Evidence of meeting #37 for International Trade in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was ira.
A recording is available from Parliament.
Vice-President, Trade and International Policy, Business Council of Canada
Unfortunately, I wouldn't have any technical information there, but it's certainly something I can look into. I think some folks working in the mining sector would be in a better position to answer that question.
Liberal
The Chair Liberal Judy Sgro
Thank you very much. I'm sorry, but your time is up.
Go ahead, Mr. Virani.
Liberal
Arif Virani Liberal Parkdale—High Park, ON
Thank you, Madam Chair.
I'm going to direct this question to Ms. Gingrich.
I was quite pleased to hear you talk about how the approach of the American IRA is a wedding between climate policy and a new industrial policy. That's the kind of vernacular we've been using as a government for literally seven years. I can remember Catherine McKenna talking about the economy and the environment going hand in hand. She was sometimes ridiculed by certain members of the House of Commons, but so be it.
We know this has now come into sharp relief. I think there was a bit of an abeyance under the Trump administration of how acute that linkage was, but with the Biden administration and the IRA, it's been thrown into sharp focus. I'm in complete agreement with you on that.
I'll confess that I have some puzzlement about your opening intervention, however. I think Mr. Baldinelli asked you about the carbon price, but I'm going to ask you about it again. You talked about the carbon price itself. You know that steel, aluminum and cement are trade-exposed industries—you outlined that. You know they're not subject to the carbon price in the same manner that other industries are. They're subject to what's called the output-based pricing system, which accounts for the fact that they're trade-exposed.
You also mentioned Algoma. My colleague Terry Sheehan always talks about Algoma and that electric arc furnace innovation you mentioned. Isn't having a carbon price the exact market mechanism economists have been constantly urging us to have? First of all, it gives clarity to industry on pricing. Second, it spurs innovation in industry, as we're seeing with Algoma right now.
Could you comment on that? I'm having trouble understanding your and your union's position.
Assistant to the National Director, United Steelworkers
Sure. Our union isn't opposed to a carbon tax. I guess the issue we see here is that if there's a lack of one in another country and there are additional incentives there, then without additional policy measures domestically, that could give an advantage. Take U.S. steel production, for example. It's not a complete opposition to the carbon tax, but we are hesitant to advocate for any increase of it at this time.
In terms of Algoma, yes, there is a shift to the electric arc furnace. There was a major investment there that assisted that as well. It's true that having some clarity on these things is helpful, but what we want is some degree of equality between advanced manufacturing countries in terms of carbon pricing, or, as I said, concurrent policies that ensure we're not losing out because we have a price and other places don't.
That's why I mentioned it in conjunction with a carbon border adjustment and also things like green procurement policies that ensure we're creating domestic markets for our steel, aluminum and other products.
Liberal
Arif Virani Liberal Parkdale—High Park, ON
I think the green procurement idea is actually a very sound one, and I heard your comments in response to Mr. Cannings when he was asking about the border adjustment policy. However, I also think the vernacular is important. You'll probably be fully aware that the carbon price was challenged in the Supreme Court of Canada. They clearly and unequivocally indicated that it is not actually a tax at all. It doesn't have any of the hallmarks of a tax because the money is returned to individual Canadians.
Let me turn now to you, Mr. Kennedy. We've been talking about unionized jobs and about different sectors that can be supported. One thing that is included in the new investment tax credit regime is small modular reactors on the nuclear side. There's a bit of a caveat thrown into the fall economic statement about large nuclear being explored.
Can you add to the conversation and give us your thoughts about large nuclear? How does that fit into our proposals and what we need for supporting clean energy needs for Canada and the rest of the planet? How would you envisage some sort of tax credit applying to nuclear, particularly large nuclear?
It's over to you, Mr. Kennedy.
Vice-President, Trade and International Policy, Business Council of Canada
One of Canada's advantages, as we know, is that we have access to clean electricity. Because Canada is also supporting nuclear power, both in the large sense and towards the future with SMRs, we have an incredible opportunity. Again, our access to hydroelectricity and other clean forms of electricity is an advantage for Canada.
I'm not aware of any plans for expansion across Canada. I'd have to look at each jurisdiction individually. It is an advantage for Canada, when we look at our competition around the world, that we have access to clean electricity, and certainly as to that question about competitiveness.
Liberal
The Chair Liberal Judy Sgro
Mr. Hoback, it's nice to see you back at committee. You have five minutes, please.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Chair. It's nice to see everybody around the table.
I want to thank the witnesses for giving us their Friday afternoon so we can talk about something very important to Canada.
Ms. Gingrich, you talked about the carbon tax. I think what you were trying to say—I don't want to put words in your mouth—is that you don't like being disadvantaged by it. If there's a carbon tax across the border in the U.S. like there is in Canada, at the same cost per tonne of carbon in Canada as in the U.S., you would not be opposed to a carbon tax. However, if there isn't, then the carbon tax creates a problem for you and your members. Is that fair to say?
Assistant to the National Director, United Steelworkers
I want to be careful on this. We're not opposed to putting a price on carbon. We're not necessarily opposed to a carbon tax. However, yes, I think the combination of the lack of a price on carbon in the United States and the provisions of the IRA could put the Canadian steel industry at a disadvantage, including our members.
As I've said—and I don't want to get too repetitive—there's a host of measures to deal with that. We're not absolutely opposed to the carbon tax or putting a price on carbon. It's only that we have to be careful about the impact on the trade-exposed sectors.
Conservative
Randy Hoback Conservative Prince Albert, SK
It's fair to say, though, that what we see in the current environment is that you have a program, a carbon tax, that is basically punitive, and you have programs in the States that are more like carrots. You're incentivizing companies to do the right thing. In Canada you're punishing companies to do the same thing by taxing them.
Is that not creating a really disjointed balance with regard to where you locate your businesses going forward? If you're going to get punished in Canada and get rewarded in the U.S., wouldn't you see more activity in the U.S., and wouldn't that impact the aluminum and steel business as well?
Assistant to the National Director, United Steelworkers
It could, especially if there are no procurement policies. I think we have seen some, and we would like to see more in domestic procurement so we have green provisions, because our aluminum—and I haven't focused as much on aluminum—and steel are, as I said, some of the cleanest in the world.
I think you can counter that with carrots, as you put them, but we need to be careful. We need to match or do something that works in the Canadian context to make sure we are not disadvantaged.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Martel, of course, is the man who, during the USMCA process, coined the terms “green aluminum” and “green steel”, which created a differential end product so that it's not a commodity. It has value because of what goes into the process.
We have green power and hydro power, and we're talking about small modular reactors, which are all great things going down the road. Small modular reactors are probably still 10 years away, but we have lots of hydro power.
When you look at the whole production facility process of, let's say, a refinery, you're also going to need CCS, or carbon capture and sequestration. You're going to need it, for example, in the cement sector or the steel-producing sector. If you don't see CCS getting the same incentives in Canada as it is right now in the U.S., why would you locate your facility in Canada when you can get all those credits in the U.S.? Plus, you can meet your ESG requirements in the U.S., whereas in Canada you can't. Would you not agree?
Assistant to the National Director, United Steelworkers
I don't know if that was for me.
Assistant to the National Director, United Steelworkers
What we're talking about is the need for Canada to have policies similar to those that exist in the IRA to ensure that production doesn't move to the United States or that new production isn't only created in the U.S. The IRA covers all of those things. That's what we're saying here; we need something similar. We've started to see that, but if we don't see a more comprehensive policy on these things, then there is a possibility that investing in the U.S. and creating jobs there will be more attractive because of all the things in the IRA.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Krogmeier, you talked about your refineries and the location of your refineries. As you look down the road and at your ESG requirements, what do you want to see in the front-end requirements of your refineries as far as the power or gas going into them is concerned? What do you need for the back-end requirements in your refineries so that you can meet the ESG requirements that markets are asking for?
We're already hearing stories. The insurance sector is saying that you need an ESG program. We're hearing the financial sector saying that if you want them to finance your operations, you're going to need that—but not only you. You'll have to make sure that all your suppliers, upstream and downstream, are part of that process.
How do you fund that, and how is that being done in Canada as compared to the U.S.?
Senior Vice-President, Supply, Trading and Refining, Parkland Corporation
It's important that we think about our ESG objectives holistically. Suppliers' qualifications will be important. Are they a responsible counterparty as well? We evaluate our suppliers on the same basis and are starting to more and more.
Refineries consume a lot of electricity and natural gas, so renewable natural gas is something we need on the front end to make that turn, as well as clean electricity. We are a big hydrogen producer. For our future investments, we will look at producing hydrogen that we call “greener”. I will not say “green”, because there are different definitions for blue, grey, green, etc.
Everything will have to have a lower carbon intensity in general—all the inputs into the refinery. Then, what goes out also has to be of a lower carbon intensity. We will use new technology inside the refinery to take, for example, the off-gasses from the refining process that are low carbon themselves—because they come from low-carbon raw materials—and burn that instead of higher carbon intensity alternative fuels.
Again, I go back to the virtuous cycle—
Liberal
Liberal
The Chair Liberal Judy Sgro
I've given an extra minute or so, and I'm trying to get Mr. Sheehan in here for four minutes.
