Environment Committee on May 15th, 2007

[Mark Lesky]

Let me simply take one point or part of the question. When we start talking about a $30 or a $15 or a $50 cost per tonne, we are starting to talk about impacts upon the competitiveness of the chemical industry specifically. Our competition now is more and more becoming competition from India, China, clearly the United States. Europe is clearly there, and they are looking at this process, but much of our competition is global, and it's the global market we're competing in. As we start pushing up the cost of a tonne, anything above $15 starts significantly impacting our competitiveness on a global scale.

[Geoff Regan, Liberal, Halifax West, NS]

Does someone else have a comment? Mr. Thomson, Mr. Knight? Nobody else wants to talk about this?

Dr. Keith, would you like to comment on this?

[Dr. David Keith]

Obviously, it depends what our competitors do. If Canada were the only place in the world acting, it might well be that prices much above $15 would affect competitiveness. But the fact is other countries are acting and may act soon. Right now, my expectation is that the U.S. will end up with higher carbon prices than we have, given the current pace.

It is also important to say that it is very rare to see companies actually move because of environmental constraints. Companies choose locations based on labour costs, access to raw materials, etc., and despite the talk, you don't very often see companies really move because of environmental regulations.

[Geoff Regan, Liberal, Halifax West, NS]

Well, it strikes me that the public is becoming more and more concerned about this, and we're seeing more and more evidence that the problem is one that we have to face and that the world has to face. So we have to be cognizant of these concerns of competitiveness, obviously, because people want to have jobs and a strong economy, yet we also have to face, as a planet, this very difficult challenge, which is one of the reasons why we have you here today to help us figure out some of these solutions.

There are tonnes of questions here that come to mind. One of them is about the kinds of reservoirs that are suitable. I mentioned that I'm from Nova Scotia, and it sounds like the best reservoirs are in the west, that there's not much opportunity for sequestration, relatively speaking, east of Manitoba.

[Dr. David Keith]

No, offshore Nova Scotia looks good.

[Geoff Regan, Liberal, Halifax West, NS]

Does it? Well, that's good to hear.

Is that a high cost, relatively?

[Simon Knight]

The problem right now I think is that there is high potential, both on the Atlantic shelf and the Gulf of St. Lawrence, but we just haven't done enough exploration to determine what is that potential at this point. The western Canadian sedimentary basin has had a lot of exploration done on it, and they have a very good understanding of what the potential is for that. What the potential is around Nova Scotia requires a lot more research. But you do have a lot of deep coal that could be used for storage as well.

[Geoff Regan, Liberal, Halifax West, NS]

Good. I have half a minute?

Are the current policies sufficient to spur development? I really wanted to ask about what kinds of incentives in particular would work. I guess we have a few seconds for someone to offer an answer to that.

[Mark Lesky]

I'm just going to share a couple of key thoughts. One of them is research in terms of efficient membrane technology associated with stripping CO₂ out of the flue gas and concentrating it. That's a type of work that needs to be done. It is breakthrough technology. It's technology that the Dutch and some Canadian companies are involved in. But we need to find a cost-effective method of capturing combustion, flue gas, CO₂.

[Simon Knight]

I think one of the things that David had talked about was that we could already capture CO₂. We need a lot more deployment, so that we're talking about R and D on the large scale. So I think one of the places that we are talking about investment or incentive is on that large-scale deployment initiative, and that is putting a backbone out there to move that CO₂ where you need it, and looking at how we can subsidize that or incent that. It may require at some point that the various levels of government just decide they're going to be an investor in that pipeline, and we'll look down the road to whether they can get a return on that direct investment as the CO₂ gets used for enhanced oil and enhanced gas and coal-bed methane.

[Dr. David Keith]

I can't speak for the national task force, but I think it's fair to say that there is a legitimate argument...you may want a pipeline in the long run, but the other choice is point-and-shoot projects near Fort Saskatchewan or Lake Wabamun near Edmonton. So one should not fall into the trap of thinking that you must have the pipeline network in order to get very large projects going.

[The Chair, Conservative, Bob Mills]

We will go to Mr. Vellacott now, please.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

I'd like to get a quick answer from everybody, from our witnesses, aside from department people. Simon already mentioned...I think you said you thought $15 per tonne was what the cost for carbon should be. Can the others give me some quick idea of what you think the price per tonne of carbon should be?

I think, Simon, you were saying $15.

[Simon Knight]

I think $15 is the minimum.

[Grant Thomson]

My response would be that I think $15 is going to incent the right behaviours within industry. I've already talked about the fact that there is a lot of uncertainty, as we sit here today, as to what some of these capture projects are going to cost in total. So it's hard to know what types of incentives we need to look at beyond, for other parts of the projects. But in terms of the $15, I do believe that's going to incent the right behaviours.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Mark.

[Mark Lesky]

I think the $15. I'd just put one concern forward, and that is the competitive nature of it. What we really do need to have is a strong, healthy industry. We've seen before that with a strong industry, high capital turnover, we're then able to achieve substantial environmental performance. So it's the focus on capital turnover that drives environmental performance, and we've seen it over the last 15 or 20 years.

[Dave Hassan]

I think EnCana has generally been planning around the $15-a-tonne cost. That's the scenario we're using.

[Dr. David Keith]

I think it's unlikely, highly unlikely, that $15 a tonne will achieve the level of emissions reductions we need to achieve in order to avoid a dangerous disturbance to the climate system. I'm not aware of any serious study that says that.

That said, the comments that have been made about competitiveness really do matter. The answer has to be contingent on what our big competitor to the south does. If I were the czar of climate policy, I would continuously push just a little bit ahead of where the U.S. pushes.

In the end, we're going to need costs more like $50-a-tonne CO₂, but I wouldn't just impose them instantly, because then there would be hideous implications for competitiveness. You do have to tie it to what other major competitors are doing.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Malcolm, do you have any comments?

[Prof. Malcolm Wilson]

Take a situation like SaskPower, which is building. If we have a cost of $15, that would reduce the net cost they have to achieve in order to achieve price neutrality if they're selling their CO₂ for enhanced oil recovery. As people say, it will incent in the right direction, but as David says, ultimately it's certainly nowhere near enough to go to less geological storage.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Okay.

I have a couple of minutes yet, and I'd appreciate responses on this one from as many as possible.

This is with regard to the whole issue of whose jurisdiction carbon sequestration falls under. Is it federal or provincial? Is there a municipal component here as well? Where does it primarily break out in terms of the jurisdiction of carbon sequestration?

[Mark Lesky]

If I could, I'd appreciate taking first crack at that question.

From my perspective, the permitting structure within the provinces is a very clear location for managing these issues. The federal government has the responsibility to set the policy direction, but the structure is currently available within the provinces.

I would prefer to operate under the single window type of approach. I'd be looking to the provinces with their current structure to take the lead on the permitting and regulatory side on this.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Simon or Grant, do you want to respond?

[Grant Thomson]

I would agree with Mark's comments.