Thank you, Chair and committee members, for the opportunity to speak to you today.
We are at a very important moment in Canadian and global history—what Prime Minister Carney has called a “rupture”. The closing of the Strait of Hormuz, resulting in what the IEA calls the biggest energy shock in history, is highlighting the importance of security and diversity in the energy supply, and the harsh consequences for people and countries when they can't access or afford enough oil and gas. This is not just about people paying more at the pump. It is an omni-crisis that is affecting our transportation, manufacturing and food supply chains. Just about every human on the planet will suffer some consequences from the insufficient global supply of oil and gas.
Our allies are asking what Canada, the world's fourth-largest producer of oil and third-largest exporter of oil, can do to help. The answer is “not much”, except prepare so that we're in a better position the next time an energy crisis occurs, which is inevitable.
This crisis comes at a time when Prime Minister Carney has committed to making Canada an energy superpower, doubling non-U.S. exports, achieving data sovereignty, making Canada the fastest-growing economy in the G7 and spending 3.5% of GDP on defence. All those things are made possible by expanding the production, use and export of oil and gas. I would suggest none of them are possible if we don't.
The biggest limiting factor to expanding production and exports in the past decade has been overzealous climate policy. The policy put achieving our Paris Agreement commitments above all other economic, social and security goals. I would argue that the policy was most effective in making Canadian industry uncompetitive and transferring industrial capacity and investment to nations with lower environmental standards. This phenomenon is known as carbon leakage and is well understood and documented by economists.
This leaves us with a dilemma. How can Canada do its part in reducing emissions to mitigate climate changes—which are observable and oftentimes harmful—while not making ourselves weaker and poorer with burdensome regulation and shifting production and capacity to our competitors and adversaries, with no resulting impact whatsoever on global emissions?
I suggest to you that industrial carbon pricing should aim at making Canadian industry the best, not the smallest. In general, almost all Canadian production of oil, gas and minerals is among the best in the world on environmental performance. This is owing to our high-quality resources, robust environmental standards and relatively clean grid. Sticking with oil and gas, it is well acknowledged that Canadian LNG is among the least carbon-intense in the world. While our heavy oil rarely gets credit, it too is far less carbon-intense than crudes from other heavy oil producers like Venezuela, Mexico and Iraq. Refineries that need heavy oil need heavy oil. If they don't get it from Canada, they'll get it from dirtier sources.
According to Statistics Canada, emissions in the Canadian oil and gas sector peaked in 2014, even as we've added the equivalent of over two million barrels a day of production. The sector knows how to reduce emissions intensity and is doing it. Certainly, Alberta's industrial carbon pricing helped with this. Alberta was the first jurisdiction in North America to introduce an industrial carbon pricing scheme in 2007. It has undergone some iterations. The TIER system is not perfect, but it's pretty good. There has been talk of significantly changing that framework and making Canadian industrial carbon pricing more expensive and more stringent. The discussion paper lobbed by Environment and Climate Change Canada in December is the most concrete example of this.
I cannot understand why, in the middle of so much crisis and so much opportunity, Canada would do this to itself. Why would we deliberately make ourselves weaker and poorer? I strongly recommend that the federal government stop making our oil and gas and other energy-intensive and trade-exposed industries less globally competitive. It wasn't ever a good idea, but it is an especially bad one now. Alberta has a system, TIER, that works to find a balance between economic growth and reducing emissions. Let's not fix what isn't broken.
Thank you for your attention. I look forward to questions.