ENSU Committee Meeting

STANDING COMMITTEE ON ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

COMITÉ PERMANENT DE L'ENVIRONNEMENT ET DU DÉVELOPPEMENT DURABLE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 19, 1997

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[English]

The Chairman (Mr. Charles Caccia (Davenport, Lib.)): Good afternoon.

[Translation]

Hello, everyone.

[English]

Resuming our work, I would like to welcome, on behalf of the committee, Dr. Slater from Environment Canada; Dr. Cleland from Natural Resources Canada; and Dr. Heinbecker from Foreign Affairs.

In order to facilitate the exchanges I wonder whether the combined effort of the three witnesses this afternoon could be managed such that the three presentations can be made within a total of half an hour. Is that asking you for too much discipline, or is it possible?

Mr. Robert W. Slater (Senior Assistant Deputy Minister, Department of the Environment): I think we can be properly disciplined.

Should I start, Mr. Chairman?

The Chairman: First of all, let me welcome you back to the committee, Dr. Slater. We are glad to see you again, and your colleagues as well.

You decide on the sequence and on whichever way you want to go ahead.

Mr. Robert Slater: We have discussed amongst ourselves how best we can answer the questions posed by the committee, which we understood to be related mostly to how the government is organized to manage the climate change file, and what each organization currently has under way.

On behalf of us all, I've prepared a set of overheads, with hard-copy versions being distributed now. The overheads describe how we're organized in Environment Canada; how we're organized within the federal government; how the federal-provincial process is organized; and how the international process is organized. Then, Mr. Chairman, each one of us will speak about the particular role of each organization.

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Within the Department of the Environment, we have mobilized the entire organization to support the work required on climate change, which for us is an extraordinary amount of work. We have, in fact, four assistant deputy ministers working extensively on this file. As senior assistant deputy minister, my job is one of coordination.

The key work is done, and if I can just refer you to these different boxes, on the left-hand side is the science. That is led by Gordon McBean. I think Gordon has been a witness before this committee and has described that work. On the right-hand side is the policy work. It is undertaken predominantly in our policy and communications groups, but also in the environmental protection group. On the bottom right-hand side is international negotiations. Our work on that is led by the assistant deputy minister for environmental protection, Tony Clarke. And on the bottom left-hand side, you'll see communications strategy and outreach programs. That section is led by our director general of communications, Anne Marie Smart. And in this capacity, of course, I report both to the deputy minister and to our management board, because the entire department is involved in this from coast to coast to coast.

Although Environment Canada has a substantial engagement, it is only part of the federal effort. Clearly, decision-making by the federal government is undertaken by cabinet and cabinet committees, and those are referenced in this chart. There is a deputy-level committee, the sustainable development coordinating committee, which reviews progress and provides direction. Then, on an ongoing basis, we have on the right-hand side what we call a core ADMs committee. These are the departments that are most critically involved in this: Environment, Natural Resources, Foreign Affairs, Finance, Industry, Transport, and Privy Council Office. They oversee the development of policy, program and communications work. On the left-hand side, the science, I mentioned that Gordon McBean led the effort within Environment Canada, but he works with colleagues in Natural Resources, Agriculture, and Fisheries and Oceans in order to develop the overall federal science effort.

Whereas that may be the way the federal government works, it has a very large and elaborate structure to engage provincial governments. The joint ministers of environment and energy, the group that met last week in Regina, represent the senior political level. Supporting them is a deputy-level group, and supporting them in turn is a more working-level group at the assistant deputy minister level. Feeding into that exercise is work involving international work on climate change, the United Nations ECE, the Montreal Protocol, Canada-U.S. Air Quality Accord, and a whole host of other things, all of which need to be integrated and fitted together in a very close fashion in order to ensure that at the ministerial level there is coordination between the federal and all provincial and territorial governments.

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My final overhead is entitled “The International Process”. What we have here is a reference to the science, and the way the science is coordinated.

On the left is the Intergovernmental Panel on Climate Change, IPCC, and the different working groups. I think you've heard a number of times from Jim Bruce, the chair of working group three—response strategies. Working group one, Gordon McBean, a science lead, is represented on that. Other Canadian federal and provincial specialists work in that science area.

On the top right we make reference to some of the existing key informal consultation mechanisms that Canada plays an important role in. Paul Heinbecker, as a lead negotiator and head of delegation, will tell us about the formal processes involved. A semi-formal process is something that involves these countries: Japan, U.S., Canada, Australia, New Zealand, Switzerland, Norway, Mexico, Iceland and Korea. It goes by the acronym JUSCANZ. This is a sounding board for testing the waters with other countries before you need to take official positions. That's an informal mechanism.

The group on the bottom, the ad hoc group on the Berlin mandate, the subsidiary body on implementation and the subsidiary body on scientific and technological advice, are formal mechanisms as part of this whole climate change exercise.

Under “Informal international consultations”, this is the place where Canada would typically discuss with other countries and receive advice from other countries their various positions on climate change. Of course, you'd know that in the last little while all of these large international groups—Francophonie, Commonwealth—have met in the last few weeks, and APEC is taking place within the next couple of days. All of those fora represent important sounding points for Canadian views and also develop and broaden the international consensus.

That's an organization that mobilizes the talents of literally tens of thousands of people around the world and a very large number of employees in our respective organizations. Whilst it may seem daunting, I think there is an understanding that can be derived of that process, because in fact it actually is quite similar in its fundamental character to the process Canada followed, both within the Department of the Environment federally, federally-provincially, and internationally on acid rain. The similarities in the roles that were played, the coordination arrangements and the policy and communications activities with acid rain are quite striking.

Obviously, climate change is a much more complex subject—we'll be hearing descriptions of that, and you're very familiar with it—but at its heart it has great similarity with acid rain. Acid rain was, of course, one of the more successful environmental issues we have managed over the last decade or so.

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That is also the process in play at the moment. When an international agreement is arrived at in Kyoto there are large numbers of people saying we will need to re-examine that process. We will need to re-examine those institutional arrangements and think through how we will need to adjust them in order to make them more responsive to the needs Kyoto will impose upon us.

I would just like to spend a couple of minutes describing the work or role undertaken within the Department of the Environment under the large headings of science, communications, policy and operations.

In the science area we spend over $10 million per year. We undertake that work in monitoring where we look at climate change—climate and its variability. We look at and report on sources of greenhouse gases. We try to understand ecological processes and the way they're affected by climate change. We have a very substantial modelling capacity to predict climate change into the future, and we dedicate some 40% of Canada's largest supercomputer to that effort.

We undertake research in adaptation, and Roger Street spoke to you about some of that work. We also do broad impact research on ecosystems and their effects. In our science work we are a very active member of the global science effort.

On communications, we are involved in trying to increase the understanding of the issue so Canadians know better what they can do, and also so they can support the difficult political decisions that will have to be taken on this issue.

I will be pleased to table with the committee the latest package of information, which includes a primer on climate change and fact sheets and makes reference to the web site we recently launched on this.

We are also engaged in community action through our Action 21 program, and we are deliberate in sharing success stories of people who have made significant contributions to reducing greenhouse gas emissions. Of course we have a substantial policy effort.

The final point I would like to make is in terms of the operations of the Department of the Environment. We have a large number of buildings and operations within the organization. I would just like to mention a couple.

We signed up recently in Alberta with a green power consortium that will provide wind-turbine-generated power to all our facilities in Alberta. As a consequence of doing that, the greenhouse gas emissions associated with our operations in Alberta will drop by some 2,000 tonnes per year.

At another single facility in Ontario, the Canada Centre for Inland Waters, we will reduce greenhouse gas emissions from that operation by some 1,700 tonnes per year by increasing energy efficiency and co-generation.

By 2010 we expect 15% to 20% of the energy used in the organization to be derived from renewable energy sources.

Mr. Chairman, that was intended as a tour d'horizon for Environment Canada and the organizations we work with.

The Chairman: Thank you very much, Mr. Slater.

Would you like to proceed, Mr. Cleland?

Mr. Mike Cleland (Assistant Deputy Minister, Energy Sector, Environment Canada): Thank you, Mr. Chairman.

I left copies of a brief document with the clerk. I believe they have been distributed to members of the committee. Since you have it there I won't read it; I'll simply refer to it in my remarks.

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My presentation is really in two parts. To start off, I'll just to give you a sense of the broader picture with regard to NRCan's activities pertinent to climate change. Then I'll take a bit more time and give a little bit more detail with respect to energy.

Energy, of course, is what people tend to associate with NRCan at least in so far as the climate change file is concerned. I think it's quite important to make the point at the outset that our role is rather broader than that.

As one of the major science departments in the Government of Canada, there are several ways in which we deal with the file. We have the role of working very closely with Environment Canada on understanding climate science, the impacts of climate change and potential adaptation strategies, and finally, mitigation strategies and related technologies.

The first of those fall under the responsibility of Dr. Marc Everell and Dr. Yvan Hardy, who are the ADMs of the Earth Sciences Sector and Canadian Forest Service, respectively. Dr. Everell, NRCan's chief scientist, has the overall coordinating responsibility in that regard.

Mr. Chairman, I've listed three areas that are simply examples of areas in which our science activities support the broader federal effort. I think the important point to underscore here though is the one raised by Dr. Slater in his presentation, which is that this work is coordinated through a committee, or a memorandum of understanding at least, called the natural resources memorandum of understanding on natural resources science. In that context, climate change is a very high priority.

Finally, I should speak very briefly about the forestry side of the department. The Canadian Forest Service contributes in considerable measure to, if you will, the upstream science, the understanding of impacts and the question of adaptation strategies. But forestry is, of course, also potentially an important part of any mitigation strategy because of the potential role of forest sinks. Therefore the question of sustainably managed forests is necessarily an important part of the government's climate change strategy.

I'll turn to energy in this regard. I'm sure I don't need to underscore for you the important role that energy plays in that. Energy production and use—I stress “use”—is responsible for something in the order 85% of greenhouse gas emissions emitted in Canada.

There are a lot of activities undertaken in the energy sector to respond to the issue, and it's not possible to list them all. To give you some sense of the dimensions, as of this fiscal year, something more than 60%—I would say it's 63%—of our expenditure on non-statutory items within the energy sector budget is wholly or primarily in support of the government's climate change policy.

A somewhat smaller percentage is there in terms of staff. The reason for that is because our grants and contributions funds are quite heavily balanced toward climate change mitigation efforts.

That number will in fact go up next year. You will all no doubt be aware of the announcement in the 1997 budget of a fund that would be available for incentives to help level the playing field for energy efficiency and renewable energy investments. Once that fund is in place, the percentage of our effort will be around 70% devoted to climate change.

As with Environment Canada, there are several strategies we employ in support of this file. We share with Environment Canada the responsibility for policy development. With Environment Canada and Foreign Affairs, we share responsibility for negotiating our international commitments.

Dr. Slater mentioned the ADM core committee. I don't need to talk about that a lot more. Similarly, he talked about the federal-provincial coordination effort, which is an effort co-managed by NRCan and Environment Canada, all of it in support of the joint ministers meetings that occur every year, and of course you're well aware of the one that occurred last week in Regina.

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NRCan is at the centre of the government's economic and analytical capacity in support of this file, but I would not want to in any way suggest we are all of it. Many other departments are important participants in that. Nonetheless, NRCan provides the economic modelling and forecasting, many of the detailed economic studies, and very importantly, understanding energy use in the economy. One of our initiatives from a few years back was establishing an energy use database that puts Canada in the forefront of OECD countries in actually understanding what goes on throughout the economy and providing us with a design of further measures to improve the efficiency of energy use. Of course this analytical work is coordinated through the ADMs committee.

Our major program area is in energy efficiency, where we deploy a broad range of programs covering all sectors of the economy, which I think is important, because this is an issue that really touches all sectors of the economy. And we use a broad range of instruments: suasion information, volunteer engagement, regulation and financial incentives.

These are coordinated with the provinces through a series of letters of cooperation that we have with most provinces. In addition, we coordinate internationally; most importantly with the United States but also with other countries, for example, through our activities in APEC and the hemispheric energy initiative, in which we cooperate with Latin American and North American countries.

Voluntary action.... On the slide Dr. Slater showed you, the VCR—voluntary challenge and registry program—is shown reporting to the joint ministers. That's an important point that I didn't make in my paper. It is a joint federal-provincial program but it has been housed at NRCan and NRCan provides the largest component of support to that program, including through a series of, if you will, supportive programs such as CIPEC, which is the Canadian industry program for energy conservation, the energy innovators program, and a series of memoranda of understanding and agreements with a variety of industry associations.

We also work in the renewable energy area, where we have a renewable energy strategy launched in 1996 and under which we promote renewables through enhancement of investment conditions—and I refer there to some of the recent tax measures designed to level the playing field through market development efforts. Dr. Slater referred to the green power initiative, which is a joint NRCan and Environment Canada initiative and of course a significant effort in the area of technology development.

More generally, with respect to technology development, it's important to make the point that the technology activities are very tightly linked to the other programs. They support, for example, the regulatory programs. They assist Canadian business in the development and marketing of new technologies and they lay the groundwork, or help lay the groundwork, for technologies of the future. NRCan has three laboratories for energy technology, two of which are at this point almost wholly devoted to activities that are supportive of climate change mitigation strategies. These are at Varennes, south of Montreal, and Bells Corners outside of Ottawa.

Again, there is coordination at several levels. The Panel on Energy Research and Development is a key component of that inter-departmentally in the federal government. Federally-provincially the same letters of cooperation through which we collaborate on energy efficiency are also used for energy technology, and internationally there are several vehicles.

Finally, Mr. Chairman, just to wrap up, Dr. Slater referred to the work on government operations. Again, it's a shared file among several departments. NRCan helps to coordinate some of that work through the production of a document called Emissions Reductions From Federal Operations, which we table every year with the voluntary challenge and registry program. We support that work through several programs that I've listed in my paper.

Mr. Chairman, with that, I will turn it over to Paul.

The Chairman: Thank you, Mr. Cleland. Mr. Heinbecker, please.

Mr. Paul Heinbecker (Assistant Deputy Minister, Global and Security Policy, Department of Foreign Affairs and International Trade): Thank you, Mr. Chairman.

I should begin by introducing myself. I'm the assistant deputy minister in the Department of Foreign Affairs for international security and global affairs, which means basically national security and human security. Under the latter we include, among other things, environment, landmines, terrorism, crime, drugs, and so on.

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If I could say a brief word about the role of the foreign affairs department, essentially we have the mandate for international negotiations, which we conduct on behalf of the minister. To cite the act, it says:

(c) conduct and manage international negotiations as they relate to Canada;

(j) foster the development of international law and its application in Canada's external relations;

So we work in a kind of triumvirate with Environment Canada and NRCan, and we also work very closely with all of the other core departments. I've been a member of the core committee of assistant deputy ministers since I came back from Germany, where I was ambassador. I came back in September 1996.

Another little bit more on the foreign affairs department: Our history in environmental activities goes back close to the beginning. We've had a division for environmental issues since 1972 approximately, and indeed I was in that division at that time. Since then, Jim Bruce has played a leading role in the Stockholm Conference itself, and we have participated in leading positions in most of the significant environment conferences since that time, including Rio.

When I returned to Ottawa in 1996, I joined the core ADM group. We've been meeting on an increasingly frequent basis ever since. In October of this year, I became more directly involved in the negotiating process. Along with Tony Clarke of Environment Canada, we led the negotiations in Bonn in October.

If you like, I could say a word about Bonn and a word about Tokyo.

Mrs. Karen Kraft Sloan (York North, Lib.): Yes, please do.

Mr. Paul Heinbecker: The discussions in Bonn were very difficult. My own assessment is that we actually collectively set back the process in Bonn. What happened was that the chairman began with his own text, which we thought was not a bad text, but it needed some improvements. I presume everybody else thought the same. He started with a position that nothing could go into the text unless there was a consensus to put it in the text, but he abandoned that stance almost immediately. What we witnessed for the next while was a series of efforts by various people to add things to the text, often when there had been agreement or consensus. The result was that the document became more and more black with brackets. In fact, a good deal of the text is now bracketed.

Partly for that reason and partly in light of the fact that it is a difficult and complex negotiation, the Japanese, who are the hosts at Kyoto, convened a ministerial meeting in Tokyo—I can't remember—last weekend, I believe. The objective was to try to clarify differences and to see what kinds of common understandings might evolve. There were two parts to that meeting.

The first part of the meeting was among the so-called annex one countries. We discussed more or less the entire text, not in any detail, but just in its generalities of flexibility, of entry into force, of compliance and so on. I think it's fair to say that while the positions remain fairly firmly held, some movement was evident at that time. Whether it's enough remains to be seen, but some movement was evident.

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The second part of the discussion took place with the developing countries which came. There I would have to say the result was less encouraging, because China and India, two of the major emitters and two of the major players in the group of 77 and China, both boycotted the Tokyo meeting. We did, however, get some relatively positive contributions from the Indonesians, from the Koreans, and from the Mexicans. There was interesting discussion also on the part of the Brazilians. So I would say the odds on achieving an agreement at Kyoto went up at Tokyo, but we still have a considerable distance to go.

I think you wanted us to finish our presentations by this time.

The Chairman: That's very kind of you, Mr. Heinbecker, and we'll certainly find out more through the questioning by members.

Mr. Gilmour.

Mr. Bill Gilmour (Nanaimo—Alberni, Ref.): Thank you, Mr. Chairman; and welcome, gentlemen.

Mr. Cleland, you said Natural Resources has a responsibility for doing the economic analysis. We're going to Kyoto in a couple of weeks. I would expect the government has worked out the different scenarios of meeting the 1990 emissions to the year 2000, 2005, 2008, 2010, 2012, 2020, and based on the various ways to achieve those, whether they be incentives, tax structure, or whatever. Have those economic analyses been done?

Mr. Mike Cleland: Several pieces of economic analysis have been done over the last several years, and most intensively more recently—not only work that has been done within the Government of Canada but, I think it's important to note, work that has been done outside, sponsored by other organizations, and that has been brought into the picture. The Conference Board prepared a very useful document quite recently, a synthesis of a lot of the economic studies which have been done on this issue. We have also done some work internally, cooperatively among Industry Canada, Environment Canada, ourselves, Finance, and other departments. We've assessed, yes, the potential impacts over a number of years, and a variety of strategies for dealing with the issue.

Mr. Bill Gilmour: Could you table those with this committee—I'm not expecting a mountain of documents, but brief summaries of the different scenarios?

Mr. Mike Cleland: If you would like, Mr. Chairman, I could certainly table the Conference Board document, which you would find very useful. Some of the work we've done has not actually been released at this point, but I will undertake to table with you everything that's available, if that's agreeable.

Mr. Bill Gilmour: What we're looking for basically is Canada's position when we go into Kyoto, based on the different scenarios and where we're going to be.

Has any work been done on after Kyoto, on the implementation? Which department looks after that?

Mr. Mike Cleland: Again, that work has been undertaken cooperatively among the various departments. Clearly, as ministers have discussed this over the last several weeks and months, they have had the benefit of the analysis and of the sorts of measures you would need to take.

None of that has yet been crystallized in the form of a program or of a specific set of propositions. The general feeling among ministers and officials, I think, was that as we looked at the kinds of measures you would need to undertake, the only thing which would make sense would be a package that was dealt with jointly among the provinces and territories as well as by the federal government. So there is nothing that would amount to a plan or a specific set of propositions, but of course ministers have had the benefit of an indicative or illustrative set of possibilities.

Mr. Bill Gilmour: I guess that's my difficulty: when you say there isn't a plan. We're two weeks away, about to sign onto a legally binding treaty, and we don't appear to have a plan. Will the government go with an open deck, try to find out where everybody is and then decide? It seems rather bizarre that our government doesn't have a plan for something of this importance to Canadians.

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Mr. Mike Cleland: Perhaps my choice of terminology was unwise. We don't have a plan in the sense of a specific set of detailed measures that we know would achieve the target. The principal reason for that is because it is by no means obvious that the most sensible or appropriate way to do that would be through federal action, acting unilaterally. The great bulk of the potential measures out there to be used are in the hands of the provincial or sometimes municipal governments, or are things that can be done by the private sector.

We have a good sense of what the general directions would be, and at the joint ministers meeting in Regina last week those sorts of directions were discussed. Provincial ministers accepted, I think with some relief, that the federal government wants to proceed in a cooperative way working with them.

We are going to Kyoto with a good sense of what we're looking at. We have a series of steps that will occur after Kyoto, prior to ratification of any agreement. The intent is that we will have a satisfactory plan in place involving the provinces, the territories, other levels of government and the private sector by that time.

The Chairman: Mr. Knutson, followed by Mr. Herron, Mr. Bigras, Mr. Pratt and probably the chair. Mr. Knutson.

Mr. Gar Knutson (Elgin—Middlesex—London, Lib.): You talk about a growth in greenhouse gases of roughly 13%. Is that as of now?

Mr. Mike Cleland: The numbers we have are for 1995 at this point, and that's more in the range of 10%. There are some numbers for 1996, but they are preliminary and won't be confirmed until next spring. I don't know if it's 13%, but it is almost certainly over 10%.

Mr. Gar Knutson: What do you think they would be for 1998?

Mr. Mike Cleland: I wouldn't want to speculate. I don't mean to avoid your question, but the difficulty is there are so many factors that bear on that. For example, if our economic growth in 1997 remains robust and that continues into 1998, that will have a very significant impact on the emissions.

Mr. Gar Knutson: Assume for the sake of argument it does and just give me a guess.

Mr. Mike Cleland: I would not want to give you a guess. If you look at where we've come from over the past several years and go back to 1990, we've seen growth compounding at 1.5% or more per year.

Mr. Gar Knutson: I've read about the possible conversion of some nuclear energy in Ontario to coal fire. Emission levels may be up to 18% above the 1990 levels once that starts to kick in.

Mr. Mike Cleland: I've never seen numbers that high. The effect of the changes in Ontario Hydro will be significant, there's no question about that. What that will ultimately do remains to be seen. In terms of our forecast, the effect of that will be to increase the numbers in 2000. But if Ontario Hydro's plans, as it has stated them now, are borne out and those reactors come back on line, that will wash out by 2010.

Mr. Robert Slater: The projection on a business-as-usual case that takes you to 2010, if I recall correctly, suggests an 18.6% to 20% increase in carbon dioxide emissions above 1990 levels.

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Mr. Gar Knutson: Sorry, for 2010 it's an 18% increase?

Mr. Robert Slater: An increase of 18% to 20%. That's a business-as-usual case.

Mr. Gar Knutson: The committee hears often about how we have to coordinate with the municipalities and the provinces, and I'm in full agreement with that, but there are some things we can do now as a federal government at little cost or no cost. When will we start hearing some specific ideas being kicked around?

I'll give you just one. Yesterday I was lobbied by the railway companies. It was Railway Day on Parliament Hill. They mentioned they were looking for a a speedier capital cost allowance. They weren't even thinking of tying it in with the greenhouse gas issue. They just want to see the railways more competitive with the Americans. That's a federal issue. It's a federal income tax issue.

Is anybody looking at specific ideas the federal government can do without getting into the whole business of negotiations with the provinces or municipalities? When are we going to start talking about specifics?

Mr. Robert Slater: On that specific example, they came and saw us as well. They were asking for a level playing field, as far as they were concerned, with a tax regime equivalent to that in the United States, which would have cost them, if I remember the numbers correctly, some $50 million to $60 million a year.

Mr. Gar Knutson: Are you talking about a tax on diesel fuel, or just their capital cost allowance?

Mr. Robert Slater: Just the capital cost allowance regime. They volunteered that would have lots of advantages not only for greenhouse gases but for smog and acid rain. At that time they hadn't actually quantified that, but that's exactly the sort of measure you would want to look at.

I would point out that when they made their comparison with the United States...other levels of taxation are levied, and there are things such as benefits accruing from medical programs which they did not include in their calculations and which a level playing field analysis would suggest you should.

Mr. Gar Knutson: I think the point around the greenhouse gas issue is that by lowering or having quicker depreciation rates for railways, if we're going to end up with more short-line railways, a better railway system.... The medical benefits are a bit of a side issue. My main question, though, is when will we start to see some specifics from the departments on what Canada should be doing?

Mr. Robert Slater: There are lots of specifics. There are many suggestions out there. One of the things we have to do, and we have to do it collectively, is to find out which set of measures gives you the maximum result for the expenditure. I can't tell you right now how many millions of tonnes of carbon dioxide emission reductions you get from a tax provision of the type you're talking about. You would have to do that and check it out with other people claiming similar sorts of benefits before you would be in a position to make a sensible investment.

Mr. Gar Knutson: I've read in the newspaper that the Americans have announced a $5 billion program. Are we looking at that to see what we can learn? Maybe we should bring in something comparable, which would be a $500 million program. Do you know any of the details on what that is?

Mr. Robert Slater: Yes, that's a technology development program. It's operating on the belief that a lot of the solutions to this problem are going to be found by way of new technologies. The United States federal government is proposing to go to Congress early in the new year with requests for $1 billion a year as the federal share of what would be a significant technology development program. We would very much like to collaborate with the U.S. government to participate and share in the benefits.

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Mr. Gar Knutson: One last question for Foreign Affairs. What does “legally binding” mean in this context?

Mr. Paul Heinbecker: Every treaty is legally binding. What makes it different is the objectives. This will have quantified targets and timetables that one will be legally obliged to meet. You have to meet a certain limitation or reduction by a certain period of time.

Previous agreements, and the convention itself, talk about “aim to”. This one will not talk about “aim to”. That flexibility will be removed.

Mr. Gar Knutson: You can expect penalties, then? How do we enforce it?

Mr. Paul Heinbecker: It's very difficult to enforce international agreements. We are talking about what penalties might be. There are various schemes on the table. The Brazilians have a proposal for a financial penalty for non-compliance, which is somehow related to joint implementation. It's rather complex. Other possibilities could include loss of voting rights or possibly loss of trading rights, if that's accepted. So there are various schemes there.

One of the difficulties.... I don't want to quote an unnamed senior Foreign Affairs source, because it wasn't me. I don't know who it was. But I read in this morning's paper that there is essentially no sheriff out there. From a compliance point of view, the most important thing is the peer pressure. There's no court you can appeal to, there's no police department. But once we all formally undertake these kinds of obligations, there are reporting responsibilities, there's a monitoring process, and we'll have to face each other, essentially.

Mr. Gar Knutson: Is that any different from Rio? We had peer pressure in Rio, and we're, what...?

Mr. Paul Heinbecker: Two things are different from Rio. I was at Rio, not for entire session but for part of it. There was no question that it was a major step forward, but I don't think people understood fully how difficult it would be to live up to it. So that's one difference.

The second difference is the idea that having seen that Rio isn't going to be enough, you now start to put down objectives that are no longer “aim to” but “shall”. Therefore, it's more than Rio. Your other partners can come to you and say, “You said you would do this, and we said we would do that, and you're not living up to your obligations', whereas in Rio there was more wiggle room allowed to us all.

Mr. Gar Knutson: So it's one of language, then.

Mr. Paul Heinbecker: I think it's one of degree. It's a more serious obligation.

Mr. Gar Knutson: But not to the point where we're going to agree to impose penalties, it seems.

Mr. Paul Heinbecker: Some kinds of penalties might be possible.

Mr. Gar Knutson: And the Canadian position on this is...?

Mr. Paul Heinbecker: The Canadian position is that fundamentally the most important objective is not to talk about the compliance but to talk about meeting the objectives, and to meet the objectives. If there is to be a penalties provision, we would prefer that they be of a kind that didn't involve trade sanctions, for example, or financial penalties, but went to such questions as voting rights, emissions trading rights, and so on.

Mr. Gar Knutson: I think I'm out of time.

The Chairman: You are, but if you have a short question to conclude, by all means.

Mr. Gar Knutson: Okay.

Why is that? It seems to me, if we're really serious about this, we would agree to submit to a regime that had serious penalties. But that's from a novice. I'm certainly no expert in international affairs.

Mr. Paul Heinbecker: The difficulty is—for example, on trade questions—we would prefer to keep the trade and environmental issues separate, if we can.

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It comes in the end to two things. First of all, in this protocol only some countries will accept binding obligations. That is to say, about 30 out of 160 or something like that. It's essentially the annex one countries, which are the countries of the OECD plus the countries of the former Soviet Union, and there's a wrinkle with the former Soviet Union. That means there are about 130 countries that don't accept an obligation to reduce greenhouse gases.

On the trade question—not to say emissions trading, but normal goods and services trading—there would be a trade distortion effect if you put compliance penalties on countries that have accepted binding obligations. That could encourage trade to go between countries where there are no such obligations.

Mr. Gar Knutson: I understand that. But from the point of view of the community, do you understand that Environment Canada is going to go on this massive effort to educate Canadians on how serious the problem is and how we need to take urgent action and the consequences of it? Then, at the end of the day, we're going to say what happens if we don't do this, so as a country we're going to maybe lose a voting right or we're going to face pressure of our peers. It seems to be a double standard and we're not being consistent. If it's a serious issue, then to me it would seem there should be some penalties. We take the issue of say the trading of milk seriously, and we have penalties if we breach the agreement on milk or supply management, yet—

The Chairman: We will have to move on. This is a question that has puzzled a lot of people, but evidently we are not in the milk business here.

[Translation]

Mr. Herron, followed by Mr. Bigras.

[English]

Mr. John Herron (Fundy—Royal, PC): I guess a fair amount of discussion with respect to the difference between Rio and Kyoto is the theme of meeting our objectives. In terms of doing that, I do have some questions with respect to the dialogue that has perhaps gone on between provinces or even with the public or the federal government itself with respect to implementation. Can you tell us if there's anything innovative going on with respect to a national transportation policy on that issue that Mr. Knutson alluded to, transportation concerns?

Mr. Robert Slater: I'd actually refer you to the gentleman you had as a witness yesterday, Ron Sully, who's ADM of transportation and is our window; he represents the window into the transportation sector. As you well know, it's the largest single source, as a sector, of greenhouse gas emissions and it's therefore going to have to be a very substantial part of the solution. There is work on a transportation policy and within that there must be consideration of this issue.

Mr. John Herron: On that same theme, again with implementation, you referred to the necessity to develop new technologies, maybe in joint collaboration with the Americans. When it comes specifically to energy efficiency, we heard from another witness, I think, that there's only $15.6 million spent annually on that particular initiative by the federal government. In your estimate, would you consider that number to be relatively low?

• 1635

Mr. Mike Cleland: I guess whether it's high or low is a matter of perspective. I suppose it's fair to say that the scale of the challenge in front of us, as demonstrated by what's been happening to the growth of our emissions, is greater than the effort made by governments to date—and by that I mean provincial and federal governments—and that's also true in other countries. By that definition, I suppose one would conclude that we're somewhat short of the mark.

In point of fact, you're not far off on the number. If you put together what we do on efficiency R and D with our programming, it comes to about $44 million a year. That's a substantial sum of money for programming in this day and age. After program review, it's actually unusual for federal government departments to have those kinds of resources devoted to a single issue of this sort.

So there are some real and I think quite fruitful efforts going on, but, as I say, the numbers would indicate that more needs to be done.

Mr. John Herron: I would think it looks kind of low.

Something that troubled me a little bit with respect to the enforcement aspect of this debate was that if this turned out to be a trade deal, for a country such as Canada, which essentially has an export-driven economy, any kinds of penalties that would focus on a trade component could be very devastating to our overall economy. Specifically speaking, who is the lead minister? More importantly, which is the lead department in Kyoto? Is this an environmental issue?

Mr. Robert Slater: For Kyoto, while there is the ministerial section of the meeting in Kyoto, the ministers heading the delegation will be Minister Stewart from Environment and Minister Goodale from Natural Resources.

Mr. John Herron: On a cooperative basis?

Mr. Robert Slater: Yes, on a cooperative basis.

Until the ministers arrive, the delegation is to be headed by Paul Heinbecker from Foreign Affairs. As Paul mentioned, the responsibility in the government for foreign policy—which includes foreign negotiations within meetings such as this—is the responsibility of that ministry.

Mr. John Herron: My last question is with respect to the federal government's role in terms of engaging the private sector, and in terms of finding solutions. From a taxation perspective, can you tell me if there has been any work done with respect to the economic instruments that would focus perhaps on providing equitable incentives for the development of alternative energy supplies?

Mr. Mike Cleland: Some work has been done. In fact, some measures have been introduced recently. In the 1996 budget, there were some changes made to provide a better incentive environment for renewable energy. Similarly, the 1997 budget measures covered energy efficiency, as well as renewable energy. Those measures are close to being designed, and we hope to have them launched very shortly.

Mr. John Herron: Can you give us an example?

Mr. Mike Cleland: The particular case from the 1996 budget essentially was an attempt to broadly replicate for the renewable industry the incentive conditions that are faced by the oil and gas industry. The analogous activities to the Canadian exploration expense would be given a similar sort of tax treatment, in addition to which provisions were made to allow a broader flow out of the tax benefits that renewable energy companies might have access to.

• 1640

So there were some changes simply to improve that environment, and the renewable energy community responded very positively. What we hope to do is take that a little bit further in the not very distant future. I'm sorry I'm not in a position to talk about the details. It has been subject to a fairly extensive consultation process this past fall. There is a consultation document that I could make available to you, but I'm not in a position to talk about the specific measures.

The Chairman: If you would make that consultation document available to members of the committee, that would help.

[Translation]

Mr. Bigras, followed by Mrs. Kraft Sloan and the Chairman. Mr. Bigras.

Mr. Bernard Bigras (Rosemont, BQ): I have two concerns in connection with the document that the NRCan ADM has just given us. I have an environmental concern, needless to say. For a month now, I think we have no option but to conclude that we will not reach our objectives concerning the reduction of greenhouse gas emissions.

What is more serious, however, and what I note this afternoon, and I quote the ADM's document: "production and use contributes about 85% of the GHG emissions emitted by Canada." And you also tell us that 63% of the energy sector budget is spent in ways that are wholly or primarily in support of the government's climate change policy. I find this is a rather pessimistic finding and it brings me back to the efficiency of government expenditures respecting climate changes.

I wanted to know whether you have evaluated the inefficiency of your measures in this area, because that seems essential to me, when we're going to Kyoto and we're going there to meet objectives, and it's quite clear that that's the objective of Kyoto. We have to know exactly what the evaluation is of the action you've taken and whether you've taken any remedial action in order to meet the objectives set in Rio and the ones that will be set in Kyoto. That's my first question.

[English]

Mr. Mike Cleland: With respect to the efficiency of the measures, I believe you heard, if not last week then the week before, from my colleague Mr. Bill Jarvis, who is the director general at the energy efficiency branch, as well as from the Auditor General. I believe the Auditor General had some comments, some of them critical, of the degree to which we have evaluated our programs to date. But I think they also acknowledged and I hope Mr. Jarvis was able to explain to you that we've made considerable progress in doing that.

I referred earlier to the work we've done to develop a national energy-use database. That is the most critical component of being able to understand the efficiency of the measures, which means digging very deeply into the way households and businesses use energy. What are the factors that influence their use of energy? I would say we've made very considerable progress in the last five years in getting a better handle on that, but I would not want to suggest that we have it nailed down. It's a complicated subject to get a clear fix on.

As we've evolved over the last several years, we've also changed the programs. We've also done several things to try to increase their efficiency, to try to increase their penetration and their salience for consumers and for businesses. It's a very key point, and as I say, I wouldn't want to claim that we have it absolutely right. I think we've made very considerable progress using the resources we have.

[Translation]

Mr. Bernard Bigras: As for your Department's recommendations, about the quantitative objectives of the Canadian position in Kyoto, I wanted to know which elements, which analytical grids you're using in connection with your recommendations, regarding the position Canada will take in Kyoto, because it's a bit risky. If the inefficient measures grid is used, isn't there a risk of levelling down rather than up?

• 1645

[English]

Mr. Mike Cleland: Maybe I could start the answer and then ask one or the other of my colleagues to take it up.

You would not, simply based on the energy efficiency measures that the federal government has in place at this point, necessarily arrive at the sorts of positions we're talking about for Kyoto or other countries are talking about. The scale of the challenge is, for certain, a great deal larger than that. Hence my point earlier that we do need to develop a national plan engaging all parts of Canadian society.

Perhaps Bob or Paul would like to pick this up.

Mr. Robert Slater: Perhaps I could, and suggest that with the nature of this issue, as I believe your committee has examined it, this is not a 13-year pollution control project. This is not a project; this is fundamentally changing the carbon content of the Canadian economy and trying to find a way of having economic growth and at the same time meeting the objectives and the obligations that are going to be made in Kyoto.

Kyoto is not a place where Canada alone goes to make a pledge. It is a place where all countries will come to arrive at an agreement. So Canada's obligations will be based upon its interest in maintaining its position as part of the international community with countries in similar positions.

With an obligation entered into in Kyoto, with the sort of target of 2010 and beyond, because clearly this is a target that is not just for a moment in time but is on a long-term basis, the question becomes: How do you mobilize the best talents within the country to assist in arriving at that goal?

The point that's being made is that while the federal government is a key player in the piece, it is by no means the only player, and what ministers said in Regina last week was that the solution to this would not be an invented-in-Ottawa solution. It would need to be effective, efficient and affordable. It would need to engage Canadians from all walks of life, from the individual in the home through to big enterprises like government and business, and they said we must take the time to do that correctly.

It is actually very difficult to engage in those discussions on how to organize ourselves to achieve that until we have the agreement from Kyoto in hand.

[Translation]

Mr. Bernard Bigras: If Canada is going to have an influence on the countries attending Kyoto, it has to start off by having a position, which it hasn't got, and I don't think it will be just the day or the week of Kyoto that we're going to influence other countries. But anyway.

My question is for Mr. Heinbecker with regard to the meeting that was held in Tokyo. We know there are two schools of thought, the one promoting a flat reduction rate, which is supported by the European countries, among others, and the Japanese school of thought, if I can use this expression, which promotes a differentiated rate. I would like to know what people had to say about this issue in Tokyo.

• 1650

[English]

Mr. Paul Heinbecker: You're quite right. I will offer a word about the European bubble and then a word about the Japanese proposal and differentiation.

The European bubble calls for reductions to minus 15% by the year 2010. That sounds pretty good. It is pretty good, but there are a couple of things to keep in mind in that.

On the one hand, its coverage of gases is smaller than the coverage of gases proposed by the Americans and the coverage that we're proposing. The Europeans cover only three gases, whereas the Americans cover six and so would ours. Looked at in that sense, the European numbers actually come down quite a bit.

The second thing is that the European bubble is effectively a differentiated system. The Germans reduce by a substantial amount. I think the French come in at about zero and the Dutch at about minus ten. I think the British are somewhere around minus ten or minus fifteen. But some other countries actually grow under this scheme. They are primarily the poorer countries of Europe, that is to say Ireland, Portugal, Greece and Spain. In addition to that, and interestingly, Sweden grows. Of all of the countries in Europe, the Swedes have the economic and geographic structure most similar to Canada's. They have a forest economy; they have a mineral-based economy; they have large distances; they have cold climates; and the rationale for why they would grow under the European bubble is that they are phasing out nuclear reactors. So it all sounds pretty familiar to us.

That's one dimension of it. The Europeans are not proposing a minus fifteen across the board for all European countries. It is, rather, already differentiated.

The Japanese proposal is essentially to say that it should be differentiated for everybody, and they've stated three criteria. One is the amount of carbon per GDP. Another interesting one, for us particularly, has to do with the rate of population growth. The Japanese proposal is interesting because it allows the idea of taking national circumstances into account in an explicit way.

There's another idea on the table about which you've heard less because it's newer. Its significance we haven't quite managed to analyse. It's a Russian proposal. The Russian proposal is to have what they call an annex one bubble, which would cover all of the participating countries, including Russia. Russia itself would agree to stabilize by the year 2010, which, given the collapse of its economy, is not too major a challenge. Effectively, that would change the outcome to one where countries would state their position and that would be the obligation that they would live up to. They wouldn't all be the same, but they would be expected to do what they said they were going to do. That's another notion of differentiation.

You mentioned another train of thought that was at the meeting in Tokyo, and you're quite right. That is the idea of equivalence of effort that began to go around the room. We're not sure yet whether this will become helpful or not.

If you start with what I said at the beginning, different kinds of gases, the actual European effort would be substantially less with broader coverage of gases. Some have calculated that it would be in the order of 25% from business as usual, or maybe a bit less because they will argue that they have made more progress in the interim than others have.

Under the American proposal, theirs is about a 25% or so reduction from business as usual. Depending on where Canada comes out, we would be in the broad general neighbourhood of a 20% to 25% reduction of business as usual. If you take that as a basis, you might actually be able to find more common ground. That's what we were talking about in Tokyo when we were mentioning equivalence of effort rather than targeted numbers that might be based on different mixes of gases and the absence of sinks.

• 1655

The Chairman: Mr. Pratt, followed by Madam Kraft Sloan, Mr. Axworthy, and the chair.

Mr. David Pratt (Nepean—Carleton, Lib.): Unfortunately I had to attend another meeting a little while ago, so perhaps this question has been asked before, but I would like to get some indication as to how the mechanics of the government's response are going to work their way through the system. I'm thinking primarily of items that can be dealt with exclusively by the federal government in terms of tax changes and specific grants, let's say, in terms of grants to organizations concerning measures for greater energy efficiency.

Would these changes be implemented by way of the federal budget in the instance of tax changes, or would they be part of a stand-alone Kyoto package that the government would put forward for consideration by the House of Commons? Has that been decided yet?

Mr. Robert Slater: I don't think it has. Such a decision would be made under the authority of the Minister of Finance.

Mr. David Pratt: To your knowledge, then, no decision has been in terms of the type of package that we might see in the House of Commons.

Mr. Robert Slater: That's right.

Mr. David Pratt: Let me ask another question. You mentioned that you were involved in the discussion with respect to the provinces. I've noticed, at least over the course of the last year or so, some changes in provincial regulations and provincial policies that seem to run exactly counter to the direction we'd like to see happen in terms of measures that would reduce rather than increase the amount of greenhouse gases.

I'm thinking primarily here of Ontario and the changes that have been made with respect to public transit. Previously, 75% of public transit expenditures in Ontario came from the province, with the balance funded by the individual municipality. That whole funding arrangement has changed dramatically.

Another thing that comes to mind, of course, is the insulation standards for homes in terms of the building regulations and the relaxation of insulation standards.

Have the provinces indicated any willingness whatsoever to rethink or reconsider some of these measures that seem to run counter to what are going to be our commitments at Kyoto?

Mr. Mike Cleland: I guess I would have to say no, not specifically.

Clearly over the past years—and I think you're correct—by and large the provincial effort has not been what we might hope for with respect to their energy efficiency programs and with respect to some of the kinds of measures that you cited in the case of Ontario.

I think, though, that the sense we certainly had coming out of the meeting last week in Regina is that we have turned a corner. There is a clear recognition that Canada has to be a credible player in the international negotiations and that we don't have the option of sitting out. And in that event, we don't have the option of standing still. Clearly, I think, we have turned the corner. I think it will take some time to start seeing the results, but that is exactly what we hope to generate some momentum for over the course of the coming year.

Mr. David Pratt: Do I have time for one more question, Mr. Chair?

The Chairman: Yes.

Mr. David Pratt: Very briefly, one of the things that has been discussed in the past with respect to tax changes is of course the class 43 issue, the capital cost allowance issue. It was raised a couple of days ago at this committee in connection with co-generation projects, waste heat and district energy projects. Do you think Canadians are going to become more familiar with those types of projects in the future as one of the possible responses in terms of the government's position on meeting its commitments?

• 1700

Mr. Mike Cleland: I would say I hope so, yes. Some Canadians are familiar with them. As you may be aware, there have been a few communities where we've had some success in that area.

I think the question really comes down to a couple of things. One is what are the best instruments to move that along. It may or may not be the tax system. One of the things characteristic of district energy systems is that their success or failure depends on a lot of factors. For example, it depends on the provincial regulatory structure for electricity. As long as you have a monopoly supplier of electricity, your potential for co-gen projects is obviously seriously diminished. It depends on municipal planning regulations and the activity of the municipalities. It depends on a lot of very specific circumstances, which vary from community to community.

The likelihood, I would think, if you were going to try to promote district energy systems further—and the opportunities are there, as far as we can tell—would be on a case-by-case basis. Then you would have to ask what would be the instruments you would use in that case. But clearly it's a very good example where provincial and municipal participation will be key.

Mr. David Pratt: I have a follow-up on that very point. Do you think the government has a role in taking a lead with its own buildings? Obviously it's not subject to provincial and municipal regulations and it can work on its own with heating and lighting its own facilities. Do you see an increased or expanded role for the government in that regard?

Mr. Mike Cleland: I'm not sure I can give you a very specific answer to that. I would think where there are good opportunities.... The federal government is clearly committed to reducing emissions from its own operations. Bob Slater referred to several things.

In areas where there are building complexes and those kinds of opportunities arise, I would think yes. The difficulty is in the case of stand-alone buildings. It really depends on what is going on in the community at large. But it's something that has to be part of the mix.

The Chairman: Mrs. Kraft Sloan, please.

Mrs. Karen Kraft Sloan: Thank you.

I apologize, because the question was answered when I was on the phone and I didn't hear the response. I'm curious about emissions trading. There has been a lot of discussion internationally about emissions trading. I'm wondering how this debate is shaping up with the pre-Kyoto meetings.

I'm trying to understand what the parameters would be for emissions trading, what the criteria for eligibility would be. Are they country to country? Are they within a country? Perhaps you could tell me a little about how the debate is shaping up.

The Chairman: Possibly within a few minutes, if you see what I mean.

Mr. Paul Heinbecker: As the chairman implied and as I think you implied also, this is a complicated issue, but an important one.

I think the fundamental principle is that the broader the reach of emissions trading the more efficient it is and probably the more effective it is. It means you would certainly want it nationally. You would probably want it among countries in similar circumstances. I'm thinking of, say, Canada and the United States—maybe NAFTA-wide. It would be better still to include the European countries and Japan, Australia, and so on, and indeed the developing countries.

This proposition hasn't yet been accepted in the negotiations. It's one of the areas in which developing countries are showing some degree of suspicion, I would say, about how it might work, and whether it doesn't just amount to being a loophole.

The Americans have some experience with emissions trading in acid rain and the Clean Air Act. It's probably fair to say that emissions trading wouldn't start until about 10 years after the agreement was signed.

By the way, the first questioner said something perhaps I could correct, that we're going to sign an agreement at Kyoto. We're not signing an agreement at Kyoto. The agreement will not be open for signature until some time afterwards. What we're trying to do, though, is to work out a text in Kyoto.

• 1705

It raises a lot of questions: the scope of the system; which greenhouse gases would be covered; what sectors would be covered; whether they include mobile sources; how you cover sinks; and in terms of participants, whether non-emitter sources would be allowed to buy permits. There would be questions on initial allocation of equity: who would set the rules for trading; who would manage the trading; who would monitor the permits; and other questions.

Essentially, this is part of the work that would have to be done in something we're promoting, called the quick start, or prompt start after Kyoto, to get down to more serious business about how such a system would work. This is one of the areas that in principle would allow people to meet their obligations on the most cost-effective basis.

Mrs. Karen Kraft Sloan: My second question was going to relate to some of the upsides and downsides of emissions trading. You seems to have indicated some of those things.

Joint implementation is another issue, and mechanisms for discussion. I understand there are some developing countries, like Mexico, who support joint implementation. Then there are other countries, NGOs or whatever, that have some concern about joint implementation. Perhaps you could provide some information for the committee around this.

Mr. Paul Heinbecker: It's one of the more perplexing problems we're facing in the negotiations. That is why there is the extent of opposition there seems to be to the idea of joint emissions trading with credits. The credit part, I suppose, is where the rub comes.

The position of the G-77 is essentially that this is another one they're suspicious of. They probably—at the moment, at least—do not support inclusion. Nevertheless, it is a means of technology transfer from the richer countries to the poorer countries. We believe if we keep working away on it and we keep finding countries among the developing world who benefit from it, that will be probably the most persuasive argument we can make.

For example, Costa Rica is in favour. Argentina seems to be in favour, and signed an agreement, actually, with the Americans in the month of October. The Mexicans appear to be in favour. I believe you would find Korea also to be in favour. The Chinese are very much not in favour.

The rub comes in I think two ways. First, there's a fear on the part of some countries that rich northern countries would be able to buy, or their firms would be able to buy, for example, part of the rain forest and hold it in perpetuity as part of their way of complying with their own emissions targets. That would take out of the hands of the host country the decision of whether or not they ever wanted to develop that territory. So that's part of the reason.

The other part has to do with credits. The Canadian proposal is that the credits should be shared. I think the example used in the discussions is that you get much bigger bang for your buck building a clean-power station in China and Shanghai than in getting the last tonne of carbon out of a power station in Hamilton or something like that. Therefore, it's wiser to use the money there, but that should count on our side of the ledger.

The Canadian proposal is not that it should count 100% on our side of the ledger but that this is for negotiation; it could be 50-50 or 60-40 or 70-30, either way, depending on what was being negotiated, and how. We're still hopeful that on joint implementation with credits we can persuade enough developing countries to come around, but I'd have to say that at the moment it's tough slogging.

Mrs. Karen Kraft Sloan: All right. That's fine, thank you.

The Chairman: Mr. Axworthy, followed by the chair.

Mr. Chris Axworthy (Saskatoon—Rosetown—Biggar, NDP): Thank you, Mr. Chair. I'm sorry I missed the beginning of the meeting.

• 1710

While no reasonable person would suppose that these international negotiations are very easy to work with or on which to arrive at acceptable settlements, it does seem to me that it would be fair to say that Canada hasn't been all that committed a world citizen in this regard to date. I must admit that I haven't heard anything in the last few weeks of Parliament or today that would suggest to me that we've become any more serious.

I have one specific question in that regard. It flows from something Mr. Heinbecker said that I presume to be government policy. He said we would treat trade and environment separately, and that we would do our best to keep them separate. This is bearing in mind the ramifications of that, which department is likely to be in charge, which is likely to be a subsidiary department, and which interest is likely to prevail. How can we possibly ensure that the environment would be forcefully represented at Kyoto until the ministers show up for the final three days?

The Chairman: That's a terrific question for question period, you realize. Keep in mind that we are dealing with officials here, but go ahead.

Mr. Chris Axworthy: I was aware of that, Mr. Chairman.

Mr. Paul Heinbecker: We'd like to think, Mr. Chairman, that we're a seamless web. As I said in my introduction, the foreign affairs department has been taking a leading role in environmental negotiations since Stockholm. It's part of our mandate. It's what we do.

I'd have to say in addition to that, I think our presence is actually welcome by the environment department, natural resources department, and others. We do have a co-ordinating role. It doesn't mean that one interest or another is going to prevail simply because of who is in the chair. We go to these negotiations with very careful instructions that are written in advance and often not cleared by cabinet. We follow those instructions.

It isn't a question of whether, if I got up and left for a few minutes, environmental interests would be better covered. It isn't the case. We do have instructions, and we do follow them. We do work together. I've been seeing more of Environment Canada and natural resources than I see of my own colleagues in the department. That's been the case for months. We certainly meet, on average, once a week. Lately I would say that we meet three or four times a week.

The Chairman: Is that why you look so happy?

Mr. Paul Heinbecker: Do I look happy? I better work on my look.

Mr. Chris Axworthy: Thanks, Mr. Chairman. I will try to reserve that question for question period. I have a couple of questions I don't think you'll feel are inappropriate for the assistant deputy ministers.

There was mention made of the EU level. Would it not be the case, because of the difficulty of measuring some of the six gases that the Americans would lump in, that in fact if we did commit ourselves to the EU approach, we would be committing ourselves to something that would work more? That would be a more rigorous commitment to reducing.

Mr. Robert Slater: I think it's fair to say, but I want one of my scientific colleagues to confirm this.

We need to reduce all greenhouse gases. Some of the gases in the full package are more potent greenhouse gases than carbon dioxide. Also, their time in the atmosphere is less than that of carbon dioxide, so knocking them out soon actually gives you a proportionately larger benefit. That's my understanding, Mr. Chairman. But I'd like to get one of my technical colleagues to confirm that.

I'd also remind you of the work of the Intergovernmental Panel on Climate Change, which said you probably need to reduce greenhouse gas emissions in the order of 60% if you want to stabilize the level of greenhouse gases in the atmosphere.

• 1715

Mr. Chris Axworthy: In terms of the percentage of the world's nations or the number of the world's nations that see Canada's commitment to be a little anemic, what percentage would argue that 20% reductions or more are necessary, as we agreed last time? Where does Canada sit in the list of those countries that want more significant reductions?

Mr. Paul Heinbecker: As I was saying at the beginning, there are 130 countries, plus or minus, that aren't going to undertake any kind of reduction. So I think we can probably set them aside, because we're certainly better than those. The U.S. is, as you know, to stabilize at 1990 levels in the year 2010, and that's a shorthand for 2008 to 2012.

The Japanese are talking about a reduction of about 2.3%. The Australians have not stated their position yet. New Zealand has not stated its position yet. I think the Russians would probably settle for a return to 1990 emissions by 2010. Some of the G-77 countries want very large reductions, not surprisingly. This is the Association of Small Island States. I've given you the Europeans already.

My expectation is that we will come out in a situation where we will be in the middle somewhere of all of that mix.

The Chairman: Thank you, Mr. Axworthy.

Mr. Cleland, I will start with you and your brief today and follow up a bit Mr. Bigras' questioning.

On page 2 you indicate that $71 million of your energy sector budget, or 63%, is spent in ways that “are wholly or primarily in support of the government's climate change policy”. How long has this been the case?

Mr. Mike Cleland: The most direct answer, Mr. Chairman, is it has been evolving in that direction, most substantially in the last three to four years. The biggest single change was through the process of program review, where this was the area we protected most against the cuts.

The Chairman: Would it be fair to conclude then that in this three or four years you have had adequate time and resources to develop a plan on greenhouse gases for Canada?

Mr. Mike Cleland: I would not conclude that.

The Chairman: So what have they been doing?

Mr. Mike Cleland: Perhaps I can explain. Certainly in the last three or four years a lot of work has been done, as I mentioned earlier in response to another question. A lot of work has been done in developing more effective responses, on developing new regulations on lighting and motors, for example—

The Chairman: On motors? Which kinds of motors?

Mr. Mike Cleland: Yes. Electric motors. There have been other improvements to the energy efficiency programs, and the development of some approaches under the renewable energy strategy, but no, we have not developed a complete and comprehensive plan.

The Chairman: Do you think that perhaps it should have been developed, considering we were heading for Kyoto and it was on the map preceded by Bonn, and preceded by Berlin and preceded by Geneva?

Mr. Mike Cleland: I suppose in an ideal world, yes.

• 1720

The Chairman: Ideal. An ideal world is one that has no deadlines or appointments with destiny, so to speak. These are well-known appointments with the global community, so they're not sprung upon you.

Mr. Mike Cleland: No, they're not, but the other well-known appointments we have are with our provincial colleagues and with a multitude of stakeholders. Three or four years ago, along with Environment Canada, we tried to develop a multi-stakeholder process that went on for the best part of a year to develop a plan. That process produced a very long list of potential measures. At the end of it, a small part of that list was accepted for implementation. Many of the measures, for a whole variety of reasons, were not implementable or certainly were not acceptable to governments, including—and I underscore this—provincial governments at the time. A lot of the work has been done, but that sort of plan—

The Chairman: May I interrupt you, because time here is valuable and you've given me an answer.

In your paper today you deal with an overview, and then with energy and policy analysis. I appreciate very much the effort you made in putting together the policy analysis. Why don't you make any reference in the policy analysis to tax expenditures and subsidies that are presently enjoyed by the greenhouse-gases-producing sectors? Don't you think this is a substantial amount that ought to be highlighted in an overview?

Mr. Mike Cleland: The paper I tabled for the committee doesn't highlight any of the actual substantive details of the analysis we've been doing.

The Chairman: I realize that. Why don't you?

Mr. Mike Cleland: It would have been a substantially longer paper and my understanding was you were looking for a very brief overview presentation.

The Chairman: Well, this is not the first time we have asked for a presentation from you. You remember in December 1995 we had you before this committee and asked you similar questions. They were not forthcoming, I must admit.

We also made a recommendation, which I will read to you. It is recommendation 7:

This committee recommends, in keeping with Canada's international commitments to achieve a stabilization of greenhouse gas emissions, that direct subsidies to the petroleum industry be eliminated as soon as contractually possible.

Has there been any movement in that direction since?

Mr. Mike Cleland: Obviously the response to that recommendation is a matter of policy for the government, and I don't think it's appropriate for me to comment on it.

The Chairman: No, no. Just a moment. This was two years ago, so there was a response. It's nothing that has not been dealt with. I'm just asking you whether there's been any movement in the direction recommended by this committee—yes or no.

Mr. Mike Cleland: The changes of the sort recommended by the committee have not been implemented. As you've stated it, clearly the tax system with respect to the oil and gas industry is broadly similar to what it was at that time.

The Chairman: Why then is there this reluctance in your approach today to deal with any financial fiscal aspects? Out of three pages you could certainly have devoted half a page to the substantial measures, fiscally speaking, you and the Department of Finance have been putting into place over the years that are actually actively facilitating the production of greenhouse gases. Don't you think that ought to be addressed?

Mr. Mike Cleland: Mr. Chairman, with respect, there are any number of things I could have added to this paper with respect to—

The Chairman: I'm asking about this method. Don't you think it ought to be addressed?

Mr. Mike Cleland: It has been addressed—

The Chairman: Where?

Mr. Mike Cleland: —when I appeared before you—

The Chairman: No, I mean today. We are now three weeks before Kyoto.

Mr. Mike Cleland: I was not asked to appear before this committee to address that question specifically. Had I been asked to do so, Mr. Chairman—

The Chairman: Well, of course you were asked.

Mr. Mike Cleland: —I would have provided you with a paper to that effect.

The Chairman: You chose to interpret the invitation in a certain manner, perhaps.

• 1725

Mr. Mike Cleland: Well, I apologize, sir.

The Chairman: You were asked to come forward and to give us an overview, and you chose the type of overview yourself. How come there is no reference to subsidies and tax expenditures in the overview?

Mr. Mike Cleland: If I may, I apologize for any misunderstanding that I may have had, but when Dr. Slater opened his comments, he started by saying that his understanding was that our appearance here before you was to talk about the activities of the three departments appearing before you and how we were working together. That was the substance of my paper.

The Chairman: The activities of your department cover the matter of tax expenditures as well, every year.

Mr. Mike Cleland: They do.

The Chairman: And they are substantial. Could you give us any indication as to what figure they amount to?

Mr. Mike Cleland: Let me be clear on this. The amounts of the tax expenditures pertaining to any part of the economy are not budgetary amounts of the Department of Natural Resources. I'm sure you understand that. I believe the numbers as they stand right now were discussed when some of my colleagues in the Department of Finance were before you on Monday, and I would not want to get into details with which they are considerably more familiar.

There are several areas of tax expenditure that provide tax incentives to the Canadian oil and gas industry. The numbers vary a great deal from year to year, depending on the economic situation faced by the industry and depending on the investment profile of the various aspects of the industry.

I know there were some documents tabled before you, and I could only suggest that I would refer you to those. I couldn't give you better information than those.

The Chairman: In the case of Monday's appearance—and I'm drawing from memory here—your colleague Mr. Toms indicated to us that on an oilsands project of $15 billion, the amount of tax incentives, subsidies, expenditures, or you name it, would amount to something like $600 million.

Mr. Mike Cleland: If I recall correctly, the number was in a range of something like $150 million to $600 million. That number is the net present value of the tax expenditure over the life of the project, so I'm not sure what it would be on an annualized basis, but it would be obviously a great deal less.

The Chairman: Mr. Toms' figure was $600 million. He did not speak of a range. I'm just indicating to you what the amount of tax favouritism, so to speak, is with respect to one project alone, what the advantages are as presently allowed.

In other words, we are here talking about the reduction of greenhouse gases, while at the same time, as a result of existing policies between the Department of Natural Resources and the Department of Finance, there is a policy in place that undermines every effort we are attempting to carry out, and we are not even talking about it. That's what I am putting the stress on. We are not even talking about the present condition of our fiscal measures. I find that very peculiar.

You have done the same as the Department of Finance did on Monday. You have excluded, you have left out, this very important aspect. How can the representative of the foreign affairs department, Mr. Heinbecker, be credible in Tokyo if at home we have no debate on the present amount of subsidies given to greenhouse-gas-producing industries? You tell me. Where is his credibility?

Mr. Mike Cleland: Mr. Chairman, I think the credibility comes from the whole suite of measures that any government takes, and that's true of any national government, or any national government along with its constituent parts. If you take it all apart, I am sure you would find that virtually any of the jurisdictions at the table have skeletons in their closets.

The Chairman: I am not interested in skeletons in the closet. I find it very peculiar that neither your department nor the Department of Finance engages in this kind of discussion. There may be very good reasons for having these types of subsidies. There may be an intent to gradually phase them out. There may be other factors. I don't know. But by not dealing with them, we somehow don't enhance our credibility. Would you agree with that conclusion?

Mr. Mike Cleland: Mr. Chairman, I would agree with you that we should debate these matters. That is correct.

The Chairman: Thank you.

• 1730

Mr. Mike Cleland: And I do apologize if I misunderstood your instructions.

The Chairman: Mr. Heinbecker.

Mr. Paul Heinbecker: Mr. Chairman, I would just add that we're not the only ones who have subsidies, of course. Take the example of the Germans—-

The Chairman: Mr. Heinbecker, I'm familiar with that. That is another discussion.

Mr. Paul Heinbecker: But you went to the question of credibility.

The Chairman: We are talking Canada in Kyoto. The rest of the global community probably has similar debates. But if we don't start these debates in our respective backyards, we will not make progress. We know that, and we know the kinds of games they are playing, but the matter will not be resolved if we say that we do not engage in certain discussions because others are not engaging in certain discussions. Would you agree with that conclusion?

Mr. Paul Heinbecker: I didn't say that. What I did say is.... You said how can I be credible. I can be credible in the sense that I know that other countries have similar problems.

The Chairman: Sure they do. We have to tackle them, don't you think?

Mr. Paul Heinbecker: They have to be tackled, certainly, by the countries concerned.

The Chairman: Of course. That's what I'm saying. So we agree on that, do we?

Mr. Paul Heinbecker: Yes.

The Chairman: Fine.

To you, Mr. Heinbecker, the debates in this kind of international forum tend usually to polarize between poverty on the one hand and on the other hand on the reduction of poverty on the part of the developing countries and the developed countries urging the rest of the global community to reduce greenhouse gases. Do you expect that this debate will emerge in Kyoto? If so, how do you plan to resolve it?

Mr. Paul Heinbecker: If I understood the question correctly, the issue is the juxtaposition of poverty reduction on one side and environmental impact on the other, and funds to assist the—

The Chairman: It's not a juxtaposition; it is a polarization between two points of view.

Mr. Paul Heinbecker: Well, if the question is will it arise in Kyoto, it's basically arisen already. It starts with the convention itself, as you're probably better aware than I am, and that debate continues. Perhaps, in a way, I can give an answer to Mr. Knutson that in some sense responds also to what you're saying to me, because I don't think I did justice to his question.

One of the difficulties with the compliance question he asked is that basically we get caught either way. The developing countries have put in a provision that would allow for the creation or require the creation of a compensation fund to compensate developing country parties that may suffer social, environmental, and/or economic loss as a result of actions taken to meet targets and timetables.

There's another provision in the treaty—and this is where the compliance question comes up and that certainly the Brazilians want to put in the treaty—that would provide for a penalty if you didn't meet your obligations. So in some sense you would be penalized if you did and penalized if you didn't. That's why, in that sense, the question of compliance is a pretty tricky one for us and we have to be very careful. I expect there will be a lot of work going on after Kyoto in what we're trying to get going under something called the prompt start. There are a lot of areas of negotiation that have to be carried out there.

The Chairman: Thank you.

Dr. Slater, I have a couple of brief questions for you as well, to conclude this round. There may be a second round that we may undertake in a moment.

In your chapter entitled “The Federal Family” you do not seem to include, in one of those boxes, the Department of Public Works. On Monday we had a presentation by the ADM in Public Works, which quite impressed many of us. They are developing, certainly, an interesting model. I was wondering whether in the core ADMs committee box you may want to include the Department of Public Works one of these days. It might be very salutary.

Mr. Robert Slater: On operational issues, you're absolutely correct.

• 1735

The Chairman: This has to do with landfill emissions. Your department produced a year and a half ago a substantial report on the landfill gases, very important greenhouse gases, and the fact that they are by way of flares burning day and night and contributing to the greenhouse gases question. Have there been any developments since that report was produced?

Mr. Robert Slater: I would have to get back to you on that.

The Chairman: Could you put that in writing to the members of the committee?

Mr. Robert Slater: I'd be pleased to.

The Chairman: My final question has to do with the innovation path. I will distribute this page for your information, because it is based on this, and to the members of the committee. I would like to ask you, after having had a day or two, but not later than Monday, whether you could please come back to us and indicate whether you concur with the claim made by this institute in the U.S.A., which has produced an energy innovation study and which provides an analysis of policies that by the year 2010 could, number one, cut U.S. emissions of carbon dioxide to 10% below 1990 levels—which is in itself stunning—two, reduce national energy costs by $530 per household, and, three, add 800,000 net new jobs. You have on that same page a chart showing the impact this innovation path would have if adopted. Could you give us an opinion on this by Friday or, at the latest, Monday next week?

Mr. Robert Slater: We would be pleased to give you an opinion. It may be a preliminary opinion based on the amount of information we'd have available.

The Chairman: Thank you.

We are ready now for a second round. Mr. Knutson, do you want to start?

Mr. Gar Knutson: The CANDU reactor keeps coming up. There was an article in yesterday's Globe that suggested that it is going to be our salvation. We're going to export it and we'll have to sell only so many a year and it will help others to convert from coal to nuclear power. I've been told that while it may save on carbon dioxide emissions, it kicks out an awful lot of heat into the water and as such it adds to global warming. It warms the rivers, which eventually warm the oceans. I wonder if you could comment on that.

Mr. Mike Cleland: Maybe just a couple of comments.... Any thermal source of electricity or of power has the same effect. There's waste heat. It can be managed more or less effectively, but there's always waste heat and that waste heat is dumped, if you will, into the environment. So it wouldn't be any different for a coal-burning plant or a gas-fired plant, except for the fact that modern gas plants are considerably more efficient.

I would stand to be corrected by my colleague, but I believe the amount of heat we're talking about here is very small in a global context and therefore doesn't in any meaningful way contribute to the effect we're talking about here.

Mr. Gar Knutson: On the one hand Sweden is maybe given an allowance because they're getting out of nuclear, and on the other we're going to get into nuclear in a much bigger way. It seems curious to an uneducated bystander. When we potentially go around the world promoting the nuclear option, are we taking into account all the other factors, all the other baggage that nuclear power has these days? Are we factoring that in, or are we just saying, here's a solution, go nuclear?

Mr. Mike Cleland: I'm not sure exactly.... Well, I think I do understand what you refer to when you talk about the other baggage. You mean issues of radiological safety and dealing with nuclear waste—things of that sort. Is that correct?

Mr. Gar Knutson: Yes.

• 1740

Mr. Mike Cleland: The answer to that is yes. When we sell our CANDU reactors abroad, we do so with what are licensable reactors under the rules of the Atomic Energy Control Board. We do so in a manner which is consistent with the standards of the International Atomic Energy Agency, and we do so in a manner that is broadly consistent with any reasonable standard of nuclear safety, including the handling of spent fuel.

Mr. Gar Knutson: In a broader way, I don't know if Ontario has been the biggest CANDU user, but it seems to me the whole industry is troubled with huge cost overruns. There seem to have been an awful lot of problems with the technology besides the safety issues, cost being the biggest one. Is that factored in?

Mr. Mike Cleland: Ontario is indeed far and away the biggest user of CANDU reactors of any jurisdiction in the world. About the recent problems Ontario Hydro has had, and the shutdown of the reactors announced in August, one of the things made clear in the report prepared by Mr. Andognini and his colleagues was that the issues were management issues at Ontario Hydro and not issues pertaining to the technology.

I wouldn't want to suggest the technology has been fault free. It has been true of, for that matter, all energy-producing technologies, but certainly all nuclear technologies, that problems have arisen and then they have been dealt with as we've understood them better.

Mr. Gar Knutson: In a very expensive way. We've had massive replacements of pipes. That's not a management issue. When we built these things we didn't foresee that their life would be much shorter than we originally anticipated. We had to replace parts of the facilities. The list seems to go on and on. Those weren't just management problems. If we promote nuclear as an option, are we going to have fostered a whole bunch of new problems ten years down the road?

Mr. Mike Cleland: It's not for me to predict what happens ten years down the road.

A couple of points. One is you're correct in noting that not all of the potential problems were anticipated. That's absolutely correct. Since then a lot of research has gone on and the CANDU reactor design has been very substantially improved. I'm sure my colleagues at Atomic Energy of Canada Ltd. could inform you better on this, but I think they would tell you they believe those sorts of problems have been resolved and future reactors will not suffer the same sorts of difficulties.

The Chairman: Mr. Herron.

Mr. John Herron: I thought it was an interesting comment about not being able to predict something that's going to happen ten years down the road and here we're going to predict something that's going to happen in the year 2010 or 2015.

In any negotiation some things aren't negotiable and some things are negotiable. Would Canada even remotely consider having a trade component penalty as an enforcement mechanism? Is that off the table?

Mr. Paul Heinbecker: We are not, and I should say most of the other developed countries are also not, contemplating a trade sanction.

Mr. John Herron: We made a comment earlier about India and China not attending the session in Japan a few weeks ago. Given that India, I think, is the fifth-largest producer of carbon dioxide and China the second-largest, where do you see India and China going in this particular negotiation?

Mr. Paul Heinbecker: This is a difficult one, because obviously they didn't show up.

• 1745

There are various ways in which the negotiations are trying to take into account the fact that there are developing countries that are serious emitters and growing emitters. The basic mandate for this current negotiation was established in Berlin. Its departure point was that as most of the cumulative carbon dioxide in the atmosphere had come from developed countries, this round of negotiation was for developed countries, for them to look after the problem they've created.

But you're perfectly right. Looking down the road, and not very far down the road, about half of the emissions of carbon dioxide are going to be coming from developing countries. And what can we do about that? There is a range of options on the table, ranging from the least aggressive, I would say, which has been put on the table by the European community. You would take advantage of the review process that is already built in to the convention. I think the next review is to arrive about 1999. The expectation is that you will find in 1999 that more needs to be done and that you would use this process to try to bring developing countries in, because it will show by 1999 even more conclusively that they have some responsibility for the ultimate solution.

That's one thing. Second, there is still on the table the idea of something called “the Kyoto mandate”. The last one was the Berlin mandate, which is now the negotiation of the treaty among annex one countries, developed countries. The Kyoto mandate would begin to deal with the question of limitations on the part of developing countries in some future period, with negotiations beginning by a certain date and ending by a certain date.

But I should add that for the time being, at least, in the negotiations nobody is talking about reducing the Chinese emissions or the Indian emissions or any other emissions, but about limiting them. This gets to the question that the chairman asked. It's a highly charged question about poverty versus the environment.

Then there is rather an intriguing idea, actually a very interesting idea, but it may not be saleable. The New Zealanders have imposed a kind of double conditionality, which meanss that it be agreed at Kyoto, either in the protocol we're negotiating or in a side agreement, that for the first budget period the developed countries will have to demonstrate that they are living up to their obligations. In the second budget period, the developing countries, having seen that the developed countries are living up to their obligations, will have to undertake obligations of their own. If they don't—and this is the double conditionality—undertake obligations of their own, the developed countries are not under an obligation to take up new commitments for the second and subsequent budget periods.

This is obviously a little tricky. There is an attempt being made to take the developing countries at their word, where they say, “You guys created the problem and you have to fix it.” And the attempt is also being made to factor in the reality that we can't fix the climate change problem unless they participate somewhere in this process.

So they say to us, “You fix the problem.” We say, “All right, we're demonstrably doing our part now, so now you also have to do something. It's also in your interests that the climate be protected so you have an obligation to participate as well.”

The long and the short of all that is that it's a highly neuralgic negotiating point, and I'm not sure what we will get out of it in the end.

But I'll put another piece of information on the table: this agreement is unlikely to be ratified until probably the year 2000 or beyond. It will probably be initialled at Kyoto and opened for signature at New York, and in the months to come there will be a period of perhaps a year or longer for signatures.

It will not actually be ratified by enough parties until somewhere around the year 2000 or later. That gives a lot of time to work on the developing countries and to come up with schemes to try to create a way forward in which everybody contributes.

• 1750

Mr. John Herron: One of the scenarios that was outlined at different seminars I have gone to is that Kyoto will result in no deal. If that were to happen—and that would be driven by the fact that there wouldn't be significant engagement with respect to the developing countries—can the departments provide us with some assurances that should there be no deal, which is a possibility, but remote maybe, Canada will still proceed with its own initiatives with respect to developing its own implementation program? Ultimately, if there is no deal, there is at least going to be a deal to chat again.

Mr. Paul Heinbecker: I would like to take that last part of your question, and maybe somebody else can take the first part of your question, on the domestic side.

I don't think I want to put a number on the possibility of getting a deal in Kyoto, but there is a substantial risk that there will not be a deal. There are a lot of unresolved questions on the table. For example, the European Community environment ministers don't meet until December 7, their next meeting. So my expectation is we're not going to see a lot of give from Europeans on some crucial issues until after that.

Indeed, one of the things you could say is that the real negotiations begin at Kyoto. So far we've had posturing and a lot of position-taking, but the crunch will come in Kyoto and the real negotiations will take place there. By the way, I think we'll be in time for that.

Were it to happen that the negotiations didn't succeed, I have no doubt that there will be further rounds of negotiations, because the issue remains whole. The problem is there. It's an undeniable problem, and it's in everybody's interest that we deal with it. If the negotiations collapsed over the kind of issue you're talking about, my guess is that you would have no choice but to schedule further negotiations. You'd have to come back to the issue.

I know there's a doomsday scenario where people say that's the end; we've caught the crest of the wave and now it's going to wash back out again. I don't think that's the case, certainly not in any of the developed countries. We have public opinions that just will not allow this situation to be ignored.

There is one other possibility. One was the breakdown, and the other is the breakout. That is, you could conceivably see agreements among the developed countries that they would separate themselves from the developing countries and have their own agreement.

The reason that's not considered to be the most desirable process is the one I gave and you gave at the beginning, which is to say by the year 2010, more or less, 50% of the emissions will be coming from developing countries, and some way has to be found to get them involved if there is to be a solution.

Mr. John Herron: Do you think there is any possibility of a breakout agreement, given the fact that in the developing perspective, the Americans have been relatively candid, I think, that without engagement with developing countries they're not willing to participate in any kind of solution? If that were the case, that means we wouldn't have the Americans onside, the number one carbon dioxide producer. We have India, which is fifth, and China, which is second. So in terms of the magnitude, how relevant would that kind of agreement be?

Mr. Paul Heinbecker: It's an agreement that would be relevant, but for the reasons you give, I don't think the prospects for it are great. I think the vote was 95 to 1, or something, in the U.S. Senate about wanting to have significant participation by the developing countries. The Clinton administration's catch phrase is that there should be meaningful participation. We think we can get meaningful participation in various ways—for example, through voluntary commitments by nearly industrialized countries.

Whether in the year 2000 or 2001 you would get a different political environment in the U.S. Congress, I don't know, but I think it would take a different political environment to have a breakout agreement.

• 1755

Mr. John Herron: My last question pertains to the fact that I find it very difficult—in fact, the entire subject, obviously, is rather daunting, which is probably an understatement—for us to deal with the situation or to debate a topic with respect to the fact that the science and technology and potential solutions could, over a short period of time—and this is in terms of us dealing with the magnitude of the problem—evolve en masse within two to three years, perhaps positively, perhaps negatively. In terms of hitting targets around 2010 or even 2012 and 2015—and other numbers are being kicked around—although they're nice to put out there I don't know how relevant they may be within three to four years.

Even if there is an agreement in Kyoto and then, as you said, it would take about two years for us to perhaps ratify anything that happens in Kyoto, what is the mechanism in place for us to revisit the issue in order to be able to say, well, given the information we have today, based upon science, we will have to have a revised...? What are the revision mechanisms that have been kicking around?

Mr. Paul Heinbecker: There is a review mechanism in the convention itself. This would be a protocol to the convention. The convention itself has a review mechanism. The Conference of the Parties will be meeting in Kyoto. There'll be another session in Bonn next year. So there's an annual or biannual process by which the Conference of the Parties comes together and reviews where they stand.

There's not much doubt that as the picture evolves the nature of the commitment might have to change. If we saw that the situation was much worse than we thought, which was the case this time, that would bring about one kind of response. But if there was some kind of magic technological breakthrough, that might produce a different kind of response. It is foreseen that the whole issue will be kept under review by the international community, which would meet periodically.

Mr. Robert Slater: To add to that, the history of these types of treaties is that indeed the first step is always improved upon, frequently to a remarkably large extent, and remarkably rapidly. If you look at the Montreal Protocol on CFCs, in 1987 we thought we might be able to reduce CFCs by 50% by 1999. In fact, they will be eliminated from trade and commerce by that time. It was, in fact, cheaper and easier to do it than anyone foresaw at that time.

The history is that once you've made that first step, it's the most critical one. Then additional steps become possible as you get to learn more.

Mr. Paul Heinbecker: The long-term timeframes are accepted. The further out you go, the more iffy it becomes, but all of the parties there more or less accept the notion of periods that, say, begin around 2010. There are some who are promoting 2005, but 2010 is not considered to be too far out there, partly because for the turnover of capital stock and the introduction of new technology, that is not actually a very long lead time.

So there's not much debate about that in the negotiations.

Mr. John Herron: Thank you.

The opposition rests.

[Translation]

Mr. Chairman: Mr. Charbonneau.

Mr. Yvon Charbonneau (Anjou—Rivière-des-Prairies, Lib.): Sir, talking of which, I'd like to ask a few questions to get a better grasp of exactly what is expected to come out of Kyoto.

Among ourselves, here, since we started discussing, I summarize what I've been hearing as follows: we're trying to agree on a date, say 2010 or a little before or a little after, when we'll return to 1990 levels.

Second, we're trying to see how fast we could reduce after that.

• 1800

For instance, does it involve finding a world level of greenhouse gas emissions or does it apply to each country signing the agreement individually? For example, if we say we want to return to the 1990 level in 2010, is this according to a calculation of all the greenhouse gases emitted or does that mean that, for each of the parties to the agreement, that particular objective has to be met?

[English]

Mr. Paul Heinbecker: There's a question on the science that maybe Mr. Slater could take.

On what the results might be, a lot of the discussion has been on the basis that there should be a single flat-rate target accepted by all. At the same time, there have been a number of proposals that there should be differentiated targets; in other words, that would somehow reflect the national circumstances of each country participating and to some degree reflect the difficulty of reaching the target, whatever is chosen, for the year 2010.

I don't think you were here when I said that, but the European bubble represents a kind of compromise, because some are reducing by a substantial amount and some are actually growing in that. So that is a kind of differentiated system within Europe itself. The European commission has some degree of constitutional authority for environment, so they want to make a common undertaking, which raises for us questions of equity and also questions of whether they can live up to their obligations in a legal sense if somebody falls into miscompliance, doesn't comply.

I think it's fair to say that we don't yet know which of those two is going to come out. I'd have to say that at this moment a flat rate looks unlikely, given the disparity between the United States and the Europeans.

It's possible that, as we were talking about the gases issue a few minutes ago, if you change the mix of gases you get numbers that are not as far apart and it may be possible to try to aim somewhere in between them and perhaps that could become the deal.

But I don't think anybody is saying—and this is where I defer to my colleagues at the table—that whatever is done in the year 2010 is going to be enough. The projection is that more would have to be done. No one has sat down and said, there is so much carbon in the atmosphere, there is so much carbon going into the atmosphere, that means that by the year 2010 country A has to do B and country C...and so on. It's rather a question of what the countries, looking at their own circumstances in any event, think they can accomplish and also think and believe the other people around the table should be able to accomplish. That's what the debate is about.

On the science I defer to Bob.

Mr. Robert Slater: I think it's fair to say that the scientific view is that there is no proposal on the table right now for the most stringent reductions made by any country that, if achieved on a global scale, would produce carbon dioxide emissions that are within the carrying capacity, if you want, of the atmosphere. The atmosphere would continue to accumulate carbon dioxide levels, which would end up changing the atmosphere, and you'd have to go beyond the targets prescribed for the year 2010 in order to achieve a stable atmosphere.

[Translation]

Mr. Yvon Charbonneau: Your answer is that we don't know, two or three weeks away from Kyoto, whether we're working towards a flat rate or a differentiated rate. We still don't know three weeks before the Conference? Is that right?

Mr. Paul Heinbecker: That's right.

[English]

I said that the real negotiations, I think, begin in Kyoto. What we've seen so far has been a lot of positioning. For example, I wouldn't want to malign them too much, but there's quite a bit of skepticism that the Europeans can really reach minus 15, even by their own definition.

• 1805

I know, for example, or at least I'm told—I take it at its face value—one of the reasons the Americans didn't name a number for their second budget period is that they want to have something left on which to negotiate with the developing countries. They don't want to state their complete position. They want to be able to try to use the incentive of getting them to go further in a second budget period or third budget period to try to draw developing countries into taking on some of their own obligations. I know there's a tactical consideration there. There are a lot of tactical considerations in what is going on.

But ultimately the real negotiations are at Kyoto, I think. The question then is whether there will be enough time and enough ingenuity to get a good enough agreement in the 10 or 12 days at our disposal; and about that I have to say I'm not sure, although we will obviously be making every effort to do that.

[Translation]

Mr. Yvon Charbonneau: Mr. Chairman, I'm simply astonished to see that, as such a deadline approaches, we're still not clear about what the final objective is expected to be.

We're mobilizing dozens and dozens of countries by means of very complex processes, but we don't have a clear idea of the expected outcome.

I'm accustomed to lengthy negotiations in the union sector. For instance, let's take teachers' salaries. Let's say I'm on an international scale and we're looking at the total payroll for teachers in 150 countries around the world. Instead of increasing it, we're going to talk about reducing it, if we're talking about greenhouse gas emissions.

And so we say we want to reduce it by 5 per cent in ten years, and I can't say whether I want that to apply to each country or I want the reduction to apply to the total payroll. I don't even know that, three weeks before the deadline. I think I'd be in a very risky situation.

Can you talk to us about the preparatory stages that led up to Kyoto? There must have been a time when these major questions were asked. Either they couldn't be answered or they weren't asked. We're three weeks away. Three weeks is nothing at all, for such complex questions.

I say that because I share the fear that some very big difficulties may arise. Especially since now you're telling me that Europe seems to have set a flat objective, though differentiated by country, within Europe, whereas in the United States and Japan, we hear talk of a figure. When it comes to Canada, are we going to have a different objective for each province, for each sector? How is the problem going to be presented?

[English]

Mr. Paul Heinbecker: This is the point at which I have to say I can't speculate on what our policy is going to be.

You're right to worry. I do think, though, that as a result of the various sessions which have taken place, particularly the last one in Tokyo, we have a pretty clear idea of who wants what, why they want it, and where there might be some room for convergence.

I'll give you a small example. Part of the treaty covers something called “policies and measures”. There are members of the European Community who want that to be mandatory. There are others, and we're included, who don't want it to be mandatory, but we can imagine a lot of things we would be happy to do in concert with the Europeans. There are lots of activities, from information exchange to accepting each other's research standards. A lot of things could be done.

• 1810

What becomes a problem is that in the European example they are used to Brussels having a kind of intervention role in their own regulatory processes. So it's easy for them to imagine living in that kind of thing. If you go to New Zealand, Australia, the United States, Canada or Japan and you start to say that somebody is going to be coming from Brussels for example to see whether you're living up to your mandatory obligations and that they're going to be dictating to you how you achieve these objectives, that's very difficult for us to accept. But there's a middle ground between doing nothing and doing everything, and that's where I think we can probably fix that one.

We can probably, with the Europeans, make quite a bit of distance on emissions trading, on joint implementation and on a number of other questions. It isn't quite as bleak as that. The difficulty I have a hard time foreseeing is how this is going to play with developing countries who for the time being are taking a very hard north-south line.

The reason I'm optimistic that this could change is that a lot of the participants from the developing countries are what you might call professional UN diplomats. They've been at every conference since anybody can remember. They know every article and every subarticle and they're willing to quote them to you at length, but they don't really have the authority to make an agreement. Once you get to Kyoto I think the pressure of time will push them a bit. In addition to that, the ministers will come and the ministers will have the authority to do things the delegates haven't been able to do.

Another thing I should say on the question of preparation and the fact that it may be determined and the real negotiations take place at Kyoto is that it isn't the only show in town, so to speak. This issue was discussed in the Commonwealth with its plus or minus 50 members quite a bit at the Commonwealth summit in Edinburgh in October. It was discussed at la Francophonie with its plus or minus 50 members in Hanoi this past weekend. I don't have any doubt that it will be discussed again seriously at the APEC meeting, which is coming up through the weekend and after the weekend in Vancouver. The opportunity will be taken in the course of lots of bilaterals and in the discussions to try to advance this issue. The ground is being prepared. The question is whether enough common ground can be found to actually reach agreement in Kyoto.

[Translation]

Mr. Yvon Charbonneau: Now I'd like to have the same discussion, but on a Canadian scale. When the issue is to set an objective or a schedule for Canada, whether it's stabilization at 1990 levels for 2010, or whatever, what is that going to mean after Canada has signed, the year after, or two years after Kyoto? One day we'll have to sign, and we have to sign something. Are the target and the schedule we set for ourselves going to be calculated across Canada, by adding up all emissions throughout Canada, or are the provinces going to join in by calculating their own emissions?

The same question applies with regard to the industrial sector. I assume that not all the industrial sectors produce exactly the same amount of greenhouse gases. Some have already made a major effort to reduce their emissions and others perhaps have done less. If, for example, Canada agrees to the objective of returning to 1990 levels in 2010, how will that be implemented?

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Here I have some notes from a document called Climate Change Cross-Canada Briefings Before Kyoto. On page 57, under the heading "Ensuring a Fair and Equitable Sharing of the Burden in Canada," I'm going to read you a sentence or two. Our Prime Minister often says that the primary principle is that there will be fair treatment among the provinces, the regions and the industrial sectors. I'd like to see what mechanism is going to be put in place to ensure this justice or fairness.

[English]

Assuming there is enough political agreement to deal seriously with the issue of climate change, a fundamental challenge will be to determine the relative responsibilities of each of the major economic sectors and each province. To date, Ministers of energy and environment have been unable or unwilling to enter into such a discussion. Canada's commitment remains a national one with no regional or sectoral targets.

[Translation]

A bit further on, it says

[English]

Determination of a burden sharing agreement essentially becomes a federal-provincial negotiation, the political spectre of which may be seen by some as too daunting at this time.

[Translation]

I'd like to hear your comments, your comments about this paragraph. Have you been

[English]

unable or unwilling to enter into such a discussion?

[Translation]

How does that happen? How do you expect that to happen? Will it be by sector, by province or what?

[English]

Mr. Robert Slater: The first thing I'd say is what you're quoting from must have been produced prior to November 12, because in Regina, the communiqué of the environment and energy ministers read in part:

Based upon the current understanding of Canadian circumstances and the state of international negotiations, ministers agreed that it is reasonable to seek to reduce aggregate greenhouse gas emissions in Canada back to 1990 levels by approximately 2010. Ministers further recognized the desirability to move beyond this basic stabilization of greenhouse gases, emphasizing the importance of flexibility elements in the agreement, the advance of science and technology, and the appropriate involvement of developing countries.

They also started to talk about how they would achieve that.

I'd have to say that prior to November 12, this level of political agreement amongst governments in Canada did not exist. While a lot has been done, I think everybody has agreed that not enough has been done.

At the outset I indicated the organizing arrangements that we've used in Canada to get us to this particular point, and I tried to indicate that they are not sufficient in themselves to get us to the sort of agreement—the fair, equitable, efficient, and effective agreement—that is going to be required to deliver on whatever obligation we enter into in Kyoto. That is going to take the attention of a large number of people. Designing that process is going to be one of the most important things we do in the next short while.

[Translation]

Mr. Yvon Charbonneau: The climate is going to go on getting warmer after Kyoto and there will be increasingly vigorous discussions among partners, provinces, the federal government and the large industrial sectors to seek a consensus on implementing the objective we're going to ratify. I think it's going to get more hot, not only warmer.

Mr. Chairman: Thank you, Mr. Charbonneau.

[English]

I have two brief questions and then we'll conclude—it's late enough—one of Mr. Cleland and one of Mr. Heinbecker.

Mr. Cleland, on the renewable energy, in today's brief you indicated to us that through enhancement of investment conditions, e.g. recent tax measures designed to level the playing field in market development and technology development, this creates the impression that a level playing field has been created between renewable and non-renewable sources of energy. Am I correct in saying that a level playing field does not yet exist in Canada?

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Mr. Mike Cleland: I guess I would have to say that I'm not sure I know the answer to that. As you will probably recall from the debates two or three years ago, it's a pretty complicated question. The analysis that was done, which I believe was discussed at this committee, indicated that there was, by at least that standard of analysis, an unlevel playing field with respect to renewables and indeed with respect to energy efficiency.

Some steps have been taken. Whether or not that has actually levelled the playing field and indeed whether the playing field really needs to be level or whether it needs to be tilted still remains to be seen. All I can say is that some steps have been taken in the right direction, but it's quite clear that the economics of renewables still makes it difficult for them to penetrate the marketplace.

The Chairman: Within my limited knowledge, that playing field does not yet exist. Would you be able to give to this committee by Monday a brief analysis as to where we are at in the comparison of the two fields as it relates to fiscal treatment?

Mr. Mike Cleland: What we could do, I believe, is we could update the analysis we did a couple of years back. I can't say, Mr. Chairman, that I could commit to that for Monday, but we will produce it for you as soon as possible.

The Chairman: Thank you.

Mr. Heinbecker, the experience in North America on acid rain is that the lessons that were learned were many. One of them was that Canada at a certain point had to reach the conclusion that it had to go at it alone rather than waiting for the United States to go ahead jointly in the reduction of sulphur dioxide emissions.

It then so happened that five or six years later the Americans came on board and declared their willingness and launched a program that probably once completed will match the Canadian program.

Granted, these are two developed nations and therefore this cannot be transferred onto the global scene. Nevertheless, do you envisage a realistic possibility for the developed nations to go it alone, on the assumption that by way of pressures from public opinion and other means, the reluctant developing nations would eventually, once they've reached a certain plateau of affluence, do the same?

Mr. Paul Heinbecker: The question was do I...?

The Chairman: Do you envisage as realistic a policy whereby the developed nations, particularly the OECD nations, would go at it alone in the next decade or even two decades in a gamble, perhaps, or on the assumption that eventually the developing nations that presently are claiming that the issue is poverty would, once they've reached a certain plateau of affluence, also join in that effort?

Mr. Paul Heinbecker: I was part of the acid rain wars, as you might remember, and I think I would respond that in a certain sense that's what the Berlin mandate is about. We will be undertaking our own limitations or reductions. There is no guarantee in the Berlin mandate and in the protocol we're negotiating that the developing countries will come along with us.

Whether, as I said earlier, something called a breakout agreement would be necessary and whether that would be feasible.... I think it's envisageable, but I'm not sure that it's practicable. I was asked about the American political situation. There are others who feel pretty strongly about that as well, as you can imagine. The Japanese would too, and there may well be Europeans who see it in those terms. There certainly is a lot of support for the idea of having some kind of follow-on process involving the developing countries.

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Another comment on this is that one of the difficulties is that some of those developing countries don't have public opinions to drive policy. In some cases there's just no provision for public input, and in other cases the public is much more concerned about economic development than it is about environment. Over time, evidently, as they are seeing in Southeast Asia these days, they need to be concerned about both. But for the time being there are countries who are more interested in cheap energy than they are in clean energy. Our job is to find some way of bridging that.

The Chairman: Thank you.

This brings to an end a rather lengthy and most interesting meeting. On behalf of the remaining members of the committee, I would like to thank you, Mr. Cleland, Mr. Heinbecker, and Dr. Slater, for your insight, your input, your patience, and the valuable information you have passed on to us.

This committee is now adjourned until tomorrow morning at nine o'clock.