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.