kilowatt power, which will be good for institutions and other small standing facilities—pollution-free electricity, if you will.
The partnership for a new generation of vehicles is something that Environment Canada, Transport Canada and Natural Resources Canada, through the PERT program and our own contribution towards the end of this fiscal year, puts our foot in the door, as it were, to a very large program that is under consideration by the United States. This is approximately, at least in American terms, a $300 million program, and it is probably the largest effort by the Americans dealing with a new generation of vehicles.
Sustainable development: As part of our effort to promote sustainable development, Industry Canada has prepared its first sustainable development strategy with the new requirements under the Auditor General Act. We expect our minister will be tabling this in the House of Commons before Christmas.
• 1610
While preparing this strategy, like other departments
we consulted largely with industry, consumers
and other stakeholders. We are embracing the concept
of eco-efficiency, which has been developed by the World
Business Council for Sustainable Development.
The idea of eco-efficiency calls for producing
more from less, not only to minimize
environment-related costs but also
to improve overall productivity.
The World Business Council, which is a coalition of 120 multinational corporations from 33 countries and some 20 major industrial sectors, deals with material intensity reduction of our goods and services in the country, energy intensity reduction, the reduction of toxic dispersion, material recyclability, sustainable use of renewable resources, extension of product durability, and increasing the service intensity of goods and services. We believe all these factors have a direct impact on such activities as climate change and the reduction of greenhouse gas emissions.
Finally, we believe the department and the portfolio per se have an important role to play, not just in terms of addressing climate change but also, more broadly, as a catalyst for industry to adopt the principles and practices of sustainable development.
I also would add in terms of any of the portfolio agencies that if you would like to speak to them on some of the activities, it's been suggested to me that they are only too happy to appear if that is the wish of the committee.
Thank you.
The Chairman: Thank you, Mr. Harper.
If it is agreeable to you, Ms Park, I propose that we have a round or two of questions with those who have made a presentation so far, while you wait for a white horse to charge up the Hill with the documents. Then we'll come back to you. Is that all right?
Ms Anne Park (Assistant Deputy Minister, Economic Development and Corporate Finance, Department of Finance): That would be fine.
The Chairman: Thank you.
We are ready for a good round of short, crisp questions. We'll start, as usual, with Mr. Casson.
Mr. Rick Casson (Lethbridge, Ref.): Thank you, Mr. Chairman.
I have questions for all of you, but I don't think we have enough time, so I'll zero in on Mr. Oulton.
I'd like to let you know that I'm from Lethbridge. There's a major facility there, a research station. I recently toured it, and I'm very impressed with the facility and the work being done there. They've done great things with research into crops and livestock and what not.
I'm encouraged to see that there's a joint program on environmental issues to do with the hog industry. I understand the University of Lethbridge and the research station are involved in that. It's an exploding industry in our area, and it's comforting to know that we're doing some research.
You indicate that you're building your scientific capacity as well as increasing your policy capacity in climate change. For example, you indicate that you are building indicators to measure change. This is one of the question I've been asking. How confident are you, with the research that's gone on to date, about how accurate it is in measuring emissions and if the technology we're experiencing now is going to give us a far better reading coming into the next five or ten years as to what's been happening or what's going to be happening?
You indicate you're building up some better techniques, a better base to work from. Can you comment on that?
Mr. David Oulton: I might make just a general comment and then ask Ray Desjardins, who's a little bit more up to date on measurement than I am, if he might join me to give you some specifics.
In my experience with measurement, whether we're talking about environment or other performance indicators, as it were, we're still at the front end of getting indicators that provide us with solid, accurate information. My sense of it is that we have a pretty good solid measurement of our baseline in terms of what is being emitted under current practices and what was emitted in 1990, for example, which is frequently used as a base year.
• 1615
I think we have a reasonable
handle on what emissions are now from primary
agriculture. It's a much more chancy thing, though, to
be able to measure those emissions and predict those
emissions in the future. That part of it is a much
more difficult and more complicated part.
Therefore I feel we have to treat with a great deal of caution the forecasts we have on future emissions and what we think our indicators are going to be telling us.
Having said that, Ray, perhaps you can elaborate a little bit on my opening comments.
The Chairman: Very briefly, please.
Dr. Ray L. Desjardins (Principal Research Scientist, Eastern Cereal and Oilseed Research Centre, Research Branch, Department of Agriculture and Agri-Food): Thank you very much, Mr. Chair.
We in Agriculture are quite fortunate in this area, because we have been measuring carbon dioxide flux for three decades. By measuring carbon dioxide absorption by crops, we know how fast crops grow. We've always used that technique, and we've been improving that technique of measuring gas exchange. Carbon dioxide being one of the three greenhouse gases, we have developed techniques that allow us to measure the exchange on all sorts of scales—at the field scale, at the farm scale, and at the regional scale. We have a research program right now where we are improving these techniques and using them to validate the greenhouse gas emissions at the regional scale.
The Chairman: Thank you.
Mr. Jordan, followed by Mr. Bigras.
Mr. Joe Jordan (Leeds—Grenville, Lib.): I have a few points I'd like to make to Public Works and Government Services.
The chair stole my thunder a little bit. I too was struck by the data you presented on the finances. I'm encouraged in the sense that you can document the savings in such a way that you can pry it away from the bean counters and reinvest it.
One of the things we heard in relation to Canada's energy-efficient activities was that it was sort of warm and grey and we didn't really have too many details. We thought it was working, but didn't know.
If you have developed instruments for measuring, in concrete and objective terms, that these things do work, I would suggest that you share those with other departments, because that's one of the steps. That's the upward spiral we need. We need to be able to prove that these things don't cost us, that in fact they're going to save us money in the long run. Those kinds of instruments help in that fight.
In terms of agriculture, in the area of biomass fuels, I've had some initial exposure to some of the fast-growing grasses they might use in this area, and I'm wondering if there are increased levels of cooperation between Agriculture and Industry. If Industry is funding the development of these, is Agriculture aware of what might be coming down the line in terms of farmers growing the things that are going to be needed? Has this resulted in an increased level of cooperation between the two departments?
Mr. David Oulton: Thank you.
Yes, indeed there is considerable knowledge. It's not only cooperation with Industry, but of course a lot of the work on fuels is also done over at Natural Resources Canada. So it's a case where you have cooperation between departments with the industry, where a considerable amount of expertise is held, and also with universities and other sectors.
But again, perhaps I might ask Ray Desjardins to give you a few more specific facts, if you'd like.
Dr. Ray Desjardins: When we use biomass to produce biomass fuel, we can use only 10% of the fuel for producing ethanol. There's a cost to produce ethanol. If we use corn and grain and wheat, for example, this cost is about 75%, so we really benefit by 25%. We expect by the end of the year to produce 30 million litres of ethanol in Ontario, for example. This is equivalent to a fairly small amount, 0.01 million tonnes, of carbon dioxide saved as far as fossil fuel is concerned.
• 1620
Mr. Joe Jordan: I have one more quick question to Transport Canada.
What I'm hearing is that the automobile and our culture's attachment to not one but a number of automobiles, in most cases, is part of the problem. I guess we should look ahead to try to adjust our culture to mass transit.
Prior to this life I spent three years in eastern Europe, where people didn't own cars, and I saw that mass transit can work if it's set up to meet the needs of people. In your submission you suggest it isn't being used very much, but I would counter that by saying perhaps it isn't designed properly and that's why people aren't using it.
I received something on my desk the other day in my riding about divesting ourselves of railway rights of way. I'm very concerned about this because I think we might be buying these back in 10 or 15 years. Is there any thought being given in the department that maybe we should think twice before we sell these things? If we go to light-rail transit, and technology may have an impact here, I can see the day when we'll want track beds to go from my riding just south of here into Ottawa, for example. Maybe we should lengthen our planning horizon a little and hold onto these things.
Mr. Ron Sully: I certainly agree with your assertion that there are reasons why people are not choosing to take more fuel-efficient modes. As a department and as a government, we will do what we can to assist provinces and municipalities in making these systems run more efficiently. You may have heard our own minister talk about the necessity to make sure we have the greatest efficiency between the modes, so connections of bus to rail, car to bus and so on are the kinds of things we need to look at.
I can't comment on any change in policy. The existing policy is that given sufficient early warning, the railways are able to divest of their short lines. Our expectation is that where there is an interest, whether by a province, a municipality or anybody else, to use that system as you have suggested, they will put out their hands at that point and say they would like to have some of that. I agree that directionally it's the way to go. If there are lines that can be better used, let's say, for light-rail passenger traffic as opposed to the traditional heavy freight, we should take advantage of those opportunities.
The Chairman: Thank you, Mr. Jordan. I apologize for stealing your thunder. We'll try not to do it again.
[Translation]
Mr. Bigras.
Mr. Bernard Bigras (Rosemont, BQ): My questions are intended for the senior officials from Transport Canada. Mr. Jordan's question is very relevant. If I may, I would like to delve further into this issue.
In your brief, you said that, in the long term, the demand for mass transit and public transit will tend to decrease because passengers will chose to use either the car or the plane. Do you not think that consumers are tending to use another mode of transportation because of the poor quality, in many cases, of public transit and mass transit? That is my first question.
Secondly, have you studied the current state of mass transit in Canada? Furthermore, the current state of mass transit is most probably linked to funding. I would like to know whether you have examined the possibility of creating a tax to fund mass transit.
• 1625
[English]
Mr. Ron Sully: Thank you for your question.
I think, as a general proposition, consumers are making their choices between modes on the basis of cost and efficiency and convenience. As it happens right now, with the growth in the economy and with the general rise in incomes and in consumer population, the fact of the matter is we are seeing fairly rapid growth in the use of the private automobile and light trucks. Within those categories, we are seeing a shift towards some of the more comfortable, perhaps, but less fuel efficient types of personal transportation, such as minivans and 4x4s, if I can put it that way.
Consumers are making choices, I guess, between their own automobile and these other forms of public transport, with the same considerations in mind. I wouldn't go so far as to say these other facilities are in particularly poor state or poor condition, but it's a matter of relativity, I guess, when consumers look at what their options are.
On the issue of special taxes, I really can't comment on whether special taxes might be considered. That would be a matter for the Minister of Finance.
As far as our own minister is concerned, I can tell you that he is very interested in doing what he can to facilitate the movement towards the more efficient modes. He has talked about ways to perhaps move more people out of their cars and onto public transit or onto rail systems, and he has also talked about the need to shift heavy freight traffic from truck to rail, where we can. I really can't go any farther than that in terms of specifics, but directionally that's the way he wants to go.
The Chairman: Merci, Monsieur Bigras.
Next will be Mr. Cadman, followed by Mr. Laliberte and Mr. Pratt.
Mr. Chuck Cadman (Surrey North, Ref.): I'd like to follow through a little bit on the previous two questioners, with a question to Transport Canada.
I come from the lower mainland of British Columbia. If you haven't seen gridlock on a hot August Sunday afternoon in Vancouver, I don't think you've seen anything yet.
I'd like to ask about any initiatives the department is taking with respect to education, educating the public. I have used public transport in the lower mainland for about 25 years now, including a van pool for the last couple of years. I've found it quite reasonable.
I think there's a mindset out there that people just don't want to get out of their cars. You certainly notice it when you ride the transit.
Are there any initiatives within Transport to work with the provinces to start to educate people about getting out of their vehicles?
Mr. Ron Sully: Like many other departments, we will be tabling in December our sustainable development strategy, which includes, in one part, a sustainable transportation strategy. In that strategy, we have eight fundamental challenges, and one of those challenges is consumer awareness and education. So we do very much intend to do what we can, either ourselves or, more probably, working in partnership with others to increase the awareness on this very issue.
We know there are organizations out there that have had quite considerable success in raising the level of awareness in our school systems. I personally believe that when it comes to something as fundamental as the way you move yourself around and something as fundamental as global climate change, we need to start at a very early age and probably get into the school system so that by the time those people graduate and perhaps go to university and start buying cars they will be making the right choices. I guess we know from other experiences that this is where you can have, perhaps, maximum impact. We probably have better chances of success in working on the school curricula than we do in getting at people who have generated 10 or 20 years of bad habits.
• 1630
That's one particular area we would like to get
involved in. At the current time we're evaluating what
would be most cost-effective in terms of where we would
provide our support for those kinds of initiatives.
The Chairman: Thank you.
Mr. Laliberte, please.
Mr. Rick Laliberte (Churchill River, NDP): The different initiatives that you take, in Public Works as an example...and I don't want to see some initiatives taken very lightly, but if you walk at 10 p.m., 11 p.m. or midnight outside in Ottawa where you're surrounded by federal buildings, all the lights seem to be on. Is there an initiative for an emissions or environment police, I guess, to be out there to slap people on the hand?
We need a wake-up call. The scientists have given us a wake-up call. Our planet is going in the wrong direction. Our lifestyle is bad. Let's not transfer it to our children. This is a time for us, as mature adults, as wise, knowledgeable people, to take a step in the right direction.
I just came from Tokyo as well. The U.S. representative there said that even though their emission target is zero, 25% could be cut off emissions with existing technology and practices, but the political will has to mount to that. He said that if a presidential candidate came out with an environmental platform, all these things would come into play.
So it's the political will. If we could measure the political will on this side of the table...can you ensure that the report cards won't show a 13% increase in five years? In the next five years we'll have maybe a 20% or 50% increase, which the scientists are pointing out to us.
For example, with respect to vehicles, in Japan they have a vehicle that can burn less fuel and has less emissions, but in Transport Canada we have a...you can save the gas. You can look at the chart when you buy a vehicle. You can look at the window and see on the chart how much gas you'll be burning. Couldn't we have an emissions rating? Can I as a consumer go buy a Ford or a Honda or a GM and say which is the safest one for my environment and make a choice between a Suburban and a Dodge Dakota or something, that sort of thing?
You rate emissions, right? But you don't put them on the consumer information.
With regard to greenhouse gases, you mentioned three: CO2, nitrous oxide and methane. But there are actually six that may enter the Kyoto agreement. Is it better to sum up these gases or split them up? I know the agricultural department says there are different sources, but it all ends up in the same place.
The other issue is catalytic converters. There's a three-phase catalytic converter now, but there is technology that could clean up the emissions by putting new technologies on the present exhaust systems.
This is kind of a generic question, but I think it deserves something.
Ms Joan Catterson: I can comment on the first part of your question with respect to lights in buildings.
As part of the federal buildings initiative that I described earlier, where we talked about greenhouse gas emissions, another element of that program is to replace lighting systems to make them more energy efficient. As lighting systems are replaced, there are various automated systems of lighting now available.
In the building I work in, for example, in Place du Portage in Hull, the lights in fact do go off automatically at 6.30 p.m. If an employee continues to work he or she must go to a panel on the floor and turn the light back on, but only on the portion of the floor where he or she is working.
That type of system is now available. That type of system was not available at the time when many of the current Crown-owned buildings were built, but those lighting systems are being replaced and I think you will see fewer lights on in large government buildings as the lighting systems are replaced.
Mr. Ron Sully: Perhaps I could comment on a couple of things in the transportation area. You mentioned the low-emission vehicles in Japan. I agree that there have been at least demonstration models introduced recently that have very low emissions, but my understanding is that at this time they would be prohibitively expensive to market on any significant scale.
• 1635
So the challenge for both Japanese and North American
manufacturers will be to continue to work to improve on
these systems but to get them in a form that would
represent a reasonable cost for the consumer.
On the reading of emissions by vehicle, there has been available for quite some time the opportunity for distributors and retailers to post, in the windows, stickers in terms of average fuel economy. My understanding is that there is one difference there between Canada and the U.S. In the U.S. it's mandatory, but I believe in Canada it is not mandatory, so these stickers don't always appear.
I don't know whether it would be feasible or reasonable to go to a complete emissions listing. I think that a sticker with regard to fuel economy would serve as a useful proxy—I know it's a very rough proxy—for all of the various emissions that you can think of, in terms of CO.2, which is directly related to fuel consumption, but even other emissions that are particularly problematic, in terms of smog for example.
Mr. David Pratt (Nepean—Carleton, Lib.): My question would be to either Mr. Sully or Ms Park. It concerns the whole issue of employer-provided transit passes and the possibility of having those considered as a tax-free benefit.
I know that many people in the transportation community involved in bus companies right across the country have been interested in this issue, because they feel that over the years an imbalance has developed in the cost competitiveness of public transit versus the cost competitiveness of the private automobile.
One of the issues that seems to be key in that equation is the issue of parking, and the fact that when people are provided with parking as part of their employment, the federal government doesn't seem to be very anxious to tax that as an employee benefit.
One of the views that's come up was very well argued by a fellow named Todd Litman from the Victoria Transport Policy Institute. I think that was the name of the organization. One of the arguments that came from him was that in order to attempt to address this imbalance, employer-provided transit passes should be considered as a tax-free benefit to encourage that cost competitiveness and to ensure that people have a financial incentive to start using buses and public transit.
I'm just wondering, Mr. Sully, if that has been an issue that has occupied any of the time of Transport Canada in terms of trying to make the case for that with the people at Finance. I understand there may be some support for the idea, but it seems to run into a roadblock once it gets to Finance. Can you provide some comment?
Mr. Ron Sully: I'll defer in a moment to my colleague Anne Park on the tax issue.
Just to make a couple of points, what I was trying to say earlier—perhaps not as early as I should have—is that we find that many times in the case of public transportation the issue of cost may not in fact be the greatest issue. There are some people who believe that even if public transit was provided at zero cost, people would still not get out of their cars. So what you really have to get at there is this whole issue of timeliness, convenience and so on.
In my own case, if I'm stuck in the office until 6.30 or 7 p.m., the bus is simply not available. So it's just not an option, and there are many people in a similar category.
On the question of taxation of benefits, I believe I'm right in saying that my parking is taxed as a taxable benefit by the federal government for the portion that's provided by the federal government.
• 1640
On the broader issue of the tax treatment of transit
passes, perhaps I could ask my colleague Anne Park to
comment.
Ms Anne Park: I think generally this idea about transit passes has been under discussion now for some time. It's not a question of any lack of will by the Department of Finance to look at this or any other creative idea for addressing issues related to climate change.
More fundamentally, though, when we look at an issue like this we start to ask ourselves some questions that are much along the lines of what Mr. Sully has raised. If we were to do this, and it would come at some cost to the Canadian taxpayer, would it really be likely to do very much to change behaviour? That's the first question we need to ask ourselves when we look at any use of the tax system in this regard.
The other question we have to look at is what it means in terms of fairness in the tax system generally. You would be giving a taxable benefit, but of course people are treated differently at different income levels. We would have to look at what it would mean in terms of the tax system itself. That's not to say we'd stop looking at it or we won't look at it. Certainly it's on the list of issues we are prepared to examine.
The Chairman: Thank you. We are running out of time and still have to give Ms Park the floor to make her presentation because of some problems with the arrival of documents.
Mr. Knutson, would you like to conclude this round please?
Mr. Gar Knutson (Elgin—Middlesex—London, Lib.): Mr. Sully, I take it from reading your material that the private automobile has to be a big part of the solution. If we go to stabilization at 1990 levels by 2010, the economy will be roughly 30% bigger than it was in 1990. We'll have that many more automobiles. We're not going to have a massive cultural change and go from buses to subways, or whatever. People are still going to love their cars. I'm going to love my car.
If you throw in the factor that people are going to hold onto their cars for five to eight years, we will have cars on the road in a fairly significant way over the next two to three years. I'm just wondering if you agree with that logic.
Will Transport Canada or Industry Canada play any significant roles in cars coming off the assembly line in the next two to four years, so their impact will be felt over the next twelve years? Is there going to be an infrastructure for natural gas? Who's going to take responsibility for it.
Just looking at the private automobile, what good ideas are coming from the departments so maybe there will be some optimism that we're going to at least deal with the private automobile part of the problem?
Mr. Ron Sully: That, of course, is an enormous question. It has many dimensions. You are right in indicating that our biggest challenge and problem in transportation is the personal usage of automobiles and light trucks.
Automobiles and light trucks account for about 65% of green house gas emissions in Canada. The whole marine sector, aviation sector and rail sector together account for only slightly more than 10%. It is an enormous problem.
• 1645
I think what all federal departments are obligated
to do is to follow this step-by-step approach,
where we will be working within the federal system
and outside it with the provinces, municipalities,
industry, consumer groups and other stakeholders
to try to figure out,
for whatever target is specified after Kyoto,
what are the most reasonable and
cost-effective measures we can take.
It might well be, for example, that we will decide collectively that it wouldn't be the most prudent way to go to simply try to stabilize all emissions in every sector formally. It might well be that we will conclude that transportation is a much more difficult sector and that therefore we should make greater reductions in other sectors and lesser in transportation. That's one example.
I would note in passing that our research to date would indicate that of all of the major western industrialized countries, only in the U.K.—perhaps in the U.K.—will they stabilize emissions in personal transportation. For example, at the current time there's no indication that the U.S. will, notwithstanding the president's commitment to achieve an overall reduction to 1990 levels by 2008 to 2012. It's not our understanding that they will make it in transportation. So that's one point.
After we have collectively decided, I guess, what the target might be for transportation, we have to look at ways to encourage auto manufacturers on the one hand and consumers on the other to do the right thing.
With respect to the auto manufacturers, many if not all of them have programs in place already, significant research programs. Ron Harper has mentioned the partnership for new-generation vehicles in the United States. A lot of research is going on. A lot of money is being spent. The speed with which auto manufacturers will get that research done and bring it onto the market will really be driven by consumer demand.
Mr. Gar Knutson: On that point, in terms of natural gas, apparently there's no infrastructure for it. I mean, we can go around in circles. The car makers won't build it until the consumers demand it, but at some point, if we're going to deal with this problem urgently, government has to step in, in a major way, to say, fine, we'll fund the pipelines for natural gas and we'll make the up-front investment. We have to force it.
Mr. Ron Sully: I think for our government and other governments working collectively we have to look at what are the most cost-effective solutions. My understanding is that it would cost a lot of money to provide a network of refuelling stations such as we have for conventional gasoline, or even diesel. These facilities tend to be tremendously expensive. But we need to look at all of the options.
I guess the point I was trying to make is that if the consumers are demanding the right products, I think we will have a better chance for auto manufacturers to introduce the requisite technology faster.
Mr. Gar Knutson: Okay. Thanks.
The Chairman: Thank you.
In giving you the floor, Ms Park. In welcoming you, I would like to ensure that you know that this meeting this afternoon is mainly due to the keen interest of the members of this committee in the activities of your department, particularly the measures your department has undertaken over time in relation to subsidies and tax expenditures to the fossil fuel industry.
So you're somehow the star performer this afternoon in this galaxy of officials. We look with particular interest to your presentation. As well, we hope we can cover good ground during the question period following it.
Again, welcome to the committee. The floor is yours.
Ms Anne Park: Thank you very much, Mr. Chairman, for the opportunity to address the standing committee today on the important issue of climate change. I only hope I can live up to the billing.
I'm very pleased to provide information on how the Department of Finance is approaching this question. As well, I have a number of colleagues with me who may be able to answer any specific questions you may have in this regard.
• 1650
As you will be aware, climate change is an issue that
does not rest with any one department but rather with
the government as a whole. The lead role in this
regard is being taken by the Minister of the Environment,
the Minister of Natural Resources and the Minister of
Foreign Affairs, and ultimately, of course, the
responsibility for whatever policy the federal
government adopts rests with cabinet and the Prime
Minister.
The role of the Department of Finance in that context is fundamentally a supportive one. We are working actively with other government departments to develop constructive solutions to the challenge that climate change presents for Canadians. This is consistent with the department's approach to environmental issues, generally, that we've been taking over the last several years.
As the standing committee is aware, in each and every budget during the previous mandate, the Minister of Finance has moved to deal with environmental issues, including taking significant steps to level the playing field in the tax treatment of renewable and non-renewable energy. More has to be done, but we are moving in the right direction.
For some time, the department has been closely engaged with other departments in examining the climate change issue in the context of the upcoming negotiations in Kyoto in December. This is very much a co-operative process, which is carried out largely through an interdepartmental committee of assistant deputy ministers—some of whom are here today—and working groups.
It recognizes that dealing with climate change will involve the collective action of a number of departments, as well, of course, as non-governmental organizations, industry, provincial and municipal governments, and the public at large. As part of this process, Finance is engaged, together with these departments, in examining the implications of climate change for the economy. This involves examining the potential costs to the economy of reducing greenhouse gas emissions, recognizing of course that no economic model is likely to deliver precise results as they are all highly dependent on various assumptions.
We are also involved in examining the potential benefits of taking action, although these, for reasons you can well understand, are at this stage difficult to assess with any degree of precision. At the same time, we're also conscious that the need to reduce greenhouse gases also opens potential new opportunities for industry in the form of development of greater energy efficiency, demands for less polluting forms of energy, and the development of new technologies for use both at home and abroad.
The challenge is therefore to find ways of moving forward that lessen the impact on the economy, while maximizing the benefits that come from new efficiencies and new technologies. In this regard we're also concerned very much with the international dimension. The close links that exist between the Canadian and U.S. economies suggest we will need to follow closely what the Americans actually do to implement whatever commitments are made in Kyoto. It will also be important to ensure that those rapidly industrializing developing countries whose emissions are growing quickly become active participants in the process, otherwise the actions we take to reduce our emissions, which represent about 2% of the global total, could be eclipsed by the growth of emissions in the rapidly industrializing countries of Asia and Latin America. There could also be potential implications for the future competitiveness of some sectors of Canadian industry.
We are also conscious, of course, that climate change will obviously need to be dealt with in the context of the government's broad agenda. As reported in the recent fiscal and economic update, Canada is on the verge of resolving the problem of the deficit. However, we are not there yet, and financial resources are expected to remain limited in the future. The government also remains very concerned about the economy and the need to ensure that the scarce financial resources are invested in areas that deliver jobs for Canadians. Canadians are also looking to the government to do more in many areas, such as education, health and children.
What they are trying to do, therefore, is to work with other departments in developing constructive approaches to reducing greenhouse gases.
• 1655
First, with respect to innovation, technology, and
trade, it seems clear that effective solutions to
climate change will require innovative new
technologies. As indicated in the recent fiscal and
economic update, the growth of the Canadian economy is
increasingly dependent on innovation and the generation
of knowledge. This applies as much to traditional
resource industries as it does to the new high-tech
industries.
In recent budgets the government has been moving away from traditional subsidies and towards investments in the key engines of economic growth: research and development, education, and international trade promotion. Canada's small but growing environmental industry can be expected to play an increasingly important role in this regard.
The Technology Partnerships Canada program, which my colleague from Industry Canada referred to in his presentation, is investing in technologies that should help us to deal with climate change. And the recently created Canada Foundation for Innovation also includes a focus on environment.
Next, with respect to energy efficiency and renewable energy, as the standing committee is aware, the government has also in recent budgets been taking some significant steps by levelling the playing field between the treatment of renewable and non-renewable energy in the tax system and by encouraging energy efficiency. I will go through these measures briefly for you.
First, there are measures in the 1996 and 1997 budgets to provide a more level playing field between renewable and non-renewable energy investments.
Second, there was a tightening in the 1996 budget of the eligibility rules for flow-through shares issued by mining and the oil and gas sector.
Third, the use of flow-through shares has been extended to investments in renewable energy through the introduction of the Canadian renewable and conservation expense in the 1996 budget and the inclusion of costs for test wind turbines in 1997.
Fourth, changes were made to class 43.1 in the Income Tax Act, including relaxing the specified energy property rules to assist in the financing of renewable energy investments in 1996, and expanding eligibility for class 43.1 capital cost allowance treatment to certain acquisitions of used equipment and reducing the qualification threshold for photovoltaic systems in 1997.
And finally, in the 1997 budget, we also provided $20 million a year for three years for incentives to promote renewable energy and energy efficiency investments.
This is not to say the job has been done. Important decisions lie ahead. However, we expect to continue making steady progress in these and other areas as part of the response to the climate change issue.
I should also mention that implementation mechanisms for following up on whatever commitments are made in Kyoto will also be important. We are involved in efforts aimed at assessing the mechanisms that will be needed to implement those reductions, such as the potential for domestic and international trading emissions schemes.
In conclusion, climate change is obviously a very complex issue that will require substantial effort to deal with over a period of 10 years and beyond. The Department of Finance is committed to working actively with other government departments to develop constructive and effective solutions.
Reducing greenhouse gases cannot, however, be done by the federal government alone. We must work hand in hand with every province, the business community, environmental groups, consumers, municipal governments, as well as the international community. If ever an issue required working in partnership with all players in the economy, it is climate change. It should be recalled that it was municipalities across Canada that developed consumer support for the recycling efforts that Canadians now actively participate in.
Initiatives to deal with climate change will need support across the board if they are to be effective, and our approach to dealing with climate change will therefore very much need to involve consultations with industry and NGOs, and will require the involvement of all levels of government and the public.
Thank you, Mr. Chairman.
The Chairman: Thank you, Ms Park.
We will start right away with a good round of questions. First on the list is Mr. Casson, followed by Mr. Pratt and Mr. Bigras.
• 1700
Mr. Rick Casson: Thank you, Mr. Chairman.
One of the points you make, and I like it, is what we've seen done in recycling, the education that went on in our schools, and now recycling is an everyday event for most people. Our kids educated us and now we're doing that. As was mentioned by some of the other people here, I think education is a key factor in all of this.
You have indicated that this is not an easy thing to handle, the economics of controlling pollution. Have you done any studies, or can you show us any figures to indicate what price is attached per tonne of reduction? Is there such a formula? Are we starting along lines that will tell us that the economic effect of this much reduction is this many dollars? Can we do that yet?
Ms Anne Park: I believe some work has been done in that regard, primarily by the Department of Natural Resources, but I would suggest that the price or cost attached to this probably depends in part on how you go about reducing those emissions. It's not a given that one set price would be attached to it. It would depend on the strategies and so on that one adopts.
Mr. Rick Casson: As for getting into specific strategies for the next 15 years, then, you can't get into that as far as how it is going to affect the economy is concerned. Is that right?
Ms Anne Park: Various studies have been done that tried to model the impact on the economy of taking action to deal with climate change. The problem, of course, as with any model—particularly in an area as complex as this—is that modelling tends to be only as good as the assumptions that go into them, and all of these models have to assume some way of accounting for the costs in the economy. Generally speaking, however, they do suggest there would be some loss in GDP by the year 2010 if one were to go down this road. On the other hand, those models do not, generally speaking, take into account the benefits that are associated with acting to deal with climate change, nor do they take into account the effect of new technologies and new energy efficiencies.
I guess the bottom line is that it is very difficult to predict with a great deal of precision, or to come up with one result that shows how much it will cost the economy to move in this direction.
Mr. Rick Casson: So you're saying that the models or the projections that have been made are present-day scenarios and have not taken into consideration any reduction or any new technologies that create efficiencies.
Ms Anne Park: I believe the models that have been done do take into account, some of them at least, some improvement in technology, general productivity gains, those sorts of thing, but they would not, for example, take into account a breakthrough in the next-generation automobile, or a major breakthrough in energy efficiency, or something of that sort.
Mr. Rick Casson: Thank you, Mr. Chair.
The Chairman: Thank you. Mr. Pratt, please.
Mr. David Pratt: I would like to begin, Mr. Chair, with a comment with respect to Mr. Sully's final remarks concerning the issue of parking being taxable. I think the federal government does ensure that employer-provided parking is taxable, but that's the exception rather than the rule in terms of the overall consideration of parking, as far as I'm aware.
The other issue I wanted to bring up with Ms Park was the fact that we do have a number of western European countries, and I believe it's so in the U.S. as well, where employer-provided transit passes are considered a tax-free benefit. Obviously, we can't get into any detail on this today—it's a fairly complex issue—but I'm wondering if, Ms Park, you could give us an undertaking to study that issue and to report back to the committee with a more formal response, because I know that various organizations have come out in support of this idea.
I'm thinking of the Canadian Urban Transit Association and the Federation of Canadian Municipalities. This committee, I believe, has also supported the idea of having transit passes considered as a tax-free benefit. There are a number of very influential groups out there that have supported the concept, and I don't think the finance department, or the Government of Canada for that matter, has really provided any really good tangible response on the issue. Would that be possible?
• 1705
On another issue completely,
on the changes to class 43, I noted there was some
mention with respect to relaxing some of the rules in
terms of renewable energy investments and acquisitions
of equipment, etc., that that has been done in the
past, but I guess a lot of people are looking at
changes to class 43 that would result in
energy-efficient practices. I'm thinking primarily
here of things like co-generation, use of waste heat
and district energy systems.
I was wondering if investments in those
types of projects could receive more favourable tax
treatment, because, as the Scandinavians have known for
years, district energy systems and co-generation have
produced tremendous benefits in terms of reductions in
energy consumption and increases in energy efficiency.
Is that something we might expect in the future in terms of tax changes? Is that something the Department of Finance would be amenable to, in terms of really making a dent in greenhouse gas emissions by allowing property owners to have more favourable tax treatment? In all of the studies I've seen over the last number of years, there's a tremendous benefit over time. The initial capital cost of these items is significant, but over time the benefits that come back in terms of reduced energy consumption and energy efficiency are very, very important.
I know there's a lot there, but....
Ms Anne Park: On your first question, certainly we can get back to you in one way or another on the implications of this.
The Chairman: Preferably one way rather than the other—
Ms Anne Park: Both ways.
The Chairman: —in the sense that we would like it in writing so we know the latest theology in the Department of Finance so as to enable the members of this committee to shoot some neat holes through it.
Ms Anne Park: I may need a little time, then, to make sure we—
Mr. David Pratt: Take your time.
Ms Anne Park: —have our analysis—
The Chairman: Take your time.
Mr. David Pratt: Not too much time. I think we're looking for something thorough. I think we've all had letters from the minister on this.
Ms Anne Park: We recognize that there is considerable interest in this transit pass idea and I don't see any difficulty with sharing our analysis with you in that regard.
With regard to the other issues you raised, perhaps it might be useful for me, if you'll agree, Mr. Chairman, to invite Mr. Bill Toms from our tax policy branch to speak briefly to those issues.
Mr. William Toms (Chief, Resource Taxation, Business Income Tax Division, Department of Finance): As Ms Park indicated, in the last few years we've been looking at and have made a number of changes to class 43.1 to try to create a more level playing field between different types of renewable and non-renewable energy. Certainly, one of the suggestions we've had is to extend class 43.1 to district heating activities because certain co-gen activities already qualify. It's something we're giving consideration to.
I must admit I've had one meeting with Michael Wiggin, whom you know, and it's hard not to be enthusiastic about some of the projects he's mentioning, particularly the one in Hamilton. It is most interesting because it's using waste heat, whereas a number of the other projects are not really built on waste heat, they're built more upon a large co-gen facility. Rather than using renewable energy, that one is a big natural gas-fired facility that has certain benefits, but probably not as many environmental benefits as the use of waste heat or renewable energy.
I think there are some meetings set up some time over the next couple of weeks to get further details from Mr. Wiggin when he returns from his trip to Europe. I believe you may have been invited to some of these meetings, I'm not sure.
• 1710
We can prepare to have some further discussions
outside the committee on the details
of class 43.1.
The Chairman: Thank you.
[Translation]
Mr. Bigras.
Mr. Bernard Bigras: My first question is for Mr. Harper of Industry Canada and the second is for Ms Park, the Assistant Deputy Minister at the Department of Finance.
Mr. Harper, in my opinion, one of the important pages of the brief that you have just tabled deals with the amounts of money earmarked for research and technological development. My question will be relatively brief so that I will have enough time to ask you all of my questions.
First of all, what is the budget for the federal Technology Partnerships Canada program, and tell me whether you feel this program has adequate funding to meet the challenge of climate change.
My second question pertains to the environmental technologies that could be used to replace certain other technologies that use fossil fuels. In many cases, these technologies have reached maturity. I would like to know what your department is doing for these technologies. I will use one example in particular, the electric car. Many people have come to my office over the past month and told me that this technology had reached maturity. You will perhaps tell me that it is not suited to our climate because of the cold and because of other reasons, but I have been told that this technology has reached maturity and is ready to be marketed. I would like to know what your department is doing to support this type of technology.
[English]
Mr. Ron Harper: You've asked a number of questions there.
First I can deal with Technology Partnerships Canada. The program was $200 million. At present we're moving to $250 million. We certainly seem to be able to spend the money, if spending money is an indication of success. Certainly on the environmental side part of the problem to date is that we've not been, as it were, saturated with a lot of projects, but we have funded the projects that have come forward.
The steady state was intended to be $250 million. That's for the aerospace and defence side, for the environmental technologies, the enabling technologies, etc. Whether there are sufficient funds just dealing with the environmental side.... To date we seem to have been able to satisfy what has come in the door by way of requests.
On your other question, dealing with fuel switching, coal to natural gas, etc., I would defer the question, since it's not really our area of expertise in the department, to our colleagues at Natural Resources Canada, Mr. Cleland, when he appears on Wednesday. That is more the purview of Natural Resources Canada.
I'm not side-stepping your question. I think it's more legitimately handled by Mr. Cleland.
On the subject of electric cars, we have not provided direct support, in my recall. Neither have we been asked to provide support. Electric cars available for the market at the moment have not been picked up by consumers. In fact, one of the companies, as I recall, CAMI, was forced to shut its doors for six months because of a lack of demand.
This has more to do with the consumer, I'm afraid, than it does with the quality of the vehicle that's available. They are more interested.... I think one of your committee members talked about the Dakota and other four-wheel-drive vehicles with power and that make noise. Those seem to be more appealing to the Canadian consumer and American consumers.
I think I've covered the questions you had.
[Translation]
Mr. Bernard Bigras: I have a question for the Assistant Deputy Minister of Finance. I'm perhaps going to be somewhat harsh, but I don't want you to take this personally.
• 1715
I feel that your brief is a political brief and not a
technical brief. Consequently, I'm going to ask you a political
question. I'm going to quote a few paragraphs from your text:
Do you not think that investing in technological innovation, particularly in the environmental sector, constitutes job creation, and, at the same time, is an important avenue that will enable us to redirect our economy in favour of our environment?
Secondly, with such a statement, are you aware of the fact that you are stripping away the ability of various departments that are trying, using the means available to them, to resolve the climate change problem?
The Chairman: These are really very important and excellent questions, and they are also very good ethical questions. This afternoon Ms Park's job is to talk as a public official. Accordingly, her answer will be based on Department of Finance policy.
[English]
With that premise,
[Translation]
Ms Park, the floor is yours.
[English]
Ms Anne Park: First, I want to assure you that this is very much not a political brief. You see that throughout my remarks I've consistently talked about the Department of Finance and the approach of the Department of Finance. This naturally reflects the approach of my minister, just as the approaches that have been outlined to you by other departments reflect the approaches of their ministers, and indeed the government as a whole.
With regard to your particular question—which I understood to be, isn't investment in environment technology also consistent with job creation?—the answer is absolutely. Indeed, what I tried to make clear in my remarks was that the government has been trying to shift away from old-style subsidies into investing in the key engines of economic growth, which are very much in the area of research and development, technology development, innovation and so forth. In this regard it is very interesting that we have a growing environmental industry in Canada and one that is exporting abroad. Logically, that industry will have an important role to play as we address the climate change issue.
With regard to the question of spending and so on, and the government's broad agenda, what I simply tried to do in this presentation is draw to the attention of members of the committee that given the nature of our fiscal circumstances, the fact that we are now on the verge of solving the deficit problem, that does not mean we will have huge amounts of money to spend tomorrow. The funds will remain limited, and this naturally affects the extent to which and the ways in which we will be able to deal with climate change.
Certainly we are very much committed, within the parameters we have to deal with, to moving forward on this.
Mr. Joe Jordan: My question is to Ms Park as well.
I see in your brief, “The role of the Department of Finance in this regard is fundamentally a supportive one”. Six months ago, prior to getting into this, I thought money talked; I now realize that money in fact swears, and I would suggest that your role is going to be far greater than a supportive one in a constructive solution—and I don't mean that in any negative way.
From what you're saying and what I'm learning as I go through this, I guess that post-Kyoto strategies are going to be evaluated in a cost-benefit analysis to see how we can...and I think your phrase was to minimize economic impact and maximize benefits. I guess we're looking at somehow balancing the economic costs against the environmental benefits. I think those types of decisions have everything to do with perspective and timeframe. It's going to be important for the department to develop models—and I guess this goes back to what Mr. Casson was saying too—that have...and I don't know whether honesty is the right word, but I think we need full-cost accounting and a perspective that takes into account, for example, disposal costs in manufacturing. At the end of the day, nobody is accounting for those costs and municipalities are getting stuck with them.
• 1720
In terms of benefits, to use a financial analogy,
there are opportunity costs that we're forsaking in
things like environmental technologies. We need to
take that into consideration if we're making economic
decisions about this sort of thing.
I realize that the economic decision-making model is fundamental. I just want to make sure that it includes all the right items and has the right timeframe associated with it, which I would suggest is a little bit longer than what we're using now.
The second thing to emphasize that point, I think, is that the finance department, again through the tax structure, is going to play a very supportive role. I don't think we're going to convince American auto makers to incorporate the technologies that are necessary as quickly as possible, so if we're looking at retrofitting existing cars with technologies, I think that's going to happen a lot more quickly if the costs are offset through the tax structure. If society is the beneficiary of these things, it's your department that's going to spread the pain around. Lifetime product stewardship legislation would require changes to the tax structure as well. So I think you're going to find yourself in the middle of this debate for quite some time, if not at the centre of the debate in terms of finance.
Finally, is work being done on a comprehensive model? Post-Kyoto you're going to get hit with strategies and plans from a number of departments simultaneously. And if the deficit fight is any indication, there are probably going to be attempts at passing emissions from one department to another or passing emissions from one jurisdiction to another.
Is somebody looking at the big picture? Is somebody going to be able to assess the economic impact of simultaneous submissions and whether something that's going on in Industry Canada might negatively affect something that's being planned in Agriculture Canada? Who's the wing person for that? Who co-ordinates the big model to make sure we're not working at cross purposes and that we are making the most effective use of the things we already know? Independent of our ignorance, I think there's enough on the table so that if we apply it effectively we have a chance here.
Ms Anne Park: With respect to your first comment about models and so on, and looking at the economic aspect of this, certainly we realize more work needs to be done on this and we are devoting increasing attention to it.
With regard to the tax system, I think it's evident by the actions we've taken to date with respect to the tax system that this is certainly part of the equation and is certainly very much part of what Finance is looking at.
With regard to the big picture and how we put all this together, this is obviously the challenge which we all share. By the nature of the problem itself, this is very much a collective exercise.
I don't think any one department by itself is able to deal with it, which is why we have tried to develop a close co-operative exercise among departments to try to focus on what really are the best strategies, the most constructive approaches and so on, that we can take to this issue.
At the same time, we also recognize that it isn't just federal government. It's also provincial governments, municipal governments, industry and so on. It really is quite a large and massive undertaking to try to move forward on a file like this. We'll have to try to crunch those kinds of key questions that you're talking about as best we can as we go along.
• 1725
The Chairman: Mr. Laliberte, please.
Mr. Rick Laliberte: To open up on something for Finance, I think the overwhelming consciousness of the Annex 1 countries is this fear of GDP loss. Somebody wrote this equation somewhere—I don't know where—that GDP loss equals emission reduction, and emission reduction equals GDP loss. What about GDP loss for non-emission reduction?
I think the first indicators are the insurance companies. They have put on some warning lights out there that there could be trouble because of major climatic disruptions. For the agricultural industry, it would be nice to have a warming for fifty years in order to have a longer harvest, but after that you'll be moving up into the Precambrian Shield and onto the barren lands. With this whole aspect coming into play, you'll have half of Texas and most of California moving up into Saskatchewan, Alberta and Manitoba. You're saying higher population means higher income. We're going to have a hard time redirecting this engine of our economy.
In terms of redirecting this engine of economy, including the coal industry and the fossil fuels, have you calculated any transition programs? In light of what the European Community is trying to do, I think we have a Canadian bubble. There are certain sectors, certain provinces, that are high emitters when compared to others. But you're going to have to have a balancing act here. In your fossil fuel aspect, you mentioned $20 million for incentives to promote renewable energy. What is the value of the incentives that you give to non-renewable energy?
In terms of role models, I mention that you said we have to watch or follow the U.S. closely. I don't know about that. It might be a political term, but I'd rather see Canadians take a lead. We may be small players in total emissions; however, as role models, I think we should have Jacques Villeneuve standing up to say you should buy a nice, environmentally friendly, reasonable car and leave the high-powered F-1 engines on the track. I think that's what's happening with our whole society. Our role models like Arnold Schwarzenegger are buying Hummers. These are the people who are stealing the media show, but if Canadian leadership can meet with these role models of today's society and redivert them to a better way of life, it may make a bigger impact. It's tragically hip to buy a hybrid car—that sort of concept.
What kind of initiatives have there been? None have shown up in the last five years. I haven't seen or heard one campaign on television or radio or in a newspaper, but Kyoto is a big issue all of a sudden, with everybody jumping on in the last five minutes.
The Chairman: Mr. Laliberte, this is a fine speech for the Minister of Finance, but would you come to your question, please.
Mr. Rick Laliberte: Okay, those are transitional programs. The other one is natural gas. Are there initiatives for natural gas, it being the lesser of the evils? As an example, in my constituency natural gas is within a hundred miles of a majority of our communities, but we still truck diesel and we still use heating fuel. Saskatchewan has 70% coal-fired generation. Why can't we revert, for cost-effectiveness, to natural gas in our region?
Ms Anne Park: Thank you.
First of all, I guess you mentioned costs versus benefits, insurance companies, and so on. In that regard, I would simply note that when we're talking about stabilizing emissions at 1990 levels by 2010, for example, we're talking about a significant reduction. It's a real emissions reduction of about 20%. It is natural to assume—and the models indicate this—that absent any major changes, this could be expected to have a cost to the economy. The question is how to minimize that.
Yes, presumably there would be benefits from acting, but one of the tricky things here is that the benefits may not be realized until sometime later. In other words, the cost of mitigation is something that one faces in the near term, while the benefits are something that presumably are likely to materialize over a different timeframe. The question, I guess, is the extent to which Canadians are going to recognize the need to act now on an issue for which the benefits may not be realized immediately. This is a real challenge, I think, in terms of the communications that surround the climate change issue.
• 1730
With regard to the question of transitional programs,
coal, fossil fuels and so on, yes, these very much
are the kinds of issues we are going to need to
address, to take a look at what it does mean
to deal with the future of coal, fossil fuels and so on
and so forth. But I'm not aware that we have
any immediate plans for transitional programs.
That would have to come out of further consultation work
with provinces and so forth.
With respect to natural gas, I think there is an assumption in that industry and elsewhere that indeed dealing with the climate change issue would increase markets for natural gas and that this would be a benefit to that particular industry sector.
The Chairman: Thank you. Mr. Knutson.
Mr. Gar Knutson: I'm not really sure where to start, Ms Park, but on the point you make about the benefits being long term and the costs being short term, this is something we hear all the time. I certainly don't intend this as any kind of personal attack, but is there any deputy minister, do you think, or assistant deputy minister who....? If we find out 25 years from now that climate change wasn't a real factor, that it was caused by sunspots, dammit, we'd have fewer kids with asthma problems; we'd have fewer respiratory problems; we'd have cleaner cities; we'd have less smog; and these other parallel benefits...or instead of running out of oil in 50 years we ran out in 75 years.
You know, this bit about how we're worried about the costs; there was a time in the seventies, not so long ago, that less reliance on fossil fuels was considered a great thing, even long before we were concerned about climate change. From your presentation, and what you've said today, it certainly doesn't seem to be part of the lingo of the Department of Finance.
Ms Anne Park: I would certainly not say that this question of whether the benefits to acting are long term or near term is a reason for acting or not acting. I'm simply noting what comes out of the kinds of economic models that have been done, which all suggest—and this is not the Department of Finance speaking; this is the modelling that has been done by various institutes in various countries and so forth, some in Canada but some in other places—that there would be some economic cost. It's something that one cannot ignore.
Mr. Gar Knutson: Did they take into account the hospital admissions rate of kids with asthma?
Ms Anne Park: No. As I indicated earlier, one of the problems with these models is that they do not take that into account. The difficulty, I think, just as an exercise in modelling, is that it's one thing to say you have to get x megatonnes of greenhouse gases out of the air and try to figure out what that means to the economy—and even that is very difficult; it's highly dependent on assumptions—but to try to then model in what benefits there may be that would accrue from that down the road is an even more challenging thing.
The bottom line, as I said earlier, is that it's very difficult to come up with a precise result that says the cost of this, the benefits of that, or whatever. We're dealing with uncertainty here in the economics of this, just as we are, to some extent, in the science. That's something we have to deal with.
I think we all recognize, however, that it's an issue we have to move forward in dealing with. Therefore, we need these constructive solutions that by their nature will have the least disruptive impact on the economy and that maximize the benefits of taking action.
Mr. Gar Knutson: Fair enough.
At the top of page 5 you talk about Canada representing 2% of the total, and if we clean up our act and the rest of the world, particularly the third world or the developing world, doesn't clean up its act, the costs we incur won't be of any benefit. Is that what you're implying by pointing out that we're 2%? That's what I read.
• 1735
Ms Anne Park: I think I'm implying that first and foremost this is a global problem. We are certainly one of the major emitters.
Mr. Gar Knutson: Are we the dirtiest per capita?
Ms Anne Park: We're one of the dirtiest per capita. But again, that has to do with the nature of our economy. One of the interesting things about the growth of greenhouse gas emissions is that they tend to be linked to economic growth, population growth, and the energy intensity of your economy. All those things in Canada's case suggest that the growth of our emissions will tend to be higher than in other countries, which creates a particular challenge for us in trying to deal with the problem.
When we look around the world at the top 10 emitters, there are a number in there like China and India that are very big and whose emissions can be expected to grow very fast. The concern is that if we take action and there is some cost to our economy and to the competitiveness of our industry, and we don't see action being taken by other industrialized countries and some of these major emitters, whose emissions are going to become increasingly important in the years ahead, we won't make much of a dent in the total global problem. It's not a reason not to act; it's a reason to have an international strategy, a global approach, that ensures we pull in everyone who is contributing to this problem and get global solutions. That's an area where I think Canada can exercise some leadership.
Mr. Gar Knutson: Just to finish, I'll share my views with you. I don't expect an answer.
I think if 12 years from now we look back and we've failed it'll be because we didn't take any kind of urgent action in the first two to four years. In the language of partnerships and working together with our international partners in the rest of the world, and the provinces and the municipalities, at some point I'd like the federal government to just come out and say there are one hundred good ideas we can use as a federal government. They're not going to solve the whole problem, and maybe 12 years from now we'll look back on 30 of those ideas and think they were rather dumb, but at least we'll have tried something rather than always talking about the process.
I read in the paper that after Kyoto we're going to spend 18 months studying. I don't hear a language of urgency when I listen to officials. No disregard to any of those people at the Department of Transport, but they're saying the transportation sector won't be able to contribute much to the solution and it's going to be too tough for us. I don't know whether that's because people love their high-speed automobiles.
We already have sectors opting out. We have huge problems with Ontario Hydro moving from nuclear to coal, so we have all these other issues that are working against it. At some point we have to say, here are some ideas we can try; they don't rely on anybody else, they don't rely on the provinces, they don't rely on the municipalities, it's just something the feds can do. At least at some point we will be able to say this is what our contribution is, rather than constantly talking about the process.
That comes from my own personal point of view and sense of urgency, which I don't get from the officials. I really don't mean that in any disrespect, but we're worried about our competitiveness and we're worried about doing more than our share. There's all that language, but at the end of the day the problem will still be there.
That's my speech for the day.
The Chairman: Well, wait for this.
I would like to congratulate you, Ms Park, for making a reference to cost-benefit analysis in your paper today in the way you did. I would only caution you that every cost-benefit analysis is difficult, as we all know. Try to apply it to having a baby, for instance, and see how useful that kind of technique is.
• 1740
Two hours ago, in her presentation, on page 2 of
her paper, Ms Catterson gave us a very fine
cost-benefit analysis, as far as her department is
concerned, without even calling it that way. I thought
it was remarkable evidence. I wonder whether you are
studying the possibility of extending that kind of
approach to the private sector, with incentives for the
next budget.
Ms Anne Park: I think you would not—
The Chairman: There, you don't have to wait for difficult cost-benefit analysis.
Ms Anne Park: No, I would not want to leave the impression at all that the Department of Finance was turning this whole issue into one big cost-benefit analysis. What I indicated was that we are interested in developing constructive solutions to this problem, with industry, with provinces, with other departments, which could involve a variety of policy approaches. I think we're not ruling anything out in terms of looking at ways of moving forward in this area.
Whether there would need to be some incentives for industry is a good question. I don't think, on one hand, one would expect this issue to be solved through sort of a massive subsidy of industry. Industry is responsible for the pollution it produces, and this is an important principle. But the question of incentives or other measures that affect the way in which industry may approach the issue is certainly the sort of thing industry makes us aware of from time to time, and we look at.
The Chairman: In your presentation today there is no reference to tax expenditures or subsidies that favour, accelerate or increase the production of greenhouse gases.
In your department's tax expenditure report in 1995, your department indicated under oil and gas a yearly tax expenditure of $493 million in 1991 and $599 million in 1992 for faster write-off for Canadian development expenses and Canadian exploration expenses, which mostly apply to the fossil fuel industry.
Two years later, in 1997, your department produced a tax expenditure report. In that report, it is impossible to find that column and a similar methodological approach. In other words, we are no longer able to determine what is the tax expenditure at this stage for the fossil fuel industry, the very industry that produces greenhouse gases. Would you know, and can you tell us today, why there has been such a change that makes it impossible to identify the figure that was identifiable in 1991 and in 1992, the tax expenditure report? In other words, what is happening in the Department of Finance?
Ms Anne Park: I'm certainly aware of the reports to which you refer. I'm not today aware of what may have been changes in methodology or presentation in various editions of the report. I'm sorry, I'm not able to respond to that question.
The Chairman: Would you be able to tell us why there is no reference to tax expenditure or subsidies in your brief today?
Ms Anne Park: Well, the brief today was intended as a broad overview of—
The Chairman: Isn't that part of a broad overview?
Ms Anne Park: It could be part of one of the areas we look at in terms of developing approaches, and so on, to the problem.
The Chairman: Let me ask you this question. Don't you think your department has a major role to play in the stabilization and reduction of greenhouse gases?
Ms Anne Park: Yes, I do think the department has a—
• 1745
The Chairman: And don't you think it starts with the elimination of subsidies?
Ms Anne Park: I do think that the department has a major role to play, and indeed, as I indicated earlier, we fully intend to play that role together with the other departments that are involved.
The government has taken significant steps to reduce subsidies in many areas. For example, as indicated in the 1995 budget, we are no longer providing major subsidies to energy megaprojects, which I think was an important decision of the government.
There are also other areas in which we have reduced subsidies. I'm wondering whether my colleague Bill Toms would like to add anything in this regard.
The Chairman: Perhaps you could do that. Yes, by all means. Would you perhaps start by indicating to us whether the Government of Canada is still subsidizing oil sands.
Mr. William Toms: Which question would you like me to start with?
The Chairman: The one I just asked.
Mr. William Toms: Let's start with the issue of the tax expenditure document itself. Maybe I can shed some light there, and then we'll move on to oil sands.
On the question of the size of the tax expenditure, which was in the 1995 tax expenditure document, the numbers you have quoted I believe were for the reduction in tax as a result of the 100% write-off for exploration expense.
If you happen to have—
The Chairman: CDE and CEE, as you call them: Canadian exploration expenses, Canadian development expenses.
Mr. William Toms: That's right.
We did a more fulsome analysis in 1995, but unfortunately probably didn't highlight it properly. It's buried away on page 96 of the document. It gives a better estimate of what we consider to be the tax expenditure associated with CEE and CDE, and this number is the estimate of the difference between a normal tax treatment of exploration expense and the actual tax treatment that exists in the tax act.
The Chairman: Are you reading from page 96?
Mr. William Toms: This is page 96 of the 1995 document. We're referring to the 1995 document first.
The Chairman: I'm now referring to the fact that in the 1997 document there is no longer that item.
Mr. William Toms: In the 1997 document, if you move to page 86, there's a better description and one that we feel is more appropriate.
The Chairman: Yes, but the total is not there any longer. That's my point.
Mr. William Toms: The total is not there.
The Chairman: And why is it not there?
Mr. William Toms: We felt that this particular analytical approach would be more useful to people because it deals with the net present value of the deduction rather than the annual cost.
The Chairman: Well, I beg to differ with you, because from a public interest point of view the figures mentioned on page 86 of the 1997 report are in the range between $2,900 and $5,800. In other words, there are figures in a micro situation but not in a totality of their impact or significance.
Mr. William Toms: That's correct.
The Chairman: Therefore you lose the overview.
Mr. William Toms: That's a percentage estimate based upon a hypothetical expenditure of $100,000.
The Chairman: Right. That's correct.
Mr. William Toms: So if one wanted to take that and multiply that percentage ratio times the amount of Canadian exploration expense incurred, then you do have an aggregate number.
The Chairman: Right. Well, we don't want to get into calculations of that kind at the expense of committee time.
I'm saying to you that we are losing sight of the overall picture with that kind of approach, because we are no longer able to know in the most recent year what is the subsidy that is given in that particular category to fossil fuel producing industries. That is where we are. And that is a major figure, because in 1992 it was short of $600 million, just in that particular figure.
So could we move on swiftly to the fact of whether or not oil sands development is still receiving federal tax assistance?
Mr. William Toms: The particular provision for oil sands is also dealt with in the table on page 86. That indicates the cost associated, in net present value terms, to the government of providing an accelerated deduction.
The Chairman: And what is the cost?
Mr. William Toms: The cost in there comes to about 5% of the cost of a typical oil sands project.
The Chairman: Can you express it in millions of dollars, please?
• 1750
Mr. William Toms: Yes, I can. If one expects that oil sands capital expenditures are going to be about $15 billion over the next decade or so, then a very rough approximation of the cost of the tax expenditure that will occur over that period.... You can take, let's say, a number of 4% at the top, and 4% of $15 billion works out to about $600 million. If the lower estimate is taken, the lower range is about $150 million.
The Chairman: And this is only for oil sands.
Mr. William Toms: This is just for oil sands projects over the next time.
The Chairman: So your department is financing the production of greenhouse gases at a very high rate, or at least at a remarkable rate. Would you disagree with that?
Mr. William Toms: I haven't calculated the emissions from oil sands plants.
The Chairman: They are 10 times as high as for conventional oil, we are told by people in the field, as far as CO2 is concerned.
Mr. William Toms: I thought the numbers were significantly less than that, based on discussions I've had with Natural Resources Canada.
The Chairman: You can see that your colleagues here from the other four departments of course will find it very difficult if they are asked to put their minds to the reduction of greenhouse gases and your department doesn't do the same thing by way of eliminating these kinds of subsidies, don't you think? In other words, you can't ride two horses in opposite directions, can you? In other words, you have a major task of turning this policy around if you are committed to greenhouse gas reductions between now and budget time. Would that be a wild conclusion?
Ms Anne Park: I don't think one could draw a conclusion that one would necessarily want to do that between now and budget time. The regime that exists for the oil sands has been in place for many years. I don't think when one has a project like that, which is built up on the basis of a certain structure and certain assumptions, one can easily change that. What we will obviously need to do going forward and looking at various policies is to be cognizant of the climate change implications of policy decisions that are taken.
The Chairman: Fair enough. This is why this committee almost two years ago to the day, in December 1995, recommended to Parliament and to you people, of course, that progress be made on the baseline study of federal taxes, grants, and subsidies which was announced in 1993. Has any progress been made since?
Ms Anne Park: Mr. Chairman, in part what we are dealing with in this particular example is some of the problems we run up against when we look at particular projects or policies or whatever from the standpoint of an environmental objective when in fact the government also takes into account other objectives: regional development, job creation, and so on. Of course the challenge is to come up with policies which, where we can, try to address all of those together. Sometimes this is more possible than it is in other cases.
About baseline work, as you know, we have been trying to approach this by looking at key areas which are of priority and concern. The area we have been most concerned with recently has been the relationship in the treatment of renewable and non-renewable energy. As you know, we've made some significant progress in moving in the direction of levelling the playing field in that particular area.
Like the other departments here today, we are also working on our sustainable development strategy, which will soon be tabled. One of the—
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The Chairman: Forgive me for interrupting you, but from the figures we have just mentioned, my impression is that we are a very long way away from establishing a level playing field between the two energy sectors, the renewable and the non-renewable. There is a lot of catching up to do.
I certainly congratulate you on your announcements in the budgets of 1996 and 1997, which are infinitesimal nano-steps compared to what needs to be done if we are to move in the desirable direction on greenhouse gas stabilization and reduction.
I apologize for the interruption. Would you like to complete your remarks?
Then I will put four questions to you and we will conclude, since it is 6 p.m.
Ms Anne Park: Yes. I was going to conclude by saying that in our sustainable development strategy we hope to indicate how we intend to make further progress in this kind of baseline work, and in particular, we hope to identify plans to produce a catalogue of available information on the structural level of existing federal and provincial taxes on energy consumption and on transportation in Canada. Examining these important areas will be a next step in moving forward.
The Chairman: On the question of how to make further progress, as we all know, charity begins at home. It would be the Department of Finance that would have to look at its own subsidy structures, decide what to do with them, and very thoroughly examine its own policy if it is really serious about making further progress. That is why two years ago one of this committee's major recommendations was that progress be made on the baseline study of federal taxes, grants and subsidies.
To conclude on a lighter note, if you like, I will ask you four questions, which you may want to answer in writing for the benefit of all of us. That will also give you more time to reflect upon them.
One has to do with—actually, you have already dealt with two of them—whether the federal government is applying any financial incentive to encourage the use of recycled materials as opposed to virgin materials. This is one of the recommendations made by this committee two years ago.
The next question has to do with whether the Department of Finance is planning to examine the possibility of a surcharge on purchases of fuel-inefficient vehicles, as was also recommended by this committee two years ago.
Next is whether any tax measure that is to be examined by your department relies upon the request from another department taking the initiative or whether you are the department that initiates the examination of possible tax measures that would reverse the present trend.
I am saying this because I noticed that in Mr. Sully's paper this afternoon, not once did he mention the Department of Finance, as if it is a prohibited phrase in his vocabulary. Surely he must have a reason for that, because most of the things he mentioned this afternoon would have to be initiated in the Department of Finance. So is Mr. Sully waiting for the Department of Finance to invite him over or is the Department of Finance waiting for Mr. Sully to make himself heard? Where does the process start, since transport is so obviously important in the scheme of things?
Would you like to answer any of these questions or would you like to do it in writing?
Ms Anne Park: I would like to answer, beginning with the last one first.
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The Department of Finance is certainly interested in
any views and suggestions it receives from other
government departments, and we do indeed receive those.
We also generate our own views and assessments in this
regard. So it is not possible to say that the initiation
always comes from another department or always comes
from Finance. It is usually a product of close
collaboration between the two departments.
Indeed, in order to increase that kind of collaboration among departments, my colleague, the assistant deputy minister responsible for tax policy, has been actively engaged in recent months, following an invitation he issued to other departments, in discussing aspects of the tax system that affect their department. So we are very much in a consultative mode—
The Chairman: Why didn't she appear this afternoon if she's the one who initiates all these policies?
Ms Anne Park: Well, she is a he, and he is not in town. I believe he's away today. I was the one invited to the committee. I'm responsible for overall co-ordination of the department's approach to the climate change issue. Mr. Toms, who is with our tax policy branch, is here and is able to answer any questions in that regard.
Mr. William Toms: My colleague, the expert on sales tax, has already departed, so let me pinch-hit for him.
The Chairman: Do you mean he departed from this room?
Mr. William Toms: Yes.
The Chairman: Why?
Mr. William Toms: I think he had an early bus to catch.
The Chairman: Oh, I see. So much for respect for parliamentary committees, is it?
Mr. William Toms: The surcharge—
The Chairman: I find that rather offensive, Mr. Toms, and I would like you to relay this comment to the person in question.
Mr. William Toms: Okay.
On the question of the surcharge on the purchase of fuel-inefficient vehicles, you may already be aware, but two excise taxes already exist at the federal level. One is the excise tax on what we call heavy or large automobiles. This generates about $5 million of revenue each year. It's a little-known tax, but it's been in existence since about 1976.
The other one that is better known and has some relationship to fuel efficiency is the auto air conditioner tax, which was also introduced in the 1976 budget. It's a specific excise tax of $100 on all air conditioners used in automobiles. This particular tax generates, I gather, about $100 million a year.
These two taxes have been around for a long time.
The Chairman: Yes, a very long time.
Mr. William Toms: Particular suggestions about restructuring these taxes and how to make them better probably should be directed to our sales tax group. They need to be considered there, rather than the business income tax group. But those two taxes do exist.
The Chairman: We rely on you to do that.
As to the other questions, would you like to reply in writing? Fine.
Are there any further questions? I don't want to preclude the field from my colleagues, who have been patiently waiting the last 15 minutes.
If not, I would like to thank you all on behalf of my colleagues, beginning with Ms Park, Mr. Toms, Ms Catterson, Mr. Oulton, Mr. Sully, and Mr. Harper. We'll welcome you again here perhaps fairly soon. We enjoyed this afternoon very much.
This meeting is adjourned until tomorrow morning at 9 o'clock in room 209, West Block. Thank you.