Thank you.
Good afternoon, everyone. It is a real pleasure to be joining you to discuss climate policy. Thank you for the invitation.
My name is Michael Binnion. I am the CEO and founder of Questerre Energy, president of the Quebec Oil and Gas Association, advisor to the Canadian Association of Petroleum Producers and president of High Arctic Energy Services, a drilling company.
My company discovered shale gas deposits in Utica, Quebec. Those are the largest shale gas deposits in all of North America.
I've published a peer-reviewed paper in Marine and Petroleum Geology and three papers on climate policy.
I want to start off by assuring your committee that I'm very well aware of the physics of carbon dioxide absorbing and re-radiating infrared energy. I'm also aware that human activity is increasing the amount of carbon dioxide in the atmosphere. I also don't at all subscribe to the idea that Canada is a small country with small emissions and therefore can't make any difference. Canadians have always been counted on to punch above our weight when there's a global problem, and I've always been proud of being Canadian because of that.
However, to do the right thing, we have to do things right, and I believe a climate policy should be measured and assessed by the overall cost to the economy divided by the net global emissions reduced, or, simply put, the cost per tonne of net global emissions reduced. In my opinion, Canadian carbon pricing policy fails on this measure. It has high costs, and almost all proponents now advocate for “supplementary measures”, which is code for the regulations carbon pricing was supposed to avoid.
As two examples, the Trottier report found that a price of $1,000 a tonne would be needed to meet our targets, while the Conference Board of Canada found that even at $150 a tonne, the policy would only reduce 12 megatonnes of emissions before carbon leakage.
I'm actually a carbon pricing dropout. It's Economics 101 that if something costs more you'll get less of it, and the market is more efficient than government mandates. It's just that in theory, practice and theory are the same, but in practice they're not. I changed my mind about parochial carbon-pricing policies when I learned first-hand how a good idea in theory was being applied in Quebec.
My company has engineered, with SNC-Lavalin, a clean gas project in Quebec to use hydroelectricity to create the world's first natural gas development with zero emissions, zero drinking water, and zero toxic frack fluids. A comprehensive environmental study by Polytechnique Montréal estimates that our project will reduce 18 different health and ecological impacts by an average of 65%, and climate impacts by over 70%. It is one of the greenest projects in Canada today, and it would reduce emissions by over a megatonne before even counting fuel-switching opportunities.
What I learned, though, is that our project had a fatal flaw under Quebec climate policy: We were reducing emissions in the rest of Canada, not in Quebec. A green project that didn't reduce emissions in Quebec wasn't encouraged; it wasn't even wanted. It's through this experience that I learned first-hand about the green paradox, in which a policy to reduce emissions locally actually increases them globally due to carbon leakage.
Now, experts in Canada will give you the quick answer that output-based allocations, or OBAs, will solve the problem that carbon leakage represents for trade. In my opinion, this is using a Band-Aid to cover up the main problem of trying to address a global problem through a parochial approach. OBAs create complex regulations that are opaque to the public. Very few experts understand the economic models used to estimate what the credits should be, and those who do understand the models understand how they can be manipulated. It's a system highly vulnerable to politicization.
Carbon Market Watch in Europe estimated that the European trading system over-allocated 24 billion euros in OBAs. Not only were companies given full credit for their emissions, but they also received bonus credits of 24 billion euros, creating a windfall for those industries that had best played the economic modelling game.
Worse, putting a Band-Aid on a system covers up the real issue: Canadian carbon pricing policy is working on a small problem, not the big problem. Canadian carbon pricing works exclusively on reducing the 1.5% of world emissions that are already top decile environmentally. As one of the few net exporters of energy-intensive goods in the OECD, we also could be working on the 98.5% of emissions with, by definition, only average environmental standards. It's the low-hanging fruit that Laurence was talking about. We only need to reduce global emissions through our exports of products and knowledge by 1.6% to make the same difference we would by completely eliminating all of Canada's emissions.
Let me give the example of Canadian aluminum which, due to hydro and clean electricity, which Anne and Patrick were talking about, produces only two tonnes of emissions per every tonne of aluminum, compared to America at 11, Australia at 14 and China at 17. My common sense climate policy paper recommends that we deregulate and give tax rate reductions to help Canadian industries like aluminum, industries with global comparative advantages in carbon, to be more competitive in world markets. I'd just ask what percentage of the world aluminum market Canada would need to reduce our global emissions by to reach our Paris target.
I'm working on a new study now that will start to quantify how Canada would actually punch well above its weight in terms of emissions reductions by exporting our clean tech, our regulatory approaches, and those of our resources, such as aluminum, that are produced to the best standards in the world.
Where Canada doesn't enjoy comparative advantages in carbon, I believe flexible regulations like the corporate average fuel economy, or CAFE, standards, have proven to be more effective. We have a global issue, and I'm confident that the planet needs more Canada and more of our clean technologies and resources, produced to the highest standards in the world.
Thank you very much for your attention.