Environment Committee on Dec. 1st, 2009

[Bob Masterson, Director, Policy, Cement Association of Canada]

Sure.

Energy costs are very important to the cement sector. In fact, 40% of the plant operating costs are energy costs split fifty-fifty between electricity and fuel.

One of the things we'd like to bring to your attention is that in all the discussion of the U.S. bills, especially the Waxman-Markey American Clean Energy and Security Act, there are provisions in there to take into account the indirect costs on manufacturers, on steel, cement, and others, that will arise due to what are anticipated to be significantly increased costs of electricity.

They're working at another level of discussion than the one we're having here and they're getting down to the nuts and bolts of what the impacts will be on the various sectors. It's the discussion we are trying to have here in Canada as well.

[The Chair, Conservative, James Bezan]

We're going to our five-minute round, so I encourage witnesses to be very succinct in your responses.

With that, Mr. Scarpaleggia, could you kick us off?

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Thank you, Mr. Chairman.

You are all here to testify on Bill C-311. You represent the most important industrial sectors in Canada.

Did you consult your unions with regard to your position on Bill C-311? Do they believe as you do that this bill would devastate your industries and consequently exert downward pressure on the number of jobs in your companies, in your industries? Did you consult your unions, who are stakeholders as well, clearly?

[Peter Boag]

I can comment from a CPPI perspective. I receive my input and my guidance from my member companies, so I don't directly deal with their unions. To what extent they have included their unions in developing their position, I cannot say.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

I believe that that is an important and relevant question. Would anyone else here know whether the position of his association is informed in one way or another by the opinion of the unions?

[Ron Watkins]

Yes, we have discussed the aspects of climate change policy with the United Steel Workers, which is a principal union in our industry. We have not discussed specifically Bill C-311, but in terms of the issues and the concerns that I've brought forward in this discussion, we've equally had that kind of policy discussion with the unions.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Do the unions share your concerns?

[Ron Watkins]

I'm not sure what their ultimate position would be, for example, on Bill C-311. As I say, we talk to them about the importance of addressing the competitiveness concerns, the sectoral--

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

I will move on to my second question.

The chemical industry representative mentioned earlier that that industry had made enormous progress with regard to reducing greenhouse gases. Of course I imagine that the industry did so voluntarily, on its own initiative and because of its environmental conscience.

Did you ever negotiate targets in your sector with any federal government? Even on a preliminary basis, did you ever agree with any federal government on certain targets in your sector, even if they were not made public? Perhaps you did not have time to divulge those targets or they could not be ratified in a legal manner. Did you negotiate targets with any federal government, ever?

[Gordon Lloyd]

No, we haven't negotiated specific targets with the federal government. What we have done is emphasize to them the point that we need to move in pace with the Americans--

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

No, no, Mr. Lloyd, I'm not talking about this government; I mean any government. Have any of the sectors represented here today ever sat down with a federal government--maybe, Mr. Macerollo, you might know--and said, “We agree to these targets”?

[Gordon Lloyd]

No, we haven't done that with any federal government.

[Pierre Boucher]

We're certainly in the process of educating not only federal governments but provincial governments on the specific issues that relate to the cement sector. We are in the process of educating them so they have a better knowledge of what the issues are, and we will certainly be able, eventually...because we must do that to determine the sectoral targets. But we are not there yet.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

You never had discussions, ten years ago, with a government and arrived at some kind of consensus as to what your industry's targets should be in the short term. Has that never happened?

[Pierre Boucher]

Not on the sectoral level, certainly not.

[Tony Macerollo]

I can say that this is a function of history, but we did begin negotiations with one of the previous governments, but it was not concluded because there was an election.

[The Chair, Conservative, James Bezan]

Thank you. Your time has expired.

Mr. Woodworth, you have the floor.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you, Mr. Chair.

Witnesses, I appreciate your presence here. It's very instructive that representatives of the steel industry and representatives of the cement industry have joined the chorus of witnesses we've heard from who have stressed the great importance of harmonization on a North American basis. I think it's instructive that representatives of the steel industry and the cement industry have talked about the existence of competitive forces from around the world and have raised great concern that we get the balance right between economic costs and environmental benefits. I say that because it illustrates that this is not just an Alberta concern; it's not just an oil sands concern, as it's sometimes painted. Anybody with a job in a trade-exposed industry that consumes energy should be concerned, it seems to me.

Mr. Boucher, you spoke about the cement industry being trade exposed and energy intensive. Would you agree with me that these are concerns for anybody with a job in an industry that's similarly situated, trade exposed and energy intensive?

[Pierre Boucher]

I definitely would. That is why we're saying for the cement sector these fundamental characteristics must be taken into account in designing the cap-and-trade system. It's all in the details, which are important, talking about free allowances, auctioning processes, etc. We're not at this level of detail with this audience, but all these issues are being discussed with many levels of government right now. When we get into the details, all of these issues will be discussed. In Australia, in Europe, and even to some extent in the United States right now, we're at that level of detail in very specific forums.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

That, I think, is our government's concern. This cuts across all sectors that are trade exposed and energy intensive.

The other thing I've noticed is that not a single expert this committee has heard from knows of any country in the world being asked to reduce emissions at the drastic rate and cost that Bill C-311 requires. Not a single country in the world is being asked to bear such a cost.

Mr. Lloyd, you made an interesting point about the fact that international credits in Canada are selling at $200 rather than the $75 the Pembina report assumes. I have some real difficulty understanding that. I'm wondering if you might be able to help Canadians understand why carbon costs are so much higher in Canada, for example, than they are in the European Union.

[Gordon Lloyd]

There are probably a number of factors. For one thing, we probably don't have as much low-hanging fruit to go after as some of the Europeans do. We tend to have more modern plants. We also tend, particularly in provinces like Quebec, to already be using hydroelectric power, so we don't have low-hanging fruit in terms of making improvements in there to go forward. Those are some of the factors that I think go into that.

I'm not sure what all the factors are, but what I did find very interesting was the Environment Canada study from which, in our submission, I provided the chart about how much more expensive to achieve any given reduction level it is for Canada than for just about any other country. When you go off into the 2050 timeframe, we kind of get a bit closer to some others. I think people probably have less confidence in these forecasts for 2050 than they have in those for 2020 and 2025. Our costs, in the range you'd have the most confidence in, are higher than anybody else's. I've given you some reasons why I think that applies, from my experience, but that may not be complete.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you very much.

I guess I'm also wondering, if there is a difference in the price of a carbon credit, say $200 in Canada as compared to $75 worldwide, what effect will that have on, for example, the steel industry? I don't know if anyone has done that calculation, but what does that do to your exports, your industry, and your competitiveness? How many jobs might be at risk in a scenario like that?

[Ron Watkins]

We haven't done that specific calculation. We have had a look at the Turning the Corner plan; we at least tried to get an estimate of what the cost exposure would be, so to speak, of the obligations this would have imposed on us. And even at much lower carbon prices than $200, it was into the tens of millions of dollars. I think what's important to understand is, first, that's bottom-line cost; that just flows right through to the bottom line. But, second, looking to the future, it changes the investment dynamic.

So the trade impacts are important and would be real, but we also have to have—and this is the longer-term concern—an investment environment in Canada that will continue to attract investment, because there are options.

[The Chair, Conservative, James Bezan]

Excuse me, your time has expired, Mr. Woodworth.

Mr. Ouellet, you have five minutes.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Thank you, Mr. Chairman.

Mr. Lloyd, you said earlier that over the long term the emissions reductions provided for in Bill C-311 were very high, but that you did not know how they could be realized. The long-term targets contained in this bill are on the order of 80%, which represents more or less the same targets as the United States will be adopting for the period between now and 2050. That is what Europe and all of the other stakeholders adopted. Contrary to what Mr. Woodworth just said, witnesses have indicated that in Europe, using 1990 as a reference year, the target is 34%.

This bill only refers to a 25% target using 1990 as a reference year. So, we are not talking about 80% within a few years. In the long term everyone agrees. That seemed to be what was bothering you earlier—we don't know how we could reach such a high target. However, everyone has the same target.

Something else was said which is that the Kyoto Accord is no longer being discussed, but rather the Copenhagen agreement, which will be much more demanding. The reductions will be much greater and all countries are preparing for them.

Could you tell me, Mr. Lloyd, why you believe that such a bill would favour the United States?