Speech

As delivered

Thank you very much for that kind introduction.

My dad was a hockey player. He was the youngest person to actually ever play for the Toronto Maple Leafs. One thing he taught me was that you are only as good as your next shift, so I always like to remember that. Canada is the kind of country where being from a place called South Porcupine can be a mark of distinction and where people can get their heads around the fact that there is no North Porcupine.

It is a pleasure to be here. I’m a great admirer of the work that the C.D. Howe Institute has done. I know that it is working because I know that there are younger generations of Canadians who are listening and understand the value of smaller governments, sound public policy and lower taxes. I know this because as I was sitting on my deck a few weeks ago, where I sit and read cabinet documents, looking out over the city of Calgary, I heard this voice say, “Hey mister, you want to buy some rocks?” I looked around from my veranda and there was a cute little guy, about five years old. His family moved in over the winter down the street. I looked and saw a sort of lemonade stand down the street and this young fellow - his name is Henry. Him and his friend Bobby had a stand and they were selling rocks down the street. These were just typical garden variety rocks, little pebbles, 25¢ a stone, except they were keeping them wet. You all know as Canadians how stones sort of shine with quartz in them when they get a bit of water on them. So I went down the street, reached in my pocket and found four or five quarters. I bought five stones, and I came back. The stones dried out, and they looked at that point like all the other stones in my own driveway.

Karen came out and made a bit of fun of me. My daughter, who lives in your city and is a university student, went back over at Henry and she said, “Henry, my dad says if you will reduce the price of those rocks, he will buy them all.” This little guy is not five years old, and he said “Lady, I ain’t cutting the price of my rocks for anybody.” Cassie said, “Well, Henry, why not?” He said, “Lady, in Canada, it’s all about the taxes.”

This is what will shape up to be a pivotal year. 2009 is the pivotal year for the international community dealing with climate change. We are on the road to Copenhagen, and that is what I’m going to speak to you about in large measure today because it has significant implications for our country.

The comprehensive set of policy announcements that we will make over the course of this year will affect all of the ways in which over time our society consumes energy - everything from the kinds of electricity systems that we have, the way that we generate electricity right through to the kinds of cars that we drive and essentially everything in between. It will set many of our industrial sectors on a course that will continue to keep them globally competitive on the strength of environmental sustainability. Their capacity to transform their operations - the combination of capital and labor in Canada into something that will be competitive on the international stage.

Climate change is certainly one of the most important public policy issues of our time and it is acquiring a momentum internationally that at this point is pretty indicative of where this is going to land. As Canadians we need to take a long-term view and set a policy framework in place that will keep us on track, in a long-term way, to achieve the kinds of transformational goals that we have in our society. We have to do this in the context of a fragile economic circumstance, one that month to month has reminded us how difficult things are. The process that we are engaged in is very much the transformation of our capital stock in our society over the course of time between now and 2050. By the time that 2009 is over, you will see not only will Canada weather this severe economic storm that we are in, but we will have in place bold and forward-looking climate change policies with respect to all sources of carbon emissions in Canada.

So in our country, we are really proceeding on three parallel pathways: a domestic path, a continental path and an international pathway.

• Internationally, certainly because global climate change really is something that requires global intervention and global solutions. Canada’s objective, to be clear about this, is to be on the international stage as a constructive player in all of the international fora that deal with the issue of climate change - the UN process, the Major Economies Forum convened by President Obama, and others.
• Continentally, because Canada’s economy is deeply integrated with that of our neighbor to the south. We share the same economic and environmental space, and we occupy the largest free-trading energy marketplace anywhere in the world. We have to work towards the same objectives.
• And domestically, because as your children and grandchildren will tell you, you have to think globally but always act locally. We are committed, as stewards of the environment, to be responsible domestically as part of our road towards the international progress that has to be made.

So we are making significant progress on each of these three pathways as we move through the course of the year. Each of them in fact profoundly influences the other - they are very much integrated if you will. 

Let me begin at the international level. Over the course of the last weeks, I was in Paris at the Major Economies Forum as well as taking part in an important carbon capture and storage session in Norway as well as taking part in the World Business Summit at Copenhagen under the UN auspices.

These meetings have really helped Canada and our international partners get prepared for December. December is where the UN Climate Change progress really crystallizes in Copenhagen, and Canada’s goal is to be there and to help secure a new global agreement on how we will move past Kyoto and deal with climate change. Copenhagen is effectively where the world will turn the page on Kyoto and look beyond 2012. It is our greatest hope that we will be successful in achieving an international consensus there to respond to what is increasingly recognized as the greatest environmental challenge of our time.

The Major Economies Forum was convened by President Obama. The UN process is a difficult process. It involves over 190 countries involved in the negotiations of the protocol. You can imagine the challenges of securing a consensus in that kind of context. President Obama convened a separate process known as the Major Economies Forum, which involves 15 countries in addition to Canada. There are 16 of the world’s major economies there, and the Danish had been invited as they are the hosts of the Copenhagen meeting. It is a process that is intended to lend form and assist in a complementary way to the UN process.

Canada’s position on Copenhagen really is built on fundamental principles. I have always found that when you are in a difficult, unchartered territory of public policy, it is always useful to come back to your principles and I say that for two reasons. The first is that you don’t achieve excellence in public policy unless you sit down and talk to people. That is something that I learned from a mentor of mine, Derek Burney. You talk to people about the principles upon which your policies will be based and then understand the application of those policies to their context. Secondly, in turbulent times and in certain policy frameworks, it is important to come back to what fundamentally our principles are as Canadians and what approach we take to climate change.

Let me just outline to you the approach of your government. Firstly, we are of the view that you have to balance environmental progress and economic progress, that our responsibilities as stewards of the environment are balanced as well by our responsibilities for prosperity. Frankly, you need a certain amount of prosperity to drive environmental progress. This might seem axiomatic to all of you in the room, but this principle is one that not everybody in the world agrees with.

Secondly, it has been our position that we have to maintain a long-term focus on this. We are essentially engaged in climate change responses in the long-term transformational nature of the capital stock of our society, our energy stock, our transportation stock and so on. In the time between now and 2050, what we are really taking part in is a transformation of that capital stock in a way that needs to be done shrewdly and carefully, in a way that needs to reduce our carbon emissions but also protects and enhances our standard of living. Once again, this may seem axiomatic to all of you in the room but this is something that is not necessarily shared by everybody at the table.

Thirdly - technology. What will drive the kind of changes we are talking about is technological change, so the public policy framework we have to develop needs to be one that will incent this kind of changes.

A good illustration of that is how we will use technology to build a low-carbon future - one of the best illustrations of this is carbon capture and storage. This is something I’m sure you have read a lot about. It is a challenging technology. It is not a silver bullet, but it is a technology that will be extremely important, where Canada has punched above its weight. The largest carbon capture and storage projects in the world today are operated either in Canada or in Norway. Of the carbon that is stored in the world today, 40% is actually stored by Canadian companies. This is something that we have led the world in and must continue to excel at.

The fourth principle that our approach as a country is based on is that the consensus at Copenhagen is crucial, but it is one that has to involve both the developed world and the developing world. It surely follows that if you are seeking an international protocol that reduces carbon emissions, it has to apply fundamentally to the people who emit carbon. It is going to have to apply to the United States. It is going to have to be a protocol that is ratified by the United States. Kyoto was not. It is going to have to be a protocol that deals with the explosive growth in the developing world and that applies in a meaningful way to China, to India and to Brazil, because they are in fact the source of the world’s largest emission growth.

These are the Canadian principles. This is what we espouse at the international table. That is the international trajectory that we are currently on. It is occupying a lot of my time. Every second to third week, we are somewhere in the world at the table, as part of either the Major Economies Forum process or the United Nations process.

Much has been happening also in a continental context. The cooperation and alignment of our measures to deal with these difficult issues, on a continental basis, are in the interest of both ourselves and the United States. Just to be clear: there has been much said about cap and trade legislation. The day that President Obama was sworn in, I gave a speech here in Toronto to the Council of Chief Executive Officers. We indicated at that time that Canada was prepared to go down the road of discussing with the United States the prospect of a continental cap and trade system. We have indicated a willingness to do that, a willingness to explore that with the United States.

It is important obviously that we take a continental perspective because of the integrated nature of our economy, our energy system and our environment. While we will always have differences, there are many areas where harmonization is possible, where we can achieve the same environmental goals as the United States. We can do it economically and in the most efficient way possible by essentially having similar or the same standards. There are other areas where there are fundamental differences, but all of this happens against a backdrop where it is worth noting that Canada and the United States have a history of working together on environmental issues. This work is long-standing. Remarkable progress has been achieved and it has served both sides of our border very well.

It was against this backdrop that Prime Minister Harper and President Obama first met, as you recall the first visit that the President made outside of the United States. At that time, we launched a bilateral initiative called the Clean Energy Dialogue. It is an important part of this as well. It is a dialogue that is focused on the opportunities for continental solutions, for continental technology. We wanted it to be very much more than the sum of its parts and it will be a a research collaboration that is larger than anything that we have previously undertaken. It will expand clean energy research and development, explore clean energy technologies and lead us to a more efficient electricity grid in a way that I will discuss in a few moments.

The Clean Energy Dialogue will also really serve as a vehicle for Canada to demonstrate its leadership. Areas like carbon capture and storage and others areas where we have excelled - we will use the Clean energy Dialogue as a mechanism to drive Canadian technology and Canadian success stories, and to build upon that. I think it represents the first stage of our collaboration with the United States and will serve as a platform upon which we can later build a continental approach in respect of many areas of environmental policy.

The working groups that have been established are worth noting under this Clean Energy Dialogue. They have been mandated to bring forward tangible projects and policy recommendations. There will be some focus on this when the Prime Minister and the President next meet. The first of these task forces is a working group where we brought in a former CEO of Nexen Energy, Charlie Fisher, who is representing the private sector in this involvement. It is focused on clean energy technologies such as carbon capture and storage - but not only carbon capture and storage. These technologies are really essential to dealing with thermal coal emissions.

One might ask: “What is the true significance of carbon capture and storage and coal thermal?” Well, it is simply this: 40% of the carbon in the atmosphere today essentially came from burning thermal coal. There is going to be 2,000 more coal-burning thermal plants built in the next 25 years globally, and those plants will definitely need to be more efficient. We need to move from the dirty generation of plants to critical and super critical technologies, but at the end of the day all of those plants will emit carbon and the only technology that has been devised at this point to avoid that consequence is carbon capture and storage. That is why you hear so much about it and that is why it is such a pivotal technology. That is why it is so important to the Americans, because their electricity system is largely based on thermal coal. That is why it will be so important as well to the Chinese and the Indians who will be building new plants in the future.

We have also focused a working group for which the Canadian representation is chaired by Jacques Lamarre, the former chair of SNC-Lavalin. It is focused on smart electricity grid between Canada and the United States. We have an electricity grid that was designed in the 1960s, built out in the 1970s, and largely at capacity by the 1980s. It is time to look at smart-grid technologies, update that grid and ensure that it has the capacity to bring on perhaps as much as 25,000 megawatts of Canadian hydroelectricity. This would be a significant achievement in terms of greening our North American electricity system.

Finally, there is a separate task force working group that Linda Hasenfratz, the CEO of Linamar, is representing our interests in. It deals with clean engine research and looks at some of the imaginative solutions that we are going to need in that area.

Outside of this process, we continue to work closely with the United States government on everything from automotive emissions right through to the coal sector and elsewhere. The auto sector has been the cornerstone of this work. I think it is useful to pause and look at where we are in terms of the automotive sector because it speaks to the opportunities that all of this presents for harmonization.

We have harmonized our emission regulations, our so-called tailpipe emission standards with the United States. In doing so, we are engaged collectively and jointly in the process of reducing emissions, of tightening the standards, of producing more fuel-efficient vehicles. But at the end of the day, we recognize that there is one automotive area in North America and that the parts move back and forth across the border. Driven by the need to be industrially competitive and to serve our consumers, we need a single dominant North American standard. We have harmonized in respect of those tailpipe emission standards. It was one of the first issues that I spoke with the U.S. administration about when Carol Browner, President Obama’s climate change advisor, arrived with him for his meeting with the Prime Minister. We have a continental marketplace and it will be well served by national emission standards.

Some have wrongly concluded that our work with the United States administration through these kinds of policies means that we are sitting back. I can assure you that we are not. We are not waiting for the Americans. This is simply not the case. In fact, in the illustration of the tailpipe emission standards, Canada actually published our approach and began “gazetting” the regulations three months before the United States even announced that they were headed down this path. Our climate change policies as a country must be, and will be, in Canada’s best interests. They will be developed on that basis. We will take into account what is happening around us. We will take into account what is taking place in the United States, as it would be unwise to shape our own policies without regard to what is happening elsewhere given the integrated nature of our economy.

But it is important to know that there are important differences in greenhouse gas emission between Canada and the United States. In contrast from the tailpipe emission standards where we have the same automotive industry, you can look at our electricity system. Canada’s electricity system is one of the cleanest electricity systems in the world. You don’t hear much about this, but 70% of our electricity system is non-emitting in Canada. In the United States, it is the converse - in the United States, close to 75% of their system is emitting and they have major challenges in this regard. Blessed with the resource endowment that we have in our country, we have been able to do something quite different - hydro, nuclear and other renewables - and our country aspires to a 90% non-emitting status by 2020. That is our policy objective. It is quite different from the United States, and as a result our policy solutions have been and will continue to be quite different from the United States.

Domestically, we will continue to roll out our specific policies. What we have committed to at Copenhagen is the same that the Americans and Australians and others have committed to. In the time between now and November, all of the Canadian sources of greenhouse gas emissions will be subject to very specific policy announcements that we will make with respect to each source of emission. The first ones that we announced were the tailpipe emission standards, and we will be moving forward from there.

The Canadian objectives are to reduce our emissions by 20% by 2020 and to try to get to 60-70% by 2050. Now that is no small achievement in the context of our country. This is a big country, the second largest territorial land mass in the world. Our weather is sometimes problematic. I sometimes say that I was born in a place - South Porcupine - that has ten months of winter or two months of bad skating. Energy is important for all of us, and we have an industrial base in this country that is also very energy intensive.

Our commitment though is to table these policies. They will cover all sources of emissions. We will deal with them sector by sector and we will define mandatory reduction targets that will apply across Canada. These will be implemented through the Canadian Environmental Protection Act (CEPA). People have asked why we have not tabled an extensive cap and trade bill. We don’t actually intend to file a cap and trade bill in the same way that is being dealt with elsewhere, because we have the regulatory authority under CEPA to enter into the regulations necessary to create this system.

I want to be perfectly clear about the timing of all this, because our position is very straightforward. We will outline the full suite of policies that relate to all major sources of emissions this year, in 2009. I have said this, this will happen time and time again and it will happen by the time we reach the international table at Copenhagen. The process then of drafting the detailed regulations under CEPA will consume much of 2010, the following year. In some cases - the tailpipe emission standards being the obvious illustration - we have already started that process, but 2010 will be the year in which the regulations are drawn together. The regulations will be drafted with a view to an application date of January 1, 2011 and they will be brought into force thereafter on a sector by sector basis. We will make individual decisions on a sector by sector basis in terms of the application date for those.

We have never said at any time that our regulations will in all cases be the same as the United States, nor have we ever said that they will be introduced on the same dates as the United States. Their content and their timing will be driven by Canada’s national interests, and as we do so we will ensure that we are cognizant of what other trading partners including the United States are doing, when they are doing it and what the implications will be in particular for trade-exposed sectors in our country.

It is clear that our regulatory framework will be designed to meet Canadian requirements and serve our interests. It will be done in such a way that it retains the ability to respond to developments that are taking place in the United States or elsewhere, depending on what transpires in trade-exposed sectors. Our government has put much effort into this over the last several years. We have actually done a lot of the heavy lifting. We have done a lot of the microeconomic analysis that needs to be done to align these regulations.

As we design it, we will be mindful of our Canadian circumstances, the uniqueness that we have - the nature of our climate, our geography and also our industrial base. We will be mindful that we have an economy that is resource-based, an energy-intensive economy in many respects, where growth is taking place in a number of sectors and where virtually all of our heavy industries are heavily trade-exposed. It stands to reason as part of all this that we would be exploring the cap and trade possibilities with the United States, and we certainly are. We are examining the kind of cap and trade system that would best fit Canadian circumstances and that would align with what our trading partner is doing.

Through all of this, there is an emphasis on technology in the approach that we are taking. As a country, one of the policy aspects that we intend to make fundamental is a technology fund that would allow and provide for emission allowances to qualifying firms who invest their dollars towards technology development and deployment. This will be one of the compliance options available in the Canadian system.  The Waxman-Markey bill in the United States is looking towards those kinds of possibilities. It is an idea that they developed following a trip to Canada last summer, where they explored how we are going about this.

We will consider also the possible implications for the coverage of our system. The process underway in the United States is looking at a cap and trade system that would be economy-wide, and we will have to have careful regard to what they are considering. We will also examine the role of complementary trading mechanisms such as domestic offset systems and potentially, as we get further down the road, international emission credits. I can tell you that in the days ahead, I will be announcing the specifics of Canada’s domestic offset system as the initial step in that direction.

Ladies and gentlemen, that is essentially where we are headed. I will just speak I think parenthetically about electricity because there has been some discussion on that in the news and I’m sure you will be interested. Electricity is a major source of emissions in our society. It is in fact the single largest source of greenhouse gas emissions in Canada. Ameliorating this and dealing with this is an important part of what we need to do in terms of our domestic and continental pathway.

The smart grid of which I spoke is an important part of that. The prospect of bringing on new hydroelectricity is an important part of that, as is the prospect of bringing on important new sources of Canadian natural gas. All of these policies and strategies will have to be carefully developed and will have to be responsive to consumers as well as to stakeholders who will be responsible for dealing with these issues.

Improving energy efficiency in both the demand side and the transmission of electricity will help Canada build a more sustainable economy.  But we can and must also address the supply side.  How we produce electricity and how we use it are flip sides of the same coin.

I would like to share with you some of the criteria that will shape the regulatory policies as we go forward for the electricity sector. Firstly, the approach for this sector will seek to create a level playing field amongst different fuels that are used for power generation. Secondly, the system will provide industry with flexible mechanisms for compliance, and it should avoid prescribing specific technologies. Thirdly, the approach will include mechanisms to encourage investments in new technology to enable industry to bring clean generation technologies forward, such as carbon capture and storage and renewable generation, which must be part of the future marketplace. Fourthly, we must recognize past capital spending and past regulatory approvals and ensure a fair transition for investors for existing facilities because it is in everyone’s interest that we avoid stranding assets. Finally, the approach must ensure that we have regional equity across Canada’s electricity sector.

These are the criteria that we will be basing our policy on. We continue to discuss this with the stakeholders who are affected by this and we will continue to make progress.

Ladies and gentlemen, in conclusion, that is essentially where we are headed - the domestic pathway, the continental implications of it and also the international consequences of where this will all take us. It truly is a pivotal year. I would not attempt to convince you that it is not a complex year. It is one where we will be putting Canada’s regulatory framework in place. It is one where we will be leading the world in terms of being a responsible party in reducing greenhouse gases. But at the end of the day, it is not the regulations that will deliver the results. What will deliver the results is the technologies and the investments that we will make, which will provide solutions for these challenges and will put Canada on the cutting edge of what is happening internationally.

We have set out an aggressive regulatory timetable. We intend to be a leader in setting the frameworks for a much greener country. By responding to those frameworks, I’m confident that the Canadian industry will be amongst the leaders in the technological revolution that all of this will entail between now and 2050.

Thank you very much, ladies and gentlemen.