Evidence of meeting #14 for Agriculture and Agri-Food in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was biofuels.
A recording is available from Parliament.
Conservative
The Chair Conservative James Bezan
I call this meeting to order.
We're going to change the agenda a little bit and deal with Mr. Easter's motion first.
Mr. Storseth, I understand you're going to hold onto your motion for a couple of meetings yet.
Mr. Easter, perhaps you could move your motion onto the floor.
Liberal
Wayne Easter Liberal Malpeque, PE
Thank you, Mr. Chair.
The motion is pretty straightforward; there's not a lot to elaborate on. It reads that the committee call, on an urgent basis and prior to March 13, 2008, Mr. Elwin Hermanson, the chief commissioner of the Canadian Grain Commission.
Calling him prior to March 13 may not be possible now, but we need to have him here very, very soon. We have the right to do this; we need to question Mr. Hermanson. I'll tell you up front that we'll be questioning him on an article that appeared in the press, in which he was advocating about areas he really shouldn't have been advocating about as chief commissioner. He swore an oath, I expect, to uphold the Canada Grain Act, and he's talking against it. So I move that we call him before the committee.
Conservative
The Chair Conservative James Bezan
We have a motion on the floor. Is there any discussion?
(Motion agreed to)
Conservative
The Chair Conservative James Bezan
We're going back to our first order of business, which is a continuation of our study on Bill C-33.
We welcome to the table, from the Canadian Renewable Fuels Association, Gordon Quaiattini; from Biox Corporation, Tim Haig, who's going to be presenting with Gordon; from Grain Growers of Canada, Richard Phillips, who is no stranger here; joined by Brian Chorney from the Canadian Canola Growers Association; and from the CFA, we have Bob Friesen, the president; and from the National Farmers Union, Ken Sigurdson.
Welcome, all of you.
I would just remind everyone to keep their opening comments to 10 minutes, and then we will have a lot of time for discussion afterwards.
With that, Gordon, perhaps you can kick us off.
Gordon Quaiattini President, Canadian Renewable Fuels Association
Thank you, Mr. Chairman and members of the committee, for giving us the opportunity to appear before you this morning.
I'm pleased to be joined by Tim Haig, the chief executive officer of Biox Corporation, Canada's largest biodiesel producer. Mr. Haig also serves as the Canadian Renewable Fuels Association chair. I am also joined by Bliss Baker, vice-president of corporate affairs for GreenField Ethanol, Canada's largest ethanol producer.
As president of the Canadian Renewable Fuels Association, it is a great pleasure to come to speak with you about Bill C-33, legislation that will help diversify Canada's fuel supply, reduce greenhouse gas emissions, and revitalize rural economies. Coupled with the $1.5 billion ecoENERGY for Biofuels initiative and the $500 million NextGen Biofuels Fund, Canada is about to emerge as a major biofuels producer. In short, this new legislation will allow Canada to grow beyond oil, with a vibrant, new, homegrown ethanol and biodiesel industry.
Energy and the environment are the defining issues of our time. Together they are driving massive change in consumer behaviour, commercial expansion, and public policy. At the same time, the emergence of the bio-economy is no longer pure speculation; it's a reality.
For renewable fuels--biodiesel and ethanol in particular--all this adds up to increased demand, greater opportunity, and steady expansion. Let's be clear that biofuels is no fad or passing fancy. It is certainly an industry that is here today--and it is the future.
Biofuels is also the biggest change to take hold of agriculture in at least a generation, and over the next generation it will also emerge as the biggest change to take hold in our energy sector. In fact, I think it is becoming more and more clear that the bio-revolution taking place today will prove to be every bit as fundamental and far-reaching as the information revolution that began in the 1980s.
The opportunity, therefore, is to gain entry to this sector now, as the benefits of its upside potential are just beginning to take full shape. Ethanol and biodiesel stand at the meeting place between the two most powerful trends that play in our world today. I am speaking of the permanent rise in expensive oil and the global effort to combat the effects of climate change. These two trends not only define the here and now, they are set to shape the way of the world for the next two decades at least, resulting in far-reaching changes to energy use, industrial growth, and consumer activity.
As we speak, oil has already broken $100 per barrel once and will do so again. Oil companies are recording the largest corporate profits of any industry in history. This reality is unshakable and unchallenged. Cheap oil is gone for good. Contrast that fact with another recent report from the International Energy Agency that tells us global energy demands are set to rise by at least 50% by 2030. All of this is on top of the fact that there is limited and very expensive remaining oil coming from ever-increasing, non-democratic, and unstable regions of the globe. Dr. Kent Moors, executive managing partner of Risk Management Associates, International, a leading expert in world energy, estimates that there are about three decades left of a sustainable, conventional, crude oil-based market system. Oil will be prohibitively expensive in the future.
The ranks of the emerging middle class in China, India, and Brazil, combined with the stark failure to discipline consumption in developed nations like our own, render the challenge clear. An expensive gap exists between what we need and what we have, between demand and supply. It is within that gap that ethanol and biodiesel and next-generation renewable fuels find their place. In a future where demand will exceed supply, biofuels are both necessary and financially viable.
Here in Canada we have come to realize that the time for action is now. As you know, Bill C-33 will make the necessary changes in law to ensure that the federal government meets its goal of an average renewable content of 5% ethanol and 2% biodiesel in Canada's gasoline and diesel pools. These regulations guarantee a future market of three billion litres of biofuels in Canada.
The reality is that energy policy is going to increase the emphasis placed on ethanol, cellulosic ethanol, biodiesel, and future generations of biofuels here in Canada and in the United States. It is important to note that car makers are also taking up the challenge. All major car companies already warranty up to E10, or 10% ethanol. There are already six million cars and trucks in North America that can use E85, or up to 85% ethanol. Last week General Motors announced another major boost for ethanol, with a new plan to make half of their new vehicles 85% by 2012. That is just four years away.
Biodiesel in Canada is equally promising. This winter over 60 trucks are being put to the ultimate cold weather test by Climate Change Central, an Alberta government public-private non-profit organization in which the Canadian Renewable Fuels Association is involved, focusing on greenhouse gas reductions and new environmental technologies. The demonstration, which is taking place in the Alberta winter cold, is providing hands-on cold weather experience for fuel blenders, distributors, long-haul trucking fleets, and drivers. Most manufacturers already warranty up to B20, or 20% biodiesel.
Of course, these developments are not driven only by peak oil but also by concerns related to security of supply. In the United States, the President never fails to give a speech on energy that doesn't highlight the fact that 60% of U.S. oil comes from foreign sources, including over three million barrels per day from Saudi Arabia and Venezuela. Even Canada, an oil-exporting nation, imports about half of the crude oil we use for transportation.
The second defining trend of our time is climate change, a challenge that also highlights the valuable benefits of biofuels. Crude oil is not only expensive and in increasingly short supply; it is a major source of greenhouse gases. By way of contrast, biodiesel and ethanol are truly clean sources of energy that avoid the release of carbon and other pollutants.
As governments struggle with measures to lower our collective addiction to carbon, there are few better or more practical options than the adoption of biofuels. According to Natural Resources Canada, in addition to other sources in government and academia, corn-based ethanol could reduce per-litre GHGs by as much as 40% to 60%. Biodiesel GHG emission reductions are 70% to 95%, depending on the feed stock.
We are a clean way to power your automobiles, trucks, tractors, heavy equipment, and marine vessels. Your automobile specifically is a critical battleground in the fight to combat climate change. Adherence to a 5% renewable fuel standard for ethanol and a 2% renewable fuel standard for biodiesel amounts to the equivalent of 4.2 megatonnes of GHG reduction, or the removal of one million cars from our national highways each and every year.
Of critical importance to you as members of the Standing Committee on Agriculture and Agri-Food, biofuels will revitalize farms and rural communities across the country, from those of wheat and canola farmers in the west to those of corn and soya farmers in the east. New world-class biofuel facilities will be built, generating over $1.5 billion in new investment and resulting in 14,000 construction and related jobs in rural communities across this country. Once built, this industry will generate 10,000 direct and indirect jobs and generate $600 million in annual economic activity in Canada.
Bill C-33 will provide a new market for over 200 million bushels of Canadian grains and oilseeds. Put in a global perspective, Bill C-33 will position Canada in a global transition to biofuels that includes our major competitors in the United States, Brazil, and the European Union. Bill C-33 will help us compete on a level playing field and ensure we enjoy the strong economic benefits of this new area of dramatic growth.
Members of the committee, the work you are undertaking is very timely. Biofuels enjoy broad multi-party support, and it is our hope that legislators in the House of Commons and the Senate will move swiftly to pass Bill C-33. Let me emphasize, quick passage will ensure the continued growth of a domestic industry and allow for the introduction of biofuels into the Canadian fuel supply in a timely manner.
Thank you for your time and your efforts. Thank you for creating the conditions to allow us to grow beyond oil, to reduce greenhouse gases, and to revitalize rural economies across Canada.
Kenneth Sigurdson Researcher, National Farmers Union
Thank you very much. We appreciate the opportunity to present the views of the National Farmers Union relating to ethanol and biofuels.
We say ethanol and biofuels are a costly misadventure and probably the most misguided public policy introduced in Canada today. Ethanol is a feel-good industry that achieves no public policy objectives.
In regard to the grain and ethanol energy balance, ethanol manufacturing is very energy intensive, using large amounts of fossil fuel to grow a crop, and then transporting and distilling it into ethanol. Three distillations are required to remove the water and produce ethanol. Many world-renowned scientists have confirmed that more fossil fuel energy is required in the ethanol production cycle than the ethanol provides.
Dr. David Pimentel, one of the early opposers of ethanol in the United States, concludes that 71% more energy is required to produce a gallon of ethanol than the energy that is contained in one gallon of ethanol.
Dr. Tad Patzek, at the University of California at Berkeley, on June 4, 2003, released a comprehensive corn ethanol report. Dr. Patzek states:
It is shown here that one burns 1 gallon of gasoline equivalent...[from] ethanol from corn. Then this ethanol is burned as a gasoline additive or fuel. Burning the same amount of fuel twice to drive a car once is equivalent to halving the fuel efficiency of those cars....
Dr. Mark Delucchi, of the University of California at Davis, was the creator of the Greek model. He did work that is some 1,000 pages, using his life-cycle emissions model. On release of his report in January 2004, Delucchi stated that the most significant changes regarding CO2 equivalency factors and lifestyle materials and biofuels indicates that soy- and corn-based fuels look worse than gasoline and diesel fuel.
Dr. Burton Vaughan, of Washington State University, researched Brazil's ethanol manufacturing from sugar cane, and he describes the pollution caused by burning the leaves off the cane and then washing the char off the cane. He stated in a visit to one of the distilleries, “I observed about 3,900 litres of water being used per ton of sugar cane”. The drain on rivers coincides with the dry season, contributing to water shortages and damaging river life. The researchers concluded that large-scale farming of sugar cane and corn for ethanol is damaging the planet.
There are a number of reports indicating that: for example, Dr. Paul Weiss; the U.S. Government Accountability Office; or the U.S. Department of Energy.
In the Library of Parliament report in February 2007, Frédéric Forge of the Library of Parliament's parliamentary information and research service, science and technology division, stated:
Canada would have to use 36% of its farmland to produce enough biofuels to replace 10% of the fuel currently used for transportation.
...if 10% of the fuel used were corn-based ethanol...Canada's GHG emissions would drop by approximately 1%.
So it's really insignificant to the total fuel supply.
There are a number of reports out indicating that there are tremendous gains from ethanol. They're generally done by the USDA, by Shapouri and Wang, and by the Argonne Institute. But these reports are in-house documents mainly done for the USDA and are not peer-reviewed, and they're not scientific documents. These reports often minimize or leave out the energy required for farm equipment, its repair and maintenance, waste water treatment, and irrigation water.
The promoters of ethanol and biodiesel in Canada are mainly the big agribusiness corporations in this country, such as ADM, Agricore United, Bunge, and Cargill, and federal and provincial governments.
The Manitoba government, for example, and the federal government often use an ethanol report that was done by S&T Squared Consultants, out of Delta, British Columbia. The S&T report omits or underestimates many of the inputs required to produce a bushel of wheat. They state that it takes 48 pounds of nitrogen, while Manitoba Agriculture is saying 70 pounds for an acre of wheat. They're saying 12 litres of diesel fuel; Manitoba Agriculture says 22 litres of diesel fuel. For agriculture chemicals, the S&T report would almost have farmers at an organic level of $4.50 of ag chemicals, while Manitoba Agriculture is saying it takes about $32.
Energy to haul the farm input 600 miles is omitted in this study. Energy required for waste water treatment and pollution control is omitted. Seed costs are omitted, and the big one always is the energy required to manufacture and maintain farm equipment. This can add up to 36,000 BTUs of energy.
Dr. Vaclav Smil, from the University of Manitoba, in a presentation to the Frontier Centre, described the problem of wheat ethanol such as low wheat yields, high water requirements, and growing wheat in the prairies, much of which is a semi-desert. Smil states, “One would simply have to be dumb to attempt to do something like this. This is a criminal public policy.” He was talking about wheat-based ethanol.
The Manitoba government and federal government currently have an energy equivalent subsidy of 45¢ a litre. Ethanol only has 66% of the energy of gasoline. If ethanol plants actually created energy, ethanol plants would use ethanol, not natural gas, as an energy source. If ethanol plants were as modern and efficient as they claim, why are there the massive subsidies? The modern and efficient APl plant at Red Deer, Alberta, went into receivership. This was prior to the subsidy age.
The cost of jobs. With a subsidy of 30¢ a litre in ethanol manufacturing, the subsidy for a job will range from $680,000 to $1.2 million per job per year. The Husky plant at Minnedosa created an additional 11 new jobs. Each one of these jobs costs $3.3 million per job per year. An ethanol plant provides little economic activity, as some would argue. That is, grain comes in and distillers' dried grain and ethanol are hauled out.
Two reports in Manitoba by the agricultural economists, Kraft and Rude, point out that Manitoba does not have surplus feed grain for ethanol manufacturing. They state that the likely raw ingredient for Manitoba ethanol plants will be subsidized U.S. corn. Dr. Ed Tyrchniewicz and Heather Gregory, in a report for the pork value chain prepared for Agri-Food Canada, state that “the likely source of feedstock for Manitoba's ethanol sector would be U.S. corn”.
East of the Manitoba-Saskatchewan border, Canada is a net importer of corn, 60 million to 100 million bushels annually. So any additional feedgrains requirement will result in more corn imports from the U.S. for ethanol manufacturing. This really makes a dumb idea even dumber. Ethanol plants are subsidized food burners.
In Canada, more Canadian children live in poverty now than 10 years ago. Twenty-five percent of Manitoba children live in poverty. Why create the illusion that we can produce energy for someone to burn in an SUV?
Biofuels. Lester Brown, president of Earth Policy Institute, warns of the coming epic competition between 800 million people with automobiles and 2 billion of the poorest people and predicts that shortages and high food prices will lead to starvation and urban riots. “I don't think the world is ready for this”, he says.
Pollution from ethanol production. Volatile organic compounds are emitted as the distillers' dried grain is dried down. VOCs emitted are carcinogens, formaldehyde, and acetic acid, which are hazardous air pollutants. ADM, the largest ethanol producer in the United States, reached a $340 million agreement with the Environmental Protection Agency to install pollution control equipment at its ethanol plants. The EPA also fined ADM for violations of the Clean Air Act.
Thermal oxidizers reduce VOCs. They're expensive to operate and, again, they take energy. The fermentation process releases large amounts of CO2, which contributes to global warming. Some ethanol plants use coal as a fuel source. Ethanol plants use large amounts of fresh water and produce large amounts of nutrient-rich waste water with a high BOD level. Waste water treatment is costly and requires energy.
As for gasohol versus the environment....
Okay, I'm not going to be able to finish. I'll just read a little bit more.
Greg Rideout, head of Environment Canada's toxic emissions research, says, as do others, that, “Looking at tailpipe emissions, from a greenhouse gas perspective, there really isn't much difference between ethanol and gasoline.”
We've had a number of failed farmer initiatives--elk, buffalo, PMU, hogs, cattle--and ethanol will be another one of them. Ethanol from straw and wood waste simply does not work. The technology is not there. We should not be removing waste material from our fields. The value of that is $20 to $40 an acre.
As for biodiesel, it takes about 250,000 to 300,000 BTUs of energy input to grow a bushel of canola. That same bushel of canola gives about 400,000 BTUs of energy. This leave about 100,000 BTUs to process and transport.
Biodiesel at best is--
Conservative
The Chair Conservative James Bezan
Mr. Sigurdson, you're well over. We'll have plenty of time for discussion after, and you can expand on your position at that time.
Brian Chorney Vice-President, Canadian Canola Growers Association
Thank you.
Good morning. My name is Brian Chorney. I'm vice-president of the Canadian Canola Growers Association and I'm a farmer from East Selkirk, Manitoba. I am here today as a member of the Grain Growers of Canada.
We support Bill C-33, and I would like to focus on the biodiesel aspect of renewable fuels and why we need Bill C-33.
This legislation will provide provisions for the regulation and renewable content in diesel fuel, and it is required to create the market for biodiesel. Biodiesel is good for the environment, good for investment opportunities, good for rural development, good for value-added and the diversification of markets. This legislation, in conjunction with other government programs, will allow primary producers the opportunity, if they so desire, to become involved in a value-added opportunity.
Canola will be a key feedstock for producing biodiesel. Canola-based biodiesel has excellent cold flow properties due to canola oil having the lowest saturated fat content of any other feedstock--which is an important consideration given the cold weather Canadian climate. It exhibits good oxidative stability and a very positive energy balance, and it can meet both the U.S. and EU quality standards.
I don't have a copy with me, but Don O'Connor did a good job of reviewing energy balances at the CRFA convention in Quebec city in December, and I would like to refer the committee to his presentation. There are many energy balance studies out there, all of which are very positive for biodiesel, but that will give you a very good background on energy balance calculations.
I could go on and on about the benefits of canola-based biodiesel, but I want to express two key points in my presentation to you today: one, we want a renewable fuel standard for diesel fuels set at 2% by 2010, increasing to 5% by 2015; and two, farmers in Canada will be able to supply the feedstock necessary.
The first one is self-explanatory, so I will expand a bit on how we plan to have canola meet the new demand for biodiesel. A 2% inclusion will require about 1 million tonnes of canola and a 5% inclusion will require about 2 million tonnes to 2.5 million tonnes of canola.
Can we do it? The answer is yes, we can.
We have historically had a canola carry-out of anywhere from 1 million tonnes to 3 million tonnes, so a substantial amount could be covered by our excess production. However, we know that we can't run an industry on a zero carry-out, so in addition, we foresee advances in technology increasing canola supply, particularly the higher-yielding varieties.
We are just in the process of using hybrid seed varieties, and the genetic potential is enormous. Yields per acre are increasing substantially, and canola production will continue to grow as farmers switch to the new hybrids. In addition to higher yields per acre, we see a potential for increased acreages of canola, as drought-tolerant varieties could significantly expand the growing region in Canada.
Finally, we see agronomic improvements in planting and harvesting technologies, which can have a tremendous impact on yield and quality--i.e., oil content. Pod shatter-resistant varieties will also increase harvested yields.
Our canola industry has set a target of 15 million tonnes of production for 2015. We are confident that we can achieve that. As part of this strategy for production, we are relying on the Canadian biodiesel market to create new demand for our seed. The potential is there. We need to seize the opportunity and make it happen now. To do that, we need Bill C-33 enacted and the renewable diesel fuel standards--at 2% for 2010 and 5% for 2015--put in place.
Thank you for the opportunity to appear before the standing committee today.
Richard Phillips Executive Director, Grain Growers of Canada
Thank you.
He touched on the biodiesel part from the Grain Growers; I'll just touch on some ethanol thoughts.
I have five brief reasons why we are happy to see an ethanol industry develop and why we would support Bill C-33.
Number one—and I'm speaking more from a western Canadian perspective—it reduces our dependency on foreign grain markets; in western Canada we're heavily dependent on exporting, and when you're exporting your grain offshore, you're vulnerable to tariff, non-tariff barriers, currency fluctuations, labour disputes, and ocean freight rates. The more grain we process locally, the more we avoid those issues.
Secondly, it reduces our dependence on shipping grain by rail. I've been before the committee before and I've talked about Bill C-8 and the need to get some shippers' provisions in dealing with the railways. In western Canada, the two main railways haul about 65% of the grain we produce, so anything we can ship to local production and local value adding will reduce our dependency on those railways. We hope you have followed up with your Senate compatriots and encouraged them to put Bill C-8 through quickly.
Thirdly, it provides us with another local option for marketing our grain beyond some of the feedlots and the other smaller value-adding processors that we do have out there. As we've seen in the corn, canola, oat, and pulse sectors, there's nothing like local buyers of grain to support local prices. From our perspective as producers, the more competition for our grain, the better.
Fourthly, it creates jobs and economic activity in rural areas. It's not just the truckers hauling in the grain, but it's the electricians who have to service the plants and the plumbers who provide the water. There's a lot of work and a lot of services needed to keep an ethanol plant running. That all spins off into other jobs in the communities as well.
On the environmental aspect, even leaving aside the arguments of some of the studies, the fact that we're not using fuel to haul our freight all the way to port to get to overseas markets--we're just taking it down the road to a local ethanol plant--that alone is a huge environmental savings, in my mind.
What are the challenges that we see? Number one, keeping producer ownership where there's a strong interest in investing. My father and I have put a fair amount of money into our local ethanol plant. It's a challenge because there are people coming in. Some day if we're successful there will be a takeover bid, I'm sure. So whatever structures can be put in place to encourage and enhance local producer ownership in the plants, we think, is critical to the long-term success in western Canada.
On keeping our livestock sector strong, I know there are some challenges out there with the feed prices right now. Whatever we can do, beyond even the dry distillers grain that is going to come out of these ethanol plants, the livestock sector is an important market for our feed grains.
I have three or four quick suggestions. We think if the committee is looking at what they could do in addition to Bill C-33, there is research into the feedability of these dry distiller grains to the beef, and especially into the monogastrics like hogs--what are the maximum rations we could use? There is also research into the component parts of wheat and corn that could be removed even before the ethanol process, like the germ. Besides the DDGs, there are many other enzymes and products in kernels of corn that could be used for other purposes. Lastly, there's research into wheat and corn varieties that are best suited to ethanol production. Let's do what we can to improve upon the formula of one unit of energy in and 1.4 units out in ethanol. Those are a couple of suggestions.
I look forward to the questions. Thank you.
Conservative
Bob Friesen President, Canadian Federation of Agriculture
Thank you very much, Mr. Chair.
Let me begin by saying that I agree with everything Mr. Chorney and Mr. Phillips have just said with regard to biofuels, and I certainly will try not to be repetitive.
Suffice it to say that we applaud in principle almost any regulation and/or legislation that helps, first of all, environmental sustainability and at the same time creates a revenue stream for farmers or helps farmers reduce their costs. When we talk about that, we can include almost any form of bio-energy; we can talk about wind power or solar power.
I was talking recently to a fruit grower in B.C. who is going to be powering his entire fruit operation, his irrigation system, his cooling shed, his house, everything, with solar power. We think that's an excellent form of bio-energy as well. Whether it's biodigesters, whether it's creating a revenue stream from carbon credits, or whether it's using waste material to generate biofuels—I know Quebec has done some research on using SRM, and I was recently talking to a cattle producer from Saskatchewan who was concerned about the high cost of disposing of SRM—or whether we use switchgrass that has been grown on buffer zones, which of course, as you know, is another very important environmental initiative, we can create a real integrated policy in the whole approach to environmental sustainability.
Specifically to Bill C-33, for us to support this bill is a no-brainer. We think it's an important step toward facilitating the whole biofuel initiative that we think has a lot of potential for the farm gate and for additional industry in Canada. In fact, if you look at how close we are to the U.S., and if you look at the list of countries where the U.S. is currently importing ethanol from, Canada isn't even on that list. So we have the potential, first of all, to fill our own market requirements and then to possibly export it as well.
People have said this bill is merely administrative. Whether it's administrative or whether it's more, again, we think it embodies the whole initiative of creating a revenue stream for farmers and at the same time doing something important for the environment. That contribution to the environment, while it creates a revenue stream for farmers, also creates a very important crosswalk between the Canadian public and the farm gate in that the public sees that farmers are making an important contribution, and it's a win-win-win for everybody.
I've already talked about the revenue stream, and I also mentioned the fact that we can use waste products in many cases. Has the science gone far enough? No. We believe we can continue to pursue science and make the industry even better and even more efficient. We also believe it contributes to rural development, especially if we make sure we create a lot of sites across Canada that produce either biofuel or ethanol. We think it contributes greatly to rural development.
On the revenue stream, it's very important that we develop very competitive policy with the U.S. As everybody around this table knows, Brazil is way ahead of us on this, the U.S. is far ahead of us on this, and we need to make sure we develop competitive policy within Bill C-33. It's an administrative bill to facilitate this initiative, but make sure we develop further competitive policy around it. If we're going to create a demand in Canada, let's make sure we produce the biofuel, let's make sure we produce the feedstock, and let's also make sure we create opportunities for farmers to be involved at the manufacturing level.
The reason why this is very important is because we all know the U.S. biofuel industry was built on the backs of some very high subsidies, and we know their industry currently is very strong as a result of it. We know, in talking to farmers who were involved at the manufacturing level as well, that they were able to pay for the bricks and mortar of a manufacturing plant in a year's time, so their industry is very strong. We're going to have to make sure we create a strong industry alongside that as well.
I already talked about the potential for rural development, and of course having many sites across Canada doesn't only create rural development, it also reduces transportation in transporting the biofuels to end-use locations.
It also goes very well with the co-op investment plan that CFA has proposed, where creating investment capital for co-ops could allow farmers to be even more involved at the manufacturing level. Of course, and I think I may have mentioned this around this table before, looking at Quebec as a model, where $6 million resulted in $36 million of direct investment in co-ops and a further $100 million of investment in rural development, we again think this fits very well, in an integrated way, with our whole plan to move towards the potential that we have in biofuels. It has a potential, as I mentioned earlier, to give us a value-added component to waste material, whether it's wheat straw, SRM, or anything else. Again, it's a revenue stream for farmers where otherwise they would have no revenue stream.
Are there some concerns? Yes. We would like to make sure that any repeal of excise tax does not apply to farmers as they're making this important contribution to the environment. We would want to make sure that any incentives that have been talked about stay around long enough for the industry to get a very solid footing. We would not want to see any repeal of incentives. Let's make sure we get this industry on a totally solid footing before we repeal incentives.
Is the increase in feed prices a challenge to the livestock industry? Of course, but we would argue that the increase in feed prices, first of all, is not solely as a result of the biofuel industry. We've had problems around the world, but we also have to figure out a way for grain producers to get what they deserve to get for their production and for livestock producers to make money at the same time. So if you look at, say, the hog industry, record slaughter numbers in the U.S. and our strong dollar contribute more to the crisis in the livestock industry than an increase in feed.
The concern for food prices has been raised. I can assure you that any stress at the retail level on food is not as a result of farmers getting paid more for their production. In fact, if you look at the market share a farmer has at the retail level, even doubling the corn price doesn't have to result in any perceptible change of price at the retail level. If you look at 2007 figures over 2006 figures, our increase in the grocery basket was a mere 0.6%. So we don't believe that food prices are an argument against this very important initiative.
As I mentioned earlier, can the science get better? Yes. I mentioned this last time: let's make sure we do as Wayne Gretzky used to say he did. Let's go where we think the puck is going to be. Let's not go where the puck already has been or is; let's go where the puck is going to be.
Can we become more efficient? Of course we can become more efficient, but let's do it together as we pursue this very important initiative.
Thank you.
Conservative
The Chair Conservative James Bezan
Thank you.
Mr. Chorney, in your testimony you quoted a study that was presented at the Quebec convention. Could you get that into the committee?
Executive Director, Grain Growers of Canada
Yes, the Don O'Connor study. I made a note here. We'll get that to the committee.
Conservative
The Chair Conservative James Bezan
I appreciate that.
Just to correct a quote that Mr. Sigurdson attributed to the Library of Parliament, there was, in the Library of Parliamentary report from Frédéric Forge, the comment that “Canada would have to use 36% of its farmland to produce enough biofuels to replace 10%....” Mr. Forge used a quote—and it says in there—from the New Scientist, a publication. So it's not his quote; it's a quote from the New Scientist, just for committee information.
With that, we're going to go with seven-minute rounds. I appreciate everybody staying within that limit.
Mr. Easter, you have the floor first.
Liberal
Wayne Easter Liberal Malpeque, PE
Thank you, Mr. Chair.
I thank everyone for coming.
To start with you, Brian, you mentioned, basically, that the production base in Canada, and the production base of canola certainly has tended to be in the west up until now. But with new varieties of canola, they're even growing canola in P.E.I. now for cold-pressed biodiesel. The figure you presented, does that include that production base out of the west towards more of the rest of the country or not?
Vice-President, Canadian Canola Growers Association
The target we've looked at, the 15 million metric tonnes by 2015, is looking at the entire production in Canada. Those are numbers that have been put forward by a strategy of the Canola Council of Canada, and that includes Ontario and all of Canada.
Liberal
Wayne Easter Liberal Malpeque, PE
Thank you.
Gordon, let me put it this way: this town, especially these days, is a bit of a political place. At times, when I've looked at the ads of the Canadian Renewable Fuels Association, I almost thought you were but a pretty face for the Prime Minister. It was almost like political advertising.
My question would be along these lines. In terms of the various proposals that are out there, and Mr. Dion certainly has one that was presented as the ten and five strategy, what is your position? Does it make sense? Does it not make sense? I'd like to see where you sit versus the competing proposals.
February 12th, 2008 / 9:45 a.m.
President, Canadian Renewable Fuels Association
Thank you, Mr. Easter, for your question.
Obviously the CRFA is very supportive of moving the mandates for biofuels beyond the commitment that has been made by the government. We absolutely endorse a strategy of taking an ethanol mandate to 10% and a biodiesel mandate to 5%.
The critical issue—I think Mr. Friesen touched on this in his comments—which is worth bringing forward, is that the proposal currently before Parliament of 5% and 2% would, as we said, result in about 2.5 billion litres of ethanol and a little more than 500 million litres of biodiesel by January 1, 2010.
What is critical for our industry, of course, is that we want to build the capacity here. If the government or Parliament were motivated to look at an increased mandate beyond that, it simply would be met by import. When you look at the size and the scope of the industry in the United States and the capacity they have to supply biofuels, not only to Canada but around the globe, that mandate could be met by import.
We of course don't want to see that happen. We want to build the domestic industry first. A 5% and a 2% target is achievable by 2010. We are on pace right now, with the level of production and construction that is under way in the industry, to meet that target. But that's just the beginning, and the CRFA very much advocates going to a much larger target in the future.
Liberal
Wayne Easter Liberal Malpeque, PE
You mentioned imports. There are a couple of fears here. One is the fear about food being used for fuel. There is certainly a hue and cry that the ethanol and biodiesel industries are pushing up the price of food. In my own opinion, Canada's influence on that price is very marginal, given the fact that the United States is next door.
Do any of you, first, have any comments or any documented studies on that fear and what the impact is on food for fuel?
Second, as you mentioned, Gordon, there's a real concern that Brazil can produce ethanol a heck of a lot cheaper than we can, from sugar cane—at least with current research. I asked James for the act, and I'm not sure from reading the act: could it happen that the Canadian government could in effect be subsidizing the import of Brazilian ethanol coming up the St. Lawrence in tankers? Is that possible under this act? I don't know. What are your thoughts on it?
Those are my two questions.
President, Canadian Renewable Fuels Association
Let me take your last question first. Under the previous support that the industry benefited from in its early stages, there was the excise tax exemption federally; that was 10¢ for ethanol and 4¢ for biodiesel. That excise tax exemption, Mr. Easter, as you know, applied to both domestically produced and any imported biofuels that come into the marketplace.
The CRFA has been quite adamant in its efforts over the course of the last several years in saying to government that a more useful approach to benefiting the development of the industry in Canada would have that excise tax exemption replaced by a direct producer payment program, meaning that the level of support enjoyed from government would find its way directly to the biofuels producer.
Imported biofuels, of course, don't benefit from that production subsidy any longer. With the removal of the excise tax exemption, which is set to take place April 1 of this year, and in moving to the $1.5 billion ecoENERGY for Biofuels program, I think we address that issue quite directly.
With respect to the issue of food versus fuel, there is a significant amount of data and information that I can share with the committee. Let's look at a couple of examples.
A UN report by Nobel Prize-winning Dr. Amartya Sen pointed out a decade ago that insufficient food is not the challenge facing the developing world. The notion that we are somehow trading food for fuel, quite frankly, is a myth. The systematic problem we're having in a developing world has to do with low income, unemployment, marketing distorting trade, and subsidy agreements. These can be corrected, as he states, through strong governing institutions, reliance on open markets, solid infrastructure, and sound public policy.
If you look at where biofuels are going and where the demand for food is going, we use a very little amount of food—corn and grains, as an example—in biofuels production right now. So as you've suggested, the impact that is happening has nothing to do with the growth of the biofuels market.
Conservative
The Chair Conservative James Bezan
Thank you. Your time has expired.
Monsieur Bellavance, s'il vous plaît.