Environment Committee on April 28th, 2022

[Jerry V. DeMarco]

We already have an early sense of that from the first stages of the coal phase-out. There's no reason to continue delaying it. They've restarted the consultation and hopefully they will pick up the pace.

The point of our report is to document that the progress to date has been very limited, considering the fact that this was committed to quite some time ago. In a sense, even Auditor General Desautels in 1993, in the context of the cod fishery, said that governments should have a legislative basis for dealing with transitions like the cod fishery, but not exclusively to it. They could have been putting in place some of the general parameters, at least, for these sorts of things long ago.

I expect that it's coming, based on what I heard yesterday in terms of the responses from the government.

[Laurel Collins, NDP, Victoria, BC]

Great.

You responded to Madame Pauzé's questions about the overly optimistic hydrogen estimates and the reliance on—I'm quoting you here—“non-existent policies” that “compromise the credibility of [our] expected emissions reductions.”

If the credibility of one part of the overall emissions reduction plan is compromised, would you say that puts the overall ability of the plan to reach its targets into question?

[Jerry V. DeMarco]

It does, because the approach in Canada, for whatever reason—it's not the only approach to do it—is to put together a plan that adds up exactly but goes no further. Even this one doesn't go to 45%, even though the new target is 40% to 45%. There's no wiggle room. It is really like a series of needles to try to thread through, and if you don't get through one of them, you're not going to get to the target.

There's also the possibility of what I call “off-script” things happening on the sidelines that undermine the plan. You could even have a good plan, but other countervailing elements arise during its execution.

That's a lack of conservatism in the approach to planning. You have all these elements that have to work in order to make the total. Putting in some buffer room, whether it's “up to 45%” or something like that, would make it less of a threading of a series of needles. The government could consider putting in that buffer in a future plan so it doesn't have to add up exactly to the decimal point and anything less than that would fail.

[Laurel Collins, NDP, Victoria, BC]

Thank you.

Mr. Chair, how long do I have?

[The Chair, Liberal, Francis Scarpaleggia]

You have about a minute and a half.

[Laurel Collins, NDP, Victoria, BC]

A recent report from Environmental Defence found Canada's biggest polluters are paying the lowest carbon tax rate, contributing only about 1/14 of the full carbon price. We've heard from multiple witnesses in our study on fossil fuel subsidies that these carbon tax loopholes are like a fossil fuel subsidy.

Can you speak a bit more about how the design of the large emitters program undermines the “polluter pays” principle?

[Jerry V. DeMarco]

Certainly that's a big part of report number five today. Most of the large emitter programs are ones approved by the federal government but put forward by the provinces or territories.

The federal government has to apply what's called a benchmark in assessing these large emitter programs across the country, and the benchmark has been very weak. For example, it allows the approval of a system that at least promises not to increase emissions, but this is supposed to be an emissions reduction initiative.

It's a weak program and it gives the sense to some that industry isn't paying its fair share compared to everyday Canadians. That's one of the points in our report, that there needs to be a fairness amongst everyone who's paying the carbon levy so that the weight or the burden of the carbon levy is distributed in a proportionate way.

[Laurel Collins, NDP, Victoria, BC]

Thank you so much.

Mr. Chair, just before we go on, will there be an opportunity for another round of questioning?

[The Chair, Liberal, Francis Scarpaleggia]

I think so.

Before continuing, I would like to mention that several witnesses are with us but they don't show on the monitor, and that gives the impression that they aren't there. So I propose that everyone turn their cameras on. That way, we will be able to see the representatives of the four departments and we can address them.

Mr. Carrie, you now have the floor for five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

Mr. DeMarco, it's wonderful to see you. It's good to see someone here in front of us with Ontario experience. I know your work with the Ontario government in the past.

I come from Oshawa. We have a very strong industrial base. We're not just that, though. We have Friends of Second Marsh, and I know you're a birdwatcher. If you ever come around, please let me know. I don't know if you've had a chance to get down there.

I want to ask you three questions. One is a follow-up from Mr. Seeback's questions, because in my community, Durham Region, we have a large cement plant, St. Marys Cement. When we're looking at the government's desire to have a just transition, there seems to be a lot of confusion and uncertainty as far as the execution and the planning of these things are concerned.

I wonder whether you have come across any options for industries that use coal, whether that's the steel industry or the cement industry. Did you take a look at anything that might be options for some of these jobs in the future as we're looking to help these workers?

[Jerry V. DeMarco]

Yes, of course. I've been to Second Marsh, McLaughlin Bay, Darlington and all of the areas along there. I'm so happy to have a little plug for those beautiful natural areas in Hansard today.

Yes, for some of the building blocks of the economy—steel, cement, lumber and so on—the transition isn't going to be to stop building buildings or roads and so on. Unlike, say, the coal phase-out, in which you're actually ceasing to use coal as an energy source and there's a shutdown of a coal plant or a thermal coal mine, I'd expect that cement will continue to be produced. The question will be as to what fuel sources, in terms of fuel switching, can be used with a lower environmental footprint in that industry.

I would expect that there will be a variety of different transitions, but they won't all be like a phase-out, with a plant shutting down and so on. Some of them will be retrofitting and changing. That actually happened in one sense with some of the coal plants in Alberta moving to natural gas, for example, or the electrification of a steel plant in Ontario, not in your riding but close by, down by Hamilton. That will be happening.

[Colin Carrie, Conservative, Oshawa, ON]

We actually have Gerdau Ameristeel. They do recycling and they use a lot of electricity in that regard. There have been some challenges with the cost of electricity in Ontario after the Liberal government changed the grid.

I want to ask about the rural communities. When we're looking at a just transition, it seems that rural communities that rely on things like fertilizers are also getting hit with the carbon tax when, for example, they are drying their hay. Usually they use propane. Frustrated farmers are talking to me about options down the road. They hear the government has all these plans, but the plan doesn't seem to include rural Canadians.

Did you come across anything in that regard that would be helpful for farmers who don't see options on the table?

[Jerry V. DeMarco]

Yes, in the carbon pricing report, report 5, first of all we encouraged much greater transparency in reporting on the effectiveness and essentially the equivalency of provincial systems and so on to the federal benchmarks.

We also talked about how smaller and medium-sized enterprises, which would include many enterprises that are in rural areas, including agricultural enterprises, are disproportionately burdened. We didn't single out particular subsectors of the small and medium-sized businesses, but the recommendation for improving fairness, which I believe is in paragraph 5.79, is to assess the burden of carbon pricing systems on certain groups, including indigenous peoples. We're hoping the department will look at that and consider initiatives on agriculture and others.

It's not that this has been completely forgotten. Now that the department officials have turned on their videos, you may be able to ask them a question directly, but there's—

[Colin Carrie, Conservative, Oshawa, ON]

I just worry that.... There's hope, and I see hope, but people make investments on certainty, and we just don't see the just transition, the execution of it, the planning. There's not very good communication on it, so there are a lot of people who are worried. If you do come across best practices from other places around the world in the future, I'd love to have you back.

[The Chair, Liberal, Francis Scarpaleggia]

That's good.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

[The Chair, Liberal, Francis Scarpaleggia]

Mr. Weiler, you have the floor now.

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

Thank you, Mr. Chair.

I'd also like to thank you, Mr. DeMarco, and your team for your detailed work on these reports and the recommendations for how our government can continue to improve on our environmental performance.

The first question I have is on the report on carbon pricing which, Commissioner, you mentioned is essential. In fact, it's a linchpin of Canada's climate action.

Five years ago there were some questions about the constitutionality of the Government of Canada implementing a carbon pricing backstop. I think we all remember the so-called resistance. While the vast majority of credible lawyers were of the view that this measure was constitutional, there was some risk that it might not be found so through the judicial system.

With this in mind, Commissioner, I'm curious about your thoughts on whether the Government of Canada may have been extra-flexible in its approach to recognizing the industrial carbon pricing systems of the provinces to ensure that this measure would be found constitutional and cement that finding and that principle into law while giving it the ability to increase the stringency of its standards over time.

[Jerry V. DeMarco]

I can't comment on Environment Canada's motivation in recommending that the government approve some substandard systems.

I was working in the Ontario Auditor General's office when we audited the large emitter program for Ontario. At the time, it had been branded as providing up to 2.7 megatonnes. Our audit looked at it and said that at most it was going to provide only one megatonne, yet it was still approved. Whether they were approving it to try to show that they were being good federal players, I don't know. That's up to them to answer.

There is, however, no doubt that in terms of issues of national concern under the broad power in the Constitution, this fits in there, and the Supreme Court confirmed it. It wasn't a surprise to anyone in our office that the Supreme Court made that finding, despite the fact that there was a lot of rhetoric and there were cases in Ontario and Alberta and so on about it.

Anyway, that is water under the bridge now. We know that it's constitutional and that now, in this report, is the time to make adjustments so that it's more effective and more fair. That's the next stage and that's what our recommendations are all about.

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

Absolutely. As you mentioned before, last summer the Government of Canada introduced a strengthened benchmark for major emitters, which will come into effect for 2023 through 2030, which will be getting tougher every year.

Do you look at that strengthened benchmark in your audit?

[Jerry V. DeMarco]

In paragraph 5.32 we talk about the strengthened benchmark criteria, and what you're talking about is what happened in August 2021, I believe.

Yes, we did look at that, and throughout this report we made recommendations on residual problems. After they did the expert review in 2021 there were still some problems that remained, and those gaps are what we hope will be filled through the recommendations we made and through the responses and, eventually, hopefully the action plans from Environment Canada.

The idea is to make it effective and fair. The theory of carbon pricing is obviously well accepted across the world, even though there are those who oppose it, but it works as a mechanism. This is about doing it right.

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

Absolutely.

I want to switch gears to your report on hydrogen and the difference in the figures given by ECCC and NRCan, which are obviously very different agencies. ECCC is more of a regulatory agency and NRCan is more of an economic ministry.

ECCC only modelled blending hydrogen with natural gas, which in my opinion is maybe not the most effective use of hydrogen where electrification, for instance, may be possible. Rather, hydrogen can help in hard-to-abate areas like freight and heavy transport, among others.

NRCan took a more holistic approach to looking at the roles that hydrogen can play, which in my opinion leads to a larger share of emission reductions.

You mentioned in your testimony earlier that we should be using conservative and precise figures, but for technology like hydrogen, which is rapidly progressing, how would you advise or recommend that government estimate the future potential for emissions reduction for these types of emerging technologies?

[The Chair, Liberal, Francis Scarpaleggia]

You have 20 seconds, Mr. DeMarco.

[Jerry V. DeMarco]

In 20 seconds that might be a challenge, especially since I just used a few of them now.

Especially for 2030, we found it to be unrealistic. For the 2050 horizon, obviously between now and 2050 the technology is going to be much different from what it is today. We'd like to see realistic numbers for both, but it is more predictable the shorter the time horizon.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you.

Ms. Pauzé, you have the floor.