Environment Committee on April 26th, 2022

[Mairead Lavery]

We have actually quite a broad definition of clean technology. It includes anything from renewable energy to waste management to water management to green buildings. We were very particular in defining in our new “sustainable bond framework” what we consider to be green projects and what we consider to be social as well as transition financing projects.

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

Thank you for that.

Building on that point about the sustainable bond framework, you mentioned that it does allow money to flow to fossil fuel companies, which of course Canada's green bond does not. Why does EDC target supporting or financing fossil fuel projects through a new finance product that's being created this year?

[Mairead Lavery]

Very similar to the Government of Canada, we have our green bond product, which does not support...but this is a new product, the transition bond. It's a recognition that we need to get in and help these companies move faster toward reducing their GHG emissions.

That's why we have the purpose of a transition financing product. It really has some drivers in it to force more efficiency faster. It also includes disclosure requirements. It includes monitoring and a link to a Paris-linked plan for transition by those companies. Therefore, we believe we're actually using our leverage to work with existing companies to help them change faster.

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

You mentioned that there's a requirement within this bond framework to have a Paris-aligned plan. Does that just mean net zero by 2050? What are the interim targets that EDC is looking at for companies to abide by as part of this bond framework?

[Mairead Lavery]

I think 2050 is perhaps the endgame for any of us working in this space. It's about actually interim targets. It's about looking at pathways. It's about looking at scope 1, scope 2 and scope 3 emissions and actually working on a plan to get there. A plan cannot just be “we will be net zero by 2050”. It has to have interim elements attached to it. It has to show progress. Like any plan, it must be monitored. We will need to see progress in the reporting from the companies that would be applicable for transition financing.

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

As part of this bond framework and the other products that are offered by EDC, what proportion, if any, is being set aside to ensure that we're supporting projects like renewable energy products and companies that will actually lead to more of a transition to renewable energy rather than having this support go to fossil fuel companies to help them reduce their emissions?

[The Chair, Liberal, Francis Scarpaleggia]

You have 30 seconds, please.

[Mairead Lavery]

We have looked at our portfolio of the future and indicated how we would like to pivot that. That results in the teams having very clear capital allocations for the purposes of clean technology. It's linked as well to our statement saying that we are not supporting new international financing of fossil fuel companies and their projects going forward.

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

How is EDC looking at the risk of new financing for fossil fuel projects in light of stranded assets that might be financed through some of these new products?

[The Chair, Liberal, Francis Scarpaleggia]

I'm sorry. We're out of time. Maybe you could address that as a preamble in your answer to another question. That's how we tend to do it in the committee to get around these time limits.

[Mairead Lavery]

Certainly.

[The Chair, Liberal, Francis Scarpaleggia]

Ms. Pauzé, you have the floor.

[Monique Pauzé, Bloc, Repentigny, QC]

First, I'd like to thank all the witnesses, who have made themselves available to answer our questions.

My questions are for Professor Leroux.

I know that 400 academics signed a letter calling on the federal government to end tax credits for carbon capture and storage initiatives. The letter mentioned that this technology was not to be rejected, but it proposed decarbonization solutions that would limit the use of concrete and cement and it recommended that the oil and gas sector be excluded. Unfortunately, that's not what we're seeing in the 2022 budget.

It's clear to you that this tax credit constitutes a subsidy to the sector.

Recently, I heard about the carbon takeback obligation, which brings extended producer responsibility into full force. For example, if you produce a barrel that emits one tonne of greenhouse gases, you have to capture one tonne of greenhouse gases. This approach would be incremental and predictable.

In your opinion, would a regulation of this kind appropriately place the cost of carbon capture, utilization and storage on the shoulders of the industry and fossil fuel consumers, rather than on all taxpayers by siphoning off public funds?

[Prof. Justin Leroux]

Thank you for the question, Ms. Pauzé.

The carbon takeback obligation is a regulatory constraint for the oil and gas industry. As you just said, the industry has to offset a certain percentage of greenhouse gas emissions from the production and combustion of fossil fuels by capturing CO2. The percentage would be incremental and we would reach 100% in 2050, that is, net zero.

This policy puts the burden on industry and doesn't siphon off public funds, as you put it. However, it's important to note two things. First, the most important thing about this measure is that it accounts for carbon not only from fossil fuel production, but also combustion. Downstream emissions are included. That's a key consideration, and the same thing could be done with respect to carbon pricing.

The flip side of this is that it doesn't prevent the political impulse to subsidize investments in carbon capture, utilization and storage, or CCUS, with public funds, in the same way that all sorts of loopholes exist for carbon pricing. It's a political impulse. So while the measure itself makes sense and puts the burden on industry, what's to stop government from subsidizing those investments?

I hope that answers your question.

[Monique Pauzé, Bloc, Repentigny, QC]

Yes, absolutely. Thank you very much.

You're also a member of the Canadian Climate Institute. Your research focuses on fair distribution and cost sharing.

With other witnesses, we've talked about the fact that Canada provides 14.5 times more support to the oil and gas sector than to the renewable energy sector. We found that lopsidedness unsettling.

Can you tell us what qualifies as fair at this point in federal public policy to address the climate crisis?

Couldn't support be a little more evenly distributed?

[Prof. Justin Leroux]

All right.

First, you mentioned my membership in the Canadian Climate Institute. Of course, I'm speaking as an individual, not on behalf of the institute.

It's hard to talk about fairness between industries. At least that's not the focus of my work, which is more about sharing the burden between Canadians and different levels of government.

In other words, disproportionate public support across different energy sectors doesn't necessarily go against the principle of fairness, but it is a political choice. By massively supporting an industry that's already profitable, I remind you, Canada has made its political choice.

That's about all I can say in terms of fairness. As I said, between industries, the lines become more blurred.

[Monique Pauzé, Bloc, Repentigny, QC]

So they can't be compared as easily as I would like.

Now, you established in your opening remarks what a subsidy is.

Based on your definition, is a loan at a preferred rate a subsidy or not?

[The Chair, Liberal, Francis Scarpaleggia]

You have 45 seconds, Professor Leroux.

[Prof. Justin Leroux]

I will be okay with that.

The key word is “preferred”. When you offer a preferred rate, you're giving someone a business advantage. So that constitutes a subsidy to me, absolutely.

[Monique Pauzé, Bloc, Repentigny, QC]

Thank you very much, Professor Leroux.

[Prof. Justin Leroux]

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

You have about 30 seconds left, Ms. Pauzé, if you care to comment.

[Monique Pauzé, Bloc, Repentigny, QC]

When the vice-president of the Canadian Association of Petroleum Producers came to speak to us—I believe it was the first time—he told us that the industry was in no position to make investments to capture carbon. I just wanted to reiterate that.

[The Chair, Liberal, Francis Scarpaleggia]

It's duly noted.

[Monique Pauzé, Bloc, Repentigny, QC]

The industry is too poor. Ha ha!