On December 13, 2016, Trevor McLeod, Director of the Centre for Natural Resources Policy, gave the following submission to the Standing Senate Committee on Energy, the Environment and Natural Resources

(pdf version below)

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THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES met this day at 5:45 p.m. to continue its study on the effects of transitioning to a low carbon economy.

Senator Paul J. Massicotte (Deputy Chair) in the chair.

[Translation]

The Deputy Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Paul Massicotte from the province of Quebec. I am deputy chair of the committee. This evening, I am replacing the chair, who is away for a few days.

I would like to welcome the members of the public here in the room as well as those watching on television. As a reminder, these committee hearings are open to the public and are also available via webcast on the sen.parl.gc.ca website. You may find more information on the meeting schedule on our website under Senate committees.

I would now ask senators around the table to introduce themselves, beginning with my colleague to my right.

[English]

Senator Griffin: Diane Griffin, Prince Edward Island.

Senator MacDonald: Michael MacDonald from Nova Scotia.

Senator Lang: Dan Lang, Yukon.

Senator Mockler: Percy Mockler, New Brunswick.

[Translation]
The Deputy Chair: I would also like to introduce our staff, beginning with our clerk, Maxime Fortin, and our two Library of Parliament analysts, Sam Banks and Marc Leblanc.

Today marks our 28th meeting in our study on the effects of transitioning to a low carbon economy, as required to meet the Government of Canada’s announced targets for greenhouse gas emission reductions.

I am pleased to welcome our witness from the Canada West Foundation, Trevor McLeod, the director of the Centre for Natural Resources Policy. Thank you for agreeing to testify before us today. I invite you to make an opening statement, after which we will go to a question and answer session. With that, I will let you go ahead.

Trevor McLeod, Director, Centre for Natural Resources Policy, Canada West Foundation: Good evening, and thank you, Mr. Deputy Chair.

[English]

I bring greetings on behalf of the Canada West Foundation. We have a new CEO, Martha Hall Findlay, who many of you know. With her leadership, we continue to focus on what’s good for the West is good for Canada, but there’s a sense that we need to be talking to more than just people in the West, so I suspect you will see us here in Ottawa more frequently.

I run the Centre for Natural Resources Policy, where we strive to ensure that Canada’s natural resources are developed responsibly, so today’s topic is right in our wheelhouse.

My key message today is simple: The pan-Canadian framework that was released late last week puts us on a reasonable greenhouse gas emissions reduction path. While it recognizes competitive challenges, we have not given enough thought, in my estimation, to competitiveness, including costs but also the difficulty of siting energy infrastructure projects.

We’re on a good carbon path. The discussion typically starts with the first chart in your slides. If you don’t have them in front of you, it’s simple. It’s the chart that appears in the pan-Canadian framework that shows just how far Canada needs to go to meet its Paris target. The numbers are familiar: 30 per cent below 2005 levels by 2030, about 200 megatonnes. This is no small task.

Then the discussion used to jump to the next chart in your package, which shows greenhouse gas emissions by economic sector. A quick look at that chart shows that oil and gas is broken out of the energy-intensive, trade-exposed sectors. The tendency when looking at that chart, especially given the size of the oil and gas sector and the transportation sector, was to say, “How do we really reduce oil and gas and transportation emissions on their own?”

I think the pan-Canadian framework released last week made a subtle shift, which is important to message. The next slide shows that we’re no longer breaking out oil and gas out from the industry sector. We’re including all the energy-intensive, trade-exposed sectors together in a bucket called industry. I think that’s important.

It shows emissions of industry, not just oil and gas – and the language of the document combines together energy production and use – account for over 80 per cent of Canada’ greenhouse gas emissions. The shift takes the focus off oil and gas and tacitly acknowledges a key competitiveness concern that all greenhouse gas emissions are not created equal. That is, reductions in some sectors – things that you have just studied, such as transportation, electricity and housing – are absolute.

For example, if we replace coal-fired electricity with hydro, natural gas, wind or nuclear, then those emissions are gone, effectively. It is the same story if we replace a combustion engine with an electric vehicle, presuming that the generation is cleaner. In these cases, a reduction in Canadian emissions also equates to a reduction in global emissions. So it is important.

That’s not the case for emissions reductions in the oil and gas sector or energy-intensive, trade-exposed sectors. Oil and gas markets are increasingly global and interconnected. Most demand forecasts have crude oil and natural gas demand increasing substantially over the next 25 years.

While M. King Hubbert predicted that crude oil production would peak around 1965 or 1970 at about 13 billion barrels of oil per year, we now produce around 35 billion barrels per year. It’s clear that we have not reached peak oil and gas production and there is little serious analysis to suggest that we will reach peak oil or gas production any time soon.

Since oil and gas reserves are abundant and the commodities are expected to remain in great demand globally, oil and gas will be produced and consumed at largely the same rate regardless of whether Canada decides to leave its oil and gas in the ground. Moreover, if Canada becomes uncompetitive to the point that investment goes elsewhere, it will harm the economy but it will not materially reduce global greenhouse gas emissions. It’s a phenomenon we’re familiar with called carbon leakage.

Given carbon leakage, the relevant comparison is between the relative emissions from oil and gas in Canada vis-à-vis our competitors. For LNG facilities, the question is not how many megatonnes of greenhouse gas emissions it emits per year but, rather, is it cleaner than the alternatives? It is the same question for oil sands.

I think it’s important to note that the pan-Canadian framework recognizes this. It recognizes that when we’re competing on carbon, the goal should be to reduce the emissions intensity of Canada’s oil and gas products. So score one for competitiveness, but I think there’s more to do.

When we get into the carbon tax, the economists have been winning this debate on carbon pricing in Canada, and why not? The arguments are good. Carbon pricing is the most efficient way to reduce Canadian greenhouse gas emissions.

I think we’ve learned the lessons of the green shift in the past, and revenue has been left to the provinces so they can design systems that work for their particular economies and political circumstances. So we can have cap and trade in Ontario and Quebec, which provides emission reduction certainty at a lower price; or we can have a carbon tax in Alberta and British Columbia, which allows the provinces to grow energy- intensive industries. Then it matters how or whether you recycle the revenues. The devil is in the details. The structure the carbon price part of the plan, I think is good.

Here is the problem with the carbon tax, in my view. Investment uncertainty is on the rise in Canada. It’s now difficult to site major infrastructure projects in this country, whether it is oil sands projects, pipelines, LNG facilities, wind projects or hydro facilities. We just did a paper called “The Matter of Trust.” We went to six different communities and did a deep dive in a pipeline, Northern Gateway, Kitimat and Haisla First Nation, a wind farm in Quebec, fracking in New Brunswick, successful and unsuccessful gas plants in Ontario, hydro in northern Manitoba and an electricity line in Alberta. We can get into more of that, but it’s very clear that it’s not going to be easy to site any kind of energy infrastructure, and we have to be cautious of that.

So the regulatory process is becoming more cumbersome and time-consuming. With increasing demands for consultation, accommodation and equity partnerships within indigenous communities, community economic benefits, local engagement and involvement in decision-making processes, this trend is unlikely to change soon.

It is great we’re dealing with climate change. I think it is important and we need to do it, but some of the underlying issues that have been leveraged by the climate movement are not resolved, and it is going to be real tough to get through them.

Even if a project is approved, there is no guarantee it will be built. We can think of Northern Gateway. We don’t whether the protests and direct action and litigation around Kinder Morgan’s Trans Mountain Pipeline will force it to suffer the same fate.

Investors are watching, and in the United States, the Trump administration is promising to slash corporate tax rates while clearing regulatory burdens. We can compare this to Canada. When you do the technical analysis, with the carbon tax, especially given how you can recycle revenue, there are a lot of great arguments for why it will not be an impact. But when you get to the technical arguments, sometimes you’ve lost the battle. It’s challenging. It’s complicated to figure out what our economists are saying.

The public debate will be at a different level, and we have to be careful not to ignore some of the backlash that’s growing. The sentiment in Saskatchewan and Alberta is growing – it’s palpable – and maybe elsewhere as well. We need to pay more attention to that.

I think we established a good framework, the carbon price framework in particular. I have more questions about some of the complementary actions, but we have been dismissive of the competitiveness concerns and costs. We might be blindsided as we seek to replace our existing energy systems with something cleaner, so we have to be cognizant of that.

Thank you.

The Deputy Chair: Thank you very much. We will now go to question.

Senator Lang: I appreciate your general observations, but you seem to have said two things at the same time. You have indicated to us that a carbon tax may be fine, but at the same time, we have not considered the international implications from the point of view of trade and the overall economic health of Canada in respect to the fact that investment is now taking a second look whether it’s worthwhile coming to Canada.

Just for the record, I had a conversation yesterday with some individuals who are very knowledgeable on the investment in my part of the world, the Yukon, and that is exactly what they’re saying. It’s becoming more and more a question mark of whether or not investors from outside the country are prepared to invest their money here.

What I don’t quite understand is, as an organization, why you would say, on the one hand, the carbon tax is okay, but on the other hand, getting back to the question of international investment and the economic consequences, wouldn’t it be a reasonable thing to look at the economic consequences first and then make a decision as opposed to what the first ministers did? They made a decision and now we’re going to see where the cards fall.

Mr. McLeod: I take your point. What I’m trying to say is that when you do look at the economic consequences, of course, depending on what happens with revenue recycling, depending on what happens in each jurisdiction, I would say that there are ways to make sure that, on the economics of the issue, we’re fine. Not everything we would do would support that.

It’s not just the carbon tax. It’s the entire regulatory environment and broader investment climate. When people look at Canada and see long delays in building energy infrastructure from the regulatory burden and tax structure, there are some concerns. In the specific case of the carbon tax, those can be addressed.

However, I would suggest that while we would like to believe that all businesses and individuals are rational, economic actors and take a deep dive into the numbers and try to figure it out, there is also a perception issue, particularly when we contrast what’s going on up here versus what’s going on in the United States, a perception about where the investment climate is good and where it isn’t. It gets complicated because you’re thinking of every province and jurisdiction. Technically, we can come up with solutions that would work and be fine economically, but we have to worry about perception as well.

Senator Lang: From your position, reviewing the various models of what could happen, a carbon tax versus the approach the previous government took, which was sector by sector, and to do an evaluation and determine what could be done by retooling and re-equipping and retrofitting, and at least going in the direction of lowering the greenhouse gas emissions, as an organization, knowing that particular approach was taken and now we’re going into a carbon tax one way or another across the country, what would be your preference: sector by sector, to give the various industries an opportunity to bring forward alternatives to meet their objectives, or the carbon tax or cap and trade? Cap and trade is another issue we can talk about later.

Mr. McLeod: As an organization, we believe that a market mechanism makes the most sense and a carbon tax is the most efficient way to reduce greenhouse gas emissions. I give the federal government full marks for keeping the revenue in the provinces and allowing them to deal with some flexibility within those parameters on the particular economic and political issues in each jurisdiction.

When you get into the revenue recycling, there is a big choice to be made. If you want to go with a revenue- neutral carbon tax, what you’re signalling is an expedited transition to a lower carbon economy. Now, that’s challenging to stomach for those who have invested money for the long-term and have been invested for a while, for example, the oil and gas sector in Alberta, and challenging if the revenue was fully to be applied to a corporate tax or tax reductions or personal tax reductions or a combination thereof, because you will not get the full benefit back.

The Alberta government has largely tried to ease the pain for the oil and gas sector and other intensive trade-exposed sectors. You have a choice to make there. You can also keep some of the revenue and spend it on various desired programs. Our view is that some combination of the revenue neutrality where you’re cutting taxes and also easing the blow for energy-intensive, trade-exposed sectors makes good sense. There should be some benefit to those on the lower end of the income spectrum.

Senator MacDonald: I want to go back to the same theme that Senator Lang touched upon. Canada’s economy is tightly tied into the American economy. In fact, Canada’s economy, in terms of the Western world, is probably more tied to the American economy than any economy in the world. There is no comparison. Ninety per cent of our population is within 100 miles of the U.S. border, which means 90 per cent of our productivity and carbon emissions probably are.

I see that whatever the short- and medium-term plan was for the present Government of Canada, that was a plan that was drawn up with the understanding they’d be dealing with a Democratic administration in the U.S. Not only are they not dealing with a Democratic administration, but they’re dealing with one that is going to be, I think, aggressive when it comes to getting rid of regulatory delay. I think it’s going to be aggressive when it comes to, really, ignoring, I think, the overkill in regard to carbon reduction. All of these things have to impact upon the economy of Canada. Plus they made it very clear they’re going to be dropping corporate tax in the U.S. from 35 to 15 per cent. None of these things would indicate that it’s going to be good for our economy.

Don’t you think the government has to take a hard look and be realistic when it comes to their carbon plans and realize that it has to be fully integrated into our two economies?

Mr. McLeod: I couldn’t agree with you more that the world has changed in the United States and that the assumptions that went into creating this plan were based upon the idea that we would have a Democratic administration. Absolutely, the Trump administration seems set to reduce corporate income taxes and regulatory burden in a big way. So yes, a serious look at that is required.

Now, I would focus more on the complementary actions, personally, than on the carbon tax, because I think that you can, in fact, create a carbon tax and use those revenues in ways that can ensure that your competitiveness is not harmed. There are some tough choices to make there, though, and there are winners and losers, and so there are some challenges there. But your basic points are some that I agree with and I couldn’t have said better.

Senator MacDonald: If their new carbon reduction regime is to make any sense for the money it’s going to cost, the United States has ten times the size of our economy and ten times the emissions. We share the same border, airspace and the same water, in many ways. It just seems to me it’s a really bad time for the government to be going down this road.

We just found out that Mexico has just surpassed Canada in terms of the amount of trade with the U.S. We were always a bigger trader with the U.S. than Mexico and now they’re bigger a bigger trader. It seems like all the economic indicators are rolling back against us and that we should be more thoughtful in
how we deal with it.

Mr. McLeod: I think that applies particularly when you look at the complementary measures in the strategy rolled out last week. There’s a lot of money being spent and there’s a lot of regulation being put in place that is going to cost Canadians more. I think it’s important that we look at these issues as we go through the National Energy Board and the environmental assessment reviews to see how we can ensure that we get projects built, but we do it in a way that it’s not going to take forever. There are some things there, for sure, I think we need to look at.

On the carbon tax, there are tough decisions to be made on what you do with the revenue. To the extent that you create a carbon tax and you impose it in your jurisdiction, and then the revenue comes in and you don’t use that revenue to grow the size of government and to spend it on whatever and you recycle that revenue back to corporations and individuals such that the hit is not great, I think it can be managed.

Now, the fact that we have to get into that kind of depth, and even more depth to adequately explain that, means it’s probably not going to resonate with people, and I think that’s an even bigger problem. That was the point I was trying to make, that even if on the merits we can explain it away, it’s going to be really tough from a political and marketing perspective to show that Canada is a competitive jurisdiction to invest in.

The Deputy Chair: I should say that Senator Seidman has joined us for some time, and I didn’t highlight that. I now pass her the torch.

Senator Seidman: Thank you. I’m sorry I was a little late. We were engaged in votes and various things going on in the chamber right now.

You mentioned your most recent study, A Matter of Trust: The role of communities in energy decision- making. One of your research questions is: What is the level of local community confidence in the actions of public authorities towards new energy infrastructure? That is clearly one of the most critical issues that we’re dealing with. What might you tell us about what you found?

Mr. McLeod: We looked at six communities. We went in curious about what we’d find, and we found a number of things. First, we found that this really wasn’t in the local communities about climate change. It was about local issues. It was about protecting the fish or the water or needs assessments as to whether an electricity line was necessary. It was about community participation and involvement in decision making. It was about a number of indigenous issues that are unresolved.

The challenges inherent in trying to get community support for energy infrastructure of any kind – and it was any kind: it was wind, natural gas, pipelines, electricity – is extraordinarily difficult. I think that we’re really facing a sea change in thinking. People are not willing to just cede authority to make decisions, in the way we typically have, to elected representatives. They want to be involved in these things. That’s a massive challenge, especially when you look at linear infrastructure, whether it’s electricity or pipelines, and how you get that built.

There are a lot of lessons from that. One of the big lessons was that the how matters just as much as the what, whether it’s wind or a pipeline. How do you engage? You have to engage authentically. If you go in with a made-up process and then you’re going to decide what you want to decide in the end, that’s not going to go over. We found quite a number of things; I hope that’s helpful.

Senator Seidman: One of the things I do notice in the executive summary is you found information matters but energy literacy is not the issue. The reason I make reference to that is because energy literacy is something this committee studied some time ago in a piece of work over three years, and the importance of energy literacy was quite a large component of witness testimony. What is the essence of the point that you’re trying to make here about that?

Mr. McLeod: Again, we looked at six communities, but what we found when we went in was that people spent a lot of time sifting through detail and trying to figure out the issues themselves. It wasn’t so much energy literacy. We think energy literacy is important, but when we went into the communities, people were very informed about what was going on, and they had taken significant efforts to inform themselves about the issues from multiple perspectives. We didn’t see that as the issue so much, but we did find that information – who has it, who presents it and how accessible it is – matters intensely. In the polling that we did, we found that governments are seen to be the most credible body for providing that information.

Senator Griffin: Thank you for your presentation today and for being here to answer questions.

You’re saying that a carbon tax is the most efficient method toward carbon reduction. If you were to name other economic instruments or policy tools to help transition Canada toward a low carbon economy, what would be your top two or three?

Mr. McLeod: The top one is another report that we did, which is called Power Up: The hydro option. From our perspective, this is about an integrated western electricity grid – that is, really high up-front capital costs particularly on the transmission lines. However, when you do the levelized cost of electricity analysis for all kinds of renewables, you find that over the actual period of a hydro project, it’s really low. It›s the lowest. It’s wonderful on the emissions side. It’s reliable energy, the back stop, and the cost was better. That’s one for sure.

I say carbon pricing is the most efficient way to reduce greenhouse gas emissions in Canada, and I do think it is, but I do think that Premier Wall has an argument that we need to listen to. That is, it’s not just about Canadian emissions. I don’t use the statistic to say we don’t need to do anything, as some do, but we’re about 2 per cent of global emissions. If we’re actually going to resolve the issue, which is tackling global greenhouse gas emissions and keeping global temperatures at well below 2 degrees Celsius over preindustrial levels, investment in technology and innovation that can be applied in other jurisdictions seems to make sense.

The one quibble I would have with the carbon plan on that side is that while there is some nice flexibility built in within the parameters of carbon pricing, why not allow our provinces to be laboratories of the nation; that is, to figure out how to solve the big problem, which is global greenhouse gas emissions.

Senator Griffin: We’ve heard from at least two presenters when we’ve asked them what is going to happen in the United States with the new national administration coming in, and they’ve told us – and I want to know what your thoughts are on this – that individual states, especially some of the larger states like California, are so far advanced now toward a more low carbon economy that they don’t see them turning around, that they think there will still be progress made. I’d like to know your impression.

Mr. McLeod: I think that the subnational markets will continue to do things to reduce emissions, just as we did in Canada when the federal government wasn’t too keen on doing the same, or at least in the same way. I think that they will continue.

I haven’t looked at too many of the U.S. subnational jurisdictions because it had been sort of run by the national piece for a while. I think jurisdictions like California will continue to try to do it, but they’re running into challenges with the cap and trade system, the allowances and the litigation around that. I think the last two auctions were not fully subscribed, to be fair. There are some internal challenges in the United States to doing that.

I have not been a big believer in the notion that if we pour government investment into clean technologies, then we will create the industries that will carry the economy down the road. I think it’s very possible that that will happen in the sense that innovation is happening really quickly. There’s a lot of uncertainty and who knows where we’ll end up, but my sense is that governments aren’t the best suited to do that.

I guess my answer is I think there will be continued efforts at the subnational level in some states to move forward. However, without the leadership of the United States government, the international scene changes completely.

Senator MacDonald: A question was asked to you about your choice and you mentioned hydro out West. Are you talking about new hydro projects?

Mr. McLeod: Yes. I’m talking about hydro in Manitoba or potentially Site C that could be transmitted to Alberta and Saskatchewan.

Senator MacDonald: When you were doing your assessment, which one was the best or the most economical? Did you compare it to nuclear?

Mr. McLeod: No. Our assessment relied on the Canadian Energy Research Institute series assessment, and they looked at projects over 500 megawatts. Their assessment was that the cheapest was the existing intertie between British Columbia and Alberta and wrapping that up, which is referenced in the pan-Canadian framework.

Interestingly, I think Manitoba was cheaper than Site C, but I think that was mostly based on the uncertainty around markets for that electricity in British Columbia and LNG and whether it was going to go or not. The biggest challenge with that will be the money, up-front costs, but also siting that line.

Senator Mockler: I want to add my comments, Mr. Chair, and thank Mr. McLeod for being here. When I look at the Canada West Foundation, I was intrigued when you said that you will need to talk to other Canadians outside of Western Canada. Did you do anything in Eastern Canada lately?

Mr. McLeod: We did this project with the University of Ottawa. We studied the fracking issue in New Brunswick, wind farms in Quebec and successful and unsuccessful gas plants in Ontario. We are branching out a bit. What I was thinking about there was more the West talking to the West is important, but we need to talk to the centre more often as well. We need to be communicating our message more broadly. That’s really what I was thinking of, not necessarily doing the projects elsewhere but in communicating outside the West.

Senator Mockler: I’m intrigued with what you’ve said. I would like to have your opinion on this because it does impact on the purpose and order of reference that we have.

Lately, I did a round table. When I talk about Eastern Canada, I like to talk about New Brunswick, Prince Edward Island, Nova Scotia and also Newfoundland. At this round table, somebody informed me that if you are looking to invest – and I look at the Energy East pipeline – it could cost up to $750 million to $1 billion to get the green light on it. That’s the figure they’ve told me. Another similarity is if we were in Mexico with the same pipeline, the same distance and exactly the same size, their licence for giving a green light would be approximately $10 million. If that’s the case, how can we compete?

Mr. McLeod: That’s a good question. Regarding the economics of the projects, I’m not sure on the details of that so I can’t speak to that exactly. Your central point is that if it’s going to cost us this much, how are we going to compete? How do we get those costs down?

I think an even more important point is that when we get the approval, how do we know it can be built? How can we restructure our regulatory system such that we get a political decision up front – or maybe no political decision as the Senate recommended, I think – or was it the Senate? One of the reports I read recently suggested that maybe getting rid of the political decision makes sense. At the very least, I think we need that decision up front, so that we’re not spending billions of dollars to get to a yes and then not building the project.

Your point is well taken. We need to find ways to make sure that this process, which will be more complicated in the future – it is not going to get more simple – doesn’t kill projects because it’s so expensive and complex.

Senator Lang: We’re already killing projects.

Senator Mockler: I want to talk about the social licence, and that’s basically the impact of what was announced. If they don’t have the social licence, there is no way we will see the end product going where it has to go. How does Canada West Foundation define social licence?

Mr. McLeod: I don’t like the term, so I tend not to define it. I call it public support, and that’s not easy to define either. How do you get to the point where the public generally supports it?

We used to do this through elections, and we’d have democratic legitimacy and our representatives would decide and off we would go. There is obviously a place for that, and I think political leadership needs to be shown in the case where we get an approval and we need to make sure these things happen; otherwise, we get on to a slippery slope with the rule of law, which obviously is important to the investment climate in Canada.

I don’t know that you can effectively define social licence, and there is no place you can get a certificate that says you have social licence, but the issues that underlie that, that have been leveraged effectively, like indigenous concerns in this country, need to be addressed. We need to find a way through it; it is not going to be simple.

I think some of the local communities support issues in the sense that when the board comes in, they come from away, and they show up for the hearing and then they’re gone. There is a sense in communities, from our research, that they don’t know anything about the communities. Can we remake this in a way that is more inclusive in terms of the decision-making process?

Senator Mockler: On the policy side, with President Trump as the new president, if he goes ahead quickly with the Keystone Pipeline, as a policy adviser, what impact will that have on Energy East?

Mr. McLeod: With the Trans Mountain expansion, so 600,000 barrels, the Line 3 expansion and then Keystone XL, we’re probably where we need to be in terms of pipeline capacity for the foreseeable future, so it probably has an impact of suggesting it’s not necessary.

The Deputy Chair: That’s not what he wanted to hear, but let’s go on.

I think a very important point that you made in your presentation is what you call the relative measure of the GHGs from the oil sands. It’s important because we have to separate supply and demand. We have to induce demand, but one should not exclude supplies because most if it is exported, and the way the accounting is done is we get attributed it, but the benefit goes someplace else. You’re trying to fix that problem, and it’s a very good point.

On page 1 of your presentation, you say that we are on a good carbon path, and you go off to 2030, and you have the December 6, 2016 emission projection, 742 megatonnes. That’s a long way from where we have to be by 2030, and yet you say that we’re on a good path. Could you help me out?

Mr. McLeod: The pan-Canadian framework has a chart near the end that shows how you will get there in three stages, and so that’s the path.

This chart that we have where it shows the emission projection at 742 megatonnes and then the goal of getting down below 550, that’s a long way. There is no doubt. This is before the frameworks, the federal government and the provincial government actions beyond, and that one, I’m pleased to see things in there like agriculture and forestry, what we can do on that and how we can get credit for some of that. There is a lot that goes into getting to that path. It will be challenging, and there are assumptions built in that are questionable, but it’s a reasonable path.

The Deputy Chair: Having said that, from the way you answered Senator MacDonald and Senator Lang, what you would recommend from an economic point of view is that the money that the governments get from pricing carbon of some sort is to use a good portion of that to help those industries that may become uncompetitive given the burden they have in our country versus the United States, and a combination going back to the consumer to make sure you stimulate the economy. Am I correct in saying that’s what you’re recommending?

Mr. McLeod: It’s important to provide some of that money back to energy-intensive, trade-exposed sectors so they are not disadvantaged. We can lead within that and have a basket of prices globally and say that we’re going to go 5 per cent over the average of our competitors, which wouldn’t be too high. We need to find ways to make sure those industries are not disadvantaged vis-à-vis our competitors.

The Deputy Chair: That’s relative to energy-intensive exports. You can help that, but how about the fact that you have a lot of imports coming to our country, and they may be under a lower-cost supplier regime? Are you proposing tariffs on those?

Mr. McLeod: I’m not proposing border measures there. When I look at border measures, it’s challenging to create them in a way that’s WTO-compliant, but the world is changing a bit, so I wouldn’t say no.

The Deputy Chair: Mr. McLeod, thank you very much for your input. You’re a credible, very informed and highly regarded institution. It was a pleasure to pick your brain and benefit from your experience and suggestions.

Mr. McLeod: Thank you very much.