International Trade Committee on Nov. 29th, 2022

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you.

What number of times out of 10 would a business choose production incentives over investment tax credits—nine out of 10, or 9.5?

[Don O'Connor]

Ten out of 10.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Arya, the floor is yours, for six minutes please.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Madam Chair.

This Inflation Reduction Act of the U.S., combined with the CHIPS and Science Act, I think is the bold new industrial policy of the United States. We talk about friend-shoring. This is actually implementing the strategy of the United States for friend-shoring or on-shoring. This is huge.

As previous witnesses have said, as a small country, we cannot react line by line. We cannot match dollar for dollar, but we have to react smartly. Not everything goes to the U.S. just because of these two acts. The CHIPS and Science Act has put $200 billion into 20 new technology centres for semi conductors, energy transition, biotechnology and so on. However, we do have certain strategic advantages.

Recently, there were press reports that the Pentagon, the U.S. military, wanted to invest in Canadian critical mining projects, which is not news to some of us because, since 1956, in different production sharing agreements, Canadian companies have been considered as U.S. domestic companies for any defence purchases. However, my question today is for Ms. Claire Citeau.

Welcome back. It's nice seeing you again.

First, I have to commend the Canadian Agri-Food Trade Alliance members because yours is the only group that I can say takes very practical advantage of the free trade agreements that Canada has been signing for so long. Whether it's with the European Union or with Asia-Pacific countries and the ongoing discussions that we have. Your members have been very active. They take all the opportunities that the federal government and the provincial governments open up for the Canadian businesses.

The manufacturing investment you mentioned is not a surprise to us. You said that 31 OECD countries have invested $1.7 trillion, whereas Canada's portion is just 1.2% at $22 billion.

We had the aluminum industry association here and the steel industry. These are the major industries where we should seek investment to grow manufacturing capacity. During the last 15 to 20 years, however, both of these sectors, the aluminum sector and the steel sector, have not added any new production capacity. These are all foreign-owned companies that consider Canada to be just one of their branch offices for catering to Canadian market and mostly to export to the U.S. market, but with no exports to Europe or the Asia-Pacific countries that we are working on. Your sector, your members, have been doing a wonderful job on that.

Do we need to have a very clear-cut industrial policy focusing on manufacturing?

[Claire Citeau]

First off, I'd like to thank you for your comments earlier.

Our members take pride in feeding families in Canada and around the world precisely because of market access through free trade agreements—and not necessarily just those, but also through provisions provided by the WTO. There are many countries around the world that we export to where we don't necessarily have a free trade agreement. A free trade agreement allows a framework that provides better access and reduces tariff and non-tariff barriers. We've been leveraging free trade agreements in the CPTPP region across North America. With Europe, it has been challenging, even though our exports to that region have increased. We have encouraged the committee and others to consider reviewing free trade agreements now that Canada is in the midst of negotiating a number of free trade agreements with the U.K., Asia and Indonesia. Perhaps they can look at how well those free trade agreements implemented in recent years are doing, and profit from lessons learned and different ideas to apply as we move forward with negotiations.

In terms of the food manufacturing sector, certainly the level of investment, as pointed out by our food processing member, compared with that in the U.S.—a large competitor and also a large customer—reflects a disadvantage, and impacts—

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry. I have a question for Mr. Bradley.

Mr. Bradley, you may know that the federal government recently signed an agreement with Ontario on the Canada-Ontario regional table that seeks to align the resources and what is on the timelines to work together on the regulated processes for five key sectors, including clean electricity, great nuclear energy, critical mineral supply, and sustainable forestry.

What do you think this Canada-Ontario regional table should focus on? How should this move forward?

[Francis Bradley]

We're hoping that the regional tables will be the critical enabler to ensure that there is coordination between the various levels of government. What we've seen up until now is that there's been a lack of alignment between federal, provincial and municipal governments. We're hoping that all of the regional tables, as they stand up, will be able to bridge that gap and be enablers for the energy transition, but it remains to be seen. However, we remain very hopeful.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Bradley.

We'll move on to Mr. Savard-Tremblay for six minutes, please.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

Thank you to all the witnesses.

And good morning to my colleagues.

I think I will direct my question to Mr. Scholz of the Canadian Association of Energy Contractors, Mr. Wilson of the Canadian Renewable Energy Association, and Mr. Bradley of Electricity Canada, as I assume they are the three who are best‑placed to answer.

We know that Canada has access to deposits of natural resources needed for batteries. Quebec, in fact, has good mineral potential, whether it be lithium, nickel, cobalt, graphite or silicon.

According to the US law, for a vehicle to be eligible for the maximum credit of $7,500 US dollars, a certain proportion of its parts must come from North America. This proportion will gradually increase to 50% by 2024 and then to 100% by 2028. These are the objectives they set, and they are good ones. Of course, we always want to encourage our own businesses. However, according to some auto makers, meeting these requirements will be very difficult because mineral production will not meet the demand as estimated and assessed. This could change, but it is how things are at the moment.

According to the US law, the credit for purchasing zero‑emission vehicles can also be applied if a certain percentage of the content is recycled material. There is therefore the issue of recycling.

Would it not be in our interest to develop a recycling strategy and the sector here?

[The Chair, Liberal, Judy Sgro]

Who would like to take that question?

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Don't be so shy, please.

[Mark A. Scholz]

Madam Chair, when it comes to the recycling piece, I would not be a subject matter expert on that question.

[The Chair, Liberal, Judy Sgro]

Thank you.

I think Mr. Bradley is prepared to attempt to answer it.

[Francis Bradley]

Yes. Certainly.

Like the other witness, I'm not a direct specialist in this area, but I would agree that certainly we should be working towards that ability. We're even now trying to figure out what happens with those batteries. There may be a role for them as grid storage in the future. I would agree entirely that there must be some way in which we can build them back into the supply chain that is so challenged today.

[The Chair, Liberal, Judy Sgro]

Thank you.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I would like to hear from the third witness I had asked my question to.

[The Chair, Liberal, Judy Sgro]

Go ahead, Mr. Wilson.

[Evan Wilson]

Yes. I would add to that, although it's not necessarily my area of expertise.

At CanREA we also would emphasize that there is a very central importance to government funding to support recycling in order to support a resilient critical minerals strategy. We could say that when it comes to the material that's required for batteries or even for wind and solar, we think there really is an opportunity for recycling to play a very critical part in a critical minerals strategy. We think that recycling can and should be treated as a raw mining source and that government support for recycling facilities, technologies and processes will be essential.

I think we're really early days in the development of strategies and opportunities for recycling. There are opportunities here not only as far as waste diversion goes but also critical minerals. Government strategy or government support can help us to remain competitive overall in providing the resources for batteries and for other technologies if there is an opportunity to take a really creative and strategic approach to recycling.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

You represent the renewable energy sector, the energy sector and the electricity sector, respectively. We know these are some of the sectors that probably have the most to lose from the inflation‑reduction bill in the US. This must worry you.

Most of you focused your remarks on what should be done here, to support our initiatives. In other words, it may be a way to respond to what it is being implemented in the US. That being said, until there is proof to the contrary, we still have diplomatic representations.

Is there anything else we should be pushing further on, looking for or changing in the US law? Do you think we should we adopt a specific position with US representatives?

[The Chair, Liberal, Judy Sgro]

Does anyone feel comfortable attempting to answer that question?

I'll go back to Mr. Bradley again.

[Francis Bradley]

Sure. I think it's a very interesting question.

It is not where we as a sector and association have focused, though I think it certainly is something that the Government of Canada should be thinking about in terms of what their approach is. We've approached this in a very practical manner. We are looking at what we can do here in the environment that we have the ability to change. We don't tend to lobby for changes with governments elsewhere.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Bradley.

Mr. Cannings, you have six minutes.

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

Thank you.

Thanks to all the witnesses who are today.

Mr. Wilson, I want to start with a quick clarification. You mentioned the low cost of solar and wind electricity, but I sit on several committees, and whenever we have witnesses from other sectors, especially nuclear, we get statements that wind and solar cost three or four times what nuclear costs, for instance.

I'm just wondering if you could clarify that.

[Evan Wilson]

Thank you for the question.

I think that it is really critical to understand the low-cost environment that we are in, in the renewable energy sector. Looking at contracts that have been signed in Alberta via the renewable electricity program, we're talking about $40 per megawatt hour or about 4¢ per kilowatt, which is the cost of wind electricity in Alberta, for instance.

Looking at the pool price or the market clearing price for electricity overall in Alberta, you're looking at over $100 per megawatt hour, which is what the average pool price has been over this past year. Certainly speaking to what the wholesale price of electricity is in Alberta versus how affordably you can deploy that same megawatt hour if it comes from wind, you're talking about quite a low cost.

As far as solar goes, looking at the recent experiences with procurements in Saskatchewan, we've seen solar coming in at around 7¢ per kilowatt or $70 per megawatt hour and those are results of a procurement from several years ago. The costs have continued to fall in the time since those were rewarded.

I can't speak to what the costs are for nuclear, but I think that any observer of the electricity markets across the country could understand that wind energy and solar energy are the lowest cost, non-emitting megawatt hours that can be put onto the grid. Certainly, when it comes to wind in western Canada, which is a very critical and strong resource, you are seeing costs that are majorly competitive with any other source of electricity, whether emitting or not, on the grid.

Thank you.

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

Thanks for that.

I might come back to you if I have time, but I want to turn to Mr. Bradley.

You mentioned how we need a national electrification strategy and how critical that is. I'm just wondering if you could maybe tell us what, in your mind, the top three priorities for that would be, outside the obvious need to produce more electricity. What do we have to do around that to make the grid work and make everything work together? What are the top three priorities there?