Speaking Points

The Honourable Jim Prentice, PC, QC, MP
Minister of Industry

Striking the Right Balance between the Environment and Energy Security

Calgary, Alberta
February 8, 2008

Check Against Delivery

Good afternoon. I am very pleased to be at the University of Calgary Law School.

It is good to be back in Calgary. When Al Lucas asked me to deliver today's lecture, I jumped at the opportunity. It is an honour to be here, because I attended this law school during my third year, some 28 years ago. While my law degree actually came from Dalhousie, I consider myself an honorary alumnus of your law school, and the vitality at this institution means a lot to me and, I would add, to my spouse, Karen, who did graduate from here.

I was also very excited to hear that Jack Mintz, formerly of the C.D. Howe Institute, has joined the university to set up a new School of Policy Studies. Under his exceptional leadership, we will move to the forefront as a leader in the study and development of public policy.

In my remarks today, I would like to take this opportunity to share with you some of my recent activities as a legislator who was tasked, along with my colleagues, with addressing the reduction of greenhouse gases.

When it comes to global warming, we — as regulators, environmentalists and industry leaders — are grappling with arguably the most important issue of our time.

To be sure, the very subject matter is an endless forest of complexity and scientific controversy. The fundamental task, however, is how do we strike the right balance and join the international community in addressing this issue while, at the same time, securing Canada's economic future?

The 2006 Speech from the Throne of our government launched our agenda to "take measures to achieve tangible improvements in our environment, including reductions in pollution and greenhouse gas emissions."

At that time, I chaired the Operations Committee of Cabinet — I still do, actually — which has the primary task of managing the day-to-day operations of government. Given the topicality of the subject of global warming in 2006, we soon found ourselves dealing with the issue of global warming on an ad hoc basis. It became apparent shortly thereafter that the demands of the subject required a coordinated and coherent approach.

Recognizing this, the Prime Minister asked me to lead a new Cabinet committee, the Environment and Energy Security Committee. We were tasked with ensuring interdepartmental coordination at the highest levels of government as we set out to find practical solutions for reducing Canada's greenhouse gas emissions.

At this point, I came to the realization that, as a lawyer, a member of Parliament and a Cabinet minister, I would not be able to achieve excellence in law-making unless my colleagues and I sat down and consulted with the many people concerned.

Experience and expertise are important parts of the law-making process, but the essential ingredient — the fundamental core of the process — is consultation. Regulatory answers are not found echoing in libraries, or indeed in classrooms; neither is excellence achieved through self-proclamation. Rather, it is the very act of dialogue, listening and balancing that leads to solutions.

My underlying premise, as straightforward as this may sound, is that the regulation of industry is far too complicated for any unilateral process to achieve success. As a law-maker, you need help in understanding the complexities of the issues that lie before you.

My father used to take great pride in my own academic success but always hastened to remind me that a good mind is an accident of birth. What you do with it, on the other hand, requires character.

You must be able — and ready — to engage in a dialogue.

As a lawyer or law-maker, you'd better be good at listening, discussing and distilling your ideas into an understandable format. It is the benchmark for success in law, and it is at the core of excellence in public policy development.

Allow me to provide the case in point of our efforts to address the issue of global warming.

In 2006, I started a process with then Environment Minister Rona Ambrose to look at how to move forward on addressing our global warming challenges in the context of the Clean Air Act. We began a process of continuing public consultations that continues to this very day, some 18 months later.

My earliest discussions were here in Calgary, repeatedly. We met numerous times with environmentalists, conservationists, and industry and corporate executives. We also heard from the public through their letters, emails and public comments to the media.

And, in the context of this very complex topic, global warming and greenhouse gas emissions, the complexity of the issues continued to reflect through the prism of continuing discussions, exposing the scientific and interest-based difficulties of the issue.

Allow me to provide some context.

Canada accounts for just 2 percent of the world's greenhouse gas emissions. The controversy arises, however, from the per capita rate of Canada's emissions and from the growth rate of our economy.

The previous government had made virtually no progress toward the Kyoto Protocol. I say that not in a partisan way but as a fact. It is easy to attend an international conference and subscribe to targets; it is harder to engage Canadians in an achievable plan to meet those targets.

Our economic modelling quickly established that there is currently no way to achieve our Kyoto targets without having a devastating impact on the Canadian economy. Frankly, impacts that are unacceptable to the Government of Canada and, I believe, unacceptable to most Canadians.

So, in this context, how could we, as law-makers, move towards an alternate approach — a plan for success?

From the perspective of government, there are a limited number of approaches that can be taken to reduce greenhouse gases:

• Doing nothing was hardly an alternative.
• We could establish unachievable targets as had been done with the Kyoto Protocol.
• Or we could take the bull by the horns and set up a regulatory framework for getting things done, ensuring measurable and realistic progress on industrial emissions.

We chose to take the bull by the horns.

The challenge was daunting. We knew that we had to contend with our past targets and the ballooning greenhouse gas emissions that have occurred since the Kyoto conference.

We also had to consider the step-changes in technology that are required to reduce greenhouse gases, for example, the development of carbon capture and storage technology. We also had to keep in mind the regional diversity of Canada's energy systems and that it was imperative to find localized solutions driven by advances in technology.

We had to consider the S-curve of technology and innovation. We had to anticipate that new discoveries from research and development will present new solutions that may dramatically reduce emissions. In fact, we took action to encourage research and development in this area. The very first step we actually took in 2006 was to strike the Carbon Capture and Storage Task Force that reported back about a month ago.

Then there was also the issue of investment and the measurable, investment-backed expectations of those who had commenced multi-billion dollar projects. Billions of dollars of investment were — and are — at play. And if Canada is to succeed, it will be as a country that minimizes regulatory uncertainty and unpredictability.

We had to present a predictable regulatory front so that companies could undertake sound business planning. We knew that businesses plan for the future based on the current environment and the present value of their stock price.

For law-makers today, we must recognize that Canada is a global nation and subject to global competitiveness. Professor Robert Reich, in his book Supercapitalism, points to developments in technology and transportation routes that have changed the way industries must compete.

In the global marketplace of today, consumers have more choices, and so do investors. As global competitiveness has increased, we have seen the emergence of “supercapitalism.” Global competitiveness is critical to our standard of living, and excellence in public policy is also critical to our competitiveness.

As concerned citizens, we may disagree with these corporate practices and boycott company products that do not meet our social standards. But, as Professor Reich points out, when many individuals go shopping, they seldom pay more for a product solely because it is environmentally friendly.

Numerous companies have attempted. We gradually began to develop an understanding from our participation in the ongoing dialogue with stakeholders from all sides of the issue.

The essential challenge is being able to listen to and reflect all perspectives, as well as to fully appreciate the reality of our Canadian position in the global marketplace.

If we subscribe to regulatory targets without considering the input and experience of all stakeholders in a consultative process, then our environment cannot be protected, nor our economy secured.

In that sense, the industrial regulatory process is the fulcrum point on the scales of justice. This is where the weight of industry and economic prosperity is balanced with our collective need to act as stewards of the environment. In my experience as a law-maker, I have learned that accuracy of information, breadth of consultation and integrity in the balanced process are what defines that fulcrum point.

The integrity of our efforts is the touchstone that future generations will use to gauge our progress in addressing the issues of today.

I believe that public policy-making is best served through a commitment to excellence. It takes integrity to strike the balance and to draw the lines that industry must eventually comply with.

If I might digress for a moment, I will comment briefly as the Minister responsible for overseeing pipelines in Canada. I would point to the Mackenzie Valley Pipeline project as a good example of how the process of regulating industry has sometimes fallen short of the standards of which I speak.

This project is immense by any standard, with more than 100 000 person-years of direct and indirect employment, an estimated $16 billion required in capital investment, and the potential to boost gross domestic product by $57 billion. It is critical to the North and critical to Canada.

The former government's own external advisory committee, in its Smart Regulation report, described the Northern regulatory framework as a "complex and unpredictable cobweb of regulations involving multiple federal government departments, and territorial and Aboriginal authorities."

Environmental issues, regulatory issues and land claims issues swirl around this project, despite a regulatory process that has gone on for many years.

In that case, the regulatory process has not yet achieved the appropriate balance, nor has it been the pivot point for technological solutions and social benefits.

When we consider industrial emissions and their impact in addressing the global warming issue, we have made every effort to avoid wrapping ourselves in another regulatory cobweb. From the outset, regulatory harmony with the Province of Alberta has been a key objective. The desire to avoid such an outcome drives us to this day in our efforts to find workable and effective solutions to the challenge of global warming.

I suspect that most people in the room today have had some experience with the oil sands and appreciate the significance of the oil sands to our future as a country.

The oil sands projects are immense and account for about 62 percent of Alberta's oil production, driven by over $14 billion in investment in 2006 alone. Given the escalating price of oil, along with technological advances, greater production has become more feasible. Currently, about 2 percent of the estimated 174 billion barrels of oil have been produced in the sands, and production could reach as high as 3 to 4 million barrels per day by 2020.

So, with this type of an operating environment, we knew that we must look at our future approach to addressing the global warming challenge in a thoughtful and informed manner.

We knew that it was critical for us to take a new approach to reducing emissions, since future growth in the oil sands accounts for a very significant portion of increased emissions.

And, as my colleague Minister Baird continues to emphasize, climate change is a major global concern.

However, while acknowledging this reality, we refused to go down the path of "complex and unpredictable" regulation. We would not limit progress on achieving our environmental goals or undermine responsible resource development.

Allow me to note that the Kyoto Protocol obligations required Canada to reduce its greenhouse gas emissions from 1990 levels by 6 percent. As laudatory as this may seem, there was no mandatory requirement for industry to comply with the targets.

Not surprisingly, without a regulatory framework, emissions spiralled. Some estimates show that they increased by 20 percent over the period from 1990 to 2004.

As I noted earlier, our government decided to take an approach that was coordinated and coherent. We also wanted it to be realistic.

That is why we took measures to engage all of the players concerned about how best to move forward on addressing the challenge of global warming.

We knew that we could never find a solution that would meet all of the often divergent viewpoints. However, we also knew that we could, and must, find an approach that would result in concrete and real improvements.

Hence, the committee that I chaired discussed the matter at great length and reviewed all of the options available to us. After extensive input, dialogue and debate, we arrived at a conclusion.

In April 2007, the Government of Canada announced "Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution."

We introduced nothing short of an entire overhaul in our approach to reducing greenhouse gases — an approach based in large part on what we had heard from all players involved in finding the solution to the issue of our time.

We started by proposing a regulatory framework that sets targets: an 18‑percent reduction in greenhouse gas emissions intensities by 2010, and another 2 percent per year thereafter.

This will reduce Canada's greenhouse gas emissions by 20 percent from current levels by 2020. It is a bold, unprecedented step in the reduction of greenhouse gases. We saw that we needed short-term targets.

We knew that we must factor in the potential of the development of new technologies that could radically reduce greenhouse gases while reducing the burden on industry.

While some critics may dispute the details of the emissions targets we set, perhaps claiming one plan as more rigorous than the other, what they fail to consider is that the current plan holds companies responsible. They must comply.

In sum, with the reduction of greenhouse gas emissions, we set the bar for industry. And it is industry — not government — that will be required to meet the obligation. However, we have provided companies with the necessary latitude to determine how best to meet the targets in the most cost-effective manner.

As I noted previously in my reference to the many books that have been written on the subject of global competitiveness, we have to keep in mind that many of our Canadian companies' direct competitors will not choose to incur these costs. In the marketplace of 2007–2008, capital is tangible and projects are prioritized on a risk-assessment basis.

These are aggressive targets, and the very act of setting forth a regulatory framework has put Canada in the forefront as a leader in the global fight against climate change. Not everyone agrees with me in that regard, but the fact remains that no other country is doing what Canada is.

The significance of the Regulatory Framework for Air Emissions can be seen in the context of the global economy. The Regulatory Framework document states: "only the Government of Canada is uniquely situated to lead on this issue if we are to meet the challenge in a cost-effective manner that will ensure the continued competitiveness of the Canadian economy."

There are two significant points here. The first is that only the Government of Canada, working together with our provincial partners, is positioned to take the concrete action necessary. We have to recognize that, in a global context, industry is often limited in its ability to regulate itself and to meet voluntary targets.

The second point is that a challenge such as global warming must be met in a cost-effective manner. It must ensure our continued competitiveness while actively reflecting the need to maintain the environmental quality that is the essence of our lifestyle and values as Canadians.

Sir Howard Bernstein, Chief Executive of the City of Manchester, gave a series of lectures espousing global competitiveness and the step-changes that his city made to keep pace.

To revitalize the city, they introduced a regeneration framework that called upon partnerships, innovation and a coordinated effort to improve the quality of life and to encourage businesses to locate there and to grow.

The lesson I take from their example, and many, many others, is that we must meet the challenge of balancing our environmental and economic aspirations.

In the context of Canada and greenhouse gas reductions, I believe our government has successfully taken the requisite steps in that direction.

It is obvious that the regulatory process has an enormous impact on competitors in the marketplace — a marketplace that is now both domestic and global.

It can decide winners and losers. As our economic security is dependent on Canada fostering a globally competitive industry, we must exercise extreme caution if we are to remain competitive. In that sense, excellence in public policy determines whether we will be winners or losers.

The only solution that has any effect in the fight against global warming — a fight that many Canadians care deeply about — is a regulatory framework that strikes a balance that works.

What is at stake is our planet on the one hand and Canada's standard of living on the other. As we act as stewards of the environment, we must also act as stewards of economic growth.

It is the resolution of this balance that will help us all to realize the quality of life that we want to enjoy.

As you progress in your law careers, you may find yourself at many points along the regulatory continuum. Some of you will represent environmental organizations and find yourselves serving as advocates in the battle against global warming.

Some will work for resource companies seeking to supply international markets with oil and gas, minerals and other commodities.

And still others will find your way as the regulators — the public policy brokers that draw the lines and strike the balances.

I would offer the observation that each of you must remember that success in dealing with global problems must eventually be solved through local, provincial and national efforts. And in that regard, we must never lose our capacity to talk to one another, to listen, to consult and to respect one another's points of view. The capacity to do exactly that is indeed part of our competitive advantage as a country.

The efforts of law-makers must draw upon inner integrity. Lawyers must excel at communication, and we must never let arrogance characterize our efforts.

One might say that law-making excellence is achieved through a fairly prosaic but humbling process; through listening, learning and precisely distilling what we have learned, down to an understandable and workable regulations and laws.

This is an approach that works domestically and internationally. It must reflect the changing nature of our world — our global economy and an ever-changing society.

We must encourage the participation of all those concerned so that we can collectively share the burden — and, ultimately, the ownership — of finding solutions to the pressing issues of our times.

We must plan for success and take confident strides toward concrete and achievable milestones. These achievements will ensure that we continue to succeed in the new era of global competitiveness.

Thank you.