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

[John Godfrey, Liberal, Don Valley West, ON]

I'm getting agreement from everybody.

Some companies, such as Pembina, have suggested you should be disaggregated from electrical production and from upstream oil and gas because you're in a different situation. Does it make sense to you?

[Daniel Gagnier]

It doesn't make sense to me, because we have no ability to pass on the costs of either electricity or any uptake in oil and gas. For example, we have no economic margin here. We don't set the cost of aluminum on the market. It's set by the LME.

[Denis Fraser]

I'd like to express a slightly different point of view on the international trading system than what my colleagues here have expressed.

I'm part of a large international group, Mittal. We operate in 60 different countries, so we're seeing both sides of the equation. A lot of steel is produced in countries that are not signatories to the Kyoto accord and that have demonstrated very little, if any, interest in pursuing avenues like the ones we're committing to under Bill C-30. We're concerned that the simple conclusion that you can adopt an international trading system and buy your credit will simply overtax some industries, the steel industry, and just move the production elsewhere. It's very easy to offshore steel production, and it is a concern that is significant for our industry.

We'd rather see policies that encourage and foster reinvestment in technology in the country so we can further advance our own ability to achieve increasingly more difficult targets.

[The Chair, Conservative, Laurie Hawn]

Thank you, Mr. Fraser.

We'll move to Mr. Jean for five minutes, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair, and thank you to the witnesses for coming forward.

I would like to read a quote that I received from the Library of Parliament. It says, “Canada could not conceivably meet its emissions reduction target through domestic measures alone without essentially bringing its industrial economy to a halt.” The chief economist for the Canadian Manufacturers and Exporters and the president of the Canadian Association of Petroleum Producers agree. Does anybody here disagree with that? Great.

I think everybody agrees that we want to have cleaner air for Canadians and get rid of some pollutants. Obviously, Bill C-30 goes beyond GHGs, which is all Kyoto deals with. It deals with indoor air, which is amazing, actually. It's an amazing step by any government. But there's a balancing act: economy versus cleaner air.

I want to go on to the cost of meeting Kyoto, just very briefly. I was doing some calculations. I asked the Library of Parliament to do some research on what it would cost for a Kyoto commitment--and just to buy credits, not to meet our domestic changes, and they actually come out to say that the president of the Greenhouse Emissions Management Consortium says it would be a minimum of $26 billion to $38 billion. It could cost up to $38 billion over the Kyoto time period of five years. That works out to $2,500 per taxpayer, or something in the neighbourhood of $5,000 per home.

We heard evidence from people from Quebec who the Bloc brought forward—one particular gentleman was very impressive—that for infrastructure dollars invested, you get a huge return in benefits in terms of greenhouse gas emissions and emissions generally. And $36 billion, quite frankly, could buy a lot of infrastructure in this country, where we're in a deficit position. It could also buy a lot of technology that we could sell internationally to people so they could reduce their greenhouse gas emissions.

Gentlemen, would anybody disagree with that?

[Denis Fraser]

I don't disagree with that. And it just basically adds to the comment I made in my prior remarks that this is a lot of money that deserves to be reinvested in our economy--with the appropriate framework, so we can achieve the goals, but through economic means. I think largely what you've heard this morning is that the manufacturing industry over the last 15 to 20 years has acted very responsibly and has reinvested in adopting ever more proficient technology and has achieved a lot of results. Actually, it has achieved the Kyoto accord goals.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I don't have much time. Mr. Gagnier, I'll just make one further comment.

Every house in Canada could just about be refitted with new windows for energy efficiency at $5,000 per home. There are smart houses. I think of all the opportunities we have domestically to use this credit money—only credit money—to help us here in Canada.

I'll ask Mr. Gagnier.

[Daniel Gagnier]

Let me be as clear as I can be. Nobody on this side, I think, is suggesting that the government should inject any funds into the market, but companies can make their own choices—

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Which market, sir?

[Daniel Gagnier]

I mean the carbon market, whether it's domestic, whether it's North American, wherever. This is a question of competitiveness and economics for individual companies. It's too easy to say that if we met the Kyoto targets it would cost us $36 billion if we had to go get them in the carbon market.

Well, Alcan is some days, questionably, in terms of its intent—But we're not stupid. We would not go into a carbon market unless it was competitively advantageous for us and it allowed for the transfer of value and the reduction of greenhouse gas at a facility level, and this is what we're after.

So nobody is saying that government should invest. I would not want the Canadian government to buy Russian hot air. I wouldn't buy Russian hot air. So if you look at carbon markets, I think the only recommendation I can make to you is that you need to better understand how the market works, because the alternative to the market is a carbon tax.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I have some more questions, and we have a chairman who keeps us really tight.

We've heard the cost of carbon sequestration. The Pembina Institute said it was somewhere in the range of a dollar per barrel for oil, for instance. I did a little research on that, and 25% is only the transmission cost; 75% is the cost to capture and to store it. I was very surprised at that. But I have heard other evidence that suggests it could be 10 times that amount, because the technology is not there yet.

Is that fair to say that we don't know where it is? There is some technology—Norway has it, and some other countries have it—but the reality is that nobody has done it on massive scales like this. And if you increased the efficiency of your capture—instead of 50% you go to 100%, for instance—it drives up the price substantially.

[The Chair, Conservative, Laurie Hawn]

A very short answer, please.

[Daniel Gagnier]

It's an unproven technology. There are pilot projects. I would steer you toward the Norwegian example. They probably lead in this area, and you'll get the parameters from them.

[The Chair, Conservative, Laurie Hawn]

I'm sorry, our time is up. I don't want to ruin my reputation.

Mr. Lussier, five minutes.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Thank you, Mr. Chairman.

Gentlemen, you have made some excellent comments this morning. I will begin by putting a question to Mr. Fraser.

In your brief, you state that 50% of our steel is imported, and that the mills producing that steel are not required to comply with very stringent environmental measures.

What countries are those mills in?

[Denis Fraser]

They are in a number of countries. I have personally visited facilities in Brazil, Kazakhstan, and perhaps most importantly—we should all understand the significance of this—China.

Steel production in China will soon account for almost one-third of world steel production. China is a formidable competitor, for all kinds of structural reasons that support the economy. China is a competitor which is very difficult to deal with, because we are in effect competing against the state. If in addition we create an economic environment that burdens us with additional taxes or additional economic disadvantages because of the need to comply with environmental requirements, it will become very difficult to justify the additional investment that would make it possible to achieve the goals we are discussing here this morning.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Thank you.

Mr. Marikkar, you provided very impressive figures on your companies that are engaged in greenhouse gas reduction efforts in a variety of ways, such as energy use reduction, pollution reduction, reduction of water use, and fibre recycling.

What do you expect Bill C-30 to deliver in terms of incentives making it possible for you to continue improving your performance?

[Rahumathulla Marikkar]

In terms of Bill C-30, to improve the air quality in general, it's to incent with market-based mechanisms. I think Mr. Gagnier mentioned that at one point.

We have green procurement policies within governments, and there are also many private sector organizations that look for greener products. We have a mechanism with EcoLogo to certify the top 20 products. And if there is a market-based mechanism, we take out the rhetoric and we start moving industries in the right direction on their own, and it will also pull the others toward it. Regulation-wise, we encourage the policy-makers to regulate the bottom 20 in each sector. It has to be considered sectorally, and then I think we will have a better direction.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Thank you, Mr. Chairman.

Mr. Peeling, in your brief you mentioned the performance of your companies. However, your list does include one poor performer. You frequently state "excluding tar sands". You say that Syncrude has reduced its emissions by 14% through intensity-based measures.

How will companies in your group respond when they note that their GHG reduction performance runs to some extent counter to the trends apparent in other tar sands operations? Is there a dialogue between the two? The targets of all groups should be aligned.

[Gordon Peeling]

There's considerable dialogue going on between those sectors. In fact, in many cases when we were looking to be more energy efficient in our processes, we were looking to benchmark our activities against the oil sands companies because they were leaders in being energy efficient in their operations. And yes, their numbers go up because of the absolute growth in investment in this industry.

This brings me to a point that I would have responded to an earlier question, in the sense that although within the sectors and subsectors we may well be ahead of our Kyoto targets in some areas, we're challenged, even though we're energy efficient in others. The reality is that Canada cannot get to that point without engaging consumers, each one of us, in our individual choices day to day. That's going to be a longer process of both educating the public in those individual choices they make and incenting the public with respect to public transportation, the automotive sector, with smaller cars, being more energy efficient, alternative fuels, you name it. That's just part of the reality that we deal with.

We have oil sands members. We have iron ore pellet plant members. We have smelting, refining. Canada has always wanted, in the development of its resources, to go as far down the value-added chain as it possibly can in creating jobs and getting into the semi-fabrication and manufacturing area to capture the best out of our resource base. You have to understand that this first process of going to metal or to pellet plant and into the steel are the most energy costly of all the steps in that process, so we need energy, as Dan has indicated. We took it for granted for a long part of our history that this energy was available and everybody was facing the same costs, but we need to be much more efficient in our use of that.

[The Chair, Conservative, Laurie Hawn]

Thank you, Mr. Peeling.

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

[Fabian Manning, Conservative, Avalon, NL]

Thank you, Mr. Chair.

I thank the presenters for their presentations today. There is certainly some great advice.

From a business point of view, I guess, competition is always a concern, and competitiveness. If someone would care to answer, what would be the likely effect on trade and competitiveness of Canadian industries if Canada introduced measures to meet its Kyoto obligations, but other major economies and trading partners, such as the United States, which is a major trading partner for us, did not?

I'm just wondering how the competition factor plays out here, Dan.

[Daniel Gagnier]

A number of U.S. companies have recently banded together under USCAP, the United States Climate Action Partnership, including GE, Alcoa, Duke Energy. Basically what they're saying is that we need a cap and trade system, we need regulation. I fundamentally believe that given the interdependency of our two economies, we need to make sure we don't harm ourselves and that basically we have a harmonization between us.

That's why I said initially that whatever we do, we have to make sure we move in lock-step, or reasonably in lock-step, so we can learn by having a domestic market, so we can learn by having sectoral targets. In the final analysis, we're going to have to make sure that on a North American basis we have a competitive bloc on which we can act.

[Fabian Manning, Conservative, Avalon, NL]

Mr. Fraser, would you care to comment on that?

[Denis Fraser]

I would echo the same thing, that an alignment with the U.S. is extremely important. As I alluded to in the past, there's a lot of steel travelling across the border; there's a lot of industrial activity of all sorts that make the continental market—the U.S. and Canada—one economic entity. Departing significantly from the policies and the economic environment that is present in the U.S. could have a very detrimental effect on the Canadian industry.

On the other hand, it's an opportunity to work and enlarge our view of how we can attack the environmental issues, in concert with actions that are being taken by the Americans.