Environment Committee on March 31st, 2022

[The Chair, Liberal, Francis Scarpaleggia]

You have 25 seconds, please.

[Julia Levin]

I think it's incredibly important that we don't take away subsidies that give energy security to indigenous nations. To put that in context, out of the $18 billion, it was $3 million. I would say that $3 million should stay. Out of the $8.6 billion, it was $2 million. That $2 million should stay.

However, that's not most of what we're talking about. I would support more money going to help indigenous communities transition or develop, whatever decision-making that nation wants to do.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Mr. Weiler is up next.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

I'd like to also thank the witnesses for joining us today.

I'd like to ask my first question to Mr. Beugin.

You've been very complimentary of carbon pricing as the most efficient tool to reduce emissions, and for Canada to do more and faster reduction of emissions—as our Minister of Environment and Climate Change said—from our largest and fastest and growing source of emissions. Do you see a role for government to support reducing emissions on top of what would be feasible through regulations alone?

[Dale Beugin]

To be clear, is this support in addition to carbon pricing and regulations?

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

That's exactly it, yes.

[Dale Beugin]

I think carbon pricing and flexible regulations should be the backbone of a cost-effective policy that will minimize costs to achieve deep emissions reductions.

That being said, there are things that carbon pricing doesn't do. It doesn't necessarily provide full support to innovation and research and development. There's a case for subsidies there. It doesn't provide incentives to build infrastructure that private individual firms might not build. However, all of them together can work more efficiently. All of those things create room for additional support, information, and providing additional certainty about long-term carbon prices, perhaps through support from the Canada Infrastructure Bank.

All of these kinds of complementary polices can make carbon pricing work even better, both in terms of effectiveness in reducing emissions and in the cost-effectiveness of minimizing costs.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thanks for that.

One of the other points you made in your opening remarks was that Canada should make tough choices by investing in areas with scarce public funds. One of the areas you mentioned is a sector that could thrive in a low-carbon future, which is hydrogen.

I was hoping you could speak to the opportunities you see in hydrogen, both blue hydrogen and green hydrogen, and how you see those competing over time.

[Dale Beugin]

Both could play significant roles on pathways to net zero to 2030, and on to 2050, and both should be part of the playbook. Ideally, policy is less technology prescriptive rather than more prescriptive. It lets the market determine where there are the most cost-effective opportunities to reduce emissions and contribute to economic growth. Options should be kept open, absolutely, with respect to both.

That doesn't mean that they will necessarily play out and evolve into game-changing technologies, but they very well might. Both domestic and international markets are going to be increasingly demanding low-carbon fuels.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you.

I'd like to ask my next question of Ms. Levin.

You made the point earlier on that we need to electrify our economy and invest in renewable energy. These are some of the things that we're already doing through the pan-Canadian framework; the healthy environment, healthy economy strategy; and, of course, the ERP, which was just announced yesterday. This is a lot of the low-hanging fruit that we really need to focus on, but there's going to be a point where we'll have harvested all of that low-hanging fruit and it's not going to get us all the way to net zero.

I am wondering if you see a role for government to invest in R and D, in moon-shot technologies and other pilots, which may not bear fruit right away but down the road could be critical, not only for Canada but also for other countries to have deep decarbonization.

[Julia Levin]

I certainly do. We need to have R and D in areas that are not going to play a role in the next 10 years but will later on.

I will say that with those low-hanging fruit parts of the equation, that's 80% of our emissions. That will take us a lot of the way there, and then some extra R and D into some of the areas that might play a role. It just shouldn't go to the companies that are fuelling the climate crisis.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

The report that Environmental Defence released earlier today was very critical of CCUS.

There are all types of different applications of carbon capture. One that I am curious about and ask that you speak on is Environmental Defence's position on the role of direct air capture, in terms of not only reducing current emissions but also reducing legacy emissions that have already been emitted.

[The Chair, Liberal, Francis Scarpaleggia]

You have 20 seconds, please.

[Julia Levin]

We should be doing R and D, but we shouldn't be making climate plans assuming that will pay off. Oil and gas companies shouldn't be doing R and D. NRCan has $400 million to do that. If the tax credit is only for cement, or some of these R and D purposes, that's okay to go ahead, as well.

[The Chair, Liberal, Francis Scarpaleggia]

I want to thank our witnesses for a very stimulating discussion, one could say debate. I know everyone's testimony is going to contribute very much to the report we will be writing at the end of this study.

Thank you very much. We're going to pause for a moment, so we can connect virtually with the witnesses for the second panel.

I'd like to thank all the witnesses for their testimony, and I'd also like to thank them for presenting their views on today's issue. We look forward to seeing you again, perhaps in another context.

We are going to take a real break to welcome the next panel.

[The Chair, Liberal, Francis Scarpaleggia]

We will go to our second panel. We have two witnesses.

As an individual, we have David Gooderham. From the Macdonald-Laurier Institute, we have Dr. Heather Exner-Pirot, senior policy analyst.

We will begin with Mr. Gooderham, for three minutes, followed by Dr. Exner-Pirot.

We will dive right into questions after that.

Go ahead, Mr. Gooderham.

[David Gooderham, As an Individual]

Thank you.

I'm going to speak about proposed subsidies and tax credits to support CCUS in the oil sands. I invite the committee to examine the plan in the context of Canada's climate predicament.

We need deep reductions, nationally and globally, within the next nine years. Our ability to make essential cuts by 2030 should be the decisive criteria for this committee's study of CCUS.

An objective of CCUS deployment is to facilitate continued expansion of oil production for another 10 years, and maintain high production levels through to 2050, but CCUS can only decarbonize the production process inside Canada. Those emissions represent less than 15% of emissions associated with every barrel we produce. The other 85% occur after our exported oil is burned as fuel, and the emissions are released as tailpipe emissions.

Those downstream emissions from our exported oil cannot be removed from the atmosphere once they are released. Direct air removal technologies do not exist. The fact that we do not count them does not halt the warming.

The IEA's “Net Zero by 2050” report warns that to have a realistic chance of keeping warming below 1.5°C, global consumption must decline 25% by 2030, 50% by 2040 and 75% by 2050.

In contradiction to that, the CER's new evolving policy scenario shows Canada's oil production will continue increasing until 2032. The CER has refused to examine what future pathways of oil production in Canada would be consistent with staying within 1.5°C.

The IPCC 2018 report found all releases of CO2 must reach net zero by 2050 to give us a chance of meeting the 1.5°C goal. That's trite. We are all talking about that.

A second crucial finding was that in order to achieve net-zero by 2050, annual global emissions must be reduced 50% by 2030. The unforgiving 2030 deadline is explained by the rising atmospheric carbon concentration load. It tracks the rising amount of CO2 in the upper atmosphere that is driving the heating of the earth. The recorded level for 2020 was 413.2 ppm CO2. It is now rising on an average rate of 2.5 ppm every year. To stay within the 1.5°C warming threshold, the carbon concentration level must be kept below 430 ppm. At the present rate of increase, it will exceed 430 ppm by 2028.

Our government says Canada has no legal responsibility to counter downstream emissions as part of our national emissions, but the accounting rules are not an answer to the problem we face. The downstream emissions from our oil are a core problem. They contribute directly to climate change in Canada to the same extent as if those emissions were released in Saskatchewan or Nova Scotia. Emissions from our exported oil will contribute directly to climate breakdown in B.C. and northern Quebec. This catastrophic outcome, which crosses all national boundaries, is being driven by the physics of climate change.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Gooderham. We'll have to stop there, as we're a bit over the time.

[David Gooderham]

That's fine.

[The Chair, Liberal, Francis Scarpaleggia]

There will be opportunities to speak in response to questions.

We'll go now to Dr. Exner-Pirot.

[Dr. Heather Exner-Pirot, Senior Policy Analyst, Macdonald-Laurier Institute]

Thank you, Chair and committee members, for the opportunity to speak to you today.

I'm speaking from the territory of the Tsuu T'ina Nation outside of Calgary.

For my remarks, I want to focus on three issues that I believe have been missing from the public debate on eliminating inefficient fossil fuel subsidies.

Not only do we have to define a “subsidy”, we also have to define what we mean by “fossil fuels”, because at their essence they're hydrocarbons, an incredibly accessible and versatile molecule with many uses that are critical to our modern way of life and living: textiles, rubber, digital devices, packaging, detergents, plastics, carbon fibre, medical equipment and fertilizer. In terms of the energy transition, they're also essential in the production of solar panels, wind turbine blades, batteries, thermal insulation for buildings and electric vehicle parts.

Demand for petrochemicals is booming, and the IEA expects it to account for over a third of the growth in oil demand to 2030. Invest Alberta, a Crown corporation, believes there's potential for the Alberta petrochemical industry alone to be worth $30 billion a year by 2030. In addition to petrochemicals, ammonia and blue hydrogen are also derived from natural gas, a fossil fuel, and a consensus is emerging that ammonia and hydrogen will play a key role in the energy transition.

When used with carbon capture, this can produce very few emissions and is an excellent low-carbon energy solution. It can be produced more cheaply in Alberta than in any jurisdiction in the world, which is important, because it needs to be cost-competitive to compete with oil and gas and ensure the demand that will help achieve that critical mass of infrastructure for hydrogen. I would tell you that it is imperative that any effort to develop fossil fuel subsidies focus on activities that burn fossil fuels, rather than conflating it with the use of hydrocarbons in general.

That relates to the second point. If the intent of the commitment to eliminate fossil fuels is to reduce greenhouse gas emissions, then public support for research and projects aimed at reducing GHGs should obviously be included, even if those supports go to oil and gas companies. I note the opposition to the CCUS investment tax credit that the previous panel had discussed. Helping the highest-emitting sector in the country to reduce their emissions faster seems highly aligned with and not in contradiction to Canada's COP26 and G20 climate commitments. Punishing the oil and gas sector is not more important than reducing GHGs. We need to be fighting a climate war, not a culture war.

Finally, I would like to highlight that, despite recent COP26 commitments, the current energy crisis has spurred governments from all over the world, including Canada, to provide subsidies and tax credits for gasoline prices, heating bills and energy costs, measures that fall perfectly into definitions of inefficient fossil fuel subsidies, but they have been implemented because affordable energy is fundamental to our collective well-being and development. Almost every human development indicator is positively correlated to energy use per capita, from child mortality to literacy to gender equality.

If it's bad in Canada, you know that it's far worse in developing nations around the world, so it is not easy to paint fossil fuel subsidies with a negative brush. Some nuance needs to be applied. In many cases, this is to help the most vulnerable in our societies have some access to energy, and it is a human right. This committee should be mindful of the role we have in ensuring every Canadian has access to reliable and affordable energy.

I'll stop my remarks there, Chair.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much.

Before we go on to the questions, I would like to mention that Grand Chief Phillip was going to be with us today, but in the end was unfortunately unable to make it, so what we will do is append his opening statement to the evidence once it's translated, and obviously it will be considered for the report.

[See appendix—Remarks by Grand Chief Phillip]

We'll start with Mr. Seeback.

You have six minutes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you very much, Mr. Chair.

Dr. Exner-Pirot, I really enjoyed your comment with respect to how we need a climate war, not a culture war. Some of the things that we've heard at the committee today, that you've heard and that we've heard previously in committee are trying to say that virtually any type of tax credit that an oil and gas company is able to use is a subsidy, and therefore it's bad.

I'm wondering if you could perhaps point out that some of the tax credits that are being attacked as subsidies actually serve a pretty useful purpose in reducing greenhouse gas emissions.

[Dr. Heather Exner-Pirot]

The one I'm most familiar with, because I do a lot of work on indigenous economic development, is the one that Mr. Buffalo referred to: the site rehabilitation program. As he said, they are a shining success. It has reduced methane, and created jobs and economic opportunity for first nations in Alberta and Saskatchewan, as well as in Ontario. Some of the money went to cleaning up some wells in Ontario on reserve from the 1860s around “Petroleum”. I believe the town is called “Petroleum” in Ontario.

Again, the idea that a tax credit going to an oil and gas company makes it bad, when it's such a huge part of economy.... The idea that you can have this transition without including the oil and gas sector, with the expertise they have in pipelines....

When pipelines aren't filled with oil and natural gas, they're going to have to be filled with hydrogen. We're still going to need pipelines, and we're still going to need to have this expertise in how you bring energy to billions of customers. Removing the fossil fuel sector from the Canadian economy is not a realistic or a desirable proposition for the climate or the economy.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

I'm going to try to give you an example, and I don't know if there's a tax credit available for this. In the example of using natural gas as a transition fuel, right now there are two steel plants in Ontario that are removing most of the coal in their operations and transitioning to natural gas. They're going to save three megatonnes each per year. That's six megatonnes. That's a huge reduction in greenhouse gas emissions.

If there were a tax credit for that, would you consider it to be one of these subsidies that we should absolutely get rid of?