HALIFAX, TUESDAY, NOVEMBER 19, 2002
STANDING COMMITTEE ON ECONOMIC DEVELOPMENT
9:00 A.M.
CHAIRMAN
Mr. Brooke Taylor
MR. CHAIRMAN: I will call the Committee on Economic Development to order. I would ask members, if they would, to introduce themselves. If you are substituting for somebody maybe you could indicate that. We will start with Mr. Chipman.
[The committee members introduced themselves.]
MR. CHAIRMAN: Our witnesses this morning are Mr. Parker and Mr. Foote but we have some other business, perhaps . . .
MR. ALLAN PARKER: I apologize, Mr. Chairman, for the delay here. Somebody was going to come and do this and that person didn't come so we have a technology problem. I think she actually is on her way now, so perhaps if you could go ahead and give us 10 minutes, we could probably get this sorted out.
MR. CHAIRMAN: Well, we have some other business, committee business, if it is the wish of the committee, we can deal with that. It will probably take us 5 or maybe 10 minutes.
Committee members have had an opportunity to review the annual report, 2001-02 of the Economic Development Committee. Darlene would like us to sign, if it is agreeable to members. Russell, just on behalf of the Liberal caucus, who is the . . .
MR. RUSSELL MACKINNON: Michel Samson.
MR. CHAIRMAN: Michel is replacing Brian?
1
MR. MACKINNON: Yes.
MR. CHAIRMAN: Perhaps we will just pass the statement of submission around and we can sign that.
Committee members, while you are signing away here, there is a letter from EnCana, we had hoped, I guess it was the wish of the committee and agreed by committee members, that we would bring in EnCana representatives subsequent, of course, to this hearing. You have a letter in your package that Darlene copied to all members, I trust, and essentially, EnCana is declining our request to appear before the Economic Development Committee. They suggest that such matters could be heard by the Canadian Association of Petroleum Producers as an alternative. I don't know if committee members have had a chance to review that letter or if they have any comment but the letter is in your package. Mr. Holm.
MR. JOHN HOLM: I'm not a regular member of this committee so maybe I shouldn't step into this but I will and just say from my perspective anyway, that the petroleum producers aren't necessarily what you would call the most objective group. It would be very interesting to hear from them but I think that if you are going to hear from them that it might also be interesting for the committee to hear from somebody who has an opposing view, somebody certainly from the side that is more favourable toward the Kyoto agreement and would present an alternate view both economically and environmentally. So I certainly, although, as I say, I'm not a regular member of this committee, think that it would be a good idea to hear from the petroleum producers and to get their views but also, for a balanced perspective, either at the same or subsequent meeting, to hear an alternative view as well.
MR. CHAIRMAN: Good point, Mr. Holm, and irrespective of whether you're a regular member of the committee or not, as you understand from being around for such a long time - I say that politely - you enjoy all the rights and privileges of any member around this table. Anybody who is substituting for another member shouldn't feel somewhat intimidated by that very fact. Any other comments?
MR. HOLM: If I could, just in response to that, Mr. Chairman . . .
MR. CHAIRMAN: You don't have to respond to that.
MR. HOLM: . . . just to point out that yes, I have been around a little while, and I don't fall into that category of Canadians who don't understand my rights. So yes, I was aware that I did have the right to do that.
MR. CHAIRMAN: We're quite sure you do know your rights. Are there any other comments on this matter from EnCana? Has everybody signed the annual report? Everybody has signed the annual report.
MR. MACKINNON: Mr. Chairman, EnCana, aside from the fact that they see there are certain business dealings and competitive positions that they would like to protect, I guess I'm trying to fathom through whether there is some other purpose that, perhaps, they do not want to appear. Maybe we could have clarification as to the intent of inviting EnCana, what really was the purpose of inviting EnCana in?
MR. CHAIRMAN: Mr. MacKinnon, I guess given the nature of that question, you weren't involved in the organizational meeting relative to the potential witness list. Maybe Darlene could refresh all our memories, as she is a constant here.
MRS. DARLENE HENRY (Legislative Committee Clerk): I believe that at the time it was put forward, it was to get the status of the Deep Panuke project.
MR. HOLM: Not relative to Kyoto then?
MR. MACKINNON: Which caucus . . .
MRS. HENRY: That was put forward by the NDP caucus.
MR. HOLM: So that wasn't relative to Kyoto, their presentation?
MRS. HENRY: No.
MR. MACKINNON: Based on that comment, I would tend to think that I don't see any purpose in us not having them come before the committee. It would appear to me, by the signature of their counsel, they're just looking for any reason at all not to appear. I just don't understand the methodology or the reasoning for not wanting to appear, other than what they say there, and that doesn't - there would appear to be considerable other issues that could be explored, much in the same parallel as with the Public Accounts Committee, without getting into the value for dollar.
MR. CHAIRMAN: Russell, again, as you well know, they are under no obligation to attend the hearing and comply with the request. They've basically indicated that their view is, they're stating here in fact, EnCana is a publicly-traded company on the Toronto and New York Stock Exchanges and subject to security regulations which outline some parameters in which corporate information may be made public. As well, they also point out that information about EnCana Corporation and its operations is largely information of a commercial, financial, or technical nature, and is required to be kept confidential in order to protect EnCana's business interest.
Other than that, I'm just wondering if there are any more comments on EnCana's position, if we should entertain a motion for a potential witness for our next hearing date, which is December 3rd? We have some other witnesses on our list. I don't believe we have that list with us this morning. Darlene, have you made any contacts with . . .
MRS. HENRY: I had called the Canadian Oil Heat Producers Association - that was a name that was put forward to examine the home heating fuel. There was supposed to be an association around that dealt with that. I had made contact with them, and they will let me know on Friday whether the short notice of being in on December 3rd is okay with them.
MR. MACKINNON: If they agree, is that agreeable with the committee?
MRS. HENRY: Yes, it was on the list.
MR. CHAIRMAN: It was agreed, Russell, on our list.
MR. MACKINNON: That's fine.
MR. CHAIRMAN: Perhaps we will wait until we hear back from our clerk here, Darlene. Our technician is hard at work here.
MR. ALLAN PARKER: I'm sorry about that, Mr. Chairman, don't worry about that. I didn't intend to have that happen, and when I finally got the right person here, obviously we were able to fix the problem.
What I wanted to do, in response in your request, was to do it in this kind of a way: what does Kyoto mean for the world and Canada; what about greenhouse gases and environmental impacts, because those are important; have a little look at emission growth in Canada and the United States; talk about results of national modelling; and then focus on the Nova Scotia results or the portion of that that is, I suppose, of the most interest to you sitting around the table here today.
[9:15 a.m.]
Kyoto is emission targets for about 40 developed countries, from 2008 to 2012, that's the Kyoto budget period. The first Kyoto budget period is only about six years away now. In order for the protocol to come into force they need 55 countries with 55 per cent of the developed country emissions to enter into force and, at this point, they don't have that in terms of the amount of ratification that's taking place. Russia would need to ratify before the protocol can come into force, and Russia has said that they will ratify but probably not until later in 2003, mid-summer of 2003. Our target is 6 per cent below 1990 and it's one of the toughest of any of the countries that are OECD members of the protocol. By the way, if people have questions or comments, I don't mind you interrupting.
MR. CHAIRMAN: If I could, I would like members, if they would, to perhaps keep their individual questions in mind and make note of it and, at the conclusion of the presentations, we will move into questions. That's the tradition.
MR. PARKER: That's fine, Mr. Chairman, I'm easy, whichever way you want to do it.
MR. CHAIRMAN: Yes, I thought perhaps that had been outlined a little earlier, but that's the normal procedure here. So carry on, Mr. Parker.
MR. PARKER: Okay. Complying with Kyoto: emissions must average target for the five-year period. In other words, we could be above the minus six at the beginning of the period, but we would have to be below it enough at the end of the period to average our target over the five-year period. It basically means that emissions from fossil fuel consumption, fossil fuel production, agriculture, forestry, landfill, all of those things, in total, can't exceed the target and, obviously, if one goes up, something else has to go down; we have an option in the protocol to buy permits internationally.
The gap: the red line at the top is the new business-as-usual forecast for Canada. The blue line, the previous forecast and, as you can see, as we move along here and as we continue to do new forecasts, the gap continues to get bigger. It was 199, or around 200 megatons, and now we're forecasting that it will be something like 238 to 240 megatons in the middle of the protocol process, either 2008, 2012 time frame. So in order for Canada to comply, to get down to 571 megatons, which is our target for that period, we would have to reduce our emissions in Canada by about 240 million tons sometime between now and the average period of the protocol time frame, which is 2008, 2012.
By province, as you can see, the majority of emissions in Canada come from basically two provinces - Ontario and Alberta. Alberta's emissions are, of course, tied directly to production of fossil fuels and coal-fired electricity. Ontario's emissions are, to some extent, tied to coal-fired electricity but their emissions are more likely to be industrial activity, manufacturing sector, and a significant amount of vehicle emissions because of the large transportation activity that goes on in Ontario. Our emissions in the year 2010, in the middle of the budget period, are forecast to be about 12 per cent above what they were in 1990 and as you can see, other provinces have a much bigger problem. Alberta, in particular, are forecast to have emissions which are 57 per cent above their current emissions in 2010.
The territories also have an interesting situation, they're scheduled to increase by 54 per cent and that is probably mostly one thing, it's a diamond mine in the Northwest Territories. They have very little industrial activity and as soon as they get some, of course, their percentage goes up significantly. It is interesting to note that P.E.I. stays about even. Manitoba and Quebec are lower because of the amount of hydro they have.
We put this slide in just to give people a feel for where we are with respect to time. It basically shows the CO2 concentration in the atmosphere over the last 200,000 years, then for 1999, and what it's expected to be in the year 2100. As you can see in the latter part of the time frame showing there has been a very significant increase in this period here, where the CO2 concentration in the air has gone up rapidly due primarily to the consumption of fossil fuels and the growing economies of the Western World.
What's happening to the temperature? Well, for New Brunswick, P.E.I., and Nova Scotia, the average temperature from 1895 to the mid-1990s looks like that. The red years are those years when the temperature was above average and blues are those years where the temperature was below. As you can see, the trend is going up at about .06 degrees Celsius per century. If you add Newfoundland to this graph it will reduce the increases. In Newfoundland the temperature is not going up as quickly. One of the things that the IPCC scientists said, that it could be cooler and wetter in the northeast.
I guess sea level rises is one of the things we're most concerned about and if you look at the reasons for sea level rise what you find is that the average estimate for the rise is about 50 centimetres, the range is 9 to 88 centimetres. The reasons are: mostly thermal expansion, because the water is warming up; some glaciers are melting, which accounts for about 33 per cent; there's a little coming from the Greenland ice sheet, about 12 per cent; and a negative number for Antarctic, that ice sheet will continue to grow a little bit because of the warming in the northern part of the world as opposed to the southern part.
What happens to Nova Scotia if we have sea level rise? Well, obviously, it reaches farther up the shore, maybe further enhanced by greater storm intensity and the decreased ice cover exposed the shore to more waves and obviously, more damage. Obviously, we increase the risk of flooding and higher average sea level increase flood risk may be further enhanced by greater storm intensity, higher storm surge, greater wave height. All of those things could be fairly significant from the point of view of infrastructure costs.
Agriculture and forestry growth rates. This is an area of particular interest. One of the things that we've talked about with the science people is the whole issue of our forests. We have what's commonly called here in this area, an Acadian forest. The Acadian forest would, in terms of higher temperatures, move to the north. The boreal forest would move north, the Acadian forest would move north and we would end up with an Appalachian forest. I suppose there are those who would say that might be a good thing, given that some very valuable species tend to grow in the Appalachian forest. On the other hand, we also have to remember that it takes probably 80 or 100 years for that to happen. If we lose our forest industry for 50 to 100 years, it probably has a significant impact on our economic well-being.
We have had a number of dry years and agriculture in Nova Scotia has suffered through two, three years now when it's been very dry in the summer. I'm not going to sit here today and tell you that's because of climate change but obviously, that's one of the things the
scientists have talked about over the last number of years. We would likely see some new species of pests and diseases moving into the province if we had in fact changes in temperature - particularly lower winter temperatures. This presents, perhaps, a new challenge for water management, particularly in terms of irrigation. As we all know, that's been a subject which has been on the minds of many in the province now for the last three or four years.
Fish species - northern cod have and perhaps would continue to move south. Our species may well move south ahead of them, in which case we would exacerbate the problem that already exists in the fishery for Atlantic Canada and for Nova Scotia.
The last one is, I think, of significant interest. Because it's warmer in the northeastern United States and in Ontario, there is more smog produced, and that increases the likelihood of long-range transport. If any of you were in the Valley last summer, you know that there were a number of significant smog days. I experienced that myself camping in Blomidon Park and found I couldn't see the mouth of the Avon River on the other side for most of the day during the two or three days I was there. So there is a significant risk that that would happen to us and that's a significant health risk.
Now, economic modelling. I'm always reluctant to get into this part of this discussion because it is exactly what it says it is - it's economic modelling. It doesn't give us any specific answers about what happens to our economy in terms of an exact number. What it gives us is learning in terms of how the economy may react to different kinds of inputs from different kinds of economic occurrences so we all need to understand that I'm not telling you today that the answer is two or three, I'm telling you that the answer is around two or three or four, but we can understand how the economy is reacting to some of the things that we're proposing to do.
We're going to talk about two sets of modelling runs - those that were done early in the Spring for a meeting of ministers that took place in Charlottetown and those that were done in October, are called the reference case. That reference case is now attached to the federal climate change plan that you've all heard about if you're reading the papers or listening to television.
We need to remember that the assumptions and the policy choices we make and put in the models are important and they differ from one run to another and therefore we need to understand the differences in those in order to be able to understand what the models are telling us. None of the policies that were modelled are identical to the current federal plan and the national results are more accurate than the provincial results. That's because, in order to do provincial results, particularly for small provinces like Nova Scotia and the other Atlantic Provinces, there is a necessity to disaggregate the information and you have to find a way to do that. Typically, economists do that by looking at how many large industries there are and doing their magic with that and then coming out with some kind of breakdown of the results.
In the past, we have always been in a situation where the results were always presented in terms of Atlantic, as opposed to individual provinces, and in the middle of this process, a few years ago, we said to the federal government that it's very important for us to have provincial results as opposed to Atlantic results because we need to understand what happens to our economy, not necessarily what happens to Newfoundland's economy or New Brunswick's economy.
[9:30 a.m.]
Those are important, obviously, to Canada and to all of us, but what's really important to us, particularly to you people sitting around this table, is what happens to Nova Scotia's economy, what's likely to happen to our economy if we undertake certain kinds of policy measures to reduce greenhouse gas emissions. So it's important to understand that the provincial results lose some preciseness as we move from the national level to the provincial level, particularly for those provinces that are smaller. Ontario's results would be more likely to be precise, because it's a much bigger economy.
What did we learn from what we saw in May? What we learned was that the overall impacts in the 0 to 2 per cent of GDP range, and that's a number for the period - in other words our GDP would be up to 2 per cent less in 2012 than it would otherwise be. If we had a 1.5 per cent or 2 per cent growth per year for that period of time, then at the end of that period it would be whatever it would be, say 20 per cent, then it would be 18 per cent instead of 20 per cent, or 10 per cent instead of 12 per cent, or whatever. The impacts on the sectors in the provinces aren't uniform. Again, that's a policy choice problem.
The other thing that matters here is the permit prices. If we are in fact in a system where people will be allowed to trade, both internally in Canada and internationally, the carbon permits - the permit to emit carbon - will have some value, and that matters, particularly after 2008, when we're operating under the rules of the Kyoto Protocol and may be required to have large international purchases in order for Canada to meet its commitment under the protocol. Energy producers are going to pay substantial negative impacts, and energy-intensive manufacturing will be less effective by the rules around the protocol.
This is the work that was done in May. We have two cases that were modelled here. Case one was what was called the broadest possible coverage, in other words we would have an emissions-trading system with a cap and that emissions-trading system with a cap would have a very broad coverage across the economy. Most emitters that were larger than individuals would be covered by the cap. The second case was what's commonly called the large final emitter case, and that picks up only those emitters that are large, like the coal-fired, oil-fired power plants, petroleum refining, pulp and paper - well there's a long list, and of course, obviously, the upgrader, the oil producers in Alberta who are producing oil from tar sands, which is one of the big emitters in the country.
So if you have a look at that for Nova Scotia, what you see is that, interestingly enough, 20 per cent of our GDP is generated by government in non-profit activities in the province. They would have a very small impact and it would be positive, under case one at $10. The other thing I need to tell you is that $10 and $50 are the permit prices. The $10 assumes that we could buy international permits at $10 and that we would not do anything in Canada to reduce emissions that would cost us more than $10 a ton. If the price went over $10 a ton, we would simply go buy a permit from Russia or whoever happened to have one for sale. The $50 one is, of course, the same thing except that the price is $50. So up to $50, we would do it at home, at $51 we would go buy a permit from Russia or the Ukraine or somebody who happened to have a lot of permits for sale.
So not much happens to the government and non-profit sector. In case one, they get slight increases in GDP and, in case two, under the $50 scenario, they get a slight decrease. I think the interesting one here to look at for us is the electric utilities one, which is the second from the last. As you can see, the impacts are pretty big and those impacts are there because we have a coal-fired electricity production industry in the province. Our electricity comes from coal and so under case one the impacts are bigger. Under case two they're smaller because - well I'm not sure why, George.
MR. GEORGE FOOTE: Less impact on the large final emitters.
MR. PARKER: Yes, right. Smaller impacts on large final emitters. So that gives you a range of the kind of impacts that we would expect to see for a very narrowly defined approach and obviously, the most sensitive sectors, which are the electric utilities and some of the others, again $10 and $50 permit prices - and we can have a discussion around these when we're finished if that's of any interest to people.
We did some internal modelling with the Department of Finance model here in the province and our view is that the GDP growth and the base case - i.e., we don't have any climate change reduction policies in place - would be about $5.3 billion in 1997 dollars and we would have about 63,500 person years of employment growth and as we go into the $10 case the GDP growth goes down and the employment goes down. That's our best guess of what might happen given the kinds of policy instruments that were in the two analyses that we just saw previous to this one.
Now, let's go to the October results. This is what was commonly called the reference case and it was done between the time that we met in the Spring and the time that the Energy and Environment Ministers met in October. It's not the federal plan; it's something other than the federal plan but, in fact, it was done again just to get a feel for what happened and, as you notice now, we're talking about government finance versus tax finance.
The previous analysis always assumed that it was tax financed, that the fiscal rule was the balances would be the same, there would be no net cost to government. So any amount
of money that was spent on reducing emissions would come from the process as opposed to coming from general taxes. This time around the federal government decided to look at what would happen if they financed this out of government revenues as opposed to specific taxes, what would happen to the economic impacts, and the ones you see there are again for a $10 case and a $50 case.
The other thing we need to remember is that there were 70 megatons missing from the 240 megatons when this analysis was done. You may all recall that the federal government was talking about credit for export of clean energy - natural gas and hydro primarily - to the United States and they were claiming a 70 megaton credit for that. The current plan that's on the table does not include the 70 megaton international credits. They got nowhere at the last international meeting with putting that forward as a proposal and so we will talk a little bit about what the analysis and the plan looks like in a minute, but this analysis was 70 megatons short of the requirement to meet the Kyoto target of 240 megatons; i.e., the gap we talked about earlier. So if we were looking for reducing by 170 megatons as opposed to 240 megatons, then these are the numbers that came out of that reference case and, as you can see, they're reasonably innocuous in terms of impacts, particularly of the government-financed one.
These are the provincial results by province, again, for the reference case and again for $10 and $50 and for government-financed and for tax finance. Nova Scotia is the third one from the left in both cases, so you can see that in the $10 permit price, the tax finance is always going to be larger, the impacts are going to be larger; basically what we're talking about, tax finance is a carbon tax. The impact on the economy would be more negative than if it's government-financed. Nova Scotia's impact is somewhere between 0.3, 0.25, 0.3, in the $10 permit price. In the $50 permit price, of course, the impacts go up a little bit. Again, the tax finance one is much more costly to the economy than the government-financed one.
What we know is that there will be impacts, both economic and environmental. Growth for some sectors will be hurt, even if the overall impact is slight. How we get there matters. The policy choice is important. It's important to understand that depending on which jurisdiction you're talking about, the policy choices will have a big impact on what happens to that particular jurisdiction. The target and the goal is critical. The cost escalates as emission cuts go deeper, so now we're back to the discussion of the 70 megatons, which, obviously, if you add at the 70 megatons and went back and did your reference case analysis over again, you would have a much bigger impact on the economy because you go farther up the cost curve, either for domestic reductions or for international purchases.
In order for us to meet a Kyoto target, energy demand has to fall. The only way we can get the carbon emissions reduced is to burn less fossil fuel. Energy demand will fall and there will be impact on the energy producers and refineries in that situation. All the results show bigger impacts on Nova Scotia electricity rates than the national average. Competitiveness is not modelled. What that means is that if our electricity rates go up, there
will be an impact on our pulp and paper industry. As most of you know, the pulp and paper industry is very sensitive to electricity rates. In fact, we've been dealing with that with one of our pulp and paper organizations over the last while. That's not part of the reference case analysis that was done.
If we increased our electricity rates by 10 per cent, 15 per cent, 20 per cent, it would have a big impact on the pulp and paper industry here, and they would have choices to make. One of those choices would be to, perhaps, move their operation to a place where electricity wasn't impacted by reductions, like Quebec or Manitoba. Marginal producers will be hit the hardest, but the models don't identify who those are. I have just identified one of those marginal producers for you, I think. So those are the kinds of things that we learn from looking at these models that we've done.
On top of the list of concerns for us is the impact on our electricity prices. There's also the issue of the impact on future oil and gas development in industrial opportunities. Whether or not, at this point in time, any particular oil or gas explorer would leave the offshore play in Nova Scotia for somewhere else where emissions weren't regulated is, I think, not something that we could say today. Clearly, they have a market advantage here. They have that big northeast market that's close by. But at some point, depending on how big the permit prices get, that becomes an issue for them. So, certainly it's an issue for the oil sands in Alberta. We talked about the impact on energy-intensive exporters like pulp and paper, and the impact on consumers and provincial balances. There obviously will be increased prices for energy for consumers and there will be reductions in provincial balances.
[9:45 a.m.]
Mr. Chairman, that's the presentation for you, if there are questions or comments. First of all, let me introduce George. George is the Nova Scotia member of the analysis and modelling group and has spent the last couple years of his life playing around with these numbers and arguing with the federal government about assumptions. So he's much more expert than I am, but perhaps I can moderate the questions and then we will see how that process goes.
MR. CHAIRMAN: Mr. Parker, thank you, and I apologize, during the confusion with the LCD projector, I neglected to introduce our witnesses properly. Mr. Parker, you're the Manager of Energy Utilization, I'm told here on the agenda.
MR. PARKER: Right.
MR. CHAIRMAN: And Mr. Foote is an energy analyst. So I have a number of members here wanting to jump in with questions and, Mr. Chataway, you had one earlier on. During the course of the presentation I had your name down and I thought we should start with you.
MR. JOHN CHATAWAY: It's not the most important thing, but I wanted to know the difference between - what is the analysis of being a developed country and an undeveloped country? I understand India is not considered to be a developed country.
MR. PARKER: No.
MR. CHATAWAY: Indonesia is not a developed country. I presume everybody produces some greenhouse gases. What's the difference in the definition?
MR. PARKER: Developed countries are primarily the OECD countries, those countries that have economies that are part of the G-8. India and China both have very large emissions, in fact they're much larger than ours at the end of the day, and they're growing very rapidly, but they, along with all of the other developing countries at this point, don't have any commitment and, in fact, were unwilling to talk about any commitment at the most recent international meeting in India which took place in the early part of this month. The OECD countries are primarily Europe, Russia, North America - the United States and Canada.
MR. CHATAWAY: Developed.
MR. PARKER: Developed.
MR. CHATAWAY: The undeveloped countries are certainly producers of greenhouse gas, are they not?
MR. PARKER: Very large producers. In fact, China produces very large numbers. Now, you need to also know that on a per capita basis they're very small producers compared to us or the United States. We are a very large producer of greenhouse gases on a per capita basis in North America because our economy is tied to fossil fuels. I mean if you look at the fossil fuel consumption and at the GDP, the two lines go together, and have gone together for a long time. We also live in a very cold country with large distances, so our per capita emissions are quite high in Canada, and Nova Scotia's per capita emissions are very high primarily due to our electricity.
MR. CHAIRMAN: Just for the record, we will try to recognize, during this round of questioning, members on probably a five- to six-minute basis if, in fact, they need that much time. I'm sure some will and some won't. Mr. Parent.
MR. MARK PARENT: That ties in with what John was asking because I have three quick questions. One is tied to the fact that our target is one of the toughest of any country and I assume that's because our use of energy has gone up faster in comparison to other countries?
MR. PARKER: Yes, I guess that's part of it. I think the other thing we need to recognize is that we're a big exporter and, in particular, Alberta is a big exporter of oil, a lot of which is produced, and more and more of it is produced from tar sands and that is a very emission-intensive process. That oil is simply produced and shipped to the United States, but Alberta gets credit for the actual emissions to produce it. I mean the way they produce oil from tar sands is you seem to disassociate the oil and the sand and so they have to produce the steam by burning fossil fuel, and so the exporter part of the thing.
The only other big exporter - well, Russia is a big exporter, but Russia has a lot of credits and many, many more credits than they need for a long time because their economy went down as part of the Soviet Union breakup. Norway is a fairly significant exporter, but they're part of the EU and the EU has a - it might be helpful, George, do you want to comment on the various countries? We have some information on where we are with respect to the current emissions and the current caps involved in the Kyoto process for the European countries and North America.
MR. FOOTE: The targets were negotiated in 1997 as part of the protocol and Canada agreed to a target of minus-six below 1990 levels for the budget period. For example, Australia managed to negotiate a target of plus-eight, Norway plus-one and the EU is minus-six as well, as a whole.
I have some numbers from 1999 to speak to your point, sir. In 1999, Canada was 15 per cent above its 1990 levels and probably close to 20 per cent above our 1990 levels now in 2002. But, if you look at some of the EU countries for instance, the U.K. in 1999 was 14 per cent below its 1990 level, Germany was 16.7 per cent below, the U.S., of course, was 11.7 per cent above. So Canada has one of the toughest tasks in terms of where we are now and what our target is and what that gap is. Canada has one of, if not the biggest, challenge of any country that has a target under Kyoto.
MR. PARENT: Two other quick questions. The sea level rises, this is important for me since the Acadian dike down the road protects my house from being underwater. Do you have a map? Could you map out for the province how this would affect it if you had a 50-centimetre rise just so one could visually see what areas would be most affected?
MR. PARKER: Environment Canada has some mapping of what that looks like, but it's pretty small-scale stuff as I recall. I'm not sure you could pinpoint a particular spot on the coast. You would get a general feeling for whether or not it would be a problem. For instance, they have some mapping that looked at the water level during the Saxby Gale when
the isthmus between Nova Scotia and New Brunswick was underwater except for the railway tracks. You have to make some assumptions about sea levels rising, storm surges and high tides all occurring at the same time.
MR. PARENT: That would make it hard to model that on a map.
MR. PARKER: But they have some mapping that I've seen. Whether or not you could say this particular spot in the Annapolis Valley where there's a dike, I don't know.
MR. PARENT: The third quick question, the other big issue for my riding would be impact on agriculture. You've not talked a lot about that besides that we've experienced some drought and there's no way of really knowing whether that's tied in with climate change or not. In terms of impact on sectors financially, you've not included agriculture in here. I'm wondering if you have any figures on how this would impact agriculture financially and if you have any thoughts on when we could know more about whether the drought that we've experienced is tied in with climate change, where the science is on that.
MR. PARKER: Well, to answer your last question first, the science is pretty immature at this point. I think it's important to understand that there's a difference between weather science and climate science. In fact, David Phillips who is the Senior Climatologist at Environment Canada was pointing that out on the radio in an interview he did with CBC yesterday morning. So, the climate science is very immature and most climate scientists would say to you that they have a pretty good confidence level in terms of the overall rise in temperature for the globe, but to try to put that in context for a smaller part of the globe is much more difficult for them.
They've made some predictions for regional impacts and regional temperature changes. They say their confidence level is lower in those. I think the other thing I would say about the science is that British Petroleum's Chairman, Sir John Browne, has said that all science is provisional. They think there's a risk, and they're going to act, and they have. They've met their Kyoto target, which was tougher than the one we're after, I might add.
I don't know whether or not the science question is going to get answered any time soon, in terms of what is the impact on agriculture in the Annapolis Valley or in the Shubenacadie River Valley or in Stewiacke. I think that's going to be a long-term science project in order to come to those kinds of conclusions, in terms of that small an area. With respect to numbers - I don't know, do we have any numbers for agriculture here?
MR. FOOTE: I don't have them with me. It doesn't show up as one of the most sensitive or important or affected sectors in any of the . . .
MR. PARENT: The effect would be fairly minimal on agriculture?
MR. FOOTE: I think there are some uncertainties on the science side. On the economic side, the modelling numbers that show up speak to mitigation, what we would have to do to get our emissions down. They don't reflect any of the impacts of climate change on agriculture production or costs. They're only partial numbers from that respect, on agriculture, because they don't talk about the environmental impacts on agriculture, they only address the economic impacts of actually meeting a target as opposed to what the climate . . .
MR. PARENT: What are the economic impacts for agriculture?
MR. CHAIRMAN: Mark, I'm going to have to cut you short.
MR. FOOTE: They're fairly small, in percentage terms, compared to say electricity or oil refining or construction.
MR. CHAIRMAN: Just an observation before I recognize Mr. Chipman. Mark, on that question, there's a farmer out West, Klein has been speaking about the agriculture sector. One of the farmers said, just off the cuff, that he didn't expect, any time soon, to see methane monitors on the cows' rear ends. (Laughter) Mr. Chipman.
MR. FRANK CHIPMAN: Gentlemen, I realize your background is not science. We're leaving a lot of this to science but a vast majority of science used to believe that the sun revolved around the earth. Of course, we know that's not so today. Studying the effects of climate change is hardly the same as understanding the mechanisms that may or may not be triggered, in other words, effect is not the same as cause. I think a lot of us believe, it's because we're told it's so. You just made a statement here that climate science is very immature. We're basing a lot of what we're being told on what science is telling us, and there are probably just as many scientists out there in the world who would come to the opposite conclusion as there are (Interruptions) Not what I've read.
MR. PARKER: A vast majority have come to the conclusion. There's a small minority who haven't. That's the truth of that part.
MR. CHIPMAN: I've read articles that have said that you will have just as many scientists opposing the view if there's a climate change. We don't even know if the sun - can they prove that the sun is not getting hotter? Maybe that's the cause of this.
MR. PARKER: I'm not a climate scientist, so I'm only going to answer it from the point of view of saying that when I listened to the members of the IPCC, the international science body whose job it is to understand the climate science and to make predictions about that climate science, they're saying certain things. The things they're saying in their last assessment report is that they're very confident now about the temperature increase ranges that they've put forward as what's going to happen in terms of temperature increases.
You also need to understand that they predicted what would happen in terms of what's happening in the North. I've had the good fortune, I suppose, to be able to sit and listen to political leaders in northern Canada, from the Territories, all three of them, say to their colleagues, there is obviously something going on here. We're losing our permafrost. If you listen to the people from Nunavut who tell you that the hunters who historically, for their whole life, used ridges in the snow, based on the wind patterns, to navigate so they could hunt, those ridges are in a different place now and they can't use them anymore. They've had to put a moratorium on hunting polar bears because there's no sea ice. That was a significant part of the income of their society, because they had people who were taking people to hunt polar bears.
I think we need to be very cautious about how we look at the science. As Sir John Browne said, whether the science is provisional or not, the issue is risk and risk management. There is a significant risk. I think most people would agree that that's true. I recognize that there are a number of scientists out there who are contrary in terms of their views, but I can tell you that number is small compared to the number of IPCC scientists and those scientists who say there's an issue and this is an issue that we need to deal with.
[10:00 a.m.]
MR. CHIPMAN: But there's no proof, I mean all these factors could be caused by overheating or an increase in the temperature of the sun. There's no proof that that's not the cause either, is there?
MR. FOOTE: The last report of the science panel indicated that in their estimate about 60 per cent of the temperature increase they saw in the last century was likely from man-made sources. That's how they broke it down - 40 per cent could have been because of the variability of the very things you're speaking of.
There is an effort going on to determine how much of the temperature increase is caused by man-made climate change and how much is caused by some of these other factors. That certainly is a question, but there is no debate about the temperature increase - the debate is about what per cent is . . .
MR. CHIPMAN: That's what I'm saying. We know the effect, we may not necessarily know the cause. We know that the earth is warming and that's what I'm saying - do we have any scientific proof that it's not the sun? Obviously, some of it probably is man-made.
I guess one of the things that concern me is that Nova Scotia has the third highest greenhouse gas output in Canada. We also have the second largest growth in GDP behind Alberta - 70 per cent of our electricity is dependent on coal, oil and gas. Then I look and I think we're going to have to reduce this - how does that affect the number of Nova Scotians that are burning wood to heat their homes?
MR. PARKER: Fortunately for the wood-burners, they don't have to count the carbon that they produce because it's in the atmospheric cycle already. If you grow as much biomass as you consume, the net carbon process is zero from the point of view of the atmosphere. So you can burn wood as long as you don't burn more than you're growing and there are no net greenhouse gases produced that are counted as part of the carbon atmosphere cycle.
It's only when you burn carbon that's been stored for millions of years in the earth that you have this problem of suddenly putting more carbon into the atmosphere. So it's a fossil fuel issue, not a biomass issue.
[10:03 a.m. Mr. Russell MacKinnon took the Chair.]
MR. CHAIRMAN: Okay. Mr. Holm, you're next.
MR. HOLM: First of all, I was interested in your reference to BP, British Petroleum and actually, BP no longer stands for British Petroleum. They've changed their name to Beyond Petroleum and they're actually one of the largest producers of alternate energy sources and they've been taking the lead in trying to encourage other oil and gas producers to follow their lead. Not only have they cut their emissions, but they've also saved a lot of money in the process.
A couple of things, if I could. One, when we're talking about the economic modelling and I'm looking at the chart again that shows the atmospheric carbon dioxide concentrations and temperature changes, when you take a look at the projected jump from about the current time up to 2100, the amounts increase very dramatically. We've done the economic modelling on what the cost would be to the GDP and so on by trying to meet Kyoto. Have we done any economic modelling on what the cost would be for not trying to meet Kyoto, not trying to turn that around?
When you take a look at the kinds of temperature changes that we're seeing now with the modest increases - and I'm using modest only in so far as it compares to what is being projected if we do nothing - that is going to have one massive increase, I would think, potentially, for increased temperatures. Once your temperatures are going up, you're going to have increased costs for health care, you will have changes in the forestry, agriculture and so on. Has there been any attempted economic modelling to find out what the cost would be to ours and to Canada's economy overall if we don't move forward?
MR. PARKER: I think the answer to that question is that there hasn't been a lot of work done on adaptation in general, not only in terms of modelling but in terms of trying to figure out how we may have to adapt. We also have to realize that if the science is reasonably correct, a lot of the warming that has taken place or that will take place over the next little while, is not going to be preventable. So some of those impacts are going to start to occur
and perhaps, just perhaps, the smog events we had last year were part of that process. I don't know whether that's true or not, but the other thing that we have never done very well, and when I say we, I'm not talking about Nova Scotia now, I'm talking royal we, i.e the world we, is really deal with the externalities of how we price the environment, for instance. I mean, what's the value of the environment? I know that lots of people have done work and I've seen and read lots of that work. In terms of that work being accepted into the mainstream economic analysis processes that we all use, that hasn't progressed yet and I think the yet is important. I mean, I think, eventually we will get better at trying to decide what the value of our environment is.
So the answer to your question is not very much has been done in terms of trying to figure out what the cost of doing nothing is, but everybody recognizes that there is a cost to doing nothing likely, if the science is reasonable, and that's the risk we talk about. It's the risk that the chair of Beyond Petroleum talks about. So, you know, I think that's work that needs to be done and obviously the whole adaptation process is something that we need to move forward with and the federal government has done some work along with the provinces and territories on that issue. We've been so focused on mitigation in the last number of years and on trying to figure out how to share the burden of the mitigation costs that we haven't done as much on adaptation as we should, but there are and have been adaptation working groups as part of the national process and I'm sure they will continue to try to push that process ahead.
MR. HOLM: I guess just in closing on that point, I mean, no, if we were to cut our emissions tomorrow, were able to do that magically, we're not going to reverse everything that has been done. However, if we are to be continuing at the rate of acceleration of polluting the atmosphere, then I would suggest that growth in those kinds of conditions would correspondingly increase and so that will have very significant impacts when we talk about not smoking in public places, and I can appreciate that, but I wouldn't want to be living under the Valley smog that had existed there last summer for extended periods of time as well. I mean, that would be as, if not far more, harmful to health than sitting downwind of the occasional cigarette smoke.
The other question that I just want to throw out there is in terms of the value of our offshore gas reserves. I can appreciate where Alberta is coming from when they're talking about the tar sands and the impact it would have on them, but natural gas, of course, is really the cleanest of all the fossil fuels. Would that not become more valuable certainly in terms of both, you know, our ability to trade it and the attached credits, but isn't that going to become more valuable as a fuel on a worldwide basis? I don't understand why, if we were to move forward with Kyoto - and I appreciate that some of the companies are squawking about concerns about the offshore value and how they might be affected if this were to go ahead - those companies that also have significant interest in places like Alberta don't want to see it going forth because of the costs there. Could I just get your views on that?
MR. PARKER: Well, yes, obviously I don't have views on what companies are or aren't doing. I mean that's up to them and they have to make those choices, but with respect to natural gas, there's no question that in the carbon-constrained world, natural gas becomes the fuel of choice and natural gas becomes a more valuable commodity, particularly if the United States at some point constrains carbon in some way. Now, we all know that the United States has made it clear they're not going to ratify now. There are, however, significant things happening in the United States with respect to carbon constraint by states themselves. I mean, we have an agreement with the New England States and the Eastern Canadian Provinces which includes the Atlantic Provinces plus Quebec, and we have a target. It's a regional target for that group of jurisdictions that says we will reduce by 10 per cent in 2020. We looked at that group and asked, is there a reasonable chance that we could get to a Kyoto-like target? The answer to that is, probably not; the time frame is a problem here.
There are no technologies that I can see in the pipe that are going to have a real material difference, make a real material difference in the process. If you ask me whether or not the federal plan will get Canada to Kyoto, the answer is no it won't, not without significant changes. That's the problem. We've overstated the reductions. There's 60 megatons missing. How are we going to deal with those issues?
The reality here is from a technical perspective, it's important to understand that we have a national plan, a federal plan that was put together by the federal government that is not a Kyoto plan. The New England Governors and the Eastern Canadian Premiers is not a Kyoto plan, but they are emission-reduction plans that attempt to move us to a lower-carbon future. I'm also not sure that it matters very much whether or not we reduce in the next seven or eight years or 10 years, or whether we do it in 15 years.
I think that we need to be cautious about how we go forward, but we also need to be reasonable in terms of that. So, lots of states - New York State has just come out with some reduction requirements, California has new requirements for vehicles. So, we will see. In a carbon-constrained world natural gas is more important.
MR. CHAIRMAN: Mr. Epstein, you're next.
MR. HOWARD EPSTEIN: Well, I take it from your comments on the science that you made, the view that seems to prevail in the Department of Energy is that regardless of whether Kyoto gets ratified or not, we should, as a matter of public policy, regard greenhouse gas emissions as something that we ought to be addressing. I take that from the comments you made about potential environmental impacts on Nova Scotia. I assume that the underlying thought is in accordance with the precautionary principle, which is that if a reasonable amount of scientific advice trends in a particular way, you ought to try to do something about it, even if there's no absolute proof. Am I understanding correctly, the views that are prevailing now in the provincial government?
MR. PARKER: Mr. Epstein, I think our minister has been clear on that subject. It's important to recognize that irrespective of whether or not Kyoto or some other national plan takes place that what is important is to move forward on climate change. I think most provinces have that view and have expressed that view publicly for a long time now. What we're searching for is a way to put a process together with the national government that we can all work together to achieve emission reductions.
MR. EPSTEIN: What I wonder is whether the information that you've put in front of us today is the extent of the detailed studies that have been done on impact in Nova Scotia, either environmentally or in terms of the overall economy. If it is, I wonder whether there are any other studies that are planned, in particular, whether any have been commissioned, or whether we're missing something in terms of other studies that have already been done.
MR. PARKER: I think the only thing that you didn't see today was the original analysis that was done by the national process, for example the first round of analysis that was done by the national process. We didn't bring those forward because they're superseded, basically, by the work that you saw today. At this point, I don't know what the national process will do in terms of additional analysis, whether or not we will do additional work. We've heard the federal Environment Minister say paralysis by analysis, so I'm not sure how willing the federal government is to move forward on new analysis.
The provinces would like to see some more analysis done, particularly around the federal plan and once it gets to a point where we can kind of figure out where the reductions are coming from. Whether or not that will happen, I don't think I can say at this point. I think that is part of the forward stuff that we need to do with the federal government. You've seen the only analysis that we've done, it was reported today. So there hasn't been much done that wasn't at least part of this presentation and at this point we don't have any plans to do anything specific but who knows where the process goes tomorrow. I can't comment on that, obviously.
MR. EPSTEIN: Did I understand your worst-case scenario to be that Nova Scotia might miss out on 6,000 potential jobs that might not be realized in terms of what would otherwise be the growth of our employment in the period to 2015? Was that the worst-case scenario that emerged from the model?
MR. PARKER: Actually, I don't know for sure. I'd have to go back and look. I didn't actually do those kinds of numbers, before I came, in my head.
[10:15 a.m. Mr. Brooke Taylor resumed the Chair.]
MR. FOOTE: I don't think that we necessarily call that the worst case. The modelling assumptions were somewhat - at least in the May round - agreed to by the provinces or at least consensus between the provinces, the federal government and the territories. Certainly a number of provinces have some questions about the assumptions that went into that model.
MR. EPSTEIN: But you offered us this model and as I look at one of your slides - they are on Page 8 of the written handout - you have your base case which is of economic growth for Nova Scotia for the period to 2015, so there is employment growth of 63,500 jobs and if the $50 per ton financed by the government is the worst-case scenario, the employment growth will be 57,500. I was just looking at the difference between those two numbers and it's 6,000.
MR. FOOTE: Oh, that's quite true but we're not suggesting that that's necessarily the worst case.
MR. EPSTEIN: How could it get worse?
MR. FOOTE: Well, for instance, the provinces are not in total agreement with the federal government that the gap of 240 megatons used in this analysis is going to be realized. Some provinces feel that the gap could be quite a lot bigger than that, so if we have to make a bigger reduction, therefore the impacts are going to be bigger. Based on the assumptions used in the modelling to date, yes, but we're not suggesting that the assumptions themselves that went into these modellings represent worst-case assumptions.
MR. PARKER: Remember what I said about modelling at the beginning of this discussion, Mr. Epstein, it's important to understand that we've done a lot of different models with a lot of different assumptions to see where the process goes and I would be very reluctant to say that that could be the worst case - I mean we could probably go back and find one that is way worse.
MR. EPSTEIN: Is there any model, though, in which the economic impact is anything other than a reduction in growth, meaning there is still going to be economic growth, it just won't be as large, isn't that the picture?
MR. PARKER: I haven't seen any . . .
MR. EPSTEIN: So, I mean that's the bottom line on it . . .
MR. FOOTE: But this may not be the worst case is all we are saying; you asked if it is the worst case.
MR. EPSTEIN: All right but within the words of that context.
MR. FOOTE: Yes, I mean if it turns out that it costs more to achieve reductions than the models estimate, if it turns out the federal government's announced measures to reduce emissions don't yield the reductions that they are projecting they yield, it turns out the gap is bigger, we could have a worst case.
MR. EPSTEIN: Another criticism that I think Mr. Holm noted was that it's not clear that these models include offsets of growth in other sectors of the economy or in a transformed energy economy, or whether they include benefits that would otherwise show up in terms of savings elsewhere, but anyway . . .
MR. FOOTE: I think they do in terms of - if I could just clarify that one - it does show, for instance, any impact of additional purchase of insulation, high-efficiency heating equipment, high-efficiency processes for industry, that shows up here.
MR. EPSTEIN: And jobs in those industries?
MR. FOOTE: Jobs created in those industries, that's all in here. I mean it's a full economic case. It doesn't show the environmental impact but it does show all the environmental. So it shows both sides; it shows that you get growth in certain areas and you get reductions in others.
MR. EPSTEIN: Can we focus for a moment on the one sector that . . .
MR. CHAIRMAN: Mr. Epstein, if you could place your question, please.
MR. EPSTEIN: Yes, I'm just asking a question. I just want to focus on the one sector where you suggested that there might be particular problems, which is the electricity sector in Nova Scotia. I'm wondering whether you have any detail for us about that because what you suggested was that the cost of electricity to consumers might well go up in Nova Scotia because of the reliance on fossil fuel I assume, and I assume this is directly connected to stranded costs in the potential mothballing of existing plants or transformation. I wonder if this has been worked out in any detail at all and whether it includes any thought about bringing in other sources and how consumers might, in fact, save if other forms of electricity generation are worked out. It seems to me that surely there's a lot built into that assumption, that electricity costs are going to go up in Nova Scotia.
MR. PARKER: The modelling would only be looking at electricity moving forward with - whatever you could do up to $10, for instance, would be included in the process. If the costs of reducing are more than $10, the models would simply go buy international permits. That's how the process is set up. So you can say, at a $10 price this is the cost, so you don't go to $20 in terms of reductions in the plant, if you like, you go to the $10 limit and then you
buy international permits. Stranded costs are part of it, but there are also issues around fuel costs for alternates.
One of the questions we get asked on the national stage all the time is, well, why don't you just switch to gas. The answer to that question is a) stranded assets, and b) what's the cost of gas versus the cost of coal and how does that impact on the price. At the moment, gas is about $4 - well, I can't remember what the number was last night on the television, it's gone up to over $4 and coal is probably $2. So you can do the arithmetic for yourself.
I think it's important to understand that while you could reduce those emissions, there's a cost involved in that. When you start to go toward renewables, which I think is another area that perhaps we should talk about briefly, wind is the most prospective of those at the moment. As everybody knows, we've just had two units running in the province. It's the beginning of a program to put in place a wind energy industry here. From the consumers' perspective today, it costs more to buy wind-generated electricity than it does to buy coal-fired electricity.
We can't get a wind system up and running to price their electricity into the system at the current cost of generating it with a coal-fired plant. That's why we need a program called the Green Power Program, where people would be invited to purchase. The other option would be to take the cost difference for the wind and put it in the rate. It will increase the rate by something like 0.5 per cent, if we went to a 5 per cent renewable portfolio standard.
I don't make the choices between whether or not we want to increase the price or whether we don't. I'm not going to pronounce on that. My view is that it's nice to have wind energy developed, and we've been promoting that for a long time and trying to find a way to do it that would allow us to build the systems, pay for them in some way, and over time the price of wind is likely going to be lower than the price of alternates. When that time comes then the problem is gone away. In many jurisdictions, for instance in the United States, wind can compete because electricity is much more costly than it is here.
I think that we're moving ahead in a rational way. If you look at energy strategy, that's the proposal. Now, could we generate 2,500 megawatts of wind? That would be tough in Nova Scotia, there's not enough room. Anyway, I think that's the answer.
MR. CHAIRMAN: Mr. Parker, I'm going to have to move on to Mr. MacKinnon. He has a question, too.
MR. MACKINNON: With regard to this agreement that you have on the table between the United States, the Northeastern U.S. States, and the Atlantic Provinces and Quebec, can you give us the specifics of that proposed agreement? Is it similar to the Kyoto
situation or Protocol where you would reduce your greenhouse gases by 6 per cent by the year 2020?
MR. PARKER: No, it's not similar to the Kyoto Protocol. It's a different kind of agreement. First of all, there are no particular reductions for jurisdictions. There is a reduction target but it's a regional target, so it applies to the group, as a whole, just like the European Union's Kyoto target applies to the group as a whole.
MR. MACKINNON: Can you quantify that figure?
MR. PARKER: Yes, the number is 10 per cent by 2020. Isn't that right . . .
MR. MACKINNON: What would the consequences be for this union, so it speak - I make reference to the European Union but the Northeastern States, the Atlantic Provinces and Quebec - has there been any impact analysis done as to what would happen if you didn't meet those targets?
MR. PARKER: Not to the same extent, I'm sorry, I'm not sure I understood your question, impact . . .
MR. MACKINNON: Well what would the impact be if you didn't? Let's say Kyoto is off on the side, okay, that's not on the table . . .
MR. PARKER: Do you mean the environmental impact or the economic impact?
MR. MACKINNON: Both.
MR. PARKER: I think the environmental impact is a really hard question to answer because we don't know enough about the adaptation or impacts of this on the environment to make that kind of choice for such a small area. From an economic perspective, the agreement was set up so that we would get reductions across the region in the cheapest possible way and we would be allowed to trade and in fact, we were able to get the New England States to agree to give us credit for exporting cleaner gas. So we have the international energy credits, if you like, built into that agreement. So from our perspective, reaching the target based on that would be - well I wouldn't say it would be easy but it wouldn't be as tough as getting to a Kyoto target.
MR. MACKINNON: With regard to Nova Scotia, the large CO2 producing industries, such as Nova Scotia Power, where they use a lot of coal and then you made reference to Stora Forest Industries, as I have always known it, have they made any presentation to your department as to what the impact would be on the power company - whether it be Nova Scotia Power, Emera, or whatever name they so choose?
MR. PARKER: I'm not sure presentation is the right word. We've had lots of discussion with the utility about . . .
MR. MACKINNON: Have they quantified in real numbers any particular model that they would . . .
MR. PARKER: I think the best way to answer that is to say that depending on the assumptions, with respect to how much and when . . .
MR. MACKINNON: What's the worst-case scenario and the best-case scenario for that power generating . . .
MR. PARKER: That's a really hard question to answer, sir. The difficulty is . . .
MR. MACKINNON: So they haven't presented anything . . .
MR. PARKER: They haven't presented those kinds of results, worst-case, best-case. What they have said is that if we had to get to Kyoto by target, by the Kyoto date - and there's no indication that that would happen, even if Canada ratifies Kyoto. What we're talking about here is an international . . .
MR. MACKINNON: What have they said, if that was the case?
MR. PARKER: A 20 per cent to 30 per cent impact on rates, but only under certain conditions.
MR. MACKINNON: Have you analyzed those figures?
MR. PARKER: No.
MR. MACKINNON: So you don't know if they're valid or not valid?
MR. PARKER: Again, I think we have to go back to the process of saying what are the conditions under which - they've also said, for instance, that they could get to a Kyoto-like target by 2017. And they've said that, for instance, the New England Governors-Eastern Canadian Premiers agreement, doesn't give them any particular concern.
MR. MACKINNON: I noticed you indicated that the cod are going to swim south as things warm up and so on, which I find a little unusual because usually the codfish stay in colder waters. Isn't it a fact that if you look on balance, with greenhouse gases and CO2 emissions, we're in a colder climate, so the impact on the big picture, so to speak, globally, is less significant than if you were in a warm climate? Am I not correct?
[10:30 a.m.]
MR. FOOTE: I think it's fair to say that the farther you are north from the equator, the bigger the impacts that are being predicted by the climate scientists.
MR. MACKINNON: The bigger the impact?
MR. FOOTE: Yes, for instance, northern Alberta and northern Canada are expected to see much larger temperature increases from the climate models than southern Canada.
MR. MACKINNON: Is that because of our economic-generated activity or is it because the prevailing winds come from the south?
MR. FOOTE: I think there's a large number of factors that go into the climate models - ocean circulation.
MR. MACKINNON: So you really don't know is what you're telling me.
MR. FOOTE: What the main reasons are?
MR. MACKINNON: Yes.
MR. FOOTE: For higher temperature increases farther north, I'm not as familiar with the models. I just report the results.
MR. MACKINNON: Do you know, Mr. Parker?
MR. PARKER: No, I don't. If we're talking about climate modelling, we've already been through that. We're obviously not experts in climate modelling.
MR. CHAIRMAN: Thanks, Mr. MacKinnon. Mr. Dooks.
MR. DOOKS: Thank you. Kyoto - I wonder, what do you feel the success of the mechanism is going to be? Are they going to be able to pull this off or is it a process to educate countries and communities and provinces? We talk about 55 countries and if each country had 10 provinces or states and there's confusion from within the country itself and multiply that by 55 countries and then again with countries that are not even going to participate, or join or fall off, is it going to be successful or is it simply a mechanism put in place to educate people on this situation? I can't see how it's going to be successful when you have so many uncertainties.
We have people in our own provinces and countries not really sure on how we can monitor certain carbons and pollutants in the air, it's all about interpretation of success. If one country interprets differently than the other, who monitors? Who is the gauge of this country meeting its goals or not? Will Canada say at the end of the day, no, we did not meet our goals? Who's going to be responsible to make that comment when it comes on a global type of comment?
I've been listening and paying attention to this for a number of years as a matter of fact and I'm concerned about our move in automatic car starters. If we have 20 per cent of our nation buying car starters and they're running 20 minutes more each morning, will that not make a difference? Who's monitoring that? Maybe some countries don't have that, do have that, who's burning gas - I will tell you I appreciate this whole approach, but where are we going? Is it going to work or is it basically an education type of initiative?
MR. PARKER: Your question with respect to success, I guess, depends on how you measure it. If you measure it in terms of ratification . . .
MR. DOOKS: Or who measures it?
MR. PARKER: The United Nations' process measures it and there are very strict rules about how those measurements take place. That's part of the protocol. If Kyoto's ratified, is that success? Well, it likely will be ratified by enough countries, if Russia ratifies, to get the target, to get to the 55 per cent and so the protocol will come into force for those countries that have ratified it.
The European Union will ratify because as George told you earlier, the European Union has a much easier time of it. They've already got reductions in some areas that will offset their growth in others. So, they will ratify. Lots of countries that don't have targets have ratified - nothing in it not to, why not? They don't have any obligation. So, Russia ratifies in the summer of 2003, the protocol comes into force and for those countries that have ratified, is that success? Well, I don't know whether it's success or not.
From Canada's perspective, if we ratify, then we will come under the rules of measurement that are set up for the protocol in terms of how we figure out whether or not our missions have gone up or down or by how much. The way they basically do that is they measure the amount of energy that gets consumed and so we may not be sending out the car starter police, but if people use car starters, it will increase the amount of gasoline they consume and that gasoline will get counted at the source. It's pretty simple arithmetic then to figure out how many tons of CO2 it makes.
So, I can't comment on its success because it depends on who is trying to figure out what success means.
MR. DOOKS: I just used the car starter as sort of an example of many other issues. What about the issue of the cost of $250 more a month across the board for a working family? That's a concern as well. As a nation, as a province, how are we going to subsidize the families on this $250 extra charge if indeed that's true? I don't expect you to answer. I'm just saying there are so many things that are not for sure and not for certain when we talk about this process. Is it federal or global, are we talking, is it provincial or even community initiatives now?
I have a lot of concerns, $250 a month is a lot of money for a family to have to fork out to be a part of this initiative. I'm not saying they shouldn't, but they wonder where they're going to get it. I am just going to follow the process and certainly hope it's a success, but boy, I will tell you, it's like working with world peace, it's a big one to try to pull it all together and I think it's necessary. I think it's very necessary, but I think we have a long way to go and we can't put aside the lack of knowledge that a lot of people have surrounding this. A lot of people certainly don't understand what it's all about yet and so on and so forth. They read opinions in the media which may not necessarily be the opinion of any one group. Thank you, that's all I have. (Interruptions) I got away from the questions and went into comments, but just an issue.
MR. CHAIRMAN: A very liberal-minded chairman here, Mr. Dooks.
MR. DOOKS: I wouldn't want to think that we could cut the trees and burn all kinds of wood and that doesn't make a difference . . .
MR. CHAIRMAN: I know that's a very real concern, Mr. Dooks. I just wonder if I could maybe throw in a couple of questions with the committee's indulgence, Mr. Parker, and this isn't a concern perhaps or a problem that you would have, but it seems as if we have people who are allegedly pro-Kyoto and people who are somehow anti-Kyoto. There doesn't seem to be any common ground, like that middle ground, and a number of people are trying to get some answers. My colleague, Mr. Parent, I share his concern about the agriculture industry and the traditional resource-based industries besides the big pulp and paper companies in the Province of Nova Scotia. Eight sawmills, for example, reside in the one little old constituency of Colchester-Musquodoboit Valley; in fact the biggest lumber producer in all of Eastern Canada. Obviously, there will be impacts to MacTara for example in Upper Musquodoboit.
I have tried and the company has made some efforts to find out what are the ramifications if the accord is ratified, and the Prime Minister has said he hopes to have it done before Christmas. I don't know if it's essentially through the media or through other political Parties but, when you try to get answers, a lot of people who represent the various political Parties find that you somehow are profiled as being "anti" or "pro" and the polls indicate over 80 per cent of Canadians are largely uninformed.
I think that is a problem that we have out there. I guess what I would like to know is, the various departments within government, within the provincial government, are they in fact working together, like with the Department of Energy? Although you're not an economist and engineer, you seem to have some pretty in-depth information on this. I would like to think that all our government departments that would be, should be, concerned, are conversing with you and that there is dialogue so we can share this with the industry and the individuals as well, who are concerned about the impacts. I have difficulty with people being somehow pushed off in a corner and saying you're "anti" or "pro" or you're this or you're that, when in fact a lot of people are trying to get some information. I don't know if you have any comments on that.
MR. PARKER: Yes, I would agree with you, Mr. Chairman, that that's a valid concern. We believe in public education. In fact, we had one of the first public education processes that was a federal-provincial arrangement going on in Nova Scotia, and it's continuing in the province as a shared responsibility between us and the federal government. We co-chaired with the federal government the Public Education and Outreach Issue Table, which was part of the original climate change federal-provincial process. In fact, George was the provincial co-chair of the Public Education and Outreach Issue Table. So we think that's important and we're pushing forward with projects that help to educate, but this is a very complicated subject and it's very difficult to get enough education out there so that people understand the value and there's lots of misinformation around it as well on both sides of the argument here, because it has become an issue for the media and an issue for federal-provincial relations and so, you know, I mean I think it's important to educate.
Now, to get to the second part of your discussion. Yes, the provincial government departments are in fact working together. We have done some work on analyses that we shared with you with other departments involved. We're working with the Department of Transportation and Public Works to look at provincial government buildings. There are a number of those. We have been involved with Transportation processes and that will grow as we get more clear about what our part in this process is as a province.
It's a subject which is going to take time, I think, in order to get the public to understand it better - and you know there are lots of polls. We see a new one every week at least that says 85 per cent want to ratify, oh, no, 40 per cent want to ratify and the problem with that is that people are being asked to question, but they're having a hard time trying to answer it because they don't have the background to do that. I think education is very important and I think governments working together, both internally here and with the federal government and other provinces is what it takes. There are lots of things we can do to start down the road, irrespective of whether we ratify or not, that makes really good sense to do because we will save money.
MR. CHAIRMAN: Exactly. I think most clear-thinking people respect the risks that are posed by climate change. I think that's indisputable. Maybe just a hypothetical question and then I will pass it on to another member. Nova Scotia, I guess in terms of electrical capacity, at least 70 per cent is dependent on coal and you have mentioned the cost factor of conversion, but have you looked at the distinction between the greenhouse gas - say if overnight we were all of a sudden on natural gas, for example, not wind power but natural gas, what would be the reduction in greenhouse gas emissions, in carbon dioxide going into the atmosphere?
MR. PARKER: For all our coal-fired power, if we changed the whole thing?
MR. CHAIRMAN: Yes, just if we took . . .
MR. PARKER: It would be a big reduction.
MR. MACKINNON: Mr. Chairman, on a point of order. I think this is very important. I believe our witnesses indicated that they did not do an analysis, they accepted Nova Scotia Power's figures that were presented to them. So I think it's very important to note that the Nova Scotia Department of Energy has not done a cost analysis on that conversion, they've only accepted the figures from the power generating. Am I correct on that? That's really what you've indicated.
MR. CHAIRMAN: That's more a comment I guess than a point of order.
MR. MACKINNON: No, no, it's a very important point.
MR. FOOTE: Well, I just went back through the numbers and for the May analysis the range was 3 per cent to 15 per cent, okay? That was the national analysis that was done in May and for the reference case, which didn't get us to Kyoto, it was missing 70 megatons, the range was 1 per cent to 9 per cent impact on Nova Scotia Power rates.
MR. MACKINNON: Not 20 per cent to 30 per cent as suggested?
MR. FOOTE: No, and I think we have to be careful here in terms of understanding what the basis for the different numbers are. In the national analysis they assumed that after a certain price, the utility will buy reductions. I think some of the analyses that Nova Scotia Power is looking at in its kind of different scenarios is what if we had to do everything in Nova Scotia, okay, and so that's going to cost more than $10 per ton on average, right? So the lower numbers are based on $10 a ton and some permit purchases, offset purchases, and the higher numbers are based on doing more and more of any reductions in the province.
It remains to be seen, too, what the final policy package is going to look like coming out of the federal government and how that looks will depend on how many reductions Nova Scotia Power has to achieve. I mean if there's still a balance here between how much do you ask the large emitters like utilities and oil producers and refiners and stuff to achieve versus how much do you ask the consumers to do and there has been no final decision on what that balance is going to look like, so we're going to end up with a range. I don't know if that helps on your point.
[10:45 a.m.]
MR. CHAIRMAN: I guess the point, just in conclusion, that I was trying to make was that where a number of developed nations haven't signed on and have no intention of signing on to the accord, if the conversion costs would hit Canada, and I guess more particularly Nova Scotia, as hard as it has been basically explained here this morning, then I think we all should be extremely concerned.
We're going into the second round and perhaps I could ask the honourable members to just place one question, if they would, so other members could get in and we can respect the clock and all that good stuff. Mr. Parent on the second round, one quick short-snapper.
MR. PARENT: And comments.
MR. CHAIRMAN: Comments, yes.
MR. PARENT: First of all, I want to thank you. It has been a very informative presentation and I'm hearing balance in your presentation, which I appreciate. My very quick question, and then I will throw in a comment, in your analysis it appears we would lose more jobs than we would gain. I have seen other analyses that say that if we moved to Kyoto, we would gain more jobs than we would lose. Can you comment on that, on where the job losses would be and maybe where the job gains might be?
MR. FOOTE: I think if we looked at where the impacts are in terms of the negative impacts from the two modelling runs, we will see where the job losses would be and I do want to refer back to Mr. Epstein's point that we're talking about growth here. So we're talking about various levels of growth. In the reference case for instance, we wouldn't have as many new jobs in construction as we would otherwise. That seems to be one sector.
I mean, obviously, the big emitters drive the construction industry by and large. It's the big projects that drive the construction industry. So if they stop doing the big projects, that's going to affect construction overall and most of the analysis sees a negative impact on construction even though there's likely more consumer spending on construction in terms of insulation, energy efficient windows, et cetera, and more business spending. So we will see it in that area. Also in the other areas we see it would be wherever we see a negative
economic impact. That's where the job loss is going to occur, so that would be utilities, petroleum products and refining, I think are the top three.
MR. PARKER: It's important to understand though that these are less growth in jobs as opposed to job losses.
[10:47 a.m. Mr. Russell MacKinnon took the Chair.]
MR. CHAIRMAN: Mr. Chipman.
MR. PARENT: Can I just make a comment?
MR. CHAIRMAN: Well, we have quite a list and we're trying to give everybody a second round. We only have 12 minutes left. Mr. Chipman.
MR. CHIPMAN: Mr. Chairman, I'm a proponent of a made-in-Canada approach and I know there has been a lot of talk in the media about the Prime Minister signing this accord very quickly. Personally, I think it's a little too hasty.
One thing I read and I've heard it this morning, but we've talked about vehicular travel, and our modes of transportation, but we hear very little about air travel and space travel which has to be a main contributor if, in fact, these are causes. One thing that struck me and I read an article, it was by EnCana Corporation. It called Kyoto, ". . . one of the most damaging international agreements ever signed by a Canadian Prime Minister . . .", and they say it could kill the Deep Panuke project off the coast of Nova Scotia. I guess my point is the very fact that Nova Scotia's economic future could depend on the offshore. I guess that's more of a statement than a question, but I will leave it at that.
MR. PARKER: I'm not sure whether you expect an answer. I mean I can't . . .
MR. CHIPMAN: No, it was more of a statement.
MR. PARKER: Yes, I can't comment on whether or not EnCana will or won't delay Deep Panuke. I think there are lots of reasons why they might do either.
MR. CHIPMAN: My concern was the hastiness of the decision to sign the accord on an international basis and not on a made-in-Canada basis.
MR. CHAIRMAN: Mr. Epstein.
MR. EPSTEIN: I think I gathered from some of the comments that you made that you might have been having some meetings, either the Department of Energy has or other branches of the government, or perhaps the federal government, with different sectors in the
province - I assume Nova Scotia Power and the pulp and paper companies and so on. Is that the case and, if so, can you tell us something about that and what the general approach has been? Has it been going to them and saying what can you do to help us meet the Kyoto target or a Kyoto-light target? Has that been the general approach, and what has been the result, and is there more planned? I think I'd like to hear more about that if I could.
MR. PARKER: The answer is that it has been both federal, provincial and federal/provincial discussions as I think people are aware with industry, in general, in Canada. In our case we've had discussions with sectors that have either initiated that or we've initiated it. They have been typically general discussions about where they see this and what their views are. The reason we do that is because obviously we want to carry those views into the national process that we are part of and, yes, the utility is a big part of that.
What we typically say to these people is, here's a policy approach that is being proposed by the national process or by the federal government or whatever and in terms of that policy approach, what do you think in terms of that, in terms of how you would react to that and whether or not what it means to you? Those are the kinds of questions we typically would ask, and do we plan more? Obviously, if we are going to be successful in getting emission reductions in Canada, whether it is under a Kyoto banner or whether it is under a made-in-Canada banner, which we like to talk about as well, I don't think it matters how we get the reductions. I think a made-in-Canada, non-Kyoto plan is as good as the federal non-Kyoto plan.
What is important here is, where can we get reductions? How much do they cost us?
What is the value of that? If one of the things we go forward with is an emissions trading system for large file admitters for any other group that has a cap on them, if industries of Nova Scotia are inside that cap, then clearly we would be talking to them as part of the process that will go on Kyoto or non-Kyoto between now and the time that the domestic emissions trading design is finished, because it's not finished at this point.
The federal government has clearly said, we have a domestic emissions training program and here is what we think it should look like; now, can we sit down and refine it and deal with some of the issues? They know for instance that one of the sectors that gets hurt the most in that situation is coal-fired electricity. They're eventually going to have to come to the table and say, well, the way we'll deal with that burning sharing issue is this.
I think they're will be lots of discussions. We are still a number of years away from
a Kyoto time frame if Kyoto, in fact, gets ratified. We're still six years away, lots of time to have those discussions, I think. Now, the domestic emissions training would need to be in place by 2006 if we wanted it to be successful, so we've got four years to design and implement that program.
MR. EPSTEIN: I'm sorry to hear you say there is lots of time, if the U.K. has already gone down 11 per cent and we've gone up 12 per cent, in a sense. The accord was negotiated in 1997.
MR. PARKER: Why did the U.K. go down?
MR. CHAIRMAN: That's a side issue.
MR. PARKER: I'm sorry, Mr. Chairman, I shouldn't be editorializing.
MR. EPSTEIN: The point is that it's achievable. We could have been doing something five years . . .
MR. CHAIRMAN: Mr. Parent on a short-snapper.
MR. PARENT: Thank you, Mr. Chairman, it's kind of you. There's not really a question in here, there may be one, but I'm not sure if you can answer it. The smog in the Valley which, of course, was a major concern for my riding this past summer, the frustration that the United States is not going to join in this. I am cheered by the regional agreement that our province has been able to work out with the New England States; I am very very cheered by that. As you say, some of the states in the United States are adopting fairly strict measures that will have some impact. California, for example, with low-emission vehicles, which are going to have an impact in Canada. If we ratified - and you may not be able to answer the question - and the U.S. didn't, would that have any effect on the smog in the Valley? That may be an unfair question considering the fact that we produce 2 per cent as a country. That's, I guess, my concern. I want to see something done. You understand my frustration.
MR. PARKER: I share your frustration.
MR. PARENT: Yes, I know, we all do.
MR. PARKER: The answer to your question is, if Canada ratifies and the United States doesn't, I think it also depends on what other agreements Canada and the United States may well sign with respect to smog abatement and there are other avenues. Smog is not a greenhouse gas issue by itself. Smog is increased by the temperature going up, and the long-range transport process brings it here from the Ohio Valley and Ontario and elsewhere, but there may be other mechanisms which the U.S. and Canada can agree to that will reduce not only smog, but we still have an acid rain problem in spite of all the work that has been done.
MR. CHAIRMAN: Mr. Parker, I have just one final short snapper myself and then we will close off. Can you advise members of the committee what the implications are for Nova Scotia if Kyoto in its present form, as proposed, is ratified and Nova Scotia does not meet its targets, what are the penalties?
MR. PARKER: Well, first of all, Nova Scotia would not have a target. We have no target as part of the Kyoto Protocol; the target is for Canada and the target would not be jurisdictional. So the only penalty that could occur if we don't meet the target - the penalties in the Kyoto Protocol are if Canada misses the target by say, for the sake of argument, 100 megatons, we put 130 megatons in the next budget period, the 30 megatons being the penalty. So there is no penalty for Nova Scotia for not meeting the Canadian target. The only penalty might be at the end of the day that if we got close to the end of the Kyoto budget period and the federal government decided unilaterally that they wanted to meet the target at whatever cost, there could be implications for our industry that might have to buy more international permits or might have to do more draconian things in order to get their emissions done. There are no financial penalties.
MR. CHAIRMAN: Could that be impacted on the federal transfers?
MR. PARKER: There has never been any indication that that would be the case.
MR. CHAIRMAN: Okay, thank you. Perhaps if either yourself or Mr. Foote would like to have a few comments just in closing.
MR. PARKER: I think I would like to, first of all, thank you for having us and I hope it has been helpful. We came to try to make sure that we do the educational process as widely as we can, and I think it's important for our legislators in the province to understand the issues the province is dealing with - and there is certainly an economic implication to whatever kind of climate change process we go forward with. So thanks for inviting us and I hope we've answered your questions to the best of our ability. Obviously - I will repeat again what I said so that people will understand - the analysis that has been done is a modelling exercise that has been put in place to try to help us understand where the impacts are going to be, and please don't look at the numbers and assume that those are the numbers that would turn up if we went forward, because they're not.
MR. CHAIRMAN: Thank you, Mr. Parker, and Mr. Foote as well. We appreciate your candour and straightforward answers.
So for members of the committee, the next meeting, just as a reminder, is on December 3rd. I believe it was indicated at the beginning of the meeting that our clerk, Darlene Henry, would be contacting . . .
MRS. HENRY: The Home Heating Fuel Association, the Canadian Oil and Heat Associations, to see if they're available for December 3rd.
MR. CHAIRMAN: Okay, so do I have a motion?
MR. DOOKS: I so move, Mr. Chairman.
MR. CHAIRMAN: We stand adjourned.
[The committee adjourned at 10:59 a.m.]