1. Climate Change Plan for Canada Senate Standing Committee on Agriculture and Forestry November 26, 2002

2. Introduction Serious issue for Canada and Canadians  environment, health and economy, impact on future generations  implications include droughts affecting agriculture, insect infestations and forest fires Serious global issue – requires an international solution  the science is clear and the international framework agreed Canada is in a unique situation  alone in the Americas with a Kyoto commitment  face competitiveness concerns from taking action  but face high costs of inaction  but can establish competitive edge by making technological advances to embrace a less carbon-intensive economy Our economy will grow while we reduce emissions  innovation and technology are critical  investments will put us ahead of the curve

3. The International Response All countries must eventually become part of any global solution  but industrialized countries have a responsibility to step up to the plate first  have considerably more financial resources and economic capacity  have led the way in other major international agreements Kyoto Protocol - result of a decade of international negotiations  likely to enter into force in 2003 covering at least 55% of industrialized country emissions  the first of many steps needed over the next 50 years  if it falters, it could take years to negotiate a new international agreement; the science suggests we do not have time Canada’s involvement will  enhance the credibility of the Protocol  improve prospects for further progress  reflect our commitment to global cooperation

4. The United States US decision not to ratify puts Canada in a unique situation with complex competitiveness considerations  but modeling indicates implications for Canadian industry are relatively modest; Canada can achieve its target at an acceptable cost Competitiveness and investment flows are about more than costs  labour skills, productivity, taxation, liveable cities, educational/health/social services, exchange rates  investment in technology R&D, capacity to innovate, state-of-the-art capital stock US approach to climate change is not a black or white issue  US government is making large investments to spur innovation, uptake of clean technology; majority of states have regulations concerning GHG emissions Government is expanding cooperation with the US to help reduce the costs and impacts of reaching our target  clean coal technology, CO 2 capture and storage, co-generation and renewables, sustainable agriculture and forestry practices

5. Canada’s Kyoto Challenge Canada’s Kyoto target  6% below 1990 levels between 2008 and 2012; “gap” is about 240 MT of emissions  upside and downside risks, but a main driver is the energy sector where we have assumed significant growth Canada played an important role in shaping Kyoto Protocol  to a significant degree, Kyoto mechanisms and sinks provisions were “made by Canada” Canada’s approach balances the management of challenges with the pursuit of opportunities  a strong Canadian presence in new markets  an economy using leading-edge technologies  clean air, water, liveable cities, healthy people Recognition of the global benefits of cleaner energy exports is one piece of unfinished business

6. Canada’s Approach to Climate Change – Guiding Principles Made-in-Canada, based on collaboration, partnership and respect for jurisdiction Reasonable sharing of benefits and burdens requiring responsible investment by all Must be transparent; proceed step-by-step; keep the Plan evergreen Minimize mitigation costs and maximize benefits Promote innovation Limit uncertainties and risks

7. Overall Plan The Plan: based on many years of collaborative work and analysis Discussion paper in May 2002 followed by extensive consultations Three Steps: Step I: Actions under way 80 MT Step II: New Actions100 MT Step III: Options for the remainder 60 MT Total:240 MT

8. Step I - Actions Under Way (80MT) Government of Canada has invested $1.6 B since 1998 Action Plan 2000 and Budget 2001 initiatives projected to lead to 50 MT of reductions over 5 to 10 years  wide range of initiatives in all sectors: incentives, information, negotiation of voluntary action  most initiatives have been in place for one year or less  many are in partnership with provinces, territories, private sector  major assessment of progress starting this year  will make adjustments in response: shift resources to areas of greater success, change approach in areas not meeting expectations  Sound agricultural and forest management practices are expected to lead to 30 MT of sinks credits  actions to foster further improvements in these areas should reduce risks to these credits

9. Step II – New Actions (100 MT) Three priority areas for action: 1. Targeted measures to support individual action by Canadians  challenge of 1 tonne per person  measures in transportation and buildings sectors assist with 2/3 of this effort  products, services, information and incentives 2. Comprehensive approach for industrial emissions  domestic emissions trading  with domestic offsets in agricultural, forestry and possibly municipal and other sectors  with seamless access to international permit market  strategic technology and infrastructure projects  targeted measures where needed 3. Direct Government participation in the international market

10. Step III – The Remainder (60MT) Decisions on Step III to be taken from now to 2008-2012  learn from experience  capitalize on new technologies  collaborations will evolve Fair sharing of responsibility for closing the gap  seek areas of most reasonable cost and greatest opportunity  share burden  transparency of decision-making Steps I and II address three-quarters of the gap  many areas where action can be anticipated or is already under way are not included  Step III will address the risks in Steps I and II and options for addressing the remainder of Canada’s Kyoto commitment

11. Agriculture and Climate Change Agricultural GHG sources: fertilizers; manure and methane from livestock; farm machinery % of emissions: N 2 0 (56%) CH 4 (41%) CO 2 (3%) Emissions by Sector in 2010 25% Transportation 4% Landfill Gas 10% Agriculture 10% Buildings 16% Power Generation 17% Mining & Manufacturing 18% Oil & Gas

12. Agriculture Opportunities to Address Climate Change Agriculture has three unique opportunities to manage GHG emissions: Remove carbon dioxide from the atmosphere via sinks Reduce GHG emissions from livestock, soils and residues Replace transportation fuels, chemicals and other products produced from fossil fuels with renewable, biological feedstocks from crops, and plant and animal residues  targeting 35% ethanol, 500 million litres biodiesel enhancement of these practices could produce potential offsets credits for an emission trading system  must be real, measurable and go beyond business-as-usual

13. Sinks - Estimated 30 MT ForestryAgriculture Kyoto Protocol44 MTno cap BAU forecast+ 1 MT afforest’n/reforest’n+10 MT -16 MT deforestation +35 MT forest managem’t +20 MT net sink Incremental possibilities??6 MT Treatment of Sinks under the Plan 30 MT BAU is national benefit reducing emission reductions from all sectors incremental sinks can be sold as offsets

14. Agriculture and Forestry - Actions Underway and Next Steps Actions Underway Developing measurement tools and inventories needed to qualify for credits through international rules as a result of existing good agricultural and forest management practices (30 MT; 10 from agriculture, 20 from forestry) Promoting additional agriculture sinks through improved soil management initiatives in Action Plan 2000 and the Agriculture Policy Framework and through Greencover program (6 MT) Through Action Plan 2000, analyzing the potential for large-scale creation of new forests Next Steps Establish a framework to enable new sinks (beyond the 30 MT from existing agriculture and forestry practices) to be sold as offsets in an emissions trading system