Environment Committee on March 24th, 2026

[The Clerk of the Committee, Leif-Erik Aune]

Pursuant to Standing Order 106(3), as the clerk of the committee, I will preside over the election of the chair.

I must inform members that the clerk of the committee can only receive motions for the election of the chair. The clerk cannot receive other types of motions, cannot entertain points of order nor participate in debate.

We can now proceed to the election of the chair.

Pursuant to Standing Order 106(2), the chair must be a member of the governing party.

I am ready to receive motions for the chair.

Mr. Bonin, you have the floor.

[Patrick Bonin, Bloc, Repentigny, QC]

I nominate my colleague Ms. Miedema for the position of chair. She has demonstrated her knowledge and willingness to work with everyone. I think she would be the best choice.

[The Clerk]

Mr. Bonin moved that Ms. Shannon Miedema be elected chair of the committee.

Are there any further motions?

(Motion agreed to)

I declare the motion carried and Shannon Miedema duly elected chair of the committee.

Ms. Miedema, I invite you to take the chair.

[Some hon. members]

Hear, hear!

[The Chair, Liberal, Shannon Miedema]

Thank you very much to all of my fellow committee members for placing your trust in me as chair. It's an honour, and I am excited to take on this challenge.

Thank you very much, Mr. Bonin, for placing your trust in me.

Also I'd like to extend a very warm welcome to Will Greaves, who is now a member of this committee for the Liberal Party.

Thank you, Will, for joining us.

Also, welcome to our witnesses. We are starting our industrial carbon study today, which is very exciting, and we have witnesses both hours.

Welcome to Franco Terrazzano, federal director, and Nicolas Gagnon, Quebec director of the Canadian Taxpayers Federation. We have Tim Weis, senior director of industrial decarbonization of the Pembina Institute; and Margareta Dovgal, managing director of Resource Works Society.

Each witness organization will have five minutes to present their opening statements and, once that's complete, we'll have questions from committee members. I'll give you a one-minute warning as you approach the end of your five minutes and then, when your time is up, just complete your sentence after that.

We will begin with the Canadian Taxpayers Federation.

Mr. Terrazzano, the floor is yours.

[Franco Terrazzano, Federal Director, Canadian Taxpayers Federation]

Many Canadians are worried about paying their bills, buying groceries and still having money left over to save for a rainy day. The last thing they need is their government making it more expensive to put gas in their car or food in their fridge.

Many Canadians are feeling deep anxiety about losing their job. The last thing they need is their government pushing the company they work for to leave Canada for the United States.

My name is Franco Terrazzano. I'm the federal director of the Canadian Taxpayers Federation. I'm here on behalf of hundreds of thousands of taxpayers with a simple message: It doesn't matter what label you slap on a carbon tax. Carbon taxes make life in Canada more expensive. Carbon taxes chase away Canadian jobs, and carbon taxes don't work.

The government should end all carbon taxes for all of the reasons it ended the consumer carbon tax. For years, politicians told Canadians that the consumer carbon tax made them richer, but nobody believed that because it wasn't true. Stats Canada showed that inflation dropped after the government cancelled its consumer carbon tax. Government MPs even shot videos in front of gas stations, praising themselves after cutting a carbon tax that they had charged for years.

Leger polling shows that Canadians aren't buying that same government spin about the industrial carbon tax. About 70% of Canadians say businesses will pass on most or some of the costs of the industrial carbon tax to consumers through higher prices. Canadians understand the simple reality: Carbon taxes on refineries make it more expensive to drive. Carbon taxes on fertilizer plants make it more expensive to eat. Carbon taxes on electricity make it more expensive to live.

The consumer carbon tax didn't work, and a carbon tax on Canadian business won't either. Canadian governments impose carbon taxes on fertilizer, oil and gas, and steel. The U.S. government does not. If you chase a fertilizer plant out of Manitoba, that doesn't reduce emissions. It just means Canadian jobs go to North Dakota. If you chase an oil and gas project out of Alberta, that doesn't reduce emissions. It just means Canadian jobs go to Texas. If you chase a steel plant out of Ontario, that doesn't reduce emissions, either. It just means Canadian jobs go to Ohio.

Canadians are already 10 out of 10 worried about tariffs and losing their own jobs. The last thing they need to worry about is attacks from their own government that push the company they work for to move to the U.S.

A trade union has already warned that the industrial carbon tax will decimate Hamilton and move steel production, and all of the jobs that come with it, into the States.

There is no escaping the fatal flaw of carbon taxes, regardless of what you call that carbon tax. A carbon tax that makes life more expensive in Canada will not reduce emissions in places like China, India, Russia or the United States, so a Canadian carbon tax won't fix the issue of global emissions.

About 70% of countries do not impose national carbon taxes, according to the World Bank, but all Canadians really need to do to understand this fatal flaw of carbon taxes is look south to our biggest economic competitor. Regardless of who is in the White House, whether it's a Republican like Trump or Bush, or a Democrat like Biden or Obama, the White House is not imposing carbon taxes.

Getting rid of the consumer carbon tax was only half the job. The government needs to end its hidden carbon taxes, including the industrial carbon tax, for the same reasons it needed to end the consumer carbon tax.

Carbon taxes make life more expensive. Canadians didn't believe it when politicians told them carbon taxes make their lives more affordable, and they don't believe it now. Carbon taxes don't work. Pushing Canadian entrepreneurs to cut production here and set up shop south of the border doesn't cut emissions. It just cuts Canadian jobs.

The industrial carbon tax is the worst of all worlds. It's hidden. It makes life more expensive. It will cost Canadians their jobs. It needs to go.

Thank you.

[The Chair, Liberal, Shannon Miedema]

Thank you for your testimony.

We will now move on to Mr. Weis of the Pembina Institute for five minutes.

The floor is yours.

[Tim Weis, Senior Director, Industrial Decarbonization, Pembina Institute]

Thank you very much.

My name is Tim Weis. I'm the senior director for industrial decarbonization at the Pembina Institute. I'm also a professional engineer and have spent 20 years researching energy technology systems in Canada, including nearly a decade teaching undergraduate courses in thermodynamics and energy systems.

It's a pleasure to be here today to talk about industrial carbon pricing. This is the most important policy to reduce our emissions here in Canada.

I live in Alberta. I had the privilege of being part of the Alberta government and working on the Alberta carbon pricing system a decade ago. This carbon pricing system became the model for the federal one.

Alberta's framework has survived seven premiers and three political parties, but recent changes are undermining its effectiveness. Left unchecked, this threatens Canada's climate goals as well as Alberta's economic future. This matters, because industrial carbon pricing is Canada's most important climate policy. It has the potential to reduce emissions by 20% to 50% by 2030, but it's also one of the most important tools we have to drive private investment towards the industries of the future.

First off, I want to start by saying that it's important to remember that a carbon price is a market mechanism. It allows companies to choose how they want to reduce their emissions, rather than the government picking winners. Of course, costs are often discussed, but it's also important to remember that the point of pricing carbon pollution is to encourage companies to not pay that price. That is the point of the system. In fact, it even financially rewards companies to do better than their minimum requirements.

Industrial carbon pricing is fundamentally a correction of a market failure. Without it, polluters are free to emit, but it's costly for taxpayers who pick up the costs. Whether it's through damaged infrastructure or wildfire smoke, the burden lands on taxpayers, as opposed to emitters. Industrial carbon pricing ensures that major polluters either pay their fair share in a predictable, manageable way or, ideally, reduce their emissions and avoid the cost all together.

This is why, for close to two decades in Alberta, industrial carbon pricing has enjoyed support ranging from oil and gas executives to successive governments, economists and climate groups alike, while hardly being noticed by consumers at all.

Alberta has a high concentration of heavy, high-emitting industries, and while these industries remain important, they must adapt as the energy transition accelerates. Industrial carbon pricing has helped Alberta to do just that. Industrial carbon pricing was central in phasing out coal-fired electricity. It played a major role in quadrupling wind and solar in the past five years in the province, and it supported the economics of some of the world's first carbon capture and storage pilot projects. Notably, all of this occurred in Alberta, with oil production continuing to increase every single year since the carbon price was introduced.

In order to ensure Canada's economic resilience, it is more important than ever that Canada continue to push development of low-carbon industries and supply chains. The first step any government needs to be doing is building a climate-competitive economy, and that needs to start with the foundation of a strong industrial carbon-pricing framework.

I'd like to dispel two myths that often come up about carbon pricing.

One is that it undermines competitiveness. In fact, the opposite is true. Some pundits have recently claimed that a $130 effective carbon price, as agreed upon by Canada in the Canada-Alberta MOU, would cost about $20 per barrel of oil. That number fundamentally misunderstands the policy design.

In fact, most of the emissions are not priced at all in the way that the Canadian system works. The Climate Institute's latest analysis finds that a $130 effective carbon price translates on average to about 50¢, or roughly the cost of a Timbit per barrel. On the other hand, carbon pricing supports innovation, including some of the technologies I've mentioned and that we've seen developed in Alberta. It also helps to create market access by rewarding investments in new future-proofed industries, while preparing our industries for potential carbon border adjustments or, essentially, import tariffs.

The second myth I want to talk about is that carbon pricing drives up grocery prices. Once again, recent analysis from the Canadian Climate Institute estimates that industrial carbon pricing in Canada has resulted in about a 0.1% increase in food costs, the obvious reason being that the carbon price does not apply to farmers or their fuels.

On the other hand, we don't talk enough about some of the real drivers for grocery inflation—price shocks that come from volatile oil and gas markets and how climate change is making food more expensive—but that's a conversation for another day. For today, it's important that this committee is focused on industrial carbon pricing in Canada, because we're at a pivotal moment. Alberta's system needs fixing. Provincial changes have recently caused an oversupply in credits that have dramatically depressed the effective price, undermining investments, including the viability of carbon capture and storage in the oil sands.

Fortunately, Prime Minister Carney and Premier Smith agreed in last year's MOU to address this issue by achieving a minimum effective price of $130 per tonne. Doing this in short order will go a long way to giving investors the confidence to start deploying capital again. Moving forward, we also need Canada to move toward a 2050 schedule, ensuring we have a stable and predictable framework in order to catalyze the billons of dollars we need in energy investment in the decades to come.

[The Chair, Liberal, Shannon Miedema]

Thank you, Mr. Weis.

Last but not least, we have Ms. Dovgal.

The floor is yours for five minutes.

[Margareta Dovgal, Managing Director, Resource Works Society]

Thank you so much, Madam Chair. Congratulations on your appointment as chair of this committee.

Since I last appeared before this committee in October, the government has reiterated its commitment to making Canada an energy superpower. It signed a memorandum of understanding with Alberta, partially about securing access to tidewater for our product, and it has said that it will not implement the oil and gas emissions cap.

The Prime Minister has spoken of trade diversification, energy security and growth. These are the right instincts, but the policy architecture that governs how our industries operate has not caught up. The federal output-based pricing system, OBPS, remains the single most consequential mechanism shaping industrial carbon costs in this country, and it is still built on assumptions, models and design choices from a policy era whose effective goal was to constrain production, not enable it.

The OBPS does not merely set a carbon price. It serves as a federal backstop and, critically, as a reference against which every industrial carbon price by province is assessed. The federal benchmark uses the OBPS to define the minimum stringency the provincial systems must meet—the same coverage thresholds, marginal price signal and tightening trajectory. Provinces have design flexibility, but the OBPS sets the floor, and the composition of a province's economy determines the weight of that floor. In Alberta and Saskatchewan—where oil and gas extraction, conventional production, mining and upgrading comprise the overwhelming share of industrial emissions—meeting those minimum requirements translates into enormous coverage obligations, more than the price of a Timbit.

The mechanism by which these costs escalate is not the carbon price itself. It is stringency—the annual ratcheting down of benchmarks—that determines how much of a facility's emissions are subject to that price. Most sectors begin at 80% of their historical average intensity, declining by 2% per year. By 2030, that benchmark will reach 64%. The impacts of stringency are significant but not well understood. Stringency is a far more politically palatable way to burden our most productive industries than raising the carbon price itself—which, to be clear, is already also happening year by year. That is precisely because almost no one outside industry understands how it works.

This is all compounded by a deeply troubling feature of the OBPS: the way energy-intensive and trade-exposed, EITE, sectors are treated. Iron, steel, lime and cement all receive very high EITE status, so they are subject to a more favourable and slower tightening rate. Oil and gas extraction should qualify but does not. In fact, when you plot the thresholds that Environment and Climate Change Canada uses to determine very high status, the boundary is non-linear. It appears to zigzag specifically around conventional oil and gas production, excluding our largest and most trade-exposed sector from this favourable treatment.

Meanwhile, the models underlying these decisions are built on assumptions that are fundamentally disconnected from how the industry operates and makes investment decisions. ECCC uses equilibrium models that effectively assume that producers will continue investing in decarbonization past the point of profitability. That assumption may satisfy an academic framework, but it is a poor reflection of how capital allocation decisions are actually made. Companies do not invest to break even. They invest where they can earn competitive returns. If the policy environment makes those returns unachievable, capital moves elsewhere. It doesn't just absorb the cost.

This matters most for new facilities, not just existing ones. Most modelling only asks whether a carbon price will shut in current production. The far more consequential question is whether it prevents new production from being built—which, to be clear, we need to do if we want to expand our energy exports to the world, as the Prime Minister has said he wants to do. Smaller facilities below 100,000 tonnes of CO2 equivalent per year lack access, often, to abatement technologies like carbon capture or electrification, which are available to larger emitting facilities. For them, this is not an incentive to reduce emissions, as the policy promises. It is a flat tax levied in a volatile commodity market, punitive in downturns and still uncompetitive in good years. The policy framework for Canadian oil and gas needs to be competitive in order to attract the amount of capital into Canada needed to grow the economy.

The government says that it wants to be an energy superpower. You cannot get there by slightly dialing back the mechanisms designed to keep energy in the ground. The philosophy has to change, and those tools must change with it. The OBPS must be reformed so that the EITE risk assessment reflects the actual trade exposure of our energy sector. The large emitter threshold should be set at 100,000 tonnes, consistent with Alberta's tier system. Also, before any further tightening is imposed, a comprehensive, transparent review of competitiveness impacts should be conducted with provinces and industry at the table as partners, not as afterthoughts.

This country is extraordinarily resource- and energy-rich. We have the geology, the workforce and the regulatory maturity to serve global markets responsibly. What we lack today is a policy framework that recognizes these assets instead of taxing them into irrelevance. That is a gap this committee can address.

Thank you so much, Madam Chair.

I look forward to questions.

[The Chair, Liberal, Shannon Miedema]

Thank you very much for your testimony, Ms. Dovgal.

Now that we have heard from all three witness organizations, we will go to questions from members, beginning with Ms. Anstey for six minutes.

[Carol Anstey, Conservative, Long Range Mountains, NL]

Thank you.

Thank you to the witnesses. Thank you for your testimony.

I'd like to start with the Canadian Taxpayers Federation.

Mr. Terrazzano, you've brought forward an opinion that we get push-back on a lot of the time, and it's with respect to the industrial carbon price and its impact on food prices.

I just want to give you an opportunity to speak to that, if you could, because this is something that's important to everyday Canadians.

[Franco Terrazzano]

Thank you so much.

An industrial carbon tax really is the worst of all worlds. It's going to make life more expensive here in Canada. It's going to drive Canadian jobs south of the border, and it doesn't work.

For the better part of a decade, the government tried to convince Canadians that carbon taxes made them richer. Canadians didn't believe it then, and they still don't believe it now.

When you look at polling, it shows that about 70% of Canadians understand that businesses aren't just going to eat the extra costs. Most or some of the costs are going to be passed on to consumers through higher prices. It's very easy to understand. If you impose massive taxes on oil and gas refineries, that will make it more expensive to drive. If you impose taxes on fertilizer plants, that increases costs for farmers and makes it more expensive to eat. If you impose taxes on electricity, that makes it more expensive to live.

[Carol Anstey, Conservative, Long Range Mountains, NL]

Something else that we hear—and it's in relation to the same kind of spin that we heard on the consumer carbon tax—is that these revenues are being recycled back into the economy. In your opinion, do you think there's enough transparency around that?

[Franco Terrazzano]

Again, it's just like with the consumer carbon tax. The government tried to tell Canadians for the better part of a decade not to worry, that they were going to take $20 from them and give them $50 back. People didn't believe it then, and people don't believe that type of messaging now.

Yes, government transparency is always important, but even better would be if the government got rid of taxes that make life more expensive, that don't work and that could very well cost many Canadians their jobs.

[Carol Anstey, Conservative, Long Range Mountains, NL]

Thank you.

If the current approach to the industrial carbon tax doesn't change, what do you see as the long-term outcome and implications for Canadians?

[Franco Terrazzano]

I think life's going to get more expensive. I think Canadians who are already feeling deep anxiety about losing their jobs may see the plants that they work for get pushed to the United States.

Regardless of who is in the White House, whether it's a Republican or a Democrat, the White House is not imposing carbon taxes. The vast majority of countries don't impose national carbon taxes. A carbon tax in Canada doesn't work.

The government needs to end the industrial carbon tax for all the reasons that it ended the consumer carbon tax.

[Carol Anstey, Conservative, Long Range Mountains, NL]

Thank you so much.

I'd now like to direct my questions to Margareta.

With respect to the natural resources sector, one of the things that comes up a lot with respect to this policy is carbon leakage. I'm wondering if you could speak to that, please.

[Margareta Dovgal]

Yes, absolutely.

If you talk to oil and gas producers, you will hear that it's no longer a theoretical. They see these regulations. I've looked at them. We're doing some research that we plan to publish in mid-April, which we will submit to this committee as well.

When they do the math, it's pretty sobering. To put it in perspective, thermal producers that are using steam-assisted gravity drainage, SAGD—and that accounts for about 75% to 80% of in situ bitumen production in Canada.... I have heard from a number of them that, with the current schedule that's been published, at a certain point it becomes more economically rational for them to turn off the steam and pull as much oil out as they can, as fast as possible, while the reservoir is still hot. Then they will get out of Dodge and deploy that capital to a jurisdiction that doesn't have comparable carbon costs—which, for the record, is most jurisdictions.

Most jurisdictions don't do what Canada is doing, certainly not energy producers. The ones that I'm speaking of aren't marginal producers. These are, as we know, some of the lowest emissions intensity producers globally. Their liabilities are fully funded, so they can get out whenever they want. Then we lose those jobs, and we lose those opportunities. Most crucially, those emissions do not stop; they just go somewhere else.

[Carol Anstey, Conservative, Long Range Mountains, NL]

Thank you.

That leads into my next question with respect to investment and the implication on investment in Canada, which means Canadian jobs and growth in the natural resources sector.

Ultimately, what does this mean for investment as we're trying to attract it? Could you expand quickly on that?

[Margareta Dovgal]

Most countries are assessing their cumulative carbon costs on a facility-by-facility level first. They want to understand whatever framework they're operating in and what their costs are actually going to be. They're also looking at it on a portfolio basis. It's not just specific.... Let's say that there's a company that operates in both B.C. and Alberta; it has different calculations, different facilities and different sizes. So, it depends on the technology that the company is using.

Many companies in those cases are now actively identifying pathways, I've heard, to get out of Canada. We're not going to be able to produce the oil and natural gas at nearly the scale that we want. We're going to lose the tax revenues, the royalties, the direct and indirect jobs, and the supply chain opportunities for indigenous communities. All of these things are in jeopardy if we don't look seriously at what the OBPS is scheduled already to accomplish if it's not fixed.

[Carol Anstey, Conservative, Long Range Mountains, NL]

Do you think in your opinion, working in this sector, that the policy is proportionate to the environmental benefits that would be achieved through the government's plan?

[Margareta Dovgal]

I think it's disproportionate, predominantly because if your objective is to decarbonize by de-industrializing, sure, the policy is going to be a success, and we're just going to lose that industry and that investment, and those emissions are going to go somewhere else.

If your objective is to get the balance with the resources that we have, the assets that we have available to serve Canadians, then this policy is not actually accomplishing that.

[The Chair, Liberal, Shannon Miedema]

Thank you, Ms. Anstey.

Mr. St‑Pierre, you have the floor for six minutes.

[Eric St-Pierre, Liberal, Honoré-Mercier, QC]

Madam Chair, congratulations on the new role.

I'm quite excited to participate in this study. It's been about four months in the waiting, and I think this is arguably one of the most important climate policies this country faces, so I'm really glad that we're here.

I'm really excited to hear from the witnesses over the next four days.

Maybe I'll start with you, Dr. Weis.

I'm curious if you have any quick comments, within 30 seconds, with regard to the Taxpayers Federation's testimony and resource work.