Environment Committee on Feb. 6th, 2008

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

You spoke about an integrated approach, Ms. Rahbar. You spoke about London. Does it use natural gas for its heating?

[Dr. Shahrzad Rahbar]

London is on the natural gas grid, as they are on the electricity grid.

What they have found is that if they look at their systems, they can find ways of harnessing energy from their local waste. They can harness waste heat from their industries to then put into use in their residential and commercial. So it's the systems look, and I think in totality, as I said, they anticipate achieving a 55% reduction.

How is that split between gas and electricity? I'm not sure, but I assure you it's not.... It's coming off one field and it's going on to the other one. They're bringing in geothermal, they're bringing in passive solar, and they're bringing in energy from waste.

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

You say that natural gas represents 26% of the energy produced in Canada. Of that figure, what percentage of the natural gas is used by the tar sands industry?

[Dr. Shahrzad Rahbar]

That's an excellent question, and it's a number I should know, but I don't. May I come back to you with that?

The 26% is across the whole economy, which is residential, commercial, and industrial. Industrial would account for roughly half. As to what percentage of industrial the oil sands would be, allow me to get back to you.

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

I see. Please send your answer to the clerk when you have it.

What advantage would natural gas companies have if there were a price on carbon?

[Dr. Shahrzad Rahbar]

Mr. Lussier, let me clarify. I represent the distribution side of the gas industry, not the production side. Colleagues from CAPP should be answering your question. We, for want of a better analogy, are the truckers. We own the pipe that delivers the gas that customers use. As you can see, our own emissions are only a small part. We touch the six million that emit the 75%. That's the space I have been talking about.

I would defer to my “upstream” colleagues; I wouldn't presume to talk on their behalf.

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

Thank you, Mr. Chairman.

[The Chair, Conservative, Bob Mills]

Thank you very much

We'll go to Mr. Harvey, please.

[Luc Harvey, Conservative, Louis-Hébert, QC]

Thank you.

I would like to clarify one point before I ask my questions. R&D tax credits are refundable. They amount to 75% for in-house research and 50% for research done outside. We should not confuse research and engineering. I worked in this field for a long time, Mr. Bigras, so I could discuss it at length.

I come back now to our witnesses. This is my time, and today I would like to talk about aluminum produced here in Canada. When we produce a tonne of aluminum here, we produce four tonnes of CO2. When the same tonne of aluminum is produced in China, seven tonnes of CO₂ are produced. Mr. Sawyer spoke earlier about a carbon cost between $100 and $200. That means that Canadian aluminum would cost between $400 and $800 more than it costs at the moment.

Since you are economists, can you tell us whether we will continue to sell Canadian aluminum or whether the market will move to China?

Since I have only five minutes, and since there are four of you, I would ask for very brief answers.

[David Sawyer]

Thank you. I'll be very fast. It's a great question.

The aluminum industry is interesting in that there are investments in new high-efficiency facilities like in Kitimat--$2 billion, which is reducing emissions significantly. Those emissions can be used through a trading mechanism to help their sectoral colleagues in Quebec to meet targets. So here's a good example of flexibility in trading, where there might not be such a big hit.

The other interesting thing about aluminum is that the technology is improving to reduce those emissions. It has improved significantly, and it continues to improve. With an emission price, the deployment of that sort of technology improvement may be accelerated. The aluminum industry may not be the best example for talking about impact, because there are opportunities in the next while to reduce the cost of possible carbon dioxide.

[Luc Harvey, Conservative, Louis-Hébert, QC]

That means that this would have no impact. We should not forget that in China, there is no price on carbon. Even if there were carbon trading, there would be no restriction. So you say this would have no impact.

[The Chair, Conservative, Bob Mills]

If you could be quick, and then Mr. Dillon.

[David Sawyer]

I'll be very quick. I'm not saying it has no influence; I'm saying the influence is likely not as stark as the first look would imply. There are opportunities there.

[John Dillon]

Thank you, Mr. Chairman.

I don't think any of us, certainly not my organization, are here to suggest that aluminum production should move out of Canada. Clearly we want that to continue. We have companies and facilities that are world class when it comes to that sort of thing.

It is about smart policies. As we said in our statement, it's about getting those countries involved in such a way that Chinese production or whatever does not have an advantage over Canada. If we're talking about implementing a price on carbon, there are means to recycle those revenues, either through production in other taxes on those companies or through the cap and trade system, to ensure there's an incentive to invest in the technologies Mr. Sawyer is talking about and that there isn't that cost advantage to our competitors elsewhere. That doesn't do anything for greenhouse gases internationally.

So we have to be smart about those policies. It's not just about putting a huge price on carbon and seeing what happens. It's about recycling revenues, making sure we reduce other taxes so the costs to that company are in line with their competitors. That's critically important, and I hope we've made that point clearly today.

[The Chair, Conservative, Bob Mills]

One more question, Mr. Harvey, please.

[Luc Harvey, Conservative, Louis-Hébert, QC]

Do you want to add something, Mr. d'Aquino?

[Thomas d'Aquino]

No, I have nothing to add.

[Luc Harvey, Conservative, Louis-Hébert, QC]

Fine.

Do you think nuclear power stations are a valid solution that should be considered? Do you think that nuclear energy is clean and a valid source of energy?

[David Sawyer]

I can jump in. I'm not advocating nuclear. In fact, if one tumbles the numbers, nuclear is a very high-cost policy option, but it is being actively contemplated in the country.

I think for the carbon prices, nuclear becomes competitive, but there are all kinds of reductions below that, and we should go after them first. Simply being very lumpy with our policy--by which I mean picking winners--is probably not a least-cost option. We may solve the problem with a bunch of nuclear facilities fairly easily, but that may not be cost-effective.

Nuclear is not the answer.

[The Chair, Conservative, Bob Mills]

Go ahead very quickly, Mr. Dillon. Your time is up.

[John Dillon]

Thank you, Mr. Chair.

We've said quite clearly for some time that Canada is going to need all forms of energy. We shouldn't be discriminating against any. Energy demand is growing, not just in Canada but worldwide. We need all forms of energy.

[The Chair, Conservative, Bob Mills]

Thank you.

Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chairman. Thanks to the witnesses for coming today.

Mr. Sawyer, Mr. Vellacott was asking you questions earlier. Like all of us, he had a very short time, and we have the choice of saying please move on to the next person and so forth. He did that, and that's fine.

He was talking, as I recall, about your numbers in terms of Saskatchewan, and you wanted to go on to explain that. I'm going to give you the opportunity to do so right now.

[David Sawyer]

Thank you. One of the observations was that the targets in Turning the Corner and Bill C-377 are not that far off. One is 35% off BAU in 2020, and one is 50% off BAU.

So my quick observation is that if someone is saying that the one target is going to reduce GDP by 50%, while the other plan is going to reduce it by 36%, I don't think those are credible numbers. I think most numbers indicate that at these deep targets, you're talking about an annual growth. You're dropping annual growth down in half or by three-quarters of a point or something. So it's sort of in the range of 1%, certainly well within the growth rate.

Again, that masks sectoral and regional implications, and there are issues there. But 45% seems crazy.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much.

Mr. Dillon is anxious to answer that.