Natural Resources Committee on March 19th, 2013

[Guy Drouin]

No.

[Joan Crockatt, Conservative, Calgary Centre, AB]

In your view, no.

Ms. Milner, thank you.

[Alicia Milner]

I can only speak to the transportation space, obviously, but there, a price on carbon—I would say no. It's marginal in the whole scheme of it, to be honest. You look at a project like Robert with their LNG highway tractors. They get a 70-tonne reduction per tractor, per year. Even with the price on carbon, for that fleet to adopt and pick that lower carbon option, that's a really small factor, really small driver for them. I don't see a price on carbon being material in terms of adoption at the market level.

Typically, when we talk about carbon we often talk about large point sources, but if we go back to innovation and transportation, this is the least innovative part of our economy, reliant on one energy source. I don't think carbon pricing will change that.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay, I'll come back to that, thanks.

Scott.

[W. Scott Thurlow]

I like your question better. Absolutely, I think the answer is yes. It will depend, of course, on what that price is, and the market drivers will make sure there is some type of universal application.

For some of the questions I've heard other panellists answer, I didn't like the underlying assumptions that they were based on. I think it's very dangerous to look at the California carbon market and the Quebec carbon market, because both of those markets were designed in a way that they could benefit Quebeckers and Californians. And that's what we have to be looking at when we look at the monetization of carbon. The first person out of the gate is going to design the program that best suits their jurisdiction. I can assure you that the people of Quebec and the people of Ontario have very different interests from the people of Alberta and the people of California when it comes to this type of industry.

I want to be really clear: the government's sectoral approach on reducing anthropogenic gases is a very good approach to take. It has been proven to work in the transportation sector, and it is definitely driving the creation of a renewable fuels industry in this country. The sectoral approach—which looks at each industry individually and the deeds of that individual industry—is the absolute, appropriate way to move forward because it looks at the industries from what they're facing in terms of competition as energy-intensive, trade-exposed sectors. That sectoral approach is the best way to move forward.

[The Chair, Conservative, Leon Benoit]

Sorry, Ms. Crockatt, your time is up.

We go to Ms. Liu for up to five minutes. Go ahead, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Mr. Chair.

This is a very interesting discussion. In my view, the “polluter pays” principle makes a lot of sense economically. I hope that we will be able to continue that discussion later.

Mr. Drouin, you talked about the importance of the scientific research and experimental development tax credit. Your suggestion was to improve that program, which helps small- and medium-sized businesses in your sector a great deal. However, we also know that, in the last budget, the Conservatives reduced the funding for that program by $500 million. What are your best arguments to convince the government to reverse course?

[Guy Drouin]

We have tried.

I am also the founder of Écotech Québec. We made representations last year, before the decisions were made. However, what we are currently proposing to the federal government and the provincial government is to change their income tax legislation so that commercialization costs will be credited for technologies that previously received research and development tax credits or for those that were either patented or protected as intellectual property. In other words, we don’t want it to become an open bar.

As you know, there are a lot of reports, including the Jenkins report, that have confirmed that Canada is in a good position to improve those technologies as a result of its tax credits and grants, but that the major challenge, since our market is small, is to export. Developing technology is expensive. We need a sustainable program for the commercialization of technologies. As the manager of Écotech Québec, I am asking the two levels of government to plan for a commercialization tax credit in their next budgets just for the salaries of technical sales engineers. We are not there to have an open bar or to get plane tickets, and so on.

This problem has been well defined. And in our view, the tax credit will make it possible to develop long-term commercialization strategies for Canadian technologies. That would help us a great deal.

Thank you.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

Last week, I had an opportunity to visit an innovative company in my riding, Galex Systems Inc. The company makes photovoltaic solar collectors. They have spent almost a decade doing the research for developing the technologies. The tax credit for commercialization that you are proposing can also help those small companies. Thank you for your proposal.

Have you looked at how much this tax credit would cost Canada?

[Guy Drouin]

That is a good question. We did it for Quebec. Every year, Quebec has $800 million in R and D tax credits. That amount has dropped slightly in the last budget, by roughly $75 million. Not all the companies that do research necessarily export.

Take Cascades for example. They do research to improve the process, but not to sell the technology. It is to improve productivity. The companies that benefit from R and D tax credits are not necessarily those that export. We estimate the cost of the measure at approximately $20 to $25 million per year for Quebec.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you.

My next question is for Scott Thurlow.

Some environmental groups have expressed some concerns about the use of forest bioenergy. I can cite Greenpeace that says that it is wrong to claim that forest bioenergy is carbon neutral when, according to that group, the burning of biomass emitted about 40 megatonnes of CO₂ in 2009 in Canada, more than all the vehicles in Canada for that same year. Do you have any comments about that?

[W. Scott Thurlow]

There is truth to that. I mean, there are CO₂ emissions that come from forestry and from forestry waste, but these are different emissions than you would get from traditional fossil fuels. These are emissions that are, what I will call, above crust. By being above crust they're part of the natural carbon cycle.

As I mentioned in my testimony, we have a new group of members in our association who can now convert that forest waste, that forest byproduct, into an ethanol blend, a cellulosic product, a bioheat, a nutraceutical, or any one of these other products.

While I agree that this is a sector that emits, all sectors emit. What we want to do is to find a way to capture those emissions into a functional part of the economy as quickly as we possibly can.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Ms. Liu.

Finally, Mr. Calkins.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Finally. Thank you, Chair. You're the one in charge of the speaking order, so finally it got to me.

[The Chair, Conservative, Leon Benoit]

Your time is up.

[Some hon. members]

Oh, Oh!

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Thurlow, in your comments you talked about certainty and predictability in the industry, and the mandate.

For the benefit of the committee, could you give us some clarification on what specifically you meant? What are the threats of a mandate change to the industry, and what recommendations do you think this committee should be putting forward to the government to ensure the certainty that I believe your industry is looking for?

[W. Scott Thurlow]

Absolutely. I want to be really clear. On the ethanol side and the creation of the mandate, our industry is working towards meeting that mandate. We don't have any advice in terms of increasing the mandate on the ethanol side.

On the biodiesel side, we've seen some questions about removing bioheat from the current renewable fuel standard. The gazetting process for that is ongoing and we will be commenting on that. I share Mr. Mabee's concerns in this regard. I think that bioheat is actually the best place for some of the biodiesel product to go. It is a very good place for renewable diesel to be used to create that heat.

The removal of bioheat from the renewable diesel mandate right now would be approximately 12% to 15% of a decrease of biodiesel that's required. That is going to be a 12% to 15% reduction in the GHG benefit. It's going to be a 12% to 15% reduction in the mandate that's required for the generation of biofuels here in Canada. Also, and interestingly, from a Foreign Affairs and International Trade perspective, it will bifurcate the Canadian renewable fuel standard from the one found in the United States. In the United States, bioheat is required as part of the mandate for renewable fuels.

I understand there are some concerns about the renewable fuels mandate, but our position as it relates specifically to bioheat is that the mandate should be growing; it shouldn't be shrinking. Removing this from the mandate is of great concern to our members.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Okay. Thank you, Mr. Thurlow.

Ms. Milner, in your presentation you talked about the performance measures and the standards among the natural gas motors and diesels and so on. I've been driving diesel tractors in the field since I was 10 years old and I've been driving diesel pickups ever since I can remember. Friends and neighbours are all truckers. I know darn well that a diesel truck I used to drive 15 years ago had more power than the one today, and it used less fuel to get that power, because the fuel efficiency standards have made the diesel engine less efficient. They have to build a bigger motor now to give me the same torque and consume more fuel to meet a performance standard. That's the way I see it. I go to the pump. I remember. Been there, done that—

[Alicia Milner]

We heard the same from Robert Transport.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

As far as performance metrics are concerned, are we talking about the current diesel motors with the fuel efficiency standards? Are we talking about what a diesel motor can do when it's allowed to do what it can do best? Are you talking about diesel electrics, in which case the natural gas is used to charge the electrical system, which provides the electrical torque? Because at that particular point it doesn't matter what energy source is creating the electricity because the electricity creates the torque.

So can you give me some clarification on these performance measures?

[Alicia Milner]

Sure I can.

Performance is up against current-generation diesel. Diesel without all those encumbrances is not an option anymore. That's a non-compliant vehicle. With the new heavy-duty vehicle regulations in Canada and the U.S., the first section is the next four years, and we know that off-the-shelf technologies will do it, in terms of compliance. It's going to get a lot uglier for the manufacturers beyond four years because they are going to have to develop the technologies to comply with diesel. Natural gas right now already gives you an almost 20% benefit on GHGs, which are now regulated.

So, no, all those comparisons are head to head. In terms of the power and torque lines, they totally map where a diesel truck is at this point, understanding where we do have gaps with natural gas. We don't have as many engines, we don't have as many models, so there are gaps in the power spectrum. You can't get anything above 475 horsepower right now with natural gas. This new engine coming in is going to plug one gap in the spectrum, but you can't go below 250 either for more of a medium duty.

So those things are going to be plugged. But head to head, if you take an ISL diesel versus an ISL G natural gas, you're going to find the same lines, in terms of power and performance.

[The Chair, Conservative, Leon Benoit]

Thank you.

And thank you, Mr. Calkins.

I thank you all very much for what has been another fascinating meeting. I do appreciate all of you coming today, from the Canadian Renewable Fuels Association, Scott Thurlow, president; from the Canadian Natural Gas Vehicle Alliance, Alicia Milner, president; from Biothermica, Guy Drouin, president; and as an individual, Warren Mabee, chairholder, Canada research chair in renewable energy development, and assistant professor, Department of Geography, School of Policy Studies, Queen's University. You have quite a handle.

Thank you all very much, it's much appreciated.

[Some hon. members]

Hear, hear!

[The Chair, Conservative, Leon Benoit]

We're going to suspend the meeting to go in camera, and we'll come back with a study of future business for this committee.

[Proceedings continue in camera]