International Trade Committee on Nov. 22nd, 2022

[Ivette Vera-Perez]

Yes, August 16 was a very busy day for us in the sector. Right away we started reaching out to government, to Natural Resources Canada and to different departments, and we filed a pre-budget feedback letter.

I wish the reaction had been quicker, but let's hope that this is because we were putting a lot of thought into how to react to the IRA. Since August 16, I have been in multiple meetings, part of them educating and discussing the implications for the sector as a whole and the short-term implications for Canada.

Here we are today. My focus would be to say that the fall economic statement has provided some good news—I believe there's still a lot of work to be done—in the form of the ITC for clean technologies that can be partnered with hydrogen. For hydrogen specifically, let's work to make that functional and clear and provide examples to investors so that they don't continue to look south. Let's do more. We haven't talked about the production side of things. That would be my approach. Here we are today. Let's get this going.

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

Given what your association has for years been calling for, how do you explain the fact that Canada is once again trailing behind? Canada is in that boat on a number of fronts. Why isn't Canada farther along?

[Ivette Vera-Perez]

That's a very good question. My position is always that we're here to help. We're here to provide the knowledge and wisdom from the members and the tools that the members bring to the table. Hydrogen is a tremendous opportunity for Canada in decarbonizing the economy. Let's get this going. The issue we have is one of scale. We need to scale up. The technology is ready. We don't need to talk about something that may be happening in 10 years; we have solutions for tomorrow morning. We just need to get going.

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

You recently authored an article in the Hill Times. In it, you suggest that Canada will stop being a global hydrogen leader if it does not respond swiftly to the U.S.'s Inflation Reduction Act of 2022.

You say that, to make sure we don’t lose investment and potential to the U.S., the Canadian government must develop a supportive ecosystem to encourage hydrogen production and demand.

Can you provide more details on the things you warn about in the article?

[Ivette Vera-Perez]

That was part of my reflection after Stephenville. Canada has a tremendous tradition on the electrolyzer manufacturing front and on the fuel cell front. This is where the electrolyzer was developed: It was in Canada. A lot of the cluster companies in the British Columbia area come from one initial company, Ballard, which is still around today and quite successful. We have all of that knowledge. We have that IP. We have the talent, the highly qualified individuals. This is what we need to capitalize on.

I have here the 1987 Canadian hydrogen strategy. This was my summer reading. We've been going at this for a long time. We were leaders when the world wasn't looking. Now everybody has jumped onto the bandwagon, and we really need to reclaim the leadership spot. It's almost an emotional topic for us in this sector, for me in particular. This is what I meant when I said we're lagging behind in terms of the leadership that we have always held, but we still have that IP and we still have that knowledge. We still have years of tradition and knowledge in Canada.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Ms. Dhillon, for five minutes, please.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you, Madam Chair, and thank you to our witnesses for being here today.

I will start with Mr. Eaton.

In March the Smart Prosperity Institute published a document entitled “Canada's Future in a Net-Zero World”, which identified aluminum as a top priority for Canada in a net-zero world.

Can you please identify any specific industries that represent potential growth for the Canadian aluminum industry? Since this report was published, have you identified any new or strengthened market opportunities for Canadian aluminum producers?

[Derek Eaton]

Yes, we did identify producing green aluminum as an opportunity for transitioning Canada's aluminum industry and potentially having continued or new opportunities for export to aluminum-demanding sectors among our major trading partners. We have not done follow-up work on those market opportunities, to be clear. I did not mention green aluminum in the list of eight top opportunity areas that I went through in my opening remarks. That is because we seem to be the only group that has identified that opportunity, and I was trying to offer a list of opportunities for which there was a consensus of opinion.

I don't think there's any lack of consensus among those of us who look in these areas that Canada needs to decarbonize major heavily emitting industries, of which aluminum is one. Cement and concrete is another, and steel is yet another. Aluminum is one that provides more export opportunities than those other two areas do, but they're also important in terms of maintaining domestic market share.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you for that.

Would you be able to elaborate a bit more on green aluminum? You said you were one of the only groups to identify it. Could you talk to us a bit more about the benefits of green aluminum?

[Derek Eaton]

Green aluminum is going to appear as the world transitions to net zero. Canada has an advantage with its industries at the moment in terms of one of the processing stages. I'm not able to specify that for you right now. I could certainly follow up and provide you with further information.

There is perhaps a narrow window of opportunity. That is was what we heard in talking to a number of people and experts in the industry. If Canada wants to seize some market share, particularly in Europe, then we would need to find ways for the industry to move faster.

Of course, this is related to some of the other discussions we're having around hydrogen and carbon capture and utilization, as these are critical components for decarbonizing heavy industry.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

You spoke a bit about having more export opportunities and about decarbonization. Can you please tell us how decarbonization could be accelerated or how you would envision that happening? How would it affect exports as well?

[Derek Eaton]

The decarbonization of major industries such as aluminum, in our view, requires a strategic approach in which some form of a collaborative strategic partnership is established, involving a range of stakeholders—the industries, the relevant provincial governments, finance and researchers—to develop a road map effectively for how this should take place. We stress that the government needs to be at the table. However, as we've seen with the cement road map initiative that was initiated, these types of partnerships ideally develop a strategy for decarbonizing that particular industry in a way that is not completely run by government, but in which government is clearly present.

These export opportunities would also be part of that scoping and road-mapping process. There would the potential for relevant stakeholders, whether they're researchers or those in the finance sector, as well as industry, to examine where those potential new markets will be strongest, particularly for, say, green-certified decarbonized aluminum.

[The Chair, Liberal, Judy Sgro]

Thank you very very much, Mr. Eaton.

We'll go on to Madam Sinclair-Desgagné for two and a half minutes, please.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you, Madam Chair.

I'd like to follow up on my earlier line of questioning.

Mr. Masterson, what you were saying was quite interesting. You mentioned the assistance that provinces such as Quebec and Alberta provide to attract foreign companies and create a more competitive landscape.

Given the current iteration of the U.S.'s Inflation Reduction Act of 2022, what could the Government of Canada do to improve the situation? What approach could the government take to improve—or at least try to improve—the legislation for Canadian companies?

[Bob Masterson]

Very good. Thank you for the question.

Let's first identify why we are here today. The IRA is the most audacious public policy instrument ever introduced to decarbonize a major economy in the world. We're here talking about it because we all know it's going to work.

What have they done? They have unleashed the power of private capital to attain a public good, which is decarbonization. We're busy—I apologize to my colleague—talking about strategies, plans and tables. Strategies, plans and tables don't decarbonize anything. Investment decarbonizes. We have to come back to that.

I think we have to stop with the self-inflected wounds. We have all these debates. Is it blue hydrogen? Is it green hydrogen? Guess what—in the IRA, they both count. It's a different level of incentive, but there's one for green, and it's really high, and there's another one for blue, and it still makes it cost-competitive.

We're debating in Canada. Why haven't we seen the investment tax credit for carbon capture and storage? It's because there are many critics who don't think it's a good idea, yet we are one of the world's top 10 chemical producers. It is one of our easiest solutions to obtain decarbonization in our sector.

We have to move on these things. The time for study and tables and plans and frameworks, as we heard from Egypt over the past two weeks, is gone. It's the time to invest and invest quickly, and that's what Canada has to do. We're talking about it because the Americans are doing it incredibly quickly.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you.

[The Chair, Liberal, Judy Sgro]

Thirty seconds remain.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

The way the U.S.'s Inflation Reduction Act of 2022 is currently worded, are there any changes that could be made to improve the situation for Canadian businesses or shield them from the impact of the measures?

[Bob Masterson]

I'm sorry, but I'm not hearing the translation.

[The Chair, Liberal, Judy Sgro]

We have to suspend for a minute here. We have a problem with our translation.

The clerk may have to raise the volume on it.

I'm turning the floor back over to you for that question.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you for indulging me, Madam Chair.

I'll repeat the question. The way the U.S.'s Inflation Reduction Act of 2022 is currently worded, are there any changes that could be made to make things better for Canadian businesses or minimize the act's impact on them?

[Bob Masterson]

From the chemistry sector, I haven't seen anything that disadvantages us.

Again, I would say that the challenges we face are largely self-inflicted. I do worry when we look at some of the other sectors, such as critical minerals, and when we look at the supply chain, but again, as Madame Dufour said, there's a nod to CUSMA that perhaps we're covered, so I wouldn't be an expert there. There's nothing that stands out from a chemistry perspective.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Cannings, go ahead, please, for two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I'd just like to ask a quick question to both Ms. Dufour and Mr. Masterson.

Mr. Masterson brought up the concern—I don't know if this is one of your self-inflicted wounds—of the carbon pricing, which causes some issues. I've heard about it a lot in terms of exports from Canada. I just want to know from Ms. Dufour what the prospects are for getting border adjustments in place to level that playing field.

If there's time, perhaps Mr. Masterson can comment as well.

[Geneviève Dufour]

Thank you for your question.

The issue of carbon border adjustments is especially timely when you consider decarbonization in the context of international trade. We know that the European Union will be bringing in adjustments in the next few months, although they could be delayed. That means Canadian companies exporting aluminum, steel, fertilizer, cement and other such products to Europe will have to start paying a surtax when those products enter European territory.

We have to think carefully about our carbon pricing. We are caught between Europe, which has put a very high price on carbon, and our other big trading partner, the U.S., which hasn't really put a federal price on carbon and isn't considering a carbon border adjustment mechanism.

Canada will have to consider all of those things carefully. Consultations on the issue were conducted about a year ago. We also need to keep a very close eye on what happens at the WTO. The next trade war will probably focus on carbon border adjustments.