International Trade Committee on Dec. 13th, 2022

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

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Now we'll go to Mr. Baldinelli for five minutes.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair.

I'd like to thank the witnesses for being with us today.

This is essentially our last session for examining the Inflation Reduction Act. Many have described it as a game-changer. Those are not just my words. They are also those of Elizabeth Kwan of the Canadian Labour Congress, who indicated the huge impact it's going to have.

I want to follow up on my colleague Mr. Seeback's line of questioning about the IRA and the notion of providing certainty.

You know what the rules are. You know about the tax credits and the production credits, so you can actually figure out the competitive advantage to investing in the United States. Ms. Green indicated that the IRA provides certainty, a competitive edge. Mr. Marshall mentioned that lacking a stronger response, it will be almost impossible for Canada to compete.

My first question is for Ms. Green.

You indicated that projects have been on hold since August and that excluding the investment tax credit in the fall economic statement was a mistake. For example, you see situations arising from the difference between the IRA and what we do in Canada.

For the clean fuels fund, a $1.5-billion announcement from the government was made in June 2021, but it took 18 months—until November 2022—for the government to make its initial round of announcements. Even so, we still need to negotiate agreements that can be put in place. We already know what the rules in place are. You've already talked about projects being on hold.

CBC had a story the other day about Ottawa preparing to go toe to toe with the U.S. to subsidize EV battery production in Canada. Here's one of the comments that was made:

A consultant who works on the green economy in Canada said several companies are now calculating subsidies that may be available in the United States. Even a company that already has promised to invest in Canada is reassessing the situation in light of the Inflation Reduction Act....

What do we need to do now to compete to keep those dollars in Canada and keep investments in RNG projects in my riding in southern Ontario, for example?

Just in 2020, General Motors did a $28-million project on methane gas with our local landfill company, Walker Industries. It produces 35% of their power. It produces heat for the plant and reduces their GHG emissions. What do we need to do right now so we can compete and keep that investment in Canada?

Go ahead, Ms. Green.

[Jennifer Green]

The time is now. There is no time to waste.

When we can look at the conditions that have been set up in the IRA, we know Canada has experience with investment tax credits. We have been able to look at eligible clean technologies in accelerated appreciation elements, so there are measures that Canada is familiar with. Biogas and RNG are identified in these measures, so implementing an investment and production tax credit in Canada now is critical to avoiding the movement of manufacturing and expertise to the U.S.

Our members see that. They're holding. They're taking a pause and evaluating what the landscape looks like. However, the time is now for Canada to put in place investments that can be competitive here.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Can we wait until the budget in March 2023, or do those decisions have to be made by the federal government now? As you've said, there are projects on hold; they're on pause. What's to stop investors from saying the climate is better in the United States right now?

[Jennifer Green]

I can only reiterate that members are calculating their options. The sooner Canada can move forward with these measures to provide conditions of success for Canada, the better.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you.

I'll go to a line of questioning—

[The Chair, Liberal, Judy Sgro]

You have 42 seconds.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

—with Mr. Auer.

One of the core elements of the U.S. Inflation Reduction Act is an expansion of their 45Q tax credit for CCUS projects. Does the investment tax credit for those types of projects here, which is currently proposed by Finance Canada, go far enough to support projects in your industry?

[Adam Auer]

By itself, it's not enough, but in combination with some of the other financing mechanisms that were announced for the Canada growth fund, for example, it could be enough. The trick is that they need to be implemented quickly, as you suggest, so that we can have certainty about how both the investment tax credit for CCUS and the Canada growth fund will operate in a way that provides investor confidence.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

We still have no certainty on the details of the Canada growth fund.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Baldinelli and Mr. Auer.

We'll move on to Mr. Miao for five minutes, please.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you, Madam Chair.

Thank you to all of the witnesses for your appearance today at the standing committee.

I'd like to direct my first question to Mr. Auer.

I was very pleased to see the work your association did for the road map to net-zero carbon concrete by 2050. How can achieving net-zero concrete help position Canada as a global leader in concrete exports? Where do you currently see the most potential for low-carbon concrete exports?

[Adam Auer]

Concrete is not typically exported. It's the cement used to make the concrete that has export potential. The technologies around the decarbonization of cement in concrete also have that export potential. Concrete is very heavy and very expensive to ship. As Mr. Cannings referenced before, it tends to be quite local because it has a shelf life. Once it's mixed, it has to be used relatively quickly. It has to be within a short truck trip, if you will, of the project.

The opportunity is twofold. For one, Canada is exporting quite a bit of cement and cement products to the United States as the United States moves very rapidly to decarbonize and as they integrate buy clean policies into how they determine they're going to use building materials like cement and concrete. We need to be cognizant of that and at least stay in step with those decarbonization achievements in the United States if we want to maintain those markets.

Of course, the other big opportunity is from technologies like CCUS that are successfully applied in a heavy manufacturing facility like that of a cement producer. With those technologies, there are economies of scale and economies that come from the learning. Those technologies will become less expensive and will be deployable by other cement facilities and other industries, ultimately going into other facilities that operate in other markets.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you very much.

I'd like to direct the next question to Ms. Green.

In British Columbia, Canadian biogas currently has a number of projects, both upcoming and ongoing. Could you share anything with the committee about these projects? What sort of potential do you see for future RNG projects in British Columbia?

[Jennifer Green]

As I mentioned, British Columbia has been a leader in promoting biogas and renewable natural gas. The projects they currently have in operation span from agricultural projects to municipal projects looking at waste water and landfills. There's quite a variety in the supply and diversification of projects in British Columbia.

Again, the driver in B.C. has been their alignment of energy and climate policy, predominantly driven by their CleanBC plan. Within that, they've had some very forward-thinking considerations for looking at how to implement renewable gases as part of their supply to hit low-carbon targets. British Columbia has definitely been a leader in this space across Canada.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you, Ms. Green.

The next question I'd like to direct to Mr. Marshall.

I understand that BIC has signed a number of MOUs with companies around the world in countries like Italy and Belgium. Could you tell the committee a bit more about these MOUs, the benefits they provide and how they can help to build a stronger bioeconomy at home or internationally?

[A. J. (Sandy) Marshall]

As you mentioned, we have a number of MOUs with organizations around the world, particularly in Europe. What these MOUs do is help us develop relationships with organizations that are like-minded and that are focused on developing early-stage companies and technologies within the industrial bioeconomy. By working with these groups, we've been able to attract interest for projects coming to Canada from Europe. We've also been able to work with our companies in Canada to give them opportunities to connect to Europe.

The prime benefit here is to build a bigger network so that we can support early-stage companies and help them commercialize and grow wherever it is best for them. That's really the strength of those MOUs.

We also have a number of MOUs across Canada. We're working with economic development aid organizations currently in Quebec in the Trois-Rivières and Bécancour region, which is a very similar region to our cluster region in Sarnia-Lambton. It's a very traditional chemical region that has the opportunity to be a real cluster and anchor for the development of the industrial bioeconomy. This allows us to accelerate these technologies forward. However, there's only so much we can do with our resources and small investment funds. That's why it's very important that we have a number of the tools we've discussed today and that they're available for moving these early-stage companies and technologies forward.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Marshall.

We'll move along to Monsieur Savard-Tremblay for two and a half minutes, please.

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

Mr. Robertson, you said in your last answer that we needed to make sure critical minerals weren't sent to the U.S. How would you describe our relationship with the U.S. in that area? It seems to be somewhat adversarial.

On one hand, the Canadian government signed an agreement with the U.S. government, under President Biden, to achieve a self-sufficient electric vehicle battery supply chain. On the other hand, the U.S. has policies such as the IRA and the previous infrastructure bill, which included an incentive for assembled vehicles. Luckily, changes were made to the incentive, so that it now applies to all vehicles manufactured in North America, not just in the U.S., as was the case previously.

How should we deal with our American partner? Should we deal with the U.S. as a partner first?

[Colin Robertson]

Yes, we should deal with the United States as a partner. We have preferred access to the United States. As you have noted, we have a whole series of entrees into the United States, the best entrees of any country in the world. In fact, we are in an envious position, although we don't always feel that sometimes because, as I pointed out in my testimony, we are often collateral damage to American actions aimed at another country—more recently, China, for example, in the case of steel and aluminum tariffs.

My argument is that for us it's a daily, permanent campaign involving not just our embassy but also members of this committee going down to see their counterparts. When we make the case for Canada with our counterparts in the United States, most of the time we are successful. Again, the business of America is business. They like us and understand us, and we can make a compelling case as to why we do things on a mutually beneficial basis. I used the word “reciprocity” for good reason: Americans aren't free traders, but they do understand the principle of reciprocity, and that's what we've basically managed to do over the past 40 years.

These agreements, to go back to my point, are based on the premise of partnership. The province that has often taken the lead in this is Quebec, quite successfully, with successive premiers going down to and working in the United States market.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Go ahead, Mr. Cannings, for two and a half minutes.

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

Thank you.

I'm going to turn to Mr. Auer now.

We often hear in this place that industry needs certainty. A couple of times you've mentioned carbon contracts for a difference. One thing that concept would bring is certainty to industry.

Could you expand on that with regard to the cement industry and perhaps also talk about border adjustments given we have Canadian companies paying a carbon tax and American companies that aren't?

[Adam Auer]

Those are two very big questions.

Effectively, carbon contracts for difference are forms of production subsidies. They guarantee that the value of, for example, the carbon sequestration from a carbon capture project will be backstopped by the government.

In Canada, we obviously have a carbon pricing system. Presuming that system has longevity into the future and that the price increases as predicted, it will create a certain value for carbon. However, that carbon is not really known because this is not just about the regulated price. The voluntary markets and credit markets also determine the value of carbon as a tradable commodity.

A carbon contract for difference would eliminate that uncertainty by having the government be the holder of the contract guarantee. If the market does not deliver a certain strike value—one required to make a project investable—the government will provide the shortfall. Conversely, if the market outperforms, the government could end up actually receiving money, depending on the structure of the contracts. Effectively, this allows investors to do what they can now do in the United States: calculate the return on investment for any given project in that space.

On the border carbon adjustment piece, we will ultimately get to a point where that becomes a necessary and important tool. I understand that the EU, after much negotiation, finally agreed to a border carbon adjustment for a limited number of commodities, including cement. Certainly, we see it as a potentially important tool when it comes to protecting the competitiveness of our sector from imports from jurisdictions that don't have similar carbon pricing pressures.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Auer.

We now have Mr. Martel for five minutes.