Environment Committee on April 21st, 2026

[The Chair, Liberal, Shannon Miedema]

Thank you very much.

I'd like to thank the witnesses for their time today.

Thank you, Ms. Brouillette.

Thank you very much, Mr. Keating.

You are now free to go.

We will suspend briefly while we switch over and get our next set of witnesses.

[The Chair, Liberal, Shannon Miedema]

We'll get back to continuing our study of industrial carbon pricing.

Welcome, witnesses. Thank you so much for spending some time with us this afternoon.

We have three witnesses for this hour: Jennifer Winter, professor, from the University of Calgary, who is online; Adam Auer, president and chief executive officer of the Cement Association of Canada, who is here with us in person; and Thomas Green, senior manager of climate solutions with the David Suzuki Foundation, who is online.

Welcome. You will each have five minutes to present your opening statements. Then we will go to questions by committee members.

We will start with Ms. Winter for five minutes.

The floor is yours.

[Jennifer Winter, Professor, University of Calgary, As an Individual]

Thank you, and good afternoon.

Thank you for inviting me to appear before the committee on this very important issue. It is a privilege to speak to you today.

I'm a professor in the Department of Economics and the School of Public Policy at the University of Calgary. My comments are based on my expertise as a researcher on carbon pricing issues and climate policy design.

Canada faces a challenge in reducing emissions and simultaneously protecting the quality of life and economic growth that we enjoy. Adaptation to and mitigation of climate change is a complex problem, and addressing it deserves careful evaluation of policy options. We are also facing unprecedented global uncertainty and numerous economic shocks, which place new constraints on feasible policy actions. My comments today reflect both my support for emissions reductions and my desire to see careful climate policy design that maximizes benefits and minimizes costs to Canadians.

I will make two points today.

First, Canada's existing industrial emissions pricing systems, the federal OBPS and those put in place by provincial and territorial governments, are designed to incentivize emissions reductions and protect competitiveness. The systems achieve these two objectives by pricing emissions, an economic bad, and subsidizing output, an economic good. Subsidizing output reduces the cost of compliance for regulated firms and maintains domestic and international competitiveness. All of these systems are designed to increase stringency over time as the need to protect competitiveness decreases with more global action to reduce emissions.

An additional benefit of protecting competitiveness is that it also mitigates the cost effects on households and businesses. My research, and that of my colleagues Trevor Tombe and Kent Fellows, among others, demonstrate that the overall effect of emissions pricing on the economy is small. For example, at $80 per tonne, the average increase in food prices from the federal OBPS is 0.5%. Importantly, a consequence of protecting competitiveness is that Canada's emissions are higher compared to an alternative policy that does not offer that protection, such as a full carbon tax.

Second, these systems can and should be improved in response to domestic and international changes. Canada's decentralized federation and shared federal-provincial jurisdiction over the environment means flexibility in design for provinces and territories. While flexibility allows for policy experimentation and customization for each jurisdiction's unique economic context, it also has negative consequences. The 10 different systems differ in share of emissions priced, thresholds for when facilities are subject to pricing, performance standards for regulated facilities, and the time path of stringency increases, just to name a few key differences.

One important consequence of this flexibility is different emissions credit prices across Canada, which matters for more than just fairness. Differential treatment of a specific sector or facility reallocates capital and labour throughout the economy, moving these production inputs away from their most productive use. This artificially expands some sectors and shrinks others and lowers Canada's productivity. Differential emissions prices, either implicit or explicit, in different sectors result in some firms engaging in more costly emissions reductions than would otherwise be the case. The consequence is more costly emissions reductions overall, increasing the cost of meeting Canada's targets. Another way to think about this issue is that differential system design and price levels are a barrier to internal trade. This impedes economic growth and reduces productivity.

An important opportunity for improvement is working to harmonize markets and harmonize the policy environment, reducing the total cost of emissions reductions and reducing the total cost of addressing climate change. This requires co-operation across Canada. Federal action alone is insufficient.

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

[The Chair, Liberal, Shannon Miedema]

Thank you very much, Ms. Winter.

We will now go to Mr. Auer for five minutes, please.

[Adam Auer, President and Chief Executive Officer, Cement Association of Canada]

Madam Chair, members of the committee, thank you for the opportunity to appear.

My name is Adam Auer. I'm the president and CEO of the Cement Association of Canada. Our six members operate 14 cement plants across five provinces, supporting more than 62,000 direct and indirect jobs, and contributing $5.1 billion to Canadian wages and salaries in 2024 alone.

Canada's cement industry has been clear and transparent since we began this journey over a decade ago. We support well-designed industrial carbon pricing. Despite the current economic headwinds facing our industry and the country, our position has not changed. We continue to believe that industrial carbon pricing, when thoughtfully designed and implemented, can attract investment, support competitiveness and accelerate the cement and concrete industry's decarbonization.

Cement manufacturing accounts for approximately 7% to 8% of global CO2 emissions and about 1.5% of Canada's. Decarbonizing our sector matters, and our member companies take that responsibility seriously. Cement is also among the most trade-exposed sectors in the economy. If industrial carbon pricing is done wrong, it will shift Canadian cement production to lower-cost, higher-carbon jurisdictions, which threatens Canadian jobs, communities and our businesses, as well as our climate emissions reduction goals. This means we need carbon pricing to do the job it was intended to do: drive investment toward cutting emissions and support the transition to an economy that values increasingly lower-carbon goods and services.

There's a global reconciliation of cement manufacturing capacity under way right now. Aging plants will be modernized or closed, and new investment will flow to the jurisdictions that present the strongest business case. A predictable, well-calibrated industrial carbon pricing policy is a central component of that business case.

Fundamentally, decarbonization is modernization and productivity improvement by another name. Fuel switching, clinker substitution, thermal heat recovery—these investments make plants more efficient, more competitive and less emissions-intensive all at once, but these projects sit at the margin of investability. The engineering confirms that the projects are viable, but the business case is lacking. Payback periods are long, and demand-side signals for new products are not yet strong enough to close that gap.

Carbon pricing is a bridge, a necessary component of closing that gap to make these projects investable today rather than in a decade from now. In a global reconciliation, in which capital decisions are being made now, timing is the difference between Canada winning or losing that investment.

Our support for industrial carbon pricing does not mean that the current system is working. It is not. Our members operate under five different provincial pricing regimes, each with their own rules and regulations. For example, in British Columbia, stringency is so high that we've lost market share to imports. In Alberta, TIER credits trade far below the regulated price, undermining the investment signal that should be driving carbon capture and other decarbonization projects. This fragmentation is an interprovincial trade barrier that undermines the very investor confidence the system is meant to build. It must be addressed through greater market integration and, ultimately, a harmonized national market capable of linking with international systems like the Western Climate Initiative and the European Union's emissions trading system.

Canada's cement industry is not here to ask you to weaken industrial carbon pricing. We're here to ask you to fix it so that it works as intended. The moment calls for it, and that opportunity is grounded in national interest. Cement and concrete are as strategic to Canada's economy as energy. There is no housing, no infrastructure, no defence project, no renewable energy installation and no trade corridor that does not depend on a secure domestic supply of cement. Maintaining a competitive, modern and increasingly clean supply is not simply good industrial policy; it's a matter of economic sovereignty.

If we get the policy conditions right, we can ensure that investment drives demand for lower-carbon concrete and accelerates the modernization of the plants that produce it, aligning Canada's economic and infrastructure agenda with its climate objectives at the same time.

Thank you. I welcome your questions.

[The Chair, Liberal, Shannon Miedema]

Thank you very much, Mr. Auer.

We now go to Mr. Green for five minutes.

[Thomas Green, Senior Manager, Climate Solutions, David Suzuki Foundation]

Thank you.

My name is Thomas Green, senior manager, climate solutions. I've been at the David Suzuki Foundation for eight years, and I've been working on carbon pricing since the very beginning.

DSF was one of the environmental organizations that signed on to the letter to the Prime Minister, which was sent in March. We've also sent the committee a more detailed written submission.

Canada's climate policy tool kit has been depleted. We've lost the consumer carbon levy and the oil and gas emissions cap. The electric vehicle availability standard is going to be replaced with yet-to-be drafted tailpipe standards. What is left is the powerful lever of industrial carbon pricing, and it's really important to get it right.

The government has rightly placed climate competitiveness at the heart of Canada's economic strategy, and that strategy depends on robust, predictable and actionable industrial carbon pricing.

Industrial carbon pricing is supported by leading economists. There was a recent letter with 200 economists supporting continuing with industrial carbon pricing.

We're very concerned that the Alberta MOU—and how it's implemented—risks undermining industrial carbon pricing. Indeed, a week after the MOU was signed, Alberta weakened its system further with regulatory changes that flood the market with credits. Prices predictably collapsed.

Why does carbon pricing matter beyond climate? It's a competitiveness policy. As the EU carbon border adjustment policy takes effect, global markets are increasingly pricing carbon intensity into trade and investment decisions.

A June 2025 survey of industrial carbon pricing participants showed that it is working to reduce emissions in Canada, to support business performance and to advance low-carbon investments, yet confidence was lacking that the price will reach $170 by 2030. That's in part because we see a lot of pressure both from industry and from some across the political spectrum to weaken it or get rid of it entirely.

The question is not whether Canada can afford robust industrial carbon pricing but whether Canada can afford to be caught without it when trading partners come looking at the carbon content of our exports. The Canadian Climate Institute showed that $57 billion in decarbonization projects are linked to the carbon price signal. Those are real investments in jobs and government revenues that are at stake.

On actual costs, you've heard referenced before the CCI study showing that oil sands' compliance costs are about nine cents per barrel today, rising to 50¢ by 2030, which is hardly a competitiveness risk. We've also heard reference to the Fraser Institute's flawed findings, and we caution the committee on basing its recommendations on a model that hasn't been validated and that doesn't do an adequate job of modelling how industrial carbon pricing works. It's an outlier, and sectors with little or no industrial carbon pricing appear in the Fraser Institute's analysis to have the largest model impacts, which shows that it's not working properly. It doesn't price how industrial carbon pricing protects competitiveness and how industry reacts by investing in decarbonization.

New Economy Canada's vice-president of government relations had this supportive statement on carbon pricing when the budget came out, saying, “The newly announced climate competitiveness strategy sends the right signal on the importance of industrial pricing for global competitiveness. At the same time, businesses need certainty as soon as possible to unlock investment”.

The task for the government—and our core ask—is to ensure that the 2026 review results in a robust system that includes a strong, rising and enforced minimum industrial carbon price; a clear and credible, post-2030 industrial carbon price trajectory; the restoration of a level playing field across jurisdictions; and a few other elements like this.

Economists support industrial carbon pricing, and the World Bank recognizes it as a powerful tool for driving efficiency and innovation.

This committee has an opportunity to see it and act accordingly with these recommendations.

Thank you. I welcome your questions.

[The Chair, Liberal, Shannon Miedema]

Thank you, Mr. Green.

We will now move to questions by committee members.

We will begin with Mr. Bexte for six minutes.

[David Bexte, Conservative, Bow River, AB]

Thank you, Madam Chair.

Welcome, witnesses. I really appreciate your presence here today. I hope to benefit from your knowledge, and I hope it helps us make good decisions.

Dr. Winter, I'd like to start with you.

If investors hate uncertainty, as you've said, why should industry trust a system where the rules keep changing?

[Jennifer Winter]

That is a great question.

We are in unprecedented times of uncertainty. Some of this is beyond our control—I'm speaking about geopolitical events.

What we can control in Canada are the choices of governments. One thing that governments can do to reduce uncertainty and maintain confidence is implement set review periods. This is something that the Government of Canada has done and the provinces and territories implementing their own systems. The rules of the game are set for a certain amount of time. After that, there is a review period to evaluate the effectiveness, the stringency and whether the systems are doing the right job. Within that review period, it leads to change.

[David Bexte, Conservative, Bow River, AB]

Thank you.

You've also expressed dissatisfaction with the carbon credit system. You've agreed that inconsistent pricing signals undermine efficiency and competitiveness. It causes confusion in industry. That's not good.

Based on that, are we underestimating the cumulative economic impact of the policy situation we're in today and going forward?

[Jennifer Winter]

That is a great question.

I haven't done the modelling myself, so I wouldn't want to mislead you. I'll defer and follow up with a written statement.

[David Bexte, Conservative, Bow River, AB]

Thank you.

I will go back to something you mentioned in your opening statement, and it relates to how predictable the current circumstances are. I've been in industry for a long time and in politics for a very short time. I remember a number of geopolitical upheavals over the last forty years, and they happened in 10-year intervals. Wasn't this predictable, what we're in right now? Maybe not the magnitude of it, but.... How should that be incorporated into economic models? The uncertainty related to big upheavals like the Persian Gulf situation, shouldn't they be part of our planning?

[Jennifer Winter]

It's difficult to plan for unexpected shocks by their nature. I will say, though, the existing carbon pricing design, by subsidizing output, does protect competitiveness. That also buffers the regulated firms against the shocks they face.

[David Bexte, Conservative, Bow River, AB]

I would suggest that we need to be a little more robust in how we risk things because we know an oil price shock is going to come every 10 years. Then it will abate, and then another one will come and abate.

I'll move to Mr. Auer from the cement industry. It's another industry that I like a lot, and I spent a lot of time in it.

At what point does carbon pricing begin creating carbon leakage rather than creating emissions reductions?

[Adam Auer]

That's an excellent question. Carbon leakage is our number one concern, obviously, with the design of any carbon pricing system. It goes back to the question of calibration. Effectively, if the compliance costs become so great that it creates—

[David Bexte, Conservative, Bow River, AB]

Do you have an estimate of how high that is?

[Adam Auer]

I can't give you a dollar figure.

[David Bexte, Conservative, Bow River, AB]

Is it higher than it is now, or is it happening now?

[Adam Auer]

The design of the system we have now, in most provinces, is such that it is protective against those leakage concerns. As I mentioned in my remarks, we have experienced leakage in British Columbia, particularly in the previous system, which was a direct carbon tax, not an output-based pricing system.

[David Bexte, Conservative, Bow River, AB]

That's evidence that we're close and that we're at the point where....

[Adam Auer]

It was under the old system. British Columbia has since transitioned to an output-based pricing system, which offers some level of protection, although it still remains significantly more stringent than other provinces.

[David Bexte, Conservative, Bow River, AB]

If cement is a core input in housing and infrastructure, how much do rising carbon prices add to the typical housing unit or major infrastructure project?

[Adam Auer]

For cement, they don't. That is the point of an EITE design. The market will not absorb those additional costs.

[David Bexte, Conservative, Bow River, AB]

How much of the Canadian production—