NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 18, 1997

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): We'll call this meeting to order.

Welcome, colleagues, and welcome, witnesses, as the Standing Committee on Natural Resources and Government Operations continues its study of climate change.

We've asked the three organizations, the Canadian Association of Petroleum Producers, the Canadian Vehicle Manufacturers' Association, and the Canadian Pulp and Paper Association, to join us.

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As we have done with past witnesses, we're trying to hear as broad a cross-section of witnesses as possible in a short period of time. Each organization has been asked to make a short presentation. Let's try to aim for five or six minutes for each so members will have an adequate opportunity to ask questions.

You can expect us to come back to this issue in the new year, so we're not going to try to cover everything today. Let's try to cover the issues that are most relevant to your organizations and most relevant to the Kyoto conference, which is coming up very soon.

Without any further ado, let's start with the Canadian Association of Petroleum Producers and its president, David Manning.

Welcome, Mr. Manning.

Mr. David Manning (President, Canadian Association of Petroleum Producers): Thank you very much. I'm sorry we were a moment late. We have just been appearing at “the other place”, as the Senate was just referred to in our departure from their meeting. We have back-to-back meetings today. We got here as quickly as we could.

I have brought Chris Pierce with me, who is vice-president of strategic planning for CAPP. He will be joining me in a moment with his presentation. He is going to hand out our material now, which we have just produced. It became available last week.

It is a brief piece put out by CAPP that includes copies of some public information ads we have been running in newspapers across Canada. It also includes a very brief summary of a few salient facts on this issue, facts that we would like to put forward and commend to you, and of course the theme of our public information campaign, Mr. Chairman, has been “better global rules and solid local action”.

Thank you for taking the time to hear from what we feel are three important stakeholders in this process.

CAPP's role is to represent the oil and gas producers in Canada, those who seek out, drill for, produce, and then ship primarily oil and natural gas, including liquids and related hydrocarbons.

We represent probably 95% to 96% of production in Canada. The rest is made up of very small producers. In our membership we now have Canada's production from six producing provinces, since Hibernia in Newfoundland came on stream yesterday.

Newfoundland and Nova Scotia are much of the growth future for this industry, and of course there is a real opportunity for Nova Scotia in that the natural gas in Nova Scotia will be available primarily to the east coast, including the United States, where we still have, as you recall, an SO₂ or acid rain problem, according to Environment Canada. That natural gas can reduce CO₂ through new high-efficiency plants and can also displace some of the smokers that have an SO₂ problem.

However, the real issue today is addressing Kyoto. I suspect we will have an opportunity, Mr. Chairman, and I hope we will, to come back in the new year as the heavy lifting starts. But in the nearer term there is some focus on Canada's position at the international meeting to take place in December in Kyoto, Japan.

I would like to commend the Government of Canada and the governments of the provinces for the Regina meeting last Wednesday. As a former deputy minister of energy from Alberta, I have been in that room at least six times in these joint ministerial meetings. I have witnessed and participated in a sincere lack of consensus that, to my knowledge, was bridged for the first time last week.

Louise Comeau from the Sierra Club tells me there have been 140 of those meetings without a consensus. I don't accept her numbers, but I can say there was a very significant development last week. Consensus was achieved amongst all the provinces, which have the whole suite of implementation measures, and Canada, which of course will have lead responsibility in Kyoto.

I think it's very important that the Prime Minister appreciate, given his statements with respect to improving on the U.S. position, that Canada has already improved upon the U.S. position and has forged a consensus that I would suggest is not going to be available in the United States. The kind of debate that's going on within the United States is a far cry from what was achieved last week. The provinces of Canada have said that if you take this approach they will stand with you.

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Of course our challenge on this issue is growth. That, of course, is growth in population. Canada's population growth, by UN numbers, is over 10% since 1990, over three times the next-in-line OECD nation.

Second, 1990 was a very poor base year for Canada's economy. We were pretty much at the bottom. There has been significant and consistent economic growth since 1990. That, combined with population growth, has meant a great deal more activity, a great deal more CO₂ production in Canada.

Third is exports. Significantly for our industry, our natural gas exports to the United States are up over 100%. That natural gas is being used in high-efficiency plants, displacing some other fuels, reducing CO₂ in the process. We have to come to a new system of international accounting where we get credit for that. In addition, energy-laden exports, such as those represented by motor vehicle manufacturers, agriculture, fisheries—all those numbers—are up significantly because Canada is first and foremost an economy that exports; and that creates the specific challenge for us.

Again, CAPP's position is that we have to do more at home to maintain that credibility, to propel us into the international theatre to get better global rules where we get credit for those unique circumstances in Canada, and of course the contribution we're making to other countries through the export of technology such as nuclear plants to China and the export of fuels such as natural gas to the U.S.

The Chairman: Thank you very much for your concise presentation, Mr. Manning. We'll certainly come back to you with questions.

We'll move to the initial remarks of the Canadian Vehicle Manufacturers' Association. Mr. Nantais, are you speaking for the group?

Mr. Mark A. Nantais (President, Canadian Vehicle Manufacturers' Association): Yes, I am, Mr. Chairman.

The Chairman: Thank you, and welcome to your group.

Mr. Mark Nantais: Thank you very much.

To the committee members, good morning.

The CVMA certainly appreciates this opportunity to appear before the committee and also to join our colleagues here from other major industry sectors to examine the issues of the December meeting in Kyoto. I personally have had the benefit of just returning from the Bonn session, the eighth session of the AGBM, which was extremely interesting.

Let me quickly introduce the people who are with me today: Jim Lanigan, who is the manager of product development for Chrysler Canada; Roger Thomas, who is also with General Motors; and Carol Moreau, from Ford Motor Company.

Together the CVMA companies produce 2.1 million of the total 2.4 million vehicles produced yearly here in Canada. Export is big business for our industry. In fact, 80% of all our product is exported to other countries around the world, but primarily the United States.

Notwithstanding the fact that there is significant uncertainty on the impact of human activity on global climate systems, the Canadian auto industry recognizes the importance of addressing climate change, and that's why we're here today. We express our commitment through participating in a number of government programs. Specifically, we're a founding member of the Canadian industry program for energy conservation in the transportation and manufacturing sector, which since 1974 has produced some very significant results in energy conservation in our plants. We're also a promoter of the industrial Energy Innovators program. We are also part of the federal government's voluntary challenge and registry program, the VCR, which you are probably aware of. We are currently involved in restructuring the VCR as to broaden its participation and strengthen industry's commitments thereunder.

We are also a signatory to a memorandum of understanding with Natural Resources Canada on fuel efficiency to improve consumer information related to new vehicle purchases as well as the exchange of fuel efficiency data, an exchange essential to government policy development and to broadening the understanding of some of the new technologies we intend to bring to market.

Over time automobile manufacturers have made substantial gains in the development of new technologies and practices to improve the overall efficiency performance of the automotive industry as a whole. With automobiles the new vehicle domestic fleet fuel consumption has actually improved by 50% since 1974. These incremental improvements have been the result of evolutionary technological changes. However, with the on-road vehicle fleet, the 14 million or 15 million vehicles on the road, vehicle stock fuel consumption has actually improved on average by 8% since 1990. Yet overall CO₂ emissions from automobiles have not been reduced, because of an increase in vehicle kilometres travelled.

I might say, however, with each new model introduction manufacturers continually seek to improve fuel efficiency. It is important to emphasize, however, that we have now harvested most of the low-hanging fruit.

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On the facility side, energy efficiency improvements have been implemented for, as I say, almost 25 years, and we continue to do so even now. The reduction in energy consumption can be attributed to several conservation initiatives, including: high-efficiency motors; lighting retrofits; energy load tracking; and manufacturing changes, such as new energy-efficient electric robotics and the use of non-conventional sources of energy, such as solar walls where feasible.

We have already taken steps, in partnership with Natural Resources Canada, to develop a new energy guide label for motor vehicles, called “EnerGuide”. It is important that consumers understand the impact of their actions and how they consume energy. The EnerGuide label will help consumers make more informed purchasing decisions regarding fuel-efficient vehicles that meet their needs. For example, it will allow consumers to convert that fuel efficiency value to the actual operating cost of the fuel they consume.

For vehicle manufacturers, we are also co-sponsoring the development of an enhanced fuel consumption guide that lists the fuel consumption values for all new vehicles, both conventionally fuelled vehicles and alternate-fuelled vehicles. This guide will be distributed widely, from coast to coast, to Canadians, thereby engaging them, we feel, in the climate change debate and providing them with the information they need to make well-informed decisions with respect to the energy efficiency of the vehicles they purchase.

We are also engaged in a massive environmentally driven research and development investment, more so perhaps than any other industrial sector, in our opinion. We are all not only looking at evolutionary change—that is, continuous improvement—but more importantly, we're also looking at revolutionary change. Conceivably, we would be replacing the internal combustion engine in the long term.

With respect to Canada's position on climate change internationally and domestically, it must be recognized that climate change is not only an environmental issue but also a trade issue, as my colleague has referred to it. Any commitments made under the Framework Convention on Climate Change in Kyoto in December must consider the linkage between these two areas.

In order to be sustainable both economically and environmentally, Canada's position on climate change must protect its unique ability to produce and export energy-embodied products. With our companies' manufacturing facilities exporting more than 90% of their high-energy-content products, our dependence on trade and access to other markets is fundamental—emphasis added.

We are all aware the environmental effect of climate change, if any, may be felt by Canadians over many decades. It is a long-term issue that must be dealt with intelligently to identify opportunity and also to avoid calamity. The same applies to the economic effect of climate change commitments. In this respect, we support the government's position that federally, provincially, and territorially we strike an appropriate balance between the costs of controlling greenhouse gas emissions in ways that safeguard our international competitiveness, trade balances, and regional economies.

We also believe that in order to effectively address global climate change a balanced systems approach must be taken. A balanced systems approach means it is applied equally among all nations, both developed and developing; among all sectors, including industrial, commercial, transportation, and residential; and within all sectors.

Take, for example, the transportation sector. This balanced systems approach within that sector would be applied to all modes of transport—air, marine, rail, cars, light-duty trucks, and all types of on-road transportation.

With respect to addressing CO₂ emissions from personal transportation, that balanced systems approach would address the following areas: transportation infrastructure; market demand; vehicle kilometres travelled; fuel pricing; fuel efficiency; fuel formulations, including the appropriate supply and quality of the fuels; and an inspection and maintenance program. All of these items would need to be examined in a holistic and integrated package to effectively address CO₂ emissions.

Having said that, the CVMA is extremely concerned that in many circles transportation policies focus on stand-alone solutions, such as fuel efficiency standards for light-duty vehicles, and that they are being proposed as one of the few concrete CO₂ mitigation measures to be taken. We believe this is not as a result of sound policy development but as a result of looking for simple solutions to a very complicated and complex problem.

Fuel efficiency standards have not delivered the desired results, as they are inherently flawed in and of themselves. We believe the best solutions will be found through a balanced systems approach involving all elements of the road transportation sector, which are extremely synergistic. Focusing on fuel efficiency standards as a single surrogate for addressing transportation-related measures fails to capitalize on these synergistic opportunities derived from the more effective strategies involving transportation infrastructure and management, vehicle kilometres travelled, and fuel pricing, as well as an effective inspection and maintenance program.

Let me comment, Mr. Chairman, on a couple of these strategies.

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First, vehicle kilometres travelled is an extremely important issue. Between 1970 and 1995, the total distance travelled by cars has increased by 125% and the trend is expected to continue in an upward direction until 2015.

Population growth is indeed one of the reasons. Perhaps more importantly, however, people enjoy their personal freedom to move about and there is an increasing trend in vehicle kilometres travelled, which in good measure is due to Canadian lifestyles, Canadian geography, and the cost and convenience of public transit.

In order to address these increases in vehicle kilometres travelled, we believe Canadians as a whole must become more engaged in the climate change issue. They must understand the potential consequences of climate change, including the economic impacts in growth, jobs, and their standard of living. Consumer education should not focus merely on potential threat, but specifically on individual contribution to the problem and the wise use of energy and lifestyle choices.

Amongst the most promising CO₂ mitigation tools available to Canada is an effective mandatory I and M program or inspection and maintenance program. Studies have shown that after a vehicle is repaired under an effective I and M program, greenhouse gas emissions, specifically CO₂, can be reduced by 9% to 14%.

Success has already been realized in British Columbia's air care inspection and maintenance program, and benefiting from the B.C. experience will be provinces such as Ontario, which intends to introduce its Drive Clean program in 1998. This can be further strengthened by market availability of appropriate fuels, which will ensure that the sophisticated vehicle technology consumers have purchased works to its maximum capacity and delivers the intended reductions in emissions.

Let me turn to some specific recommendations for Kyoto. As an auto industry, we'll continue to work with the government to achieve Canada's international climate change commitments. As automakers, we're prepared to do our part by developing new vehicle technology and improving energy use in our manufacturing operations. That strategy must be based on the balanced systems approach I've mentioned and include a wide range of policy options.

The key to success at Kyoto is to ensure that the climate change policy in Canada recognizes its contextual implications and seeks a balance that will accommodate Canada's long-term economic interests.

With respect to the international policy considerations, we believe any commitments Canada must make must involve developing countries as well as developed countries, accelerate research on advanced technologies, develop programs to assist in technology transfer, and, in the case of our industry, recognize a harmonized vehicle product manufacturing approach that is absolutely necessary across North America. It must also take into account the needs of energy-producing nations with balanced economic impacts on all nations, take account of individual countries' circumstances, and most importantly retain the flexibility to choose the optimal approach as knowledge of global climate change evolves.

What Canada must avoid in Kyoto is a protocol that locks in specific, mandatory, or co-ordinated policies and measures that will be unduly intrusive and restrict industries' and governments' flexibility and innovation as they develop their own domestic response. In simple terms, the policies and measures that may be appropriate for other countries may not be suitable for the Canadian context and will likely disadvantage Canada relative to its major trading partners.

Mr. Chairman, I'll conclude on that note. Thank you.

The Chairman: Thank you, Mr. Nantais.

Next is the Pulp and Paper Association, Claude Roy.

Mr. Claude Roy (Senior Director, Environment, Health and Safety Programs; Canadian Pulp and Paper Association): Thank you, Mr. Chairman.

I'm accompanied by Lucie Desforges, who is the director of environment and energy for the association, and Doug Bradley, who is the director of corporate planning for one of our member companies, E.B. Eddy. Doug is involved in one of our forest committees on the global climate change task force, and if there are some questions or comments on the forest sector, Doug will be happy to cover that.

Thank you for giving us the opportunity this morning to present the CPPA point of view on the climate change issue. Especially at this special and critical time, just a few weeks before the Kyoto meeting, the CPPA recognizes the importance of climate change.

We are an energy-intensive user and have been greatly involved in the climate change issue over the past years. We created a task force many years ago at the board level, and Doug is a member of this task force. We have also been directly involved in the VCR program and the CIPEC. Just as a backgrounder, we have been involved in that file for many years now.

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I have a few words about the CPPA, the Canadian Pulp and Paper Association.

The association was founded in 1913 to represent the pulp and paper manufacturers. Our membership as of today accounts for 85% of the pulp and paper production across the country, and also our membership produces over 70% of the solid wood products.

At the association level we have a common set of issues: sustainable forest management—we've been greatly involved in that file for many years—environment, natural resource policies, technology, taxation, and trade practices.

We have to recognize that the forest sector as such is a major key player in the Canadian economy. The forest sector represents one million jobs, direct and indirect. It's an important sector. We are the largest contributor to Canada's balance of trade—$31 billion in 1996—and 80% of our production is exported. So our capacity to survive really depends on the regime that our country is going to give our member companies to meet their needs.

As far as climate change is concerned, it is an international issue that requires co-operation among all people in all nations to achieve solutions. The CPPA and its membership support the international scientific and political processes aimed at finding these solutions. As I said, the forest sector is an important contributor to the Canadian economy and the balance of trade, and we want to be part of the solution to climate change.

We are therefore very grateful to have the opportunity this morning to present our views on this issue.

As a representative of the forest sector, the CPPA believes that any commitment to win our gas emission reduction made by Canada at the upcoming Kyoto meeting should take into account a number of factors: the economic and social impact of this commitment on Canada, our country's national circumstances, the need for all people in all nations to get involved in this issue, the success of voluntary measures in reducing emissions, and the need for long-term rather than short-term emissions reduction goals.

Lucie Desforges will give more comments on these issues and how we are saying what should be done in terms of the upcoming Kyoto negotiations.

Ms. Lucie Desforges (Director, Corporate Planning, Canadian Pulp and Paper Association): As Mr. Roy mentioned, the Canadian Pulp and Paper Association takes very seriously the issue of global climate change. We believe action must be taken to avoid damage to environment, including Canada's forests.

But one thing must be clear: the climate change issue is more than an industry problem. In Canada the greenhouse gas emissions of the industrial sector account for 20%, the same proportion as automobiles and households. So any action to reduce greenhouse gas emissions must involve all sectors of society if Canada has any hope of reducing its greenhouse emissions. The burden cannot rest only on industry.

The CPPA has made significant contributions to reducing greenhouse gas emissions. Emissions from the pulp and paper sector come from the combustion of biomass, as well as the combustion of fossil fuels. More than half of our industry's energy source is biomass, or wood waste that would otherwise be landfilled or incinerated with no energy recovery. However, the CO₂ emissions that come from biomass do not contribute to the overall net increase in CO₂ emissions. That was decided by an international panel on climate change. So biomass fuels are an important part of the solution for our industry in reducing greenhouse gases, and biomass fuels are a renewable byproduct of our sustainable forestry operations.

The pulp and paper industry is also a leading participant in the VCR, or the voluntary challenge and registry program, as well as the Canadian industrial program for energy conservation, called CIPEC. Our sector's voluntary accomplishment speaks for itself. From 1990 to 1995, the sector reduced its CO₂ emissions by 20% below 1990 levels even though production had increased by 22%. In the same period, energy efficiency increased by 7%. We also reduced our fossil fuel use by 12%, favouring biomass use. From 1972 to 1995, fossil fuel use declined by 77%.

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These emission reductions were accomplished through energy efficiency improvements and also by switching from fossil fuels to biomass as well as less carbon-intensive fuels like natural gas.

Our industry has accomplished all of this on a voluntary basis. It has surpassed Canada's objective of stabilization at 1990 levels.

Other climate change mitigation opportunities also lie directly within the forest. The forest industry can increase the forest's capacity to store carbon by: practising sustainable forest management; ensuring the rapid regeneration of the forest; protecting the forest from fire, insects, and disease; making efficient use of harvested fibre, such as increasing yields and recycling fibre; producing products that have long life spans and continue to store carbon; and promoting the long-term use of forest products through recovering, recycling, and reuse.

Furthermore, depending on competing needs for land, there are also opportunities to increase the carbon storage in the forest by expanding the amount of forested areas through urban forestry, agri-forestry, as well as by the afforestation of marginal agricultural land or abandoned land.

The pulp and paper industry is significantly contributing to reducing Canada's greenhouse gas emissions. Those voluntary achievements must be recognized as we move on to new reduction scenarios. The industry's accomplishments are proof that a voluntary approach can work in Canada and can lead to results.

CPPA would like to offer the following recommendations to the standing committee before Canada enters into negotiations in Kyoto.

Canada's commitment to a new climate change target must take into account the economic and social impacts it will have on Canada. The approach put forward by several industrial nations—

The Chairman: Lucie, in view of the time, could you summarize just the part of those recommendations in bold?

Ms. Lucie Desforges: Okay. There is one point I'll want to include a bit more information on, but yes.

The Chairman: I just want to make sure we have time for questions, that's all.

Ms. Lucie Desforges: Sure, no problem.

As I was saying, we must take into account economic and social impacts. Internationally agreed upon policies or measures must be appropriate to Canada's national circumstances, as our other colleagues already mentioned.

A point I would like to stress is that it is essential for all nations, be they developed or developing, to be part of the solution. To illustrate that, in the pulp and paper sector, countries like Chile, Brazil, or Indonesia have production costs that can be 10% to 20% lower than that of Canadian industries.

If these countries are not part of an international agreement or do not participate in mitigation efforts to reduce climate change or greenhouse gas emissions, our industry in Canada, which is one of the largest exporters, will be placed in a very disadvantageous position.

Also, as I mentioned earlier, the voluntary approach is the key to success in Canada. As well, the timeframes must be set. We must have long-term timeframes to react and adjust to climate change mitigation.

Finally, we are committed to improving the science around measuring carbon storage in Canada. We want to make sure that Canada supports a net approach whereby we can account for the carbon storage in our forests. This is an approach Canada must support.

I'll conclude. Thank you very much, Mr. Chairman.

The Chairman: Thank you to the association, Mr. Roy and Ms. Desforges.

Excellent presentations by all, though on average a little bit over their time. We'll try to do the best we can, but you've all done well.

We'll start with questions from the Reform Party. Darrel.

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Mr. Darrel Stinson (Okanagan—Shuswap, Ref.): First of all, Mr. Chairman, could I just state now that I think our time here is very short and if we could have these people back as witnesses as soon as possible I would greatly appreciate it.

The Chairman: Absolutely.

Mr. Darrel Stinson: To Mr. Manning, if members of the Organization of Petroleum Exporting Countries do not sign the Kyoto treaty but Canada does, could you tell us what effect that would have, in your opinion, on our ability to compete as a petroleum producer and exporter on the world scene, or even Alberta's ability to supply our own east coast against the cheaper supplies from overseas?

Mr. David Manning: This is a very critical issue. As you may know, Venezuela is the largest retail vendor of oil and gas in the United States, larger than any of our members. There is a very significant export flavour here on this panel, as you have heard. Some 80% of their production is exported; 52% of our oil is exported, 50% of our natural gas. If the liquefied natural gas technology were less expensive there would be substantially more of an export flavour from Canada. We are in fact exporters.

We are also of the belief that we maintain the highest environmental standards in the world. Let me give you another illustration, sir, if I could.

Norway's numbers are up dramatically. Their domestic consumption is not up at all. They have been supplying a substantial amount of natural gas to Germany. About 50% of Germany's reduction in its CO₂ emissions—and of course the Germans are the ones who are putting the pressure on everybody else in the world today—is attributed to natural gas fuel switching for coal.

If Norway meets its commitment to stabilize and dramatically reduces its own production, which of course could happen to Canada, Germany's alternative source of natural gas is Russia, at three to four times the transportation distance. Russia's CO₂ emissions per unit of production are five times those of Norway's. Great Britain's are three times that of Norway.

Again, offshore Newfoundland, Hibernia, will be a very efficient source of oil for the world, because it will hit 180,000 barrels a day from a single facility, and that is a dramatic improvement over any of the fields you just mentioned.

So it's very key. Not only are economics at play and you will discourage an industry which is important to Canada, but it will not be a win for the environment.

Mr. Darrel Stinson: I would like to ask this of any industry.

We have known since 1990 or 1992 that this was coming down the pike. I would like to know from any industry how much help you have had from the government since that time on this problem we are facing today. How much real commitment has your industry had from the government in contact, contact people, or funds for R and D?

Mr. Mark Nantais: About assistance from the government, as you probably are aware, discussions among the government, the provinces, and industry have been going on for the period you mentioned, since 1992; perhaps, I would suggest, even before that. So I would say yes, we have received significant co-operation. I think we have had a good understanding of the issues from the word “go”.

What I do not think we have had is a good understanding of the complexity of the issue: how it is going to affect us here in Canada in terms of economic prospects. That is what we have not had to date. It's going to be very difficult to go to Kyoto without having a good understanding of what the total economic impact will be and what our long-term prospects will be in Canada if we do not do more in that regard.

On the R and D question, I can speak only for the auto industry, but we have to remember that in Canada we have one of the best R and D tax structures in the world. We have a great deal of expertise in Canada. For those companies and those institutions that are able to conduct work in Canada, they will indeed benefit from that structure.

In the auto industry we made a trade-off a long time ago wherein our R and D work, technology development, was centralized. We are now looking at ways where we might decentralize to a degree, I might add, whereby we might bring some of that R and D into Canada, if we assume the expertise lies in Canada.

One of the best examples we have, probably one of the companies on the leading edge of new technology, would be Ballard Power Systems. Each of the big three has a stake in Ballard, as do some of the import companies.

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So there are opportunities in Canada that we can capitalize on, and I think the government is very willing to assist us in that regard.

The Chairman: Thank you, Mr. Nantais.

Does anybody else want to jump in? Mr. Manning.

Mr. David Manning: Just very briefly, I think it must be stated that the Minister of Natural Resources throughout that period, who has been the champion of the VCR program, has been very supportive of that program. I should say, however, that there has been a dialogue within different elements of the federal government that has not always been constructive. However, we see a real improvement in that of late.

Our industry has had, in fact, two meetings jointly with the Minister of Natural Resources and the Department of the Environment at the ministerial level, and has had other meetings, and we would have to say that our dialogue with the federal government is even more constructive as we go forward.

I think it would be fair to say that, as my colleague has pointed out, there has been an increasing awareness of the complexity, but that has not always been the case over the last five years.

Ms. Lucie Desforges: We as well have had a great deal of help from the natural resources ministry in the area of energy efficiency, as well as from the Canadian Forest Service in the scientific area. But I have to agree with Mr. Nantais: in the area of economic impact there's a lack, and we need support and a better mutual understanding of the effects on our sector.

The Chairman: Mr. Jackson.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): I have two questions.

The first one is probably for Mr. Manning. He said that they were going to replace the automotive engine. I would like to know what other options they are going to be using.

Secondly, we're hearing more and more about being voluntary and things like this. When Henry Ford had a challenge of replacing... They had these engines, and when you had a 4-cylinder it was one thing, a 6-cylinder was longer, an 8-cylinder was longer. If you remember all those old cars, they got longer and longer. He threatened to fire his engineer if he didn't get a better engine, and within a short period of time he got a V-8.

Similarly, I spoke to a friend and he had a kid that used the blow drier, was in the shower for long periods of time, used the automobile a lot. He really burned up a lot of energy. Finally he got a job, and he said to his mom, “How can I help?” She said, “Pay for the hydro”. And as soon as that happened, he got energy efficiency things. He put more R insulation in, he kept turning lights off and so on.

I know we should do it on a personal level, but what are some of the things that your firms will be doing to help in that capacity, whether it's increasing the mileage per gallon or what have you? What are some of the incentives from each of the sectors? I know you might have it buried in here, but could you flush it out for us, or could you maybe table it for us later?

The Chairman: Volunteers? Mr. Nantais.

Mr. Mark Nantais: Our industry, as I mentioned, has for a long time been engaged in trying to provide our customers with information about the purchase of their vehicle, for one, but also about how their vehicle operates and how they should maintain it.

What we've done recently is to work in partnership and voluntarily with NRCan to develop the EnerGuide label. The EnerGuide label is the replacement for the former label that would appear on vehicles in the showrooms. That label, while providing the customer with a fuel consumption value, is easily converted now as to what it means to them in terms of their pocketbook; in other words, what they will save in fuel costs of vehicle A versus those of vehicle B.

So it gets to the very issue you raise, that if a person's child has to pay for the hydro when they turn the light on, they have a much better understanding of what it means to them and they're more inclined to turn it off and conserve energy. That's the kind of thinking behind the EnerGuide label. It's a thinking that is very similar to the EnerGuide labels that appear on your washers and driers and your refrigerators. You've got to convert it into how people think and how people use the energy in terms of their normal lifestyle and day-to-day lifestyle choices.

So that's one of the things we're doing.

We're also supplementing that by enhancing the fuel economy guide, which is a complete listing of all new-model vehicles, conventionally fuelled gasoline vehicles but also now the alternate fuel vehicles that are entering the market. We wish we had more demand for the alternate fuel vehicles, but that's not the case at this point in time.

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So the idea here is to help the consumer get a much better understanding of the consequences of their actions in their day-to-day lives.

The Chairman: Thank you. Mr. Manning.

Mr. David Manning: Due to the shortage of time I will give just one example of what the Canadian Association of Petroleum Producers has done.

For the record, Mr. Jackson, it was not the petroleum association that advocated the end of the internal combustion engine. I would take that quote off the record right now so that I can still go home today.

Some hon. members: Oh, oh.

Mr. David Manning: One specific example would be the heat challenge. The petroleum association has for years sponsored, and continues to do so, a program in Canadian schools where kits are sent home. We have 3,500 schools in Canada participating. We're putting more money into this to expand the reach.

This is a program in elementary school in Canada where children take home an energy audit. They test their homes for energy conservation, and drafts. They check EnerGuide labels on their appliances. It teaches them more about conservation at home. That's funded by our association.

It's our intention to try to expand that program even further, but right now it is taken up across the country in schools on a voluntary basis. We provide that material and fund that program.

That's just one of the examples.

The Chairman: Thank you, sir.

Ms. Lucie Desforges: Mr. Chairman, in the pulp and paper industry we've been strongly supporting activities to encourage recycling or reusing forest products, since they maintain carbon in the products for a longer period of time. We are contributing to blue box programs. We publish a recycling guide.

From 1990 to 1996 the consumption of recycled paper has more than doubled. It's 2.4 times higher. This is one example of where we try to influence individuals.

The Chairman: Thank you, Ms. Desforges.

Mr. Chatters.

By the way, I appreciate members' brief questions.

Mr. David Chatters (Athabasca, Ref.): Thank you.

I have a two-part question. First, to any of the witnesses, do you believe, assuming the government goes to Kyoto with a commitment somewhere close to what was made in Regina—that is, reducing greenhouse gases to 1990 levels by the year 2010—this target is achievable while at the same time maintaining population and economic growth at current levels?

Second, if you do see that as achievable, and we commit to that, how would you see the regulations and the success of the program being enforced? Who would see that the developing countries in fact are complying? Who would impose penalties, or whatever it might be, upon those who aren't achieving success and aren't meeting their commitment?

If I can have those answered, I think that's a start.

The Chairman: Who wants to go first? Mr. Manning.

Mr. David Manning: I can take the lead on it, and I'm sure my colleagues will join me.

Mr. Chatters, that's a very good point. It's a tough pull. I think the Regina meeting was very clear that this was a consensus reached under stress. I don't know that the provinces would support a position that goes beyond that consensus. I don't think that was an easy effort that day.

Similarly, I don't think attaining that goal will be an easy effort for Canada by any stretch. It'll be very tough sledding. It will be critical that we get credit for the export nature of Canada. It will be absolutely essential that we get credit for the export of our environmental technology.

Canada has already provided two nuclear plants—on paper, at least—to China. There was no discussion of carbon offsets at that time. That discussion has to be there. That is a critical part of how we can meet that kind of commitment.

Again, our exports have gone up so dramatically that we now represent 14% of U.S. gas consumption. That has provided a lot of efficiency, as you know, in terms of co-generation power, that type of thing. It's backed out less efficient sources of power.

The U.S., where they used to oppose the increase in exports from Canada, now embraces those exports, because we are now a critical part of their energy mix. They're now coming to us and saying, “Give us all of your numbers in terms of the sustainability of your volumes”. Quite frankly, oil and gas production is declining in many parts of the United States, as you know.

So we now have an opportunity to have that discussion with the United States that we couldn't have had five years ago in terms of getting those credits. Quite frankly, they now need us, at least in our industry, and of course I would suggest that goes for the industries here as well.

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How do you police it? I think some countries may gamble that there will not be an ability to build an infrastructure to put this in place, that a GATT model, an international trade bureaucracy, is just not attainable, that it's just too vast. That would be the way, of course, in which this agreement would be enforced. It would be enforced in terms of some sort of trade implications through, I would suggest, a new bureaucracy not unlike the GATT or the World Trade Organization, as it's called now. That may well prove to be a model.

So is it attainable? Yes, but only if Canada gets recognition for its unique circumstances, of which we've spoken today, and only if Canada gets credit both for its international efforts in terms of providing environmental technology internationally and for the energy-laden exports that continue to be in demand. Only if we get full credit for those elements can we reach those numbers. However, I do think Kyoto is not an end point; it's a starting point. And Canada has an opportunity for leadership.

Mr. David Chatters: Should Canada sign if it can't get those assurances?

Mr. David Manning: There is still a great deal of debate as to whether there will be a signature in Kyoto. I think the U.S. position, off the record, I suspect, is probably that regardless of whether there is a signature it'll come back with a lot of unilateral actions, including their budget elements for R and D and that sort of thing.

I think Canada has to keep its powder dry right up to the last day in Kyoto, but I do think that as far as its opportunity for leadership in terms of the developing world, it has to make that call.

The Chairman: Thank you.

Mr. Bradley, for the pulp and paper association.

Mr. Doug Bradley (Director, Corporate Planning, Canadian Pulp and Paper Association): I'm not going to comment on whether or not the 2010 target is achievable, but I do know that there are two ways to get there. One is to reduce fossil fuel emissions. The second is to increase the size of our carbon sink.

The forestry industry is now employing a lot of projects that include sawmill yield improvements, forest fire protection, etc., all of which enhance the carbon sink we have.

But there are innumerable projects that aren't starting right now, such as extensive juvenile spacing, site productivity, and genetic tree enhancement and tree breeding, all of which will very much more increase the sink, which will offset our carbon, our fossil fuel emissions.

I think a very important part of achieving our goal is to ensure that we can start these projects. That really means the development of a carbon market, a market whereby companies in these two industries, perhaps, which are emitting more fossil fuels, may find it more cost-effective to start a forestry project rather than a reduction project.

The Chairman: Interesting challenge.

Mr. David Chatters: With all due respect, I think he's taking a different direction. We're going to Kyoto to sign an agreement to reduce greenhouse gas emissions, not an agreement to recapture greenhouse gas emissions. It's an interesting concept, but I'm not sure that's what we're talking about.

The Chairman: Anyone from the vehicle manufacturers?

Ms. Lucie Desforges: If I may, Mr. Chairman, part of the mandate of Kyoto is to reduce greenhouse emissions, but it's also part of the mandate to enhance and protect the sinks we have right now. Enhancing sinks is an integral part of the mandate as well.

The Chairman: Good point.

Okay, Dave, we'll let it go at that.

Do the vehicle manufacturers want to comment on Mr. Chatters' question?

Mr. Mark Nantais: We certainly support the comments that both of these other groups have made. We have to remember that Kyoto is a starting point.

If you look at the document that came out of Bonn—and I don't believe anybody has seen that yet, at least not anybody in industry that I know of—contained in that document are a lot of very unresolved issues and a lot of very difficult issues. Kyoto is not going to be an easy process. It is a beginning.

But if we don't keep all our options open, the options that have been described here, then we're going to be in trouble, I think. We have to make sure we don't place ourselves at a real disadvantage relative to our major trading partners.

The Chairman: Thank you, Mr. Nantais.

Mr. Cullen and then Mr. Asselin.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman.

I have a question for the CPPA and one for the automobile manufacturers, if we have a chance to get to it.

First, I'd like to congratulate the CPPA for its huge progress on greenhouse gases over a relatively short period and largely, I guess, through voluntary measures.

I'd like to talk a little about co-generation. It wasn't so long ago that co-generation opportunities for the forest industry were rather limited, largely because of overcapacity in hydro-electric power in provinces like Ontario and Quebec, and perhaps in others.

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How far has the industry come with co-generation? Do you see it as part of a possible solution for the future that would address greenhouse gases, particularly given the restructuring of the hydro-electric utility industry in Canada, looking at Ontario as a model?

Ms. Lucie Desforges: Co-generation projects are part of the solution, given that there is an actual deregulation of the electricity market that takes place. There are opportunities that lie within the sector that have not been exploited. Unfortunately, I don't have any numbers. But it is part of the solution and will allow us to use more biomass instead of carbon-intensive fossil fuels. We are encouraging—in other forums as well as here—the government to continue its deregulation of the electricity market. It is essential if we want to pursue co-generation projects.

The Chairman: Roy, a brief supplementary.

Mr. Roy Cullen: I'll move on to the automobiles. You talked about a balanced and multi-pronged approach. Could we just look at emission standards? I don't know enough about what they have done in California, and I'm going to make it my business to know more about it in the next little while, because transportation is a huge contributor, as your presentation shows; cars and light trucks represent 14.7%.

Can we learn anything from the California experience? What was it, and are there any lessons to be learned here in Canada?

Mr. Mark Nantais: We're going to split this one up because Roger has had a good deal of experience with it.

First of all, with California one has to be very careful. You need to understand the situation. When you say standards, are you referring to exhaust emission standards or fuel economy standards? California's progress has been primarily on emission standards, that is, the exhaust side of the scenario.

Quite frankly, when you look at the stringent standards it has in place, they create what it calls a fuel economy penalty. Its fuel economy is actually adversely affected by those emission standards. So you have to split the two. One is CO₂-related, which is the fuel economy standard. The other is the exhaust emission standard, which relates to what we call the criteria pollutants, which are carbon monoxide, hydrocarbons, and oxides of nitrogen. They are two very separate issues. California has made tremendous progress on the three criteria pollutants but not necessarily on CO₂.

Mr. Roger Thomas (Manager, General Motors of Canada; the Canadian Vehicle Manufacturers' Association): One of the things California has done that is very significant is it has finally linked vehicle technology to fuels and has made a number of advances in fuel technology over the last few years. In doing so, it actually reduced the carbon intensity of the fuel, which reduces the CO₂ coming out of the tailpipes. So there is an opportunity with cleaner fuels to also reduce the CO₂ coming out of vehicles.

Mr. Mark Nantais: California is subject to the same fuel economy standards that apply across the entire United States. They are not specific to California. By the way, those are the same standards we meet voluntarily in Canada as part of our voluntary objectives.

The Chairman: Thank you. Thank you, Mr. Cullen.

Gérard, give a brief introduction to your question, please.

[Translation]

Mr. Gérard Asselin (Charlevoix, BQ): I thought the Canadian Vehicle Manufacturers' Association and the Canadian Association of Petroleum Producers supported Canada's position going into the Kyoto meeting. Your two associations know that the natural resources and the environment committees are considering the issue of reducing greenhouse gases.

This morning, we are lucky to have your two associations at the same time because you know as well as I that you can't have one without the other. You can't buy gas if you don't have a vehicle, and if you have a vehicle, it needs gas. This morning, we have the vehicles and the gas.

I've always been in favour of the polluter pays principle. Whether it's applied at the pump or to the vehicle's selling price, it's always the consumer who will pay.

We're living in a modern world of consumption. Everything today runs on gasoline. There are very often at least two cars in front of the houses of working couples. Whether it's your snowblower, your lawnmower, your automobile or your 4 x 4, everything runs on gas.

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By raising the price of gas at the pump or charging an environmental tax on vehicles at purchase, we are increasing your profits. That's something we can observe right now: the more people buy, the more money you make. Can you tell us this morning, how much in percentage or dollar terms you invest each year in research and development in order to comply with environmental standards and substantially reduce greenhouse gases by 2010?

The Chairman: Thank you, Gérard.

[English]

Are there takers? Mr. Manning?

Mr. David Manning: I'm afraid, sir, we don't have a breakout for specific CO₂ measures because our environmental measures are tied to the efficiency of our industry.

I can give you a number of examples in the oil sands, for instance. The CO₂ emissions per barrel of production are coming down 22% by the end of the century. They are converting their method of mining from major draglines to truck and shovel. They're converting the transportation system of oil sand from conveyor belts to hydro transport. The breakdown between oil and sand will begin within the transportation system itself.

They have reduced the heat. The heat used within Syncrude and Suncor is now about 80°C. The heat is, of course, one of the agents that separates oil and sand. That heat will drop to 32°C with improved technology. That's just one example; there are those throughout.

In terms of total environmental expenditures within our industry, what we have spent would certainly be well in excess of $500 million, but we haven't given you a breakout as it pertains to CO₂.

We've gone to high-efficiency motors in our drilling. We have gone to methane recapture within our pipeline systems.

We could keep you here all day in terms of those sorts of elements, but clearly, in our association, we combined the departments of environment and operations two years ago. They're indelibly linked. I would suggest there is no operation today in the upstream oil and gas industry that is not tied to environmental standards and efficiency in some way.

The Chairman: Mr. Nantais or Miss Moreau?

Ms. Carol A. Moreau (Manager, Government Relations, Ford Motor Company of Canada Limited; Canadian Vehicle Manufacturers' Association): Actually, in our particular case, I don't have the exact dollars or percentage, but I can tell you that half, fully 50%, of the research done in our scientific laboratories is done for environmental purposes.

Right now we are part of the partnership in new vehicles, which is a joint effort with all three manufacturers. We have made full investment in the development of future technology in fuel cells, and that particular area is extensive. We have been involved for over 30 years in alternate fuel vehicles also. We currently have over 10 vehicles that are available in Canada, and that is one of the areas that we are looking at for our future development.

The Chairman: Mr. Nantais.

Mr. Mark Nantais: Mr. Chairman, if I may supplement that, to give you a sense, for instance, of the cost of developing the emission control systems on vehicles for the 1996 emission standards, for the big three alone expenditures were about $4 billion. The PNGV program that Carol references is a billion-dollar program, very aggressive.

The Chairman: Thank you, Mr. Nantais.

Pulp and paper, do you want to pass on this one?

Gérard, thank you very much.

There's a short question from Mr. Provenzano and hopefully time for a short question from—

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): Actually, Mr. Chairman, part of my question was answered in response to Mr. Jackson's question. But my question was for Mr. Nantais in a more general sense.

You provided what you feel are essential components for any global climate change policy that this government should formulate. I think those are interesting, and I must say your presentation reflects the same kind of balance you're looking for in the solution.

Given the complexity and the magnitude of the problems we're facing, what component, if any, of that policy do you foresee being effectively implemented on a voluntary basis?

Mr. Mark Nantais: It's an excellent question, you're right. The VCR program, which is founded on voluntary action, could deliver the necessary reductions provided some of the externalities, the pressures that would arise from other countries and other trading blocs around the world, do not put us in a position where our economic prospects, for instance, are going to be diminished. We have to look at measures that are not punitive. We have to look at measures that are going to provide incentives.

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So much of our ability to reduce CO₂ emissions will be with you and me, the general public; consumers who consume energy through their day-to-day actions. I often say if you could convince people to reduce their vehicle-miles travelled by just 5%, that would not be a very intrusive measure through public education, which would be voluntary. If they took one, two, maybe three fewer trips a week to Mac's milk, I submit to you that it would amount to 5% of their driving over the course of a year. Because CO₂ emissions are directly related to fuel consumed, you would have a very, very substantial reduction, at least from the mobile sector.

The Chairman: Before we move to Mr. Pickard, I will say that as a committee we reserve the right to invite you all back in the new year, post-Kyoto, when we intend to spend more time on it. We're under a bit of a time constraint, so we appreciate that you've been concise.

Mr. Pickard, a short question.

Mr. Jerry Pickard (Kent—Essex, Lib.): I have noted very carefully the consistency of the industry's position and the Government of Canada position. I think they are very, very close, going into Kyoto.

There's no question there has been a tremendous amount of dialogue. I was just in Japan and we discussed the Canadian position, and it's so consistent with what you have presented this morning I find it quite amazing.

However, there is one point I would like clarified, because certainly we as the government don't know what the outcome of Kyoto will be, any more than you do. We are players on a world stage, as you've pointed out. The economics and all are world stage. It's not a narrow Canadian interest. We have to be competitive exporters. We have to be everywhere.

I was surprised that you suggested the Canadian government didn't understand the economics as well as we should. That was suggested by both the auto and the pulp and paper industry. Can you tell me how the Canadian government could have understood the economics better, realizing we're going into a negotiation position, not a position carved in stone? Not one person here wants that position carved in stone. You want to go in flexible and open, as the Canadian government has taken the position at this time. How can we better, as the Canadian government, deal with that economic impact question you brought forward, saying we don't know all the answers, but realizing we're in the flexible negotiating position the industry has asked us to be in?

Mr. Mark Nantais: In our earlier discussions—and this is not to be critical of the people from government who have been involved in the consultations with industry—I would suggest we probably spent too many resources on the philosophical questions early in the debate. What we didn't do until much later was start to look to the computer modelling, the economic models we have as tools to try to assess the potential impacts; the economic impacts, the trading impacts, as well as environmental impacts, because they are environmental models as well.

We have such variances in the models. We have to remember what modelling is all about. If you don't start off with a good, solid inventory of emissions or economic data, the product that comes out of that model is going to be poor in quality.

I congratulate the government, albeit it's somewhat late, for trying to pursue those models, trying to get the answers it needs, but quite frankly, it didn't come soon enough. We're moving in that direction, but we have little time till Kyoto. In fact, one country that has been responsible for a good deal of quite rigorous modelling said to Canada, if you don't have these economic questions at least assessed or evaluated before going to Kyoto, you shouldn't even be at the table.

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Mr. Jerry Pickard: Pulp and paper is I guess the same.

Has the government received all the information that you as an industry have on modelling, so that it can assess the whole nature of the Canadian business impacts as such? Do we have that information?

Mr. Mark Nantais: We have not provided models. What we have done is contributed to one model in particular, the Charles Rivers Associates model. That was done primarily through the senior economists in our member companies' parent corporations. That was in turn evaluated by Canada. That was our contribution to the modelling side, specifically.

We have also, by the way, participated in the modelling consultation working groups on all of the models that have taken place, so that would be our contribution to that, sir.

Mr. Jerry Pickard: Even though it is late, are you satisfied that we are on the right track now?

Mr. Mark Nantais: I believe we are.

Mr. Jerry Pickard: Thank you.

Pulp and paper?

Ms. Lucie Desforges: We also believe we're on the same track. We are still investigating the contributions, or trying to put numbers on the contributions our forests can make to...and we can make to enhancing the sinks, so that we can measure that and measure the economic potential that is there. But we're not there yet, unfortunately.

Mr. Jerry Pickard: Mr. Manning, it is my understanding you may have some comment there.

Mr. David Manning: The improvement that I see, sir, is that there is engagement now by a number of departments. There is some horizontal approach to this issue within the Government of Canada that I would say was lacking earlier in the game. I think my colleagues would agree that there is a level of engagement from Industry Canada, from Finance, from Environment, from Natural Resources—a much more horizontal approach. I think that may have accounted for what many of my colleagues may have felt is a bit of a late start.

The economic analysis is very difficult. The U.S. administration abandoned its effort. They put out a draft this spring in anticipation of a final draft and then walked away from the issue. It's a very, very difficult issue for all of us, as you say, going into this discussion.

The Chairman: Thank you, Mr. Pickard.

Thank you to our witnesses. Clearly we've had a lot of areas opened up that we will pursue in the new year. Hopefully witnesses here will be able to come back at some future time as this subject further unfolds.

I'd like to excuse our witnesses and invite our witnesses from the Conference Board of Canada and from Global Change Strategies International to the table. We will take a one-minute recess for that purpose. Thank you very much to our witnesses.

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The Chairman: We are pleased to have with us, for this second part of today's study of climate change by the natural resources and government operations committee, representatives from the Conference Board of Canada—Gilles Rhéaume and Al Howatson—and from Global Change Strategies International, Doug Russell.

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We will ask each of you to make a brief presentation, allowing members ample opportunity to ask questions. As with earlier witnesses, this is really an opening round, to try to get something on the record and some work done before Kyoto. We reserve the right to impose upon you in the new year as we come back at this and hopefully go to another level.

So, welcome. We invite the Conference Board of Canada to make the first comments.

[Translation]

Mr. Gilles Rhéaume (Vice-President, Innovation and Regulatory Affairs, Conference Board of Canada): Thank you very much.

First, we would like to thank you for this opportunity to present a summary of the findings of our study on the economic impact of reducing greenhouse gas emissions. I believe you have all received a summary of the findings of this study.

My name is Gilles Rhéaume and I am Vice-Chairman and the person responsible for the environmental research program at the Conference Board of Canada. I'm here today with Al Howatson, who is the program's research attaché and the author of the study in question.

Our presentation is in three parts. First, I would like to give you a brief description of the Conference Board of Canada to outline the role of our organization. Second, we will give you a brief overview of the implications of an imposed reduction in greenhouse gas emissions and, lastly, a summary of our study.

It is important to note that this study is a review and a synthesis of the documentation and analyses of the economic impact on Canada. We have prepared a synthesis of various studies.

[English]

First I would like to say a few words about the Conference Board of Canada. It is a private research institute that helps its members anticipate and respond to the rapidly changing global economy. We do this through the development and sharing of knowledge on organizational strategies and practices, which includes environmental management practices, emerging economic and social trends, and key public policy issues like the ones we are discussing today.

The Conference Board's members are primarily business and government. We have the federal government as well as provincial and local governments as members of the Conference Board of Canada, and close to 400 corporations that are involved with our organization. We also have associations, unions, educational institutions, etc.

One key guiding principle in terms of all the work we do is our independence and non-policy-prescriptive nature. We're not a lobby group, like industry associations. We try to present things, as much as possible, in a neutral fashion.

Concerning the overall implications of policy measures to control greenhouse gas emissions, on the basis of the literature review there are a few key points I would like to mention. First of all, on the basis of our study, it seems that Canada would be one of the hardest hit industrialized economies—harder hit than the U.S. or the European Union. We're somewhat closer to Australia in terms of economic impacts.

Why is this the case? There are a number of reasons. First of all, we are one of the rare industrialized nations that is a net energy exporter. Any time there is an impact that affects that energy sector, one can expect that it's going to have an impact on those types of exports.

We're also highly trade-dependent. Major trading nations, on the basis of the studies we have seen, would have reduced economic activity from their cutbacks in greenhouse gas emissions. There would be an impact on our trade as a consequence of that.

Another factor is that we have rich energy resources that permit us to have energy-intensive industries such as petrochemicals, pulp and paper, steel production, etc. They are not energy inefficient, but require a lot of energy to produce products. Cutbacks in greenhouse gas emissions would hit these industries and investment could flow to non-Annex 1 countries when corporations make new investment decisions. That is, Canada would have reduced investment in economic activity in these industries without global greenhouse gas emissions necessarily being reduced, since this economic activity could be displaced to the other countries. This is something to consider when looking at impact analyses.

Another factor is that Canada is a vast country with major distances between urban centres. Curtailing greenhouse gas emissions could adversely impact the transportation of passengers and goods. It could have a negative impact on interprovincial trade and also on our competitiveness.

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Canada is also one of the rare countries that has major variations in temperatures, as you all know, from extreme cold weather in the winter to very hot weather during the summer. Canadians are fortunate to have access to rich energy resources to respond to these extreme temperatures. But measures like the ones we are discussing could mean increased expenditures for Canadians to maintain the comfort level they're used to. At least some major changes in behaviour would be required.

We can continue to improve our energy efficiency—and we have seen that—and there are trends that demonstrate that energy efficiency gains will be in place again for the future. But we also must realize that we have stronger population growth than most industrialized nations, which means more energy needs. There is a link there between population growth and energy needs.

So, overall, curtailing greenhouse gas emissions would not only impact Alberta and the fossil fuel sectors, it would have a significant impact on other industries, as I've mentioned, and also other provinces. It would affect, in the end, most Canadians. So it's an important issue for Canada.

When we're looking at this issue we must ensure that our self-interests are protected. It's not surprising to see ambitious targets, for example, proposed by the European Union because it is in their self-interest. If other industrialized nations would have the same targets, according to our assessment, the European Union overall could be in a more competitive advantage against countries like the U.S., Canada, Australia, and Japan. So it is in their own self-interest to promote these types of targets.

One other point I'd like to draw your attention to before I turn to the actual results of some of the studies we've done is that having 1990 as the target year makes it harder for Canada. In 1990 Canada was in a severe recession, contrary to other countries like the U.S., the European Union, or Japan. In a recession, emissions drop. So our target year is a recessionary year and not a growth-and-peak year like other nations. We therefore have more of a challenge than these other countries.

From our study we have come to the conclusion that Canada would be one of the industrialized countries hardest hit from policy measures that dramatically force a reduction in greenhouse gas emissions. However, we recognize the insufficient economic analysis that has been undertaken in Canada to look at its options. For this reason the Conference Board of Canada, in partnership with the Canadian Energy Research Institute, is conducting a feasibility study to explore options for a longer-term climate change economic analysis forum. The forum would provide an ongoing structure to discuss the economic analysis needed to support implementation of any Kyoto agreement and to better prepare Canada for future negotiations that could take place after Kyoto. We feel we must not get caught again with a lack of analytical effort to deal with such an important issue.

I'll turn it to Al to give you some of the results of the studies we've reviewed.

[Translation]

Mr. Al Howatson (Research Associate, Conference Board of Canada): Good afternoon, ladies and gentlemen.

[English]

Thank you very much, ladies and gentlemen, for the invitation to be here this morning. Over the next few minutes I'd like to provide you with an overview of our brief to which my colleague, Gilles Rhéaume, has already referred. I believe you've already received copies of this brief. If you do not have copies I have extras here in both languages.

Our full report—and I believe you also received copies of that some weeks ago—scanned about 70 studies. When we began looking at this process almost a year ago, we scanned some 70 studies that had been done, not all of them showing Canadian impacts, and we selected 14 of those for closer inspection, both for the results they showed for Canada and for their methodology.

These 14 fall into three groups, as described in the brief. I would refer you to page 2 in the brief.

The first group of five studies, noted in point 1 at the bottom of page 2, and the first five studies on the table at the end of the brief are the studies that I believe most closely model the situation facing Canada in Kyoto; that is, there's a scenario in which the industrialized nations agree to stabilize their emissions at 1990 levels in about the year 2010 and the models use some sort of price measure to constrain fossil fuel growth.

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We highlighted the results of these studies that we think will be of greatest interest to Canadian decision-makers over the next few months, and those can be seen at the first three bullets on page 3. Let me just highlight them for you.

The first result is simply that there is a range of economic impacts shown. From the five studies shown, they simply show that Canada's economic output is likely to be some 1.5% to 2.3% lower by 2010 than it would without application of the policy instruments.

What does this mean? The Conference Board's latest long-term forecast shows that the Canadian economy with business as usual is likely to grow about 38% between 1998 and 2010. If we put price measures on to control greenhouse gases, then the economy could be expected to grow in the region of 36%. That doesn't seem like a great reduction, but what it's saying is that the economy is in fact growing more slowly and that potential loss to the annual economic output reaches some $18 billion to $28 billion or $500 to $800 per Canadian by the year 2010; $18 billion to $28 billion is in the ballpark of certainly the GST, and when the Economic Council of Canada some ten years ago looked at the economic potential for free trade, the range was in that range, about 2% to 2.5%.

The second interesting result is that the economic impacts are likely to be uneven, affecting most heavily the regions and industrial sectors that produce or use fossil fuels.

The third point to which my colleague has already alluded this morning, and I won't spend more time on it, is that Canada is likely to experience greater reductions in GDP growth than our major trading partners.

These studies are very strong in analysing how changes in one economic sector or country can affect economic changes in other sectors or countries, and that is important when we're dealing with an issue such as climate change.

The second group of studies, and I would refer you to point 2 at the bottom of page 3, look at Canadian impacts from domestic measures; that is, they aren't concerned with how changes in other countries affect Canada. These studies look at a wide variety of measures, financial incentives, auto and appliance efficiency standards, changes to urban transport, and so on. They look at these measures being implemented and then they look at what the economy-wide impacts from those measures might be.

The GDP effects from these studies in fact are shown to be somewhat less than in the first group of studies. On the other hand, these studies do not take into account the international context and, as I've said, that's likely to be important if we're looking at a situation like climate change.

Finally, a third group of studies, the third point on page 4, focuses on the implementation of specific energy technologies. These studies are good at examining the benefits to companies from adopting these particular technologies, but they're less well suited than the other two groups for exploring economy-wide economic impacts or the effects of changes in other countries on Canada.

Some of these studies have shown that Canada could perhaps reduce overall greenhouse gas emissions from, say, 10% to 30% at either little or no overall cost to the economy, but as I've said before, these studies do not capture economy-wide interactions very well nor do they capture the effects of changes in international trade and investment patterns.

So we've highlighted the first group of studies in our brief for two reasons. First, they're all quite recent—published within the last 18 months—and therefore focused clearly on challenges ahead. One of those studies in fact, the DRI study, is currently under review and it will be released shortly, I believe next month. It's being done for the government. But more importantly, they're all focused clearly on the negotiating context for Canada at Kyoto.

As my colleague has noted, many questions remain to be answered. We hope that our new climate change economic analysis forum, when it's up and running, will provide a venue where further research and dialogue can be undertaken. Thank you.

The Chairman: Thank you both.

We'll ask Mr. Russell for his opening remarks.

Mr. Doug Russell (Principal Director, Global Change Strategies International): Thank you very much, Mr. Chairman.

Let me just begin by introducing Global Change Strategies International. It is an Ottawa-based consulting company that is about a year old now and aims to assist governments, international organizations, and proactive corporations, both in Canada and abroad, to deal with some of the opportunities and challenges presented by global change, in particular climate change. We have senior associates in various parts of Canada as well as in Europe, South America, and South Africa.

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Prior to founding the Global Change Strategies International company, I spent 21 years in the federal government and have been both a member and head of the Canadian delegation team at the bureaucratic level from the outset of the framework convention negotiations. Since leaving the government in 1996, I have been very close to the developments internationally. I guess I would be considered an observer of the political process, both internationally and domestically, on what is happening.

I've titled this talk, “Post Kyoto Challenges”, although I recognize, Mr. Chairman, you'll be dealing with this post-Kyoto. This is just to plant a few seeds as to why Canada's performance is the way it is at this point and how it compares with other countries.

I'd like to draw members' attention to two pieces of background material that have been circulated to you. One is an excellent overview that has been assembled by the Canadian global change program of the Royal Society of Canada. It's a very lengthy document, both in English and in French. It has been prepared and distributed to a number of people across the country.

We have appeared in front of 70 to 80 people in Calgary, Vancouver, Toronto, Montreal, and tomorrow, Halifax. It might be useful for your committee to hear back from what those reports have been in those cross-country round-ups and discussions.

The second paper is an executive summary of a longer piece I was contracted to do for the David Suzuki Foundation this summer. It basically compares Canada's performance on climate change with that of six other countries—the United States, the U.K., Germany, Norway, Australia, and the Netherlands.

I would be very pleased to answer questions on any of those aspects, as you wish. However, in the five minutes available to do this I'd like to focus on a few observations I'd like to make about Canadian policy, primarily from a policy process point of view, and why we're in the situation we're in. In so doing, I would like to remind the committee of the commitments that are currently in play, what's likely to emerge at Kyoto, and deal with some of the four key challenges that face Canada once the hoopla of Kyoto is over.

By way of a reminder—and you're probably aware of this—the framework convention splits the world into three categories of countries vis-à-vis commitments.

First, you have the OECD countries, which have to report on the measures aimed at returning greenhouse gas emission to 1990 levels by 2000. They do not have to meet that as a goal; it's just to report on it.

Countries of the former Soviet Union and central Europe, who are undergoing transition to a market-based economy, have the same commitments as do the OECD countries, but they do not have to provide financing to the developing countries.

Then you have the G-77 and China representing the developing countries of the world, who have only general commitments related to the development of inventories, raising public awareness, and scientific co-operation, to name a few.

Those commitments, taken collectively, were judged to be inadequate by the parties of the first meeting of the conference of the parties in Berlin in 1995 and a process was launched to decide what the next steps would be, to culminate in Kyoto on December 10.

There is a range of possibilities for Kyoto. My personal prediction, based on a number of years of following this thing very closely, is that there will be a deal. It is rare that you do not get a deal on environmental issues. It will likely be a deal that will involve a legally binding target, probably stabilization to minus 5% somewhere around 2010. The exact numbers will be in and around that area. It will not be what the Europeans want.

To get that deal, however, there will have to be a side agreement, or some sort of a note, that would have developing countries agree to enter into negotiations on what they're willing eventually to commit to under the convention process. That will be absolutely crucial. Otherwise, the Americans will walk.

There is a slim possibility, a very slim possibility, of a deal involving a soft target, basically an “aim to” target, with further negotiation, to look at differentiated commitments, similar to what Australia's looking for. I think Australia's asking now, or thinking now, in the order of a growth cap of plus 10% to plus 20%, although they haven't come out and said their exact numbers.

The final possibility is that the talks collapse, mainly triggered by developing countries' resistance to future talks on emissions reduction. They will not collapse based on the target stabilization of plus 5%, minus 5%, or whatever.

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I'd like to move to four areas that I think are going to be extremely important for us in Canada as we move through Kyoto. I don't want to discount the notion of what Kyoto is all about with regard to the target, but at the end of the day whatever that target is we have a lot of work to do.

First, somehow or other public awareness has to be raised on this issue in Canada to a point where the average person on the street is thinking about what is being done on this front. So the question is how to mobilize that grassroots effort and at the same time move it into the political process in a way that is sensible and takes into account what lifestyle changes are acceptable to Canadians.

The second area is the fundamental area for Canada to look at after Kyoto, and I'll talk about it in a little more depth. It's the whole notion of ensuring a fair and equitable burden-sharing across the country. How are we going to actually do this? I'd like to spend a few moments, with your indulgence, on that at the end of the session.

The third area is providing Canadian companies with the flexibility needed to undertake further action. You heard just a few moments ago from the Canadian industry that one of the key messages is the need for a clear policy direction coupled with the provision of flexibility for individual companies to choose how they will most cost-effectively reduce their emissions.

It explains the voluntary challenge. It explains why the industry wants to do that. However, I would contend that the voluntary challenge will be a spectacular failure and will continue to be a spectacular failure if there is no clear direction provided from government at the sectoral, provincial, and regional levels as to what is expected.

If I were the owner of a big company I'd be very happy to sit on the sidelines and wait for the dust to settle. I'd make some nice noises about voluntary challenge but actually wait to see what happens. Until governments are willing to put some credits on the table as to how this is going to happen, we're not going to have much in the voluntary challenge.

You also need to take full advantage of the international opportunities associated with flexibility, and that includes joint implementation and emissions trading, both of which Canada has not paid much attention to, I'm afraid to report.

We have a joint implementation office in Natural Resources Canada that has been limping along at best. We're just barely starting to scratch the surface on emissions trading, whereas in the United States today there are 200 people working in the government looking at a national cap and trade system for how they're going to meet their goals in the future.

Fourth is the area of new markets for Canadian products and knowledge. There is an opportunity agenda associated with climate change. We've seen that in other countries. My paper talks a little about Germany. We've seen Japan and how it is moving on fuel-efficient vehicles. Those opportunities exist. Canadian companies need to look at how we may move forward, and government has a responsibility to ensure we do that.

I'd like to turn very quickly in the moments left to talk about what I think is the central issue for Canada. It has been central all along, but we haven't been able to deal with it at all since Rio, and I'll explain why.

Our commitment now, as we expressed last week in Regina, is to return greenhouse gas emissions to 1990 levels by approximately 2010. It's a political commitment at this point. It is not legally binding. There are no regional, provincial, or sectoral targets and hence there is absolutely no accountability for achieving the national goal. At the end of the day, the federal government is left holding the bag and corporate Canada is left scratching its head as to what is expected of it.

During the years following Rio, and up to the present day, the ministers of energy and environment have never spoken seriously about how to share the burden amongst the various sectors and regions of the economy, and there are good reasons for that. It's just a very difficult political issue.

However, after Kyoto, with a legally binding target, this whole question of accountability absolutely becomes central. If you cannot figure out how you're going to get there and cannot hold various sectors accountable, you're not going to be able to make it.

The key problem is we have the process wrong. Yes, there is a federal-provincial committee in place with lots of people and the bureaucracy is feeding that process, but we have the wrong people at the table.

Dealing with climate change is far broader than just energy and environment. The ministers who sit at these meetings do a very good job of trying to represent the interests, but their interests are on the far opposite ends of the spectrum of this issue. Over the past five years this has set up a win-lose polemic that limits creativity and any search for innovative solutions.

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We've known for some time, since Rio, how to go about dealing with climate change and the specifics. The question is being able to have a sensible and reasonable discussion of how to put the pieces together.

Add to this the fact that few of the provinces are actively engaged, which has been the case up to now, and the lack of political pressure being brought to bear on the issue, it's small wonder that Canada has now become one of the international climate change laggards—you'll see this in my paper—in terms of how we rank among others.

The key is to come back and work immediately after Kyoto on a new process, one that engages the right people and brings the best and brightest thinkers to help ministers deal with the issue.

One way forward is as follows. I've suggested a little diagram that would do that. I'll just very briefly introduce it.

First ministers have to become engaged. They have a two- or three-year period after Kyoto to figure this out. They would make the final decisions in that kind of a model.

There would have to be some sort of a federal-provincial negotiating forum established that would be fed by a very well-funded group. I call this a “safe haven”, if you wish. They would bring the best and the brightest to the table to take the sectoral and policy instrument analysis to a point where they can fit it into the federal-provincial framework. They should come up with a sensible way of ensuring that not one sector or one region of the country is unduly affected by this, but that everybody shares the burden equally.

Until that is done, we're going to have difficulty meeting our climate change goal and keeping pace internationally in the competitive markets that will be established under a Kyoto treaty.

Thank you Mr. Chairman.

The Chairman: Thank you.

As with past witnesses, all of you have helped with establishing a platform for post-Kyoto discussions. We'll first start with Darrel Stinson.

Mr. Darrel Stinson: I have a couple of questions for Mr. Russell.

You mentioned trading credits in regard to reducing emissions. How can we work out the details of trading emission credits between provinces and industry if, for example, a chemical producer in the maritimes creates an automotive part that's lighter than the one the present manufacturers use in Ontario? Who gets the credit: the chemical industry or the automotive industry, the maritimes or Ontario? This is going to be extremely complex right here in Canada in between provinces working that out.

Also, how will Canada, and the world on the larger scale, monitor emissions? Companies struggling to introduce their own emissions will want to ensure that no other competitor gets the advantage by cheating. Are we looking at a bureaucratic nightmare here with regard to reporting, inspections, federal-provincial overlap, and escalating costs? Who will monitor emissions internationally? How will we enforce the standard?

Mr. Doug Russell: Thank you. Maybe I'll deal with the last question first and then come back to the first one.

With regard to any legally binding target that might be agreed to at Kyoto, the process is already in place. In fact, that's what the framework convention established in 1992: countries have to report in detail the inventories of their emissions.

That has been functioning for a number of years in Canada and abroad. It's not overly bureaucratic from the perspective of making this happen. There is a small secretariat as part of that framework convention in Bonn that looks after this and co-ordinates this work. I believe that in Canada we have probably in the order of 20 people in total who are involved at any given time, but not full time, to actually do that.

The actual emission reductions for the country aggregated as a whole are in place. There are methods in place to gather this. It's fairly reasonably straightforward to do those actually.

Mr. Darrel Stinson: I don't want to seem too negative here, but we're already having problems. Look what's going on right now with Hussein and the talk about chemical warfare and what could be there. We can't even investigate that to our satisfaction today, so how are we going to believe that this will be implemented in the process you're saying?

Mr. Doug Russell: I can only report to you that in fact part of the work I had done when I was in the government was to chair the group of OECD countries that developed the guidelines for making this happen internationally. We took into account, in doing that, how you would go about ensuring that you have that information you needed to take place. It is relatively easily found in the various national accounts, because it really is a derivative of the amount of energy that a country uses, to a large extent, particularly for carbon dioxide.

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So it isn't secret. It isn't something that's hidden away à la Saddam Hussein, so you don't need to have teams of investigative experts that go in and ferret out these kinds of things. That aspect of it is fairly straightforward.

However, I want to turn to your question about emissions trading, because again, that doesn't have to be bureaucratically difficult. I would argue that some of the projects associated with joint implementation are extremely bureaucratically difficult and take a lot of transaction time.

An emissions trading system, however, based on a permit system where you have gone through the process I explained in my opening remarks, where you have a clear allocation amongst the various sectors or amongst various regions of the country as to how much you are allowed, what your cap is and how much you're allowed to produce...if you have that established—and that is a big if and it does take a couple of years at the front end to get it straightened away—once you have it up, there are many efficient markets that can actually make this happen.

It's happening now already with the sulphur dioxide trading program in the United States. It's also happening with CFC trading elsewhere. These markets are there and the financial institutions are more than willing to move forward with it.

Part of my role is that of senior political adviser to an international group that is now aiming to establish an international pilot trading project involving a limited number of countries, Canada being one and others being the United States, the Netherlands, Norway, and the U.K. They're aiming to establish that kind of an international missions allocation and trading project by the year 2000.

We feel very clearly that once the front-end work is done—which is two or three years' work—then the market can dictate and run this very efficiently.

The Chairman: Thank you, Mr. Russell.

Darrel, are you okay with that?

Mr. Darrel Stinson: Yes.

The Chairman: We'll hear from Carmen Provenzano and then Yvon Godin.

Mr. Carmen Provenzano: Mr. Chairman, I have just one question for Mr. Rhéaume.

You mentioned that there's a problem with going back to 1990 levels because of the severe recession that Canada was suffering at that point. To me that's a very significant statement. In your view, is it possible to factor that recession in to adjust the level? Can you come up with an argument that has a strong rationale for factoring in the recession in order to raise the level?

Mr. Gilles Rhéaume: There's a strong rationale in the sense that initially when we were looking at this target we weren't even aware that we were in a recession in 1990. By the time we got the results, we found out that we were really in a big recession at that time.

Mr. Carmen Provenzano: I think you'll agree that's a huge point.

Mr. Gilles Rhéaume: It is a huge point.

If you're looking at that part of it, our emissions peaked in 1989. In the U.S., emissions peaked in 1990, and in the European Union, if I remember correctly, it was 1990 or 1991. So you're looking at a high end for them in terms of greenhouse gas emissions prior to entering the decline they've seen. For us it happened sooner. You can certainly factor that in. You can go back and ask how much the recession contributed to the reduction in greenhouse gas emissions and say, this is one we have to discount given that it was under extreme circumstances, i.e., it was an economic downturn.

I think it's legitimate to bring forward a position like that.

Mr. Carmen Provenzano: We don't want to look foolish, certainly—

Mr. Gilles Rhéaume: No.

Mr. Carmen Provenzano: —and if a strong argument could be made without us looking foolish, I think we should have that.

Mr. Gilles Rhéaume: Yes. It's not that difficult. If one were to look at the data that exist for emissions during that period, 1989-1992, and compare Canada's with other countries, you'd notice the pattern. We've seen that pattern because of Canada's severe recession in 1990-91. Our recession started in the spring of 1990. We had back-to-back declines from the second quarter of 1990 to the first quarter of 1991, so one has to recognize that in terms of looking at targets.

Mr. Carmen Provenzano: Mr. Chairman, could I have Mr. Russell comment on that as well? I think his presentation would actually dictate that he respond to this.

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The Chairman: Certainly.

Mr. Douglas Russell: On the issue of baselines, which is exactly what you're getting at here, I don't think you're really looking at a tremendous difference at the end of the day. There were a number of opportunities in the actual framework convention negotiations. At one point, in fact, Canada supported the notion of having a three-year average for a baseline, but it was not possible to get that in the final rounds of negotiation prior to the signing in Rio.

I think you can look at other countries that have attempted to adjust the baseline. The Netherlands, for example, adjusted because they said they had an abnormally warm winter that year. It can always be done in your reports, if you wish. The question is how it makes Canada look in the international field. I know that ministers from the Liberal government who spoke on this—and spoke publicly—back during the international negotiations, said Canada would not be a “fudger of numbers”. I recall that those were the words used by the then natural resources minister.

The question is how much it is worth to us to do that. I guess I would look at it, because I would really like to see what the numbers are with regard to this. Would it be 1%? If that's what we're really talking about here, is it really going to be all that important in terms of whether or not we're stabilized or 1% higher by the year 2010? I think the key question is to actually move the trend down. We're going like this now, but we have to start moving it down that way.

The Chairman: Is that okay for now, Mr. Provenzano?

Mr. Carmen Provenzano: Yes, it is.

The Chairman: Thank you.

Mr. Godin, then Mr. Pickard.

[Translation]

Mr. Yvon Godin (Acadie—Bathurst, NDP): I only have a few comments to make.

We were talking about sensitizing people and the use of a dryer was given as an example. We're talking about sensitizing people to global warming. This reminds me of the person who takes his car, throws a piece of paper out the window and is assessed a $1,000 fine, while his neighbour can pollute all he wants and nothing happens. I don't believe in voluntary efforts. The only way to clean up our streets is to take action against the people who pollute.

As others said at another sitting, I am disappointed that it's being said that Kyoto is a start. I thought Rio was the start and that this was the continuity. This is a time when the government is invited to become aware and to consider what it must do if voluntary efforts are not made to prevent global warming.

We have to think of future generations; we have responsibilities. I believe we have to consider adopting regulations that are strict, but not so strict as to close down companies, and that we must undertake to make efforts to protect our planet. If we can't do that, aren't you afraid we won't be able to stop polluting voluntarily? Those who throw papers and cans out the window aren't prevented from doing so until they are assessed $1,000 fines.

I'll give you an example of another place where the government might perhaps be able to act. This morning, I was speaking with CN representatives, who told me that three locomotives pulling freight cars could replace 250 trucks. Imagine how much that could reduce pollution and global warming. It's incredible, completely incredible. And the tires of all those trucks, how do we get rid of them? It's incredible.

Then someone comes and says we have to sensitize ordinary people and advise them not to use their dryers, which use too much energy. I can't believe it. I thought you wanted to rely on voluntary efforts.

Mr. Gilles Rhéaume: First, we didn't present the impact of voluntary programs in this regard. Our study didn't necessarily look at this aspect.

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Our study, particularly from a macroeconomic analysis standpoint, was conducted on the basis of measures that influenced prices. The options that we considered and that can be considered include an environmental tax or charge and a system of emissions trading permits. These options necessarily have an ultimate impact on prices and result in an incentive to change behaviour. One of the challenges we're discussing from the standpoint of climate change is a change in behaviour. How can we make a significant enough change while maintaining our quality of life? That's important.

For example, someone can throw a piece of paper out the window and it's fairly easy to make a decision on that. That doesn't have a significant impact on us, but we have to say what we should do as members of society. We have to say that's not something that should be done.

When we discuss energy issues that affect us every day, since we use energy every day, that has a much more fundamental impact. That's why this issue is more delicate than other environmental issues, as you mentioned. However, it's a much more difficult issue to resolve.

In the past four years, we have conducted studies on the various voluntary programs around the world. We have seen what works and what doesn't work. Some voluntary programs may work very well, but those programs have objectives and involve a system for communicating progress achieved and a way for making various groups accountable for achieving objectives. That's clearly defined.

It's these voluntary programs that can produce results without regulation or economic incentives other than the benefits of the voluntary program itself, that is to say the making of decisions that mean something not only environmentally, but also economically.

The Chairman: Do you agree, Mr. Godin?

Mr. Yvon Godin: I don't have to agree, but that's his answer.

[English]

The Chairman: Mr. Russell, did you want to add something?

Mr. Doug Russell: If you wouldn't mind, Mr. Chairman, just a couple of comments on that. I think what the honourable member has said points exactly to the notion of the need for the kind of accountability I talked of earlier, a clear target to drive a voluntary program. However, I should note that voluntary programs are important, but they are part of the overall solution. The key is to develop a portfolio that makes sense and is balanced and is reasonable.

For example, in Germany 130 measures are currently in place to implement this, of which 45 to 50 are classified as economic instruments—tax breaks, taxes, and whatever—30 to 35 are regulatory in nature, and the remainder are voluntary. They are actually doing something about it.

Other countries, which have chosen a single approach, are having difficulty. I would draw your attention to the table in the paper I have put forward. Under “mix of measures”, which is one of the key criteria to look at how countries are performing, you will see that those with a balanced approach, involving a mix of regulation, a mix of volunteerism, and a mix of market instruments, are doing better than the countries that are relying exclusively on one instrument alone; and that includes one country relying exclusively on a tax instrument, which has been not very helpful for them in that front. The key is a mix.

The Chairman: Mr. Pickard.

Mr. Jerry Pickard: Obviously the studies, the models, the presentations, are leaving probably more questions than answers, and that isn't different from anything else. A little learning is a dangerous thing, drink deep or taste not the Pyrrhonian spring—that kind of thing I see happening more and more and more here, and it's significant, because bringing more different viewpoints together creates a solution, though maybe not the idealistic solution by each individual who brings everything into the mix.

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I heard industry a few minutes ago, and you were here when industry raised the question that the Canadian government hasn't looked at the economic impact. I have a feeling that your comments, Mr. Russell, on Canada dragging its feet may have something to do with the economic impact, may well have something to do with us as a confederation. We don't act independently as a federal government; we act as a government among 11 governments. That confederation is held together by its economic viability here in this country and throughout the world as an exporter.

So there are all kinds of variables in the economic question there.

It seems to me that studies have been done and the Canadian government has looked at it. But I'm just coming back to the same kind of question I asked the industry that was here just previous to you. Do you believe the Canadian government is attempting to look at the economic impacts to Canada's industry, to the world, and measure what we can do?

Remember, everything that we commit to at any point in time has to be achievable—achievable on a political side, achievable on an economic side, achievable on a competitive side.

So there are all kinds of parts there, and you've modelled all of those.

I would like each of you...because I thought you brought tremendously good information here—and I'm thankful for that—but I do think you're doing a tremendous amount of homework that wasn't recognized by the people who previously brought testimony.

Mr. Al Howatson: I'd be pleased to respond to that. Thank you for your comments.

Yes, in the full report that we produced, a number of those studies were commissioned by federal government departments or agencies reporting to various government bodies. So government officials have indeed been aware of these studies.

We undertook the piece we did to pull all of them together, and to try to have a look and compare them one after the other, to look at the various assumptions that were made in these studies. This was done keeping in mind, of course, that each study was done for a specific purpose, for a specific client, and you can't be unfair to the researchers and lay them all on a Procrustean bed and chop off their legs if they don't fit and stretch their heads if they do.

Keeping that in mind, we tried to compare the studies as much as possible and then bring this to bear on the issue in Kyoto, for example. Some of the studies are more suitable for looking at longer-term issues, or looking at, say, the kind of mix of instruments that might be useful. But in this brief we've tried to boil them down and ask what these studies that have been done over the last couple of years are saying for the situation facing Canada.

I think the government is engaged on this now. Clearly the DRI piece that we refer to in this study was undertaken, done at considerable expense, and it's also undergone a lot of debate within government right now. I believe their preliminary results are out and the full report should be out shortly.

But I would reiterate what my colleague has mentioned, that there hasn't been that much economic analysis done in Canada, at least not as much as you would think the topic might warrant.

The Chairman: Mr. Pickard, is that okay, or did you want Mr. Russell to comment?

Mr. Jerry Pickard: One might comment if that's okay, Mr. Chairman, because I think they're all involved in this intricately.

Mr. Doug Russell: I'd like to make a very short comment.

A lot of the economic models have been good at looking at the costs, and we've seen some of that, but I don't think they've been very good at picking up some of the opportunities. It's very difficult to model that side of it.

The other side of the coin that hasn't been modelled is the costs of inaction, what it will cost the economy on that front. Unfortunately, it doesn't lend itself very well to classical economic modelling, and I would argue that we haven't seen that full picture. Therefore no one model is straightforward on this front.

I would like to note, though, that it is very pleasing, after having spent five years on the government side of things trying to move things along and going through a succession of various changes within government, to see that the Prime Minister is now speaking on the issue of climate change, that indeed we are engaging the various committees—and I commend your committee for doing that. I just hope that commitment will continue—and I'm sure it will, as I heard the chairman say this earlier—after Kyoto, because that's when the real political commitment is going to be required, when the real debate will come on board. That's when you will start to bring out some of the other things.

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My personal view on this is that this is achievable, it is something we have to do in order to stay competitive, and if we fall behind other countries, particularly the United States—and they are moving on this front—we're going to be playing catch-up, and I don't think we want to be in that position, politically or economically.

The Chairman: Thank you, Mr. Russell, and thank you, Mr. Pickard.

The last question is from Mr. Jackson.

Mr. Ovid Jackson: I have one quick question. I'm sitting here trying to get a hypothesis. Whether we look at the game of soccer, basketball or hockey, we go by the points, how much a person scores. A lot of people don't realize it's not the person who scores in the game of basketball or hockey, or even soccer; the most important thing is the pass. If you get the pass in front, you score automatically. It's not the shot; it's the pass, followed by going towards the net, followed by the shot. So you have to attribute value to the contribution one makes to the game, so to speak.

What I want to know is how we are going along with these rules. Have we come to grips with the value to these tradable permits and what not? How is that working out?

Mr. Doug Russell: To continue with your analogy of sports, in order to do so you have to be a member of a team, and certainly on this front, Canada. One can look at it from different points of view.

I would like to look at it globally. There is a real opportunity for Canada, as one of the other speakers said earlier this morning, to bring in developing countries on this front, if we have our own house in order and if we are able to use inventive opportunities, such as tradable permits, and so on.

I would say at this point we haven't made that pass. I don't think we're even setting up the formations properly at this time, and we do have some work to do on that front. However, I am confident that we can pick up in these areas and identify some niche areas where Canada can play a leadership role within that overall global team that's going to be required to make this happen. But we have to be prepared to make some choices very soon and to get on with what is a very important part of a good, solid, and informed debate here in the country.

The Chairman: Are there any other comments?

With that, thank you, Mr. Jackson, and thank you to our witnesses. We reserve the right to invite you back post-Kyoto, at some time in the spring.

With that we're adjourned, with gratitude to our witnesses.