Finance Committee on Feb. 4th, 2020

[Jean Simard]

I think Canada is best placed to claim that position because it produces different materials with a very low carbon footprint. The United States has buy-local policies like Buy America and so on. They have a different carbon footprint from ours because they use a lot of natural gas and coal. Mexico is completely different.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Would we be able to establish a purchasing policy by talking to each other? The environment is still a topical issue. This would benefit the Canadian aluminum industry.

[Jean Simard]

I think it will be difficult to impose this on the Americans. They're very protective of their government procurement market—they've demonstrated that. As for Mexico, I doubt it very much, because it has a completely different carbon footprint. In that country, the notion of the environment is not at all as important as it is here.

The example must come from the Canadian government and the way it makes its funds available to the provinces to finance major infrastructure projects. For example, Quebec buys $30 billion worth of goods and services annually. There is a lot of room to use that purchasing power to reduce its carbon footprint.

[The Acting Chair, Conservative, Pierre Poilievre]

Thank you very much.

Mr. Fraser, you have the floor.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you, Mr. Chair. I would also like to thank the witnesses for being here today.

Mr. Simard, I hope you won't mind if I ask my questions in English. It would be difficult for me to ask them in French.

I'll pick up where we left off, just on the carbon intensity of the aluminum industry.

Is there a key area where you think we can make a strategic investment to get the biggest bang for the buck in terms of helping reduce emissions within the Canadian aluminum sector?

[Jean Simard]

The Government of Canada has already committed, through the Elysis project, jointly with the Province of Quebec, to develop a game-changer, literally. This is a new way of producing aluminum that will set us apart from a hundred years of an electrolysis process using carbon anodes. Elysis will use a different material, the result of which will be emissions of oxygen instead of GHG, so we will go from a low-carbon footprint to a no-carbon footprint. That's about 10 years down the road.

As I mentioned earlier, we have invested about $13 billion over the past 20 years in our plants in order to ramp up capacity to where we are now, and at the same time reduce our carbon footprint all the way down. We are at the threshold of emissions. We cannot produce aluminum in Canada in any of those plants without emitting what we are emitting right now, which is about 1.93 tonnes of CO2 equivalent per tonne of aluminum, while China is emitting anywhere from 17 to 21 tonnes.

[Sean Fraser, Liberal, Central Nova, NS]

You mentioned during your remarks that 80% to 90% of our exports are destined for American markets, is that right?

[Jean Simard]

Yes.

[Sean Fraser, Liberal, Central Nova, NS]

What was the actual economic impact of the tariffs from the United States on the industry in Canada?

[Jean Simard]

It seems obvious, but it's a tricky question.

We are part of a continental value chain. We're working from a comparative natural advantage of access to large volumes of hydroelectricity. We've developed primary capacity and we ship to a market that has a critical mass to justify the processing of the metal all the way down to products.

The key impact that we feel more and more is the dysfunctionality of the market. Imports coming from China or from other areas that are discounted to access the U.S. market are eroding our market shares slowly but surely, pricing out our clients that are replaced by imports from Mexico or other areas. We're losing market share; we're not losing jobs. We're not putting people out. It's just that we have to strive continually to the shifts in the market. There are no assurances of keeping your shares in the automotive market, let's say.

The U.S. has become the highest netback market in the world, which means that everybody around the world wants their metal to get there, be it from the Middle East, Russia or somewhere else. Prices are kept very low, and competition is very strong.

[Sean Fraser, Liberal, Central Nova, NS]

Okay. I do have a question for Mr. Roberts, but to conclude this issue, I take it that it's obvious that the elimination of the tariffs and the conclusion of the new agreement are good things from your perspective.

My understanding is that when the tariffs were eliminated there was a side agreement to monitor the import with Canada and Mexico. Is that a top priority, to finalize that monitoring?

[Jean Simard]

To us, it's fundamental. We have to....

Aluminum is like water. It seeks the path of least resistance to access the highest-paying market. Mexico is that entrance to the market. We have to close the gate there in order to protect the privilege of being a party to this agreement.

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Chair, do I have any time remaining?

[The Acting Chair, Conservative, Pierre Poilievre]

You do, yes, but not a lot.

[Sean Fraser, Liberal, Central Nova, NS]

I'll go very quickly then.

Mr. Roberts, you mentioned opportunities for biofuels that can support the forestry sector. I've met with a number of folks who are looking at residual forestry products—chips, essentially—where there may be a supply glut from sustainably harvested woodlots. They can be used to produce biodiesel, usually, but not necessarily exclusively.

What is the role of the federal government to pour gas on the fire, so to speak, to create the best economic opportunity from that industry?

[Don Roberts]

Probably the best thing is following through on the actual implementation of the clean fuel standard, and not making the mistake we've made in other jurisdictions where we've often allocated too many credits to folks. That's what they did in Europe and in other jurisdictions where the value of the low-carbon fuel standard credits is low.

You're absolutely right. This is a promising lifeline for a lot of the forest sector, whether it's in B.C., Quebec, northern Ontario or Pictou County, where you're from, where you have a problem at Northern Pulp.

The technology is there, but you need a market. The creation of the market has to be helped by the clean fuel standard.

[The Acting Chair, Conservative, Pierre Poilievre]

Mr. Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

My first question is for Mr. Simard.

I want to make sure I understand. In the new NAFTA, it states that 70% of aluminum components used in automobile manufacturing must be produced in North America, but I understood from the answers you gave that these parts could be made from aluminum from China. It's a protection that aluminum manufacturers don't have, but that the steel industry does. Is that correct?

[Jean Simard]

Indeed, our understanding of the negotiated protocol is that the rule applies to purchases that are to be made in North America, but the metal that is included in those purchases can come from just about anywhere in the world. It becomes local once it is processed again.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Of course, you would have preferred the agreement to offer protection for aluminum equivalent to what exists for steel.

[Jean Simard]

That's what we asked for. We were on the verge of getting it through the negotiations of Ms. Freeland and her team until, at the end of the negotiations, Mexico said yes to steel and no to aluminum, for its own strategic reasons.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Simard.

My other questions are for the representatives of the AGRTQ.

Thank you for your presentation. From the outset, you have established that you are the key group in terms of social housing in Quebec. You know the issue, and you are involved in the projects.

At the end of your presentation, you were a little pressed for time to formulate your requests to the government for the next budget. I'd like to hear them again.

I also have a sub-question. You talked about the importance of having a quick agreement between the Government of Quebec and the Government of Canada. How long have you been waiting for this agreement?

[Éric Cimon]

Your second question is easy to answer. Since the federal government made the money available, if I am not mistaken, Quebec is the only province that has not signed an agreement, so we are losing out on $70 million a year.

We understand that parliamentarians are responsible to their constituents for the proper management of money, but the Quebec government and the municipalities involved in the projects have the same reaction. So there is no reason not to have an agreement and deprive people of affordable housing. This agreement must be ratified very quickly, because the needs are desperate.

I'll now present our requests.

We are asking that the $1.7 billion for the current agreements be maintained. The current social and community housing agreements that are expiring must be maintained.

We are asking for an additional $2 billion to increase construction to meet the needs. We were talking about the federal-provincial agreement.

We want investments to be made to keep the rental housing stock in good condition. We have to be able to maintain the entire stock in order to meet the needs.

We know that there are budget constraints and that we need to get to an adequate budget, but it is very clear that we need to accelerate the pace. The demands of the entire housing community in Quebec are to create 5,000 housing units per year. Last year, there were no new ones. The money allocated in the federal budget would help create momentum in this regard.

Prior to the 1990s, the federal government spearheaded funding, but since its withdrawal in the 1990s, there has been a shift from co-housing to affordable housing. There has been a 20-year gap. Now we have to look at the bigger picture to meet our needs.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

There was a 20-year gap, and now the government is coming back with its strategy.

Earlier, when you gave the amount that was announced, you said that it was unfortunately insufficient. How much should be spent each year on social housing? As you said, this expenditure is an upstream investment.

[Éric Cimon]

It is an investment because it reduces costs in the areas of health, education, public safety and many other things.

We are saying that an additional $2 billion is needed to catch up. The amount depends on the regions. It is a bit like the complexity that we have to deal with when it comes to housing. We have to be able to build community and social housing where it is needed. It costs more in Vancouver, in the regions and in the downtown areas, but we have to keep up the pace. We cannot uproot people, and occupancy of the land is paramount. We have to spend the money needed so that people can be housed in their communities. We have to ensure that low-income people and the most vulnerable can stay in their communities.

We are talking about a substantial increase in budgets, but this must go hand in hand with leadership in terms of regulation and decentralization of powers in order to respect the needs of the communities.

In previous meetings, you have had First Nations people. This is a good example of how the primary need for adequate housing must be met while respecting communities. It is the same thing in housing throughout the territory. It concerns everyone, whether they are seniors, families, people with mental health problems or people with disabilities. These are vulnerable people who must have housing that is adequate for their condition; it is essential in our society. That is our challenge.