Environment Committee on Oct. 30th, 2024

[Lloyd Longfield, Liberal, Guelph, ON]

I think it might be that the translators are giving us the English translation at the same time as the English is being spoken. Could we just have the floor for English? I keep flipping back to the floor when people are speaking English so that I don't have two voices.

[Laurel Collins, NDP, Victoria, BC]

I'm happy if we proceed, but maybe the IT folks can work on it while we're continuing our committee business.

[Lloyd Longfield, Liberal, Guelph, ON]

It's better.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Chair, if I may, I will not start from the top, but I will just ask the last sentence of my question to get back to where we were.

Mr. Dubey, my question is very simple. Canada is a fossil fuel energy producer and we are all part of the energy transition. If oil production were to cease in Canada tomorrow morning though, would that reduce oil consumption or, on the contrary, would it remain the same because that oil would be produced in other countries, which would be very costly to Canada?

[Akshay Dubey]

Thank you for your question.

Essentially, as I said in my opening statement, the oil market is a global supply-and-demand market. Canada makes up only 6% of the global supply of oil. It is clearly a demand-side issue, where we need to reduce the demand for fossil fuels over time, and supply would respond to that.

In a situation, for example, where we decided that Canada was not going to produce any oil and gas starting tomorrow, that supply would simply be overtaken by another jurisdiction that also produces oil. From that perspective, it wouldn't be the most effective method for us to pursue decarbonization.

Instead—and I am a strong believer that we do need to decarbonize—what we should be doing is investing heavily in innovations and technologies, especially those developed here in Canada, that can help the decarbonization of oil production and oil use as we transition. Along with many others in this room, I hope that the transition is as quick and orderly as possible, but again, we need to make sure that the transition happens in a way that makes sense.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

You have worked in the industry for many years now. Can you give us a few examples of investments in new technologies that are having a real and positive impact on reducing greenhouse gas emissions?

[Akshay Dubey]

In regard to the technologies that have been deployed in the space, we have seen reduction in carbon emissions. I have experience in both the mining space and the oil and gas space. We're seeing, for example, the electrification of truck fleets. In long-haul distances, where you see this in a variety of commodities, that reduces carbon emissions significantly.

There is a copper company currently in Canada called Foran Mining, which is building a mine that is going to be a carbon-neutral mine.

There have been a variety of technical innovations in the space, but certainly more needs to be done. I think this is where it's important to have public-private partnerships to be able to move things ahead that make sense for industry but also make sense for the goals that we have as a society.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

As to the investments, some are backed by considerable financial resources, but bank financing is of course necessary.

In your opinion, should bank financing be facilitated for the development of high technology designed to reduce emissions?

[Akshay Dubey]

I certainly think there is a role for banking to play in terms of reducing emissions, but, really, from my perspective, that comes to the banks providing a helpful ecosystem for innovation to take place here in Canada.

What we need to do is emphasize the fact that innovation is taking place in the country. There are a lot of companies doing great work out there, but the struggle in Canada has historically been moving a technology from that development cycle, from a technical readiness level of seven or eight, to something that's a commercial technology. That's really where I would focus my efforts from a policy perspective: How do we get these technologies over the hump?

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Canadian engineers are working on finding solutions.

In your opinion, can we find any solutions in Canada that can be applied immediately to fossil fuel production here in Canada and elsewhere around the world?

In short, it's a business opportunity, isn't it?

[Akshay Dubey]

Absolutely, there are technologies that could be deployed right away. The technology that we have developed at CVW for creating value from waste is one of them. It's a ready-to-deploy technology. It's the result of 18 years of research and development here in Canada. Really, it just requires the right regulatory framework, the right incentive, but also the right emphasis from industry to move solutions ahead.

That's really why I always stress that we do need to have this partnership among innovators like us, industry and the government, which sets the regulation and the incentives for industry.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Mr. Deltell.

Ms. Chatel, you have six minutes, please.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

To begin, I want to welcome all of our witnesses to the committee today for our study on this extremely important topic.

My questions are primarily for Ms. Hubert.

Ms. Hubert, thank you for your excellent work in this very complex field. I know you have been extremely active in this field by virtue of your ongoing work, as well as your passion, I might add.

On October 9, the government finally announced that it is putting forward the taxonomy. We will have to wait though because it will take 12 months. Nonetheless, they are putting forward a science-based taxonomy, which is very important to meeting the target of 1.5°C in global warming. So that is encouraging. We are already lagging behind, in my opinion, but we are moving forward.

We are also moving forward on mandatory disclosure of financial information related to climate and the environment. These two very important announcements are at the heart of green financing and the transition.

I would like you to talk to us specifically about the role of disclosure and the International Sustainability Standards Board, or ISSB, and the future interaction with that body. I would also like you to talk to us about the consultation process of the Canadian Sustainability Standards Board, or CSSB, which will be closely involved in this important step of mandatory disclosure.

On that note, Ms. Hubert, please go ahead and speak to us about these matters.

[Anne-Marie Hubert]

Thank you.

First of all, I'll say a word about the taxonomy, which I think was very well explained by Barbara Zvan. Whether a taxonomy is introduced or not, all investors will define what sustainable commitments and sustainable finance are.

As I mentioned, Canada has a better energy portfolio than most countries in the world. By saying how we align our investments to enable our industries to meet the target and by introducing disclosure to allow businesses to say so—we are not asking them to do anything, we are simply stating what they are doing to be in a winning position. We're already going to be better than the others, thanks to our energy portfolio. Not to do so would be to forgo market access.

The ISSB, the International Sustainability Standards Board, has set sustainability standards for the private sector, and they are championed by central banks. North Korea and Russia are not participating. Along with the other participating countries, we will have to think about our economy in terms of the 1.5°C target, or we're going to face systemic risk to financial markets. The number of climate incidents, the number of fires and the number of viruses will bring down the insurance system. When you no longer have insurance, you can no longer get a loan. We are seeing it in Florida, where the insurance on a condo that cost $6,000 four years ago cost $12,000 three years ago, and then $25,000, last year, to $60,000 today. You can't get insurance anymore, so you can't get a loan. We're starting to see that here as well.

Disclosure is essential to allow us to integrate climate as a factor in all financial decisions. The ISSB is acting for the private sector. Investors want that, but they also want to make sure that climate plans don't cause damage to nature, to humans or to the communities that will be affected, because that also has harmful effects on the financial system. We are asking for disclosure, but let's first make sure that we have, as a first standard, disclosure on the other important things for which we can demonstrate the correlation of a measure and the long-term performance for the private sector.

In the case of the public sector, another standard-setting organization is the IPSASB, the International Public Sector Accounting Standards Board. That organization created the Sustainability Reference Group, whose members indicated that they would adopt the same standards as the private sector all over the world and that they would add requirements for the public sector. Whether we want those standards or not, they are there. The investors behind the International Sustainability Standards Board have $55 trillion in managed assets. When they decide they want something or ask for something, whether or not we pass regulations is of little importance to our businesses. What's important is to join forces to help our businesses make plans aligned with a Canadian taxonomy and to help harmonize our economy for 2050, in addition to supporting workers and businesses in the meantime.

There was a question earlier about proven technologies. The United States has aligned all of its tax credits with technologies that work and are cost-effective. They gave tax credits to accelerate the use of these technologies. Texas is one of the most advanced states on the planet. The U.S. is outpacing Europe.

To understand what is required, there needs to be science-based collaboration, finance at the service of alignment to—

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you.

I would like to briefly come back to a very important point you just mentioned, i.e., the risk of inaction in green finance and the transition. If we don't take action through this type of finance, we risk cutting ourselves off from financial markets and investments.

Can you clearly explain the risk of our government's inaction in this area?

[The Vice-Chair, Conservative, Dan Mazier]

Your time is pretty well up, but if you can do it in 10 seconds, that would be great, or you can table that reply.

[Anne-Marie Hubert]

It's losing access to capital markets and losing access to markets for our products—pretty simple.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

[The Vice-Chair, Conservative, Dan Mazier]

Thank you, Ms. Chatel.

We are moving on to Madame Pauzé for six minutes.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you to all of our witnesses for being here. This is indeed a very important study, because we have learned that Canada is lagging behind in this area.

Ms. Péloffy, you worked closely with the senator on the climate-aligned finance act. My question is for you. You talked about all the support that the bill enjoyed.

Has the financial sector also shown any support for this bill?

[Karine Péloffy]

There are stakeholders in the financial sector among the 120 organizations that support the bill. One of them is Vancity, which is a credit union in western Canada. There is also the Caisse d'économie solidaire in Montreal. Impact investment funds have also supported the bill.

However, the major financial institutions do not officially support it, although individuals within those institutions have told me that we have to move forward. It should also be noted that another commonality between the financial sector and the fossil fuel industry is that both industries are extremely effective at avoiding regulation.

[Monique Pauzé, Bloc, Repentigny, QC]

Yes. However, if we do nothing, what is the risk to the financial system in terms of international competitiveness?

[Karine Péloffy]

As I think Ms. Hubert was going to say, the funds will go elsewhere, where the regulatory systems are clearer and it's easier to invest in solutions. We would therefore deprive ourselves of funding for solutions.

There is also a financial risk for us as Canadians, because our money—our pension funds, our savings—is invested in the fossil fuel industry. About five years ago, we saw that foreign investors had massively disinvested in Canadian fossil fuels, and Canadian banks filled the gap. So now, not only are Canadians at risk of seeing the entire world decide to invest in energy elsewhere, but they are also at risk of permanently losing about $100 billion of assets invested in the oil sands. It's our money that's on the line because we took the place of financial institutions when they left.

[Monique Pauzé, Bloc, Repentigny, QC]

When Senator Galvez came to testify before this committee, she emphasized the concept of double materiality, that is to say the fact that climate change is having an impact on financial institutions and that financial institutions are having an impact on climate change.

Since Canadian banks rely on voluntary commitments and there are people who sit on boards in both the banking and oil sectors, what is your take on the huge challenge we will face?

[Karine Péloffy]

There are a lot of questions in there.

I do think there needs to be some sort of divorce between the fossil fuel industry and the financial industry to avoid real or apparent conflicts of interest. Board minutes are not made public, so we don't know how they manage this issue, but, from the outside, we clearly see a problem.

In terms of materiality, there are terms floating around, such as “double materiality”, “dynamic materiality” and “explosive materiality”. I had a lot of fun reading accounting texts. An accountant in 1972 called the materiality assessment an Alice in Wonderland exercise. The former chair of the U.S. Securities and Exchange Commission even said that lawyers, accountants and business people get materiality wrong all the time. That is why, in my opening remarks, I said that this was not an appropriate standard. We are managing not only a financial risk, but also an existential risk for life on earth.

Senator Galvez's bill calls for action. It's not just a matter of disclosing, you have to be part of the solution. It's not enough to talk about it or disclose the impact that climate change will have on the entity; we also have to look at the entity's impact on the real world, particularly in terms of its greenhouse gas emissions, and we have to force action in order to reduce that impact and move towards solutions.