ENSU Committee Report

KYOTO AND BEYOND: MEETING THE CLIMATE CHANGE CHALLENGE

INTRODUCTION

Since the mid-1980s when climate change first became an issue of concern, Canada has been at the forefront of international efforts to stabilize the concentration of greenhouse gases in the atmosphere at a level that would prevent dangerous interference with the climate system of the globe. These efforts culminated in the 1992 Earth Summit in Rio, where 36 countries including Canada entered into a voluntary agreement to reduce greenhouse gas emissions to 1990 levels by 2000.

Today, however, it is clear that the majority of these countries will fall short of this objective. Perhaps equally important is the fact that Canada’s leadership role has been called into question by the lack of progress made here at home in meeting this commitment.

The United Nations Framework Convention on Climate Change (FCCC) Secretariat has reported that, among developed nations, the United States, Japan and Canada are responsible for 85% of the increase in CO₂ emissions between 1990 and 1995 (United States, 56%; Japan, 21%; Canada, 8%). Based on the relative size of the economies and populations of the United States and Japan, Canada’s record is poor. Projections indicate that despite our efforts since then to reduce emissions, without additional climate change initiatives Canadian emissions in the year 2000 may still range from 8% to 13% higher than in 1990.

Concerned with the overall lack of progress made to date, the Conference of the Parties to the FCCC held a series of preliminary meetings throughout 1997 in preparation for a major negotiating session in Kyoto in early December, where it was hoped a set of legally binding timetables and targets would be adopted.

As a result, and in response to Canada's weak performance and the negotiations in Kyoto, the House of Commons Standing Committee on Environment and Sustainable Development felt compelled to examine the current situation with respect to climate change efforts in Canada, and to offer a number of concrete suggestions for ways in which our performance might be improved. Specifically, the Committee reviewed the existing programs and initiatives of the federal government regarding climate change for the purpose of identifying the gaps and conflicting policies that may be impeding our national effort to stabilize and reduce greenhouse gas emissions.

For most of the past 10,000 years, the CO₂ concentration in the atmosphere remained stable at about 280 parts per million (ppm). Since the industrial revolution, however, the concentration of CO₂ has increased 30% and, today, stands at 364 ppm. Conservative estimates for the year 2100 suggest the CO₂ concentration will approach 500 ppm, or nearly double that of the pre-industrial era. In addition, it is known that the concentrations of the other major greenhouse gases, methane and nitrous oxide, are also on the rise.

These facts, coupled with the observation that global mean surface air temperature had increased 0.3^o - 0.6^oC over the past 100 years, alerted climatologists and, in turn, policy-makers, to the potential for significant warming of the earth’s atmosphere over the next century, a phenomenon which could produce many possible negative consequences.

Around the world, this concern resulted in increased funding and the rapid expansion of climate change research. In particular, it was considered essential to determine whether human activity had been a factor in the increase in greenhouse gases, and thus has contributed to the global warming trend. In 1988, under the auspices of the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP), the Intergovernmental Panel on Climate Change (IPCC) was created. The IPCC conducts an open-ended process where both the number of participants and the number of participating countries vary. The IPCC process is open to all member countries of the United Nations, and from time to time more than 120 nations have taken part. A mix of approximately 2,500 scientists, economists and other specialists have been engaged in the IPCC process – either in the submission of papers to the IPCC or in the review of these documents.

The IPCC was given the mandate to assess, on a comprehensive, objective, open and transparent basis, the scientific, technical and socio-economic information relevant to understanding the risk of human-induced climate change. Worldwide, it is the IPCC assessment of climate change science that stands as the "scientific consensus". In 1995, the IPCC stated that "the balance of evidence suggests that there is a discernible human influence on global climate."

At a conference in Bergen, Norway in 1991, the concept of the "precautionary principle" was adopted, reinforcing the scientific consensus that a sufficient preponderance of evidence, rather than a smoking gun, is sufficient to call for remedial measures. Subsequently, during the period 1991 – June 1992, a great deal of international environmental effort was focused on preparations for the United Nations Convention on Environment and Development, also known as the Earth Summit. The Summit was held in Rio de Janeiro, and was attended by a large number of Canadian Members of Parliament including the membership of the House of Commons Standing Committee on Environment. The Earth Summit promoted world action on the linked issues of environment and development. It generated the principles contained in Agenda 21, the Statement of Forest Principles, and The Rio Declaration. Perhaps of greatest significance, the Earth Summit achieved agreement on two conventions, the Convention on Biodiversity and the Framework Convention on Climate Change.

Canada played a lead role during the negotiations for a convention on climate change. Since the serious potential consequences of climate change had been apparent for some time to the Environment Committee and federal government departments, as well as environmentalists and policy-makers at the provincial, territorial and municipal levels, the Canadian delegation brought a high level of knowledge and scientific expertise to the negotiating sessions.

Canada had a clearly defined position that paralleled the Green Plan commitment of stabilizing greenhouse gas emissions at 1990 levels by 2000. At the negotiations Canada pressed for targets and schedules, and pursued two main objectives:

In addition, Canada went to the negotiations with three aims: (i) to preserve Canada's competitiveness; (ii) to provide opportunities for Canadian business; and (iii) to involve as many countries as possible using a common approach that allows differentiated action among countries.

Although there was much agreement on many of these points, the United States and a number of oil-producing countries opposed initial drafts of the FCCC. After much negotiation a convention lacking in firm targets and timetables which met their objections was drafted. The final Convention text therefore represented a compromise, as the following passage demonstrates:

In the Convention, developed countries agreed (i) to assist developing nations with the technology and resources they would need to meet their obligations under the treaty; (ii) to limit emissions of greenhouse gases; and (iii) to develop a national action plan and publicly report on their progress. One of the central principles of the Convention states that any policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest cost. The Prime Minister of Canada signed the FCCC on 12 June 1992 and it was ratified on 4 December 1992.

Probably no other document coming out of the Earth Summit has provoked so much debate as the FCCC. Opponents of the final document claimed that the lack of targets and timetables rendered the Convention ineffectual. By contrast, proponents claimed that the lack of arbitrary targets and rigid timetables were the Convention's saving grace; only a document open to flexibility would have been signed by such a large number of nations. In light of this debate, to help strengthen efforts and demonstrate leadership, a number of countries, including Canada, made a voluntary commitment to reduce greenhouse gases to 1990 levels by 2000.

At the first meeting of the Conference of the Parties to the FCCC, which met in Berlin in spring 1995, it was concluded that climate change commitments for beyond the year 2000 were inadequate. In response, the Conference of the Parties agreed to the establishment of the Berlin Mandate, an open-ended process to strengthen the commitments on the part of industrialized countries to reduce greenhouse gas emissions beyond the year 2000 through the adoption of a protocol or other legal instrument. More specifically, the Ad Hoc Group on the Berlin Mandate, through a series of meetings, managed a negotiating process that was aimed at elaborating policies and measures and setting quantified limitation and reduction objectives for action by developed countries, according to specified time frames. The 1-10 December Kyoto Conference represents the culmination of the work of the Berlin Mandate.

Many countries had announced their negotiating positions well in advance of the Kyoto Conference. For example, in March 1997, European Union countries announced their commitment to reduce aggregate greenhouse gas emissions to 15% below 1990 levels by 2010. The G-77 countries, plus China, called for a 15% reduction by 2010, while the Alliance of Small Island States made a more stringent demand for a 20% reduction by 2010.

Even the United States, which had been one of the most recalcitrant countries in the climate change debate, announced a position in advance of the Conference, calling for mandatory caps by industrial nations on greenhouse gases, principally CO₂ from burning fossil fuels, at 1990 levels by 2008 to 2012, with reductions after that. The United States also announced a $5 billion program to spur energy efficiency and develop new energy technologies; however, this program must yet be approved.

On 13 November 1997, at a joint meeting in Regina of the Canadian Council of Ministers of the Environment and of Energy, the ministers, with the exception of those from Quebec, concluded that it is reasonable to seek to reduce aggregate greenhouse gas emissions in Canada back to 1990 levels by approximately 2010. On 1 December 1997, the federal government announced that the Canadian position is to reduce greenhouse gas emissions to 3% below 1990 levels by 2010, with a further 5% reduction by 2015. Not all provincial governments were in agreement with this position; Alberta and Saskatchewan indicated that the goal was too rigorous, while Quebec requested a more stringent greenhouse gas reduction target.

The mounting evidence that human activities were beginning to alter the natural systems of the Earth compelled the House of Commons Standing Committee on Environment in 1989 to launch an exhaustive study of global climate change. This comprehensive investigation resulted in the release of two reports. An interim report, No Time to Lose: The Challenge of Global Warming was tabled to Parliament in October 1990, to be followed by the Committee's detailed report, Out of Balance –The Risks of Irreversible Climate Change, in March 1991. This latter report contained 25 recommendations and called for significantly increased Canadian initiatives to reduce domestic greenhouse gas emissions, particularly CO₂.

Following the 1992 Earth Summit, the Committee again examined climate change, but within the context of the Conventions of the United Nations Conference on Environment and Development. In April 1993, the report A Global Partnership was presented to Parliament. This document made 23 recommendations, of which 9 specifically addressed the issue of climate change by recommending mechanisms that the federal government might initiate in order to achieve the Canadian commitment made in Rio.

The Committee's report, Keeping a Promise: Towards a Sustainable Budget, was presented to Parliament in December 1995. The report's 18 recommendations identified specific fiscal disincentives, the federal departments responsible, and the policy changes needed to encourage sound environmental practices. Many of these recommendations, if initiated, would lead to a significant reduction in Canadian greenhouse gas emissions.

The Committee heard from a number of witnesses concerning the state of the federal government’s current climate change initiatives. While many positive examples were identified, it must be noted that areas of little or no progress were also uncovered. In addition, the uneven nature of some departmental performances led to the frequent identification of a lack of coordination as a major problem.

Nevertheless it should be stressed that an encouraging level of awareness of the seriousness of the issue was communicated by many of the witnesses who appeared before the Committee. Where possible, the Committee has attempted to highlight the "good news" examples brought forth by witnesses, in an effort to demonstrate that real progress in meeting our climate change commitments is not only desirable but possible, often producing considerable economic benefits as well.

According to officials, NRCan's commitment to the challenge of climate change is embodied in three measures: its Efficiency and Alternative Energy Program (EAEP); its research funding in the areas of energy conservation/efficiency and alternative/renewable energy; as well as in the Voluntary Challenge and Registry Program (VCR).

The VCR Program is considered by the government to be a key element of Canada's National Action Program on Climate Change. Under the VCR Program, the Minister of Natural Resources issued a challenge to Canadian companies and organizations, including all levels of government, to develop action plans to voluntarily limit or reduce their greenhouse gas emissions. NRCan maintains a registry that claims to record all such commitments, plans and progress. Since its inception in 1995, more than 700 organizations have become participating members of the VCR. Some individuals and organizations believe the VCR program is more form than substance, while the federal government and industry claim the program is a success.

With respect to the EAEP, the April 1997 Report of the Auditor General of Canada examined the energy efficiency initiatives of NRCan and noted:

NRCan had estimated that its efficiency and alternative energy programs would contribute 20 to 30% toward meeting Canada's stabilization goal. Accordingly, it was of some concern to the Committee to learn that the department might not have the capability to measure its success in attaining this objective. As well, according to NRCan officials, most of the reduction for oil and gas extraction is attributed to the VCR program.

Although the mechanisms of program auditing may not have been able to establish whether NRCan initiatives were meeting their objectives, data presented by Mr. Jarvis on energy demand in Canada reassured the Committee that the government was indeed getting good value for its investment. Mr. Jarvis informed the Committee that, from 1990 to 1995, energy demand in Canada had risen by 500 petajoules. During this period, Canada experienced both population growth and a relatively healthy expanding economy. Data analysis has shown that, if energy efficiency and conservation initiatives had not been implemented, the growth in energy use during that five-year period would have been 650 petajoules. Accordingly, it can be assumed that NRCan initiatives contributed to this 30% saving in energy not expended. According to Mr. Jarvis, not consuming 150 petajoules of energy is equivalent to a $4 billion a year benefit to the Canadian economy; and since efficiency gains are embedded in the economy, this is a year after year benefit. Further, as compared to a "business as usual" scenario, this reduction in energy use also provides indirect benefits: lower CO₂ emissions; less air pollution; improved environmental health; and the development of environmental technologies that give Canada an increased competitive edge in the international marketplace.

Mr. Jarvis further stated that NRCan could indeed do more if additional funding was made available:

PWGSC is responsible for the timely and cost-effective provision of central and common services to other government departments. As such, it is uniquely placed to facilitate the government's sustainable development priorities, and in particular, to support Canada's commitment to reduce greenhouse gases.

The Committee was informed that PWGSC is active in the promotion of greater energy efficiency and alternative energy in federal government buildings and in the vehicle fleet. Since 1979, the cost to heat government buildings has dropped 25%. One of the key elements that encourages energy efficiency gains is the Savings-Financing Mechanism. This allows the department to pay for improvements in energy efficiency out of the money that is saved from reduced energy consumption. Other spin-off benefits include creating healthier workplaces and strengthening Canada's environmental industries. By the year 2000, it is expected that energy renovations will have provided the private sector with contracts worth $60 million that will lead to annual energy savings of $12 million. Accordingly, the annual return on investment is expected to be 20%.

In addition, as part of its "Fleet Wise" initiative, PWGSC has developed an action plan to reduce the size of its fleet, improve its efficiency and environmental practices, increase the use of cleaner fuels, and develop and improve data collection and monitoring systems. Greater emphasis is being placed on the purchase of smaller more energy efficient vehicles, as well as on the use of alternative fuels. PWGSC believes that these actions will allow the department to meet the objectives of the Alternative Fuels Act.

The Committee notes that PWGSC efforts, particularly in the area of energy renovations, have been remarkable. However, it also believes there is more work to be done, particularly with respect to the fleet initiative, which is still largely in the planning stages.

Officials from Finance Canada told the Committee that the role of the department is fundamentally a supportive one. It was noted that in recent budgets the government has been moving away from traditional subsidies to industry and towards investments in the key engines of economic growth: research and development, education and international trade. Beginning in the budget of 1996, some specific steps to level the playing field between the treatment of renewable and non-renewable energy in the tax system and to encourage energy efficiency were also introduced, including:

In December 1995, this Committee recommended that subsidies to the petroleum industry be eliminated as soon as possible. The Committee also recommended changes in the 1996 budget to reduce the tax benefits afforded to the mining industry, and provided the government with the following options:

During this study, the Committee wished to determine the exact amount that oil sands operations receive each year in terms of income tax expenditures from the federal government. Officials from Finance Canada explained that this amount varied widely from year to year, and that 1994 data was not yet available. In response to the Committee's question: "What is the extent of income tax expenditures for the oil sands?", Finance officials provided a written brief. To help shed some light on this complex question, this brief, entitled Income Tax Expenditures for Oil Sands Projects, is attached as Appendix A.

The playing field in the energy sector is far from level. What this means is that there is an uneven allocation in the way that the federal government provides support to the various sources of energy in Canada. More specifically, federal tax policies continue to be biased towards the conventional, carbon intensive energy industry at the expense of energy efficiency and renewable sources. This fact is alarming given the Liberal Government's 1993 Red Book commitment to reduce CO₂ emissions to 20% below 1988 levels by the year 2005.

Canada has done poorly in its attempts to meet the greenhouse gas reduction commitment made at the Earth Summit, and it is clear that a much greater effort is needed. The Committee is confident that significant future reductions in energy use can be achieved in a revenue-neutral fashion. To that end the Committee is somewhat encouraged by this budgetary action but fears that it may be too little too late. If Canada is to mount an effective challenge against global warming, the Department of Finance must incorporate substantial changes into its economic decision-making.

The Committee received presentations from Transport Canada, Industry Canada, and Agriculture and Agri-Food Canada. Each department discussed the role their sector plays in the production of greenhouse gases; indicated where the most cost-effective reductions might be made; and presented an overview of their climate change projects. These departments, however, did not translate a clear understanding of their role or their responsibility in the larger national effort to reduce greenhouse gases. Although some of these departments obviously had invested time and money in climate change initiatives, there was no sense of urgency, and no indication that their actions had yet contributed to any significant reduction in greenhouse gases. Climate change initiatives appeared to progress until they reached some limitation or obstacle, at which point each department waited on the other to take some form of facilitating action.

Industry Canada, for example, has done good work in the promotion of research and the development of environmental technologies to reduce CO2 emissions as well as other pollutants that pose an environmental health risk. Two cases stand out. The Dynamotive project assists the development and commercialization of fuel additives from biomass that will lead to cleaner burning of fossil fuels; yet no one burns these fuels in their car, lawnmower or home furnace. Ballard Power Systems of Vancouver is recognized as a world leader in the development of hydrogen fuel cells. However, hydrogen-powered buses have not yet been widely commercialized.

The story is much the same for Transport Canada. This department is well aware that the transportation sector is responsible for approximately 27% of total greenhouse gas emissions in Canada, and it is estimated that this percentage will grow. They are also aware of the solutions: a shift from cars to public transit, a shift from shipping goods by truck to more energy-efficient rail transportation, greater market penetration of energy-efficient cars and light trucks. Indeed, much greater reductions in greenhouse gases could be achieved by increased voluntary measures by the automotive industry to raise fleet efficiency each model year.

Many witnesses told the Committee that their department was working with other government departments to develop constructive solutions to the challenge of climate change. If this were accurate, the regulatory mechanisms and the financial incentives needed to get climate change initiatives functioning would, to a large extent, already be in place. The Committee found that few departments appeared to demonstrate a high level of responsibility for climate change initiatives, and no department brought forward any examples or analysis of what other countries are doing to help deal with climate change. Furthermore, no individual or department has been vested with the authority to bring together one consolidated national implementation plan.

Mr. Brian Emmett, Commissioner of the Environment and Sustainable Development, has already drawn this deficiency to the attention of the government:

CONCLUSIONS

The challenge of climate change offers a unique convergence of economic with environmental goals. The economy can only benefit from energy efficiency, energy innovation, and the prolonged life of fossil fuel reserves through more careful consumption. Meeting the challenge of climate change may require many changes in the way we conduct our lives, but it will also provide Canadians with a healthier environment and the opportunity to become more efficient and economically competitive which will result in increased employment.

Hand in hand with energy conservation and greater efficiency are the benefits of improved air quality and environmental and human health. For example, a move toward significantly expanded use of public transit, increased use of alternative fuels in our cars and trucks, and the choice of more fuel-efficient vehicles will result in decreased emissions of not only CO₂ but also of those pollutants responsible for the creation of smog.

Canada has bountiful reserves of natural gas; a clean-burning fuel of high calorific value. As capital equipment needs to be replaced, the gradual shift by industry from coal and oil to natural gas will result in improved air quality and a significant reduction in acid rain. The need for technical innovation in the transportation and industrial sectors will spur research initiatives and the development of new energy efficiency technologies. This will provide Canada's emerging environmental industry with the opportunity to become a world leader in the marketing of environmental technology, an action that will generate wealth and create jobs. The following recommendations are designed to achieve these objectives.

RECOMMENDATIONS

Following on the testimony of witnesses and evidence presented to the Committee, as well as the conclusions drawn from this input, the Committee has arrived at a number of recommendations which it believes will assist the government in meeting Canada’s climate change commitments.

These recommendations are divided into two categories. The first set of recommendations addresses the structural problems within the federal government, and most notably the lack of coordination which was repeatedly referred to by witnesses. The second set of recommendations are concrete measures which the government could adopt to quickly improve its record in this area. Many of these, it should be noted, are based on actual models of successful examples in Canada and elsewhere.

To begin with, the Committee was struck by the obvious lack of coordination among government departments and agencies in the administration of Canada’s climate change program. In addition, as previous efforts to accomplish major government-wide changes such as official languages policy or affirmative action have demonstrated, it is necessary to provide leadership at the highest levels in order to demonstrate political will. As a result, the Committee is of the view that the climate change agenda must be managed by the Prime Minister personally, with the aid of selected senior officials specifically assigned to that task.

The Canadian position on cuts to the production of greenhouse gases calls for a reduction to 3% below 1990 levels by 2010, followed by a further 5% reduction by 2015. Such a reduction would entail not only dropping our current emissions to 3% below 1990 levels, but it would also require that we limit emissions from future economic growth that is projected to increase by as much as 20 to 30% by 2010.

Given the magnitude of this effort, it was suggested that the target be divided up into a series of smaller targets with a complimentary timetable. For example, it should be possible to divide the 12-year period of 1 January 1998 to 1 January 2010 into a series of intermediate target dates with on-going monitoring. Shorter-term targets would allow the various climate change initiatives to be measured and evaluated within time periods that would tell whether an initiative was on track or failing. In the event of a failure, a fall-back plan could be quickly initiated. Moreover such an implementation plan would provide incremental successes, thereby encouraging renewed commitment.

Committee members identified the need for an expert group, at arm's length from the government, to evaluate climate change initiatives, to identify failing programs and suggest where efforts and resources might be re-focused. Some Committee members felt that this requirement called for the creation of an independent expert advisory group. On the other hand, it could be argued this expertise already resides in the Office of the Commissioner of the Environment and Sustainable Development. Further, the Office of the Commissioner is at arm's length from the government, and the mandate of the Commissioner is to evaluate all government sustainable development programs, including those related to climate change. In addition, the Office of the Commissioner may consider requests from Parliament to conduct special evaluations, such as an evaluation of the national implementation plan for the reduction of greenhouse gases. While it is outside the mandate of the Office of the Commissioner to make policy proposals, accurate and timely evaluations would allow those responsible for Canada's climate change commitment to decide how efforts and resources might be re-focused following identification of a failing initiative. In order to conduct accurate and timely evaluations of short-term targeted projects, the Office of the Commissioner may have additional budget requirements.

It has often been stated that policy-making related to climate change must be based on a solid scientific foundation. At present, there is little doubt that the scientific consensus on the reality of global warming, and on the vital role played by greenhouse gases, does not extend to the use of various mathematical and computer models to predict the consequences. On the other hand, there is also no doubt that the reliability and sophistication of these models have increased greatly in recent years, and that further efforts to improve these models will be well worth the effort.

Mr. Gordon McBean, Assistant Deputy Minister, Atmospheric Environment Service, described the Canadian Climate Centre’s global climate model (GCM) as a sophisticated mathematical model involving the atmosphere, the ocean and the ice component. The two oceanographers who appeared before the Committee, Mr. Allyn Clarke, Acting Manager, Ocean Sciences Division. The Bedford Institute of Oceanography, and Mr. Roger Pocklington from the Bermuda Biological Station, took exception to the claim that present GCMs adequately incorporate the role of oceans in determining world climate.

The ocean is believed to be the principal source of climate variability over time scales of months to decades because it has the ability to store and redistribute heat over these time scales. A small change to the freshwater supply over a small part of the Atlantic can trigger a rapid shift of the climate system into a new equilibrium state. According to Mr. Allyn Clarke, "This is one of those 'surprises' that the IPCC assessments warn about."

It is clear to the Committee that much greater effort must be expended on improving GCMs, particularly by achieving a better scientific understanding of the roles of oceans and ocean currents on climate change. In view of Canada’s existing expertise in this area, and the importance of oceans to our climate system, this would appear to be an issue which should receive a high priority.

To date the Canadian Government has funded both in-house and extramural research projects for the development of GCMs to predict the physical effects of climate change. However, it was brought to the Committee’s attention that equally important, if government is to develop effective climate change programs, is the need for sophisticated economic models that incorporate the social, environmental and economic costs and benefits of climate change mitigation strategies.

The need for better economic and social models was exemplified by the 1997 report of the Conference Board of Canada entitled The Economic Impact on Canada of Greenhouse Gas Reduction: A Comparative Review. In this study, 14 economic models were compared and found to suggest varying outcomes. The most pessimistic model indicated that, under a business-as-usual scenario, the Canadian economy could grow some 30% from 1997 to 2010; however, with the application of climate change mitigation strategies, growth might be restricted to 27.7%; or a 2.3% reduction in economic output.

On the other hand, models run by other organizations suggested benefits to both the environment and the economy. Another witness, Mr. Jim Bruce, from The Royal Society of Canada, noted that:

Tax expenditures, direct and indirect subsidies and other fiscal measures offered by the tax system to the petroleum, oil sands and coal industries are very large. Not only do they deprive the government of considerable revenue, but they stand in the way of the implementation of a policy intended to stabilize and reduce greenhouse gases. Although it was recognized by department officials that some movement in this area has begun, the Committee believes an immediate reduction in such subsidies is urgently needed, in favour of sources of energy that are producing fewer greenhouse gases or none at all.

The costs and benefits of climate change initiatives may be borne inequitably, unless care is taken to distribute these outcomes evenly. Accordingly, as action is taken to limit greenhouse gas emissions, it is essential that no one segment of the Canadian population feel that they are unfairly carrying the burden. The removal of financial incentives favourable to the fossil fuel industry could potentially have some negative impact on Canada's petroleum and coal producing provinces. In a similar vein, as Ontario Hydro shifts from nuclear to coal-generated electricity, the residents of this province may be squeezed between the need for electricity and their responsibility to reduce greenhouse gas emissions.

The Committee heard that perhaps the best means of distributing potential costs is the development of an array of mitigation tools. Prime among these tools, however, is the double-edged potential that fuel switching offers. A gradual move from coal and oil to gas will help assure economic stability, while more careful consumption of petroleum and coal will prolong the life of these reserves. Natural gas has a low carbon concentration, but can be cleanly burnt at high efficiency. These characteristics make it an ideal fuel for industrial and domestic users, while the environment also benefits from reduced pollution and greenhouse gas emissions.

Flowing from the two previous recommendations, the Committee believes the next logical step with respect to tax policy is to encourage the development and utilization of alternative energy sources, and environmental technology such as district energy systems and cogeneration. Apart from the obvious benefits of such a move in helping to achieve Canada’s climate change commitments, the Committee has repeatedly been told of the economic benbenefits that will accrue to the Canadian economy from pursuing such a strategy.

The Committee noted with considerable pleasure a number of developments in this regard. For example, Mohawk Oil's commercialization of ethanol-blend fuels demonstrates industry's capacity to lead in the area of alternative energy sources. A recent announcement by Environment Canada of an agreement with Calgary’s electric system, ENMAX, to provide heating for federal offices in Alberta through wind power, is estimated to be reducing CO< SUB>2 emissions by 2,000 tonnes annually. Another announcement, by Petro-Canada, involves an agreement with Iogen Corporation of Ottawa to invest in alternative transportation fuel technology. According to Petro-Canada President, Mr. Jim Stanford, "Petro-Canada believes innovative technologies such as this can play a significant role in meeting the challenge of global warming while creating new economic opportunities for Canada. We are pleased to be joining with Iogen, which is on the cutting edge of alternative fuel technology." The Committee also notes developments in biomass utilization as an alternative fuel option, and believes such developments warrant further review. Consequently, and especially in light of these positive developments:

The Canadian Constitution grants the federal government the authority to conduct international negotiations and to sign and ratify international agreements. In meeting the obligations and commitments contained in an international agreement, however, the federal government usually requires the cooperation of the provinces and territories. The role of the municipalities is also recognized as being essential. This will be particularly important in meeting the objectives of the FCCC as energy production and use, which are largely under provincial jurisdiction, are the major sources of greenhouse gases. In order to achieve federal-provincial-territorial agreement on such shared issues as energy and the environment, the Canadian Council of Ministers of the Environment, and the Canadian Council of Energy Ministers were created. During the past year, federal, provincial and territorial Ministers of Energy and the Environment met a number of times to reach agreement on the issue of climate change and to assist in the process of developing Canada's negotiating position for the Kyoto meeting.

The necessary mechanisms therefore exist between the federal, provincial and territorial governments to build consensus and to agree to shared responsibilities and actions in the fight against climate change. The municipalities, on the other hand, are largely left out of this consultative arrangement. This is indeed a cause for concern, as the Committee heard, many of the levers necessary for greenhouse gas reductions reside within the power of municipal governments.

As one witness pointed out, current regional planning by municipal governments often runs counter to the goals of sustainable development. Zoning bylaws tend to facilitate the development of large, low-density suburbs as satellite communities around major cities. Land use policies, in turn, encourage multiple vehicle use, and contribute to increased emissions of greenhouse gases. Curbing urban sprawl is but one of the areas where municipal leaders and regional planners must be encouraged to take action. Additional actions include improving public transit and increasing ridership; trapping and using natural gas generated in landfills; promoting cogeneration efforts by local industry; and moving towards greater use of district energy/heating plants. The Committee noted with interest that successful district heating and waste energy recovery systems have been established in a number of Canadian including Oujé-Bougoumou, Cornwall, Windsor, Edmonton and Charlottetown.

Given the critical role that municipalities can play in reducing greenhouse gas emissions, the Committee was greatly encouraged to hear about the Toronto Atmospheric Fund.

Toronto was one of a number of Canadian cities that accepted the challenge to reduce greenhouse gas emissions to 20% below 1990 levels by 2005. In 1992, the Toronto Atmospheric Fund was established with a capital base of $23 million, obtained from the sale of municipal land. This capital is never depleted; instead it is deposited in conventional investments, or loaned to projects that lead to reductions in greenhouse gas emissions. The Fund provides borrowers a preferential interest rate and a long pay back period. Loans are returned with interest, and that interest, along with interest from investments is granted each year to community groups to carry out projects that bring about emissions reductions. The pool of money available for grants has grown from about $500,000 in 1992 to over $1 million in 1997.

Due to the success of the Toronto Atmospheric Fund, it is projected that Toronto may actually reach its objective of reducing greenhouse gas emissions by 20% of 1990 levels by the year 2000, earlier than originally planned. Further, in a worldwide survey conducted by the International Council for Local Environmental Initiatives (an organization funded by 300 member cities and towns around the world), Toronto ranked first among 150 cities in terms of reducing CO₂ emissions. During the period 1990 to 1996, Toronto cut CO₂ emissions by 7.8 million tonnes, Berlin came second with a reduction of nearly 7.5 million tonnes, while Leipzig came a distant third with a cut of 2.6 million tonnes.

The Fund has provided multiple benefits. Efforts to reduce greenhouse gases have also resulted in improved air quality, the realization of financial savings from energy efficiency and conservation, the growth of an energy management industry and job creation. Fund organizers are particularly proud of two projects. Toronto now captures the methane generated from its mature landfill sites, burns it and uses the energy to generate electricity which is then sold and fed into Ontario's electrical grid. Also, the Fund provided the money needed for the city to change all of its street lighting to energy-efficient bulbs, an action that now provides an electricity savings of $2.2 million per year.

It was suggested that the Toronto Atmospheric Fund could be used as a model for a national program that would be called the Canadian Climate Change Fund (CCCF). The CCCF would help finance programs and leverage further financing for programs that would lower greenhouse gas emissions in Canada through a federal, municipal partnership. As a public investor, the CCCF would seek a positive but long term, conservative return on its investments. It would preferentially make loans to participants who had the greatest opportunity to make large greenhouse gas reductions. The CCCF would also sponsor research, the development of tools, techniques, standards and methodologies for gas reductions, and disseminate this information. Given the support for the government’s recent municipal Infrastructure program, this type of approach would appear to be extremely feasible.

The major constituents of landfill gas are methane and CO₂, which are by-products of the biological decomposition of organic matter. Also present are traces of hydrogen sulphide, mercaptans and volatile organic compounds, which can create nuisance odours, degrade air quality and may have adverse health effects. The methane component of landfill gas is a potential explosion hazard and a greenhouse gas contributing to global warming. Indeed, methane is a greenhouse gas with a 100-year horizon global warming potential, that is, 24.5 times greater than CO₂ by weight.

Landfill gas is one of the major contributors of anthropogenic methane emissions to the atmosphere from Canadian sources, accounting for approximately 26% of the nation's total methane emissions. However, methane is also a potential energy source. In Canada, landfill gas systems recover about 25% of the emissions, but only 17% of this gas is used for energy production. Controlling methane release to the atmosphere should be an important component in Canadian efforts to reduce greenhouse gases. As Environment Canada officials confirmed, the use of methane for district heating is feasible and can be cost effective.

The need to encourage a shift from private vehicles to public transit will require the development of facilitating policies and financial incentives at the provincial and federal levels. In many Canadian cities, such as Edmonton, Calgary, Vancouver and Ottawa, action has been taken to create bike paths and bike lanes to facilitate the use of bicycles to commute between home and downtown.

Several witnesses suggested that the federal government could encourage increased use of public transit by changes to the tax system. For example, one suggestion is that employer-provided transit passes be considered a tax-free benefit. This type of tax benefit has been in place for a number of years in the United States and several Western European countries. This approach has also been strongly promoted for several years by the Federation of Canadian Municipalities, the Canadian Urban Transit Association, the National Round Table on the Environment and the Economy and this Committee.

In addition, officials from Transport Canada told the Committee that the Canadian transportation sector would not be able to provide significant cuts in greenhouse gas production. Therefore, the Committee concludes that there is the need for the development of a National Transportation Strategy.

The Committee heard persuasive arguments from a number of witnesses that attempts should be made in schools and communities to instil attitudes that favour sustainable development, pollution prevention and energy conservation and efficiency. To ensure that all Canadians are doing their part to limit greenhouse gas emissions, it is essential that everyone becomes aware of the risks posed by climate change and that people develop a feeling of individual responsibility. Some excellent material has already been prepared in this field by the Canadian Global Change Program in publications such as Canada and the State of the Planet in which considerable attention is paid to the role of the individual. In Quebec, an educational program called Planèt'ERE has been launched by an international group of teachers and individuals to provide information on the environment and sustainable development. Another exceptional group is the Green Communities Association, which, among a number of activities, addresses the environmental and economic savings to be made in the home. Target reductions of 15% in energy consumption, 20% in water consumption and 15% in waste production have been achieved in participating Green Community homes.

The government has also done some work; for example, Health Canada and Environment Canada have had experience in the development of educational programs for school children such as the highly successful "sun safe" campaign to teach children how to protect themselves from the burning rays of the sun. Of particular note, in response to the need for Canadians to know about climate change, Environment Canada recently published its series of Canada Country Studies. Six regions (Quebec, Arctic, Prairies, Ontario, Atlantic, British Columbia and Yukon) were specifically examined in terms of the effect climate change might have on the land, the waters, and the communities that depend on them. The Committee believes that a good start has been made, but more needs to be done.

The Committee believes there is a need for the federal government to take prompt action within its jurisdiction. The United States has already announced a $5 billion program to spur energy efficiency and to develop new energy technologies, and it is the opinion of this Committee that Canada must also make a substantive financial commitment in support of climate change efforts.

In areas of shared jurisdiction, the Committee feels there is a need for the federal government, in cooperation with the provinces, territories, aboriginal communities and municipalities, to recognize that significant discussion and consultation is required for a successful implementation program to ensure that Canada can meet domestic and international greenhouse gas reduction targets. These discussions should include substantive discussion on the benefits and disadvantages of a variety of measures including, but not limited to, differentiation, transition, joint implementation, sinks, reservoirs, emissions trading, and other instruments for implementation. Particular attention should be paid to these measures so that agreements are developed that bring about actual reductions of greenhouse gases and do not provide loopholes that allow nations to shirk responsibility for real substantive reductions.