Just over one year ago, the federal government signed an historic agreement in Kyoto, Japan that commits Canada to reduce significantly emissions of the gases that are thought to be contributing to global climate change.

That agreement would require us to reduce our emissions by six percent from 1990 levels by the period 2008 to 2012. However, 1990 was a recession year in Canada. Our emissions since then have grown considerably (by more than 13 percent as of 1996), largely as a result of economic expansion, population growth and exports of energy-intensive products. Many of these factors are likely to push our emissions even higher as we approach the commitment period of 2008 to 2012. In fact, current government estimates suggest that the Kyoto commitment in reality represents a 25 percent reduction in emissions from what they would otherwise be by that time.

The Business Council on National Issues (BCNI) has already indicated that it does not believe such a commitment is realistic for Canada. As shown in the chart above, individual consumers are responsible for many of the sources that contribute to Canada’s greenhouse gas emissions. While Canadians have heard a wide range of predictions about climate change, there is little evidence that individually they are prepared to make the fundamental changes in their behaviour and lifestyle that such an ambitious target for reducing emissions would require.

On the other hand, a growing number of Canadian companies are seriously addressing the issue — and have been for years. Ever since the oil price shocks of the mid-1970s, businesses have invested in energy efficiency, investments that contribute to the environment and to the corporate bottom line. Many of the changes in technology that improve productivity and competitiveness also result in less energy consumed per unit of output. Firms in diverse sectors of the economy have demonstrated over and over that they will aggressively seek out opportunities to reduce emissions that also contribute to competitiveness and industrial performance.

The most recent statistics confirm this trend:

• As of 1997, participants in the Canadian Industry Program for Energy Conservation, representing a wide range of manufacturing and mining enterprises, had virtually stabilized their emissions at 1990 levels.
  
• Member companies of the Canadian Chemical Producers Association have undertaken measures that are expected to result in emissions that are close to the Kyoto target level by 2010.
  
• Greenhouse gas emissions in the aluminium industry decreased by eight percent between 1990 and 1996, even as production rose by 46 percent.
  
• Through voluntary energy efficiency improvements, the steel industry has reduced greenhouse gas emissions by 15 percent between 1990 and 1996 despite increasing shipments by more than 10 percent.
  
• Petroleum refineries have reduced their emissions by three percent since 1990, and have improved energy intensity per unit of production by 14 percent.
  
• Carbon dioxide emissions in the pulp and paper industry declined 16 percent from 1990 to 1997, while output increased 21 percent.

However, as the chart demonstrates, Canadian industry can supply only part of the answer. And having made early investments in energy efficiency — harvesting the so-called ‘low hanging fruit’ — further improvements will be much more difficult and expensive. Many of Canada’s most energy-intensive sectors are also its leaders in exports, which have always been a major source of our national wealth. Yet these and other Canadian industries want and need to grow in the global marketplace. Indeed, sales and investment by such firms are critical to job creation and Canada’s economic health in the next century.
The ability to reduce greenhouse gases also will be constrained by the solutions adopted to deal with other environmental issues. Efforts by petroleum refiners to reduce levels of sulphur in gasoline, by utilities to reduce sulphur dioxide emissions that contribute to acid rain, and programs adopted in a number of industries to address urban air quality problems all require more energy and therefore more greenhouse gas emissions.

As well, natural gas is increasingly being considered as part of the solution, since burning natural gas produces less carbon dioxide than coal or oil. This is especially so in the United States, where many electrical utilities are responding to new demand for electricity by building more efficient natural gas units. While the United States enjoys the benefits of this transition, Canadian firms that produce and transport natural gas to the American market will be charged with higher emissions.

The ability of Canadian industries to limit or reduce their emissions of these gases in a cost-effective manner clearly can vary considerably. Firms and sectors will face a variety of technological constraints and opportunities and widely varying market conditions. Continued growth and profitability will be critical to finance investments in new technology. Any sensible Canadian strategy to deal with climate change will have to take account of these factors. Canadian industry must be able to pursue a course of continuous improvement consistent with flexible and market-based responses.

The challenge for the country is immense if we intend even to begin to implement the scale of change that the Kyoto commitment requires. In a fundamental sense, the question is whether Kyoto can be reconciled with the other goals we have as a country — goals related to continued economic growth, job creation and an enhanced standard of living.

Whether or not the arbitrary target of Kyoto makes sense, Canadian industry believes it is possible to make steady improvements in limiting greenhouse gas emissions. An increasing number of Canadian companies will devote their best innovative and entrepreneurial talents to devising solutions that contribute to both environmental and economic progress — the true test of sustainable development.