Environment Committee on Oct. 4th, 2022

[The Chair, Liberal, Francis Scarpaleggia]

I call the meeting to order.

Good afternoon, members of the committee and witnesses.

Welcome to meeting number 29 of the House of Commons Standing Committee on Environment and Sustainable Development. Today's meeting is taking place in a hybrid format.

You may speak in either official language. When you're not speaking, please put your mike on mute. This is for those who are at home or somewhere that's not here. If you need to raise your hand, you can use the yellow hand icon.

I'm told that, unfortunately, Mr. Létourneau, who was supposed to appear on the first panel, did not receive his regulation headset in time. Therefore, he will be invited to appear at our next meeting. This means we will have five witnesses at that meeting.

The first panel comprises three witnesses, each of whom will have three minutes to make their presentation.

Let's start with Dr. Madeleine McPherson, assistant professor at the University of Victoria, who's appearing as an individual.

Dr. McPherson, you have the floor for three minutes.

[Dr. Madeleine McPherson, Assistant Professor, University of Victoria, As an Individual]

Thank you so much for having me.

Good afternoon, everyone.

My name is Madeleine McPherson and I'm an energy systems modeller at the University of Victoria, where I lead a team of researchers who develop models that focus on how to decarbonize our energy systems.

What we're seeing is that the electrification of transport and heating systems is at the heart of decarbonization, but it will only work if our power systems are decarbonized first. Some of our provinces' power systems are already decarbonized—B.C., Manitoba and Quebec are largely powered by hydro—but the fossil-dependent provinces will see enormous wind and solar build-outs to meet carbon targets at a rate we've never seen before.

To get to a net-zero power system by 2035, our modelling is showing that we'll need over 100 gigawatts of wind across Canada by 2050. Alberta alone will see about 40 gigawatts of wind by 2035 and over 80 gigawatts of wind by 2050. This will constitute most of their energy needs. It is an incredible amount of infrastructure to build in not very much time.

This is a huge opportunity, but only if we have the programs in place to train people, the supply chains to get equipment and the policies that streamline processes. That only solves one part of our problem, because once we build this system, operating a renewable base grid requires flexibility to mitigate variability—those times in the year when the wind doesn't blow or the sun doesn't shine.

Batteries and other kinds of storage will no doubt have a key role to play, but each of these future high-wind provinces conveniently neighbours a hydro-rich province. This characteristic, which defines the energy fabric of our country, is an opportunity that we can't ignore. If provinces had more transmission linkages, hydro in one province could balance the wind in its neighbouring province. Interprovincial transmission connection is coming out of our modelling work as a no-brainer.

The federal government has a critical role in making this happen, though. First, there's the question of funding for that infrastructure, either directly or by de-risking private sector investments. Perhaps more importantly, the federal family can help facilitate a conversation between the ministers and premiers in the provinces. One thing that's coming up in a lot of our conversations is ensuring that rates remain affordable and equitable, and that's coming out as a huge concern.

You can also start the engagement process with indigenous rights holders to ensure that free, prior and informed consent happens, ensure that benefits flow to indigenous communities, and ensure that this massive effort is a force for decolonization and a pillar of reconciliation.

I think there's a clear role for the federal government to play when it comes to providing leadership and direction on this issue. What's hopeful is that if the federal government and provinces work together to achieve this, I think we can get to net zero, but we have to start now.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much, Professor McPherson, for that very clear presentation.

We'll go now to Mr. Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers' Association.

Go ahead, Mr. Kingston.

[Brian Kingston, President and Chief Executive Officer, Canadian Vehicle Manufacturers' Association]

Thank you, Mr. Chair and honourable members. Thank you for the invitation to be here today as part of your study on clean technologies in Canada.

The Canadian Vehicle Manufacturers' Association, CVMA, is the industry association that represents Canada's leading manufacturers of light and heavy-duty motor vehicles. Our members include Ford, General Motors and Stellantis, which is also known as FCA Canada.

Canada's auto industry is responsible for $13 billion in annual economic activity, 117,000 direct jobs and approximately 370,000 jobs in the aftermarket services and dealership network. The industry is our second-largest export sector, with $36 billion in exports last year.

The auto industry is one of Canada's leading green technology sectors. Electric vehicles and their related infrastructure now account for fully 40% of energy transition investment in Canada.

It's CVMA members that are really at the forefront of this transition. Over the past two years, we've had some excellent news in Canada. Ford, General Motors and Stellantis have announced investments of $13.5 billion, which will create over 6,000 direct jobs and tens of thousands throughout the auto supply chain. The majority of this investment is dedicated to EV assembly and the battery supply chain.

We recommend the following actions to realize the full economic benefits of clean technologies in the auto industry and to ensure that Canada achieves its climate objectives.

Priority number one is that we have to keep up and keep aligned with the United States. The Inflation Reduction Act is arguably the most significant development for Canada's auto sector since the passage of CUSMA. The U.S. is committing more than $370 billion U.S. to fight climate change. This includes massive new investments in EV manufacturing, sales and related infrastructure. The federal government should move swiftly to identify and react to competitive gaps in our manufacturing sector that will be exacerbated by this act. Particular attention should be given to battery manufacturing, where the U.S. now has a significant advantage.

Number two is that we need to boost EV adoption in Canada. We need a comprehensive plan to help more Canadians make the switch to electric and achieve our climate goals.

According to RBC's recent assessment of the investments required to achieve net zero by 2050, spending on EVs will need to grow from $4 billion annually right now to approximately $22 billion annually.

Priority, of course, should be on building a comprehensive public charging network; investments in clean, affordable and reliable electricity generation and grid infrastructure; and improvements to the consumer purchase incentive program, also known as iZEV, to make EVs affordable for all Canadians.

Thank you for your time. I look forward to questions.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Kingston.

Last, but not least, we have Ms. Natalie Giglio, senior associate of business development at Carbon Upcycling Technologies.

Go ahead, please.

[Natalie Giglio, Senior Associate, Business Development, Carbon Upcycling Technologies Inc.]

Good afternoon.

My name is Natalie Giglio, and I'm here representing Carbon Upcycling Technologies. I'd like to thank you for inviting me to speak on behalf of my company today.

Carbon Upcycling's technology is simple. We capture and utilize CO2 directly in a single-step, low-energy system that uses only two main inputs. The first input is an industrial by-product or natural mineral that is typically sent to landfills. The second is CO2 directly from a point source of emissions. We combine the waste materials and CO2 in our system to produce cement replacements that actually make concrete stronger. Our technology will enable Canada to build climate-resilient concrete infrastructure.

Carbon Upcycling is a Canadian-founded company based in Calgary, Alberta. We operate a commercial facility in Calgary. Earlier this year, the Honourable Chrystia Freeland visited us to see the progress we are making in deploying CCUS in Canada. Over the last eight years, we have successfully scaled up our technology 10 million times. That scale-up was largely supported by $12 million in government funding, and now we've begun raising capital investment.

As I discussed, our first input is an industrial by-product or natural mineral. Across Canada, there are abundant supplies of these materials that are simply underutilized. Carbon Upcycling turns those materials into valuable cement replacements, so we can continue to use concrete without increased emissions. Our second input is CO2. Canada has 15 operational cement plants, each emitting CO2. Carbon Upcycling's technology directly captures and utilizes that CO2 from the cement plants before that CO2 even has a chance to enter the atmosphere.

Our technology is being scaled up in Canada today. We're working with some of the most influential partners on that journey. We partnered with the City of Calgary to deploy low-carbon concrete sidewalks, and we are actively working with some of Canada's largest cement and concrete companies.

In order to keep scaling this technology in Canada, we see three areas where we can be better supported. First, funding needs to enable technology to scale quickly. Companies and projects need to be granted funding now, so we can build our first commercial units before 2030. Second, regulatory barriers need to be reduced or removed in order to foster innovation. This can be done by adjusting federal procurement language. Third, CCUS needs to be incentivized, so it can be rapidly deployed and scaled. The investment tax credits for CCUS have set a solid framework for supporting companies like ours. We have submitted our recommendations on ITCs, so they can better support a more holistic CCUS ecosystem within Canada.

With that, I hope you continue to support and follow our journey, as we're on track to becoming one of the most impactful carbon utilization companies of this decade. If you are ever in Calgary, I would be more than happy to host a tour at our facility.

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you very much.

We will now go to our two rounds of questioning, starting with Mr. Seeback for six minutes.

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

Thank you very much, Mr. Chair.

Brian, it was interesting to hear you mention the IRA. We've heard about that at this committee several times during this study. What would you say needs to be done to compete with the IRA, specifically in the zero-emissions vehicle space?

[Brian Kingston]

Thank you.

The most significant component of the IRA, as it relates to auto manufacturing—particularly zero-emissions vehicle manufacturing—is what's called the “advanced manufacturing production credit” in section 45X of the IRA. What it does is provide a refundable credit of $35 per kilowatt hour to companies that build battery cells or modules in the United States.

This is a game-changer. It's the most significant incentive we've seen in a very long time, and Canada now has to compete with not just municipal and state-level governments, but the federal government. That tax credit alone is estimated at a cost of $30 billion U.S. If we want to win battery investments, we have to match that.

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

Is there any comparable, or relatively comparable, program currently being offered by the Canadian federal government?

[Brian Kingston]

No. Budget 2021 introduced a zero-emissions manufacturing tax credit, but it's very narrow. The timelines are narrow, it's not refundable, and the calculation of eligible income is very precise, so it's not comparable. It had potential and got a lot of attention when it was announced, but the definitions are too narrow. It won't even come close to what the U.S. is offering.

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

Would you hazard a guess about what will happen if the federal government in Canada doesn't come up with similar incentives with respect to the battery sector?

[Brian Kingston]

If we don't match what the U.S. has done, I think it's safe to conclude that it's highly unlikely we will see significant battery investments made in Canada going forward.

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

I want to turn quickly to this. You have a dashboard that your organization has put up with respect to the incentive and charging gap, and the Road to 2035 zero-emission vehicle mandate.

We had a gentleman here at committee last week, Monsieur Rochette. I brought up the charging gap. If I look at the dashboard, it says that right now 1,660,338 is the gap in Canada. The gap is not closing quickly. He said basically that's crazy. What would you say about that?

[Brian Kingston]

There are differing estimates for what is required in terms of public charging infrastructure. Our assessment is based on what leading jurisdictions in the world are doing and what ratio they're using. Typically, the ratio that's determined is, how many EVs on the road per public charger do you need?

What we see when we look at California, Germany and the European Union is that the ratio they use is 10:1. In Canada, the federal government's most recent assessment put out by NRCan is suggesting that we need 43 EVs on the road per public port. I don't understand why we've chosen such an unambitious target. I think that's extremely concerning if we're going to help every Canadian make the switch. While you can debate which ratio is the best, I know that we are not currently on track. Of the 34,000 chargers that the government has provided funding for, only 2,500 are operational.

The government's own study admits that we need to get to over 700,000 by 2050 to support an electrified fleet. I don't see a path from 2,500 to 700,000, and I would argue that 700,000 is far too few.

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

What you're saying is that Europe is using the standard of 10 vehicles per charger, but somehow, the Government of Canada is saying that the correct number is 43, more than four times higher.

[Brian Kingston]

That's correct. The European figure is one public port for every 10 EVs on the road. In Canada, the recent study says that we need 43 EVs per port.

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

How much time do I have, Mr. Chair?

[The Chair, Liberal, Francis Scarpaleggia]

You have less than two minutes.

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

I now want to turn to the incentive gap part of your chart. We know that there is a zero-emission vehicle mandate coming. By 2035, you can no longer purchase an internal combustion engine. The adoption right now is somewhere around 5% or 6% of new vehicles that are EVs. What would you say is the main impediment and the reason why we're nowhere close to 100%?

[Brian Kingston]

Affordability is the number one impediment. Survey after survey, from both industry and government, confirms that's the biggest barrier. Recent data that we've just had a look at, from J.D. Power, which looks at transaction price, shows that there is a gap of $20,000 in the most popular segment, the compact SUV segment, between EV and ICE.

Canada's incentive is $5,000, and in our most populous province, Ontario, there is no incentive. Asking a middle-class family to increase their vehicle budget by $20,000 is highly unlikely in the current economic environment. We need a bigger incentive, first and foremost.

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

Would you say the lack of charging infrastructure is also a problem right now?

[Brian Kingston]

Number one is affordability and price. Number two is charging. Those are the two big barriers that consistently come up.

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

Those are my questions.

Thank you.

[The Chair, Liberal, Francis Scarpaleggia]

Thank you, Mr. Seeback.

Next is Ms. Thompson.