Bill C-30 (39th Parliament, 1st Session) Committee on Feb. 22nd, 2007

[Fabian Manning, Conservative, Avalon, NL]

Would the continental market be more positive than the international market?

[Denis Fraser]

To me, a continental market makes a lot more sense. The regulatory framework in the U.S. is known to us; it's a known quantity. There are a lot fewer opportunities, if I might say, to cheat the system or circumvent the measures. As you get into the world scene, it's much more difficult to have confidence that the flow of economic money, with carbon credits, would be significantly put to good use. It would be a shame for us to buy a lot of carbon credits in the world and, in the end, to have the world not reduce its emissions.

[Fabian Manning, Conservative, Avalon, NL]

Mr. Peeling, would you like to comment on that?

[Gordon Peeling]

Yes. I'll be very brief.

It's absolutely important for us in terms of that connection to the U.S. market, but in many ways our view is a slightly different one. Although they're our primary market for our products, we're competing against the rest of the world for that market in the United States. The burden we might bear in Canada becomes important when the bulk of that competition for the U.S. market may well be China or other jurisdictions that do not have a Kyoto burden.

So the message here, going into the next round of negotiations beyond 2012, is that the Canadian government, with others, should be looking to ensure that there is at least some burden, even if it's not equalized burdens, between developed and developing countries. You have to start putting everybody on a level playing field. We have a part playing field right now. That's one thing.

The other reality is that there is a component of the U.S. industry that we do compete with, absolutely. It's better to have a level playing field than not, so that's a key point for us.

[The Chair, Conservative, Laurie Hawn]

Okay. We'd like to move on now to the final round. We'll keep it pretty tight here.

Mr. Holland, five minutes, please.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you, Mr. Chair.

Thank you to the witnesses.

The first question is about the opportunity side of this. I think we're talking a lot about the fear and the problems that this may cause for industry, but there's also an opportunity side. Somebody mentioned that this doesn't have to be painful if the right tool kit is in place. One of the things when we talk about a cap and trade system is the ability for companies to draw an economic benefit out of doing the right types of activities, and actually incent those types of activities and make them economically advantageous.

I'm wondering if you might want to talk about some of those opportunities. There are also opportunities in developing technologies that not only reduce emissions but also improve efficiency and improve productivity. So some of these things can actually be drivers, as I think some of you have explained, of new methods of doing things that make you more productive, more competitive, as well as deriving an environmental benefit.

I don't know if any of you want to comment on those specifically, about the opportunity side of this equation, while we're talking about all the things that are bad.

[Denis Fraser]

I think the industry has demonstrated self-discipline when it comes to efficient energy use, taking actions from an investment perspective that foster not only achieving the goal of improving emissions but also improving efficiency, productivity, and reducing energy input.

If I can come back to the issue of pain, pain is just a relative term. If you can guarantee that the rules will be the same for everybody in the world, then there's no such thing as pain; then it's a challenge. The minute you have rules that are set differently against competitors that are formidable on a worldwide scene, then it becomes a big issue and becomes pain. So we have to remind ourselves that pain is only defined in a sense of relative competitiveness among the players on the world scene.

[Daniel Gagnier]

We're investing $300 million a year on R and D. By converging a number of technologies and investing another $550 million in this commercial-sized plant in Quebec on AP50, we're looking at 20% efficiency gains, elimination of PAHs and fluoride emissions, and a reduction of CO₂.

Now, we want that in five years. If we invested less, we'd probably have to wait 10 years or 12 years for it. So we have to move faster, and we need that regulatory certainty to be able to do that. That's where you get the gains.

[Mark Holland, Liberal, Ajax—Pickering, ON]

I need to go on, because my time is limited.

Obviously what this committee is trying to do is take Bill C-30 from a series of just minor amendments to CEPA into something that really does give you an array of choices, both through cap and trade and perhaps other things that are in that tool box, to use the term you've been using.

You mentioned that the new technology is really the principal driver of your ability to reduce emissions and to make a substantive dent in getting to whatever those emission targets might be. Can you tell me what role you see government playing in that regard? We have the technology partnerships program—something along the lines of a green version of that? What role do you see government playing in assisting the research and development process, if any? How important do you see that being?

[Daniel Gagnier]

I think it has to do with helping industry manage the risks of unproven technologies. I don't think you're necessarily talking about giveaways here, but more like partnerships between the public and private sectors. In other words, if there's a reasonable opportunity from carbon capture and storage or clean coal technology, then if we can have partnerships to help make that happen and share the risk, we're going to gain economically, we're going to gain on a technology basis, and we're going to gain on an environmental basis.

[Mark Holland, Liberal, Ajax—Pickering, ON]

To the witnesses, gentlemen, how critical do you see that this moves quickly toward reasonable caps?

[Daniel Gagnier]

Long term is very critical, because beyond 2030, if we don't have new technology, then we're going to be scratching our heads.

[Denis Fraser]

In addition to what was said, there is a lot of international effort researching means of production that will be more effective. IISI, our worldwide association, has a program that gathers resources worldwide to advance the technology and identify best practices. That's an area where we're not competing; we're collaborating for the benefit of the environment. Being able to directly and indirectly support these efforts is extremely critical for achieving the goals on a long-term basis, because technology and large investment are going to be the foundation of our success.

[The Chair, Conservative, Laurie Hawn]

Thank you, sir.

We'll have to move on to Mr. Watson, for five minutes, please.

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair.

Thank you, gentlemen, each of you, for being witnesses here today.

Kyoto was adopted in 1997, and it's going to be tough to fight. It was a catalyst for early and consistent action for each of your industries, and certainly we're hearing a lot of success stories.

Of course this contrasts to the lack of early action by the previous government for eight years from the adoption of Kyoto, of which seven were budget surplus years, so there was no funding problems for them. It was seven years of majority government, which is the best climate to impose your political will, if you have the political will to do it. There were six years with the current CEPA tools, which they keep saying are sufficient to do the regulatory job. Clearly the previous government shouldn't get credit for early action. Broadly speaking, it sent the wrong signals to industrial players.

Regarding the other discussion around early action, you testified that essentially you picked the low-hanging fruit for improvement in your sector, so you've achieved your first round of deep emissions reductions. I'd like a comment from each of your sectors about how long you think the next technologies for each of your sectors will take to develop to achieve the next round of deep reductions.

Can you give us some timeframe? Are we talking about five, ten, fifteen, or twenty years?

[Daniel Gagnier]

In the last five years, the gains that I talked about were on the back of the AP50 technology—

[Jeff Watson, Conservative, Essex, ON]

Is that for marginal or deep reductions?

[Daniel Gagnier]

These were deep reductions of 20% energy efficiency in an industry that had been achieving 1% a year. This was a big pop.

As for the longer term, if you're looking out to 2030, for example, we're going to have to have some technological breakthroughs, inert anodes or something, that will fundamentally change the way we make aluminum. We're also going to have to get involved in life cycle analysis, looking at what the best application is in terms of downstream greenhouse gas saving capability of different materials, from plastics to steel, to aluminum, to composites.

[Jeff Watson, Conservative, Essex, ON]

Would some of the other sectors please comment?

[Denis Fraser]

You have to look at a 10- to 15-year horizon, but I would not leave you with the impression that there is nothing that can be done even on a shorter-term period. The steel industry has identified cogeneration at the integrated site as a significant opportunity.

It's important to repeat, as Mr. Gagnier said, that the regulatory regime and economic environment must be brought to more certainty, so that these investments can be brought forward to achieve the goal of significant improvement.

[Jeff Watson, Conservative, Essex, ON]

Mr. Peeling, Mr. Marikkar.

[Gordon Peeling]

The issue for us is that we can continue to make process changes at the margin, and we will do better than we are currently doing.

As an example of big technological change, there's the development of hydromet for nickel recovery, which is at a pilot plan stage in Newfoundland, at a cost of $250 million, and moving to a $1.1 billion full-scale plant. The technology will take five years to prove once that gets built. Then it will take considerable time to actually get implanted anywhere else in the industry.

That's only one of our product lines. So some of these things are well beyond the 2010 to 2015 period, and that's where government assistance is needed.

I'm not sure that government assistance is needed there. Where it is needed is when you get into pre-competitive areas, such as carbon sequestration, where no individual company can justify the total carriage of that research, because it can't capture the benefits. This is where you need partnerships. Those are longer-term solutions that will have a transforming effect on the end result.

[Jeff Watson, Conservative, Essex, ON]

I'm going to interject since I only have about a minute left here.

On the question of pain or no pain, you've taken early action. Imagine the scenario if you hadn't acted in 1997 and right now were faced with this committee, saying it would be a Kyoto target timeline.

I want to bring this around to what other sectors might be facing here. What would your options look like right now, knowing what you've just come through over the last number of years? What would your options look like in that short-term timeframe and time window? What would they be? Would you feel some pain if you hadn't acted earlier?

[Daniel Gagnier]

It would probably be painfully expensive to achieve the same result under very tight pressure. As I said before, it's taken us 10 years to educate people on how to do this and put in the resources. So the sooner you start, the more you can do.

[Denis Fraser]

But we would be able to offer economically feasible and justifiable solutions for very large gain, as we demonstrated over the years, which is questionable at this time. The issue is how much time you allow yourself, and whether you are going beyond what is technologically proven today.