ENVI Committee Report

HOUSE OF COMMONS OTTAWA, CANADA K1A 0A6

38^th Parliament, 1^st Session

The Standing Committee on Environment and Sustainable Development has the honour to present its

FIFTH REPORT

In accordance with its permanent mandate under Standing Order 108(2), your Committee undertook a study of a draft report on the subject-matter of Bill C-43, An Act to implement certain provisions of the budget tabled in Parliament on February 23, 2005 and agreed to report the following:

INTRODUCTION

Budget 2005 included announcements of $5 billion dollars towards sustainable development initiatives with a strong emphasis on addressing climate change. The budget announced, among other things, two market based systems to provide incentives for the reduction or removal of greenhouse gases and to develop technology towards the same goal.

The budget also referred to other market mechanisms, namely a credit trading system for Large Final Emitters (LFE), stating:

In the coming months, the Government will set out the details of a mandatory emissions reduction regime and emissions trading system, including the related legal framework, for LFEs to support further improvement in the performance of this sector in addressing the challenge of climate change.

The budget implementation bill, Bill C-43 An Act to implement certain provisions of the budget tabled in Parliament on February 23, 2005, received first reading on 24 March 2005. Bill C-43 included two parts that implemented the Budget 2005 announcements related to market mechanisms. Part 13 related to the creation of the Canada Emission Reduction Incentive Agency, to oversee the Clean Fund, and Part 14 to the creation of a Greenhouse Gas Technology Investment Fund.

Section 15 of Bill C-43, was also related to sustainable development. This section would amend the Canadian Environmental Protection Act 1999 (CEPA) to remove the word “toxic” from most parts of the Act. In particular it removes the word “toxic” from section 64 which defines the criteria used to establish whether substances should be found “toxic” under the Act. This change is apparently intended to facilitate discussions surrounding back-stop legislation for the Large Final Emitter credit trading system.

While the House of Commons Standing Committee on Environment and Sustainable Development (the Committee) acknowledges that there is some relationship between Part 15 and the discussion in the Budget of a legal framework for an emissions trading system, it does not believe that Part 15 is strictly a budgetary measure.

In addition the Committee is very concerned about the process by which these amendments have been introduced and possible implications beyond the stated goal of facilitating regulation of CO₂ emissions from LFEs. The Committee has had two meetings regarding Part 15 of Bill C-43 and has the following concerns.

IMPLICATIONS OF REMOVING THE WORD TOXIC

The Committee acknowledges that there are problems with using the word “toxic” for every substance that meet the criteria of section 64 of CEPA. Labelling such substances as ammonia in water (which is listed) and road salt (which met the criteria but has not been listed) as “toxic” is confusing to Canadians who use them in very different circumstances and may give an unfair stigma to products produced by Canadian industry.

It is unclear however if removing the word “toxic” from CEPA is the best way of resolving this issue. As the Committee heard, removal of the word “toxic” could present a small but significant risk that the Act could be challenged as unconstitutional. It could also impact on the management and use of inherently toxic chemicals by changing perception of the hazards that they pose.

IMPACT ON THE PARLIAMENTARY REVIEW OF CEPA

The five year review of CEPA 1999 has recently been delegated to this Committee. Work by Environment Canada in the lead-up to the review identified the use of the word “toxic” as an issue ^[1]. Without the benefit of the review, the government has decided that the word should be removed.

This arbitrary action to facilitate the use of CEPA for a single purpose without any discussion of the possible consequences could weaken the impact of the review by decreasing the level of trust, on the part of the Committee and witnesses, that the Government will listen to their recommendations.

LACK OF DISCUSSION OF ALTERNATIVES

The large final emitters group at the Department of Natural Resources has been working on the issues surrounding legislation for the LFEs for some time. There has never been any open discussion during that time regarding the use of CEPA as the legislative tool for implementing such regulation.

CEPA may be the best legislative tool for this purpose. As the Committee heard it does have some advantages, such as sections enabling emissions trading and provincial/federal equivalency agreements. Without hearing about the discussions of alternatives, however, the Committee is not in a position to say whether alternatives would be better or worse.

CONCLUSION

The Committee does not believe that Part 15 of Bill C-43 is strictly a budgetary measure. It has, however, even greater concerns regarding the substance of this section. There remain many questions regarding the impact of removing the word “toxic” from CEPA that need to be discussed publicly. As the Committee heard, there is no legal requirement to remove the word “toxic” from the Act to use it as the legislative basis for LFE back-stop regulation. While the Committee would prefer to see legislative options for LFE regulations, it remains open to stand-alone legislation for such regulation.

Whichever enabling legislation is used to create regulations to back-stop the LFE credit trading system, it is the substance of the regulations that should be discussed.

For these reasons the Committee makes the following recommendation:

The Committee recommends that the government remove Part 15 of Bill C-43 and that it expedite the publication of Large Final Emitter regulations for parliamentary and public scrutiny.

Climate change requires immediate action. Canada’s large final emitters are ready and willing to make the decisions necessary to reduce emissions, but they need certainty in their investment environment. The government must act clearly and accountably, and it must do it now.

REQUEST FOR GOVERNMENT RESPONSE

In accordance with Standing Order 109, the Committee requests that the government provide a comprehensive response to the report within 120 days.

Copies of the relevant Minutes of Proceedings (Meetings Nos. 28, 30 and 32) are tabled.