Evidence of meeting #34 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 price.
A recording is available from Parliament.
Conservative
Carol Anstey Conservative Long Range Mountains, NL
For the benefit of people who may not understand the offshore industry, can you explain how the complexities and time frames really impact this industry uniquely when we're talking about the development?
Chief Executive Officer, Oil and Gas Corporation of Newfoundland and Labrador
Our offshore oil projects are almost as long-life as the oil sands: 25- to 30-year trajectories are common. Companies must model that and understand what their trade-offs are. With the carbon pricing mechanism, you have an escalating price per tonne, but you also have a diminishing floor, a cap to which this tax is not applied, so they are divergent. Unfortunately, as the oil projects age, the emissions intensity worsens over time. That adds a level of complexity that needs to be reckoned with.
Liberal
The Chair Liberal Shannon Miedema
Thank you very much.
We will now move to Mr. Grant for six minutes.
Liberal
Wade Grant Liberal Vancouver Quadra, BC
Thank you very much, Madam Chair.
Thank you to the witnesses for being here.
It's a pleasure to see you again, Ms. Brouillette. I want to touch on the letter that the Climate Action Network jointly signed to the Prime Minister earlier this year, in March.
The industrial carbon pricing is “widely agreed to be the most efficient road to industrial decarbonization”. Can you explain to the committee what is meant by “efficient”?
Executive Director, Climate Action Network Canada
A group of CAN-Rac member organizations, including the David Suzuki Foundation, the Pembina Institute, West Coast Environmental Law, the Conservation Council of New Brunswick and the International Institute for Sustainable Development recently submitted a letter to the committee with our recommendations.
It's been modelled that industrial carbon pricing could be the tool in our policy tool box right now that drives the largest share of emissions reductions in Canada, which is why we're very impatient to see the government move forward with it.
The efficiency argument is also from an economic perspective in terms of the marginal cost of reductions happening first. That's what we mean by efficiency, that investors and companies will be investing first in those emissions that are lower cost and increasing the investments in those that are higher over time.
Liberal
Wade Grant Liberal Vancouver Quadra, BC
There's a concern we often hear that pricing industrial emissions in Canada pushes production and investment to countries where there's no carbon price without actually reducing global emissions.
Can you walk the committee through why a well-designed output-based system like OBPS addresses that concern?
Executive Director, Climate Action Network Canada
The first thing to keep in mind is that the world is increasingly shifting to electric and zero-emissions-based technologies. For our industries, our workers and our markets to remain competitive, we have to make sure that our economy is incentivized to move into those sectors, which is where the world is moving.
The second thing is that major jurisdictions, including markets like the European Union and China, which Canada is seeking to diversify to, especially in this context, as we're seeking to loosen our dependence on exports to the United States, have policies in place that either take into account emissions, like the EU's upcoming carbon border adjustment mechanism, or have pricing mechanisms in place.
There are approximately 14 individual countries, excluding the EU's original system, that have emissions trading systems that are comparable to Canada's OBPS. If we want to compete, it's really important that the government incentivize our industries to reduce emissions.
Liberal
Wade Grant Liberal Vancouver Quadra, BC
How does industrial carbon pricing support investment certainty for clean energy and decarbonization projects in the country?
Executive Director, Climate Action Network Canada
An industrial carbon price basically forces companies to internalize the cost of their pollution. It's a polluter pay mechanism.
Right now, these sectors, in particular the largest polluting sectors of the Canadian economy, namely the oil and gas sector, which accounts for over a third of our national emissions, often are not fully paying the social cost of carbon that is imposed on Canadians and on the world. Forcing these companies to price that out in their investments will mean that they will prioritize technologies that are less polluting over time. If we look at the bigger macro picture, the Canadian economy and specific sectors of the economy will grow where there are less emissions and where there is compatibility with not only that competitive outlook we were describing earlier, but also in terms of a healthy environment, which is better for people and the planet.
Liberal
Wade Grant Liberal Vancouver Quadra, BC
Can you speak further to what it would cost the industry and Canada's competitive position if we didn't have industrial carbon pricing?
Executive Director, Climate Action Network Canada
I don't have that data with me, but I would be happy to submit it in writing.
Liberal
Wade Grant Liberal Vancouver Quadra, BC
I'll go back to the OBPS then. How does the way the OBPS is structured help keep production here while still creating an incentive to reduce emissions?
Executive Director, Climate Action Network Canada
It ensures that our products and our industries invest in sectors of the economy where emissions are progressively reducing so that we can compete in a global market that's shifting towards net zero.
Liberal
The Chair Liberal Shannon Miedema
Thank you very much, Mr. Grant.
Mr. Bonin, you have the floor for six minutes.
Bloc
Patrick Bonin Bloc Repentigny, QC
Thank you, Madam Chair.
Earlier, we talked about the Bay du Nord project.
Ms. Brouillette, do you think it's normal for the government to want to strengthen industrial carbon pricing while continuing to support the Bay du Nord project, for example?
He talked about giving $1 billion to the oil company. So he wants to give the oil and gas sector $1 billion in subsidies.
Do you think that makes sense?
Bloc
Patrick Bonin Bloc Repentigny, QC
Okay.
If I understand correctly, you're proposing that there be carbon pricing, but that fossil fuel subsidies be eliminated.
Is that correct?
Executive Director, Climate Action Network Canada
Climate Action Network Canada and its members have very emphatically requested that fossil fuel subsidies be reduced and eliminated.
The climate crisis is caused by the burning of oil and gas. It's good to invest in new sectors and provide incentives to oil and gas or other sectors to gradually reduce their emissions. However, we also have to stop encouraging investments to increase oil and gas production through other incentives, such as fossil fuel subsidies.
The first step is to stop increasing production, and this kind of subsidy unfortunately does the exact opposite.
Bloc
Patrick Bonin Bloc Repentigny, QC
Today in The Globe and Mail, there was an article stating that Alberta and the federal government have agreed to withdraw the greenhouse gas emissions cap for the oil and gas sectors. It also talks about a proposed project to expand Trans Mountain by 300,000 barrels a day, a new pipeline that could carry a million barrels a day. Meanwhile, the government says it wants to strengthen carbon pricing and give billions of dollars to oil and gas companies for carbon sequestration.
In your opinion, is this agreement between the government and Alberta a responsible approach to the climate crisis?
Executive Director, Climate Action Network Canada
Personally, I'm very concerned, first of all, to see that the April 1 deadline wasn't met. As for Alberta, we found that it didn't commit to certain key elements of the climate policy that was laid out in that well-known memorandum.
I am all the more concerned to hear about possible public investments in new pipelines, especially when we recall the financial disaster that investing taxpayers' money in the Trans Mountain pipeline turned out to be. Are we really going to continue to play this game in 2026? I think that's very concerning.
Bloc
Patrick Bonin Bloc Repentigny, QC
You mentioned that the oil and gas companies are making an estimated $90 billion in profits right now.
How much of those profits can be attributed to the war in Iran, for example, compared to what we would normally see?
Executive Director, Climate Action Network Canada
If current fuel prices had stayed the same prior to the war, profits were expected to reach about $30 billion. They've tripled to almost $90 billion because of the devastating war in Iran.
A number of members of Climate Action Network Canada are emphasizing how important it is that the government tax this excess profit and reinvest it in measures to help Canadians who have to deal with rising energy prices.
Higher energy prices have a direct impact on their wallets, whether it's the price of gas or the price of heating. It's very important to think about how to address this unfair situation and to describe what's really happening right now. People talk about putting the fuel tax on hold, but they don't address the issue of those who are benefiting from this situation.
Bloc
Patrick Bonin Bloc Repentigny, QC
From what I understand, you're saying that companies can afford to pay for industrial carbon pricing, among other things.