Industry Committee on April 17th, 2024

[The Chair, Liberal, Joël Lightbound]

I call this meeting to order.

Welcome to meeting number 119 of the House of Commons Standing Committee on Industry and Technology.

Today’s meeting is taking place in a hybrid format, pursuant to the Standing Orders.

For our first hour, pursuant to the motion adopted on Monday, March 18, 2024, the committee is commencing its study of the development and deployment of ELYSIS technology at Rio Tinto and Alcoa facilities.

I’d like to welcome our witnesses today and thank them for being here, and I apologize in advance for having to interrupt our meeting a little later owing to a scheduled vote in the House.

We are now welcoming two representatives from Rio Tinto: Jérôme Pécresse, chief executive aluminium, and Nigel Steward, chief scientist, who will be joining us by videoconference.

As you know, you have five minutes for your opening statement.

Mr. Pécresse, please begin.

[Jérôme Pécresse, Chief Executive Aluminium, Rio Tinto]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen.

Thank you for this opportunity to be here today to discuss Rio Tinto's commitment to Canada, and more specifically the development of ELYSIS, a revolutionary technology being proudly developed in Quebec's Saguenay—Lac-Saint-Jean region.

I'll begin by introducing myself. My name is Jérôme Pécresse. Six months ago, in October, I was appointed chief executive aluminium at Rio Tinto in Montreal. Before joining Rio Tinto, I had worked for 20 years, initially in the mining sector and then in the renewable energy sector.

Before getting into the topic at hand, although I'm pleased to be here today to answer any questions you may have, I would just like to briefly point out that the wording of the motion that has brought us here is not exactly correct. Rio Tinto never, to my knowledge, publicly announced that the total budget for ELYSIS was $240 million. Nor did we ever say that there had been cost overruns beyond the initial budget. More specifically, since 2018, Rio Tinto and its joint venture partners publicly announced an initial funding phase of $228 million, $160 million of which came in the form of equal contributions from the Quebec government and the Canadian government. I'll come back to this later.

Rio Tinto is a world leader that produces minerals and metals the whole world needs. Our products include iron ore, copper, aluminum and critical minerals.

Needless to say, we want to grow our business and create value for our shareholders and all the stakeholders, and we have publicly promised to be carbon neutral by 2050. Our clients, our investors and all of our employees are working towards achieving our carbon neutrality goal. A major share of the technology needed to achieve this goal is brand new, and that's also true of ELYSIS.

Rio Tinto, a global enterprise, is also the largest active mining and metallurgical company in Canada. Our Canadian operations rank second among our many activities around the world. We take pride in investing here for the long term, growing our business and working with provincial governments and the federal government. Our Canadian operations generate well-paying jobs for over 13,800 employees in Canada, approximately 8,000 of whom work in Quebec. Of these, approximately 4,400 are in Saguenay—Lac-Saint-Jean.

Canada is particularly well positioned for the production of low carbon primary aluminum. Access to self-produced hydroelectric energy is a key competitive advantage for us and the energy transition will require more and more aluminum.

Many of our top technological breakthroughs came right here in Canada. I'll mention just two of these, beginning with AP60 technology.

Last June, we announced the first major aluminum sector investment in the western hemisphere in nearly 10 years. It involved a $1.4 billion investment to further develop our AP60 technology in Saguenay, $1.2 billion of which came from Rio Tinto.

AP60 low carbon emission technology is currently among the most effective in the world for the production of aluminum on an industrial scale. When combined with hydroelectricity, it generates only one-seventh as much greenhouse gas per tonne of aluminum as the current industry standard.

We are currently finishing site preparation work. In 2026, the AP60 aluminum plant will be fully operational, increasing production capacity to approximately 160,000 metric tons of primary aluminum per year.

AP60 technology is essential for our development of ELYSIS. ELYSIS is why we are here today. It is cutting-edge technology, and it's no exaggeration to say that it could revolutionize the world of aluminum. Research and development on this scale requires major investment and teamwork by all stakeholders. Government funding initially represented 70% of ELYSIS funding, but the ratio has since flipped and the joint venture partners' contribution now accounts for 70% of the total.

In 2021, the partners stated that ELYSIS was aiming for installation of the technology to begin in 2024. We are now in 2024, and as I mentioned to a business audience in Montreal on Monday, I hope to be able to publicly announce our plans over the next few weeks.

We are making good progress on ELYSIS. However, as is usually the case for anything new, it takes time to do things properly. The development of such visionary technology also has risks. I'm sure we'll be returning to that topic. We're prepared to take these risks because we believe in the technology and its benefits. However, risk management for such a large-scale project requires step-by-step adoption of the right approach.

To conclude, it's in Rio Tinto's interest to develop ELYSIS with a view to large-scale production. It would benefit all of our workers in Canada.

I applaud Canada's foresight, because it has supported us from the very outset and invested in a revolutionary development that could well become one of the great inventions of the century. We intend to implement the technology here in Canada. Rio Tinto has invested $5.5 billion since 2018, only 7% of which comes from government funding. We wouldn't be investing at that level if we weren't serious, if aluminum wasn't central to Rio Tinto's strategy, and if we weren't convinced of its possibilities.

I'd be happy to answer your questions. I'd just like to remind you that my colleague Dr. Nigel Steward, Rio Tinto's chief scientist, is with us virtually today.

Thank you.

I'm looking forward to continuing this discussion with you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Pécresse.

We are going to begin the discussion now.

Mr. Martel, it's over to you now for six minutes.

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

Thank you, Mr. Chair.

I'd like to thank the witnesses for being with us. We're delighted to welcome them.

As you know, Saguenay—Lac-Saint-Jean is a world centre for aluminum. It's where we live and I'm proud of it. Alma is where the feasibility of ELYSIS was demonstrated.

Mr. Pécresse, I know that you've made major investments in our region. As you know, our equipment suppliers also want to work. What percentage of ELYSIS investment was spent on Canadian content?

[Jérôme Pécresse]

Thank you, Mr. Martel. I'm glad you asked that.

It's important to know that 60% of our global aluminum production is in Canada. It's partly in Kitimat, British Columbia, but most of our Canadian production is in Saguenay. Saguenay is, and will continue to be, the focal point of Rio Tinto's worldwide aluminum production.

To answer your question specifically, I would say that ELYSIS is a joint venture that now employs 100 researchers, all of whom work in Quebec, with about three-quarters of them in Saguenay and one-quarter in Montreal. There is funding for research at our Quebec laboratories and also at those of our partners around the world. These activities represent equipment expenditures, for tests and all the other research being carried out in Saguenay. The vast majority of these expenses are in Saguenay, as are all of our investments in the region. The STAS company provides the equipment needed for ELYSIS prototypes, and we intend to continue with them.

I repeat that 100% of ELYSIS employees are in Saguenay, and the vast majority of ELYSIS expenditures on laboratory equipment, prototypes and tests are also in the region.

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

What will Canada gain from the marketing of ELYSIS?

[Jérôme Pécresse]

There will be short-term and long-term benefits.

In the short term, by which I mean the next few years, we will continue to create jobs. In fact, we hire researchers in Canada and Quebec on a quarterly basis to work at our research centres in both Saguenay—Lac-Saint-Jean and Montreal.

I should point out that ELYSIS technology decarbonizes aluminum electrolysis by using non-carbon anodes that do not release any CO2. This allows us to attract talented researchers and workers who were not particularly interested in yesterday's aluminum industry. We are going to continue with these efforts and invest in a pilot unit.

I believe that ELYSIS will help build the Saguenay of tomorrow. Saguenay's production site exists today because 100 years ago, my distant visionary predecessors built hydroelectric power stations. That's what gave Quebec a sustainable competitive advantage in aluminum production for decades. It's clear today that if we want to continue to do so, aluminum production will have to release diminishing amounts of carbon. Carbon emissions from production in Saguenay result from the electrolysis process. If we can manage to produce aluminum on a comparable scale using other patented processes, it will become possible to restore this sustainable competitive advantage and keep a step ahead of the competition in the entire industry. And as I was saying, in doing so, we'll be inventing the Saguenay of tomorrow.

ELYSIS is being developed in the Saguenay and will be used in Saguenay. That will make it possible to create another level of competitive advantages for the aluminum industry in Quebec. Our clients, or rather the clients of our clients, such as those who build automobiles or aircraft, or who produce packaging, want aluminum that has a very low carbon footprint. For 20 years, when we told them that we were producing aluminum using hydroelectricity, that kept them happy; but it's no longer enough for them. They now want an electrolysis process that doesn't release any carbon. And that's precisely what we are trying to accomplish together, through ELYSIS.

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

Mr. Pécresse, last June, Rio Tinto announced the initial major investment in the project, for the purpose of installing 96 AP60 cells. At the time, Rio Tinto was the only company doing so.

We now know that Century Aluminum in the United States announced a green aluminum production project. Do you think this could constitute a threat to ELYSIS?

[Jérôme Pécresse]

I think there are two different ways to interpret their announcement.

First, it shows that governments are supporting their aluminum industry. The Canadian government has been doing so for a long time, as has the Quebec government. The U.S. government has also begun to do so through its very powerful Inflation Reduction Act. The fact that this highly important job-rich industry is being maintained by the government is therefore no longer just a Canadian anomaly, because the U.S. government is doing it too.

The second thing that needs to be pointed out echoes what I was saying earlier. When Century Aluminum says that it is going to produce green aluminum, it's oversimplifying. What it really means is that instead of using electricity from coal power plants, as it is doing now, Century Aluminum will switch to using renewable energy, and will be receiving support to do so. In Saguenay, on the other hand, we've already been using renewable energy for 100 years, in the form of hydroelectricity.

As I was saying earlier, through ELYSIS, we are going to try to restore our competitive advantage to an even greater extent. To the best of my knowledge, Century Aluminum will not be using an electrolysis process like ELYSIS. It will use carbon electrodes. That means a production process like the one we are currently using in Saguenay. They're trying to catch up to us. That means that we need to continue to move forward, and that's precisely what ELYSIS will enable us to do.

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

How much time do I still have, Mr. Chair?

[The Chair, Liberal, Joël Lightbound]

You have 45 seconds.

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

Mr. Pécresse, we know that our region is a major aluminum production centre. Will the Saguenay—Lac-Saint-Jean aluminum smelter be the first to use ELYSIS technology?

[Jérôme Pécresse]

Well, we're doing everything we can to make it so. There are no plans for ELYSIS development projects anywhere other than Saguenay—Lac-Saint-Jean. Nor are we planning any elsewhere. That's our goal. I can't tell you much more than that.

I should perhaps have pointed out at the beginning that for certain questions I might be asked about ELYSIS, I'm somewhat constrained by two things. First of all, ELYSIS is a joint venture in which we are only one of several partners. Secondly, it's an innovative technology protected by intellectual property laws and is commercially very sensitive. So I apologize for not being able to give you all the details, but it's because we have a duty to our joint venture partners to protect certain sensitive information.

I'll repeat that we are developing ELYSIS in Saguenay. There are no plans to do so elsewhere. What you said is precisely our objective.

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

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Turnbull, it's over to you now.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Chair.

Thanks to Mr. Pécresse for joining us today.

Mr. Pécresse, I want to start with a question about how Rio Tinto's Canadian aluminum-processing operations compare to international competitors in terms of GHG emissions. Could you explain how your Canadian operations compare on that level?

[Jérôme Pécresse]

If you look at the industry globally, the average emissions of a smelter would be 12 tonnes of CO2 per tonne of aluminum produced. If you look at what we do today in Saguenay—Lac-Saint-Jean, we are probably at 2.3 tonnes—much lower.

The reason is that most of the smelters in the world use, as a source of electricity, electricity taken from the grid, which has fossil fuel origins, whereas in Saguenay—Lac-Saint-Jean we use hydroelectricity from our own hydro power plant. Just to frame it, what ELYSIS is all about is to bring the 2.3 tonnes as close to zero as possible.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

What impact, if any, will your plans have for future innovation in greening the minerals and metals industry? What are your plans? Are your plans to do things internally, which you're already doing, and then help to green the entire industry? Is that part of your plan?

[Jérôme Pécresse]

Our plan—and, if I take a step back, Rio Tinto's plan as a group—is to lower its CO2 emissions by 50% by 2030 and to get close to zero by 2050, which is much more ambitious than the average in the mining industry.

The emissions of Rio Tinto aluminum are 70% of the total of the emissions of Rio Tinto. We want to reduce CO2 emissions, first, to meet our group's CO2 targets; second, to create a long-lasting competitive advantage; and third, I would say, to create a much more healthy aluminum business.

I've been in renewable energy before, as I told you, and it's clear now that when you look at the energy transition, in moving the world to renewable energy there are bottlenecks that need to be lifted, but that happens. What you need to attack is the how-to of each sector: steel, aluminum and transportation. Greening aluminum is part of that pool as well.

[Ryan Turnbull, Liberal, Whitby, ON]

I couldn't agree more. I guess what I wanted to understand a bit more deeply is.... Can you tell us about or or walk us through the current process for aluminum smelting and how ELYSIS will change that?

[Jérôme Pécresse]

Today, the way aluminum is being done is the way it's been done for a hundred years. There is just one way. Basically, you put alumina in a bath and then you put an anode—an electrode—in that alumina bath. That chemical reaction creates aluminum. The process used in the world is called Hall–Héroult, which basically uses anodes, which are in carbon. That's what everybody in the world, everywhere, has done for a hundred years. That chemical reaction creates aluminum, but the anodes progressively dissolve and they have to be changed every 20 days. As the anodes dissolve in the carbon, you release CO2 into the atmosphere, basically.

Maybe, Nigel, you can help me if I say anything wrong.

That's the process. When I say that we emit 2.3 tonnes of CO2 per tonne of aluminum, that's the bulk of it. What ELYSIS is about—and I'll stop there—is using anodes that are not formed of carbon while creating a chemical reaction that still produces aluminum with the same alumina. If you do that and you use hydro power, you are left with CO2 emissions in your alumina refineries and in bauxite mining that are of a smaller magnitude.

Nigel, is there anything you want to add on that?

[Dr. Nigel Steward, Chief Scientist, Rio Tinto]

No. I think it was a good description.

The key thing we've been trying to do ever since the Hall–Héroult process was invented, which uses the carbon anode, is really to replace that carbon anode with something that's truly inert and isn't consumed in the process. This is what we've been successful in doing. It's that change of electrodes and the way in which we operate and design the cell that's the big change that differentiates it from the conventional Hall–Héroult process.

[Ryan Turnbull, Liberal, Whitby, ON]

Just as a quick follow-up for my final question, how does greening your operations create more jobs? Related to this change that you're making, how does it create more jobs?

[Jérôme Pécresse]

Look, the greening of our operations allows us to create a competitive advantage. It's competitive. The car producers, some of them, want to move to low-carbon cars. Packaging wants to move to low-carbon beverage cans, etc. If we manage to create a gap there, I'm convinced that we'll gain market share. By getting market share, we produce more aluminum.

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Turnbull.

You have the floor, Mr. Simard.