Environment Committee on Dec. 11th, 2018

[The Chair, Mr. John Aldag (Cloverdale—Langley City, Lib.)]

Good afternoon, everyone. Welcome to our final hearing that we have scheduled on clean growth and climate change in Canada, looking at forestry, agriculture and waste.

We're booked until five o'clock today with our panel.

I just want to make sure our guests via video conference can hear me all right.

[Robert Coulter, Vice-President, First Carbon Credits Corporation]

I can. Thank you.

[The Chair]

We'll get started with our opening statements right away. Each of our three presenters will have 10 minutes.

We'd like to have our video conference guests go first while we have them and the feed is working. First, we have Mr. Robert Coulter from First Carbon Credits Corporation.

Mr. Coulter, if you'd like to start, we'll give you 10 minutes.

Just so everybody knows, I use a card system here. Yellow means there's one minute left in your time. Red means your time's up, so just finish your thought. You don't have to stop dead, but wind it up

I would like to welcome Mr. Falk to the table.

[Ted Falk, Provencher, CPC]

Thank you.

[The Chair]

I don't think we have any other substitutes today.

Mr. Warawa.

[Mark Warawa, Langley—Aldergrove, CPC]

I have just a very quick question, as I don't want to delay anything.

The environment minister was invited to the committee. Is there any indication that she's going to be coming before this session of Parliament ends?

She was asked to speak to the supplementary estimates, which have already been reported back.

Is she going to be coming here and answering the questions of this committee?

[The Chair]

My expectation is that we will be inviting her.

[Mark Warawa]

We've already invited her, Mr. Chair.

Is she going to come?

[The Chair]

I would like to get into witness testimony, while we have the feed going. This isn't a point of order.

[Mark Warawa]

I didn't say it was a point of order, Mr. Chair.

[The Chair]

I realize that.

We'll see if it comes up with committee business that there's a desire to invite the minister.

[Mark Warawa]

It's an easy question. You acknowledged me. You've given me the floor to ask you that question.

Are you saying you don't know, Mr. Chair, or are you saying you won't answer the question?

[The Chair]

I'm saying I have nothing before me in the form of a motion or anything directing us to invite the minister for something.

[Mark Warawa]

The committee chair said that they were going to invite her. There was a subsequent motion that wasn't supported by Liberal members to meet at any time or any place. Before that, there was a motion that the committee invite the minister and that happened. The minister was invited.

The question is whether she is going to come at any time before this session ends.

[The Chair]

On that, the debate had been adjourned on that motion. It never came back, so we didn't invite the minister for this specific session because the motion wasn't resolved. That's where we're at.

[Mark Warawa]

Thank you.

[The Chair]

We'll go back to Mr. Coulter.

You have 10 minutes.

[Robert Coulter]

Thank you very much, Mr. Chairman.

I'd like to start off by thanking the committee for taking the time to hear me.

I'd like to acknowledge that I am on the traditional territory of the Songhees Nation here in Victoria, B.C. on a beautiful rainy day today, and that I am the son of a Sto:lo Nation father, Robert Coulter. My mother is Thelma Chalifoux, a Métis from Alberta.

Getting that out of the way, I'd like to start, first of all, by saying that the mission, as I understand it from the pan-Canadian framework, is to increase stored carbon and identify and enhance carbon sinks.

Of course I've had many experiences since 2000. I was initially working with first nations and Métis groups in northern Alberta as we identified different intensive livestock operations. It was there that I was first introduced to the idea of composting as a soil amendment and also as another revenue stream for potential livestock operations. That got me into this whole field of climate change, especially into carbon sequestration and the different methodologies we could use as we strive to develop a market-based approach to carbon sequestration in particular.

Having said that, I'd like to start off by defining what a carbon sink is. I am going back because there are many different interpretations of carbon sinks that I've run across. I have 10-plus years of experience of dealing with this issue, both on the Prairies and out here in B.C. as I went around negotiating with all the first nations on clean energy developments, especially around tidal energy.

A carbon sink is a natural or man-made reservoir that accumulates and stores carbon dioxide, like the ocean and of course the earth.

When I was meeting with farmers, I often told them that although we know carbon is absorbed from the air by the land anyway, by using best practices we can enhance that absorption even more. That is measurable, and we could measure that absorption and take that difference to the marketplace as a compliance offset. That was our strategy at the time as we were developing a market-based aggregation process with the farmers of Alberta.

That was our definition, and of course we also moved into the landfill area and land use change, talking to various landowners in both the forestry sector and the agricultural sector.

As an aggregator, in the company I founded and operated, we had about 1,100 farmers enrolled in our program. We were encouraging them to use best practices—no-till farming in particular—to effect a more meaningful change.

That was just a small portion of what we were doing, because we know that in Alberta in particular there were about 52 million acres, and I think in western Canada as a whole we had about 55 million hectares, or about 137 million acres of agricultural land. That land had the potential to become about 30% of the solution, as opposed to being measured at about 10% of the problem of CO2 emissions.

We also looked at methane capture on some of the intensive livestock operations, because of course methane is about 21 times more intense than carbon dioxide emissions.

Of course, there was the old issue of arable land, especially summer fallow, in particular, with nitrogen emissions about 210 times more intense than one tonne of carbon. There was a lot of incentive for us to look at agricultural emissions in particular, and to try to mitigate them by using enhanced practices.

I've put together a slide presentation, which apparently you'll be getting later on in the week once it has been translated.

I wanted to talk about one of the things that we really tried to encourage farmers to do, which was to maintain their crop residue and keep that on the land without touching it. Even though it could be used for feed, fuel, fibre or construction material, we wanted to encourage them to maintain it because the more organic matter that you have left on the field, the better water retention you have. More than that, we wanted to encourage them to do these best practices because they increase the coefficient of the land to absorb more carbon.

Of course, in our market-based approach, the coefficient was the money number. The higher your coefficient, the more dollars you generated from your land by aggregating the carbon offsets from it. This slide show you're going to get later talks about how conservation tillage increases the coefficient by 0.01 to 0.4.

There was a winter cover crop. We encouraged them to do a winter cover crop and increase their coefficient from 0.05 to 0.20. Soil fertility management, eliminating summer fallow, forage-based rotations, organic amendments and water table management all increased their coefficient, which meant there were more dollars in their pockets. We really tried to show the farmers that it was a win-win. As they incorporated these practices into their farming operations, it would increase their soil organic carbon and they would also have better water retention. We could also show that because of increased yields, they would have a better profit. Not only that, but they could add an additional revenue stream by selling their offsets to the large final emitters in Alberta under the rules of Ed Stelmach in 2007.

That was our main business model. They would make the assertion that they were following these practices. As aggregators, we would take on the role of validating and verifying their assertions, so that we could convert those raw offsets, as we call them—farm offsets—into a compliance offset suitable for sale to the large final emitters in Alberta under the Alberta system.

That was our methodology. Of course, it included the verification process using an agronomist. We had to make sure that they actually had the one-pass conservation system, they had the proper equipment and they had complied with all the elements of the contract we had with them.

Once we did that, we then had to serialize them under the CSA at first. Eventually we convinced the Alberta system to develop a serialization process to ensure that we had an accurate way of tracking the compliance offsets, particularly to ensure there was no gaming or double counting.

It was quite an eventful time between 2007 and 2009, in particular, as we developed that market-based approach to ensure that land use and land use change was documented, verified and converted to a compliance offset. Then, of course, we were able to sell them to some of the large final emitters on behalf of the farmers.

That was our methodology at the time as we worked through this. The value of soil carbon to the farmer is that the soil quality is enhanced. The value of soil carbon to society is that we reduce erosion and sedimentation of water bodies, and there's an improvement in water quality, biodegradation of pollutants and mitigation of climate change.

The common denominator between both forests and agriculture is that we maintain our precious resources.

Thank you very much, Mr. Chairman. I conclude these remarks.

[The Chair]

Thank you so much for those opening comments. There will be a chance for the members around the table to ask questions as we get into the session.

I'll turn now to Ms. Baldwin from the Agricultural Institute of Canada.

We'll turn it over to you, and you have 10 minutes for your opening statement.

[Kristin Baldwin, Director, Stakeholder Relations, Agricultural Institute of Canada]

Thank you, Mr. Chair.

Thank you for inviting us here to participate in the committee's study about clean growth, technology and climate change and their impact on various industries, including agriculture.

The Agricultural Institute of Canada was founded almost 100 years ago, in 1920, and is a unifying voice for cross-sectoral research and innovation in Canada. We advocate on behalf of agricultural research, disseminate information and create international linkages. To put it simply, the stakeholders we represent research, develop and innovate technologies and products for use in the agri-food sector. They know that Canada's agri-food sector holds significant potential for the development and use of clean technologies and bioproducts.

The innovations being developed today have the potential to revolutionize both the way we produce and cultivate products as well as the products themselves, whether they are making products that grow cleaner for fewer emissions and lower carbon footprints, developing techniques that improve how our producers cultivate the products, or making better use of the waste products generated. Canada's researchers are at the forefront of this industry and are world leaders. We are already seeing products that use fewer resources, emit less carbon, have higher crop yield and greater nutritional value.

With targeted and strategic support, the impact of these innovations can be felt on a greater scale. We believe that this presents an opportunity for federal leadership. A central part of this strategy begins with fostering collaboration between sectors. By encouraging and nurturing cross-sectoral partnerships, we will take great strides to find solutions to ongoing issues.

As an example, in the spring AIC will be hosting an agri-food innovation summit to promote collaboration between sectors, research clusters and governments. Participants from across various industries will gather to discuss future research plans and paths forward. The end goal is to find areas where research overlaps and applications can be shared between sectors as well as to identify what tools can be used to further support the research and adoption of these technologies. As an example, we will be bringing together representatives from the artificial intelligence and robotics sector, along with the agricultural sector, to find opportunities to use an existing knowledge base for action in another field.

We believe that the government has a role to play and hope that they will consider further supporting initiatives like this one and more going forward, including by supporting the development of carbon dioxide sponging systems in urban cities, comparable to what is done currently in the Netherlands, promoting indoor horticulture in urban designs and investing in systems to increase carbon dioxide use, including bioenergy and waste product utilization.

As is true with most technologies, being an early adopter is expensive, and the impact of delaying the use of green technologies merely exacerbates the use of older, less efficient and less environmentally friendly technologies. Key government support and incentives from the research stage to the adoption by the end-user are essential to broadening the use of these technologies. Creating a favourable climate for the adoption of clean technologies will help ensure that the desired effects are felt on a broader scale. This could be done through the taxation system such as with tax breaks, writeoffs or direct financial support.

A central element of the application of new technologies is often the same: access to broadband Internet. Without this basic building block, the impact of many of these new technologies cannot be felt as widely as their potential. This fall's Auditor General's report painted a disappointing picture of the state of Canada's connectivity in rural and remote areas. The federal government has taken some action on this, including setting up the federal-provincial-territorial connectivity committee and launching a public consultation on the topic. We encourage the government to move forward expediently and shift from the consultation stage to the implementation stage.

Adapting Canada's urban environment presents a unique opportunity for Canadian innovators and great potential for the development of carbon capture and storage capabilities. I know that this committee has previously conducted a study on this topic, so I won't go into too much detail, but if steps are taken today and leadership is shown, we can convert our built environment into carbon sequestration hubs and generate revenue while reducing our carbon dioxide.

This government has outlined an ambitious climate plan and has identified areas where further action is needed to help meet our emissions targets, including in our agricultural sector. Further to this, ministers of agriculture agreed to address priority areas as well as accelerate science, research and innovation in selected areas. We believe this is a step in the right direction but would like to see some further leadership from the federal government as it relates to the use of carbon tax revenue.

Recognizing the significant impact of clean technology in the agricultural sector and the environment as a whole, we recommend that a portion of these revenues be specifically earmarked for the introduction of new sources of energy as well as to support the production of biofuels. Through dedicated earmarked funding, this sector will get the support it needs to grow, and I'm sure that my colleague here will touch on that point as well.

Canada has already demonstrated global leadership in clean growth in the agricultural sector, notably in the development of alternative protein, which is the focus of the protein supercluster based out of Saskatchewan. Through the use of plant genomics and other techniques, the nutritional value of key crops such as pulses, wheat, canola and more will be increased. This in turn lowers the impact on the environment while increasing the products' appeal on a global market.

With strategic and targeted investments, innovations like these have the power to succeed. Coupling the ingenuity of Canadian researchers with government support will allow the agricultural sector to meet its potential while supporting clean growth and technologies.

Thank you very much for taking the initiative to address this important topic.

I look forward to your questions.

[The Chair]

That's excellent, thank you.

Now we'll go to Mr. Hooper with Advanced Biofuels Canada for his opening comments.

[Doug Hooper, Director, Policy and Regulations, Advanced Biofuels Canada]

Good afternoon, ladies and gentlemen.

Thank you for the opportunity to speak to the committee today. My name is Doug Hooper, and I am the director of policy and regulations for Advanced Biofuels Canada.

Advanced Biofuels Canada is the national voice for producers, distributors and technology developers of advanced biofuels in Canada. Our members are global leaders. They have built and operate plants on four continents, with the capacity to produce over 12 billion litres of advanced biofuels annually. Here in Canada, they currently operate seven biofuel facilities, with annual capacity of over 400 million litres. They are working hard to supply clean fuels and develop new refinery projects in Canada to meet increasing demand for low-carbon fuels.

Since 2005, ABFC has provided federal and provincial leadership on effective biofuel policies that expand low-carbon fuel options, achieve measurable climate action results, and stimulate new investments and clean growth. I am here today to speak to your analysis of how to generate more bioenergy and bioproducts, and to advance innovation in the forestry, agriculture and waste sectors.

Specifically, I will address the potential of advanced biofuels to reduce greenhouse gases in Canada, and describe how the Government of Canada can incentivize their production. I will conclude by defining some of the economic benefits, and describe a path forward. Before I speak to those issues, let me begin by introducing you to biofuels use in Canada today.

Canada's renewable fuel industry was born several decades ago, as farmers sought to improve farm gate revenues and reduce dependence on foreign exports by producing ethanol made from our corn and wheat crops. Over the last decade, refineries to produce low-carbon, advanced biofuels, such as biodiesel made from canola, soybean oil and animal fats, and cellulosic ethanol made from biomass and municipal wastes, were built in Canada to meet demand for clean fuels under federal and provincial regulations, such as the federal renewable fuels regulations, and various complementary provincial RFS regulations.

ln 2013, British Columbia pioneered Canada's first low-carbon fuel standard, called an LCFS, for transportation fuels. Canada's clean fuel standard is now under active development by ECCC to apply this proven regulatory approach to fuels used in transportation, industry and buildings.

The adoption of renewable fuels regulations and LCFS regulations has opened up market access for biofuels in Canada, and stimulated investment in new refining capacity. lt has also contributed to significant greenhouse gas reductions. From 2010 to 2016, biodiesel and renewable diesel use has grown from 160 million litres per year to 540 million litres. Over the same period, ethanol use expanded from 1.7 billion litres to 2.8 billion litres. Annual greenhouse gas reductions from the elimination of fossil fuels used in cars and trucks has gone from 1.8 million tonnes in 2010 to 4.1 million tonnes in 2016. These are remarkable achievements in a short period.

However, despite having a wealth of sustainable forestry, agricultural and waste resources, Canada has fallen short of its goal to meet our biofuels demand with Canadian-made biofuels.

ln 2016, we produced 1.6 billion litres of ethanol, but relied on 1.2 billion litres of U.S. imports to meet our domestic demand. ln addition, we produced 415 million litres of biodiesel, most of which was exported to the more lucrative U.S. markets, and we relied on imports of 240 million litres of U.S. biodiesel and 300 million litres of renewable diesel from Asia and Europe. Over 2017-18, this trade imbalance is growing, with expanding imports of ethanol, biodiesel and renewable diesel today.

Let me turn now to your first question—what is the potential for advanced biofuels to reduce greenhouse gases in Canada?

Under the clean fuel standard, we anticipate that clean fuels will replace liquid fossil fuels to deliver at least 20 million tonnes per year of greenhouse gas reductions by 2030. This is two-thirds of the targeted emission reductions under the CFS. These reductions will come largely from advanced biofuels that are commercially established today—biodiesel, renewable diesel, ethanol and advanced ethanol. Emerging technologies such as biocrude and carbon capture are in the pilot and demonstration stage. They will expand clean fuel supplies and enable the deeper reductions that are necessary to meet our 2050 targets.

Advanced biofuels will replace gasoline in cars and diesel fuels used in trucks, locomotives, ships, airplanes and heating. Liquid fossil fuels will also be replaced by expanded use of electric vehicles, renewable natural gas and renewable hydrogen.

To achieve these emission reductions, renewable distillate fuel use could expand sevenfold, and ethanol and other renewable gasoline fuels could expand threefold by 2030. This is not a moon shot, but it is ambitious. It will require a transformation of our fuel supply systems.

This transformation is not confined to Canada. It is a global market shift. Canada has extraordinary potential to expand production, use and export of advanced biofuels. We need to reset our vision. Given our forestry and agricultural resources and technological know-how, Canada has the ability to be a global leader in advanced biofuels and other clean fuels.

To get there, we recommend that we develop a clear, focused clean fuel growth plan. A clean fuel growth plan would have three core elements. First is the clean fuel standard. The CFS will establish clear climate targets, create market access and expand consumer options. Complementary measures, such as carbon and excise fuel taxes, fuel economy, emission standards and RFS/LCFS regulations, are the second component. Number three is competitive conditions, programs and tax policies that create the appropriate conditions to attract the necessary investment.

Together these pillars will align market signals and address market failures to enable advanced biofuels and other clean fuels to meet our domestic needs and open new export markets.

In November, we released our 2018 ABFC capital project survey data. Over the period 2018 to 2030, our members collectively identified 44 new advanced biofuels production projects and eight facility expansion projects. These projects require capital investments exceeding $6 billion. Twenty of the projects exceed $100 million in capex. A further nine of the projects are estimated to cost between $50 million and $100 million to construct.

The projects span a range of technological processes, renewable fuel products and bioproducts. You will receive a slide deck with a summary of these projects and the data describing them. By 2030, they represent over 600 million litres of renewable gasoline fuel production capacity, over 2.5 billion litres of renewable diesel and biodiesel capacity, and one billion litres of biocrude fuels that can be co-processed into a range of finished fuels including biojet and renewable marine fuels.

Importantly for your committee's consultations, these projects represent utilization of up to 2.1 million tonnes per year of vegetable oils and animal fats, and up to 3.5 million tonnes per year of forestry and agricultural biomass residues and wastes. This significantly reduces our dependence on export markets and adds value to our natural resources.

Earlier this year we released a study on the economic impact of expanded biofuels production in Canada. If Canada increased its biofuels production capacity to 11.9 billion litres per year, Doyletech Corporation estimated one-time direct and indirect construction impacts of over $9.5 billion and 45,000 jobs. Annual operations would increase economic output by over $18.5 billion and sustain over 12,000 full-time jobs.

To build capital-intensive projects, investors are seeking to minimize and manage risks and generate stable and predictable returns. Over the past 20 years of global biofuels build-out, there's been solid evidence that performance-based production credits are an effective tool to support capacity investments. Capital support for commercializing novel clean fuel production technologies and new clean fuel infrastructure assets is also necessary. As with all dynamic technology sectors, targeted measures to support ongoing innovation and research and development are a core component.

We are currently consulting our members on the specific measures to address whether Canada is competitive to attract the necessary investment. We are looking at the measures that were announced in the fall fiscal update. We welcomed those announcements. We're looking at the economic strategy table recommendations that were released earlier this fall, and we're evaluating the federal and provincial policies and programs that currently are targeted at clean growth more generally.

As I stated earlier, our members are global leaders. We'll inform our analysis and recommendations based on their feedback.

In summary, advanced biofuels are a key partner in Canada's climate action and clean growth plans. We thank you again for the opportunity to appear today, and I look forward to your questions.

Thank you again.

[The Chair]

Excellent. Thank you.

Now we're going to get into a series of six-minute interactions with individual members.

First up, we have Mr. Bossio.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you, Chair.

Thank you all so much for being here today. They were outstanding presentations with a lot of information. My brain is reeling right now, trying to get it all in there and figure out how I want to frame some questions.

I'd like to start with Mr. Coulter, if I may.

Alberta set up a market-based system back in 2007 to drive the carbon sink model in agriculture, in a sense. I know that it was to drive down emissions and to use carbon sinks as a carbon offset, to offset the emissions that were being generated in other parts of the economy. It gave businesses the opportunity to do that.

Would you say that was the catalyst that has driven the carbon sink model that now exists in Alberta?

[Robert Coulter]

Yes, I tend to agree with that.

I've spent many hours, many evenings, going around talking to various farmers. I think I must have been at over 100 farmer meetings. Our model was very constituency based, so I wanted to get on the ground to talk directly to farmers and show them....

Of course, as you know, Alberta was not about more taxes. They wanted to know how a market-based system could benefit them and generate another revenue stream. The large final emitters that I was negotiating with also wanted to know how they could participate in this new market that Premier Ed Stelmach at the time had put together, but they wanted to mitigate their risk. That was their main concern.

We were the go-between, between the farmers who generated, like you said, an additional carbon sink because of their good practices, and the larger final emitters who wanted to have a compliance credit that they could take to the marketplace in exchange for their over-the-limit carbon emissions.