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Moving Beyond Kyoto Ratification

Presentation to the

Senate Standing Committee on

Energy, the Environment and Natural Resources

April 3, 2003

Ottawa, Ontario

THE CANADIAN CHAMBER OF COMMERCE

LA CHAMBRE DE COMMERCE DU CANADA

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Kyoto Protocol

• Signed in 1997 with limited prior consultation on targets and achievability

• Ratified by Canada in December of last year and awaiting Russian ratification for Protocol to enter into force

• Limits Canada to GHG emissions of 6% below 1990 levels starting in 2008– approximately 240 Mt (per year) less than Business

as Usual projections

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Between 1990 and 2000

• Emissions increased 19.6%, from 607 Mt to 726 Mt

• Canada's Gross Domestic Product (GDP) grew nearly 33%

• Total domestic energy consumption increased 17%

• Population rose 11%.

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The Challenge

• We will need to cut as much as 30% from our 2010 projected emissions

• The “Business As Usual” projected emissions for 2010 is approximately 810 Mt

• “Kyoto Gap” is approximately 240 Mt

• No clear strategy on how to get there

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Industry Action to Date• Canadian Industry Program for Energy

Conservation (CIPEC) – participants from a wide range of industry sectors have

improved energy efficiency by 2.4% per year between 1990 and 2000.

• Voluntary Challenge and Registry Inc. (VCR Inc.)– serves as a registry to record actions planned and

executed to reduce GHG emissions– 962 organizations currently registered

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CIPEC• Canadian Chamber members passed

resolution last September supporting CIPEC

• CCC signed letter of cooperation with CIPEC in February 2003

• Working with local chambers of commerce to encourage SMEs to practice energy efficiency– pilot project with Hamilton Chamber of

Commerce and VCR Inc.

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What prevents industry from doing more?

• Low hanging fruit has been picked for many

• Capital stock turnover timeframes

• Internal competition for project financing

• Confusing messages from governments

• No business case

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Concerns with Government Plan

• Falls short of Kyoto target by at least 60Mt

• Less than 5 years before we have to start meeting our target

• Achievability of the 55 Mt allocated to Large Industrial Emitters (LIEs)

• What are the roles/expectations for the other sectors (non-LIEs)

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First Commitment Period

• We don’t have ten years to develop a plan• Commitment period runs from 2008 to 2012

– must achieve 240 Mt of reductions per year in each of those years

– if not met by 2008, then we must over-achieve in subsequent years

• Challenges become more severe the longer we delay

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Short Time Frame

• Canadian industries are bringing in new technologies and fuel sources– not feasible in most cases to have them broadly

in place by 2012, let alone within 5 years

• Many initiatives are pilot projects and would have to be scaled-up to full projects and programs

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Capital Stock Turnover

• Artificial deadlines for compliance will lead to accelerated retirement of plant and equipment– this leads to stranded investments costs -- to be

borne by consumers and shareholders

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What is the U.S. doing?

• Will NOT be ratifying Kyoto

• Is committed to:– cutting greenhouse gas emissions intensity by 18%

over 10 years– improved GHG registry– funding for climate change research and

development of new technologies– incentives for renewable energy, sequestration, and

transportation sector

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U.S.-Canada Competitiveness

• Important for Canada to:– remain in step with our largest trading partner– look for opportunities to cooperate (such as

funding scientific research)– avoid policies that would make our businesses

uncompetitive with their American counterparts

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Moving Forward

• We need:– a national approach involving all levels of

government– a wide variety of offsets (projects outside LIE

sector which achieve reductions) – ONE NATIONAL SYSTEM FOR

REPORTING GHG EMISSIONS

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Key Policy Principles

• Stimulate growth and competitiveness• Establish reasonably achievable emissions

intensity objectives for industry• Provide policy certainty and avoid arbitrary

changes that disadvantage past actions• Facilitate investments in new technologies• Establish a sound framework for

government/industry agreements

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Conclusions

• Implementation process must have proper governance structure

• Incentive for action is needed (ie. a business case)

• The federal government plan is lacking in detail and the assumptions are unclear

• Involving the provinces is critical to avoid duplication

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Conclusions (cont.)

• This is a national issue -- not a regional one• The whole package (LIEs, targetted measures,

offsets, etc.) needs to be clear -- as well as how each part relates to the others

• Adequate resources will be required• The forced purchase of credits through

emissions trading is equivalent to a carbon tax on industry

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Conclusions (cont.)• Supply chain implications are not understood

– what would be the impact of one sector’s action on another?

• Need to consider impacts of climate change efforts in relation to other environmental objectives

• we need a reliable energy supply to fuel our economy and maintain our quality of life