International Trade Committee on Nov. 29th, 2022

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Cannings.

We will now move to Mr. Baldinelli for five minutes.

Go ahead, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

I'd like to thank the witnesses for being here today. It's been incredible testimony.

It's an important study on the Inflation Reduction Act. We're looking at the U.S. spending $390 billion over the next decade to seek a 40% reduction in emissions by 2030.

Several witnesses have come forward. Even just last week, Elizabeth Kwan from the Canadian Labour Congress called this bill and this legislation a “game-changer”. The Canadian Steel Producers said that the U.S. is now taking an “enabling” approach to draw in investment, to reach not only its economic goals but also its climate goals. They're almost moving together in unison.

Bob Masterson, the CEO of the Canadian Chemistry Industry Association, said that the Americans have “unleashed the power of private capital” to decarbonize while Canada is still stuck in debates over strategies and plans, which is disappointing.

I'd like to go to Mr. Bradley first and talk about electricity. Of course, in my home province of Ontario, 60% of the grid is nuclear energy. There were some discussions by the Province of Ontario about taking Pickering off in 2024. Well, that's 14% of the grid. I believe the province has delayed that decision to 2025. They're looking at whether refurbishment can take place and are drawing in investment to do that.

How is that investment climate now looking because of the IRA? It would almost seem as though foreign companies—for example, Bruce Power, which was British Energy that came in and took over in Kincardine—made that decision. The draw for investment to do the refurbishment of Pickering is now a lot less, would you not agree, because of the IRA?

[Francis Bradley]

I think the IRA, indeed, as you suggest based on what you have heard from other folks, is a game-changer. I'm hoping the fall economic statement is the first step in an effective Canadian response. We see that, really, as a first step, and we're waiting to see what comes out in budget 2023. Hopefully, we will have a more full-throated response.

There certainly is the possibility that investments in these areas will flow south if the investment climate is more favourable in the United States. Even in the electricity space, there are a number of Canadian electricity companies, both public and private, that have assets in Canada and the United States. We'll have to make decisions about where those investments are going to be made.

We are hopeful that budget 2023 will rebalance that in favour of seeing those investments remain here in Canada.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Is that something that could be broadened as part of your recommendation for a national electrification strategy, taking in not only those considerations but also those critical decisions that need to be made in terms of the grid, and when those have to be made? There are the transmission lines. You had talked about some of your recommendations. The government needs to allow support for government agencies—for example, the OPGs and our local municipal electric utilities—to be able to participate in programs. That's going to be critical. If everyone is going to have an electric car tomorrow, we don't have the capacity. All the transformers in our neighbourhoods would blow. Who's going to make those investment decisions to upgrade those transformers, not to mention getting that electricity to those homes? That all needs to be considered.

Again, there are the large projects. For example, as I said, with Pickering itself, if the decision is made to refurbish Pickering, that's 14% of the Ontario grid. If we take that out, how are we going to replace that? I come from Niagara Falls, where we have Sir Adam Beck I and II, but that's only 2,200 megawatts, with almost no more potential to expand the production there.

Those are the decisions that we need to make. Those are critically important. I was hoping you could elaborate on those decisions that the government expand; for example, is it green bonds that you're saying the government should allow large Ontario government operations and local municipalities to be able to draw into?

[Francis Bradley]

As I said, we're working on what we will be proposing specifically in budget 2023, but there absolutely needs to be something in parallel with ITCs for those non-taxable entities.

With respect to the challenges you see in Ontario, actually, relative to some other jurisdictions, Ontario is starting in a pretty good place. Ontario is already 92% non-emitting. The fact that you recognize that it's going to be challenging in Ontario—you can imagine how challenging it would be in some jurisdictions that do not already have the non-emitting system Ontario has today. It is absolutely a challenge.

One of your other points was about whether we will have the system in place if everybody goes out and buys an electric car tomorrow. The good news—or the bad news—is that you can't go out and buy an electric car tomorrow. I've been on a waiting list for 21 months. What it means, though, is that the deployment will be gradual. We need to recognize that we won't one day flick a switch, the entire economy will be electrified and we will be behind the eight ball. It is a gradual deployment, but we have to start today to make sure we're building that future.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Bradley.

Ms. Dhillon, you have five minutes, please.

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

Thank you, Madam Chair.

Thank you to all our witnesses for being here today.

This is a question for anyone who wishes to answer. We've been discussing the Inflation Reduction Act in committee for a number of weeks now, as you know. Is there is anything in the Inflation Reduction Act that we haven't discussed and that the government should pay particularly close attention to?

Thank you.

[The Chair, Liberal, Judy Sgro]

Would anyone like to answer Ms. Dhillon's question, please?

[Claire Citeau]

I would just say that the possibility of new programs being announced down the road would be something to keep an eye on.

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

Does anyone else wish to add to that?

[Evan Wilson]

Perhaps I could jump in as well.

I just want to reiterate something I said in my opening commentary about ensuring that we have, especially on the renewable electricity or the net-zero grid 2035 question, not just a program conversation here but also a policy conversation. Prior to the IRA, Canada was a real leader in decarbonization of the grid via both the carbon price and the OBPS as well as the conversations around clean electricity regulation. We are looking forward to more conversations about programs coming out of the upcoming budget. We also want to ensure that we keep our momentum going on carbon pricing and see a longer-term carbon pricing framework so that we can make long-term investments in renewables. We also want to see the publication of a clean electricity regulation that sends a strong message that we are aiming for a 2035 net-zero grid and that we are looking to achieve a 2035 net-zero grid.

We think the response should be a combination of both policy and program approaches, so while we're discussing programming, we should also be talking about the policies that will continue to drive investments in renewable energy across the country.

[The Chair, Liberal, Judy Sgro]

Mr. O'Connor, do you want to supply some information as well?

[Don O'Connor]

Yes, I would say that we need to look at the resulting change in trade patterns. In the case of biomass-based diesel, there is an existing blenders tax credit that's available to Canadian companies that export to the United States. That program will disappear at the end of 2024 to be replaced by the clean fuel production credit, which will mean that those Canadian companies will no longer have equal access to the U.S. market.

We're going to see some changes in the trade patterns because of some of the protectionist aspects of the IRA.

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

Yes, please go ahead.

[Francis Bradley]

Yes, certainly, and thank you for the question. I think it's an interesting one. What have we not thought about?

What I would add is that instead of simply thinking about one-off investment decisions, this isn't a matter of whether a single investment will be made in Canada or the United States. These have knock-on, long-term effects, and I think back to the late 1960s and throughout the 1970s into the 1980s and 1990s when we built an ecosystem in Canada to support our CANDU nuclear system. That ecosystem, in fact, included hundreds of different companies, products, services and so on. We should be thinking in terms of the same sort of future. Are we going to be building the ecosystems over the longer term here in Canada to support that energy transition for those new technologies?

It isn't simply a matter of whether a particular project is going to the United States or Canada, but are we, over the longer term, going to build an ecosystem equivalent to what we did with CANDU for hydrogen, small modular reactors, carbon capture, wind or storage?

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

I thank you so much for answering that.

Ms. Citeau, I have a question for you as well.

[The Chair, Liberal, Judy Sgro]

Be very brief, please, because you have 15 seconds.

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

Okay.

Overlooked is the support for farms and farmers in the U.S. Inflation Reduction Act. Is there potential for the IRA to affect the competitiveness of Canadian agriculture?

[Claire Citeau]

There are two areas identified by our members for primary study, and they are continuing to do their own analysis on the canola biofuel front that I spoke to and the food manufacturing side, which do seem to be adding a pressure overall.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Mr. Martel, please.

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

Thank you, Madam Chair.

Thank you to the witnesses for being here.

My question is for Mr. Scholz.

During testimony before the committee on November 22, Mr. Masterson, of the Chemistry Association of Canada, told us that “the real value of the IRA's incentives and the biggest challenge for Canada is the transparency and certainty provided to investors.” He also reminded us that “we pay a very steep and ever‑steepening carbon price.”

He said there are a few, very lucky industries that are on the government's preferred list and get “hand‑picked access to federal grants, tax incentives, loans and other incentives to assist with decarbonization.” Mr. Masterson also explained that “the criteria to get on the list are not transparent; they are not clear; and they are not available to everybody,” and that this means that not every industry can build them into a business case.

In your opinion, Mr. Scholz, is the industry you represent one of the ones in the government's good graces?

[Mark A. Scholz]

Well, certainly I think one of the things we've pointed out within our white paper is that there is a huge opportunity within our sector to support decarbonization efforts not only within traditional hydrocarbon extraction sectors but, I would say, sldo more broadly within what we would define as subsurface extraction commodities or sectors.

One of the interesting things about our industry—and I have to kind of differentiate us from our customers. Our member customers are energy producers. They're the ones who would attract capital into Canada and deploy into either the hydrocarbon-based industries or things like lithium, helium, geothermal, etc. My members are the ones who ultimately hire people and have the equipment and technologies and processes to basically help producers extract those resources. What's really interesting about our sector right now is that although the majority of our industry is in the hydrocarbon-extraction sector, we've seen a huge increase in the extraction of lithium, geothermal and helium as well, which are going to be on the front lines of natural gas, which is going to be the feedstock for blue hydrogen.

When we talk about a transition with our people and our businesses, all roads lead directly through our industry, so we are really looking for support from the government to help us move in that direction. Over the last seven years our particular industry has been completely decimated. We've had a lack of capital entry into our business. That is a function of pricing within the market and how much capital is deployed by our customers.

We're starting to see some sustainability and growth in our industry. If you want to grow the battery technology sector and you want to grow other renewable electricity sources like geothermal and industrial uses for hydrogen through blue hydrogen feedstock, you need our industry in order to do that. Our white paper is saying, “Look, partner with this industry. We can get you there.” We have ready technologies we could deploy in a very short period of time that could decarbonize our industry anywhere between 85% to 90% in a very short period of time. Some areas are going to be tougher to decarbonize because we are operating in very remote locations.

So we're asking for a movement from diesel to natural gas as we move towards net-zero solutions. There is a huge opportunity here to take our workforce along the journey of this transition, but we can't do it without collaboration, particularly with the federal government. That's made clear in our decarbonization pathway in our white paper.

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

What you are saying is interesting, Mr. Scholz.

[The Chair, Liberal, Judy Sgro]

You have 25 seconds remaining.