Environment Committee on Oct. 27th, 2009

[Jeff Watson, Conservative, Essex, ON]

What would it mean to existing refining capacity? Is there any potential to put existing refineries at a disadvantage?

[Dr. Rick Hyndman]

We are exposed to competition at the import points, so if the refineries in Canada faced a huge carbon charge relative to their competitors in the U.S. or offshore, then we'd see a lot more imports coming in and refinery runs going down. Whether any refineries would close, I don't know. They certainly would be facing real competitive pressure from suppliers outside the country.

[The Chair, Conservative, James Bezan]

Thank you. Your time has expired.

[Jeff Watson, Conservative, Essex, ON]

Could they provide something to the committee in terms of a quantification, if that's possible?

[The Chair, Conservative, James Bezan]

Does CAPP have any documents that be given to the committee?

[Dr. Rick Hyndman]

We don't deal with the refineries. That's the CPPI, but--

[The Chair, Conservative, James Bezan]

Maybe that in case we'll--

[Jeff Watson, Conservative, Essex, ON]

CPPI could be a future witness, perhaps, Mr. Chair.

Thank you.

[The Chair, Conservative, James Bezan]

Mr. Calkins is next.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Mr. Chair.

I appreciate the opportunity to have another Albertan at the table.

Mr. Hyndman and Mr. Turk, I appreciate your interventions, wisdom, and guidance here.

Through your associations and industries, when it comes to discussions, whether they're within the industry, with the government, or at an international level, you're constantly going through a series of negotiations. Whether it's negotiations for acquisitions, negotiations dealing with industry challenges, negotiations with landowners, or negotiations with government, there's constantly a set of negotiations.

As we prepare for Copenhagen and as we prepare our country for the discussions with our largest trading partner--a trading partner with whom we have integrated markets, as has been discussed already, whether it's our energy or consumer markets--does it make sense to any of you that we would play our negotiating hand out before those negotiations basically even start? That is what Bill C-311 would do. It would be the equivalent of playing Texas hold'em and showing everybody at the table our two cards.

[Dr. Rick Hyndman]

I think it's worse than that. I think it's turning in your aces and pulling out deuces.

To take on a target that is so much more onerous than any other country would even contemplate just puts you in a very awkward situation in dealing with how you're going to align with the U.S. You couldn't have a policy with a comparable effect on your industry that delivered anything like the reductions you're talking about. That's a big challenge—20% off from 2006 levels.

How are you going to reconcile these things? You either have to sacrifice industrial growth and have some output shift or force the costs on some other part of the economy, which the general public is not anxious to pick up.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Turk.

[Eli Turk]

I think we need to look at what's going on continentally and internationally in terms of context. That's an important element.

Again, electricity underpins a lot of the other sectors of the economy. In relation to cost burdens, it has a huge impact on competitiveness.

So to answer your first question, what's happening continentally and internationally has to form the context of what we're negotiating. There's no doubt about it.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Mr. Hyndman, you said that if this bill were passed we would see no new upgraders built, that we would see a dead stop in investments in the refining industry in Canada. Wouldn't it also undermine the investments that we're already making in carbon capture and storage, like the carbon trunk line, the announcement directed west of Edmonton? There's a proposal on the east side of Edmonton to take carbon south into my constituency.

As a matter of fact, both of these lines would take carbon dioxide into the constituency that I represent, to use for enhanced oil field recovery. This bill would essentially kill all of those processes and undermine the investments that are already made, would they not?

[Dr. Rick Hyndman]

There are balancing forces. But there is no set of policies with enough public support to get you anywhere near this. It would raise the level of policy uncertainty dramatically. We wouldn't have a framework to ramp up with our competing trade partners. We wouldn't have people investing in the fundamentals of the product and not worrying about whether it was being produced in Canada, the U.S., or somewhere else. This policy uncertainty gets us into a debate over how we're going to come up with something to meet a target that's un-meetable.

Yes, I think it would have a negative impact on investment.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I just returned from a meeting of parliamentarians in Europe. One of the representatives was talking about the United Nations Framework Convention on Climate Change. He was talking about the numbers and the predictions, and he said that what we've seen during the global economic recession is a decrease in the amount of carbon dioxide emissions. I said that without the transformative technologies to get us to the next step, if a recession implies a reduction in carbon dioxide, then a reduction in carbon dioxide implies a recession. He didn't like my comment.

Would either of you like to address this?

[The Chair, Conservative, James Bezan]

Mr. Hyndman.

[Dr. Rick Hyndman]

The recession-induced reduction is like the Russian solution, where their economy collapsed and their emissions went way down. If you force a reduction in carbon dioxide that cannot be met by capital stock turnover in implementing more efficient equipment and new technology, then the only way of achieving such a reduction is to cut output. That's simple arithmetic.

The trick is to get a plan that is achievable, one that you can use to develop and deploy technology that will reduce emissions over time. But trying to go faster than you can, without being disruptive to your existing capital stock or trying to force things on consumers that they won't accept, actually slows you down.

[The Chair, Conservative, James Bezan]

Thank you.

Your time has expired, Mr. Calkins.

I have a question before we start our third round, Mr. Turk. You said that 20% of the electricity in this country comes from fossil fuels. What percentage does that represent of Canadian greenhouse gases?

[Eli Turk]

In terms of the total, we're about a third of the emissions in terms of industrial emissions.

[The Chair, Conservative, James Bezan]

We are making the investments in carbon capture and storage. We are starting to see some of that take place in coal-fired electricity.

What about moving those coal-fired plants to renewable fuels, such as biomass? There has been some interest in producing biomass carbon-neutral fuel from waste products. To me, switching from coal to a biomass product sounds like a fairly simple solution.

[Eli Turk]

There has definitely been an increase in activity in terms of biomass. It is something that has been done for quite a few years in the forest industry.

The key question, of course, for places in western Canada, where you have anywhere from 200 to 600 years of coal, is how you are going to use that effectively going forward. If China, India, and others are going to be using coal as well, the key question is how we actually find the technology that burns coal in an effective manner.

There is no doubt about it; there is a push to increase biomass, but there is a limit, also, to the fuel in terms of biomass.

[The Chair, Conservative, James Bezan]

Thanks.

We have about 11 minutes left, so we are going to do a quick round for all four parties. I am going to hold everyone to three minutes.

We'll go to Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Gentlemen, just to follow up on something Mr. Calkins said, in fact--not in speculation, but in fact--emissions decreased in this country between 2003 and 2006. They augmented by 4% in 2007 alone. They've continued to increase since the government's arrival.

Dr. Hyndman, I think I heard you say something about these targets being in excess of any other targets around the world. What is the European target?

[Dr. Rick Hyndman]

In my view, the right way to look at a target is how much you have to do to get from where you would otherwise be to where you're trying to get.