EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 28, 1995

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[Translation]

The Chairman: Good afternoon, ladies and gentlemen. Pursuant to Standing Order 108(2), we are continuing our panel discussion of the tax barriers to the adoption of sound environmental practices.

[English]

We sat yesterday until late and this morning and are sitting now in order to pursue this elusive goal of how to implement sustainable development effectively and substantially in environmental fiscal practices. A lot has been written about it. Declarations have been made in various domestic and international fora. The intentions are good, but we know which road is paved with good intentions. We would like to find the one that will lead us to substantial results.

That means we have to know more before we can act, and in order to know more we need the advice of people who are experienced and knowledgeable in the field of sustainable development or in certain sectors where there is an obvious policy choice that can be made, provided there is sufficient political will, of course.

This afternoon our guests are clearly identified, so I will ask whoever of you wishes to be first to take the floor, introduce yourself briefly, and make the supreme sacrifice of a short presentation, possibly less than ten minutes, because if you do that then we can have a more meaningful exchange by way of questions and answers.

Who wishes to go first? Mr. Hartman, by all means go ahead. Welcome to all of you.

Mr. John Hartman (Director of Transportation Forums, Transportation Association of Canada): Thank you.

I think it's very timely for this committee to turn its attention to the transportation sector, because sustainable transportation is a very hot topic in Canada right now.

You're aware that the idea of sustainable development has been around for about 20 years, but it's only in the past couple of years that we've started to develop practical strategies in individual sectors and in local regions. Since transportation is so critically important to the environment and to the economy and to society, it was only a matter of time until it started to move up to the top of everyone's agenda.

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Today I would like to tell you what the Transportation Association of Canada is doing, and then I'll conclude with a few personal comments about the future.

When people think about sustainable transportation, they often think about urban transportation first. Urban areas are where most people live, where most resources are consumed, and where most pollution is generated. Eight out of ten Canadians live in urban areas, and transportation issues touch all of them. By almost any scale, the magnitude of urban transportation dwarfs its inter-city counterparts. For example, in 1993 all of Canada's airlines boarded 32 million passengers. The Toronto Transit Commission alone boarded 400 million.

It is in the field of urban transportation that TAC has done most of its work. We do have a public policy position on a federal tax as it relates to sustainable transportation. This is in the form of a letter of 1994 addressed to the federal minister of finance, and I understand that you have received a copy of that letter in your packages.

We urged the minister to amend the Income Tax Act so that employer-provided transit passes would not be treated as taxable benefits to the employees. We reasoned that the present law is sending the wrong signal to Canadians. It serves as a deterrent to transit use, when in fact greater use of transit and less reliance on the automobile will move us more in the direction of sustainability. This will improve air quality, reduce energy consumption and lessen demands on municipal road budgets all at the same time.

Ours is not an isolated position. The same suggestion has come from the Federation of Canadian Municipalities, the Canadian Urban Transit Association, and it also appears on page 15 of your own task force report.

It's rather unusual for TAC to take a public position like this. In fact it's the only one I can recall in the five and a half years that I have been here. Our normal method is to resolve issues in-house using the various round table forums that we have created.

We went public in this case for two reasons. One is that action was required by someone outside of the TAC family. Secondly, the suggestion is entirely consistent with TAC policy as reflected in this document, A New Vision for Urban Transportation, which I understand you also have in your handout packages. We believe this is a very important document. It was published in 1993 and is a product of our urban transportation council, which is one of five permanent councils we support.

We are calling here for major changes from past practice in terms of land use and urban structure, the role of private automobiles relative to other modes, and transportation funding. We believe the results will be cleaner, more economically competitive and more socially desirable cities.

Our strategy is to have this vision endorsed by as many people as possible so that real change will be built into future land use and transportation plans. We are doing quite well at that so far. We have received endorsement not only from TAC but also the Federation of Canadian Municipalities and the Canadian Urban Transit Association, the Institute of Transportation Engineers, the Ontario round table Climate Change Collaborative and from individual municipalities like greater Vancouver, Regina, Hamilton - Wentworth, which is Canada's local Agenda 21 model community, Metro Toronto, the regional municipalities of York and Ottawa-Carleton, and that list continues to grow.

Unfortunately, this is not a truly sustainable vision because it still depends on internal combustion engines powered by fossil fuels. However, it does move a long way in the direction of sustainability, and many people consider it to be the best division available today and the best starting point for any discussion of a completely sustainable system.

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At this point I have to take off my official TAC hat and speak to you from personal experience.

I have to tell you first - you might already have guessed - that it is my firm belief that the battle for sustainable transportation is going to be won or lost in the trenches of the cities. If we can do it there, then we can do it everywhere.

Historically, the federal government has not had a large or direct role in urban transportation, so my remarks have to be somewhat constrained. What we notice is that the big challenge in governments today, of course, is to reduce deficits and control debts, which is very important. Unfortunately, at the same time transfer payments have been reduced with a cascading effect that winds up back at the municipal level, where there is really nowhere else to go. Municipal budgets are being cut, including transit budgets, some by in the order of 25% or 30% a year.

It is unfortunate that this is happening at this time, because this is just when we need to put more money into transit in order to make its attractiveness better relative to that of automobiles.

In the questions posed to the members of this panel, there was talk of a level playing field. The playing field is not level today. It is tilted in favour of the automobile, and there are many reasons for this.

Our cities have been designed for cars. Autos would never have gained the popularity they have today if it had not been for roadway infrastructure provided by the public purse. We have the second-cheapest gasoline after the Americans. Low-density suburbs are being subsidized by the city centres. Most by-laws work against higher-density mixed-use development. The list goes on and on.

We feel that we need to tilt the playing field away from the single-occupant auto and more in the direction of walking, cycling, transit, and high-occupant autos, which is what the TAC vision is proposing.

Taxation of transit passes is in your task force report. I'm in favour of that, as is TAC.

Increased gasoline taxes: I believe in carrots rather than sticks. Carbon taxes and smog taxes are relatively blunt instruments that, frankly, I don't think are very effective.

However, you should be aware that there is a growing feeling within Canada today in favour of user pay, as long as it is accompanied by some form of user save. Therefore, I would support the proposal in the task force report, provided that all these new revenues are dedicated by law toward transportation system improvements moving us toward sustainability. The TAC urban transportation council would probably support that as well.

Some brief thoughts on the future: where do we go from here? Canada needs to do several important things quickly. First, we need to create a vision of what sustainable transportation is. Nobody has done that yet. If we don't know where we're going, then we're never going to get there. Hand in hand with that is a definition of what sustainable transportation means in a country like ours; nobody has done that yet, either.

Both the vision and the definition should be developed in a cooperative manner by a cross-section of the transportation and sustainable development communities; that is, by the same kind of people as those who will have to live with the results. This would take at least a year and would involve a lot of negotiation along the way.

After that comes a period of marketing and promotion, where we could spread the gospel as far and as fast as possible to get buy-in to this new vision, especially at the senior decision-making level.

Once we know what we're talking about and people start to come onside, we can start to talk about developing practical strategies and actions to achieve that happy state of affairs in the future. Of course, this suggested process is based on our own experience at TAC with our own urban vision.

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In the course of doing this there are going to be many barriers. There are three that I think are particularly important. The first one is public perception. We have to change public perceptions because a sustainable future for transportation is going to require lifestyle changes and behavioural changes. We need public communication programs that can reach out to the average citizen at the grassroots level. We don't have that right now, although Environment Canada and Ottawa-Carleton are both starting programs in this direction.

Second, we need performance indicators. We need new ways to measure the quality of our lives and the value of our economies in relation to the natural environment. Gross national product is a complete failure in this regard. It sends the wrong signals. The new indicators must be meaningful, easy to communicate, and believable if they are to be useful tools.

The third, something that is very important in the transportation sector, is what we call total cost accounting. Everyone must have a clear understanding of the true total cost and benefits of the current transportation systems and of the options that are being proposed. Conventional accounting systems and conventional cost-benefit analyses do not do this.

None of this will happen overnight. If we're serious about achieving sustainable transportation, we have to recognize that we are in this for the long haul.

I believe Canada's sustainable transportation future will deserve and need a permanent home to provide a permanent focus and an ongoing effort. That home will have to provide a truly neutral forum to reconcile the very different agendas that will be brought before it from various levels of government, carrier shippers, the travelling public, labour unions, and other people. The Centre for Sustainable Transportation was specifically created to fill that kind of a role, which is why I support it. I understand that a brochure on that organization is also included in your packages.

I believe achieving sustainability is the greatest challenge facing the Canadian transportation community today. There is no reason Canada cannot meet this challenge and provide global leadership at the same time. To those of us who devote a big part of our lives to the task, it's often frustrating and it's sometimes hard to keep the faith, but ensuring the well-being of those who come after us is a noble goal and I think it's worthy of our best efforts.

I hope that was ten minutes, Mr. Chairman. Thank you.

The Chairman: Thank you, Mr. Hartman. I hope you are not losing sleep in the search of a definition of sustainable transportation. Your presentation is very substantial in itself and the definition may be secondary.

A very simple theme may actually serve your purposes, because it would be a policy that permits the attainment of sustainable development. That transportation policy may vary from region to region and from density to density, but you would probably want to have as flexible a definition as possible for the attainment of your ultimate goals. As long as that transportation policy fits into the attainment of an overall sustainable development policy, we would be in great shape.

Mr. Hartman: That's correct and that's what we're shooting for.

The Chairman: So I wouldn't waste too much energy in that search, because in the meantime valuable time goes by.

Who is the next speaker?

Mr. Colin Isaacs (Director, Temporary Information Analysis): Thank you, Mr. Chairman. My name is Colin Isaacs. I am a consultant in sustainable development strategies, primarily for the private sector. I was also a member of the task force on economic instruments, and I guess because I was a member I agree with all the recommendations that are contained in the report.

I was also a member of the Ontario round table collaborative on transportation and climate change, which produced just last week the report ``A Strategy for Sustainable Transportation in Ontario''. I know that David Runnalls, a colleague on the former Ontario round table, introduced your committee to the work of the collaborative last week, but today I'd like to formally table the collaborative's report with you.

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Finally, among the large stack of paper I brought to you today is a discussion paper I recently prepared for the national round table task force on principles for sustainable transportation. I have provided copies of that discussion paper also for members of the committee.

Having said all that about my background, I want to stress that my comments today are my own and I represent no one but myself. However, some of the data I will reference does come from work carried out for the round table transportation collaborative. I have provided one set of the very extensive background research documents to the clerk for research use. That work was funded jointly by the Ontario and National Round Tables and by other government and private sector sponsors.

I define an activity as sustainable when it is economically, socially, and environmentally sound. There is no doubt Canada's transportation system fails on all three counts. For example, from data from western Europe, it is likely that transportation congestion accounts for at least 2% of GDP.

This illustrates one of the perversities of the GDP measure. Transportation spending, including spending on congestion, is an economic inefficiency, as well as being environmentally damaging, yet it contributes positively to GDP. Clearly we have to deal with that problem, as Mr. Hartman has suggested. Clearly also our society would be more sustainable if we were to spend less on transportation.

Canadian transportation also fails socially, because it contributes adverse health effects of numerous kinds, from asthma through to stress.

Perhaps more importantly, Canadian transportation does encourage a free movement of people and it does not help Canadians to get to know other Canadians from across this great and rather large country.

I want to stress I used the word ``help''. Canadian transportation systems do allow people to travel around the country, and that is an important first step, but clearly they do not help people to travel around the country. In my view, to be truly sustainable, passenger transportation must be a social benefit, and in that regard our systems also fall down flat.

It is interesting to note that on the freight side our transportation systems also fail to achieve social goals. Because our freight transportation systems are subsidized by government and by society by their meeting the costs of the externalities, it is that much more difficult for communities to develop local industries which serve local needs.

We must give priority to removal of subsidies and to ensuring that our transportation systems pay the full costs of the externalities that are associated with them. In addition to helping us meet our environmental goals, this will also help the economy by allowing local communities to focus on local enterprises with the highest value-added and hence the highest job creation potential, because the transportation of dross will become uneconomic.

Most importantly for the points I want to make today, transportation fails environmentally. I am sure I do not need to draw your attention to the massive pile of information supporting this charge. Basic data show that transportation accounts for 32% of Canada's carbon dioxide emissions. Carbon dioxide emissions are a fair proxy for many other environmental impacts, especially air pollution. Within the transportation sector, by far the largest contribution comes from highway vehicles.

What can be done? Well, first there are some big-picture questions we must address as a society. For example, is increased movement of people around the country and around the world a positive or negative factor when we consider sustainability? Frankly, I am inclined to see it as a positive. In other words, I suggest that increased interaction between, and hence understanding of, people from different provinces, different nations, and different continents contribute positively to sustainable development.

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I also suggest that the issue of freedom to travel, whether or not it contributes positively to sustainability, is hardly open to debate. People demand the right to travel essentially where and when they want, and that right is not open for review. Hence, government must provide Canadians with that right. But freedom to travel does not encompass freedom to destroy the global environment. Travel must be undertaken in the least environmentally harmful manner possible with the maximum of social benefit and the minimum of social harm, and at minimum cost to the economy.

In Germany, for example, automakers Mercedes Benz, Porsche, Volkswagen, and BMW have signed a deal with several states to bring out cars by the year 2000 that consume less than four litres of fuel per hundred kilometres, or for those of us still used to the old way, more than 70 miles to the gallon. Of course these cars will also meet the European targets for the recycling of vehicles at the end of their useful life.

In less than five years' time will Canada's automakers have cars in the showrooms that use less than four litres of fuel per hundred kilometres? If they don't, whose cars will Canadians be buying? Working together, technology and the economy can provide solutions. If we don't take environmental considerations into account, and if we keep manufacturing and using environmentally gross transportation technologies, we'll no longer be competitive in the world.

A second message I want to leave with the committee is that we must begin the process of shifting travel patterns from private automobile to public transit where the opportunity to use transit exists. This is where the federal government can provide some necessary leadership.

The economic instruments task force recommended a tax exemption for employer-provided transit passes. The Ontario round table collaborative recommended the same thing. It is not exactly a big deal, but it is an important first signal that government priority is moving towards encouraging people to use transit systems wherever possible. Why do these little things take so long?

In its own policies and practices, and through already existing programs such as the green buildings initiative, the federal government can also provide leadership. It can encourage discussion. It can assist the transition that has to come and it can help Canadians make the transition with the least disruption to the economy and society.

There is no question that something must be done to put Canada on a path towards more sustainable transportation systems. The only question is whether we get on with the job now or whether we wait until the environmental crises are significantly more intense.

My third and final message in the very limited time we have today relates to the question of a carbon tax. Having said it once, I promise not to say it again, but there is no doubt at all that the question of regulating greenhouse gas emissions is now crucial.

The Ontario round table report, signed by individuals from such noteworthy organizations as General Motors and the Canadian Auto Workers, says:

One of the greatest economic and environmental challenges now facing Ontario and the world is the control of carbon dioxide and other greenhouse gases that threaten to destabilize the climate and lead to global warming.

I am dismayed at the amount of debate Canada has spent on the subject of the you-know-what tax. I accept that we are not going to have that kind of tax. I even go so far as to say that a flat rate tax based on the carbon content of fuels would be harmful to Canada's economy and would be unfair in the Canadian context. This does not mean that we should abandon all consideration of economic instruments to discourage wasteful fossil fuel use.

The Europeans, especially the Danes, are showing us the way to the use of economic instruments to reduce fossil fuel use. The Danish energy tax package seeking reduction of emissions of both carbon dioxide and sulphur oxides is revenue neutral, involves refund to businesses of taxes in respect of essential energy uses, and has been approved by the European Commission.

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We are bright people and we can do it too. I suggest that what we need is not a tax on the fuel itself, but a tax on the wasteful use of fuel. That is what causes the greatest damage. We must develop heavy economic disincentives to the use of fossil fuels for recreational purposes, for social purposes, and for just plain cruising.

I am confident that Canada can develop a fuel wastage tax that significantly discourages unnecessary use of fossil fuels while permitting efficient essential use of energy for business purposes to continue to fuel Canada's economy.

If the human energy that has been put into fighting about the carbon tax had instead been put to developing an economically sound alternative, I am confident that a viable fuel wastage tax proposal would be in front of the finance minister today.

I urge you as a committee as a very high priority to begin the process of developing an economic instrument that encourages energy efficiency and heavily discourages energy waste and other environmental harm in the transportation sector.

The Chairman: Thank you, Mr. Isaacs. Mr. Bell.

Mr. Dave Bell (Assistant Deputy Minister, Review, Transport Canada): Thank you, Mr. Chairman. I appreciate the opportunity to renew the discussions in this committee on how Transport Canada is meeting the challenge of integrating environmental consideration in its policy and program decision-making.

I will try to respond to the committee's questions in the spirit of this panel discussion to the degree that I can. I have not prepared any handouts as my colleagues have. They have provided detailed handouts in a variety of areas and I did not want to duplicate that.

As I understand it, the committee wishes to assess how government is responding to the recommendations of the task force on economic instruments and disincentives to sound environmental practices, particularly with regard to issues of whether or not the federal fiscal regime inhibits the development of sustainable transportation. I want to take some time at the outset to review the broader context within which these specific responses have evolved.

At the outset, I wish to note that transportation is a sector of derived demand. This means that while transportation has to meet its environmental responsibilities, for example reduced air emissions, the sector's ability to do so is constrained somewhat by Canadians' need for freight and passenger transportation. Our sustainable transportation strategy must therefore balance economic, social and environmental considerations. Colin spoke very eloquently about all three of these parts, so I will not cover that same ground.

We are working collaboratively at the federal level to try to establish this balance when we make decisions. Given that other jurisdictions must be involved in developing solutions, for example, to sustainable urban transportation, there must be a collaboration at all levels of government with users, operators and the public at large.

John spoke to this whole issue of the necessity for collaboration. As I said before in my appearance here in February, our department is committed to ensuring that its policy and program decisions, in addition to meeting the traditional transportation tests of safety, efficiency and competitiveness, also address the challenges of reducing or eliminating pollution and conserving resources. We are doing so. The national cleaner vehicles and cleaner fuels initiative is but one example of what is being done to reduce pollution and conserve resources. This response is the prerequisite for building more sustainable transportation, integrating environmental factors in all our decision-making.

In some cases, achieving a balance is relatively straightforward. Clearly, the transportation sector must meet environmental laws and regulations for environmental protection and for human health and safety. In other cases, the solution is much more complex.

Transportation systems and government transportation policies have evolved to meet the public need for mobility and the industry's need for seamless, affordable freight transportation. In some cases the form of transportation evolved to meet these needs seems unsustainable. The patterns of low-density urban development that evolved in Canada and abroad have inhibited development of affordable transit systems and fostered dependency on the automobile.

As you know, some 70% of the transport sector emissions of greenhouse gases, which is a major contributor to climate change, arise from the automobile and truck traffic in urban areas. I should note that this has also led to transportation inefficiencies, which again Colin discussed: issues such as congestion and potentially higher social costs.

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The committee is also concerned that the freight transportation systems that have evolved and those whose services and rates are a key factor in enabling industry to compete in maintaining jobs - in allowing Canadians to have access to, for example, fresh vegetables - are also unsustainable because of the predominance of trucking to move inter-city freight. These matters are of concern. They arise because in meeting Canadians' needs for transportation the environmental impacts of the transportation system that are involved have not been appropriately defined.

We need to achieve a new balance. It will be achieved only through a long-term commitment. In that sense, I support what John had to say, that this is a long-term exercise and not a quick fix.

In the first instance, informed choices are needed based on the public understanding of the environmental consequences of the current pattern of economic and social activity, including transportation. It also is important that there is an understanding by the public of the relationship between demands for transportation and the services involved and an awareness of the costs and benefits of more sustainable transportation. This is also an issue that John discussed in some detail.

There has been progress in understanding how to deal with the environmental impacts of urban transportation. There are cities in other countries - for example, Portland, Oregon - where the results of integrated land use and transportation planning have produced a more liveable, less polluting, and resource-conserving urban environment.

The acceptance that the changing urban form is a prerequisite for sustainable development and to enable more sustainable transportation is a bit of a breakthrough. This does not mean that actions with more immediate impact should not be undertaken in order to address the environmental impacts of urban transportation.

I have mentioned the cleaner vehicle fuels initiative. Among other things, Transport Canada will achieve its national objective of reducing greenhouse gas emissions for its own fleet.

Equally, the Transportation Association of Canada and the Federation of Canadian Mayors and Municipalities are promoting sustainable transportation nationally. We have heard two people speak about it. For example, the greater Vancouver region has developed a vision and measures to achieve a more sustainable urban area in the lower mainland of British Columbia.

At issue, really, is whether or not further measures will be needed nationally and in urban areas to support the evolution of sustainable urban transportation. We at Transport Canada are working with other federal departments to ensure that transportation contributes to the federal action plan on climate change.

The committee will be aware of the major changes in the inner-city transportation world and how the government is responding to the need for fundamental reform. We have a competitive system, and market forces within the broad framework of the new national transportation policy are working to meet Canadian needs.

There are adjustments, and there will be further adjustments over time as the transportation sector moves through this period of major change. In part, this will be achieved through means to ensure that Canadians pay the full cost of the transportation services they use.

The pace of a move to full costing in transportation, in part through reducing transportation subsidies, will not always satisfy all objectives. We have eliminated some subsidies - including western grain transportation assistance and the Atlantic freight rate assistance, but in time the economic or social costs will outweigh the environmental benefits.

There is an even more fundamental barrier: the fact that environmental costs are just beginning to be recognized in pricing decisions in all sectors of the economy today.

The transportation sector is moving to become more sustainable. Much more can be done to make it more sustainable, but transportation cannot become sustainable until the other sectors of the economy and the general public change their patterns of demand for transportation service. Colin and John alluded to that a little bit in terms of the public perception issue; they need that understanding.

The department is approaching these matters in a way that balances the environment and economic and social costs and benefits. We are doing so in partnership in government and within the transportation sector. You'll be aware that we are a member of TAC, to which John belongs.

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In general, I should say we have certainly considered and in some cases moved as recommended by the task force and by many other proponents of sustainable transportation. For example, we are involved in the climate change collaborative, which Colin spoke to, and the Ontario round table on the economy and the environment.

Environmental protection and environmental stewardship are not new to the transportation sector or to our department. We have some distance to go. We've come a long way in terms of compliance management, environmental assessment, green office and green procurement.

Sustainable development, which should be supported through the evolution of more sustainable transportation, is somewhat new. We are looking to an OECD conference on sustainable transportation next March to move forward internationally on this issue. I'm sure your committee's guidance will be most helpful to us in developing a contribution to that conference, as well, of course, as to the evolution of sustainable transportation.

In summary, we are moving to create an economically sustainable transportation sector through commercialization of facilities, subsidy removal and a variety of other measures. We believe this will produce a more appropriate balance in supply and demand for transportation services. We also believe this will allow the public to make more informed choices on transportation based on more full cost information.

Over time, environmental issues will be factored into the pricing for transportation services once better information is available. But to generate that better information - and both John and Colin spoke to this - we need a variety of activities to take place. We need a framework for identification of what exactly are the issues and what are the costs, we need some measurement and indicators to be able to value those costs, and then we need the capability to inform people of the value of those costs as they make their transportation choices.

In summary, we are working toward sustainable transportation. It is a path with many forks and many arteries, but we think in the end, with a concerted effort across a variety of fronts and with time and cooperation amongst the various levels of government and the public at large, we will get there.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Bell.

[Translation]

Dr. Genest, you have the floor.

Mr. Bernard-André Genest (Professor, Department of Administrative Sciences, School of Management Sciences, University of Quebec at Montreal): Mr. Chairman, ladies and gentlemen, members of the committee, I would like to start off right away by describing the aim and scope of my presentation.

Using one example, namely passenger rail transportation, I want to get people thinking and perhaps discussing the unwanted, harmful and perhaps surprising environmental effects of certain transportation subsidies.

My position does not reflect new research or the views of a particular organization, but rather a personal opinion formed as a result of nearly 30 years of experience in this field, in-depth studies and observations as to what is technically, economically, and above all, politically feasible.

Let me start by saying a few words about rail transportation in Canada, about the associated myths and realities, as well as about Via Rail and its untenable mandate. This will not be a revelation to you. I will then speak briefly about high-speed rail travel in the corridor, not to reopen the debate, but rather to use this as a very eloquent example of what I would like you to think about today. I want you to think about the paradox between the environmental benefits of this project and the less than enthusiastic welcome it received.

As for the myths and realities associated with rail transportation in Canada, Berton has said that each country has its pyramids and that Canadian Pacific's transcontinental railroad is Canada's version of the pyramids. In some ways, he was right.

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There is no denying that the railway opened up the Canadian West and helped to build the Canada that we know today.

However, we have also observed that the rail industry, like others in North America, has become indifferent and has been too slow to specialize its operations. As a result, it has adapted poorly to societal changes.

Subconsciously, Canadians have an immense, almost adolescent love, for trains, as well as a nostalgic vision of this mode of transportation.

Rail transportation in Canada is also a reflection of political decision-making based on emotion and influenced by special, local, economic, social or other interests.

Via Rail has been assigned an impossible mandate, namely to provide services along specific corridors, trans-continental services, regional services and services to remote towns that are serviced only by the railway.

Of course, in recent years, the system has been greatly rationalized. However, this operation was conducted too late. Via Rail had already earned a reputation as a profligate corporation and the future of rail transportation was perhaps already compromised.

I would like to come back to the example that I gave you, namely high-speed rail travel within a given corridor. I will spare you an account of the benefits of this mode of transportation. Numerous studies have already brought these to light. I would, however, like to stress the environmental benefits of rail travel which are modest given the current technology available. These benefits would increase greatly if a high-speed, electric rail system was introduced into the corridor.

Why then was this project received with so little enthusiasm when in fact it presented major environmental advantages, particularly in a country where everyone claims to support environmental and many other good causes?

I would like you to consider the following points. First of all, there is a misconception about modern rail transportation, the counterpart to our love of railways as they existed in our childhood and earlier still. The public has an unfavourable impression of Via Rail which is due in part to the untenable mandate that the corporation has been given. However, I would also suggest, and this may be of further interest to your committee, that regional and remote services were perhaps maintained for too long, the reason being that they benefitted from subsidies.

I'm not disputing the merits of these subsidies, but I would like to draw your attention to the fact that their impact on the environment has been negative.

This is what I would like you to think about. In some ways, it is a negative response to questions 3, 5 and 6 of the sectoral panels.

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I'm sorry to have to give you a negative answer, but that was all I was able to do given the time allotted to me. I would be very happy to answer any questions that committee members might have.

Thank you for your attention.

The Chairman: Thank you, Mr. Genest. We will begin with Mrs. Guay.

Mrs. Guay (Laurentides): Regarding railway companies, I always recount the history of the petit train du Nord which once passed through my riding. Today, the old rail line has been transformed into a 230-kilometre-long bicycle path, the longest one of its kind in Canada.

Rail transportation has never been truly developed in Quebec or even in Canada. Instead, the focus has been on developing highways. At issue was the time required to travel from place to place. Even today, it takes as long to travel from Montreal to Ottawa by train as it does by automobile. These days, people are always in a hurry and want to get from point A to point B as quickly as possible. It would be very difficult to change this way of thinking. We have held panel discussions and conducted negotiations and consultations on this issue. It would take years to change the North-American mindset.

I would like to get back to the subject of our tax policy which we were talking about earlier. Yesterday, I put the same question to our witnesses. How do you feel about a green tax? How could such a tax be applied to the field of transportation? To which sector should it be applied and how should the revenues be used? If you would care to respond, please do so each in turn and quickly, if you please.

Mr. Genest: My distinguished colleagues have commented at some length on the economic merits of certain decisions. I agree with them on this point. However, the example that I have just given you shows that even when a consensus exists on the economic merits of adopting a different course of action, political considerations do not always come into play. I don't believe that a green tax or some other economic instrument alone can alter the situation. In some countries that enjoy a better record than we do when it comes to environmental safeguards in the transportation sector, changes came about first and foremost because of political leadership. The economic evidence is there, but the decisions that need to be made are extremely difficult ones. I think I have delivered this message to the right people.

[English]

Mr. Isaacs: There is quite a number of opportunities for green taxes in the transportation energy field. The difficulty in Canada is that few of them rest solely within the area of responsibility of the federal government.

Virtually all of the key opportunities, such as some of those identified in the Ontario transportation report and many of those discussed by the economic instruments task force last year and not included in our report, are areas that would require at least federal-provincial consultation and possibly primarily provincial government leadership.

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I do believe, however, that if one wanted to go in this direction there are some clear opportunities to develop a green tax on wasteful use of transportation energy. Some of the European models I have alluded to and some of the work being done at the OECD and elsewhere could be a foundation for this.

It is not yet on the shelf ready to be implemented, but it would not be a huge amount of work to develop something and put through the kind of multiple stakeholder process Mr. Hartman suggested to provide this leadership. In fact we hoped the Ontario collaborative was going to do some work in this field. Unfortunately, our mandate ran out in September and there just wasn't time to continue with this.

I would also say that I'm a little bit worried about focusing on the instruments first. I would rather identify the problems and then find the best tool to deal with the problem rather than take the tool, which a green tax fundamentally is, and try to find a place to apply it.

I am generally in agreement with the idea carrots are better than sticks, and if we can use an incentive-based approach rather than a tax-based approach it is a better way to go.

I think today it is very much a matter of finding the opportunities. They may be micro opportunities initially, but let's get started where we can and let's also put the mechanisms in place to develop the longer term sustainable transportation strategies and programs.

Mr. Bell: Like Mr. Isaacs, I would support the fact that often green taxes, which tend to be mostly road-oriented, are a federal-provincial regime. There is not a single authority able to make it happen all by itself. This causes a great deal of difficulty in terms of how you get the implementation done and the speed at which you can do these sorts of things.

As you are quite aware, different regimes at different times have different political tenets and this makes it difficult to get consistency across the country. Like Mr. Isaacs, I think there are a variety of questions we need to answer before we are sure fiscal instruments are the best way to get at the problem. I think we have a fair way to go before we can be assured of this.

There is some work going on in a variety of areas and I think we need to support it. We also need to learn from others who are probably a little bit ahead of us in these kinds of areas. Colin spoke of some. We are trying to be involved in the OECD conference coming up in March and we are hoping these kinds of issues begin to come out so we can start to see the range of possibilities and how you would go about this.

Certainly a green tax is difficult to do unilaterally, if you will, as a federal government. But I would want to be sure it was the right solution to the right problem as opposed to a solution if we are not sure what the problem is. A tax can often be negative in its effect if it is the right solution to the wrong problem.

Those are my thoughts.

Mr. Hartman: What is being taxed and how much is the amount of the tax? And what is the tax revenue going to be used for after it is collected? It is difficult for me to comment without knowing these things.

I am, as I said before, generally against the idea of blunt taxes. However, there is growing support for additional taxation, provided it is dedicated exclusively toward transportation system improvements.

This would certainly receive a positive reception in almost any municipality in Canada. In fact, the regional government of Ottawa-Carleton has - at the committee level, not the council level - approved a program to request the provincial government return to the Ottawa-Carleton region additional gasoline taxes and licensing fees. They can then be specifically dedicated to transportation improvements here in Ottawa-Carleton. To me, those kinds of taxes make a little bit of sense.

If the purpose of the tax is simply to bludgeon the motorist into being a good citizen and leaving his car at home, it will not work.

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I was very impressed about 25 years ago when we did a consumer panel in the city of Regina for the Regina transit system. At that time gasoline was about 50¢ a gallon or something like that. We asked people how much the price of gas would have to increase before people stopped using their cars and started using transit. The answer in those days was $4. From 50 cents to $4 is what it would take to get people out of their cars. This is why I do not think these kinds of taxes work as a way of modifying behaviour. But I think they have some utility if they are going to be a means of raising new revenue at the municipal level when this revenue can be dedicated to the transportation system.

The Chairman: Thank you, Madame Guay. Mr. Forseth.

Mr. Forseth (New Westminster - Burnaby): Thank you very much, gentlemen. I think it was you, Mr. Bell, who introduced into the discussion today paying the full costs. In any event, I have a two-part question and I would like any of you gentlemen to respond.

The first part deals with this idea of full-cost accounting. I would like you to give some examples, especially for the automobile. I hear constituents mumble away and say from their perspective, looking at cost regimes in the lower mainland of British Columbia or elsewhere, cars are paying disproportionately. They're paying too much. The taxes collected in the name of roads do not build them.

So I would like you to convince the viewer and others of what is the case. Describe and give an argument to the viewer about your specific view, which is a car is perhaps currently too good a deal and is getting a bit of a free ride at someone else's expense. This issue of full-cost accounting must be brought into perspective.

The other aspect of this is to look at it and concentrate on the journey to work in an urban area. This was involved in some of the examples we have given where the greatest person-trips are being made. And certainly it is the area of concentration of municipal concern with congestion. The infrastructure is really responding to this problem of the journey to work.

What would be some of the likely areas of best pay-off to achieve a sustainable transportation mode, especially in this journey to work in the large urban centres of Canada?

So it is a two-part question. Maybe, Mr. Bell, you could lead off.

Mr. Bell: I will do my best to answer the question, although I think my colleagues will do a better job than I will in dealing with this one.

I am sure John will answer this one better, but in terms of the question of cost accounting or full accounting for costs in terms of, for example, the urban trip, you would want to think about what makes up the full cost. What is the full cost really made up of? You start to talk about things like the cost of not only the fuel itself for the trip but the cost of the production of the vehicle and the cost of production of the fuel. Then you start to add in things like damage to the environment. You start to add in questions about the cost of congestion, lost time and this sort of thing. And in the end you try to balance this off with the benefits. Benefits might include the freedom the car rider gets to be able to make the side trip on the way home, the benefits the car rider gets by being by themselves, the freedom to pick the shortest route home, the freedom of choice of what time they come and go.

So in terms of full-cost accounting, if you will, those factors that are different today have to be taken into account. Many people say the cost of the trip is what my gas costs me. Or they talk about what parking will cost when they get there. And the transit rider often says the cost for is just the cost of the pass each month or the ticket they put in.

Those are some of the kinds of issues I think you need to have in your mind as you reason through full-cost accounting versus the current price being charged. And there is a whole myriad of them. I have just covered a few.

Does this help, Mr. Forseth?

Mr. Forseth: Okay. Then relate this to the journey to work. Just speculate or explore. Certainly folks have been thinking about this. Where do we go for the best pay-off if we are looking specifically at the journey to work in an urban area? Where should we be going to get to sustainable transportation?

Mr. Bell: This is a tough one for me. I have not done a lot of work in the urban area, because it is not our area of responsibility, Mr. Forseth. I would, if possible, defer to Colin, who has done some work on this, as has John. They would probably be much more lucid on this subject.

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Mr. Isaacs: Mr. Bell has done a good job of explaining the externalities associated with the use of cars and trucks, so I will not take more time on that.

The Ontario round table collaborative commissioned a lot of research on the theme of full-cost accounting. I have provided those great numbers of volumes to the clerk, rather than a copy for each member of the committee.

There is no doubt at all the federal and provincial governments gain more revenue from the motorist than they spend on highways and associated direct costs. However, municipalities receive very little of that money. Municipal road infrastructure, which is the largest in this country in terms of mileage, is therefore paid virtually entirely out of municipal revenue sources, out of a tax base. So although when one does an analysis of federal and provincial spending it looks as if the motorist is getting hosed, the reality is that at the local level the motorist is receiving a very substantial subsidy; and that is in direct costs. On top of that, of course, are the massive indirect costs Mr. Bell mentioned.

About how we deal with that at the urban level, again the round table research showed that despite what one tends to read and hear, the level of subsidy to municipal transit services is actually lower than the level of subsidy to the automobile in major urban centres. That would suggest that economically as well as environmentally the shift should be, wherever possible, from the private automobile to public transportation. That will both save money and help save the environment.

Clearly, one cannot do it just on the basis of transit systems and transit vehicles. It must be integrated with a revisiting of the way we plan our urban areas. If we continue to sprawl.... Transit systems do become very uneconomic when you are serving low-density suburban areas.

Mr. Forseth: Are you suggesting then that we become a Hong Kong - instead of building out you build up?

Mr. Isaacs: Not in the least. We are nowhere close to the kinds of densities one finds in Hong Kong. Even the densest city areas of Toronto, Montreal, and other older cities are still way below the kinds of densities that exist in much of Europe, in very pleasant cities such as Paris.

However, it is not just a matter of density. It is a matter of how one locates facilities. It is a matter of the interrelationship of homes, workplaces, and schools, and of taking a whole new look at the way we build. That is coming now, because there are good economic reasons to make sure we redevelop our inner cities rather than allow them to decay, and a lot of time and effort is being put into that.

Some work is also being done on developing new communities in ways such that cars would become virtually unnecessary within the urban area. You would rent a car or have your car parked at a garage on the periphery for when you wanted to leave the urban area.

Mr. Hartman: When you are talking about the cost of automobiles, three costs are involved here. There is the cost you perceive and think about daily when making daily decisions: gas, oil, and things like that. There is the total cost of the car to you, which includes other things, such as depreciation, preventive maintenance, insurance.

Then there is the total cost of that car to society. It is this cost we are talking about in total-cost accounting. That includes things such as the cost of air pollution, noise intrusion, the cost for the health care system of people hospitalized through accidents, the cost of policing, and all sorts of things like those. If I got ten different people to make this cost estimate, we would get ten different answers. That is part of the problem today. That is why people discredit the results and nobody believes them. However, the fact is that all these studies and all this new research going on consistently show that the total cost to society is substantially higher than the total cost to you, by anywhere from 50% to 300% of your total cost.

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What I was saying in my presentation was that this is a very new discipline of trying to estimate what these costs are. We really have to refine these things and get them to the point where they're accepted in daily decision-making and we don't have these arguments. Then the constituents who are telling you that the car is not being subsidized wouldn't have a leg to stand on, frankly, because the car is being subsidized.

In the greater Vancouver area, where they did the Transport 2021 project, I think the estimate they made was that the average automobile in the lower mainland is subsidized $2,600 per year. That's one example of that.

The second part of your question is about where we get the best pay-offs in the journey to work. It's impossible to answer that in a general sense. You have to look at each municipality individually.

Also, you will find that the answer is not one single magic bullet. In some cases you have to improve the level of transit a little bit here, adjust your pricing of parking policy over there, maybe have some feeder service over here. If you're in a place like Ottawa-Carleton, maybe the Transitway is the thing to do. In places like the lower mainland, you have a ALRT option because the densities are high enough. It's a combination and a package. It's a cocktail, not a beer. The ultimate answer rests in the right cocktail.

Mr. Forseth: Thank you.

Mr. Hartman: I think your folks out there on the lower mainland are doing a hell of a good job with this whole Transport 2021 and all that stuff.

The Chairman: All right, Mr. Hartman. Thank you.

Dr. Genest?

Dr. Genest: Yes, Mr. Chairman.

I would agree with you, sir, that the public does not believe the money they spend on gas goes to building roads. I think they're right in not believing it. No government I know of has come forward and clearly demonstrated that the money taken from motorists was given back to the motorists. There is a suspicion on the part of the taxpaying public that the money is not going where it's supposed to be going, which makes it difficult for decision-making in these issues.

It's probably also true, and I would agree with Mr. Hartman, that automobiles don't pay their full costs. That's going to be hard to explain to the public, to those who vote.

My third comment would be that I'm not sure we should be focusing on the journey to work now. The journey to work is probably less and less representative of the big volume of transportation that occurs in urban areas in the following sense. More and more people will have a three-point or four-point trip, so travel throughout the urban areas is much more dispersed. Many of the conventional transit systems are not well adapted to these new patterns and may not be adaptable at all. I don't think we have found the transit services that will serve these needs.

I would also agree with Mr. Hartman on the last point that there's absolutely no way we are going to tax people out of their cars. They will use transit if transit provides a better alternative, but most of our transit services have not been designed to do that. No wonder they can't do it.

The Chairman: Merci.

Let's keep in mind the mandate of this particular exercise of our committee before we get too embroiled in the ramifications of transportation policies. That is an invitation I make to Mr. Steckle, Mrs. Kraft Sloan, Mr. Adams, and Mr. Lincoln.

Mr. Steckle, the floor is yours.

Mr. Steckle (Huron - Bruce): If I might, gentlemen, I'd put a question to you. I think Mr. Hartman had raised the issue of fuel wastage tax. I'll wait for your explanation on that. Was it you, Mr. Isaacs? I apologize.

You mentioned the difficulty in the administration of such a tax if indeed such a tax were to be applied. Perhaps you should give us an explanation of what you meant by that and how that would or would not affect people travelling, for instance, in the area of tourism. Let's hear your explanation of that.

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Mr. Isaacs: A simple approach to that is one that has been applied in various sectors for a long time; that is, everybody pays the tax at the pump and refunds are available to people who qualify, such as farmers, businesses and so on. Those kinds of systems have been with us for a long time.

One could certainly develop a framework that would ensure that economic implications were kept to an absolute minimum while simply, for example, limiting the tax to clear non-essential uses.

The sale of gasoline in cans would be a good place to start, because in virtually every case gasoline that is sold in cans is going into recreational use and a very significant amount both of carbon dioxide and of air pollution is created by two-stroke engines from recreational vehicles.

Even when one is travelling on vacation, one should be looking at doing it in the most efficient way possible, driving from point A to point B if that is where one is going for vacation, but using public transit in the local area if one is visiting a city, making sure that the routes one takes are as efficient, rather than as circuitous, as possible, and so on. There is a lot that each of us can do.

One model that has been looked at is that, depending on place of residence, etc., everyone would get a basic allowance at presumably the present rate, but excessive use above that rate without business justification would become the amount that could be taxed.

The models that are being developed at the moment are primarily European. They are not immediately applicable to the North American situation, because taxes on fuels are already much higher in Europe, as much as three or four times the rates we pay, and the geography of the country is very different.

My suggestion is that rather than dismissing the concept of fuel-related taxes, we should start looking at it seriously and seeing if, as the Danes and the Dutch and others have done, we can design a tax system that discourages wasteful use of carbon fuels but continues to allow the economy to function without any disruption. I am confident that this kind of thing is well within our creativity.

Mr. Steckle: We have been talking about the transport of human bodies. Another aspect, on which we have not touched much this afternoon, is the transportation of goods and services across the land. Mme Guay alluded to the fact that we are concerned about speed and arriving quickly at our destinations. We now have just-on-time delivery services. We have now gone to the roads, to the highways, using that infrastructure as a means of getting the products there on time.

There was a time when this country relied on the railroad services, but in the last decade we have spent our time in taking up railroad tracks in this country. Are we going to return to that?

People generally, by their own volition, will take the road of least resistance. If it is getting there faster by car than it is by taking the bus or the train, then they will go by car, regardless of the cost.

The $4 might well be relevant today, too. In fact it might now be $6. I'm not sure.

Perhaps you would want to comment on that.

Dr. Genest: The comment is a bit broad, but we have to take this into account.

The institutional and fiscal situations over maybe the last thirty years in Canada have provided considerable incentives for competition between rail and trucking. Competition has been fierce, with the railways losing much of their traffic in areas where clearly in the short term the truck was more efficient and very economical. That has created the situation we have now, where considerable use of trucking has deteriorated the roads considerably.

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Still, the institutional, legislative, and fiscal framework provides serious disincentives for practical cooperation between railways and truckers. We may be on a road towards the Japanese situation, where apparently they are seriously questioning the just-in-time manufacturing philosophy because of the damage to the roads from all these trucks moving around at all hours of day and night.

There are clearly institutional obstacles to the cooperation we would need in the interest of the environment.

Mr. Isaacs: The transportation collaborative, which included representatives of both the trucking industry and the railways strongly supported the concept of intermodalism; that is, local delivery by truck but long distance hauling by rail. CN has just this fall announced its Ecorail service, which is a high-efficiency system for putting trucks right on the rails, without the extensive loading and unloading that has been required in the past.

We are beginning to move in the right direction. But a great deal more work needs to be done to find out what the barriers are to greater use of intermodal systems and how to overcome those barriers. Some of the barriers may indeed be fiscal barriers, but I'm not aware of them.

Mr. Hartman: We are not going to go back to a day when everything travels on the railway because it's more energy efficient and more environmentally friendly. What we see today is a very clear trend of the railways and the truckers forming strategic alliances and working together, the rail on the long haul, the truck on the shorter haul, the road-railer and the thing Colin mentioned, and so forth. That is not going to change. The railways don't want it to change, the truckers don't want it to change, and their customers don't want it to change. The whole thing is market driven.

But this raises an interesting question that troubles me - and I don't have an answer to it. There is this tremendous change we see taking place in the North American transportation system, market driven: faster and faster, with more and more transportation of things. We're very concerned about our economic competitiveness, so we're doing all sorts of things to be economically competitive. What is the relation between those economic activities and environmental sustainability? Are they really two competing objectives? Under the theory of sustainable development they are not supposed to be.

I am very concerned, and I don't have an answer to that. It's something the committee might want to think about later on.

I sometimes feel we are like gerbils on our little wheels in our little cages. We're running faster and faster to stay in the same spot. We don't dare stop, because we know what the momentum of the wheel will do to us. That is how I see transportation today.

The Chairman: Ms Kraft Sloan, please.

Mrs. Kraft Sloan (York - Simcoe): Mr. Isaacs, I was briefly skimming through your paper here, Criteria for Sustainable Transportation. I had noted where you talked about developing support for infrastructure development around the use of alternative fuels: having refilling and recharging facilities for alternative fuels, batteries, etc. If we are going to encourage people to use more energy-efficient fuels in their transportation, we have to make sure the choice is available for them. You can't expect people to do that if the infrastructure isn't out there to support that. In light of the discussion we're having on fiscal disincentives or barriers to sound environmental practice, I wonder if you see a link through the fiscal system such that we could support the development of these other infrastructures.

Mr. Isaacs: If this meeting had been about four or five months ago, I would certainly have recommended that the federal government implement a program of alternative fuels in its own vehicles. But of course your government has done that. That's a piece of extremely good news in the alternative fuels area.

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We have in place a reasonable program of tax advantage at the price level for alternative fuels. That is, fuels such as natural gas, propane, ethanol, etc., are exempted from the excise taxes that are applied to gasoline and diesel fuel. So there's already an incentive there.

I was planning today not to get into the issue of subsidies for the petroleum sector, because that's a very complex one and not directly attached to prices. We're in a situation where there is that opportunity, and quite frankly, I think moving ahead as quickly as possible with the procurement of alternative fuel vehicles is one of the best things the federal government can do to encourage the availability of those.

I have two quick comments. One, we can't do it all by fuels. They are an important part of the equation. Some of us thought, going into the Ontario round table research back in the spring, that alternative fuels were a good option. We found that maybe a 10% improvement is about the best one can look to for fuels, and we'll take it for sure, but once you've switched fuels, there's nothing more you can do in that area.

Secondly, in some parts of the country, the availability of alternate fuels is actually way ahead of demand. The public is not aware of that, but they're out there. Natural gas and propane in particular are relatively easy to use as a transportation fuel. These days I use propane in my own vehicle and have essentially no problems filling up wherever I am, including more remote parts of Canada and the United States.

So we're there with fuels. I wouldn't put encouraging more use of alternate fuels as high on my list as encouraging people to drive less.

Mrs. Kraft Sloan: I have another question, unless other witnesses want to comment. Okay.

We have to think not only of the environmental costs of using a particular fuel, but also of the generation of the fuel. We have to think over the life cycle of that particular energy source. I'm wondering if any of the witnesses would care to comment on what they see as the most ecologically sound fuel in light of generation and use. Or, if you're not able to comment directly on that, can you point us to some sources where people might be doing some research?

Mr. Isaacs: I would say you're absolutely right. You've put your finger on a key area that is extremely complex. It is relatively straightforward when dealing with petroleum-based fuels such as natural gas, propane, gasoline and diesel, but extremely complex when one gets into biomass-based fuels such as ethanol, because there is a multitude of methods of production. It depends on how you produce the fuel as to whether or not there are environmental benefits.

I'm sure you're aware there has been some controversy around ethanol in recent months and years, with some suggesting it takes more energy to produce a gallon of ethanol than one gets out of it when using it as a fuel. If that is indeed the case, obviously it's not an environmentally beneficial thing to do.

However, there are also ways of producing ethanol in a very environmentally sound way. When you're getting to that level of detail, life gets really tough in the life cycle analysis business.

Mrs. Kraft Sloan: That's the only way you're going to undertake a full environmental costing, unless you do a full life cycle analysis.

Does anyone else have any comments on this?

Can you point us to anyone you know of who is doing some good research in this area?

Mr. Isaacs: I'd be happy to share some literature with the committee that includes lots of information on fuels. We've done work on both biomass-based fuels and petroleum-based alternate fuels such as natural gas and propane.

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Mrs. Kraft Sloan: When we are looking at a baseline study, this is something that would certainly have to be a strong component within its determination, along with the full life cycle approach.

Mr. Isaacs: Right.

The Chairman: Mr. Adams, please.

Mr. Adams (Peterborough): Mr. Isaacs, I would be very interested in seeing some of that material. I will give you my card later on.

My question is for Mr. Hartman, but Drs. Bell and Genest might also want to comment, because it has to do with this tax exemption for transit passes.

The idea strikes me as a delightfully simple one. I can see all sorts of advantages, particularly for lower-income, taxpaying people. There would be a sort of big plus in that area. I wonder if you would take the opportunity to perhaps think aloud or talk about it a bit further. For example, has it been thought out as an optional part of contracts, or would it have to be a required part? Has the tracking of the permits been thought about? In other words, if one person gets it, are other people using it? Is there experience in other jurisdictions? Has it been costed for Canada? In other words, has it been costed in our income tax system?

Lastly, I see it is in the report of the task force on economic instruments and disincentives, as you have mentioned. I suppose that's one indication of where it is, but what is its present status in the system as far as you're concerned? For example, is it being costed? Is it being considered seriously?

The Chairman: Could we have some concise replies, please?

Mr. Hartman: Could you give me those questions one at a time, please?

Mr. Adams: Sure. First of all, is there experience in other jurisdictions?

Mr. Hartman: Yes.

Mr. Adams: And have they been positive? What about the practical side of it? For example, does it have to be an optional thing for income tax purposes, or is it required as part of a contract? How is that affected in income tax terms?

Mr. Hartman: It would be dealt with like any other condition of employment.

Mr. Adams: Okay.

Mr. Hartman: You can't give it to your buddy because there is a photo ID on the pass. This policy exists in the United States and in European countries. In some European countries it is very successful, and they also tie it in with special promotional kinds of things - students during the school year, and different marketing schemes like that.

Mr. Adams: The other thing is whether or not it has been costed for Canada. In other words, what are the actual financial implications of a subsidy, or whatever you would call it, of this type in Canada? That then ties into this question: From your point of view, what is the current status of it?

Mr. Hartman: TAC has not costed it, but the Canadian Urban Transit Association has. I will get that number to you before I leave today.

Mr. Adams: Okay, thank you.

Mr. Hartman: And your final point?

Mr. Adams: What is its status? I see it's in the task force report, but is it in the system somewhere else?

Mr. Hartman: The proposal has been consistently rejected by the Department of Finance.

Mr. Adams: Thank you, Mr. Chairman.

The Chairman: Thank you.

We have twenty minutes and we still have three interventions to include before the bells start ringing. The three interventions are from Mr. Lincoln, Mr. Finlay and myself. The first one to take the floor is Mr. Lincoln.

Mr. Lincoln (Lachine - Lac-Saint-Louis): I have two little questions. The first one follows up on what Mr. Adams discussed about the task force report. What you are really suggesting is that we repeat the suggestion for a tax exemption system for transit passes. Because Mr. Isaacs was a member of the task force, I would like to know this.

I see, Mr. Hartman, that you refer to at least one of the other two recommendations. One was for a gasoline tax with a transportation efficiency fund. The second one was for a gas guzzler tax. Could you and Mr. Isaacs comment very briefly on whether or not you would want to see this back in circulation? I could see from your text that you had reservations about the guzzlers tax.

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Mr. Hartman: I am in favour of the gasoline tax provided all those new revenues are dedicated to the transportation system.

As for the ``feebate'', I don't have strong feelings about that. I don't think it's going to achieve very much in the end. It's sort of like the $100 federal tax on air conditioners in cars. How many people have ever not had an air conditioner in their car because of that tax? I don't think it's going to have a big impact.

Mr. Isaacs: I guess on the transit passes it would be precocious of me to suggest what the committee might do, but it seems to me one opportunity available to the committee that was not available to the economic instruments task force is to ask Finance to explain why they have not moved on a proposal that seems to have very broad agreement across society.

With respect to the other two, I indicated that I perceive moving forward as 1,000 small steps rather than any silver bullet, as Mr. Hartman suggested.

A gasoline tax would still be a useful thing to do for the reasons that are indicated on the positive side in the economic instruments task force. I think the feebate would be useful.

Are they by themselves sufficient to cause major changes in the way society behaves? I suspect not, and certainly not at the kind of gasoline tax level that I would expect to be implemented. But that doesn't mean one shouldn't look at doing it as a component of a bigger, longer-term program.

Mr. Lincoln: I have one last question. It refers to what Mr. Steckle and Mr. Adams brought up. It's the whole question of commercial and freight transportation, trucks and.... If I look at your chart, Mr. Isaacs, if you add the truck transportation and the diesel fuel use, which is mostly buses and trucks, you have about 34% of the fuel use.

As was mentioned to you, when you look at the expense of building roads, of maintaining roads, at the social costs, it's horrendous. And yet because of what you brought up, Mr. Hartman, competing objectives, socially and economically, of trying to push goods faster and faster.... As a layman using roads on a regular basis going back and forth to my riding I see more and more truck transportation going at higher and higher speeds.

In my own riding there have been several fatal accidents at one particular spot. And I think just about every one of them lately has been caused by truck transportation, by the big trucks that get stopped because they are going too fast.

Meanwhile, we are closing up the rail system more and more. I know we are trying for the eco-rail. I think there is a very successful project now between Drummondville and Montreal and there are projects in other places as well.

How do you recommend we re-balance this equation in favour of rail? Rail accounts for 3% of problem emissions compared to the others. How do we re-balance this? How do we proactively change a system on a massive scale so that we make more use of environmentally friendly transportation versus trucking?

The Chairman: Could we have brief answers, please?

Mr. Hartman: I don't think it's possible.

The Chairman: That is the briefest answer we could seek.

Would you like to elaborate, Mr. Genest?

Dr. Genest: I think I could do that, Mr. Chairman.

I agree with what Mr. Hartman said earlier. We're not going to go back to the days when 100% of the freight was moved 100% of the way on rail. Obviously, we're past that. But I think we have gone away beyond on the other side to a situation where the true economics of having intermodal transport, not imposed intermodal transport, but desired intermodal transport.... The true economics are not apparent partly due to history - including the history of the management of the carriers - and partly through conflicting legislation due to some conflicting objectives between jurisdictions, like provincial jurisdictions favouring the truck, which they control, while the federal government is supposedly favouring the rail, which it controls.

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All that is not very conducive to a profitable and efficient intermodal system. We do have intermodalism, but we could have more of it, which would result in less damage to the environment and to the roads.

The Chairman: Mr. Isaacs.

Mr. Isaacs: Mr. Chairman, I would concur with that, obviously. I didn't want there to be two of us on each side of Mr. Hartman, but it seems to me there are some tremendous opportunities still for giving encouragement to rail.

The costs in terms of cents per tonne-kilometre are given in the other little chart I provided to the committee, and there is a lot more detail in the background material from the Ontario task force.

It seems to me that the number one place to start is in those areas where the rails already exist. At the present time there is still federal money going into road expansion projects in the congested areas of Canada. As soon as we expand our highway system, it just fills up all over again and becomes more and more congested. It seems to me it is time to redirect some of the infrastructure funding that is available into ensuring that our rail infrastructure is taking pressure off the roads.

The Chairman: Thank you, Mr. Isaacs.

Mr. Finlay and I will share the balance of the time, which is exactly 14 minutes. Mr. Finlay.

Mr. Finlay (Oxford): I hope, Mr. Chairman, I can leave you the positive balance of the time.

I have a question of information. In your submission, Mr. Genest, you used the term ``in the environment'' several times, and you said that high-speed rail would have favourable impacts environmentally. You said that railway transport in Canada is relatively environment friendly already. On your last page you said there is little enthusiasm for the project for improving VIA Rail and so on, and the high-speed train, ``resulting ultimately in part from subsidies that had negative environmental impacts, which had not been considered''. What are you thinking of there?

Mr. Genest: What I was referring to in part is the subsidies that were used to maintain railway services to remote localities and to short-distance regional services, which were ultimately removed in many instances. But they were kept for many years.

Of course it's the ultimate result that was negative to the environment. This is not at all what was desired of those subsidies; they were done for very good reasons in their time. But the fact that it took so long to rationalize railway services ultimately had undesired and certainly unplanned negative impacts on the environment in the sense that it slowed down the development of modern rail, which is more environmentally friendly than competing modes.

Mr. Finlay: And more environmentally friendly than older-style rail?

Mr. Genest: Very definitely.

Mr. Finlay: I have one question for everyone, if I could.

We are dealing with disincentives to sustainable development. We have heard some positive things and negative things from you about that. I wonder whether each member would suggest for me one or more present federal fiscal activites that actually encourage unsustainable transportation practices. How are we encouraging the continuation of this fiscally?

Mr. Hartman: I don't know this for a fact, but we must be subsidizing gasoline somehow or we wouldn't have the second-cheapest gasoline in the world. I don't believe we as Canadians are paying the real cost of gasoline. That's my suspicion. If I am correct, then I would put that as number one.

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Mr. Finlay: This ties into your suggestion that we should tax gasoline more heavily.

Mr. Hartman: Yes, provided we put some money back into the transportation system.

Mr. Bell: I would support John on that one. What we're trying to do is build a competitive transportation system that takes in the social, economic and environmental issues. Anything that doesn't allow the transportation system to provide the appropriate cost to the users when it's a derived demand - as transportation is - is going to make that process long and very difficult. So the kinds of things that distort the appropriate supply and demand of transportation are the kinds of things you would want to go after, and subsidies happen to be one of those.

Now in some places you need subsidies for very special social reasons - handicapped folks or very remote communities, that sort of thing. But in general subsidies tend to distort the decision-making process by the users of the system that derive demand.

Mr. Isaacs: I would agree with Mr. Hartman as well, though I would caution that the economic instruments task force spent a long time trying to find those subsidies, and in the time that it had available, which was about a six-month period, wasn't able to do so. But I think it is certainly worth revisiting that area and trying to find them.

I would still suggest - and this may sound weak, but I think the power of example is by far the most important area where the federal government is failing - that the alternate fuel vehicles should just be a start of a program of green procurement and energy efficiency that cuts across everything government does, so that industry and the public can see the tremendous savings that are available and the tremendous job and environmental benefits that will spin off from a program of reducing the amount of time and money we spend on unnecessary transportation.

Dr. Genest: I think we have a number of fiscal and other measures that can be used to achieve these objectives. I submit that the selection of a particular measure is not as important as ensuring that we follow through with the measure and implement it thoroughly.

For instance, there seems to be consensus here that free passes for transit are a good thing. I had the opportunity of talking about this to maybe ten persons who were in a managerial position. Each of them forcefully claimed that it was absolutely infeasible and managerially unwise. I'm not claiming they are right. What I am saying is that if we want to do that, let's make sure we follow through and not stop halfway and say it was a good idea, but it didn't work. It will work if we make it work, and that requires more detailed planning.

Mr. Finlay: Thank you very much.

The Chairman: In the five remaining minutes I will try to cram in six questions, which are all inspired or driven by the desire to reach some conclusion that might be useful for a baseline study and which could perhaps be incorporated into our report.

The first question that comes to mind is which are the most environmentally damaging transportation modes, in order of decreasing damage, let's say?

Secondly, which mode is subsidized the most? I suppose we have to look at this from a national perspective.

Thirdly, what type of organization is needed to bring about a coordination or a cooperation of policies between federal and provincial levels, since we all know that our constitution is designed in such a manner that land use is a provincial responsibility, and it determines the shape of the cities and the suburbs for fifty or sixty years ahead.

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Fourthly, how should Canada's commitment to a 20% reduction in carbon dioxide be allocated across the country and by level of government, and is that perhaps the way to go about it?

Fifthly, how should the VIA Rail mandate be rewritten? We were told by Dr. Genest the mandate is faulty. How should it be recast?

Sixth, how come in a very dense part of Europe such as France, la Société nationale des chemins de fer is in deep debt and deficit? How is that to be explained?

Seventh - and you had mentioned this in reply to questions by Paul Steckle, I believe, and Mr. Lincoln and Mr. Adams - is this infernally complex question of revenue from taxation, which comprises taxation from licence plates, taxation from gasoline, taxation from other sources related to the user. How is this revenue from taxation going to be linked, allocated, and transferred to the purpose of subsidizing transport that is not private?

It's something that has been done - as you could probably teach us, all of you, I suppose - in several European countries. The motorist pays a fee in order to enter certain parts of the city. That fee is then used to subsidize local transit, for instance. Therefore the connection between private and public transit has become a reality. There is no artificial division. Mr. Hartman, you mentioned it in one of your interventions, I believe.

These are questions that, in addition to the others, would help us enormously in putting together something on transport that will have some relevance to the system next week. I hope you will not rest over the weekend, so on Monday we can get some interesting input from you.

Mr. Lincoln: Can you repeat the second and third items, please?

The Chairman: I think the second was which are the most environmentally damaging transport modes.

Mr. Lincoln: That was the first.

The Chairman: Which mode is subsidized the most.

It may be in here. I was looking for an answer to that. Maybe you have moved beyond that and it may not be a relevant question; in which case, tell us which of these questions is not relevant. Nobody will be offended.

Mr. Lincoln: Which is the third, Charles?

The Chairman: Probably it was what type of organization is needed to bring about cooperation between the federal and provincial levels of government. Obviously we can't go on like this. It's insane. But that's the constitution we have, so we have to work with it.

Any comments?

Mrs. Payne (St. John's West): I have a short question. This can be answered in the comments also.

I think it was Mr. Hartman who made the comment that we need to communicate at the grassroots level when it comes multi-passenger vehicle transportation. I am wondering if you could tell me what you consider to be the grassroots level. It seems to me that I consider people who are at a lower income level to be at the grass roots. They normally do use the multi-passenger vehicle system. They use car pools and bus transportation and those sorts of things.

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Mr. Hartman: What I meant was our neighbours - the people who live on your street, the people who live on my street, and the people who live on his street.

Mrs. Payne: Okay. I'll follow that up by saying that in my house there are two people. I use my vehicle and my husband uses his vehicle. My next door neighbour has three children and the lady of the house uses public transportation. They bus their children to school or they take them in their vehicle. So I'm still not sure what you mean by the grass roots. Should we not be educating the people who are in the middle to high income levels on the use of...?

Mr. Hartman: Perhaps you are right, but that is not what I meant. The grass roots are the people who elected you.

Mrs. Payne: Yes, and that is what I misunderstood.

Mr. Hartman: That's what I mean. It's whoever they were.

Mrs. Payne: But is it still your feeling that these are the people we probably should be communicating with, as opposed to the people at our level or the higher income levels?

Mr. Hartman: Yes, it is. Poorer people use transit because of their economic situation, but it's true that as soon as they move out of such an economic situation - if they ever do - the first thing they are going to do is buy a car. When a teenager gets old enough to get a driver's licence, the first thing he does is throw away his bus pass. Why is that? It's because of social standards in our society. That's where the fundamental change has to take place. The grassroots people are the kinds of people I am talking about right now. That's what I meant.

Mrs. Payne: Thank you, Mr. Chairman.

Mr. Isaacs: I would like to take a stab at some of the questions, and perhaps even link into Mrs. Payne's question.

It seems to me that it is the use more than the mode that defines the environmental damage in a relative sense. A car with four or five people in it that takes kids to school may be more efficient than a school bus system. But a car being driven to the corner store, or a snowmobile or jet-ski or whatever is being used for purely recreational purposes, tops the list.

If one insists on modes, there is a great deal of information in the collaborative background material that I have provided to your researchers. There is no doubt at all in my mind, having gone through that material in great detail, that passenger cars top the list in terms of environmental damage related to value delivered. I think one still has to keep that link.

In terms of greatest subsidized mode, one gets into all kinds of battles because it depends how one allocates subsidies for road construction and so on. Given that the majority of road pavement is still being provided for private automobiles, however, I think it is fair to say the automobile comes out ahead on that one as well. A focus on passenger transportation is therefore very appropriate for both environmental and economic purposes.

In terms of federal-provincial coordination, both -

The Chairman: Excuse me for interrupting, but you also examined the airplane in this analysis, did you not?

Mr. Isaacs: Yes, aircraft are included as well.

Again, as soon as we get into public transportation systems, load factors become very important. Load factors on Canada's airlines have increased quite dramatically recently. Obviously, the environmental harm per passenger-kilometre has therefore dropped. It was not too long ago that we had two airlines flying between the same city pairs at the same time, each with half-empty airplanes. That was clearly a very inefficient system, which seems to be starting to change for economic reasons.

In terms of the process of federal-provincial coordination, both Mr. Hartman and I talked about roundtable processes. I think the Ontario collaborative is an excellent example of how people who would be expected to disagree - people from the federal government, the provincial government, the auto industry, the rail industry, the trucking industry, the public transit industry, organized labour, and some fairly radical environmental organizations - managed to sit down together to sign their names to a report that has some very worthwhile recommendations in it. That process can be taken a lot further and it has tremendous scope for public policy development in Canada.

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Quite frankly, the people who are involved in this - the stakeholders - tend to ignore the kinds of federal-provincial jurisdictional squabbles that break out so often, instead addressing themselves to the reasons for the meeting. It is a slow process, but I think this report and many others that have been mentioned prove that it can be very productive indeed.

I will pass on a couple of the others and perhaps let others on this panel address them. The only other one I'd like to touch on is your reference to the 20% cut in greenhouse gas emissions and how this would be allocated, both geographically and presumably among sectors.

We have to remember that this is only an interim target; that sustainability is a path, not a goal; that we're not simply looking to achieve 20% and will then say we've done the job and should go onto other things. I'm convinced that when we get toward the 20%, we will be looking at much greater targets. We should therefore look at reducing carbon dioxide emissions wherever we can possibly find them, in every sector and in every geographical region of Canada, without worrying too much about trying to allocate responsibility to particular people or particular regions.

The Chairman: But you will agree there has to be a division of labour here.

Mr. Isaacs: There absolutely has to be a division of labour, but let's all do as much as we possibly can and perhaps start giving out praise to those who achieve the most.

Dr. Genest: I agree with Mr. Isaacs' answers to the first several questions, Mr. Chairman, but you probably expect something from me on VIA Rail and SNCF.

The recasting of VIA Rail's mandate has been partly done already. Rationalization has taken place. My comment is that it has taken place too slowly and too late. There is more rationalization to be done. More services are to be - I don't want to say cut because part of the problem is that they were just cut - rationalized. They have to be replaced by something else, rather than just being cut. The mandate for providing services for non-social, i.e. non-transportation, purposes should be even more clearly set aside than it is today, and perhaps should be operated otherwise than by VIA Rail.

As for SNCF's debt, I was not asked to perform financial analyses but I suspect two causes. First, being a monopoly, they probably undercharge for freight just to keep the volumes up. We have seen even private railway companies do that, so that may be part of the answer. The other part of the explanation may be that they have so many so-called ``social tariffs'' that they are probably not operating on a cost-recovery basis. This is because the railway is being used to achieve social purposes that are probably quite valid but distort the actual financial performance of the railway.

I don't know if it's still like this today, but Philadelphia had one price for their transit tokens for a long time. There was no youth price; there was no elderly price. It was a flat rate for everyone. If you were a school kid and were entitled to a school rebate, you would purchase your tokens at your school and the difference between the flat price and the price the kid paid was paid by the school commission. If you were allowed an elderly person's rebate, then you would go to your elderly persons' association; you would pay what you would pay and that association would pay the difference to the transit authority.

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That was a fiscal approach that might have shown that SNCF is possibly not really in debt. It's just that it has been doing things other than moving people around.

The Chairman: Have you any comment on the transfer of funds from taxation and revenue that comes from taxation of the motivator, user, to the public sector?

Mr. Hartman: Are you asking about the mechanism by which this is accomplished?

The Chairman: Whether it is being accomplished, yes, and to what extent.

Mr. Hartman: Oh yes, roadway pricing is in effect in a number of cities in Asia and Europe and has been for many years.

The Chairman: In Canada?

Mr. Hartman: Not in Canada.

The Chairman: Have you any recommendations in this respect in your report?

Mr. Hartman: Yes, to the extent that we talked about the gasoline tax and its dedication back into the transportation system.

I don't have anything to add on any of your seven questions, but could I add one final thought on your report? Maybe it would be possible for someone in the federal government to spend a little bit of time and a little bit of money in thinking about the transportation energy source of the future when we won't be able to use fossil fuels any more. Canada is never going to be able to do a great deal of research in that respect compared to the Americans, the Japanese, and so forth, but it would be nice if we had a little bit of a Canadian position going in. I'm talking about solar energy.

The Chairman: At 1 p.m. Mr. Passmore, who was one of the witnesses, made quite an intervention on the lack of political awareness of the importance of research and development in solar energy. He informed us that the yearly allocation by the Department of Natural Resources is less than $1 millon. Evidently, what you're saying reinforces what he told us already. We shall make a good note of that observation.

Any final questions?

[Translation]

Mrs. Guay: Mr. Chairman, I have one last point to make. You spoke about taxing license plates and so forth. Isn't this one area that has been under provincial jurisdiction for quite some time? It would be difficult to tell the federal government to intervene in this field.

[English]

The Chairman: Yes.

[Translation]

Mrs. Guay: Certain provinces such as Quebec have introduced automobile insurance and have developed excellent, highly efficient systems. I fail to see how the federal government could tax an area that comes under provincial jurisdiction. I simply wanted to make that point very clear.

[English]

The Chairman: Yes, and there is no implication of the time. It is a question of how to organize ourselves so as to optimize federal-provincial cooperation in the field of transport.

We thank you very much for your presence and your input. We'll see you again.

This meeting stands adjourned.