Natural Resources Committee on April 20th, 2010

[The Chair, Conservative, Leon Benoit]

Thank you very much, Ms. Labrie.

We go now to Resource Efficient Agricultural Production Canada, or REAP Canada, to Roger Samson, for your presentation.

Go ahead, please, Mr. Samson.

[Roger Samson, Executive Director, Resource Efficient Agricultural Production (REAP) Canada]

Thanks very much to the committee for the invitation to speak to you today.

For the past 20 years, REAP Canada has been Canada’s leading agency in developing ecoENERGY from agriculture. We commend the federal Government of Canada in its recognition of the need to support bioenergy initiatives from the farm sector. Support for the Government of Canada's ecoENERGY initiatives can help strengthen Canada's prosperity in two ways. It creates demand enhancement for farm products, thereby strengthening commodity prices for the farm sector, and it enables Canada to become a leader both in the development of crops that efficiently harness the sun and in processing technologies that turn plant matter into useful energy forms for consumers.

Our agency supports the general concepts of existing ecoENERGY programs: support for producers for business plans, support for capital building offsets, and support for fuel producer incentives. However, before our agency makes specific recommendations to the committee, let me take the opportunity to better explain our approach and history with developing renewable energy from agriculture.

In 1991, REAP Canada gave a brief to the House of Commons Standing Committee on Agriculture about the state of the crisis at that time. We proposed that the best solution to the farm crisis was to recognize that the farming sector has a surplus production capacity and countries need to use this surplus agricultural production capacity to efficiently develop environmentally friendly renewable energy. Twenty years later, Canada has only been partially successful in developing this potential. We have been successful in strengthening farm commodity prices by using grains and oilseeds as feedstocks as liquid biofuels for the transport sector. However, the food commodity crisis that occurred in 2008 makes us realize that creating too much food crop demand through biofuel use can be too much of a good thing.

Canadians must now collectively acknowledge that the rapid scale-up of food crops into renewable fuels can also bring appreciable social dis-benefits to others. Make no mistake, the commodity crisis was largely driven by the rapid expansion of coarse grain utilization in 2008. In retrospect, renewable energy policy that creates liquid biofuels from food commodities has been a breakthrough in creating demand enhancement for Canada’s farm sector. Using food commodities for renewable energy, however, can bring appreciable harm to the one billion people on this planet who remain hungry. While it remains the Government of Canada's aim to develop non-food crops as liquid biofuels, this remains technologically and financially elusive, despite noteworthy efforts by Canadian companies over the past 35 years.

Where the Government of Canada has failed over the past two decades is not recognizing that in order to create appreciable amounts of renewable energy from agriculture, one needs to view first and foremost the land as a means to capture and store solar energy. This stored energy must be harvested and efficiently converted into an energy form that we can use, such as solid biofuels, biogas, and liquid biofuels.

Let's briefly look at the state of the solar battery technology on farms. From a solar energy collection standpoint, it is remarkably inefficient to use only the seed portion of plants to capture the sun's energy. Instead, energy crops like switchgrass, where the whole plant is used, should be prioritized. REAP Canada’s recent book chapter on developing energy crops for thermal applications, published in 2008, found in the case of the province of Ontario that switchgrass can produce 67% more net energy gain per hectare than grain corn and more than four times the net energy gain per hectare than soybeans or canola.

It does not make sense to put appreciable research support and generous incentives in place to support seed crops as fuels. Canada should be developing ecoENERGY policies that embrace the development of whole plant energy crops and phase out investments that develop grains and oilseeds into biofuels. Seed crops can be used to produce bioproducts, but it is a fully inept renewable energy policy to try to develop these crops as energy sources for the Canadian energy supply.

The Obama administration has fundamentally recognized this need to move beyond grains and oilseeds as energy sources by making important investments in energy crops through the new biomass crop assistance program. This program provides incentives for the farmer by offsetting establishment costs for growing energy crops, as well as providing the bioenergy conversion facility up to $45 per tonne of incentive for utilizing these feedstocks.

I want to stress to this committee that investing in energy crops is the best ecoENERGY policy approach when it comes to using Canada’s agriculture sector for renewable energy production. Energy crops are the solar batteries of agriculture. They provide both large- and small-scale investors the potential to have relatively abundant and affordable energy feedstocks for their energy conversion technology. This approach takes the Government of Canada out of the business of picking technology winners and unleashes the entrepreneurial spirit of Canadian businesses.

Our agency recommends that the new ecoENERGY program provide farmers a $100-per-acre incentive to plant perennial energy crops. This will help them minimize their liquidity constraints in developing energy crops and help mitigate their risks. Furthermore, we recommend that Canada develop its own biomass crop assistance program, which would provide bioenergy conversion facilities a $40-per-tonne incentive to use energy crops and a $20-per-tonne incentive for the sustainable use of crop residues over a three-year period.

Canada can develop an appreciable energy supply from dedicated bioenergy crops. REAP Canada has calculated that using 14% of Canadian farmland for bioenergy crops could produce 55 million tonnes of biomass or the equivalent of 175 million barrels of oil.

Now let's examine what happens to the energy we have collected on farmland after it is processed at a bioenergy conversion facility. What we find is that traditional liquid biofuels, such as corn ethanol and soybeans, produce 16 and 11 gigajoules respectively per hectare of net energy gains. In contrast, whole plant crops like corn silage converted to biograss or switchgrass converted to pellets can produce 120 to 140 gigajoules per hectare of net energy gain.

This again is from the same report I mentioned earlier, our book chapter on thermal energy crops for bioenergy.

It is evident that the greatest amount of renewable energy production can be realized by using bioconversion technologies that use whole plant energy crops such as switchgrass or whole plant corn. The least efficient thing we can do is turn seed crops into liquid biofuels. Clearly, the Canadian government should develop ecoENERGY policies that promote the use of whole plant crops into energy for producing densified solid biofuels or biogas for heat, power, and transport. It is time for the Canadian government to move boldly forward with progressive new policies to use our farms and fields to efficiently harvest the sun.

Thank you very much for your attention this morning.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Samson, from REAP Canada.

We will go now to our teleconference witness today. As an individual, we have Professor Daniel Sperling, University of California, Davis, California.

Go ahead, please, Professor, with your presentation.

[Prof. Daniel Sperling]

Thank you very much. It's an honour to be with you, Mr. Chairman and committee.

I'm a professor of engineering and environmental science and policy here at the University of California, Davis, and also director of our Institute of Transportation Studies. I've studied alternative fuels for 30 years. I've written over 200 papers and 12 books on this topic, including the most recent--this is my only advertising here--Two Billion Cars. It came out this past year.

All energy supply options have large downsides. All of them have problems, including biomass. Incidentally, that is the reason energy efficiency strategies deserve to be the number one strategy to be pursued.

I want to make three points. The first point is that while there are many biomass feedstocks, some are clearly more attractive and promising than others.

Making fuels from food and feed materials is problematic, the so-called first generation. In general they use a lot of water, they have high energy inputs, they push up food prices, and they have high greenhouse gases. There are some exceptions to that. Probably the most promising is sugar cane from Brazil, where they've learned how to use much of the material from the sugar cane plant. They grow it very efficiently; it has high yields. But that tends to be one of the few exceptions.

What are much more promising are the second-generation feedstock materials you've been hearing about, the cellulosic materials, grass. A wide variety of grasses and trees can be used. They have much higher yields, they can use marginal lands, they use much less water, they use less energy, and they have a lower carbon footprint.

But this is what I really want to emphasize in talking about feedstock materials: by far the most promising and what I believe will be the most important feedstock material is the waste stream. That means crop residues, forestry residues, municipal solid waste. That's where the focus should be. I believe in the long term that will be the principal source of biomass material we will use for energy and fuel.

Then we come to the second topic, and that is the best way to use biomass. Here there's quite a bit of uncertainty. As the previous speaker talked about, biomass can be used for electricity production. Incidentally, it can be co-fired with coal and fossil fuel. It can also be converted into biomaterials as well as used for liquid fuels and fuels for engines.

The point I want to make here is, as far as transportation is concerned, probably the most important and promising application of biofuels is that they will eventually be used in airplanes and in long-haul, heavy-duty trucks, because those are the two applications where very dense energy materials are needed, and electricity and hydrogen are not very good sources for those two end uses.

As we think about the use of biomass, we really should be thinking those are the applications where the biomass materials are most attractive and in the end probably most likely to be used.

Then, third, we come to policy. I'm more familiar with the United States and Europe. In the United States, as you know, we have the renewable fuel standard, essentially a mandate to which they also attached a greenhouse gas threshold requirement. I believe very strongly that we need a much better policy, one that is more fuel neutral, that harnesses market forces. That approach is similar to what California has done on the low carbon fuel standard. This approach has also been embraced by the European Union. The European Union is moving away from mandates and towards a performance standard.

In California, there's a 10% performance standard. It means fuel suppliers need to reduce the carbon content of fuels by 10% by 2020. In a sense, it's grams of CO₂ equivalent per megajoule. In the California case, and I think anywhere it's likely to be used, it will be based on a life-cycle metric. The target or the point of regulation would principally be the oil companies that are major fuel suppliers, but very importantly, it covers all fuels.

The real danger we have when we make policy is that, as one speaker said, there's a tendency to try to pick winners. The reality is that as policy-makers and academics we don't know what the best options are going to be. I've studied transportation fuels for 30 years. If you ask me what the best fuel options would be for 20, 30, or 40 years from now, I don't know the answer. I know some of them are more promising.

We need a policy that is fuel neutral and performance based and that harnesses market forces and motivates innovation. That's what the low carbon fuel standard does. One can tweak it and make small modifications, but I believe this is fundamentally the right approach.

The low carbon fuel standard provides a durable framework so that we don't have to keep changing it every couple of years, with a new subsidy here and a new subsidy there. We've gone through the process of what I sometimes call the “fuel du jour” phenomenon, where we keep jumping around. Policy-makers, legislators, journalists, and the public jump from one silver-bullet solution to another. It doesn't work. We keep making the wrong choices and there's a lack of fundamental performance standards.

In closing, that's my recommendation and my suggestion. I'll leave it to you, if you have any questions.

Thank you very much for your time.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Professor Sperling, for your presentation.

To all of you, thank you for your presentations.

We unfortunately have very little time left for questions. A committee will be coming in immediately following ours, which leaves about two minutes for questions.

Starting with Mr. Tonks, let's have one short, crisp question, with a short, crisp answer.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you to both panels.

We've heard a little of everything in terms of a strategic overview. Ms. Labrie talked about the recycling of municipal waste in terms of the energy stream and biomass stream. There's the canola approach. We then have reminders from Mr. Samson with respect to the implications for developing countries.

The question is this. Where is the strategic positioning that will do what Professor Sperling has said, a strategy that's based on policy performance and the unleashing of innovation?

My question has two parts to it. I'm sure the committee would be interested in what you would advise the government. Does the Obama administration have it right in terms of biomass crop energy programs? Will that position provide the necessary incentives in terms of the types of non-cellular and non-cellulosic technologies that will gently lead us to a more rational and balanced future with respect to cellulosic innovations and other innovations?

There are two parts to the question. The second part is on carbon pricing. How does that figure in? I don't think we're going to get to that, but the government needs to know or we need to know what the implications would be.

Thank you, Mr. Chair.

[The Chair, Conservative, Leon Benoit]

We have a problem here. The two minutes is gone, and I know all parties would like to ask questions. I don't know how I'm going to handle this. Would one individual like to give a really short answer to that, and if so, who would that be?

Mr. Samson.

[Roger Samson]

I've worked on energy crops and bioenergy conversion systems for 20 years, and from a practical standpoint, we need to use marginal farm land because those are the lands that are really in surplus and are providing low income to farmers. We can increase those farm receipts from that farm land, and if we strengthen the overall demand from the farm sector, we help all the commodities like canola and we can produce appreciable amounts of energy. Utilization of wastes can be a good thing, but crop residues really aren't waste; they do feed the soil and protect the soil. So we have to do that judiciously.

The Obama strategy of supporting the sustainable use of crop residues and wood residues and energy crops I think is brilliant because it takes the government out of the business of picking technology winners on the conversion side and it's a safe investment because you're investing in energy and helping support it broadly for conversion technologies.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Tonks.

Madame Brunelle for just two minutes.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good morning.

Ms. Labrie, I am very interested in what Enerkem is doing. I see it's highly diversified. You use 20 types of raw materials. You use a broad range of biomass. Is that the secret to your success? Is it also the fact that the plant is near the resource, whether it be waste or anything else?

Furthermore, you say the U.S. government has granted you $50 million for a plant in the United States and that here, the ecoENERGY program has limits. In view of the fact that your business is a success, shouldn't the government be investing more to support your efforts?

[Marie-Hélène Labrie]

As regards the neutrality of the raw material, I believe it's by having the broadest possible diversity that we'll achieve the most success.

As for your second point, I would say that a model under which plants are located near the raw material is an environmental and sustainable development advantage.

With regard to your last point, I would like to point out that the SDTC program, NextGen Biofuels Fund, offers roughly the equivalent of what we have in the Mississippi. We intend to use that program in Canada for our plants.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Brunelle.

Mr. Atamanenko, make it a very short question.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

For Professor Sperling, I've studied in Davis, by the way, and it's a beautiful campus.

Should we be moving, as soon as possible, away from first-generation biofuels?

[Prof. Daniel Sperling]

Absolutely, yes. I think certainly in the United States, certainly in most parts of the world, we've already gone beyond the threshold of what is desirable. Many people make the argument that these first-generation fuels are a good transition, create the foundation for a transition. But to the extent that's true, we've gone beyond that boundary already, so every incentive we create, every policy we create, should be aggressively focused towards moving towards second-generation options and waste materials.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

[Prof. Daniel Sperling]

Someone asked about carbon prices. Carbon prices are probably the best policy option, but most politicians are unwilling to do that, and that's why I advocate the low carbon fuel standard as a second-best approach to it that is fuel neutral and that uses tradeable credits so that you create market forces, stimulate innovation, and create a durable framework. A parliament or a legislative body should not get into the business of trying to micromanage and pick winners. It will lead to wasted money. Something like a low carbon fuel standard also reduces the burden on taxpayers because it creates a requirement in which the fuel suppliers need to respond and it reduces the need for subsidies.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Atamanenko.

We'll go now to the government side with Mr. Anderson.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I want to wrap up with a comment rather than a question.

Mr. Samson, I enjoyed most of what you had to say, and I agree with the importance of involving the agriculture community in this. We set up ecoABC to deal with that and give that opportunity.

I want to take exception to one thing. I think in the public's mind the commodity price hike in 2008 was supposedly due to ethanol production and biofuels production. I don't think that's accurate. We had stocks-to-use ratios dropping off for years, particularly in grains. Some manipulation took place in the financial markets there.

Ethanol production may have had something to do with that, but if it had played a major role in it, our prices would still be high, and our grain prices now are very low. I see Ms. Buth shaking her head.

I think it was a simplistic explanation to try to blame that on ethanol production. We should be encouraging ethanol production as much as possible, and other agriculture-related biofuels production on the farm. I don't think that argument is one we can use as producers and as responsible people who are putting programs in place.

[Roger Samson]

If you go to the FAO Food Outlook report, they give the status of grain carry-overs from 2006 to 2008. You'll see there was a 10.9% increase in other uses of coarse grains, and that was primarily ethanol. The world's farmers had a good crop year in 2008. The problem was that we had a major change in industrial use, and that brought down the world's stocks.

Although Canada is not a very big player in the global grain industry as far as coarse grains, it has a role because it imports corn from the U.S. The farmers of the world were basically delighted with the program, because it really strengthened them and they had been living in a state of penury. But we really need to be cautious about how far we go with these mandates.

[The Chair, Conservative, Leon Benoit]

Thank you very much to all the witnesses for being here today. There was some great input for the study we're doing on the ecoENERGY biofuels part of the question. We will meet again on Thursday.

Thank you to Professor Davis for joining us by teleconference. I very much appreciated the short time. It would have been good to have heard more, but thank you very much.

The meeting is adjourned.