Introduction

Thank you for the invitation and opportunity to speak. During my political days, I very much appreciated the forum that The Empire Club offered for the presentation of ideas and positions, and I want to thank you again for providing that forum and continuing to do so.

A few years ago I wrote a book entitled Think Big. And I was going to expound on that theme today until I saw that Michael Ignatieff has expropriated that theme for his latest television commercials. So now if I urge you to Think Big, my conservative friends will think that I’ve gone over to the dark side. And so to be safe – and we Canadians do like to be safe – I will simply urge you to Think, and leave it at that.

Why Talk about Economy and Ecology?

These days, of course, the big subject on everyone’s mind is the economy – in particular the recession and the prospects for recovery. That is the major theme of luncheon, dinner, and conference speeches all over the country, and understandably so.

But today I want to talk to you about sustainability – in particular, environmental sustainability – and its relationship to the economy. Why?

Because for the first time, according to the pollsters, public concerns about and interest in the environment have not declined as the economy has worsened. In the past, when the economy got into trouble, public interest in the environment dropped off markedly, but not this time.

And secondly, because environmental sustainability is a major and growing concern of the younger generation – of our children and grandchildren. And if our generation doesn’t address these questions more earnestly and substantially, we run the very real risk of alienating the next generation from both the political arena and the world of commerce.

And so, our subject, “Economy and Sustainability: Partners or Adversaries?”

The Need to Alter our Conceptual Framework of the Economy

The traditional conception of “the economy,” which many of us still hold, involves the systematic extraction of resources, refining, manufacturing, distribution, and consumption.

In the Canadian economy, the organization of these functions is generally driven by market forces operating within a legal and policy framework created by governments.

Because we value these functions and see them as the heart of our economy, we measure and monitor them. The National Economic Accounts were developed to define, measure, and track, in dollar terms, all the economic inputs and outputs of every economic enterprise and activity in the country engaged in these functions. And the sum total of all these economic outputs (again stated in dollars) is the Gross National Product, the increase of which is the primary measure of our progress towards the goal of economic prosperity.

But now in more recent years, we have been challenged to recognize that there is another dimension to all this economic activity – a dimension which our traditional models of the economy and calculations of GDP do not adequately take into account.

We have been challenged to recognize that for every major economic function – extraction of resources, production, distribution, and consumption of goods and services – there is another stream of physical, chemical, and biological outputs and impacts – waste, pollutants, environmental stresses that heretofore have not been recognized as an inevitable consequence of our economic activity.

As yet we have no National Ecological Accounts to enable us to fully and accurately measure these outputs and environmental impacts. But if we did, the sum total of these outputs and impacts in physical terms would eventually add up to the Gross National Waste, the reduction of which would be a measure of our progress toward achieving the goal of environmental sustainability.

In my judgement, the need to broaden our traditional conception of the economy to incorporate this environmental reality is a necessary condition to keeping our economy and ecology in sustainable balance – to achieve a complementary partnership relationship between economy and ecology rather than an adversarial one.

Is it possible for Canadians to change their conceptualization of something as big and basic as the economy?

Of course it is because we have done so – you have done so – in the past.

When this Club was formed in 1903, its members conceived of Canada as part of the British Empire – an enterprise with deep historical roots and vast dimensions for which 100,000 Canadians were prepared to die in the First World War. But today our conception of Canada – your conception – is completely different. We conceive of ourselves as an independent nation, linked to no empire, but part of a global community.

We have had to alter and broaden our conception of our country to accommodate political and economic factors only dimly perceived at the beginning of the last century, just as today we are challenged to alter and broaden our conception of our economy to accommodate physical, biological, and ecological factors which only recently have come into sharper focus.

Achieving Economic and Environmental Sustainability

Suppose for a moment then that we accept as legitimate and worthwhile the goal of simultaneously achieving economic and environmental sustainability, precisely how is the environmental sustainability aspect to be achieved?

Or if you will permit a Western analogy, what horses must be harnessed to the environmental sustainability wagon to move it forward?

If time permitted, we could talk extensively about better harnessing science and technology to the achievement of environmental sustainability. And we could talk about harnessing grassroots political energy to create the demand for complementary public and private policies. But the two major instruments for achieving environmental sustainability that I would like to dwell on for a moment are government regulation and markets.

Government Regulation

Imagine for a moment a psychiatrist’s couch here on the head table. Imagine further that we have persuaded a politician – any politician, it matters not what party – to lie down on the couch and to play the word-association game. We will say a word, and the politician will respond by saying the first thing that comes into his or her head.

We then say the words “environment” or “pollution” or “climate change,” and what is the most likely word to come into that politician’s mind? It will be “regulation.” It is the automatic response of a lawmaker to any societal problem attributable in whole or in part to the actions of individuals, companies, and the private sector. If in doubt, regulate. If in doubt, legislate. At least you will appear to be doing something, and it is something that you as a legislator are in a position to do.

To date this has been the primary instrument that we have relied upon to come to grips with environmental degradation. From international treaties like the Kyoto Accord, to the acts of the legislatures and parliaments establishing Environment departments and agencies, to the hundreds of specific regulations promulgated under those acts, regulation has been our primary response to the demand for environmental sustainability.

And of course there is a place for enlightened regulation, especially macro regulation that creates the framework within which sustainable economic and environmental conservation activity can occur. But regulation also has its limits. You can bring the economic horse to water but you can’t always force him to drink. And under our constitutional arrangements, regulatory jurisdiction over the environment is split three ways between federal, provincial, and municipal governments which very much complicates the efficient regulation of ecosystems which of course do not respect political boundaries.

So, while enlightened regulation – especially macro-regulation – is an important tool to be harnessed to the task of environmental sustainability, it by itself is not enough. Something more is required.

Which brings me to a dark horse – a neglected horse in some respects – and that is the market system itself.

Harnessing Markets to Environmental Sustainability

Markets in their purest form are simply mechanisms for bringing supply to bear on demand, using pricing signals and financial incentives. In theory, a market mechanism can bring supply to bear on any demand – the demand for bread, or gasoline, or health care – or the demand for clean air, sustainable forests, or re-usable water.

At the core of harnessing markets to environmental conservation is the task of attaching a price to those outputs of our extraction/production/distribution processes which have negative environmental effects – a price that reflects the cost of eliminating or mitigating those effects and that ensures that those costs are included in the price of the good or service being produced.

This of course is what the whole carbon-pricing debate – whether through carbon taxes or a cap-and-trade system – is about, particularly in relation to ameliorating the environmental effects of the combustion of hydrocarbons. And the key question of whether market-based pricing systems can and will be adopted to control and reduce the emissions from the combustion of hydrocarbons really comes down to one of whether we as individuals, as businesses, and as a society are prepared to pay the price of this aspect of environmental conservation.

Also at the core of harnessing markets to environmental conservation is the task of attaching a price to the ecological goods and services delivered by ecosystems such as watersheds – goods and services that are currently under-priced or not priced at all.

Alberta, for example, is the largest per capita consumer of “useable water” in the country – mainly because of the heavy use of water for irrigation, for secondary and tertiary oil recovery, and the vast amounts of water used in the production of oil from the Athabasca oil sands. In southern Alberta particularly, there is a growing danger of severe water shortages. So, how should Albertans sustain their water resources?

Presumably one approach would be to set up an elaborate water regulation system – micro-regulation of water use – operated by some government authority such as Alberta Environment. Or the alternative would be some combination of macro-regulation and a pricing system – a provincial policy requiring Albertans to meter and measure the use of every drop of water consumed in the province and the attachment of a price to that water to conserve and allocate it efficiently.

Would such an approach impose some initial hardships and inequities on some individuals and industries? Yes, it would, and public policy would have to include measures for recognizing and mitigating those. But if you want a clear and comprehensive signal with respect to the value and environmental costs of using and sustaining water resources to be sent to every water consumer, every day, dozens of times a day, every time any one of us turns on a tap or any business or industry sticks a pipe into a river or a reservoir, there is absolutely no substitute for communicating these messages through a properly established pricing system.

Can These Two Horses – Markets and Macro Regulation by Governments – Be Harnessed Together?

Can they pull together? Can they be harnessed together as a team? Or are they inherently adversarial?

In the political world, partisan politics tends to polarize support for the use of these two instruments. People who have great faith in governments and government regulation are often sceptical and even antagonistic toward private-enterprise and markets, while people who have great faith in markets and private enterprise are often sceptical and antagonistic to government and government regulation. Thus they present the public with polarizing, either/or choices.

But to me this is a false dichotomy, at least in this instance. Just as with respect to selecting instruments to promote economic recovery, the choice is not either/or – either government or private-sector action. The wisest course of action involves both, and our focus should not be on choosing between the two but on seeking the right balance between the two.

A Broader National Vision for the 21st Century

Finally, on a broader level, this task of reconciling economy and environment, and harnessing both markets and government regulation to the task of economic and environmental sustainability, would be greatly enhanced if we were to expand our vision of Canada as the Fathers of Confederation once did when they founded this country.

You will recall that the Fathers of Canadian Confederation were for the most part local, parochial political leaders from the various British North American colonies. They had been largely preoccupied with the affairs of their own individual colonies, but when they got together in Charlottetown and Quebec City under the leadership of Macdonald, Cartier, and Brown, they were challenged to expand their vision.

And they responded by envisioning the creation of a new community – a Dominion, they called it – on the northern half of the North American continent. Their expanded vision was to create a new national community, uniting all the BNA colonies under a federal constitution, creating a single national economy with a common tariff, acquiring the vast territory of Rupert’s Land from the Hudson’s Bay Company, and then tying the whole thing together by building the longest railway in the world. What a change in perspective – from your own little colony to creating second larges nation in the world! What a vision! What breadth! What depth!

Is it not to create a sustainable national community on the northern half of the North American continent, to sustain the ecosystems and renewable resources of Canada (the land, the forests, the water, the air, the wildlife) in such a state that the economy they support, the services they provide, and the beauty they represent are unimpaired for the use and enjoyment of future generations? 

Conclusion

In conclusion, therefore, I offer you these three challenges:

   • Help shift our conception of the economy – especially in the boardrooms – to fully incorporate its environmental dimensions and impacts.

   • Join in the task of harnessing both markets and government regulation to the task of environmental sustainability.

   • Embrace the expanded vision of a Sustainable Canadaon the northern half of the North American continent, sustainable ecologically as well as economically.

That model – Canada as a sustainable partnership between its people and the environment – is already out there in the minds and hearts of many of the next generation. I am optimistic that the road to a Sustainable Canada will be followed, because many of Canada’s future voters and leaders are already on that pathway.

Thank you.