Environment Committee on April 26th, 2022

[Craig Golinowski]

It's completely outrageous to even say that. The history of the last century is that the human population has grown to eight billion people, and we've consumed ever-increasing amounts of fossil fuels to do that.

Vaclav Smil, an eminent professor from the University of Manitoba, clearly lays out the reasons that the modern world exists, and it's substantially because of fossil fuels, and the reverse is true. If we are unable to supply a sufficient quantity of energy to the human population, we'll have famine, we'll have war and we'll have chaos. It is not an acceptable answer to just simply ignore how we achieved what we have in 2022.

With respect to the Canadian economy itself, the fact is that demand for oil and gas is growing in the world. It is incorrect that there's a peak demand; there's no evidence of that whatsoever. The Canadian economy's role in the world in many respects in terms of supplying things like grain, fertilizer, oil and gas products and a variety of industrial products is because we use fossil fuels. This idea that we can just switch off fossil fuels is ridiculous.

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

I guess what you'd say is that using technology like CCUS and this “subsidy” is going to get oil and gas and other parts of the Canadian economy towards net zero without causing damage to the economy, prices and everything else.

[Craig Golinowski]

Precisely. That's our view. We fully accept the goal of net zero. How does humanity reduce greenhouse gas emissions from 40 billion tonnes annually down to a much lower number, perhaps net zero? Carbon capture and storage allows you to directly capture the emissions of CO2 and sequester those back into the subsurface.

The capital that's needed to do that is significant. The operating cost needed to do that is significant. It does require investment, but the comparison is what happens if we don't have sufficient energy. What happens if there's insufficient energy? The cost of doing carbon capture is cheaper than not having—

[The Chair, Liberal, Francis Scarpaleggia]

We'll have to stop there and go to Ms. Thompson for six minutes.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you, Mr. Chair.

Mr. Golinowski, I'd like to continue with that thread. Would you speak about the timelines and how quickly organizations can move to net-zero emissions?

We've heard so much today about the need to understand the temperature of 1.5°C that we need to move to net zero. I don't think that's a question, but for me the confusion is around how we do this, understanding geopolitical realities and how our world relies on energy, to move from one end of our day to the other.

[Craig Golinowski]

It's an unprecedented challenge. It's absolutely extraordinary.

In terms of carbon capture and storage, perhaps I can speak to that in a Canadian context and with respect to energy development generally. Ten years is a planning cycle for energy projects. If we endeavour today to set off for perhaps a 15- to 30-million tonne annual goal of capturing and sequestering CO2 emissions, it's probably an eight- to 10-year process to realize that, to fully do the engineering, with the permitting process, the financing and construction.

I look at what we can accomplish in a decade and what we need to do with respect to regulations, pore space allocation, financing structures and engineering to realize the goal of, say, between 15 and 30 million tonnes annually. Once we achieve that phase one, in the next decade, perhaps that could be doubled or tripled. Perhaps in the following decade, you could double or triple it thereafter.

This is an incredible engineering problem to solve as well.

[Joanne Thompson, Liberal, St. John's East, NL]

Somewhat along the same line of thought, would you speak about public financing of the fossil fuel sector? There's not a lot of common thought on what it is that we're speaking about, so I'd be really interested in your thoughts and your perspective.

[Craig Golinowski]

With respect to carbon capture and storage specifically, the range of applications includes power, cement and fertilizer. It could also include the production of oil sands. This spans a wide range. The capital investment needed to build a carbon capture and storage device and the sequestration, the wells, requires a certain amount of upfront capital. After that, the operating costs are significant.

The way the United States has approached this problem is to create a tax credit for 12 years that would pay for the capital and operating costs, and they've done that through one program, the section 45Q tax credit. In Canada, the investment tax credit allows for perhaps half of the capital up front to be shared between the government and the private sector, and then the government will need to contractually guarantee or ensure that the carbon tax remains in place.

When the private sector looks at financing these projects, the investment rates of return and how it would do those calculations, that's in law. As a fiduciary and a manager of capital, how we make these decisions is enshrined in law. Basically, there needs to be a rate of return for a pension fund or other sorts of institutional investors to invest in the space.

The framework of the investment tax credit, combined with a guarantee on the carbon tax, will allow institutional capital to invest in this broader asset class, which we've called carbon management infrastructure.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. Again, I'm interested in your thoughts on this. We've heard so much about oil and gas, and the timelines of when we need to move away from the resource and move into other resources that are net zero.

Do you see a role for oil and gas in that transition in being able to continue to supply resources that fuel the world's needs, so that it's not one or the other, but how all stakeholders become part of a transition and move into the realities of a world of net zero?

[The Chair, Liberal, Francis Scarpaleggia]

Basically, you have 30 seconds left.

[Craig Golinowski]

Sure. Our perspective is that the binary that we need to eliminate oil and gas and do renewables is impossible. Renewables are made from fossil fuels. The copper that goes into solar panels is fundamentally made from diesel in the mining process. It is impossible to eliminate oil and gas, because you reuse oil and gas to make renewables.

The system is not simple. It's complex, and carbon capture allows you to still use the energy embedded in fossil fuels while we build out renewables, nuclear and the other alternatives.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Ms. Pauzé, you have six minutes.

[Monique Pauzé, Bloc, Repentigny, QC]

Good afternoon.

I'd like to thank our witnesses. I will address Professor Chaloux first.

I'm very happy to see you again, Professor Chaloux, it has been a long time. You do a lot of work in environmental paradiplomacy, federalism, the environment and cross-border relations. You mentioned the fact that, despite Canada's statements in various international diplomatic forms about its intentions to fight the climate crisis, the actions the government takes unfortunately often contradict those statements.

Given Canada's ranking with respect to global oil and gas production, and therefore in downstream greenhouse gas emissions, what implications do you see for environmental paradiplomacy?

[Annie Chaloux]

Thank you for your question.

It's also about the responsibility of Canadian provinces that are committed to fighting climate change. It's a challenge of consistency. We see some provinces being very proactive and making very ambitious commitments, while others drag their feet a bit, for economic reasons and reasons related to oil and gas production, which we're discussing today.

One challenge with respect to subsidies is that any funding that goes to this industry puts a substantial drag on the fight against climate change and it prevents Canada from not only meeting its commitments, but doing its part. Historically, Canada has been a major contributor to the climate change issue. It must recognize this, because any added emissions will have an impact on the entire planet. This is a major international responsibility that must be acted upon. In the case of oil and gas, Canada has made an international commitment and it must act on it as quickly as possible to transition to a low-carbon society.

[Monique Pauzé, Bloc, Repentigny, QC]

Surely you study existing legislation elsewhere in the world.

What will Canada face, given these other policies that seem to be much more restrictive than what we have here?

[Annie Chaloux]

Currently, Canada's commitments to end subsidies are not binding. Canada is committed in good faith to eventually ending inefficient subsidies to the oil and gas sector. However, for the past 30 years, Canada has had a reputation for making very ambitious commitments and then failing to meet them. This undermines our credibility on the international stage, of course. As more and more countries want to set ambitious targets, there could be penalties economically and in terms of our reputation, because Canada can't be seen as a credible player.

This is where I think the oil and gas issue is fundamental, because it's the big issue that no one is talking about in terms of addressing climate change. As long as we continue to support this industry directly and indirectly, we're investing in the issue rather than in solutions. As a result, this has consequences elsewhere in the world.

[Monique Pauzé, Bloc, Repentigny, QC]

In the current environment, given the IPCC report, do you believe that if the federal government chooses to maintain financial support for the oil and gas sector, it should consider mechanisms to ensure producer accountability?

[Annie Chaloux]

I feel it has to go beyond that. Canada needs to end all direct and indirect subsidies to the oil and gas sector right now. This investment made in the form of credit can be redirected to help the workers in this problem sector get through the transition and maintain their quality of life. That's the key. It's also about assisting communities that are more vulnerable because of their dependence on oil and gas so that they can quietly make the transition.

As for the companies and industries in the sector, they're not the ones we should be supporting, because they are the bearers of the climate change issue. We must therefore find ways to curb their production. Subsidies artificially bring down the costs associated with this sector of activity. If the externalities generated by the oil and gas sector in Canada were taken into account, the costs would be much more substantial and therefore much less appealing, and the transition would naturally occur much more quickly.

[Monique Pauzé, Bloc, Repentigny, QC]

We have the Canadian Council of Ministers of the Environment, but I don't hear much about its work, and I wonder if it's up to snuff. Could the council be instrumental in getting the various jurisdictions moving in the right direction? Would we need other tools as well?

[Annie Chaloux]

In Canada, we face a great challenge in terms of intergovernmental and interprovincial cooperation. We must all raise our greenhouse gas emission reduction targets and our climate ambitions together. The Canadian Council of Ministers of the Environment, which you mentioned, may be a solution, although the commitments it makes are also non-binding. In addition, some have brought up the question of the Council of the Federation, since the premiers sit on it.

The more forums we have to talk about this issue and how we can share good practices and raise climate ambitions, the easier it will be. However, shared jurisdiction in Canada being what it is, it's a very difficult thing to bring about. That's why we need the federal government to be very proactive in reducing greenhouse gas emissions.

[The Chair, Liberal, Francis Scarpaleggia]

Your time is more or less up, Ms. Pauzé.

[Monique Pauzé, Bloc, Repentigny, QC]

That means I can't ask any more questions.

[The Chair, Liberal, Francis Scarpaleggia]

No, but only for the time being.

[Monique Pauzé, Bloc, Repentigny, QC]

Okay.

[The Chair, Liberal, Francis Scarpaleggia]

Ms. Collins, you have the floor.