Notes For An Address by the Honourable David Anderson, P.C., M.P. Minister of the Environment on the Occasion of the Annual Awards of the Voluntary Challenge Registry (VCR) March 5, 2002 Hull, PQ

Speech delivered by the Hon. David Anderson P.C., M.P., Minister of the Environment

Thank you Michael. It's a pleasure to once again attend the annual awards ceremony of the Voluntary Challenge Registry.

I have enjoyed seeing many familiar faces. I am even more pleased to meet the many new VCR participants and award winners.

The growth of the VCR Registry reflects an increased awareness of the need to reduce greenhouse gas emissions (GHG). Your success is contributing to a cultural shift in how Canadians approach this issue.

I want to congratulate VCR on another successful year.

Another year of growth for your memberships rolls - now totaling almost eight hundred organizations.

And another year of honouring environmental excellence - I understand there are now over one hundred gold level reporters.

The VCR program has been instrumental in building momentum for a strong national response to climate change.

First, you are helping to build the business case for reducing greenhouse gas emissions. The VCR Registry includes a long list of "win-win" climate change success stories.

Fairmont Hotels, for example, will save $3 million per year on energy costs, after making a $10 million energy retrofit investment.

Second, you are building a market for environmental products and innovations. You are showing that innovations - from ground source heating to energy efficient street lighting - not only reduce emissions, they also impact the bottom line.

Most important, you are leading by example. You didn't choose between growth and greenhouse gas reductions. You are achieving both. This is the promise of sustainable development - a promise that can be fulfilled.

The growth of the VCR Registry reflects an increased awareness that reducing greenhouse gas emissions is an opportunity for all Canadians. We can do more with less. On our balance sheets. In our public sector budgets. And in our household spending.

Like any challenge, the more hands we put to the job, the more progress we can make.

I congratulate VCR Inc. on the diversity of its membership. School principals and college administrators are showing leadership right alongside manufacturers and resource company executives.

I encourage you to continue these efforts. VCR must broaden its participation to under-represented sectors, especially small and medium-sized businesses (SMEs).

I am pleased to note that individual Canadians, and owners of small and medium-sized enterprises (SME's) can now join VCR to register and track their individual action plans to reduce GHG emissions.

Celebrating excellence is a great motivator. Reducing greenhouse gas emissions can be a good news story, but it's not the story that always gets out.

By shining a spotlight on the success of VCR members, these awards show that we can marry strong actions on climate change, with strong economic growth.

Looking towards the future, voluntary reductions can, and must, continue to play a role in meeting our greenhouse gas reduction targets, but alone they will not be able to bridge the gap between our Kyoto target and our current emissions.

We will need a stronger system in order to meet our international obligations.

Can Canada achieve our targets under the Kyoto Protocol?

We can. We are already on our way.

The measures to date include a series of programs across a wide-range of sectors in Action Plan 2000 that are expected to significantly reduce our emissions. In addition, in international negotiations last year we received sinks credits from the good forestry and agricultural management practices we have already put in place. And Budget 2001 measures will account for further reductions.

Let me say a few words about Kyoto and ratification because the subject comes up frequently. The Prime Minister has said that the successful negotiation of the international rules for implementing the Kyoto protocol opens the way for Canada's ratification of the Kyoto protocol this year, following full consultations with the provinces, the territories, stakeholders, such as VCR, and other Canadians. He has also said that his goal is to join other countries that want to ratify the protocol.

We have two imperatives in making our decision. The first is that we have an implementation plan in which no region of the country is asked to bear an unreasonable burden. The second is that we complete meaningful consultations with provinces, territories, stakeholders and other Canadians.

In conjunction with a decision on ratification, the Government of Canada is currently assessing approaches that could be part of a plan for achieving the rest of our Kyoto target.

I would like to emphasize that what I am about to share with you is a framework for discussion and not our final plan. We want to consult and adapt it according to the views of provinces and stakeholders, including industries such as those represented by VCR.

Some of our key considerations include:

• Cost-effectiveness;
• Regional and sectoral impacts;
• Domestic reductions versus purchase of international credits; and
• Environmental, health and other co-benefits.

So what is a realistic approach that we might focus on?

For me, it is a three-part approach involving emission trading, some targeted measures and some government investment in international permits.

The emissions trading system would cover large final emitters and include major industrial plants, oil sands operations, petroleum refineries and electricity generators. It would drive both low cost emission reductions at home as well as the purchase of some international credits.

Each firm that would be covered would have to decide whether to buy permits or reduce its emissions. They would reduce their own emissions where that is less costly than their three alternatives which are:

• Buying emission reduction permits from other companies in the domestic trading regime;
• Buying emission reduction credits from other domestic sources such as agricultural sinks and landfill gas capture that could be opted into the trading regime - which by the way becomes a source of earnings for other sectors of the economy; or
• Buying credits in the international marketplace

It is actually the international price of carbon credits that would determine what emission reductions might be most cost effective to make at home. In essence if we leave everything up to the market the international carbon price determines the balance between domestic reductions and the international purchase of credits.

The second part of a likely approach would be targeted measures which would address emissions in sectors not covered by the domestic emissions trading system such as residential and commercial buildings, transportation, forestry and agriculture. These measures could include both low cost emission reductions and other measures we might consider putting in place for a whole variety of reasons.

I would suggest that there are reasons why we would want to ensure more reductions are made domestically than the market alone might dictate. For example, there are environmental and health benefits from cleaner air. There are employment and competitiveness benefits from investing in new technologies at home. There are policy goals, like improving urban transit systems that we would likely be pursuing for a wide variety of reasons.

Finally, the third part of any approach would likely be government investments in any international credits that might be needed to close any remaining gap. We negotiated international rules that allow us to purchase emission reduction credits in the international market place and to invest in emission reduction projects in developing and developed countries and earn credits. Canada's approach will want to take advantage of this international market.

Such a three part approach using a mix of policy tools would position us well to deal with all the design considerations I mentioned earlier. It could achieve a reasonable balance between low overall costs and our ability to deal with competitiveness issues and to moderate differential impacts while reaping desirable co-benefits.

I'd like to take a moment before I conclude my remarks to expand a little on a theme I addressed earlier - the future role of voluntary reductions. As I mentioned before, we will not meet our Kyoto targets through voluntary initiatives alone. We will need to build upon the successes of VCR and reward action in the market place.

In short, because of your efforts and leadership we will be better placed to get everyone sailing in the same direction. I urge you to continue your good work.

The success of VCR Inc. and its Council of Champions proves that reducing greenhouse gas emissions can also make good business sense.

Once again, thank you for this opportunity to say a few words. Best wishes for another successful year for the Voluntary Change Registry and all its members and I look forward to presenting this year's awards later on this evening.