Evidence of meeting #10 for Environment and Sustainable Development in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investment.
A recording is available from Parliament.
Liberal
Patrick Bonin Bloc Repentigny, QC
Thank you, Mr. Chair.
Ms. McKenzie, I believe you made some comments related to the strategy the federal government is going to propose to promote climate competitiveness. Is that correct? Could you possibly table that document with the committee?
Director, Oil and Gas, Pembina Institute
Yes, we would be happy to send our notes on the climate competitiveness strategy to the committee.
Bloc
Patrick Bonin Bloc Repentigny, QC
Thank you.
I think you're talking about reinforcing the corporate carbon tax. I'd like to hear your comments on that and on the fact that Alberta has refused to increase the tax. Do you think that's a setback? Is it currently equivalent to what is being done elsewhere in Canada in terms of the carbon tax?
Director, Oil and Gas, Pembina Institute
Industrial carbon pricing can really be the key policy in Canada that catalyzes private investment in clean technology deployment and projects that reduce emissions from heavy industries.
The Province of Alberta, in the last year, has made some key changes—or signalled some key changes—to its industrial carbon pricing system, including freezing the headline price for carbon at $95 a tonne and investigating new ways and new additional compliance flexibility for farms, which threaten to undermine what is already a weak credit market and which open the door to reducing the price signal for farms to invest in emissions reductions, including in carbon capture.
To your question as to whether this is aligned with what we're seeing across the country, it depends a little bit on the province. There are certainly issues with the strength of industrial carbon pricing across Canada, including in the federal output-based pricing system. The upcoming federal review of both the federal output-based pricing system and then the equivalency agreements with the provinces in 2026 will be quite critical to ensuring that those systems can be adjusted, can be made more stringent and can get heavy industry on track with our 2030 emissions reduction targets and beyond, and really begin to see significant investments in heavy industry decarbonization.
Bloc
Patrick Bonin Bloc Repentigny, QC
Earlier this month, you released a report entitled “A Not-so-Grand Bargain”. In that report, you estimate that the carbon capture project of the oil and gas industry's Pathways Alliance would not be enough to offset the increase in greenhouse gas emissions that would be generated by a new pipeline carrying one million barrels a day. The pipeline is being considered by Mr. Carney and Alberta, among others.
Director, Oil and Gas, Pembina Institute
Yes, our report called “A Not-so-Grand Bargain” looked at three different scenarios of what oil sands emissions could look like in Canada.
When we looked at an additional new million-barrel-a-day pipeline, along with the emissions associated with it and the production that would need to be brought online to fill it, it would result in a scenario where, even if the Pathways Alliance project were built in full, emissions from oil sands would still likely be higher in 2035 than they are now. That's not really aligned with decarbonized barrels or beginning to see emissions come down from this very high-emitting sector.
We proposed in that report that the Pathways Alliance project on its own represents a significant capital investment, if it can be fully realized, but that a good, strong industrial carbon pricing system, in addition to the public support already on the table via the federal carbon capture investment tax credit and provincial grants, is sufficient to incentivize investment in that project.
Bloc
Patrick Bonin Bloc Repentigny, QC
Between regulations and carbon capture and storage technology, which do you feel is the more effective measure to reduce greenhouse gas emissions in the oil and gas sector?
Director, Oil and Gas, Pembina Institute
Beyond industrial carbon pricing, I'd also like to highlight methane and the success that some parts of Canada, British Columbia in particular, have had in reducing methane from oil and gas emissions.
Our research has found that British Columbia is the first jurisdiction in Canada to have met its 2025 oil and gas methane emissions reduction target, and they did so two years ahead of schedule. Notably, B.C. achieved this while also growing national gas production, highlighting the fact that stringent methane regulations do not undermine the industry's ability to operate.
In fact, methane abatement is one of the lowest cost and most readily available emissions reduction opportunities in the oil and gas sector. It also creates jobs, particularly in small and medium-sized businesses that work to develop world-leading methane abatement technology and assess leaks at oil and gas sites and things like that.
It really is a success story that we've seen in British Columbia when it comes to reducing methane from oil and gas.
Bloc
Patrick Bonin Bloc Repentigny, QC
You also mentioned taxonomy, I believe. Can you tell us what you would like to see in terms of climate action in the Canadian financial system? For example, should we require action plans aligned with the 1.5‑degree target, a taxonomy or something else?
Director, Oil and Gas, Pembina Institute
There's already been quite a bit of work done by the sustainable finance action council attached to developing a sustainable investment taxonomy in Canada.
There are some really significant changes or ways to prompt investment—
Liberal
The Chair Liberal Angelo Iacono
Ms. McKenzie, I'm sorry, but the time is up.
If you can, reply to Mr. Bonin in writing and forward your response to the clerk. Thank you.
Mr. Bexte is next for five minutes.
Conservative
David Bexte Conservative Bow River, AB
Thank you very much.
Thank you witnesses and committee chair. I appreciate the opportunity today.
Mr. Hornby, Canadian producers compete in a global market. Could you comment on the system that has been imposed for drying grain and heating? The costs have gone up for drying grain and heating barns. Are they passed on, or do they just reduce competitiveness on the world stage? Can you expand on that, please?
General Manager, Keystone Agricultural Producers
Sure. Thank you for the question.
The big thing to think about here is that farmers are price-takers, not price-makers, so input costs rise due to things such as additional taxes or whatever it may be. The carbon tax is a significant additional cost, especially if it's a year where you're trying to dry a lot of grain or it's a cold year. In Manitoba, we get to -40°C, so it's pretty cold here, and the summers get hot. You have to really make sure you keep a consistent temperature in your barns for animal welfare purposes.
The big thing is that those costs cannot be passed on to the consumer. The farmer has to eat them, and they're going to be paid for their product whatever the market is dictating. Sometimes they've already signed a contract for that price. They've locked in a price for part of their crop that year, so if they've locked in that price and the carbon tax goes up, for example, as it did—thankfully, it doesn't exist anymore—they have to eat that cost entirely.
It causes significant issues because the less money the producer has, the less money they are going to invest in their business. Also, farmers drive rural economies. When they have additional dollars in their pockets, they are going to invest in their communities whether by purchasing more products at the local seed dealer, buying new equipment or doing whatever it might be in the community. That's another downfall. Rural communities thrive when farmers are successful.
Conservative
David Bexte Conservative Bow River, AB
Thank you.
Do you have any data on how much per acre these carbon taxes are costing per operation?
General Manager, Keystone Agricultural Producers
Off the top of my head, no, but I could—
Conservative
General Manager, Keystone Agricultural Producers
Yes, I will look something up.
Conservative
David Bexte Conservative Bow River, AB
I appreciate that.
Farmers' contributions to carbon management have been disregarded; you've alluded to that, and others have spoken to it.
Carbon credits could be rewards for good practices. Could you explain the hypocrisy of the circumstance right now and how farmers are doing the right thing but are not being rewarded for it?
General Manager, Keystone Agricultural Producers
I'm sorry, but could you clarify your question around carbon markets?
Conservative
David Bexte Conservative Bow River, AB
The question was about how farmers aren't being rewarded in the carbon markets for all the good practices they are doing.
General Manager, Keystone Agricultural Producers
We've seen a bit of a challenge with carbon markets. They just haven't really worked for producers. I'm not sure fully what the issues have been. It just doesn't seem like there's an interest in or a demand for that. The way we should be rewarding producers for their contributions is through market-based approaches—not through a stick but more through a carrot. I think more generally—
Conservative
David Bexte Conservative Bow River, AB
There should be recognition for self-started programs. Is that correct?
General Manager, Keystone Agricultural Producers
That's correct, and if we can try to figure out a way to reward those early adopters—people who are putting their necks out there to do the right thing when it doesn't pay off—I think that would also be welcomed by the industry.
Conservative
David Bexte Conservative Bow River, AB
You suggested that with the 4R nutrient management programs. They're best practices, and they're done because they're the right thing to do and there's a value proposition, but there are no rewards in the carbon market.