Thanks very much, members of the committee. Thanks for your time.

I'd like to make four points today.

First, current policies, both provincial and federal, are working. The Climate Institute's independent analysis uses economic modelling to show that absent federal, provincial and territorial climate policies in place since 2015, national emissions would be on track to be 41% higher in 2030 than they otherwise would have been.

Trends in current emissions reinforce those findings. The institute's new early estimates of national emissions show that current emissions are around 7% below 2005 levels. Since 2017, shifts towards lower-carbon sources of energy have reduced annual emissions by 50 megatonnes. Improvements in energy efficiency have reduced emissions by 62 megatonnes. These reductions are greater than increases in emissions from growth in the economy, showing that Canada is decoupling growth of the economy from growth in emissions.

Second, swift policy implementation is a priority, both for competitiveness and for emissions reductions.

Achieving the full potential of policies not yet finalized requires implementing those policies pretty quickly. Policies take time to affect emissions. As the commissioner of the environment and sustainable development noted, slower implementation of planned policies will decrease emissions reductions in 2030.

Implementation also matters for competitiveness. Policy certainty—for example, on the details of investment tax credits—increases investment. It seems likely that at least some elements of the Inflation Reduction Act will be maintained in the United States. Canadian climate policy can help Canada attract investment to drive new sources of economic growth.

Third, ensuring that existing policies are working—especially industrial carbon pricing—is critical.

Climate Institute analysis finds that large-emitter trading systems, otherwise known as industrial carbon pricing, are Canada's most important climate policy, delivering up to half of the emissions reductions expected in 2030 from the main policies in the federal emissions reductions plan. That's about three times the emissions reductions, for example, expected from the consumer carbon tax. Examples of these large-emitting trading systems include Alberta's TIER program, Quebec's cap and trade system and the federal backstop.

When designed well, these trading systems drive both emissions reductions and competitiveness. These systems protect the competitiveness of existing industries while maintaining incentives to reduce emissions. Carbon credits also provide essential revenue for low-carbon projects, such as carbon capture and storage, clean electricity or clean steel, helping them to attract private investment.

These systems will only deliver these benefits if they're working as designed. Our analysis suggests that some credit markets are currently unbalanced in these systems. Excess supply of credits can devalue carbon credits, undermining their ability to help attract private investment and reduce emissions. Insufficiently stringent performance standards are one issue leading to more supply and less demand for carbon credits. Monitoring and updating policies over time can ensure they deliver on emissions and competitiveness benefits.

Fourth, addressing interactions between policies matters for efficacy, for cost effectiveness and for competitiveness.

In some cases, different policies overlap in terms of the emissions they cover. Governments should assess and manage those interactions carefully. Policy interactions mean that additional policies don't necessarily drive the same scale of additional emissions reductions they deliver on their own.

For example, policies such as investment tax credits can enable new low-carbon projects, but at the same time they make it easier to generate credits in those large-emitting trading systems, increasing the supply of credits and decreasing demand, thus depressing the effective price of carbon and the emissions reductions from industrial carbon pricing.

Those policy interactions also risk increasing overall costs, potentially increasing higher-cost emissions reductions but decreasing lower-cost emissions reductions.

Policy interactions can also undermine competitiveness by creating uncertainty about future credit prices. Attracting investment for large low-carbon projects depends not just on current prices for carbon credits but also on expected future prices. Interactions increase the risk that future carbon credits will have lower value.

Governments can address policy interactions either by streamlining policy packages or by explicitly accounting for interactions and adjusting policies to compensate.

To conclude, overall, delivering on emissions reductions in Canada is not a pass/fail test. Current policies are working, but we are short of the target. More stringent and more coherent policy packages with more policy stringency will drive more emissions reductions and more private investment.

Thank you very much.

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