Environment Committee on Oct. 6th, 2025

[Dave Sawyer]

Really quickly, if I may, we just did a bunch of work on looking at shared jurisdiction in the country. By far the biggest reductions in emissions have come from federal and provincial policy that has worked out jurisdiction and deferred federal policy off to the provinces to implement. Methane regulations are implemented by the provinces, so that one jurisdiction implements it.

Our success is built on shared responsibility and shared jurisdiction, and that's really the way it functions. Minimum federal standards provincially tailored to meet local needs is the way the federation works.

[Shannon Miedema, Liberal, Halifax, NS]

Thank you for that.

Mr. Kabbara, you spoke about competitiveness. There's a lot of talk about a climate competitiveness strategy that's being created right now by the federal government. That should come out before the budget.

If you could shape the competitiveness strategy, what would you put in there? What things would you be thinking about that are the most critical for us to be thinking about at this time?

[Moe Kabbara]

Sectorally speaking, I think it would be electricity, EVs, critical minerals, mass timber and a connection to the defence sector. These are the five sectors I would focus on.

More broadly, one of the things we've been arguing for is what's really at the upstream for all of these things. It's a strong industrial base, right?

When you look at Korea during the Nixon crisis in the seventies, ultimately what they did was build their upstream industrial base in terms of the chemicals industry. That then led to all of the downstream sectors they have.

I think it would be looking at things that would build that industrial base in terms of labour, energy, R and D, innovation, infrastructure and a trade diversification strategy or trade corridors. I think it would be really focusing in on a limited but effective number of priorities and making sure there's an industrial base that can feed into all of these different sectors.

[The Chair, Liberal, Angelo Iacono]

Thank you, Mr. Kabbara.

Mr. Bonin, you have the floor for six minutes.

[Patrick Bonin, Bloc, Repentigny, QC]

Thank you, Mr. Chair. Welcome back.

Thank you to the witnesses for their presentations.

Mr. Sawyer, you said that according to your assessment results, we were three‑quarters of the way to our 2030 target, but that because of recent rollbacks, among other things, emissions reductions for 2030 are at 20% to 25% against the 2005 baseline.

Could you give us more details on that? Where are we exactly?

What do you mean by recent rollbacks? What would be their impact?

[Dave Sawyer]

The big policy holes are the large emitter trading systems: the industrial carbon-pricing systems. The federal government sets a benchmark standard and the provinces can choose to implement their own policies.

A number of jurisdictions have watered down the system. Saskatchewan has suspended its system entirely. Alberta announced a bunch of changes just last week. This puts significant downward pressure on emissions and prices. Traded prices right now in TIER are below former prime minister Stephen Harper's levels, at under $15 a tonne. The market's illiquid with these latest changes. That really doesn't put the long-term signal in place that we had seen.

On the EV availability standard, pausing that is a big deal. Yes, there are issues around sales. The slowing sales had a lot to do with fewer subsidies being available as well. When you look at the transportation sector, the population is growing and emissions are not falling as fast. You're not getting the technology uptake that you anticipated. That's another big one.

Also, then, methane regulations in oil and gas need to be strengthened. A lot of our work was assuming strength in oil and gas regulation. That could be slowing.

Soon there's clean electricity regulation, although the clean electricity regulation really doesn't come into force until 2035, so it doesn't have much of an impact now. Sure, there's an investment horizon, but it's 10 years away.

It's stuff like that. There are a number of policies that we can point to, including the repeal of the carbon tax in B.C. and the federal....

[Patrick Bonin, Bloc, Repentigny, QC]

I'd like to go back to the industrial price for provinces.

You said that Alberta has taken a step back regarding the carbon pricing system.

Should the federal government intervene to make sure the industrial carbon price in Alberta is equivalent to the one set by the federal system or to the cap system in place in Quebec?

Is it equivalent?

[Dave Sawyer]

I'll address the Quebec question first.

The Quebec system is a strong, functioning and well-organized and maintained system with all the design features you'd want. There is lots of flexibility to keep prices down. It's linked to California to keep credit costs for industry and households down while recycling back to households and industry to help with low-carbon technology. The Quebec cap-and-trade system is very solid.

With the TIER program, there were a bunch of technical announcements just released. They look technical, but when you put them into the models and look at what's going on, we see future prices maybe at $65 a tonne, if you're lucky. This has put an absolute chill on the market. We hear from traders that the market's illiquid.

There is massive uncertainty in the system. If we had a public exchange and transparency, like we do in Quebec for the WCI, there are announcements in California and Quebec, and the price responds. The market speaks, and we see that. We really don't know what's going on. We don't have price discovery or an exchange, so we hear from traders what's going on.

The market spoke. When you tumble the numbers, it now remains well below the levels for good decarbonization or for major investment in decarb to pay.

[Patrick Bonin, Bloc, Repentigny, QC]

Are the systems in place in Alberta and Saskatchewan equivalent to the federal system?

Should the government intervene to make sure Alberta raises its current price?

[Dave Sawyer]

I won't comment on what the government should or shouldn't do.

I do know the way the federal backstop is set up. It allows the provinces to design their own systems to meet their needs. Alberta, Saskatchewan and Ontario have unique systems.

Saskatchewan has announced that it has suspended its system, so it's not in compliance with the federal benchmark. The government could impose the backstop.

[Patrick Bonin, Bloc, Repentigny, QC]

It sounds like you’re saying it's still possible to meet the target set for 2030 if Canada makes major changes.

Could you explain briefly which changes should be prioritized?

[Dave Sawyer]

We would need—

[Patrick Bonin, Bloc, Repentigny, QC]

My question is for Mr. Kabbara.

[Dave Sawyer]

I'm sorry. I'll go quickly.

We would need emission reductions of 40 megatonnes year over year to hit the target. The Pathways project.... Since former Prime Minister Chrétien and former Premier Klein, we've been talking about CCUS in Alberta and across the country. That's 10-12 megatonnes. We would need 40 megatonnes year over year to hit the target. We called it this year. I think we're offside with it. Every tonne matters.

We sort of identified a number of things. We should strengthen the provincial large emitter programs; tighten oil and gas and methane regulations—carbon capture can work, but we need strengthened large emitter programs; fix the EV standard; keep the clean fuel regulations; and implement the clean electricity regulations with investment tax credits.

[The Chair, Liberal, Angelo Iacono]

Thank you, Mr. Sawyer.

Mr. Bexte, you have the floor for five minutes.

[David Bexte, Conservative, Bow River, AB]

Thank you very much, Chair. I appreciate the opportunity.

Dr. Exner-Pirot, thank you for being here today. I have some questions.

In considering alternative emissions management tactics, you previously stated:

It is hard to conceive of a more expensive and divisive way to reduce emissions from the sector and from the Canadian economy than the proposed emissions cap.

Can you explain why the emissions cap is really a production cap and why is it harmful in terms of investment?

[Dr. Heather Exner-Pirot]

Yes. There seems to be a very big disconnect between bureaucrats who design these and people who actually have to work and raise money for their businesses in the system. Everyone in the oil and gas sector who has to have buyers and sellers and investors says that this is going to result in a production cap. Whether or not there is some elegant mechanism to choose different offsets or that kind of thing, the fact is that their business will be less competitive vis-à-vis their global peers.

At the heart of all this, for me, is that we are focusing so hard on reducing Canadian emissions without a line of sight on how that impacts global emissions. You're shutting in Canadian heavy oil and Canadian LNG when the direct comparators, the orange-to-orange comparators in global markets, will almost always have higher emissions intensity. Actually, the oil sector has done quite well in reducing emissions intensity. As mentioned, methane reduction has been a huge part of it on the conventional side. Oil sands barrels have also reduced by about 30% in the last 12 years.

There are things that are working. There is TIER, which is working to reduce emissions intensity. People are trying. People have put billions of dollars into trying to reduce emissions, but at some point, you're just not competitive. At some point, you just give that market share to somebody else.

In terms of what their business is, most of it is not trading carbon credits. It's trying to produce that unit of natural gas or that barrel of oil at the lowest possible price. Right now, oil is about $65 WTI. Natural gas in western Canada has been below zero—sub-zero, beyond net zero—prices in the last month. How can you be competitive when you're in a low-price environment—it's a commodity, so it sometimes will be a low-price environment—when you're adding climate costs that probably would be equal to $10 or $20 on each barrel of oil?

So no, it doesn't require that you shut in production, but your business is not at all competitive and not at all profitable if you have to do all these things.

[David Bexte, Conservative, Bow River, AB]

Thank you.

Further along that vein, the government's own modelling through ECCC assumes only a 0.7% decline in oil and gas production under the emissions cap. The PBO projects a 5.4% loss. The Conference Board of Canada and Deloitte estimate around 11%. Actual production trends seem to align more closely with the higher estimates. From your perspective, which dataset is closest to reality? What does this suggest? Does this suggest that the government is downplaying the impact of its own policy?

[Dr. Heather Exner-Pirot]

That's a good question, because the ECCC's scenario is already wrong. It's already based on data that has proven to be wrong. I think it was based on Canadian Energy Regulator scenarios, which were in turn based on International Energy Agency scenarios. As most of you in this committee probably would have noticed, a month ago the IEA came back and said their current policy scenario doesn't see peak oil this decade and sees pretty much plateaus until 2050. If you went back and put that into the ECCC model, you would see that it was extremely ambitious. It hasn't played out that way at all. There's a huge gap.

In fact, even the PBO numbers look very conservative and are not on track with reality here in October 2025. It does look like the Conference Board and Deloitte numbers were the most representative of what's actually happening in reality.

[David Bexte, Conservative, Bow River, AB]

Your research suggests that putting a cap on Canadian oil and gas emissions could actually raise global emissions. You've stated this already today.

You also mentioned that the cost of reducing emissions this way could have up to an “infinite” cost per tonne of carbon. Is that correct? Can you explain how you came up with that?

[Dr. Heather Exner-Pirot]

I'll explain. I had wanted to use the infinity symbol in my paper, but the editor said it was too nerdy, so I had to take it out.

Basically, when you're talking about Canadian LNG, I think a lot of people across the political spectrum are now rightfully proud of Canadian LNG. It tends to be the very lowest greenhouse gas intensity of any LNG available in global markets. Part of that is the makeup of the Montney. It is a particularly low-emitting field or low carbon-intense field. Part of it is the hydroelectricity that it takes to liquify it. Part of it is just Canada's good environmental standards—for example, the regulations on no flaring and methane.

If you were to displace—

[The Chair, Liberal, Angelo Iacono]

Thank you.

[David Bexte, Conservative, Bow River, AB]

Thank you.

[The Chair, Liberal, Angelo Iacono]

You're welcome.

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

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

Thank you, Mr. Chair.

Mr. Sawyer, provinces have adopted greenhouse gas emissions reduction targets. My home province, Quebec, has set its target at 37.5%.

Are provinces on track to meet their 2030 targets?

Will that have an impact on the national target?