Natural Resources Committee on March 7th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone. Welcome to our meeting. Of course, we're continuing our study on innovation in the energy sector. We have five witnesses today.

From the Association of International Automobile Manufacturers of Canada we have Andrew Morin, vice-president, technical and regulatory affairs. Welcome.

From Canadian Manufacturers and Exporters we have Martin Lavoie, director of policy, manufacturing competitiveness and innovation. Welcome.

From the Canadian Clean Technology Coalition we have Céline Bak, president, Analytica Advisors.

By video conference from Windsor, Ontario we have Dennis Dick of Pelee Hydroponics. He is vice-president of Seacliff Energy Ltd. Welcome to you.

By teleconference, which is rare, from Courtenay, British Columbia, we have from Waste to Energy Canada Inc., Alistair Haughton, chief operating officer. He is the person who was trying to make it last week but had some problems with his flight.

We'll go ahead with the presentations in the order on the agenda.

We'll start with Andrew Morin. Go ahead, please, with your presentation.

[Andrew Morin, Vice-President, Technical and Regulatory Affairs, Association of International Automobile Manufacturers of Canada]

Good afternoon, Mr. Chair. Thank you for inviting us, Parliamentary Secretary Anderson, opposition critic Mr. Julian, and honourable members of Parliament.

My name is Andrew Morin. I'm the vice-president of technical and regulatory affairs for the Association of International Automobile Manufacturers of Canada. It's a bit of a mouthful, but we do represent the 15 globally based automotive companies here in Canada. The information is in my notes, but the best way to put it is that we represent all the non-Detroit-based companies in this country.

In 2012, our members sold approximately 930,000, or 55%, of all the new vehicles in the Canadian market. I should also note that over 54% of our companies' Canadian sales were assembled in the NAFTA region. Of those sales, 19% were manufactured at Honda and Toyota's affiliated Ontario assembly plants, and approximately 29% of our sales were assembled in the United States. There are 11 of our 15 manufacturers that currently produce vehicles in the NAFTA region, which includes Canada, Mexico, and the U.S. In an aggregate, our members' affiliated manufacturing operations accounted for over 38% of Canada's light duty vehicle production, that being passenger cars and light trucks.

Our association advocates for the sound public policy to support a competitive and sustainable Canadian automotive marketplace. Our members are committed to meeting the mobility needs of Canadians by offering greater consumer choice and providing leading-edge environmental and safety technologies.

We certainly appreciate the invitation to appear here today and to provide some very brief comments regarding the committee's ongoing study into innovation in the energy sector. Indeed, the federal government's proposed future policy orientation with respect to the end users of energy will have a profound impact on Canada's manufacturers and importers of passenger cars and trucks.

Our comments today will focus on three key areas: first, Canadian companies' requirement for continued flexibility to introduce unique-to-Canada vehicles and technologies that will meet the needs of Canadian consumers and comply with federal regulations; and second, the requirement for better quality fuels, lower sulphur, and caution with respect to the expansion of biomass content requirements in gasoline and diesel. Third, I'll briefly touch on some of the challenges associated with the adoption of new advanced technology vehicles, including electric vehicles, in Canada.

In response to the government's recent publication of the GHG or greenhouse gas emissions regulations for passenger automobiles and light trucks covering the years 2011 through 2016, and then successively 2017 through 2025, our association has reiterated its support for a single national program that addresses both GHG emissions and the fuel efficiency of Canadian specification vehicles. It's our belief that only a national approach to reducing GHG emissions and improving the fuel efficiency of new vehicles will prevent the unwarranted development of an inconsistent patchwork of provincial or territorial requirements.

Now, as previous witnesses have already told you, there is no silver bullet or panacea or, shall I say, green magic, that will enable our companies to meet the aggressive GHG emissions standards for 2011 through 2025. All of our companies will need to employ a very broad suite of technologies to comply with the regulations and satisfy Canadian consumers. These include vehicle downweighting; turbo charging; gasoline direct injection; high output, highly efficient, yet small displacement internal combustion engines, both gas and diesel; further hybridization; clean diesel; multi-speed transmissions; and alternative fuels, including electricity and possibly CNG, and ultimately hydrogen.

The real issue is that 70% to 80% of fuel's energy is lost within the vehicle's powertrain and is not transferred to the wheels as motive power. Thus, the automaker's challenge in this new regulatory environment is very complicated. It's costly and it's fraught with risk.

Our members must do several things. They must improve fuel efficiency, and at the same reduce GHG and criteria air contaminant emissions, as well as shrink the transportation sector's carbon footprint. They must keep customers satisfied, while also increasing power, torque, driveability, and safety equipment, which is, by the way, demanded by government regulation as well. We also have to improve utility and legroom, of course.

Canada has unique infrastructure relative to the U.S. Our extreme climate and sprawling geography, including long driving ranges, are natural inhibitors to the introduction of some new technologies, such as battery electric vehicles. Consider, for example, that Canadians purchased only 571 battery electric vehicles in 2011 and only slightly more than 2,400 in 2012, which respectively account for .03% and 0.1% of annual Canadian new vehicle sales.

Even after 13 years on the market, conventional gasoline electric hybrid vehicles, for example, the Prius family from Toyota, account for only about 5% of new vehicle sales in Canada. We have much more work to do.

We expect that the internal combustion engine, therefore, will be primarily fuelled by gasoline and diesel, and potentially by hybrid electric, and these will serve as the predominant vehicle engine technologies for the foreseeable future.

Given that the Canadian light duty vehicle market comprises a significantly different fleet mix relative to the U.S., the types of vehicles sold by our companies in Canada are typically smaller and more fuel efficient than those sold by our members' U.S.-based affiliates.

While our companies will continue to design, build, and sell common products in the Canadian and U.S. markets, we ask that the Government of Canada be mindful that Canadian companies must always require the flexibility to introduce Canada-unique vehicles, meaning vehicles that might not be marketed in the U.S. We might also require the need to introduce unique powertrain offerings or even other technology variants, including safety features that meet the specific needs of Canadian consumers while also satisfying government regulations.

Canadian companies, I would remind you, and not their U.S.-based planners or their international parents, are solely responsible for compliance with these stringent GHG regulations in Canada.

With respect to fuel quality and the requirement for lower sulphur content in Canada, we remind the committee that vehicles and fuels are an interdependent technology. They demand a holistic systems approach to both reductions in GHG emissions and improving the quality of Canadian gasoline and diesel fuels. Improvements in fuel quality will, to a very large extent, determine which advanced technologies will be required to meet the 2011 to 2016 and 2017 to 2025 GHG emissions regulations.

To facilitate the introduction of the latest, and I mean the most cutting edge, internal combustion engine technology and to meet the requirements of government regulations, two critical improvements for fuel quality are required in Canada. These include the requirement for lower sulphur in gasoline to a 10 ppm maximum, and also the higher octane levels; for example, increasing availability of 95 research octane fuel across Canada.

At the bare minimum, the Government of Canada must align its sulphur requirements for Canadian fuels with the anticipated U.S. tier 3 proposal to reduce sulphur in fuel, which is expected to be released either later this month or next month in the U.S.

It's important to note that this recommendation is very consistent with the November 2009 Environment Canada auto industry-oil industry joint work group, which produced the “Report of the Technical Working Group on Certain Fuel Quality Parameters”.

With regard to the introduction of renewable fuel content, fuel additives, and so-called boutique fuels, I just have to say that our industry's experiences with certain biofuels, including higher level ethanol blends and including methanol and biobutanol, for example, have been largely negative. Without sufficient evidence to show that increased biomass in conventional gasoline and diesel is safe for vehicles, consumers, and our environment, the Government of Canada should delay moving ahead on an E15, or higher, mandate for gasoline until all studies are complete regarding the potential impact of these blends upon the current fleet and on future vehicles, both in Canada and the U.S.

Similarly, before any new boutique additive or component is introduced into Canada’s fuelling infrastructure, or indeed the on-road fleet, our companies expect that at a minimum, a potential new additive would be registered with the U.S. EPA and have successfully completed all relevant tests and extensive third party validation covering factors including human health effects, toxicity, fuel distribution system durability and impact, catalyst and engine durability, as well as the finished fuel shelf life and storage.

Finally, I'll just touch very quickly on some of the challenges with the adoption of advanced technology vehicles. Canadian consumers' general price sensitivity and cautious approach to adopting new technologies, as demonstrated by the slower adoption of EVs, electric vehicles, in Canada—and I say all types of electric vehicles, both hybrids and the pure electrics—relative to their U.S. cousins, could further exacerbate our members' challenges in complying with regulations.

Given the relatively small size of the Canadian market and the current lack of a regulatory framework that would permit the introduction of plug-in electric vehicles, for example, it could be difficult for Canadian companies to develop a business case to support the introduction of some ATVs, advanced technology vehicles, in this country. This is especially true given the lack of market incentives available to consumers that would encourage the more rapid adoption of new technologies, as well as the infrastructure challenges inherent in Canada.

The federal government's efforts to improve EV infrastructure availability will, to some extent, determine the pace of EV and PHEV, plug-in hybrid electric vehicle, adoption in Canada over the next decade or so.

I'll stop there. Chair, thank you once again for your time and attention. I'd be happy to take the committee's questions as the meeting progresses.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Morin.

We now have the next presenter from Canadian Manufacturers and Exporters, Martin Lavoie, director of policy, manufacturing competitiveness and innovation.

Go ahead please, sir, with your presentation.

[Martin Lavoie, Director of Policy, Manufacturing Competitiveness and Innovation, Canadian Manufacturers and Exporters]

Thank you, Mr. Chair.

I want to thank the members of the committee for inviting me to appear today.

Canadian Manufacturers and Exporters is Canada's largest trade and business association. We represent about 10,000 manufacturers and exporters across the country.

My presentation covers three main topics. First, I will give you an overview of energy consumption in the Canadian industrial sector. Second, I will talk about the drivers of energy efficiency in our sector. Finally, I'll give an overview of government programs that are incentives for manufacturers to become more energy efficient.

In terms of an overview of energy consumption in our sector, the industry in general represents about 37% of all energy consumed in Canada, if you compare it with the residential and other sectors, of which about two-thirds is manufacturing. We're definitely a sector that requires a lot of energy to produce things.

From 1995 to 2010 our industry grew by 11% in terms of output, what is produced in the plants, but despite that, we reduced energy consumption by about 14.3%, which means there has been a lot of investment in getting machinery and plants that are more energy efficient.

Among the 21 subsectors included in the manufacturing sector, about nine represent 92% of all energy consumed. They are paper manufacturing, which is the sector that consumes the most energy at 25%, followed by primary metal manufacturing at 21%, petroleum and coal products at 16%, chemical manufacturing at 13%, and then other sectors such as food manufacturing, wood products manufacturing, and non-metallic mineral products.

Looking at energy consumption is one thing. We want to look at energy intensity. For example, if a sector is declining in terms of outputs, it is normal that the energy consumed would decline. What you want to know is how much energy is used to produce one output, or one unit of output. It's pretty much a ratio of energy consumption and share of a sector's GDP.

In terms of the sectors that I would qualify as best in class since 1995, it would be primary metal manufacturing, which had an energy consumption decline of 11% despite a growth in share of GDP of almost 15%. Paper manufacturing, of course, is a sector that has declined in the last 15 years. Its share of Canada's GDP has declined by 17%, but its energy intensity has declined by over 40%. Despite the decline in the industry they kept investing a lot in energy efficiency of machinery, equipment, and plants.

The source of energy used in the manufacturing sector is mostly dominated by electricity and natural gas, both of which account for 57% of all energy consumption in Canada’s industrial sector. Then if you add all the variants of heavy fuel oil, you have pretty much 91% of all energy consumed in our sector.

In terms of the drivers of energy efficiency, we're a sector where investing in energy efficiency can be cost-effective because then you reduce the cost of production. It becomes more competitive, and you protect yourself against the business cycle of some sources of energy.

There is a close relationship between capital investments in our sector and reduction in energy consumption. We hear a lot about the most common ways for manufacturers to reduce their energy footprint. First would be machinery and equipment, more specifically, investments in heat recovery systems, furnace replacement, air leak detection, and air compressor upgrades. Those are all ways you would find if you talked to manufacturers. You hear that a lot.

With respect to training of employees, for most companies that have a sustainable development strategy, getting the right training for employees to make them aware of the importance of energy and so on is a big part of that.

When refurbishing existing plants, some of our members will try to include solar panels and other new technologies that can help them achieve their targets.

In terms of government programs and policies that are seen in our sector as incentives to invest in green assets, I would say the most important one would be the accelerated capital cost allowance that covers classes 43.1 and 43.2, which include a variety of equipment that generates or conserves energy by using renewable energy sources, fuels from waste, or making efficient use of fossil fuels.

This measure was expanded in 2010 to include other types of equipment, especially those related to heat recovery systems. Then in 2011, the federal government again expanded the coverage of types of equipment to include any equipment that generates electricity using waste heat sources. Then last year, there was a further expansion to include clean energy generation equipment. That includes bioenergy equipment.

The second class of government programs is direct support for research and commercialization of clean technologies. Some of them are used by our members, either on their products or in their processes in their plants. One of the big ones would be Sustainable Development Technology Canada, SDTC, which has a $590 million tech fund that addresses climate change, air quality, clean water, and clean soil. They also have another fund of $500 million that supports the next generation of biofuels.

Then you find a bunch of other programs, including ecoENERGY for biofuels, which has a budget of $1.5 billion over nine years to boost Canada's production of biofuels. The scientific research and experimental development tax credit is used by a minority of our members involved in wind and solar energy manufacturing, for example. They'll use that tax credit to do innovation in the sector. A third one would be the 2009 clean energy fund.

Of course, there are other programs at the provincial level. The one you're probably most aware of in Ontario is the feed-in tariff program, which is used to subsidize the production of renewable energy, such as wind and solar.

In conclusion, I want to stress the importance of capital expenditures in our sector. It's true for productivity; it's also true for energy efficiency. At the end of the day, it's the type of machinery we're using. Refurbishing our plants is going to make a big difference.

What is interesting for our sector is that these tax incentives are really achieving some results. In many ways, our members, our manufacturers, have an incentive to invest in these things because there's a business case for using more clean energy.

I'll leave it at that, and I welcome your questions.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Mr. Lavoie.

We go now to the third presentation. This is from the Canadian Clean Technology Coalition. We have Céline Bak, president of Analytica Advisors. Go ahead with your presentation for up to seven minutes, please.

[Céline Bak, President, Analytica Advisors, Canadian Clean Technology Coalition]

Mr. Chair, Mr. Vice-Chair, members of the committee, thank you very much for this invitation to appear today.

I am very pleased to represent the Canadian Clean Technology Coalition, whose mandate is to promote information and facts about the clean technology industry.

It gives me great pleasure to follow the presentations of Monsieur Morin and Monsieur Lavoie, because the companies of this industry are providing the technologies that were just referred to in the two previous discussions.

I'm going to speak about three things: first, to characterize the industry; second, to talk about the barriers for Canada to reap the economic benefits of this industry; and third, to speak about the benefits that would ensue if we chose to pursue these strategies.

Just very briefly about the industry as a whole, it's a vibrant and expanding sector where clean technologies are increasingly becoming economic drivers of growth in the energy and other industrial sectors.

There are more than 700 innovation-based SMEs in this sector in Canada, including 10 sectors overall and 60 subsectors. You can think about it like the aerospace industry, where you have flight simulators on one side and then the forming of nanomaterials and things like that on the other side. It's really as diverse as that.

The thing that unifies the industry is that all of these companies have intellectual property, all of them are investing in R and D, and almost all of them are already exporting. In fact 82% of them already export today, with 50% of revenues from exports.

The thing you may find surprising is that whereas the industry is investing about $1 billion a year in R and D, more than 75% of that investment is by companies that have less than $50 million in revenue. It's a bit of an interesting combination of relatively small companies that are very significant investors in R and D.

Together they employ 52,600 Canadians, which again is a surprising figure, but it's a lot of small numbers, with many small companies who together employ the equivalent of the mining industry or the oil and gas core employment.

I'd be very pleased to answer any questions about the sectors that we have included, but at a very high level it includes production of energy, the use of energy including transportation, manufacturing, etc., and then water and waste water. Where you speak about water, it's almost always to do with energy and water applications, be they in an industrial context, in an agricultural context, or obviously in a municipal context.

I think it's helpful to note that the companies are distributed across Canada per GDP. This is an opportunity for all Canadians, for all regions, and reflects an entrepreneurial capacity that we have across the country to incubate and grow companies that are in many cases world class.

The rate of exports at the moment is 50% of revenues. Total revenues of the industry are $10 billion, which is about half of the aerospace industry today. You may know that in aerospace, exports are now 70% of revenues.

That is a very basic characterization of the industry.

In terms of the challenges the industry faces, many of you will already have heard about capital and debt financing. I think Monsieur Lavoie made some very useful remarks regarding STDC.

To build on that, the government funding is leveraged 3:1 with the private sector in the early stage. The policies we have in place are definitely attracting capital from the private sector. I think that's all to the good, and speaks very highly of the programs that are in place.

You may have heard about the 33¢ to the dollar ratio between investments in Canadian companies and their American equivalents. That leads to slower growth and makes our companies more vulnerable. That's something we need to bear in mind.

What I'd like to add to this discussion is the question of debt and project finance, because it's not often brought up. Companies in this area are exporting, and often in the form of projects, whether they are large deployments or multiple deployments in international markets. Those projects will need to be financed through debt. We don't really yet have policies and programs in place for that. I'd be very happy to answer any questions on some possible recommendations in this area.

The other thing is human resources. It's not necessarily often spoken about in terms of innovation and energy, but in this sector the human resources gaps are not what you would expect. They have to do with international business development and complex systems sales. It's not the usual that we need more engineers. It's actually that we need people who can sell into complex international markets.

What is the potential role of the federal government for this industry? It's important for us to think about how domestic markets must act as a springboard for international exports. That means that the government walks the talk, as it already has through the expansion of Public Works' Canadian innovation procurement initiative. It means a strategic approach to supporting the exports for this sector, and possibly doing that in conjunction with new free trade agreements.

I happened to be in Panama earlier this week. We're about to announce a free trade agreement in Panama. That's an opportunity to really shine a light on this new sector. It just happens that in that market there are certainly opportunities.

In terms of the government's recommendations in the recent Jenkins report on procurement, there was mention of a whole of government approach for defence procurement. We would benefit from a similar type of thinking for this new innovation-based industry, as we have done in the past with aerospace, more than 15 years ago now.

In terms of financial markets and financing, I'd like to introduce the concept of a CMHC for technical risk. I'd like to do that in the context of what will probably be quite a lot of new thinking and policy work to be done on the financing of energy-related technologies in developing countries in the next eight to 10 years.

CMHC has played a foundational role in our property development industry, in our banking industry. If we are to have the same growth and success in this industry, we have to address technical risk. Otherwise the debt that I mentioned a moment ago will not be available to enable our companies to grow.

As Monsieur Lavoie and Monsieur Morin mentioned earlier, I also really believe in the importance of coordinating with our provincial and territorial governments in order to expand the programs that are in place.

What is the opportunity if we choose to focus on this sector? Per our research, it's a $3-trillion global market. To give you a benchmark, the aerospace industry is about $360 million. We have a 6% global market share in that industry. For us to have even just our share of global commerce in clean technology, we're talking about something in the order of $60 billion. It's a very significant opportunity. It represents expanded exports and advanced manufacturing, as my colleagues mentioned a moment ago. It represents an opportunity to balance our exports between advanced manufacturing and natural resources. It provides innovation-based opportunity across the country. It's not just in cities; it's also in rural settings. As well, it provides employment opportunity for skilled workers and young people all across Canada.

As has been mentioned earlier, it strengthens our oil and gas industry, mining industry, our forestry and industrial sectors, both through improved performance and through productivity.

Finally, it would definitely be an area of strength for Canada's global brand. It's one that we should take the opportunity to leverage.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Bak, president of Analytica Advisors.

We go now by video conference to Dennis Dick, from Pelee Hydroponics.

Go ahead, please, Mr. Dick, with your presentation.

[Dennis Dick, Vice-President, Seacliff Energy Ltd., Pelee Hydroponics]

Thank you, Mr. Chair and members of the standing committee. It’s an honour to be speaking to you from the deep south of Canada.

My topic today is the innovation of renewable energy biogas, which is generated through anaerobic digestion. Pelee Hydroponics is a 6.5-acre greenhouse farm producing organic tomatoes. It hosts Seacliff Energy, the farm-based anaerobic digester that is designed to handle a large number of different solid and liquid organic waste materials.

I'll answer the questions that were provided to me.

First, what is the current status of the research, innovation, and technology development for biogas? Most of the research and the innovation and technology are currently taking place in Europe. Aggressive feed-in tariff rates and premiums have driven the uptake of that technology.

Biogas development in Canada can be described as a series of individual achievements. The Biogas Association, an Ontario association of biogas owners, operators, and stakeholders, has been a leader in the research, as well as in assisting in the development of a biogas safety code.

Aided by OMAFRA, the Ontario Ministry of Agriculture, Ontario has led the charge in Canadian farm biogas. There are 30 farm-based operational biogas plants in Ontario and a few in Quebec, British Columbia, and the western and Atlantic provinces. Biogas is also a name given to landfill gas and sewer gas from water treatment plants.

Research, innovation, and technology remain a priority for biogas. The innovation of a mutually beneficial relationship between urban and rural Canada can evolve where rural areas can close the loop of field to food to field with management solutions to organic waste through renewable energy.

Second, how do we compare to other countries? Canada is far behind Germany in the production of biogas. There are 7,200 biogas plants in Germany alone, in a country the size and with the population of Ontario. We can build on and improve on European models. Most of the specialized equipment for biogas comes from Europe, but we have the skills and infrastructure to manufacture that equipment in Canada. Consistent support of biogas will open the doors to manufacturing, exporting, and job creation. A huge opportunity exists to capitalize on organic waste treatment and manure treatment as well, while reaping environmental and economic benefits.

Third, what are the most promising innovative technologies? Biogas production in itself is a promising, innovative, and evolving technology, with several applications to energy markets: heat, power, transportation fuel, gas to grid, and fertilizer. Technology to enable dispatchable biogas-generated electricity can offer a solution to aging electricity grids.

Fourth, what are the barriers and the main challenges? They are: regulation; policy, which can address economics; bureaucracy; and process. A Canadian biogas strategy is needed, a policy with targets and initiatives. There’s a need for a centralized body to collect and integrate sector knowledge for proponents, ministries, government agencies, financers, and consumers. One of the barriers is that the absence of a long-term Canadian history of successful biogas plants promotes a perception of higher risk, and that translates into higher associated capital costs.

Fifth, what role can Canada play? It can develop a Canadian biogas strategy with policies, targets, and initiatives. We can look to Europe for aggressive and sustainable biogas blueprints. Canada can incent the production on the back end, and not so much the capital costs, which will enable biogas investment and attract development.

Again, we can adapt variations of the European models for price-adders for innovation, efficiency, and environmental attributes. We can establish a central agency to develop a long-term policy to collect and standardize that information and provide assistance to the ministries, proponents, and financers, and the education of consumers.

Funding is desperately needed for existing associations, like the Biogas Association in Ontario. It has the experience and framework in place to mentor a central agency. This voice of biogas currently assists biogas stakeholders nationally and is poised to transition to a national agency.

We need to enable access to the grid. The dispatchable baseload power and local potential of renewable energy, again, can benefit those aging grids.

The government could provide grandfather incentives to existing plants and keep them on the same competitive level.

We need specific biogas research funding for entities, such as the University of Guelph, Ridgetown campus, which has a demonstration anaerobic digester. I know that universities across the country are researching biogas anaerobic digestion.

We need to target agriculture for this—farmers understand sustainability—and consider biogas incentives and investment as an investment in job creation, investment attraction, and ultimately tax revenue.

So in the words of Norma McDonald, past-president of the American Biogas Council, “Let's not waste our waste.”, and I would add to that, let's stop wasting our waste.

Thank you for the opportunity.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Dick, vice-president of Seacliff Energy Ltd.

Now by teleconference from Courtenay, British Columbia, we have Alistair Haughton of Waste to Energy Canada. He is the chief operating officer.

It's good to have you with us today, sir. It's unfortunate that you couldn't make the connections for our last meeting.

Go ahead, please, with your presentation, for up to seven minutes.

[Alistair Haughton, Chief Operating Officer, Waste to Energy Canada Inc.]

Thank you very much, Mr. Chair.

Thank you, committee members, for allowing us to present today. It's definitely a privilege on our part.

Waste to Energy Canada Inc. is an innovative supplier of patented and proprietary technology, specifically in the field of gasification. Very quickly, what we do is take a mixed group of waste streams, and I'll explain those in a second, and we place those waste streams into a combustion chamber. However, we do not combust the waste. We keep it at a sub-stoic level, and then draw a synthetic gas off that waste. Then we combust the gas at a higher temperature. This gives us a very clean gas and emission profile, emission profiles that are able to meet and better any emission standards that are currently available and regulatory compliance levels in the world globally.

We have a very long in-service history with the technology, going back 15 years, and have deployments as far out as the Ronald Reagan ballistic missile base on Kwajalein Atoll in the Marshall Islands, down to the Cayman Islands, Wake Island, the North Slope of Alaska, oil and mining camps, and smaller communities. We also are up in Canada, just recently, with a smaller deployment of a 1.5-tonne system for the community of Old Crow above the Arctic Circle in the Yukon. That system was flown in by a Hercules.

We are able to deploy the technology in a very modular and scalable fashion, and by that I mean from one tonne a day of waste through to multiples of hundreds of tonnes, upwards of 500 tonnes a day. We work on a decentralized model, which primarily means that we eliminate the need for communities to hub or transport their waste. We're able to drop a system into any community globally and provide its waste management solutions in-house rather than it having to centralize and go to larger systems like the mass burn system. We can match the technology to any community or industry size and its growth model, again through the scalability and the modular nature of the technology.

We provide turnkey solutions in waste management. We are able to effectively destroy and provide recovery through MSW, so we're able to take all forms of municipal solid waste. By this I mean there's no presorting required if that technology is not available. The technology we own is able to take the waste directly from the garbage truck, if you will.

We also provide services in that the technology can effectively manage hazardous waste and medical waste; waste water, which is raw sewage; abattoir or slaughterhouse wastes; biomass, which is more of a homogenous waste stream, for instance, pine-beetle kill, spruce-beetle kill. We provide a closed-loop approach in many of our projects, which includes a front-end recovery system where we're able to separate out all recyclables. This is very good for communities to understand where their model for RRR is. Those recyclables go back to the market; organics go to an AD, anaerobic digestion, solution, which the last gentleman was just speaking about. The final non-recyclable organic material, the residuals, go through our system, are gasified, and the residuals from the AD system at the close of that system's loop go back to the BOS. Then, of course, we're able to clean up all of the sewage that is present as well, the human waste.

The scalable example that I gave in regard to Old Crow, again, provides you with an understanding of how we're able to deploy into the highest, most remote regions of Canada, as well as globally. We currently have, as part of our ongoing process, a number of systems that are being deployed into Ukraine, Russia, Poland, the U.K., and New Zealand. The solutions that we provide are key in the mitigation of the primary drivers, especially here in Canada and globally, of air pollution.

The primary component that we release into the atmosphere is CO₂. That CO₂ is basically being unlocked from organics that are currently in the waste stream so we don't create CO₂; we just release it. We're able to convert that CO₂ through a scrubbing process and provide that CO₂ back into greenhouses and/or algae production. We feed them CO₂ and they produce oxygen. It's pretty straightforward.

We're also able to eliminate water contamination. I will give a couple of examples again.

Old Crow is a very good example. There was an open pit landfill where it was being burned or landfilled because of the permafrost. It was just running straight down the hill on a clay bank into the Porcupine River. We also eliminated a cross-vector contamination issue through medical waste being transported to drinking water and such by animals like birds.

We assist communities and industry implementing effective RRR solutions. We overlay all projects with an ISO 14001 environmental management system. We employ local community operators. The technology is very low in O and M, operations and maintenance, so we don't have to fly in Swiss engineers. The teams that operate these systems are local community members.

The energy recovery component is always key. It's actually an add-on in the sense that our primary focus is to remove those vectors as I talked about earlier. The upside to it is cleaner air, cleaner water, and of course, the energy recovery component. For instance, one particular facility that our technology is employed at is in Husavík, Iceland, where the heat is recovered and sent to a community grid for heating purposes of the local community. We're also able to produce electricity from the system, which is just boiler to turbine to generator and to the grid.

We have a large export market. Unfortunately, we are not that well implemented within Canada mainly due to growing policy regimes and some of the other issues that were described earlier. In Canada, we're a little bit further behind the curve when it comes to the communities being educated on this type of technology, which includes, as the last gentleman was mentioning, AD and biogas.

Our strongest markets to date are outside Canada. We currently are one of the last RFPs compliant to the New York City bid. As well, our technology is being featured in, and won, a bid in Santa Barbara County. We also are now in the RFP process for Maui. We are under way with projects in Poland, Ukraine, Russia, Panama, and South America.

I must add that the EDC and the Canadian Trade Commissioner Service have been absolutely fantastic in assisting us at every level in all of those overseas projects. Interestingly enough, the last lady was mentioning Panama. We have worked very well with the group in Panama, as well as of course overseas providing credit facilities to the company.

We provide a very interesting holistic model, which incorporates a socio-economic overlay. I want to highlight two very good projects here in Canada, one being the Kelly Lake Métis Settlement Society, a first nations group on the Alberta and British Columbia border. For the community I don't recall the exact employment rate but there's probably up around 75% unemployment, mainly due to the devastation of the pine beetle kill in the forest region with the community being a logging one by nature.

W e will be able to harvest that pine beetle kill for the next 25 to 30 years. We're able to facilitate those community members back into the field for work. We deliver that employment component. We then are able to translate that wood waste into a usable byproduct that is both heat for processing and electricity to the grid, which provides them with a long-term residual annuity, if you will, to the community.

We're also able to convert the generated heat into community grid heating systems and the implementation of a food greenhouse. It's a five kilometre radius for the food. We're also able to provide the greenhouse systems that use the residual heat from the equipment that provides for the silviculture for the replanting of the harvested material we take from the forest.

We also have a very similar project that is almost the same in size and scale. That is for the Tl’azt’en Nation, just outside the Prince George and Fort St. James area.

We're currently involved with three projects in the James Bay area with first nations groups there as well.

Again, it has been a great pleasure to present to you today.

My apologies for not getting that flight earlier. That wasn't the best for us.

I thank you again. I welcome any questions you may have.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Haughton.

Thanks to all of you for your presentations. I know that the members have a lot of questions. We'll start with a seven-minute round, starting with Ms. Crockatt, and then it will be Mr. Julian and Mr. Hsu.

Go ahead, please, Ms. Crockatt, for up to seven minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you very much, Mr. Chair.

My first question is for Martin Lavoie. I was fascinated when you said that there's been a lot of investment in getting machines more efficient and getting our industries more efficient. I'm not sure the Canadian public knows that.

I think you said that paper was the highest at 25%, then primary metal at 21% to 23%, and then bitumen at 16%. I'm just wondering if you could enlighten us a little bit more about those top players and how they have become more efficient.

[Martin Lavoie]

Yes. On what you just said in terms of the percentages, the share of energy consumption, it's very concentrated. As I said, there are about 21 subsectors in manufacturing. Nine of them consume 92% of all energy.

In terms of paper, the context was that they've had a very hard cyclical business. Since 1995, a lot of very energy-demanding plants have shut down as well, so I guess it has reduced the consumption. As I said, they also invested a lot, because the amount of energy they use to produce one output has also decreased. Not only have they had rough years and low profitability, but it seems that they have invested in making their plants more effective and their machines more effective.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Could you tell us how? Could you give us details of that?

[Martin Lavoie]

Well, for example, I know that one of our members, Canfor in B.C., put together a sustainable plant, I think back in 2006, and then they looked at everything. As I said before, they will look at the machinery they use to make their products, and they will look at their plants, their buildings, to see if there are leaks in the air or whatever, in the furnaces, the heating systems, and the ventilation systems.

They will look also at their employees, as I said. Part of their plan was to train employees better, to make them aware of how they can actually succeed and reach some targets.

In their specific example, they've reduced their energy consumption by 25% with that plant.

[Joan Crockatt, Conservative, Calgary Centre, AB]

What example is that? I'm sorry.

[Martin Lavoie]

It's Canfor in B.C.

[Joan Crockatt, Conservative, Calgary Centre, AB]

At Canfor...you may not have it with you today, but I wondered if you could supply us with more information about that in specifics, because I think that would be very interesting.

[Martin Lavoie]

I could definitely, yes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

That would be great.

Ms. Bak, I think there are still some myths that Canadians are hewers of wood and drawers of water. For what you've suggested to us today, that certainly would not be the case.

Can you tell us about how Canada is doing with regard to clean technology and high-tech, high-quality jobs in this sector?

[Céline Bak]

The current U.S. versus non-U.S. export split for clean technology is 56% to the U.S. and 44% to the non-U.S. The forecast by the companies for that moving forward is for it to actually become half and half non-U.S. and U.S., and for the share of emerging markets to grow significantly. At the moment, Europe is the dominant non-U.S. market. As you say, these are not hewers of wood and drawers of water. These are companies selling to Germany and selling to the U.K. These are highly competitive, difficult markets, and our companies are winning projects there.

I was in Mexico earlier last week. In emerging markets there's a great openness to buying from Canada, and many opportunities. Waste-to-energy is a good one. For leaks of various kinds, whether it's methane at Pemex or energy leaks at the major Coca-Cola bottler, which is a multi-billion dollar industry, we have a very good brand, and there are markets that are quite dynamic.

I would say that Asia is an area where we probably need to think some more, because there are still concerns regarding intellectual property in China. If you're investing a billion dollars a year in IP, you should be concerned about it.

The average number of countries where companies are applying for patents is 11. There's a very interesting rule of thumb. For a $10-billion industry, 10% of revenue, or $1 billion, is invested in R and D. Of that, 10% is invested in IP protection. That is invested for 11 patents, on average, per company. It obviously varies according to the type of sector you're in.

[Joan Crockatt, Conservative, Calgary Centre, AB]

If I got the number right, I think that this sector employs 52,600 Canadians?

[Céline Bak]

Yes, with the 5x supply chain.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay.

How has that changed in the last two to five years?

[Céline Bak]

The figures we have are from the last three years. The compound annual growth rate over the recession, with all of the issues in the global credit crisis, was 18% employment growth per year.