Evidence of meeting #35 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 tax.
A recording is available from Parliament.
Bloc
Patrick Bonin Bloc Repentigny, QC
In your view, the fact that the government subsidizes fossil fuels has no effect on the effectiveness of carbon pricing.
Vice-President, New Economy Canada
The oil and gas sector is just not an issue that we work on.
Bloc
Patrick Bonin Bloc Repentigny, QC
Very well.
Does that take money away from the deployment of clean energy, for example? Does it create competition? Does it create economic inequality if one sector is funded and the other isn’t?
Vice-President, New Economy Canada
What we've seen, and we've certainly advocated for this, is the delivery of the clean economy investment tax credits, ITCs. One piece that I would highlight, which we've also advocated for, is the extension and expansion of those ITCs. I think that is an important and productive—
Bloc
Patrick Bonin Bloc Repentigny, QC
Thank you, but that wasn’t really what my question was about.
You published a report in which you mention that Canada is falling in the global rankings for investments in the energy transition, while Saudi Arabia is skyrocketing. Can you explain that to me briefly?
Vice-President, New Economy Canada
Were you referencing Canada's clean energy investment?
Vice-President, New Economy Canada
It's the transition investment.
What we saw last year, according to BloombergNEF, was a decrease. Canada dropped out of the top 10 in those investments last year. In part, that was due to the removal of the subsidy around electric vehicles, which has been reinstated. We hope that Canada returns to the top 10 next year.
It's a very significant opportunity. As I mentioned, it's $3 trillion annually globally. We believe Canada is incredibly well-positioned to capture some of that, not only in things like clean electricity, which this committee has heard and thought a lot about, but—
Liberal
The Chair Liberal Shannon Miedema
Thank you, Mr. Clark.
Thank you, Mr. Bonin.
We will now go to Mr. Bexte for five minutes.
Conservative
David Bexte Conservative Bow River, AB
Thank you, Chair.
Thank you, witnesses. I appreciate your contributions today. I hope we all benefit from them.
I'll start with Dr. McKitrick. I wonder if you could comment a bit, even though we've heard testimony from the Climate Action Network casting aspersions on your model and there's some dismissiveness of the notion of carbon leakage.
What portion of our trade economy do you think—I know you're not Stats Canada—is with countries that have no carbon pricing? Between our competitors and our customers, how are we exposed to the globe?
Professor of Economics, University of Guelph, As an Individual
I don't have specific numbers off the top of my head, but as a general rule, about 75% to 80% of our exports go to the U.S. It's not the case that the U.S. has no climate policy or no carbon pricing. Some jurisdictions do, but nationally, they do not. Likewise, with countries in Asia, like India and China, if they have carbon prices, they are at a mid de minimis level.
In Europe, there is a much higher carbon pricing system. The U.K., Germany and the other participants in the European emissions trading system have comparable carbon pricing systems, although the prices in the European system were very low for a long time. It wasn't all that big a deal.
Off the top of my head, I would say about 80% of our trade goes to countries that don't have meaningful carbon pricing.
Conservative
David Bexte Conservative Bow River, AB
Could you comment on how there's a desire to align our economy with trade with jurisdictions that have some sort of carbon border adjustment mechanism, which makes us purely uncompetitive compared to all of these other jurisdictions? More than 90% of our trade exposure doesn't care, but we're....
Can you comment on that paradox?
Professor of Economics, University of Guelph, As an Individual
Suppose that we didn't have this carbon pricing system and we paid the full cost of carbon border adjustment mechanisms for those jurisdictions that have imposed them. How would that compare to imposing the carbon pricing system on ourselves for all of our exports? I suspect that even if we ate the cost of the carbon border adjustment mechanism, it would still be less costly for us.
The other point that I would make is that we hear a lot of references to places like Germany and the U.K. We have to ask if we really want to emulate their experience with deindustrialization, because there are certainly problems in those countries where they've moved out of step with their major competitors, including in Asia. As a result, it's this leakage problem all over again. Emissions don't go down. They just move to different jurisdictions. Domestically, you incur a lot of reductions in your standard of living.
Conservative
David Bexte Conservative Bow River, AB
I appreciate that. The standard of living of Canadians will suffer because of that. Thank you.
I'd like to turn to Fertilizer Canada. Our time is running short, so I'll be really succinct.
Scarcity is an issue in all economies in every part of the world, but particularly in North America and Canada. In the agriculture sector, fertilizer inputs are important, especially this time of year with seeding starting. I know there's a lot of anxiety with inputs right now.
To what degree are we a net importer or exporter of urea and other products like that? We manufacture them here, but we export some and we also import a lot. How does that control the price?
How exposed is our industry because we are not replacing plants and infrastructure to manufacture them ourselves for domestic security?
Vice-President, Industrial Relations, Fertilizer Canada
I'll take that one. Thanks.
From a nitrogen fertilizer perspective, Canada exports about 35% of what we produce—predominantly to the U.S.—but we also import a fair share. Eastern Canada is quite exposed to imports.
In terms of the global pricing dynamics of nitrogen-based fertilizers, we are trading on a global commodity market. We are price-takers, not price setters.
Conservative
David Bexte Conservative Bow River, AB
Are the industrial carbon tax and these carbon pricing mechanisms and schemes stifling the building of new plants and infrastructure in Canada?
Vice-President, Industrial Relations, Fertilizer Canada
It's hard to tie the two together directly. I would say the overall capital investment needed to bring a new nitrogen production facility online is very significant. It's in the billions of dollars. The last time a nitrogen fertilizer plant came online in Canada was in 1992.
Conservative
David Bexte Conservative Bow River, AB
With big trade with the U.S. in urea, especially, among the products, their having no carbon pricing really curtails our proponents.
Thank you very much. The time is up.
Liberal
The Chair Liberal Shannon Miedema
Thank you very much, Mr. Bexte.
Finally, to wrap up the industrial carbon study that he proposed is Mr. St-Pierre. The floor is yours for five minutes.
Liberal
Eric St-Pierre Liberal Honoré-Mercier, QC
I'd like to thank the committee for studying this really important climate policy. This request to study the industrial carbon price came out last November. I'm glad we're wrapping up this study, and I'm really excited to see what the recommendations will look like.
Thank you to everybody for contributing. Thank you for coming today as witnesses.
I have a question for Fertilizer Canada around hydrogen and ITCs. I'm wondering if you can elaborate on what it would take to make clean hydrogen. I'm thinking green or blue, or whichever colour you want to discuss...hydrogen to ammonia production. Discuss the link to the ITCs.
I think Fertilizer Canada has been supportive of some of the ITCs, but if you could unpack that a bit, it would be appreciated.
Vice-President, Industrial Relations, Fertilizer Canada
Absolutely. Yes, we've been generally supportive of this suite of clean economy ITCs, but we've been critical of the scope and the timelines in which they're being applied. For many of these projects, like a clean hydrogen project, for example, there's been a lot of interest in that space in the last number of years and not a lot of projects that have been able to reach final investment decision.
Clean hydrogen and clean ammonia are sisters, essentially. If we have a clean ammonia story to tell, it's not coming to Canada right now. What we're seeing is that some of those investments in lower carbon and clean ammonia are generally going to other jurisdictions, such as the U.S., where they have production-based tax incentives.
Right now, specifically to the clean hydrogen ITC, it's unworkable. The CCUS ITC has more potential, but we would look for it to be expanded in scope and timeline.
Liberal
Eric St-Pierre Liberal Honoré-Mercier, QC
Mr. Clark, thanks for attending today.
Could you comment on whether industrial carbon pricing is one of our most effective mechanisms or tools for reducing emissions and combatting climate change?
Vice-President, New Economy Canada
While emissions reductions and climate aren't the focus of our organization, I think the research is pretty clear that the momentum on emissions broadly across the economy is trending in the right way. The industrial price is one of the most effective mechanisms, if not the most effective mechanism, we have to reduce emissions.
Liberal
Eric St-Pierre Liberal Honoré-Mercier, QC
I believe you mentioned that New Economy Canada has over 70 members and that you represent close to half a million workers across Canada.